Jordan - Urban Development Project

Document of The World Bank FOR OFFICIAL USE ONLY Report No. 7866 JORDAN FIRST URBAN DEVELOPMENT PROJECT (LOAN 1893-JO) JUNE 23, 1989 Infrastructure Division Country Department III Europe, Middle East and North Africa Region 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.  ACRONYMS AUJRPG Ammnan Urban Region Planning Group CVDB Cities and Villages Development Bank GOJ Government of Jordan HB Housing Bank HBCR Completion Report by the Housing Bank IDB Industrial Development Bank LCHD Low Cost Housing Department, in Housing Bank lpcd Liters per capita per day MMRAE Ministry of Municipal and Rural Affairs and the Environment MOP Ministry of Planning NPC National Planning Council PAD Population Affairs Directorate in UDD ECR Project Completion Report SAh Staff Appraisal Report UDD Urban Development Department UDDCR Completion Report, by the Urban Development Department UDP1 First Urban Development Project (Loan 1893-JO) UDP2 3econd Urban Development Project (Loan 2587-JO) UDPs Urban development projects USAID United States Agency for International Development VTC Vocational Training Corporation Country Exchange Rates US$ JD Appraisal Year Average 1.00 = 0.2981 Intervening Years Average 1.' ) = 0.3610 Completion Year Average 1.00 = 0.3387  FOR OmCIAL USE ONLY THE WORLD BANK Washington. D.C 20433 USA Of ceod Of.ctm-cf~Ai Opwatmi Ewa.t~in June 23, 1989 MEMORANDUM TO THE EXECUTIVE DIRECTORS AND THE PRESIDENT SUBJECT: Project Completion Report on Jordan - First Urban Development Project (Loan 1893-JO) Attached, for information, is a copy of a report entitled "Project Completion Report on Jordan - First Urban Development Project (Loan 1893-JO)" prepared by the Europe, Middle East and North Africa Regional Office. No audit of this project has been made by the Operations Evaluatinn Department at this time. Attachment This document has a re tricted 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 authornution.  FOR OFCLAL USE ONLY JORDAN FIRST URBAN DEVELOPMENT PROJECT (Loan 1893-JO) TABLE OF CONTENTS Page No. Preface ........................................... Basic Data Sheet .................. ................ Highlights ...................... .................. v I. INIRODUCTION.. 1 II. PROJECT BACKGROUND .. 2 III. PROJECT PREPARATION, APPRAISAL AND IMPLEMENTATION 2 A. Preparation and Appraisal. 2 B. Objectives and Description. 3 C. Implementation. 4 D. Performance of Agencies Involved .4 IV. ACHIEVEMENT OF PROJECT OBJECTIVES. ... 4 A. Provision of Affordable Housing. 4 B. Subsidies. 5 C. Community Facilities. 6 D. Empployment. 6 E. Policy Studies ..................., 7 F. Institutional Development ....................... 8 V. ECONOMIC REEVALUATION ................................ 9 VI. SPECIAL TOPICS ......... ............................. 10 A. Reporting .......... ............................. 10 B. Community Development ........................... 11 C. Incomes and Affordability ........................ 12 New Sites ......... ............................ 12 Upgrading Sites ............................... 13 Financing Construction ........................ 14 D. Private Construction Activity ..... .............. 14 E. Health Improvements on Upgrading Sites .... ...... 15 VII. CONCLUSIONS AND RECOMMENDATIONS ......... .. .......... 16 ANNEXES 1. Reference Documents ............................. 18 2. Income and Affordability ......................... 21 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.  i3. Private Construction Activity in UDPI Sites ..... 30 4. Economic Rate of Return .......... ................ 34 5. Detailed Recommendations Based on UDPl Performance . ............ ........................ 37 6. Photographs and Map .......................... 41 7. Completion R!port of the Urban Development Department .................... 52 8. Completion Report of the Housing Bank .......... . 128 9. Comments from the Borrower ................ 153  JORDAN FIRST URBAN DEVELOPMENT PRO.-ECT (LOAN 1893-JO) PROJECT COMPLETION REPORT PREFACE This is the Project Completior Report (PCR) ,6or the First Urban Development Project in Jordan, for which Loan 1893-JO in the amount of US$ 21.0 million was approved on July 15, 1980. The loan was closed on December 31, 1987, two and a half years behind schedule. USS 1.38 million of the loan was cancelled and the last disbursement was made on July 11, 1988. The PCR was prepared by the Infrastructure Division of Country Department III, Europe, Middle East and North Africa Region and is based, inter alia. on the Staff Appraisal Report; the Loan and Project Agreements; supervision reports; correspondence between the Bank and the Borrower; internal Bank memoranda; and the Borrower's project completion reports which are attached to the PCR (Annexes 7 and 8). This PCR was read by the Operations Evaluation Department (OED). The draft PCR was sent to the Borrower for comments and they are attached to the report (Annex 9).  - ii - PROJECT COMPLETION REPORT JORDAN FIRST URBAN DEVELOPMENT PROJECT (Loan 1893-JO) BASIC DATA SHEET KEY PROJECT DATA Appraisal Actual or Item Expectation Current Estimate Total Project Cost ($US million) 57.6 62.5 Underrun or overrulL kUS$ million) 4.9 Loan Amount (US$ million) 21.0 Disbursed 19.191' Cancelled 0.45L' Undisbursed 1.36"' Repaid to IBRD 4.84i' Outstanding 20.95"' Date Physical Components Completed 06/85 06/871' Time Overrun (%) 55 Economic Rate of Return (2) 20 12 Upgrading 19 11 Sites and Services 20 13 1/ As of March 31, 1988 2/ Date of completion of componients identified at appraisal. Additional minor physical components to be completed by 12/31/88.  - iii - MISSION DATA No. of No. of Date of Item Month/Year Weeks Persons Staffweeks Report Preidentification 08/77 1 1 1 09/20/77 Identification/ Preparation 02/78 2 4 8 03/24/78 Preparation 02/79 0.5 2 1 03/30/79 Preparation 05/79 2 3 6 07/19/79 Preappraisal 07/79 1 4 4 08/31/79 Appraisal 09/79 3 5 15 10/22/79 Post Appraisal 04/80 1.5 2 3 04/15/80 38 Supervision 09/80 1 1 1 10/31/80 Supervision 02/81 0.5 2 1 04/30/81 Supervision 06/81 1 1 1 07/31/81 Supervision 10/81 0.5 3 1.5 12/14/81 Supervision 06/82 1 2 2 06/25/82 Supervision 10/82 2 1 2 12/03/82 Supervision 05/83 1 1 1 06/23/83 Supervision 10/83 3 1 3 11/10/83 Supervision 02/84 1 2 2 04/06/84 Supervision 10/84 2 4 8* 11/05/84 Supervision 09/85 2 1 2 10/21/85 Supervision 02/86 2 3 6 03/07/86 Supervision 04/87 2 2 4 05/13/87 Supervision 10/87 1.5 1 1.5 11/03/87 Completion 01/88 1.5 2 3 02/09/88 39 Total 77 * Combined with preparation of second project.  - iv - OTHER PROJECT DATA Original Item Plan Revision Actual First Mention in Files 05/06/77 Government's Application 10/05/77 Negotiations 01/80 03/80 06/11/80 Board Approval 03/80 05/80 07/15/80 Loan Agreement Date 09/80 09/08/80 Effectiveness Date 12/09/80 04/81 05/22/81 Closing Date 06/30/85 12/31/87 Borrower The Hashemite Kingdom of Jordan Executing Agency The Urban Development Departmentt" Fiscal Year of Borrower January 1 to December 31 1. Follow-on Project Name Second Urban Development Project Loan Number 2587-JO Amount (US$ million) 28.0 Loan Agreement Date 07/08185 2. Second Follow-on Project Name National Urban Development Project Loan Number 2841-JO Amount (US$ million) 26.4 Loan Agreement Date 07/13/87 I/ At appraisal, this office was in the Municipality of Amman; during the project implementation, the office became part of the Mitnistry of Municipal and Rural Affairs.  v - PROJECT COMPLETION REPORT JORDAN FIRST URBAN DEVELOPMENT PROJECT (Loan 1893-JO) HIGHLIGHTS The First Urban Development Project has enjoyed considerable success (paras. 4.01, 7.02-7.0i.). Although there were some initial delays due to the need to redesign the sites and services schemes to accomodate the increased plot sizes required by the Government of Jordan, implementation proceeded with no major problems thereafter (para. 3.05). By making serviced land available at affordable prices, the project has shown that, when given legal access to land, households are motivated to invest time, effort, and financial resources in solving their own housing problems. This was amply demonstrated in the speed with which houses of good quality were constructed in slum areas, once land tenure had been granted to the residents. The overwhelming response to advertisements for the small serviced plots offered by the project also demonstrated high excess demand at the lower end of the housing market, cLue to the unavailability of affordable plots for low-cost housing. The project has also been successful in its affordability (para. 4.01) and cost recovery (para. 4.05) objectives: the beneficiaries on the new sites, with some minor exceptions discussed in this report, are within the target group with respect to household incomes; and on the upgrading sites, the households who were resident at the time of initial surveys are, on the whole, the households who have benefitted from the project. Very few beneficiary households ort the upgrading sites have rot yet committed themselves to pay for the land and services provided by the project. Institutional objectives have been fulfilled (paras. 4.12-4.14); The Urban Development Department (UDD) and The Housing Bank (HB) have gained experience from this project and its first follow-up, which allows them to prepare subprojects (UDD) and appraise them (HB) under the third project. Recommendations concerning ongoing and future urban projects in Jordan focus on continuing the progress made under the project in reducing housing costs for low-income urban families through decreased plot sizes and on-plot provision. The need for increased attention to beneficiaries' monthly repayments, and to the cost of beneficiary loans to HB are also highlighted (para. 7.05). Some aspects of this project, particularly those concerned with beneficiary relations, would be valuable examples for other Bank shelter projects in the region.  PROJECT COMPLETION REPORT JORDAN FIRST URBAN DEVELOPMENT PROJECT (Loan 1893-JO) I. INTRODUCTION 1.01 The Urban Development Project (Luan 1893-JO) was the Bank's first shelter-related project in Jordan. The loan was signed in September 1980, and was closed in December 1987, after two extensions. During project execution, the Loan and Project agreements were amended to reflect the cancellation of one component ($0.45 million), and the transfer of the project implementation agency, the Urban Development Department, from the Municipality of Amman to the Ministry of Municipal and Rural Affairs and the Environment (MMRAE). The last disbursement is expected to be made in June 1988, leaving a loan balance of about US$0.5 million to be cancelled. 1.02 The Urban Development Department (UDD) has prepared a Project Completion Report (UDDCR), attached as Annex 7. As the primary project implementation agency, the UDD has, at the suggestion of the Bank, organized its report along the lines of a standard Bank PCR. The Housing Bank (HB), the other agency involved in the project, has also written a report (Annex 8), which, again at the suggestion of the Bank, focusses on the aspects of the project for which the HB had primary responsibility. The findings of both reports are incorporated into this Project Completion Report. In view of these agencies' completion reports, the availability of extensive data on project beneficiaries, and the successful completion of the project, the Bank's review focusses on topics of particular interest. This PCR therefore presents findings of additional studies in two specific areas; namely the affordability of the various shelter options offered under the project, and the amount of construction activity carried out in the private sector as a result of public investment in the project. This has been discussed and agreed with OED. It also comments in some detail on particular aspects of this project worthy of note; specifically on reporting, community development programs, and health improvements in upgrading areas. 1.03 The Bank's review, in most instances, agrees with the findings of the UDDCR particularly concerning implementation, project finances, and institutional aspects. The areas already covered in the UDD report are only addressed by the PCR where expansion or clarification is felt to be beneficial, where there is a difference of opinion, or where the Bank had access to additional information.  - 2 - II. PROJECT BACKGROUND 2.01 This section supplements the UDDCR (Annex 7) section on project identification by emphasizing the constraints prevailing in the low-income housing sector, as well as the deficiencies in infrastructure and employment productivity that the project was to address. At the time of project identification, Jordan's East Bank population of 2.2 million was already highly urbanized. About two-thirds lived in urban areas, with a high concentration in the Amman urban region, which accounted for about 1.3 million people. High population growth rates, a result of both high birth rates and in-migration, contributed to the shortages of housing and infrastructure, which were particularly severe for the lower income groups. It was estimated that about one quarter of the population of the Amman urban region lived in areas of uncontrolled housing and squatter settlements, under conditions of insecure tenure, overcrowding, tF.d inadequate infrastructure and public services. 2.02 H.gh urban land prices, large minimum legal plot sizes, restrictive planning and building regulations, and inadequate access to established financial markets contributed to the inaccessibility of adequate housing at affordable prices for low-income households. The existing public sector housing program primarily benefitted middle-income groups, particularly government employees, who were provided subsidized housing by the National Housing Corporation. Government policy towards squatter areas tended towards slum removal and relocation of residents. 2.03 Infrastructure services were particularly substandard in the squatter areas. Water consumption in these areas was only about 10-15 liters per capita per day (lpcd), compared to about 28 lpcd nationally. Water had to be purchased from private vendors, and supply was infrequent. Roads and footpaths, street lighting, and garbage collection services were also inadequate. School attendance was good in the urban areas, but schools were overcrowded, and usually sited in unsuitable rental premises. Even though health services coverage was increasing, studies carried out in the squatter areas during project preparation indicated that health conditions could be improved by increasing the quantity of safe water available, improving excreta disposal, reducing room occupancy rates, and extending public health education. 2.04 Although official unemployment rates were low, there were indications of underemployment and low productivity, particularly amongst the unskilled workers living in the squatter areas. The low level of female participation in the labor force contributed to the problem of low household incomes. III. PROJECT PREPARATION, APPRAISAL, AND IMPLEMENTATION A. Preparation and Appraisal 3.01 The UDDCR describes project preparation, appraisal, negotiation, and approval; this section supplements the UDD account by adding detail regarding the evolution of Government policy, and dialogue with the Bank  - 3 - duviitig Lthese project stages. Government policy in the urban sector evolved steadily in the 1970s in response to a growing concern with the problems of urban poverty. An important early step in the formulation of urban policy was the establishment of the Amman Urban Region Planning Group (AURPG) in 1976, with the assistance of the United States Agency for International Development (USAID). The AURPG had responsibility for developing an overall development plaa for the Amman Region. In April 1977, the Government of Jordan (GOJ) expressed an interest in programs to ameliorate the housing situation of the urban poor. The Bank responded by sending a mission to Jordan to assist the municipal services of Amman in identifying urban development options and to advise on the preparation of renewal and upgrading programs. In December 1977, the Government agreed to the Bank recommendation that detailed components of a first urban development project be identified and prepared by consultants, in order to be corsidered for Bank financing. A pre-identification mission visited Jordan in February 1978 to discuss terms of reference for project preparation. By this time, there had been a definite change in Government attitudes away from slum clearance towards upgrading as an alternative, and a willingness to consider lower cost alternatives to new housing rather than subsidizing higher cost housing. Consultants, financed by GOJ, were selected a year later to assist Amman municipality in preparing the project. A Bank preparation mission reviewed the consultants' interim findings with the Government in May 1979 and ensured consistency with the findings of the AURPG, which were being disseminated during 1979 in a series of seminars on planning issues, including housing. 3.02 This preparation study for the First Urban Development Project (UDPl), dealt specifically with the development of low-cost replicable solutions for the provision of infrastructure and shelter services. The project was appraised in October 1979 and a post-appraisal mission visited Jordan in April 1980 to finalize arrangements with the Municipality of Amman as the implementing agency. Negotiations were completed in Amman in June 1980; and the project was presented to the Board in July. B. Objectives and Description 3.03 The primary objective of the project was to provide shelter and related infrastructure and community facilities to the lower income groups in the Amman area at affordable prices, with minimum subsidy to ensure replicability (UDDCR Section 2.3). In order to achieve this primary objective, the project included a Sites and Services component (schemes on 3 sites, US$36.5 million), and an Upgrading component (schemes in four low-income squatter settlements, US$10.0 million). These two major components accounted for 81 percent of project costs. The shelter and infrastructure objectives of the project have been fully met (section IV). 3.04 A second objective was to achieve improvements in productivity through the provision of loans to small-scale enterprises, vocational and commercial training, and training facilities. The Small Business Assistance and Manpower Training component (US$5.3 million; 92 of project costs)  -4- included the provision of shop and workshop plots, some with core units; loans and technical assistance to small businesses; vocational training; and women's training centers. The project was to assist in the development of a longer term strategy for dealing with the problems of inadequate housing and services, and to prepare a future project as part of this strategy. The Project Management, Design, Supervision and Studies component included the provision of equipment, and of consultant and advisory services to assist the project agency in project design and supervision, and to carry out studies. The achievement of these objectives is discussed in section IV D, E, and F. C. Implementation 3.05 The project suffered several delays in its initial stages, of up to a year (UDDCR, sections 3.1 and 3.2), including extensions in loan effectiveness, a delay for retendering of bids, and a major delay for revision of standards. In spite of these initial delays, once the physical components were under way, only minor delays were encountered. Actual physical works implementation period was similar to the appraisal estimate with the exception for the Wadi Haddadah and Nuzha upgrading sites 3.06 During implementation, the Bank agreed to some additional civil works, which included the construction of a headquarters building for the UDD on the Marka site, ar.d some minor additional community facilities, such as kindergartens, and extensions to community buildings. D. Performance of Agencies Involved 3.07 The PCR agrees with the general findings of the UDDCR on performance of consultants, contractors, suppliers, the borrower and the Bank. The performance of all these concerned parties has been good. The Bank's regular supervision missions in the early years of project implementation dealt promptly with problems, and helped to maintain the good working relationship it enjoyed with both HB and UDD. As pointed out in Annex 5 of this report, more thorough knowledge of the Government's concerns on lower standards could have prevented initial delays. IV. ACHIEVEMENT OF PROJECT OBJECTIVES A. Provision of Affordable Housing 4.01 The PCR agrees with the UDDCR's finding that the project has been successful in achieving its primary objective of providing shelter and related infrastructure and community facilities to the lower income 1/ The Loan Agreement (schedule 2 part B) refers to four upgrading areas; one of these areas includes two separate sites (Wadi Haddadah and Nuzha). Both of these sites were affected in 1983 by the Municipality's plans for a highway which would pass through the area. Nuzha was eventually upgraded in 1986, and the Wadi Haddadah upgrading is the only project componer.t that was not implemented.  5- groups at affordable prices with a minimum of subsidies to ensure replicability. At project closing, all sites and services and upgrading schemes, with the exception of Wadi Haddadah, were well-established. Most plots had resident beneficiary families, children were attending the schools built under the project, and the shops and community facilities ,,ere functioning smoothly. The subsidy and affordability aspects of the project are particularly important; a review of the subsidy aspect follows, and affordability is discussed in more detail in Section VI. B. Subsidies 4.02 The project produced a small overall surplus, currently est,mated at about JDl million. This indicates that, apart from the Government's contribution to costs associated with community facilities and off-site infrastructure, there has been no government subsidy for housing. Plot charges for units produced under the project included the costs of land, site preparation, on-site infrastructure, on-plot develo-pent, design, supervision, interest during construction and project management. The corresponding costs relating to schools and other community facilities were not included in beneficiary charges. 4.03 The financial viability of the UDP1 project depended on realizing adequate surpluses from the sale of commercial plots and some residential (type A) plots at market prices to cross-subsidize the low income beneficiaries' plots. Plot prices were differentiated to take into account plot accessibility, road frontage, and commercial potential. The plots to be sold at market prices were originally to be sold for cash; however, in response to a lower initial demand than anticipated, marketing policy was revised during implementation to allow for up to 75% of the purchase price of such plots to be financed with HB loans. This marketing strategy contributed to the success of UDD's cost recovery, and also provided some of the surplus from the project. 4.04 The long-term aspects of cost-recovery are not dealt with in the UDDCR, and are therefore mentioned here. The pricing of plots, and the signatures of beneficiaries on mortgage loans are only one aspect of the cost recovery performance. The long-term replicability of low-income housing projects depends, in part, on the management of beneficiary, repayments. Therefore, it is recommended that the HB invoke its remedies whenever necessary. Most of the UDPI new plots are being financed by HB loans. The proportion is about 70% if upgrading plots are also included. About 20% of total beneficiaries, including one fourth of the upgrading beneficiaries, paid cash fur their plots, and the remainder are making monthly payments directly to UDD. This last category consists of about 280 househlods on upgrading sites who declined to take a bank loan, usually on religious grounds.-I HB terms for mortgage loans under UDP1 are for 15 years at an interest rate of 8.5 percent. 1/ The decision to allow this form of repayment was made to avoid a serious negative impact on the cost recovery performance of the upgrading components. It is not an optimal solution in the long term, however; the HB should be the sole provider of housing finance.  -6- 4.05 The HB's experience with cost recovery had been good for both new sites and upgrading sites. The situation appears to have deteriorated recently, however, particularly with regard to the upgrading areas. In the upgrading sites, only East Wahdat has a sizeable number of HB borrowers. HB reports indicate that at the end o-f January 1988, 49 beneficiaries out of 400 (about 12X) had payments that are 3 months or more overdue, and nearly 6Z are six months or more overdue. These figures compare with corresponding figures of 7% and 4% respectively for end-August 1987 (UDDCR's Annex VII on P. 113 of this report). This situation needs to be carefully monitored, particularly in the face of worsening economic conditions, which could make it even more difficult for beneficiaries to repay their loans. C. Community Facilities 4.06 All the community facilities envisaged at appraisal were constructed and functioning before loan closing. As the community development programs progressed, the need for additional small community centers became apparent. A small kindergarten at one of the upgrading sites, and a maternal and childhood center at another were added to the project. Furthermore, community centers were found to be too small for carrying out all the proposed programs, and extensions were proposed. Because of the excellent progress being made in organizing cmmunity programs, the Bank readily agreed to these minor additions. D. Employment 4.07 The project was seen by the Government and the Bank as the beginning of a longer term program to provide for shelter and employment-related needs of the poorer urban dwellers. The shop, workshop, and coreshop plots were successfully built and marketed-' and are providing a range of retail and repair services on project sites, income for the owners of the plots, and employment. The small business loans sub-component was deleted from the project due to lack of demand for the loans. The deletion had no effect on project performance, since demand for commercial plots was satisfactory, and no major delays were encountered in the establishment of the various retail and other activities on the sites. Contributory factors to the lack of demand probably included (i) a lack of need for loans, shopkeepers having sufficient capital or other sources of finance, and (ii) potential borrowers, i.e., those without other sources, may have been unwilling to take on loans in addition to those needed or already contracted for plots and shops. Whatever the reason, loans and some technical assistance 1/ In one site, the East Wahdat upgrading site, the Municipality bought a large proportion of the shops. Although the financial flows and marketing performance of the project were not affected by this purchase, the transaction was not beneficial because of the subsequent delay on the part of the Municipality in renting out the facilities. The shops remained closed during this time, precluding the benefits of additional income/employment and access to shops/services in the area.  - 7 - remain available to interested small businesses, including those on the UDPl project sites, under the regular programs of the Industrial Development Bank (IDB). 4.08 Women's participation in the labor force is traditionally low, and a special emphasis was placed on women's training in project design. It was determined from studies carried out at project identification and preparation that women's classes would ne^d to be offered very close to their homes. Women's training centers were therefore provided on all sites. Men's courses have been offered at the Quweismeh site, and women's courses on all sites. Although the employment effects of the project's training programs have not yet been evaluated, it appears that they have been very successful. A study of women's employment and productivity will be carried out under the Second Urban Development Project (UDP2). This study will examine the constraints to increased female employment by looking at attitudes, work opportunities, and training and other employment-related needs of women in UDP project sites. E. Policy Studies 4.09 This section reviews experience with policy studies under the project, a topic which was not covered in detail in the UDDCR. The project was to aid in regularizing land tenure arrangements in areas of uncontrolled housing through studies of planning and building regulations. The Government, with the assistance of consultants, would implement improvements in planning and building regulations and land tenure arrangements in the Amman Region, and would develop an overall housing strategy for Jordan. A Planning and Building Regulations Study was prepared by UDD, assisted by its consultants, in February 1985 and was reviewed by the Bank and found satisfactory. Subsequently, the Municipality of Greater Anman, incorporating smaller surrounding towns as well as the city of Amman, was formed. The newly formed Municipality, assisted by consultants, carried out a study financed by the Ministry of Planning which aimed at the formulation of Greater Amman Comprehensive Developoment Plan. This plan incorporates the finding of the previous plar.ning and building regulations study, as well as the work done earlier by AURPG. 4.10 The Housing Strategy Study: Draft terms of reference for the study were sent to the Bank by NPC in April 1982. The revised terms of reference were sent to the Prime Minister's office in January, 1983, but no further action was taken for some time, due apparently to GOJ doubts as to the need for such a study. The Covernment established a committee in January 1984 to review the situation, and it was decided that the study would not be financed under UDPl, but would be carried out in-house, under the leadership of Jordanian staff, with appropriate technical assistance advisors. USAID and the United Nations Centre for Human Settlements (Habitat) agreed to finance the technical assistance. A Shelter Unit was established at the Ministry of Planning (MOP) and started its work in July 1985; the expatriate consultant staff arrived in February, and the survey was carried out in the summer of 1986. Draft reports (20 volumes)1' were prLduced during late 1986 and in 1987. 1/ A list of the volumes produced is included in Annex 1; most of the documents are available in pro4ect files.  - 8 - They are still being reviewed by the Steering Committee comprised of representatives of all the concerned agencies, e.g. MOP, RB, UDD, the Cities and Villages Development Bank (CVDB), the Municipality of Amman, etc. 4.11 In spite of a five-year delay, the study has already been useful in focussing Government attention on the principal issues facing the housing sector in Jordan. The issues concerning high standards for both building and zoning have been highlighted in the study, and adoption of more appropriate standards in order to provide affordable housing on a wider basis is being discussed. The Government is strongly committed to increasing the supply of lower cost housing, as outlined in the current Five-Year Plan. Moreover, the easing of constraints to low-cost housing production will stimulate construction activity, which has very strong linkages with other productive sectors in Jordan. F. Institutional Development 4.12 The Urban Development Department: The provision of consultart and advisory services was to strengthen the institutional and organizational framework of public agencies responsible for the development of low-cost housing. TORs for the consulting firm providing technical assistance to the UDD included the provision of training to local staff. As pointed out in the UDDCR Section 3.8, most of the training provided was on-the-job. Staff turnover in certain technical areas meant that some of the training was lost to the UDD. This is inevitable, but much of the knowledge imparted will remain within Jordanian institutions. The consultants also assisted in the preparation of manuals, covering most aspects of project design, implementation, marketing, financial analysis, etc. These manuals are kept current by UDD, which includes the revision of manuals as part of its work program. 4.13 As a result of training programs, experience, and increasing responsibilities, the Urban Development Department has developed from a small group within the Municipality of Amman, to a relatively large well staffed Department within MMRAE. This has enabled it to enlarge its mandate, and to carry out projects on a national basis under the National Urban Development Project (Loan 2841-JO), the second follow-up to UDPl. Under this new project, appraised in 1987, UDD's role is expanding to include sub-project identification and preparation, as well as implementation. It currently has approximately 190 staff organized into six directorates, and is able to handle most technical design and supzrvision tasks in-house. It has also developed substantial competence in the social survey and comuounity development areas, and carries out surveys to monitor beneficiaries' progress in construction, satisfaction with plots, and opinions on community programs. 4.14 The Housing Bank: As the main housing finance institution in Jordan, HB was, at the time of project preparation, already providing support for much of the housing being built, and had a relatively long-standing involvement in the sector. RB's participation in the project was essential, and consisted of financing about 43Z of project costs, administration of all project finances, and provision of beneficiary mortgage loans for over 70X of the total households in the project. Its performance has been good. The Housing Bank's policies in  - 9 - the area of low-cost housing have evolved significantly through its participation in the project. Special conditions were granted to project beneficiaries, including the financing of up to 95% of the cost of land and building, whereas normally HB would finance only 75% of the cost of the building only; land was not eligible for financing. HB staff now have considerable expertise in the implementation of loans to low-income beneficiaries. In 1986, the Low Cost Housing Department (LCHD) was formed within HB, and given responsibility for loans under UDP1 and the follow-up projects. It is now acquiring the additional staff needed for HB's expanded role under the National Urban Development Project, which includes appraisal of sub-projects prepared by UDD. 4.15 CooPeration between institutions: Although there have been some differences of opinion between UDD and the HB on matters relating primarily to beneficiary loan procedures and follow-up, the two agencies have learned a great deal from each other by working together on the project. The relationship might perhaps have been improved through the sharing of more information. Examples cited included the need for increased mutual discussion of special studies carried out by either agency, increased on-site participation of HB at meetings with beneficiaries, and more frequent reporting (e.g. of UDD marketing to HB, and of HB beneficiary repayments to UDD, etc.). The progress made in these areas attests to their ability to solve these differences without major disruption in project implementation. V. ECONOMIC RE-EVALUATION 5.01 The ex-ante economic rate of return for the upgrading and sites and services components was estimated at 20% at the time of appraisal, with the sites and services components yielding an estimated 20% and the upgrading components yielding 19X. These were based on the quantifiable benefits and costs. The estimated benefits for the sites and services schemes were based on the imputed rental values for beneficiary housing, and on market sale prices for the commercial and larger residential plots. The estimated costs included those for land acquisition, site development, site preparation, on-site infrastructure, administration, design and supervision, on-plot development, community facilities, and the share of off-site infrastructure allocable to the project site, physical contingencies, and operation and maintenance. 5.02 The ex-post rate of return was estimated on the same basis as the ex-ante return. The ex-post economic rate of return is 131 for the total project, and 14% and 11% for the new sites and upgrading areas, respectively (Annex 4). The lower ex-post rates of return primarily reflect higher costs than expected, rather than lower rental values. A substantial part of the increased cost was due to delays and redesign. In addition, for sites and services schemes, land acquisition and site preparation costs in particular were much higher than estimated at app-aisal (UDDCR section 3.6). A major factor in the lower returns for both new sites and upgrading was the underestimation of beneficiary construction costs during appraisal. Construction costs were estimated at JD 180 per room whereas current estimates are close to JD 1000. Since the inflation rates assumed at appraisal were not very different from those which actually occurred, beneficiary construction costs were substantially underestimated.  - 10 - 5.03 The ex-post rates of return for the various individual sites show, in spite of being lower than at appraisal, that the project was economically justified. In only one site, Nuzha, was the return below what would normally 'justify' the investment. In this case, this was due to long delay caused to uncertainty regarding a proposed highway. 5.04 It should be pointed out that in shelter projects of this kind, and in the case of upgradirg areas particularly, the rate of return represents a conservative estimate, because of the necessary omission of non-quantifiable benefits relating to improved health and quality of life. VI. SPECIAL TOPICS A. Reporting 6.01 Progress Reports: Reporting to the Bank by the UDD has been very good, and the quality of the progress reports has improved steadily over time. As the UDD staff gained experience in reporting, the Bank has suggested changes to improve the quality of reports; and its comments were well received, and reflected in subsequent reports. On the occasions when the Bank failed to comment on the quarterly reports, the UDD, justifiably, complained of lack of feedback. The quarterly reports now cover progress of the three Bank-financed urban development project (UDPs); the time anik eff3rt required on the part of the UDD is well justified in view of the usefulness of the reports to the Bank, and to the UDD. 6.02 Progress reports were to include information from HB on the status of beneficiary repayments. Although discussed several t4mes during supervision missions, HB has supplied the desired information only intermittently. Nevertheless, the information provided has been useful for assessing the financial performance of the UDPI mortgage loans program. This information should, however, be provided regularly, in order to monitor the status of LCHD's loan portfolio." 6.03 Other Reports: Both UDD and HB provided completion reports on UDP1 to the Bank, and the writing of these reports has been a valuable experience for both agencies. The Completion Report prepared by the UDD represents a thorough review of most aspects of the project. It has allowed the Bank's review to concentrate on areas of specific interest. The additional insight provided by the RB report was also helpful. There is broad agreement on the achievement of the overall project objectives, and on the gains attained by the cooperation between the two agencies. Various aspects of UDPI activ:' es have been reported on in other contexts; for example, the surveying, data processing and analysis carried out by the UDD for the two health surveys (paras. 6.16 - 6.18) has been documented in several reports. Good examples of the reporting 1/ The Housing Bank points out in its comments (item 7, Annex 9) that there is no requirement in the agreements for HB to provide this information to UDD. However, the World Bank notes that the information is of interest to all parties concerned with low income housing, since it aids in monitoring affordability of beneficiary households, and hence is also useful in project design.  - Li - new sites, also utilizing the data processing expertise of UDD staff. Reports on these surveys, however, would benefit from being more detailed, and more widely circulated. B. Community Development 6.04 PAD's approach was to initiate programs within the community, and to set up systems that would eventually allow communities to maintain ongoing programs themselves, or with the help of the various Government agencies, and to initiate new programs as the need arises. The first step in this procedure was to encourage weekly meetings within each community (site), at which urgent needs were discussed, and community leaders identified and invited to form committees. The committees continued to meet regularly, and with the help of the UDD social workers, identified needs and ways to address them. 6.05 The community centers built under the project were the focus of several community programs. The main achievements of these programs include: (i) health education: vaccinations are provided and homes are visited to educate mothers on hygiene, nutrition, immunization, pre-natal and post-natal care, etc. The local health educators also treat cases of diarrhea and distribute oral rehydration solution; (ii) activities for children: programs include handicrafts, educational games, trips, storytelling, films, and music. (iii) activities for youths: evening classes are held to help young people complete their secondary education, and films are shown and discussed, and exhibitions of books, handicrafts, flower-arranging, etc., are held periodically; youths are encouraged to participate in clean-up campaigns, and in various local and national activities. (iv) literacy classes: literacy classes have been held in all the project sites (in 1987, 118 women participated), and educational films and lectures encourage further participation in other community activities. (vi) lectures: on womens' legal rights, and on family planning, etc., were presented voluntarily by local groups. (vii) training: on-the-job training programs have been provided by the Director of the Social Department of Jordan University for the Community Center Staff, and public health training is supervised by the Ministry of Health for the health workers. (viii) libraries: small libraries have been established in each community center; a voluntary association has opened a public library in one upgrading site, and this could be replicated soon on other sites.  - 12 - (ix) coops: lectures on cooperatives have been given, and two projects have been started, one to provide snacks at the training center and a girls' school, and the other to provide school uni'orms for a kindergarten. (x) other training: in addiLion to the literacy classes and the training of health and social workers, vocational training centers for women have been established on all sites. The main objective is to provide women with skills that will assist them in finding suitable work and increase LI-eir household incomes. Initially, the women have expressed interest in traditional activities, and the centers have offered (machine) sewing and knitting classes, as well as typing classes. These classes, as well as the men's training courses, are rur, by the Vocational Training Corporation (VTC). The support of the VTC has been instrumental; and the indications are that it would be flexible enough to design specific courses for the beneficiaries if, for example, the study to be carried out under UDP2 indicates a potential demand for different skills. 6.06 There is a certain amount of complementarity between the community centers and the training centers; the community centers encourage education and training, and the knowledge and confidence gained through education and training has aided the beneficiaries in learning to run the community programs themselves. Arrangements were made for the Ministry of Social Affairs to help with salaries of social workers, and with UNICEF for health workers, both kinds of workers coming from project beneficiary families. 6.07 The participation of PAD in community development has been facilitated by its role in project implementation. PAD personnel have been involved with the beneficiary households almost continuously, carrying out registration surveys, participating in the health surveys on the upgrading sites, and assisting households in filling out application forms for mortgage and building loans, etc. The Directorate's continued involvement in helping beneficiary households solve their problems hias probably been a major factor in attracting assistance from local and international organizations for various aspects of community development. Because of the success of the community programs under UDPl, the same approach is being followed in subsequent UDD projects. C. Incomes and Affordability New Sites 6.08 The most important objective of the project was the provision of affordable housing to low-income households. The sites and services component was originally designed for households in the lower one-third of the household income distribution. By contrast, the target population in the upgrading areas was of course the existing squatter households. Changes in standards expanded the range to households with incomes  - 13 - between the 10th and 40th percentiles of the distribution. The UDD has conducted two surveys of beneficiary households, which have allowed an investigation of the affordability of the plot options offered at the new sites. Detailed findings resulting from this investigation are included as Annex 2, and only the conclusions are given here. Most of the information in the remainder of this section is from the report on affordability, for which the principal source of data was the second Monitoring Survey, carried out by the UDD in the three sites and service schemes in the spring of 1987. 6.09 On new sites, a 'matching' of incomes to plot options was carried out, as envisaged at appraisal, and applicants were allocated a plot from the three principal types (B: two built rooms and a small kitchen and bathroom; C: one room plus kitchen and bath; and D: serviced plot only) according to their ability to pay. This was determined on the basis of monthly household income, which had to be no more than the 40th percent of the distribution for Amman, and the estimated monthly mortgage payment for a loan covering 952 of the sale price. The cheaper vacant plots were reserved for those at the bottom end of the target range, while the expensive B-type plots were sold to those in the upper part of the range. The profits from the larger A-type plots sold on the 'open market' were used to cross;-subsidize those in B,C, or D plots. 6.10 Results of the survey showed that there was a regular decline in mean income from the B-plots to the D-plots, but that matching between plot prices and household incomes was not very precise. There was no constraint on income for A-plot applicants, and it was expected that applicants would come from higher income levels than the target range. In fact, however, average incomes of the A-plot and B-plot residents were not significantly different. 6.11 Although by the time of the monitoring survey about 25 percent of the purchasers of beneficiary plots appeared to have a monthly household incc'e in excess of the established upper limit, there were several possibie reasons for this, including increases in income after plot allocation, for example, from additional householder members taking on work. Increases of this kind are desirable, indicating that moving to their own property has stimulated economic activity among beneficiaries in order to pay for construction or improvements. This effect of the project in generating higher income levels among households is an encouraging development. Such increases in no way lessen the importance of allocating UDD beneficiary plots only to low-income households. Detailed investigation of apparent income increases should be carried out as part of the next monitoring survey. Upgrading Sites 6.12 The affordability record is also good for upgrading sites. Plot prices were generally lower than on the sites and services schemes. Although land prices were higher, plots were usually smaller, and there was normally no built provision apart from the sanitary cores.-I Sixty percent of plots cost less than JD 300, a range equivalent to the 1/ Sanitary cores were only built on the E. Wahdat site. They were discontinued because the beneficiaries preferred to have the flexibility of designing the placement of sanitary facilities within their houses.  - 14 - D-plots, making the great majority of plots affordable to the lower-income households. The UDD carried out a follow-up study of households which had very low recorded incomes in 1981. By 1985, incomes had improved substantially (adjusting for inflation) for many of the households. These changes were clearly connected with the entry or re-entry of household members in to the labour market. Out of the original very low income households in 1981, 68% had been accommodated on tUDD plots. Financing Construction 6.13 There is some indication that, within the extended family system, major inflows of capital may be provided in return for housing for family members. Although the standard house plans for UDP1 were drawn up on the assumption that the housing on the sites would be developed into two-story homes for single families, there may be a substantial number of separate apartments built on the setnd floors of the houses. The second apartment could be used to finance constructijn costs, either through rent that could be used to pay off a construction loan, or directly by advance payments from the intended occupant of the second appartment. The three-room norm is fairly common in Jordan with the rooms being multi-purpose living and sleeping areas. Parents tend to sleep in one room, male children in another, and female children in a third. It may well be that in UDD project sites, as beneficiary families achieve this norm (and many are doing so for the first time), the house extension possibilities, together with family financing, will be used by some beneficiaries to build an extra apartment. Such a system would allow beneficiaries to maintain close family ties through interconnected living and financial arrangements. Since it also increases either their rental income, or their ability to finance construction, and does not preclude the eventual use of the building for single family occupation, it should not be discouraged. It would be of interest to see to what extend this system is being applied in the next monitoring survey. D. Private Construction Activity 6.14 The project has generated a considerable amount of construction activity in the private sector. A survey of this activity was carried out in January 1988, for which the rationale and methodology are described in Annex 3. Based on the results of the survey, it is estimzted that, for residential construction, the private sector investment on the project's new sites is about two and a half times the initial "-public sector investment. This estimate is based on the sum of the (revised) contract values of the three new sites (JD 6.6 million) compared with an estimated sum of JD 16.6 million in construction costs to beneficiaries at the same sites (based average of JD 5,571 per addition on B and C type plots, and JD 6,833 for a new house on A and D plots). If anything, the ratio is an underestimate, since the public sector contracts include some off-site infrastructure costs. 1/ Public sector investment is described as 'initial' beca'