Senegal - Fourth Urban Project

Report No. PID991 Project Name Senegal-Urban Development and (@ +) ... Decentralization Program Region Africa Sector Urban Development Project ID SNPA2365 Borrower Republic of Senegal Supervisory Ministry Ministry of Finance Implementing Agency Municipal Development Agency (MDA) for PAC1 and PAC2 and AGETIP for PAC3 Dakar, Senegal Contact: Mr. Sakho and Mr. Sarr (MDA) Tel: 221.823.93.56 Fax: 221. 823.93.60 Date PID Prepared December 4, 1997 Date the initial PID prepared July 15, 1994 Appraisal Date April 1, 1997 Board Date November 20, 1997 Country/Sector Background 1. While the economy of Senegal grew at an average annual rate of 2.2 percent from 1982 to 1992, the population also grew at a relatively high rate of 2.6 percent per year. The average urban population growth rate was 3.7 percent from 1990 to 1995. The urban areas are not equipped for the rapid pace of expansion which severely tests the capacity of municipalities to efficiently deliver basic urban services and manage economic, environmental and investment resources. Investments in urban infrastructure have increased over the past years, supported by a number of externally funded projects. 2. The Government of Senegal (GOS) has pursued a progressive, yet cautious decentralization policy since independence in 1960. The 1990 reforms brought about a better definition of roles and responsibilities of local governments but were not linked to the transfer of financial or technical resources, both essential to municipal development. The adoption of legislative reforms in February 1996 are initial efforts to ensure the transfer of financial resources to support the transfer of technical competencies. With the emergence of the decentralization process, municipalities are faced with the crucial issue of deciding, in a context of limited financial, technical and human resources, what to deliver (priorities), where to deliver it, who should be the primary beneficiaries, and how it should be financed, managed and maintained. Project Objectives  3. This program supports the Senegalese Decentralization Policy and aims at gradually shifting responsibility and accountability, in terms of delivery and maintenance of urban services, and infrastructure to municipalities. The program's objectives are: (a) to improve the financial and organizational management of municipalities; (b) to improve the programming of priority urban investments; (c) to rationalize and simplify the financing of urban investments; and (d) to upgrade basic infrastructures in urban and some rural communities. Project Description 4. The program includes two main components: (1) capacity building of central and local governments through (a) the implementation of a Municipal Adjustment Program (MAP) based on a municipal contract, a binding agreement between the central government and municipalities, and (b) support activities aimed at providing an enabling environment for these Municipal Adjustment Programs to take place (training, fiscal reforms study, etc.); and (2) physical investments including the construction, rehabilitation and maintenance of public infrastructure, facilities and services under the responsibility of local governments, including: (a) roads, drainage and lighting; (b) education and health facilities; (c) socio-collective facilities; (d) administrative and technical buildings; (e) revenue generating facilities (markets, bus stations); (f) environmental sub-projects (on-site sanitation and solid waste management); and (h) rehabilitation of historic buildings. Project Financing 5. In addition to IDA credit of US$75 million equivalent, external financing will be available. The Senegalese Government and the municipalities will finance an amount estimated at US$19.3 million. The donor community has expressed interest in parallel financing. The CFD (Caisse FranQaise de Developpement) has agreed to a parallel financing of Ffs 50 million. Project Implementation 6. The different actors who will participate in the execution of the project include: (a) the Senegalese Government; (b) the MDA; (c) municipalities; (d) the Mayors Association of Senegal and the Association of Presidents of rural communities; (e) accepted contract management agencies; (f) financial institutions; and (g) the private sector (contractors, consultants and the beneficiary population). The MDA was created as the delegated executing agency for the UDDP. A manual of procedures defines the MDA's role and operational procedures. The MDA will: (a) assist municipalities in the preparation of municipal contracts and implementation of their MAPs; (b) implement and supervise support activities; and (c) work closely with the contract management agency. The collaborative, independent relationship between the MDA and the administration will enable the MDA to maximize its position of neutrality in decision making while maintaining close contact with the Government. - 2 -  7. The Senegalese Government is responsible for the: (a) allocation of the amount of the FECL; and (b) adoption of legislative and local fiscal reforms to assist the MDA's objectives. 8. Municipalities elaborate, negotiate and sign a municipal contract, prepare an investment plan, work with the MDA on studies and financing, and work with a Contract Management Agency (CMA) on project implementation. The CMA will be the primary agency to execute and supervise the investment program defined in the municipal contract. AGETIP will be the primary CMA for PAC1 and PAC2 and the executing agency for PAC3. All studies and projects will be implemented by private sector firms. As is currently the practice, the CMA does not execute any operations itself and, therefore, contracts out all the sub-projects to local consultants, entrepreneurs and suppliers in order to maximize the participation of local entrepreneurs and generate employment through labor- intensive approaches to public works. Contracting enables the municipality and the CMA to avoid hiring additional technical staff and remain focused on improving work quality and developing skills of managers and workers. An improved quality of work will be obtained through training consultants and contracting staff, tightening classification criteria for contract awards and improving supervision of work. Project sustainability 9. The program is timely, considering the recent decentralization reforms and the latest municipal elections (December 1996). The tools to improve the programming of municipal investments and the overall management of municipalities have been designed with the major objective of being user-friendly and becoming, over time, part of common management practices. The overall institutional framework of UDDP responds to the need to simplify and rationalize the distribution of responsibilities among the various public and private actors in the financing and delivery of infrastructure and services, in a political climate which is ripe for these changes. Lessons learned from past operations in the country/sector 10. While the previous two Public Works Projects have been successful in the provision of urban services, they have not addressed the crucial issue of transferring responsibility to local governments for programming, financing and maintenance of these services and infrastructure. The lessons learned from the Public Works Projects include the need to: (a) increase the involvement of beneficiaries in project identification and planning to secure program sustainability, especially operations and maintenance. Capacity development at the municipal and community level will enable the municipalities to play their proper role in the development process; (b) include social and economic analysis in the appraisal process in addition to the technical engineering studies; (c) require the deposit of counterpart funds before the review of sub-projects to offset the slow disbursement of funds by the Government; (d) increase environmental impact consideration; (e) consider the proposed projects' impact on current projects; and (f) -3 -  take into account the effectiveness of setting up an autonomous, commercial oriented agency with stakeholders representatives on its Governing Board. Poverty Category 11. The program will have an impact on a large percentage of the urban and rural population, particularly in low-income, urban neighborhoods which currently endure inadequate levels of services with serious environmental risks. The Priority Investment Program (PIP) is selected on the basis of an inventory of basic infrastructure and services (Inventaire pour la Programmation des Infrastructures et Equipements/IPIE), a tool which assesses and identifies gaps in the level of neighborhood services. Each sub- project is then screened on the basis of a poverty impact evaluation. Furthermore, the urban audit process places an emphasis on underserved areas and aims to enhance the population's access to basic services. Environmental Aspects 12. This category B program will facilitate sustainable improvements in the living and working environment of Senegal's urban areas. See annex for details. Project Benefits 13. The program will support the decentralization process and promote a more active role for municipalities and to some extent for rural communities. It will: (a) stimulate the capacity of local governments to efficiently program, finance, execute and maintain facilities, as well as to deliver the services; (b) facilitate improved municipal financial performance and contribute to the macroeconomic objectives, through a reduction of the public sector deficit; (c) positively impact the urban and rural population through: (i) reduced costs of and better access to municipal services and to basic rural infrastructure; and (ii) employment generation through sustained public works activities. Project Risks 14. The major program risks are: (a) introduction of parallel competitive, less demanding sources of funding to municipalities by other donors; (b) inability of the Government to enact the required fiscal reforms or effectively manage the decentralization program; (c) failure of municipalities to implement the municipal adjustment programs or to reimburse their share of the credit; and (d) unfavorable macroeconomic conditions during program execution. 15. These are important risks which cannot be ignored, although the rewards from the successful implementation of the Program are also very high. Several factors reduce these risks: (a) continued coordination with donors during project preparation and their adherence to the Program as demonstrated by their willingness to participate in UDDP; (b) strong ownership demonstrated by the - 4 -  Government and the municipalities through their participation in project preparation; and (c) a realistic assessment of the municipalities' financial capacity and a pragmatic Municipal Adjustment Program catered to specific local circumstances and performances. Contact Point: The InfoShop The World Bank 1818 H Street, N.W. Washington, D.C. 20433 Telephone: (202)458-5454 Fax No.: (202)522-1500 Note: This is information based on an evolving project. Certain components may not necessarily be included in the final project. Processed by the InfoShop week ending January 23, 1998. - 5 -  Annex Environment This category B program will facilitate sustainable improvements in the living and working environment of Senegal's urban areas. The physical and socio-economic conditions of the urban population will improve due to the upgrading of urban infrastructure and increased provision of basic urban services. In order to ensure the physical components have a positive impact on the urban environment, an environmental impact checklist will be included in the preparation of the municipal contract. The checklist capitalizes on the 1993 final environmental report (etude sur l'Environnement Urbain au Senegal) and the 1994 complementary study (Complement de l'etude sur l'Environnement Urbain au Senegal). The creation of a checklist has the dual advantage of: (a) screening sub-projects in a more operational manner than with an environmental assessment; and (b) enhancing the pedagogical value of raising local governments' awareness of their proposed projects' environmental impact. Each sub-project will be selected on the basis of an environmental impact evaluation form, highlighting specific eligibility criteria. - 6 -