Ghana - Fifth Urban Project

Report No. PID7973 Project Name Ghana-Urban Five Project Region Africa Sector Urban Project ID GHPE50624 Borrower Government of Ghana Implementing Agency Ministry of Local Government & Rural Development This PID prepared October 15, 1998 Appraisal Date October 1999 Board Presentation October 2000 1. Country and Sector Background. Ghana's goals of accelerated economic growth, improved quality of life for all Ghanaians, and reduced poverty- through macroeconomic stability, higher private investment, broad-based social and rural development, and direct poverty-alleviation efforts--have been reiterated in the 1995 Government report (Vision 2020). Small and medium cities serve as agricultural marketing and service centers in support of the rural economy. Inadequate urban infrastructure and services and weak local government institutions hamper the ability of cities to fulfill their economic and social functions. Basic infrastructure such as roads, drainage, sanitation, water supply, transport terminals, and markets, needs to be improved to set the basis for greater private sector activity in these urban centers and improve the quality of life of the population. The most important government policy related to urban development is the recent decentralization initiative. Under the Local Government Act Service of 1993, Ghana's metropolitan, municipal and DAs were given the status of autonomous local governments with legislative and executive powers within their areas, and the power to prepare and approve annual budgets, raise revenues from taxes and fees, borrow funds, acquire land and provide basic services and local infrastructure. The issues of local government capacity at the district level, including resource mobilization and management for District Assemblies (DAs) will need to be addressed. 2. Project Objectives. The overall development objectives of the project are to: (i) improve basic urban infrastructure and urban services in secondary towns, especially services benefiting lower income people; (ii) strengthen the financial, technical and managerial capacities of District Assemblies; and (iii) improve the financial viability and sustainability of the housing finance system 3. Project Description. The proposed project would include the following components: Basic infrastructure improvements in selected secondary towns: Specific sub-projects in each town are to be prioritized by the DAs against a budget  constraint. The menu of eligible subprojects will include: roads, drains, water, sanitation, street lighting, markets and public transport terminals. Capacity-building for District Assemblies: Capacity-building would focus on the management of urban services and municipal finances. The project will finance a review of financial capacities of DAs. The modalities for capacity-building will be determined during project preparation based on this review and on an assessment of the lessons of experience from ongoing urban projects. Housing Finance: Project preparation studies have concluded that the HFC's mortgage operations would have to double to make HFC a self sustainable institution. Therefore an infusion of capital from IDA of around $10 million would contribute to expanding HFCs mortgage operations, providing construction finance, strengthening HFC to make it a financially viable entity. 4. Project Financing. The project is estimated to cost US$67 million of which IDA will finance US$60 million. The Government of Ghana is expected to contribute US$7.0 million. 5. Project Implementation. The overall project implementation will be coordinated by the Ministry of Local Government and Rural Development (MLGRD). Given the weak technical capacity among District Assemblies, a Central Implementation Unit acting on behalf of the DAs and MLGRD would be required. This unit would procure civil works, studies and goods required to implement the physical sub-projects. The Home Finance Company would be a separate implementing agency for the housing component with its own special and project accounts. HFC would deal directly with the World Bank. 6. Project Sustainability. Sustainability of investments depends on: (i) ownership of sub-projects by DAs and communities; (ii) availability of resources for operations and maintenance; and (iii) management capacity at the DA level, especially for O&M. The project aims to involve DAs and communities from the preparation and design stage to ensure ownership, and aims to enhance the management of municipal infrastructure and services. Involvement of communities and DAs from the beginning will sensitize them to the need to pay for services where appropriate, and ensure cost recovery. 7. Lessons Learned from Previous IDA Involvement. IDA has been financing urban projects in Ghana for over a decade. Significant progress has been made: urban roads have improved considerably; waste management systems have been established and are functional in major cities; a number of upgrading schemes have been successful; and inroads have been made in municipal capacity building, although a lot more needs to be done. This project has built on key lessons learned from four ongoing urban projects (Urban II, Local Government Development and Urban Environmental Sanitation Projects, and the Public Financial Management Reform Program) that are performing satisfactorily. The following issues will be addressed in the proposed project: Establishing effective institutional arrangements: There is need to ensure that the agency or unit given the responsibility for project implementation is also given adequate autonomy to enable it to function efficiently. Reforming local government staffing policy: The centralized staffing policy which places authority in the civil service to hire staff for DAs needs to be - 2 -  changed in favor of a policy that encourages DA participation in decisions relating to DA staffing. Concentrating resources for impact: The investments should not be too thinly spread out so as to make little or no impact on the local economy. Ensuring adequate operations and maintenance: There is need to ensure that proper institutional and fiscal arrangements are in place to carry out adequate operations and maintenance (O&M) of the infrastructure created/rehabilitated through the project. Increasing own source revenues through Revenue Improvement Action Plans (RIAPs): The fiscal health of DAs can be significantly improved by maximizing local revenue generation through the preparation and implementation of RIAPs and using budgets as a management tool. Strengthening capacity of DAs and central government agencies: The implementation of Government's ambitious decentralization program has been slow partly due to weak capacity both at the sector ministry and the DA levels. Continuing donor coordination: There is the need to continue donor coordination already started through Resident Mission in Ghana to support the Government's decentralization program. Under the proposed project, these past shortcomings will be addressed 8. Poverty Category. The proposed project is a poverty-focused intervention, aimed at promoting higher private investments and poverty alleviation through improved basic infrastructure in secondary towns. 9. Environmental Aspects. The project is rated B. The proposed project is expected to have a positive environmental impact. The Government's National Environmental Action Plan (1991-2000) highlights, amongst others, sanitation, drainage and waste disposal as major issues that need to be addressed on priority basis. The project will directly address improving drainage and the management and disposal of solid and liquid waste. The final disposal of solid waste and liquid waste (human waste evacuated from latrines, septic tanks and cesspits) is of particular concern in the towns, as the most common mode of disposal is indiscriminate dumping at "convenient" locations, such as fringe areas of the town, lagoons, streams, or the sea. The project will establish disposal sites in a cost effective manner that are appropriately located and engineered to provide maximum protection to the environment , specifically with regard to groundwater, drainage, air pollution and odor. The project will also establish appropriate operational practices for the sites. The project will take into account the policies and strategies undertaken by the Government and other projects in urban environmental sanitation to ensure the use of appropriate technical options and consistency in approaches. 10. Program Objective Categories. This project would promote higher private investments , improve basic infrastructure in secondary towns, and deepen the financial sector, banking, and non-banking sector reforms. Contact Points: -3-  InfoShop The World Bank 1818 H Street, NW Washington, DC 20433 Telephone: (202) 458-5454 Fax: (202) 522-1500 Jagdish Bahal Task Manager (202) 473-4158 Processed by the InfoShop week ending July 23, 1999. Note: This is information on an evolving project. Certain components may not be necessarily included in the final project. - 4 -