Sri Lanka - Municipal Management Project

 Municipal Management Report No: ; Type: Report/Evaluation Memorandum ; Country: Sri Lanka; Region: South Asia; Sector: Other Urban Development; Major Sector: Urban Development; ProjectID: P010257 The Sri Lanka Municipal Management Project, supported by Credit 1697-CE for US$13.0 million equivalent, was approved in FY86. The Credit was closed in FY95, one year late, and US$2.9 million was canceled. The Implementation Completion Report (ICR) was prepared by the South Asia Regional Office. A summary of the borrower’s report is included as an annex. The project objectives were: (i) to strengthen the urban management capacity of the Ministry of Local Government, Housing and Construction (MLGHC); (ii) to improve financial management and revenue generation by local governments; and (iii) to enhance the service delivery performance of Urban Local Authorities (ULAs). These broad objectives were to be achieved by: (a) assisting MLGHC's implementation of institutional reforms intended to help local governments; (b) improving the financial performance of local authorities and rationalizing the system for allocating grants and providing loans; (c) improving service delivery by ULAs by undertaking pilot projects that would provide guidelines for infrastructure investments and traffic management; (d) providing technical assistance to prepare base maps of urban areas; and (e) by establishing programs for managerial, financial and technical training and a human resource development strategy for the ULAs. Few project objectives were fully achieved. Soon after the project became effective, widespread civil unrest (1988/89) led to the virtual suspension of project implementation outside Colombo. The subsequent Peace Accord resulted in a constitutional amendment that changed the structure of local government by strengthening provincial governments, thereby blocking ULAs' direct access to the central government. During the lifetime of the project there were six elections with consequent changes in government at all levels. These changes materially reduced borrower ownership of the project and had a detrimental effect on project implementation. Moreover, the failure to appoint a full time Project Director until 1993 further slowed implementation. More provincial councils benefited from training programs than originally planned. The required studies were completed and recommendations on the grant formula, accounting procedures, and a management information systems were made; but in both cases the failure to retain experienced staff in the Urban Program Unit prevented local authorities from benefiting from the program and thwarted improvement of the MLGHC's capacity for urban management. A limited number of pilot projects were carried out, but not completed because of delays. The mapping component was not undertaken mainly because of the civil strife. The project did however succeed in improving the financial performance of ULAs. The share of local revenues in the total revenue rose from 52 percent in 1985 to 71 percent in 1992. Now, 86 percent of all ULAs have new accounting systems. Because of the technical assistance nature of the project, no economic rate of return was estimated. In agreement with the ICR, OED rates project outcome as unsatisfactory, institutional development as modest, and sustainability as unlikely because of the failure to retain the personnel trained under the project. Bank performance is rated as satisfactory as in the ICR. The key lesson is that the Bank needs to be prepared to re-establish ownership of projects when the Government changes. Also, for sustainable institutional development, incentives to retain and make effective use of the staff that receives technical assistance and training should be put in place before the project starts. The ICR is rated as satisfactory. No audit is planned.