Mozambique - Municipal Development Project

Report No. PID8361 Project Name Mozambique-Municipal Development Project (@) Region Africa Regional Office Sector Decentralization; Urban Management Project MZPE1806 Borrower(s) GOVT OF MOZAMBIQUE Implementing Agency Address MINISTRY OF STATE ADMINISTRATION (MAE) Municipalities of participating cities Contact Person: Mr. Jose Guambe, Director of Local Administration, Ministry of State Administration Tel: 258-1-307888 Fax: 258-1-428565 Email: prolmae@zebra.uem.mz Environment Category F (Financial Intermediary Assessment) Date PID Prepared January 8, 2001 Projected Appraisal Date February 19, 2001 Projected Board Date June 30, 2001 1. Country and Sector Background The prolonged civil war in Mozambique (1975-92) had a severe impact on its urban centers. Large numbers of rural people fled to urban areas, tripling the urban population between 1980 and 1995. The urban population of Mozambique now represents about 38t of the national total (1998) and is still growing rapidly, at nearly 6t per year, compared with a total national population growth rate of around 2.4w per year (figures from the World Development Indicators 2000). The huge influx of mostly poor migrants into cities and towns overwhelmed infrastructure systems originally designed for much smaller numbers. With severely deteriorated infrastructure and services, cities are not capable of adequately supporting the economic productivity of firms and households. Living conditions in cities are deficient for most residents. Slums and squatter settlements are a very visible part of the urban landscape. The urban poor -- 62t of urban dwellers according to the most recent 1996-97 poverty study -- suffer disproportionately from bad environmental sanitation, resulting in ill health and stunted economic opportunities. Urban service deficiencies include deteriorated roads, inadequate supplies of potable water, and poor drainage and domestic sanitation resulting in widespread water-borne diseases (infant mortality was 135 per thousand in 1997 compared with 69 for low-income countries world-wide, with a major share due to diarrhea and other sanitation-related diseases). In 1993, only 23t of households in Maputo had a sewerage connection; the vast majority of urban residents still rely on pit latrines or have no sanitation facilities. Haphazard dumping and low collection levels of solid waste (only 37T in Maputo in 1993, which probably has gone down since then due  to rapid growth of the city) contribute to these problems. In addition, a severe problem of deforestation and loss of mangroves near coastal areas results from the dependence of most of the urban population on fuelwood and charcoal for energy. Since 1987, the Government has been engaged in a program of economic rehabilitation, shifting from a command economy to one based on market forces. A policy of gradually decentralizing authority to local governments is a key feature of this program. In early 1997 the National Assembly approved a package of several laws governing municipal elections, the creation of municipal councils and assemblies, and municipal finances. Among the main components were constitutional amendments to permit the creation of local governments (Lei 9/96, November 22, 1996); the Law of Municipalities (Lei 2/97, February 18, 1997); and the Law of Municipal Finances (Lei 11/97, May 31, 1997). These constituted a comprehensive national legal framework giving municipalities extensive administrative and financial autonomy. Municipal elections were held on June 30, 1998 in 33 urban centers: 10 regional capitals (Cidades Capitais), 13 cities (Cidades), and 10 towns (Vilas). In August 1998 the newly elected municipal Presidents (mayors) were sworn in. Support for the preparation of the legislative package on municipalities was a major accomplishment of the Bank-financed Local Government Reform and Engineering Project (PROL). As the Goverenment's Letter of Sector Policy indicates, the next few years will be a learning and testing period for the new municipalities and the central government. Based on these lessons, the Government plans to go forward with further decentralization. Achieving the full degree of municipal autonomy envisaged in the laws will be a long-term task, however. Entrenched habits of centralization and authoritarianism will take time to break down, and the essential building blocks of successful government -- appropriate staff, adequate financial resources, and an appropriate regulatory framework -- will requires years of work and experience to establish and fine tume. Moreover, the performance of the municipalities in the near future may be affected by the fact that the main opposition party boycotted the 1998 municipal elections, and the voter turnout was extremely low (around 15% of the eligible population). Municipal governments have consistently lacked investment funds, and they are barely beginning to develop systematic approaches for the provision of urban infrastructure and services. There is a huge backlog of dilapidated roads, drains, and sewer systems which have not been maintained. Recurrent services such as solid waste collection have low coverage and fluctuate with the availability of municipal or donor funding. Organizational structures for infrastructure and service provision are archaic, often relying on "force account" cadres of municipal laborers. Little use is made of private sector contracting. User fees for sewerage, sanitation, and solid waste disposal are minimal or non-existent. Municipal sanitation departments don't keep fees collected for services; these go back to the general municipal treasury. Municipal governments' revenues are extremely low, averaging US$6.71 per capita across the five main cities in 2000. Less than half are own source or locally collected revenues (US$2.71 per capita in 2000 for the five cities), and these are largely a fees and licenses, with market fees being the most important. The majority of municipal revenues are fiscal -2 -  transfers from the central government. At the same time, recurrent expenditures are increasing and now represent 70 percent of total expenditures on average. Of these, over 40 percent are consumed by personnel costs. In consequence, maintenance of municipal assets is extremely low in proportion to total expenditures, and, unless the trend is changed, municipalities will be able to afford little of the needed new investment and improvement in municipal services. To deliver the improvements promised by municipalization, municipal revenues will have to increase significantly. Financial projections undertaken as part of the preparation of the project show that under a realistic scenario of pro-active measures to increase revenues and control expenditures, the five main cities would be able to afford steadily growing investment programs and still provide for adquate operation and maintenance. This scenario presumes a modest success in increasing revenue generation (including fees to cover costs of services), new tax revenues that exceed the cost of collection, actively controlled recurrent expenditures, and an increase in fiscal transfers. Importantly, a number of new local taxes are provided for in the recent Law of Municipal Finances, potentially representing very productive sources of municipal revenues. However, to date the appropriate regulations have not been promulgated, and thus the municipalities have not yet been allowed to start collecting these taxes. The new municipalities are empowered to provide a full range of municipal infrastructure and services. Basic urban services (such as garbage collection and drainage) have always been handled by the local city and town administrations. However, the transfer of competencies for activities beyond these basic services (such as pre-school and primary education and primary health posts), along with commensurate resources, will be a long and difficult process. It will depend, to a large extent, on improving the capacity within the municipalities to fulfill existing responsibilities. MAE, with help from the PROL Project, drafted a decree regarding the transfer of competencies which is being considered by the Council of Ministers. The transfer mechanism envisaged in this proposed legislation is intended to be a contract between the central government and the municipalities spelling out the assignment of central government staff to the municipality, the transfer of fiscal resources, and the allocation of physical assets for each type of service. Finally, the new municipalities require policy reforms and assistance to improve their human resource capabilities. Except to a limited degree in Maputo, municipalities have no senior level engineers, planners, or financial specialists, and one is lucky to find middle-level technical personnel in the larger urban centers. The new municipal Presidents and Assembly members will require considerable orientation and training. Even in the private sector, there is a severe shortage of trained and experienced Mozambican engineers, planners, and financial specialists. It is especially difficult to recruit technically qualified people for long- term assignments away from Maputo. 2. Objectives The primary, long-term development objective of the proposed project is to strengthen the capacity of municipal governments in the areas of management, finance, and the provision of infrastructure and services. - 3-  The project's specific objectives are: (a) to assist the Government of Mozambique (GOM) in completing the legal and institutional framework for municipal governance, mainly to ensure municipalities' financial viability and constitutionally defined autonomy; (b) to create an institutional capability and a framework for training of elected and appointed municipal officials and municipal employees; (c) to train officials and staff of all the municipalities in basic administrative and technical subjects; (d) to establish a replicable Municipal Grants Fund (MGF) -- through a pilot in five cities -- to finance investments by the municipalities; (e) to implement, through the MGF, capital investments which will have tangible economic and social benefits; and (f) through their actual practice as implementing agencies under the MGF, to improve the technical and financial capacity of the five municipal governments to provide sustainable urban infrastructure and services. 3. Rationale for Bank's Involvement The Bank is the only external assistance agency in a position to provide significant resources for a national program in urban policy, capacity- building, and investment. While a number of other agencies are supporting activities in the sector, their interventions are limited in scope, mostly focusing on particular urban centers or specific aspects of urban development. The Bank's comparative advantage is to operate simultaneously at the center and local levels, linking both capacity building and investment to policy reform and the strengthening of municipal autonomy, enabling an iterative and cumulatively reinforcing process. The Bank's 10 years of experience in urban development in Mozambique (through the PRU and PROL projects) give it credibility and a mature understanding of the issues. Moreover, throughout the duration of these projects, as well as other projects related to reform of the public sector, the Bank has built up a relationship of confidence with MAE in particular and the Government more broadly. As a result, the Bank is leading the support for the next stages of public sector reform, now in the design stages, which will also be supported through a Bank-funded project. As a multilateral agency, the Bank is in a position to serve as a focal point for establishing a programmatic framework for urban development with the concerned Mozambican institutions and other assistance agencies. Developing a program of support over the long-term will be an output of the project. The other main agencies active in the public sector reform sector are UNDP, through its support of SIFAP among other initiatives, and Swedish SIDA, through its long term support for the institutional development of MAE. 4. Description The Municipal Development Project would have three components: (1) Legal and Institutional Reform, (2) Municipal Capacity Building, and (3) a Municipal Grants Fund. The first and second components would cover all 33 municipalities. The Municipal Grants Fund would be a pilot program in five municipalities: Maputo, Beira, Nampula, Quelimane, and Pemba. The Legal and Institutional Reform component would provide technical assistance to the Ministry of State Administration for the drafting of legal instruments (regulations, decrees, etc.) and the preparation of studies, manuals, guidelines, and other materials needed to establish the legal and policy framework -- the "enabling environment" -- for municipal development and management. -4-  The Municipal Capacity Building component would provide in-service training to elected and appointed municipal officials, municipal staff, and members of other organizations which support the municipalities. It would also develop materials for pre-service training and provide technical assistance to develop and improve systems and processes. This component would develop a strategy that encompasses training in the municipal government system and public administration in general, as well as basic technical skills needed by the municipal authorities, such as municipal finance and delivery of infrastructure and services. The Capacity Building component would be institutionalized in the Intermediate Institute for Public Administration (IMAP). This component would be funded by the Nordic Development Fund (NDF) as parallel financing of the project. The Municipal Grants Fund (MGF) would provide municipalities with financial resources to implement high-priority civil works, equipment, and consultant services. The MGF is based on the idea that if municipalities are to be responsible for the operation and maintenance of infrastructure and services, they should be responsible for their implementation, in the interest of building local-level capacity and promoting the sustainability of the investments. The Municipal Grants Fund would be designed on a modest scale, as a pilot program for "learning by doing". It has been agreed that, during the initial four-year phase of this project, the MGF would be initiated with five municipalities (Maputo, Beira, Nampula, Quelimane, and Pemba). The objectives of the MGF are (a) to provide resources to municipalities for small and medium sized infrastructure, equipment, and consultant services; (b) to enable the municipal governments to develop capacity to plan, implement, and manage basic investments and to integrate the associated expenditures (municipal contributions of 10. of the investment costs; operation and maintenance costs) and revenues into their budgets; and (c) to test and refine the MGF, identifying problems, trying different solutions, and, to the extent possible, laying a foundation for a sustainable, expandable municipal grants mechanism. It is important to note that the US$ 24.8 m. cost of the Municipal Grants Fund component represents an estimate of the maximum amount that could probably be drawn down by the five municipalities under optimal conditions and with the best performance by municipalities and contractors. The actual amount that would be disbursed under this component would depend on many factors and may be significantly less than the maximum estimate. 5. Financing Total ( US$m) Total Project Cost 41 6. Implementation The Ministry of State Administration (MAE), through its Directorate for Local Administration (DNAL), would be the responsible central government agency for the project. The Legal and Institutional Reform Component would be managed directly by an official of MAE, nominated by the Minister and reporting to the Director of DNAL. This component would have a Steering Committee composed of officials from MAE, the Ministry of Planning and Finance, and a sample - 5 -  of municipalities. The Capacity Building component would be implemented by the semi- autonomous Intermediate Institute for Public Administration (IMAP), under a Memorandum of Understanding signed with MAE/DNAL. IMAP already has been designated as the training arm of the Government's new civil service training system (Sistema de Forma6ao da Administra6ao Publica/SIFAP). Under the project, IMAP would create a new, permanent unit within its structure, the Gabinete de Capacita6ao Municipal (GCM), to manage the component. The GCM would be staffed by seven specialists, two of whom would be counterpart staff from IMAP and five who would be contracted through a specialized consulting firm. The GCM manager would report to the Director of INAP. This component would have its own Steering Committee composed of the Director of DNAL, the Director of IMAP, and municipal officials. The GCM would operate its own budget for the implementation of the component. The five municipalities participating in the Municipal Grant Fund would be implementing agencies in their own right for the activities funded by the MGF. The municipalities would sign contracts, operate bank accounts with project funds, carry out procurement, make payments, and be accountable for their financial and technical performance. The obligations of each party would be specified in a Grant Participation Agreement signed between each Municipality and MAE. Each municipality would be required to establish a project team consisting of a Council member (Coordinator), a qualified civil engineer, a qualified accountant, and a tehnician. A consulting firm under contract to the Project Coordination Unit (see below) would provide technical assistance to municipalities on request to help implement contracts and transfer skills. A Project Coordination Unit (PCU) would be established within DNAL to administer the project's finances, oversee procurement, manage contracts, and supervise technical assistance. The PCU would be headed by a full- time Project Director reporting to the Director of DNAL. The other staff of the PCU would be a Senior Financial Controller, a Senior Procurement Specialist, and a three-person Grants Unit (see below). The Terms of Reference for the PCU appear in Annex 11 of this PAD. The PCU would provide administrative, financial management, and procurement support for the Legal and Institutional Reform component. For the Capacity Building component, the PCU's role would be limited to the provision of advice on administrative and procurement matters. An ad-hoc sub-unit within the PCU would be established to manage the Municipal Grants Fund. The responsibilities of this Grants Unit would be: (i) to assist the municipalities to meet the requirements for funding activities; (ii) to review the eligibility of municipalities and grant- funded activities; (iii) to supervise the consulting firm providing technical assistance to municipalities; (iv) to compile annual data on the technical and financial performance of the municipalities; and (v) and to manage disbursements of grants to the municipalities. The Grants Unit would be staffed by a Grants Fund Manager, a Civil Engineer, and an Accountant. A Grants Fund Board would be established to annually review the performance of the MGF and of the participating municipalities and to hear appeals from municipalities concerning decisions of the Grants Unit. The Board would consist of the Project Director (chair), the Team Leader of the consulting firm providing technical assistance to the - 6 -  municipalities, two Municipal Council members from two municipalities other than the five participating in the Grants Fund, one official of MAE, and one official of the Ministry of Planning and Finance. The Project Director would be hired on an individual, long-term contract based on advertised, competitive recruitment. The remaining staff of the PCU would be contracted through a consulting firm. 7. Sustainability The question regarding the project's Legal and Institutional Reform component is the extent to which the government would promptly enact the new decrees, regulations, and other legal instruments that would be produced under this component. This is difficult to predict, because the enactment of legal instruments is a political process. Past experience-- as in the case of the Municipal Tax Code which was sent to the Council of Ministers in 1998 but has not yet been passed--shows that there is a lot of uncertainty as to the timing of reforms. The project finds assurance of the government's commitment to extending the legal and institutional framework in two factors. One is that the Legal and Institutional Reform component was prepared entirely by the Ministry of State Administration. The work plan for the component is therefore fully "owned" by the client. The other is that municipal governments, as autonomous political entities, have been and should continue exerting pressures on the central government to implement the enabling legal instruments for municipal finance and management. There is a risk that changing political circumstances might lead the government to not create additional municipalities or to not extend the competencies of the existing municipalities beyond the core urban services. Either of these situations would represent a blockage in the decentralization program. The project aims to promote conditions in which this would be less likely to happen by enabling the municipalities to show some concrete results through the Grants Fund, thereby enhancing their legitimacy; by creating a framework for further donor support; and by building support for the municipalization process among the affected populations. There are two aspects to the sustainability of the Capacity Building Component. One is the sustainability of the institutional framework for providing in-service and pre-service training to officials and staff. This faces few risks, as the new Capacity Building Office will be fully integrated into the existing IMAP from the start. The other aspect is the sustainability of the benefits of the training. MAE's priority for the training program under this project is to provide as many officials and staff as possible in the 33 municipalities with basic knowledge; i.e., a strategy of training widely and broadly for the many rather than deeply for the few. It is likely, therefore, that the benefits of the training program would likewise be broad but not deep, in the sense of substantially implanting new technical skills. Even so, as with all training programs for the public sector, some of the benefits could be lost to the public sector (but not to the economy as a whole) because of the government's difficulty in retaining skilled staff. The mitigation measures for this are long-term. The government is launching the next phase of civil service reform to help address this problem, and the project would work closely with these initiatives. The Legal and Institutional Reform component would seek to increase the autonomy of municipal governments to manage their own staff, thus freeing them to - 7 -  adjust their staffing tables, salary scales, and employment conditions to local needs and the local environment. The project would also encourage contracting private enterprises to deliver services, as well as local consultants to complement the regular municipal staffs. Nevertheless, in the short term, as economic growth continues to fuel demand for scarce skills, losses to the public sector of recently-trained staff will be difficult to avoid. The Municipal Grants Fund also poses sustainability issues at two levels. One is the sustainability of the MGF as an institution. The MGF would require outside funding (from the World Bank and/or external assistance agencies) for its medium/long-term continuation. It is hoped that, if successful, the MGF can be moved, in the next phase of the municipal development program, from its initial ad hoc status to a more permanent institutional home, preferably in a semi-autonomous Municipal Development Institute. The other aspect concerns the sustainability of the capital investments funded by the MGF. The Grants Fund would require all proposals for sub-projects to include evidence of community consultation on their selection and design and an acceptable operation and maintenance plan covering institutional responsibilities for O&M and a financing plan based on user fees and/or general revenues. Making municipalities responsible for proposing and implementing the investments and the requirement that municipalities contribute 10% from their own budgets to each investment are also designed to promote sustainability. 8. Lessons learned from past operations in the country/sector Africa and Other Regions: The proposed operation incorporates the main lesson of the World Bank's experience in urban development from the region and worldwide. The main lessons on decentralization and urban management are drawn from (i) the Africa Urban Assistance Strategy prepared for the World Bank's Urban Strategy of 1999; (ii) the Operation Evaluation Department's Evaluation Summaries; and (iii) the report "Fiscal Decentralization and Sub-national Finance in Africa" (DANIDA and World Bank, 2000). The project team examined four operations in the region designed to channel funds to local governments for investments through grant systems: the Zimbabwe Rural District Council Pilot Capital Development Project (closed in June 2000); the Zimbabwe Local Government Capital Development Project (negotiated but "on hold"); the Uganda Local Government Development Program (active); and the Senegal Urban Development and Decentralization Project (active). The Bank has financed numerous municipal grant mechanisms in other regions; two examples which were examined in the preparation of the present project are the Parana Municipal Development Project in Brazil and the Municipal Development Projects I and II in the Philippines. Among the key lessons that have been incorporated in the design of the proposed project: 1. Long-term approach. The project takes into account the fact that the development objectives in the local government area are inherently long-term and must be pursued not on a project-by-project basis but in the framework of an extended program. This gives rise - 8 -  to the conceptualization of this project as the first stage of a hoped-for long-term program, which would be an output of the project. 2. Realistic objectives. A further lesson is that local government projects should establish realistic development objectives, taking into consideration (i) the long-term nature of the fundamental objectives and (ii) that it takes a "critical mass" of technical assistance, training, and investments, supported by a positive "enabling environment, to produce real results. The project's development objectives have thus been formulated as modest, concrete, and specific objectives which are considered achievable within the span of the project's life. 3. Municipal implementation. The project incorporates the lesson that investment programs for municipal infrastructure and services should be implemented by the municipalities themselves in the interest of (i) building capacity through "learning by doing" and (ii) promoting the sustainability of the investments. 4. Ownership and sustainability of investments. In line with the previous point, the Municipal Grants Fund is designed with several features which, according to experience, should promote ownership and sustainability of investments by municipal governments. One is the requirement for a 10. counterpart fund contribution from municipalities toward all activities financed by the MGF. Another is the requirement for an operation and maintenance plan for each activity financed and the monitoring of the actual performance of O&M once investments are completed. 5. Attention up front to implementation. The Government's main client agency, the Ministry of State Administration, and the Bank have invested considerable time working out the details of effective institutional arrangements during the preparation phase. Such "up front" attention to implementation details has been shown to be key for project impact and sustainability. 6. Demand and performance-based approaches. Prior experience has shown that strengthening sub-national governments should be a demand- driven process, to ensure that the interventions are truly effective and sustainable. Ideally, the grant system should operate with self-selection of municipalities based on meeting criteria for participation. Mozambique's municipalities and the legal framework are too new and weak for such an approach, and the Government has insisted that five municipalities be pre-selected for the pilot. Nevertheless, the MGF does incorporate an initial "performance incentive" approach whereby a municipality's eligibility for an annual grant is dependent on its performance in using the previous year's grant, and the amount of the subsequent grant varies in proportion with the municipality's ability to improve its financial position. 7. Mitigating risks of political factors. Previous local government projects have shown that there is a risk of political interference in the operations of capacity-building programs and municipal funds. - 9-  The ideal approach is to try to institutionalize such mechanisms outside of Government ministries and to provide steering committees or boards with non-political members. In this project, the Capacity Building component would be housed in a semi-autonomous body, the Intermediate Institute of Public Administration, whose vocation is public sector training. It would have been desirable to establish the Municipal Grants Fund as a separate entity, but the institutional framework in Mozambique is not sufficiently developed to allow it at this point. The possibility of setting up a new Municipal Development Institute was raised during project preparation, but the Government considered the idea premature. Therefore, for the pilot phase under the project, the MGF would be managed by an ad hoc unit in the Project Coordination Unit. The expectation is that once the mechanism is tested and proven, its permanent institutionalization would be re-visited as a key issue for the long-term municipal development program. Mozambique: The Bank has supported two prior urban projects in Mozambique, the Urban Rehabilitation Project (PRU, Cr. 1949), effective from 1989 to 1996, and the Local Government Reform and Engineering Project (PROL, Cr. 2530) which became effective in 1994 and closed in 1999. PRU financed mainly infrastructure in Maputo and Beira. The main outcome of PROL was the set of laws, known collectively as the Pacote Autarquico, that comprise the legislation creating the first 33 autonomous municipalities. The recently completed First Roads and Coastal Shipping Project (ROCS I, Cr. 23740), which became effective in 1992 and closed in 1999, also provides useful lessons. The lessons from these projects which are reflected in the MDP's design include: 1. Definition of responsibilities. The MDP reflects the lesson that project design should be well focused and simple, with clearly defined institutional responsibilities. MAE, through its Directorate for Local Administration (DNAL), would be the main central government counterpart agency for the project. The Legal and Institutional Reform component falls clearly within MAE's main mission, which is policy formulation and legal oversight of municipalities. Both the Capacity Building and MGF components require implementing agencies with specialized vocations in the respective areas. In both cases these are existing institutions (IMAP and the municipalities) with the appropriate mission. 2. Trust and ownership. The previous projects showed that the success of efforts toward governance reforms are especially dependent on a high level of trust between the Bank and the borrower and "ownership" by the client agencies. This lesson came particularly forcefully from the PROL project, and it has strongly affected the project preparation process. 3. Institutional reform and investment reinforce. The PRU focused on physical investments with little attention to institutional or policy measures while the PROL aimed to bring about policy and institutional changes without accompanying investments. Both projects fell short. The MDP attempts to give due weight to both - 10 -  aspects, recognizing that (i) investments provide a good vehicle for local institutional reform and capacity building and (ii) the sustainability of investments at the local level depends on a conducive policy and legal framework at the central level. 4. Demand driven technical assistance. Some technical assistance interventions for local authorities in the PROL project were not successful because they were supply-driven and top-down. The new project incorporates features to correct this. The Capacity Building component includes annual beneficiary assessments as well as include a Steering Committee of representatives from the municipalities who will meet twice a year to approve action plans and strategies. The Municipal Grants Fund also includes a Grants Fund Board with municipal officials on it. Also, technical assistance for the municipalities is to be supplied by a consulting firm which will operate on a demand-driven basis. This firm would be evaluated annually for the technical quality of its outputs as well the promptness and consistency of its responsiveness to the Municipalities. 5. Early skill training. Experience has shown that, where implementation capacity is especially scarce (as in Mozambique), projects should ensure that project personnel have the necessary skills from the start. Appointment of qualified staff, and their training in administrative procedures and Bank guidelines, are a key part of the project preparation process and the early stages of implementation. 9. Program of Targeted Intervention (PTI) N 10. Environment Aspects (including any public consultation) Issues An Environmental Data Sheet (EDS) for this project was prepared and cleared by AFTE1 on February 24, 2000. In the approval of the EDS it was agreed that the review process for investments under the Municipal Grants Fund would incorporate a system of environmental checklists prescribing mitigating measures for the various types of eligible facilities. This is the same approach used in similar IDA- financed projects in Uganda (Local Government Development Program) and Zimbabwe (Local Government Capital Development Project). The Grants Fund would require that the appropriate mitigation measures be included in each proposal (along with other requirements for approval such as O&M plans, etc.). To keep implementation risks to a minimum, the project would also require that civil works should involve no involuntary resettlement in order to be eligible for financing. It was also agreed that an Environmental Analysis (EA) should be carried out before appraisal of the project. Terms of Reference for preparing the EA were approved by AFTE1 on March 6, 2000. 11. Contact Point: Task Manager Alan G. Carroll The World Bank 1818 H Street, NW Washington D.C. 20433 Telephone: (202) 473-4554  Fax: (202) 473-8301 12. For information on other project related documents contact: The InfoShop The World Bank 1818 H Street, NW Washington, D.C. 20433 Telephone: (202) 458-5454 Fax: (202) 522-1500 Web: http:// www.worldbank.org/infoshop Note: This is information on an evolving project. Certain components may not be necessarily included in the final project. This PID was processed by the InfoShop during the week ending, January 12, 2001. - 12 -