Burkina Faso - Public Works and Employment Project

C^RZ c Z-4r2 _ -,J Document of lThe World Bank FOR OMCLAL USE ONLY Repet No. P-5565-BUR IE AN N >:. 4l1 / I'h"iN UORANDWI AND RECOMMENDATION OF THIl PREI8DENT OF THE INiT!EATIONAL DEWLOPHENT ASSOCIATION TO THE iKCUTIW DIREMRS ON A PROPOSED TREDT IN THE AMOUNT 8QUIVALET TO US$20.0 KILLION TO URITNA FASO FOR A PUBLIC WORKS AND LOXENT PROJECT MAY 31, 1991 Ti doeument has a restricted distribution and way be used by recpeit otly in tlhe peonnanc of tleir -officis duties. Its contents inay oot oftllwise be dw witbwa World Baol atbrztion.  CURRENCY EQUIVALENTS Currency unit 3 CFA Franc (CFAF) US$1.0 CFAF 250 CFAF 1 million = US$4,000 SYSTEM OF WEIGHTS AND MEASURES: METRIC ABBREVIATIONS AND ACRONYMS AGETIP Agence d'Ex6cution des Travaux dInt6rdt Public Contre le Sous-emploi (Senegal) DANIDA Danish International Development Agency GTZ Deutsche Gesellechaft fur Technische Zusammenarbeit (Germany) KfW Kreditanstalt fur Wiederaufbau (Germany) ONPE Office National de la Promotion de l'Emploi OPEC Organization of Petroleum Exporting Countries SAL Structural Adjustment Loan SDA Social Dimensions of Adjustment UNDP United Nations Development Program FISCAL YEAR July 1 - June 30 This report is based on the findings of a World Bank mission consisting of Messrs. Leslie PMan (Economist, Mission Leader), Peter Wataon (Division Chief) Jean-Marie Lantran (civil engineer), Jacques Balanche and Magatte Wade (consultants) who visited Burkina Paso in March-April 1991 to appraise the project. Mr. Patrick Canel was the Peer Rsviewer for the operation. Mmes. Christiane Eliopoulos and JoAnne Nickerson provided secretarial support in the preparation of the report. Mrs. Katherine Marshall and Mr. Peter Watson are the Department Director and managing Division Chief, respectively for the operation.  FoR omCIAL USE ONLY PUBLIC WORKS ANDR UP NS PRRJIS CREIT ANID PROJCT SHUNMA Government of Burkina Faso 12tn2ficiar: Ministry of Plan Amount s US$20.0 million equivalent Termfts Standard, with 40 years maturity snInging Terms Not applicable ancine Plans Goverment: US$ 2.2 million IDA$ US$20.0 million Others USS 7.8 million TOTAL: US$30.0 million Economic Rate of Ret_nMs Not calculated Staff A&nrAiLal aenor:s 9535-WA This document has a restricted distribution and may be used by recipients only in the pirfor-m.Ace of their official duties Its contents may not otherwise be disclosed without World Bank uw..iuation.  MEMORANDUM ANp REOOHMENDATION OF THE PRESIDENT OF THE IDA TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT TO BURKINA PASO FMR A PUBLIC WOMKS AND EMPLOYMENT PROJECT 1. I submit for your approval the following memorandum and recommendation on a proposed credit to Burkina Faso for the equivalent of US$20.3 million to help finance a project for public works and employment. The credit would be on standard IDA torm with 40 years maturity. The Government of Burkina Faso will contribute US$2.2 million ar 10 percent of the IDA Credit. 2. Backgzond. Burkina Faso's record for the decade of the 1980s is one of upheavals. The country has known two coups d'dtat and one attempted coup in that decade. The socio-political unrest, coupled with drought, rainfall fluctuations, and the fall in world market prices for its main agricultural export commodities (cotton and groundnut oil) have contributed to reduce its competitiveness. For example, between 1972 and 1989, Burkina Faso saw a 50 percent decline in its terms of trade. 3. Meantime, Burkina Faso's economic structure underwent some changes during the 1980s, indicating the diminution of agriculture and the rise of services. In 1980, agriculture contributed 39.9 percent to GDP while industry and services contributed 18.8 percent and 36.4 percent respectively. In 1990, it has been estimated that agriculture constituted 30 percent of GDP while industry and services contributed respectively 23 and 42 percent. Also, the financial crisis has reduced investments in urban areas while the diminishing contribution of agriculture has reinforced rural-urban migration. With higher population growth and a small modern sector, the social effects of the crisis have been the most visible at the urban level. 4. According to the last population census of 1985, Burkina Faso has a population of 8.3 million representing an average density of 30 persons per square kilometer as compared to 20 in 1975. It has been estimated that by the year 2000, Burkina Faso will have a population of 12 million. The population of Burkina Paso is very young. Forty-five percent is lses than 45 years old, 52 percent is between 15 and 64 years old and 3 percent ts over 65 years old. The bulk of the labor force, estimated at about 3.8 million, works in agriculture (82 percent), industry (13 percent), and services (5 percent). In the past 30 years (1960-1990), there has been a small increase in birth rates (from 49 to 51 percent), a marked decrease in death rates (from 32 to 19 percent), and an increase in life expectancy (from 32 to 48 years). 5. The average informal sector worker is young and has little education. According to the 1987 survey done by the Office National de la Promotion de l'mploi (ONPl) in ouagadoagou, 60 percent of these workers are between 20 and 40 years old. Eighty percent of informal sector workers are illiterate, 15 percent have completed primary school, and 3.7 percent have completed secondary school. Eighty-two percent declared themselves self-employed, 8 percent are in an apprenticeship program, and 4 percent are employers. There exists a great deal of labor mobility in the informal sector but the group of "employerw is made up of those who declared that they have been working for more than five years in their present activity. 6. A high population growth rate of 3.3 percent and intense rural-urban migration have dramatically increased urbanization in the 1980s. The capital city, Ouagadougou, which had a small population of 276,000 in 1980, has more than doubled in population, reaching 600,000 in 1990. This population represents 40 percent of the urban population. Bobo-Dioulasso, the other large urban agglomeration, accounts for another 25 percent of the urban population and has seon its population increase to 300,000 since 1980. The labor force growth of these urban areas has not been matched by job creation. For a long time, the traditional outlet for the youngest strata of the urban population has been emigration to neighboring C6te d'Ivoire and Ghana. These workers sent  -2- remittances equalling 6 percent of GDO for the 1986-1990 period. 7. The unemployment situation in the urban areas o! Burkina Faso li very acute. The two traditional o-itlets for demand of labor (secondary private sector and public sector) are unable to satisfy the flow of new entrants to the labor market. The modern sector of light industries is not labor-intensive and does not create many jobs, while the public sector is saturated. According to a survey of the labor markets in the three largest cities (Ouagadougou, Bobo- Dioulasso, and Koudougou), carried out by ONPI in 1987, there were 31,974 demands for only 5,470 offers or a coverage ratio of demand to supply of 17 percent. The situation was worse 'n Ouafadougou where for a total of 22,147 demands there were only 3,288 offers, or a coverage ratio of 14.8 percent. since then, things have worsened due to intense rural-urban migration. The ONPE survey indicates that compared to a total of 50,089 informal sector workers identified in Ouagadougou, there were only 28,000 civil service employees, while the modern private sector had 23,570 employees. 8. Urban unemployment has been rising, especially as the policy environment has not been conducive to private investment and output growth because of too many regulations and controls hindering productive activity. Estimated unemployment figures range from 11 to 25 percent, depending on whether or not the informal sector is taken into consideration in the methodology used for the calculations. Urban unemployment is further aggravated by the return of many former emigrants. The possibilities of the emigration safety valve for Burkina Paso to neighboring C8te d I Ivoire and Ghana are dwindling. The recession in those countries has led to the return of many migrants to urban areas and to a drop in the level of remittances from US$19' million in 1986 to USS164 million in 1990. This last level of annual remittances for 1990 remains significant as it exceeds the combined earnings from cotton, gold and livestock exports aetimated at US$130 million annually. 9. pRationale for IDA Involvement. The Government of Burkina Paso is facing a serious fiscal deficit that is straining its public investment capacity. In order to improve this situation, it has committed itself to apply a series of measures and carry out certain reforms to correct the external and internal imbalances. While preparing a structural adjustment program whose aim is to Improve public sector resource management, the Government approached IDA to undertake a program of small urban infrastructure upgrading and rehabilitation works that would complement the more extensive works being carried out under the Second Urban Project. Municipalities have a whole list of projects ranging from street paving, road maintenance, drainage rehabilitation, refurbishing schools and clinics, etc., that cannot be funded because of the diminution of public investment brought by the austerity resulting from the economic crisis. While having a long-term beneficial impact on economic growth, the execution of these needed urban works will also contribute in the short term to emplcyment creation in the construction-related trades. Because the project provides the opportunity for the private sector to grow and to demonstrate its capacity to implement efficiently and effectively public programs, it will support the reforms that are being undertaken at the macro level. IDA knows the urban sector and, building on its experience in similar projects in Senegal and Niger, can help the Government to support the municipalities to achieve their primary task of cleaning and maintaining roads and drainage systems, collecting garbage, building and rehabilitating schools, dispensaries, and other small economic and social infrastructure. 10. 2roioct Obiectives. The wain objectives of the project aret (a) to finance a program of small municipal works in the area of urban infrastructure upgrading and rehabilitation; (b) to promote local private contractors and consulting firms in project execution; (c) to improve, through execution of the works financed by the project, the individual skills of the workers who will be employed and the corporate competitiveneLJ of the firms that will carry out works  so an to develop their capacity to respond to increased opportunltLos for sustained employment after completion of the project; (4) to create, at least temporarlly, substantial new employment in urban area. as rapidly as possible using tho private sector, thereby stimulating small local prLvate contractors and consultLng firms (e) to revLow exlstlng public works programs and recant them wlth the lntent of speedlng up theLr implemntatLon and overall performancel and (f) to demonstrate the foeasblilty of labor-intensive projects and test the p.:ocedures that will ensure the publie sector's abilLty to commLisson such projects. 11. Proin2t DescrLtLon. The components of the proposed project are: (a) a program of public facility and infrastructure rehabilltation and maLntenance in urban areas to be carried out under labor-lntensive achemes by local contractors; (b) a package of servicee related to work organization, management, and labor force training to be offered on a voluntary basis to the local contractors who wlll be awarded contracts under component (a); (c) a supervLoLon and monltorlng component ln order to closely monitor the progress of the project and to prepare the transltlon toward locally supported employment of the target group; (d) a selective audit of public works programs to LdentLfy bottlenecks and design system Lmprovementsl and (e) a package of consultant services related to a training program for the beneficiaries and engineerLng firms on the preparation of feasLbility studLes and technical project proposals; and a program aimed at increasing grassroots participation in urban infrastructure maintenance. This is an innovative component aimed at increasing the uommitaent of neighborhood residents to the Lnfrastructure that is beLng rehabllitated in thelr immediate envlronment. Thls will facliLtate the future maintenance of the facilltLes. 12. Aareed Actions. The Executing Agency wlll be created prlor to effectiveness. Its statutes and bylaws were discussed and approved during negotiations. Also durlng negotiations, agreements with the Government were reached on the detailed operational guidelines of the agency, including, Later alJa, the *ligibility criterla of the subprojects to be included ln the program and the procurement procedures. The followLng actiong, aimed at enuring rapid start-up of the project, are conditions of effectivenest (a) the ExecutLng Agency will be staffed by a Director General, a Technical Director, and a Financial Dlrector with qualLfications and experlence acceptable to the Association; (b) the Executing Agency shall have selected a flret-year program of subprojects whose aggregate estimated cost is equlvalent to US$4.8 m$illon or more, and the Assoclation shall have approved the selectLon of such subprojects; (c) a Convention has been signed by the Borrower and the Executing Agency; (d) the Executing Agency has prequalified an initial list of enterprLses and * engineering flrms; and (e) the ExecutLng Agency has set up an operatlonal accountLng system and has selected audltore acceptable to the Assoclation, and (f) has submitted for approval to IDA the traLning program for the beneficLarLes and engLneering firms. 13. Snnvironmental Aaiectn . Works to be financed under the project will be small and scattered and their cumulative impact on the physical environment is expected to be minor. Many of the ellglble subprojects, both works and servicees, will have a net positive impact on the urban envlronment. Thli is partlcularly true of subprojects such as soil and water conservatLon works, drainage improvements and torracing, sanitation improvements, plantlng and park works, and solld waste collection. All subprojects will be consistent wlth the strategic Agenda for Improving Urban Living Conditlons that will be executed under the soon to be completed Surkina Faso Natlonal EnvLronmental Action Plan. The project is claseLfLed as Category C. 14. *efLdta. The project wlll assLit municipalities and "collectLvit6s locale" to carry out useful investments ln the rehabLiltation and maintenance of public infrastructure. These inventments either wlll have satLifactory  - 4 - ecoomic rates of return (estimated at 12%) for road reconstruction and 27% for drainage canals) or, in the case of social infrastructure such as schools and clinics, will constLtute least-cost construction solutions. It will help the private sector, especially the amll firms in construction-related industries that will be engaged to execute the works. It will create employment as these firms will hire laborers and technicians to fulfill their contracts. It wlll promote the local engineering and architectural consulting industry which will provide subproject design and supervision servico. The project will also help the Government in the area of contract management. It will demonstrate the effleiency of private sector approaches and procedures in public works management. The ultimate direct beneficiaries will be the low-paid temporary workers in the building and construction trades. 15. Riskg. The main risks arise from the possible inability of Burkina Paso's economy to develop enough stable job opportunities at the and of the project period, leading to pressure from tho Government to extend the project beyond its initial three years. This risk cannot be addressed within the proposed project but should be alleviated if the ongoing adjustment program is implemented successfully. The risk will also be reduced by the development of stable infrastructure maintenance programs that are being developed under Bank- supported urban and transport projects. Another risk is that there might be pressure for continued employment for those who would benefit from the program to take the form of their being hired by local governments when the program ends. Such continuation of employment would jeopardizse efforts of public sector management improvement, including restrictions on personnel hiring, implemented during the recent years by the central and local governments. Lastly, the control of proper use of funds is more difficult with such a program than with regular investment projects. The implementing arrangemeto established during project preparation and appraisal and contained in a Procedures Manual, have been carefully designed to address this risk. As a result, project selection will be carried out according to economic criteria and approved by the Association. Pinancial management will be closely monitored through six-monthly audits of the Agency's operations. 16. Recommendatin I am satisfied that the proposed credit would comply with the Articles of Agreement of the Association and recommend that the Executive Directors approve the proposed credit. Barber B. Conable President Attachments Washington, D. C. May 31, 1991  s chedsle A BMIN FASO PUBLIC WORM AND Hoi PR 3STINATRD OOSTSs 9A= 1=0 LOCAL jFOREIGN J TOTAL j OEG I , I i1 I~~~~~~FOREIGN ._ _ . _ _ _ _ _ _ _ _ _ _ . . _ _ _ 4! 2.U I mf tion) , , _ _ Co t (a) Labor-intensive Civil 13.9 2.t 16.6 16X Coupenent (b): Technical Assistance to 1.01 .49 1.50 32_ Contractors Comwnent (c): Nonitorina .36 . .60 40X Contract Nanaseim nt 8tudv 0 _j_ .30 100l Training Program for Benoficlaries .05 .20 .25 80X Grassroot Particiostfon Program .10 .0 .10 __ _ Executina AseneY Oneratin" CoSts 1.58 .08 1. 6 5X Executing Agency Capital .48 .38 .86 44X Budget (from PPF) _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ Base Costs 17.5 4.4 21.8 202 Price Contfnwencies .22 .16 .38 42X Total Project Costs 1 17.7 4.5 22.2 20X Paraltel Financed Civil LUrks 6.5 1.3 7.8 11X Total Program Costs (1) 24.2 5.8 30.00_1 20X (1) umbers my not add du to rownding. FINACIN PLA 2OF TOTAL LOCAL FOREIGN TOTAL PROJECT | . I O~~~~~~~~OST _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ X(US$ mI Lion) 6overnnent 2.2 2___ . 2.2 lOX IDA 16.4 3.6 20.0 90X Total ProJec Cots (la * IDA) 18.6 3.6 22.2 1002 Other donors (OPEC Fund, DANIDA, 5.2 2.6 7.8 KfU.