Niger - Urban Infrastructure Rehabilitation Project

Document of THE WORLD BANK Report No. 16460-NIR STAFF APPRAISAL REPORT REPUBLIC OF NIGER URBAN INFRASTRUCTURE REHABILITATION PROJECT May 6, 1997 Transport Group 2 Infrastructure Department Africa Regional Office  CURRENCY EQIJIVALENTS (as of January 24. 1997) Currency UJnit CFA Franc (CFAF) US$1.00 CFAF555 CFAF I million US$1,802 FISCAL YEAR January 01 -- December 31 WEIGHTS AND MEASURES Metric System ABBREVIATIONS AND ACRONYMS CAS = Country Assistance Strategv CFD - Caisse Francaise de D6veloppenient (French Development Agency) CIDA - Canadian Development Agency CNEDD - Conseil national de l'Environnement pour un Developpement Durable (National Council of Environment for Sustainable Development) DE = Direction de l'Environnement (Department of Environment) DUH - Direction de l'Urbanisme et de l'Habitat (Department of Urban Development and Housing) ERR = Economic Rate of Return EU - European I Jn ion FAC = Fonds d'Aide et de Cooperation (French Cooperation Fund) GDP = Gross Domestic Product ICB - International Competitive Bidding ICR - Implementation Completion Report IDA - International Development Association KFW - Kreditanstalt fur Wiederaufbau (German Development Agency) MEI - Ministere de l'Equipement et des Infrastructures (Ministry of Equipnment and Infrastructure) MHE - Ministere de l'Hydraulique et de l'Environnement (Ministry of Hydraulics and Environment) NBC - National Bureau of Coordiniation NCB = National Competitive Bidding NGO Non-Governmental Organization NIGETIP = Agence Nigerienne de Travaux d'Interet Public pour l'Emploi OPEC = Organization of Petroleum Exporting Countries PIE Public Investment Program PPF = Project Preparation Fund UNDP United Nations Development Program TVA = Value Added 'T'ax Vice President: Jean-Louis Sarbib, AFR Country Director: Theodore Ahlers. AFC13 Technical Manager: Maryvonne Plessis-Fraissard, AFTT2 Task Team Leader: Jean Noel Guillossou, AFTT2  REPUBLIC OF NIGER URBAN INFRASTRUCTURE REHABILITATION PROJECT TABLE OF CONTENTS Credit and Project Summary ............................................i I. BACKGROUND ...........................................1 A. Country Background ......................................1 B. Urban Sector Background .....................................2 C. Previous Bank Experience and Lessons Learned .....................................5 D. Project Rationale .....................................6 IL. THE PROJECT ............................................7 A. Project Objectives .....................................7 B. Project Description .....................................7 C. Project Cost and Financing ......................................9 D. Project Implementation .................................... 10 E. Procurement .................................... 12 F. Disbursement .................................... 14 G. Accounting and Auditing .................................... 16 H. Reporting and Monitoring .................................... 17 1. Environmental Aspects .................................... 18 J. Benefits ..................................... 19 K. Risks ..................................... 21 III. AGREEMENTS TO BE REACHED, CONDITIONS AND RECOMMENDATION ...22  ANNEXES 1 Project Design Summary ....................................... 23 2 Decentralization Plan ....................................... 29 3 Revenues and expenditures of municipalities ....................................... 34 4 Letter of Sector Policy ....................................... 36 5 Summary of NIGETIP activities ....................................... 40 6 Detailed Project Costs ....................................... 45 7 Project Implementation Schedule ....................................... 47 8 Performance Indicators ....................................... 50 9 Supervision Plan ....................................... 53 10 Action plan to develop protection of urban environment ....................................... 54 11 Urban environmental issues ....................................... 55 12 Economic Analysis ....................................... 56 13 Documents available in the project's files ....................................... 58 MAP IBRD No 28606  REPUBLIC OF NIGER URBAN INFRASTRUCTURE REHABILITATION PROJECT STAFF APPRAISAL REPORT I. BACKGROUND A. COUNTRY BACKGROUND 1. Niger is a large landlocked country covering an area of 1.27 million km2, and is 600 km away from the closest seashore. The population estimated at 8.7 million in 1994 -- about half of which is less than 15 years old -- is growing at about 3.3 percent a year which is above the average for sub-Saharan Africa. Social indicators are among the lowest in the Sahelian countries. The human resource base is weak, with an adult literacy rate of only 14 percent (9 percent among women) and a primary school enrollment ratio of less than 30 percent. Life expectancy at birth is 47 years, one of the lowest on the continent and infant, and child mortality rates are high. The natural resource base is fragile due to low and irregular rainfall and low and declining soil fertility. As a result, Niger's fast growing population is becoming one of the poorest in the world. Per capita gross domestic product (GDP) has declined by more than 52 percent since 1980, reaching US$176 in 1994. Niger has an open economy, with imports and exports exceeding 30 percent of GDP. Strong trade links exist with Nigeria, which exerts considerable economic influence through long-standing trading and cultural bonds. 2. Besides the weak natural resource base, Niger faces additional constraints in the form of high factor costs, overdependence on uranium, a relatively inefficient public sector and a small modem private sector. The fall of uranium prices in 1981 has resulted in severe financial imbalances and triggered a long-term economic decline. The devaluation of the CFA franc in January 1994 has given Niger an opportunity to resume its economic growth. Political instability, however, has prevented the country from taking full advantage of the devaluation. Eventually, the Government reached agreement with the International Monetary Fund on an Enhanced Structural Adjustment Facility program in June 1996. IDA approved a one-tranche adjustment credit on March 20, 1997. 3. Poverty remains critical in Niger. 63 percent of Nigeriens (5.3 million people) earn incomes below the poverty threshold defined by the Government. About 34 percent (2.8 million people) are classified as extremely poor. Urban/rural differentials are stark, with average rural incomes being half those in urban areas. The participatory poverty assessment carried out in 1996 (Report no. 15344-NIR, June 28, 1996) pictures vividly poverty in Niger:  2 Niger - Urban Infrastructure Rehabilitation Project (a) Urban areas: Poverty is hunger. Ownership of goods is a form of safety net rather that money. Being employed is what matters. Women earn revenues through petty trade, mostly the sale of cooked food. They take care of the family when men lose their jobs. Squatting neglected areas saves the cost of renting houses. Recently, the number of beggars has increased in Niamey, and "traditional" beggars have been joined by large numbers of younger people. (b) Rural areas: Access to land is a major constraint because of the dearth of fertile land and competition exists among groups to exploit natural resources. Households exchange young children: families with many children send older children to help families who do not have enough labor force and receive younger children. Diversification of income sources is a necessary strategy because of the climatic risks, but the poor have little possibilities available. Migration is a survival strategy, the poor migrate to look for food and work within Niger or to neighboring countries. Remittances contribute to the income of those in the household who have stayed in their villages. During the dry season, Niamey's population is estimated to increase by 100,000 dwellers. 4. Putting the country back onto a development path requires the pursuit of the reform agenda, including private sector development and restructuring of the public expenditures to improve basic education and health services coverage. Government's commitment and action on key reforms, the return to political stability and the resumption of donor assistance are critical for the reform program. Sustained success depends on continued fiscal discipline and the increase of investments to rekindle growth, especially in satisfying in the large needs in social infrastructure. To pursue its reform agenda, Niger critically needs to regain donors' confidence through an effective transition to democracy. In reaction to a military takeover in late January 1996, several important donors have suspended budgetary aid, causing uncertainty for the budget situation and medium-term policy outlook. A Presidential election was held in July 1996 and legislative elections in November 24, 1996. B. URBAN SECTOR BACKGROUND 5. In February 1996, the Government adopted a policy to decentralize responsibilities to local governments. Because of severe budgetary constraints, however, its implementation will require a long period of time. As a first step, the Government has decided to strengthen the capacity of the 15 most important urban communities, including Niamey. The Government has prepared an action plan to promote the decentralization process and facilitate its implementation. The plan includes training and sensitization activities, studies and technical assistance, and seminars (Annex 2). Its objectives are: (a) decentralization: (i) achieve a national consensus on the restructuring of the territorial administration; (ii) strengthen the institutional and operational capacity of local governments; (iii) put in place the local governments after their election; (iv) implement financial mechanisms to provide resources to local governments; (v) strengthen the capacity of staff in local governments; and (b) administrative reform and human resource management: (i) define a strategy to reform the administration and an action plan to implement the reform; (ii) strengthen the capacity of managerial staff in the territorial administration to improve the efficiency of the administration; (iii) train and sensitize members of committees for the administrative reform; (iv) update the roster of civil servants; (v) define a national policy for human resource management.  Niger - Urban Infrastructure Rehabilitation Project 3 6. Municipal elections are envisaged at the end of 1997 or early 1998. They are expected to result in more accountability in municipal management and more incentives for the mayors to address urban development issues. Conditions for a sustainable development of Nigerien cities have deteriorated in the past ten years and rapid urban growth is compounding social problems in cities. This has been caused by a decline in the amount of investment in the sector and weakening local governments resulting in poor delivery of urban services and insufficient mobilization of resources. Urban development responsibilities are centralized and decisions have been taken without consultation with sector stakeholders due to an incomplete and imprecise institutional framework and the lack of urban development strategy. The spatial organization has resulted from cutting up available space in parcels and juxtaposing housing development plans without planning and coordination, integration with the existing urban environment, and programming of basic infrastructure. Based on the 1988 census, the urban population would amount to 1.75 million inhabitants in 1997, about 21 percent of the total population of Niger. Urban growth has averaged 5.5 percent per year since 1988 after an annual 10 percent during the previous decade. The capital, with about 600,000 inhabitants represents 35 percent of total urban population. 7. Introduction of fundamental reforms in the urban institutional framework is a compelling necessity if the challenge of an orderly urban development is to be met in the future. Because of the centralized management of the sector, the government has been unable or unwilling to adjust the urban framework to the extensive changes that have taken place in the sector during the past twenty years. There are no clear criteria to define urban areas. Proper urban authority only exists in 22 municipalities comprising urban centers designated as such already in 1964; Diffa, which despite its modest size was elevated to the status of a municipality for political reasons in 1986; and a few other cities which have received this status, based more on a ad-hoc decision than on a desire expressed by populations or on a planning process based on technico-economic criteria. All other centers, whatever their size or economic importance, continue to be considered part of rural areas and are administered through institutional arrangements and procedures tailored for such areas. 8. Central government responsibilities in the management of local governments are in principle limited to overseeing and coordination. The central authorities in the urban sector are: (a) the Ministry of Interior and Land Development which supervises the functioning of local governments, especially the preparation of annual budgets; (b) the Ministry of Finance which assess and collects property taxes and business license fees; and (c) the Ministry of Equipment and Infrastructure which participates in the preparation of urban development plans, land subdivision and sanitation and housing projects. The Ministry of Finance has decentralized actual assessment and collection of fiscal resources to regional services. Within the Ministry of Equipment and Infrastructure, the actual implementation of urban development plans, the processing of land subdivisions and the control of central government-funded investment projects are also decentralized to regional services. However, the decision to prepare a development plan is still taken at the central level without much consultation with the local governments. 9. The financial situation of urban communes differ significantly depending on their size. Three communes show annual operating expenditures above US$1 million equivalent. Five communes have operating expenditures ranging between US$1 million and US$200,000. The other 14 remaining communes have operating expenditures below US$200,000, averaging US$60,000. In the latter communes, expenditures cover mostly operating costs (salaries, reimbursement of the debt). The smallest communes are heavily indebted, with the total debt equaling one year of revenues. Larger communes are less indebted because of their capacity to invest from their own resources. In 1995, the annual tax revenues averaged US$2.1 per inhabitant in the communes other than Niamey. This is less than one fourth of the 1984-1985 average revenues per capita for all communes, excluding Niamey. In comparison, the average tax revenue in Niamey's communes is about US$7 par capita in 1995. Tax  4 Niger - Urban Infrastructure Rehabilitation Project revenues represent between 50 and 100 percent of total revenues. The tax collection rate is a low 60 percent. Taxes fall into two distinct categories: state taxes levied by the central government and partially returned to the local governments, which represent about two third of the total taxes, and local taxes directly levied by the local governments. State taxes comprise mostly business taxes and property taxes. The transit through central government circuits frequently delays the restitution of taxes to local governments and puts the actual availability of funds at random, even more so with the current fiscal crisis in the central government. 10. Investment expenditures vary widely depending on the year. They range between CFAF 85 million and CFAF 907 million for the municipality of Niamey, between CFAF 20 million and CFAF 220 million for the other communes in Niamey, and between 0 and CFAF 200 million with an average of CFAF13 million per year for the other Nigerien municipalities. Infrastructure represents more than 85 percent of expenditures. Social infrastructure is predominant with more than 50 percent of expenditures. Economic infrastructure comes in second and administrative infrastructure in third. Revenues are generated by the sale of plots, taxes collected on water and electricity bills, which are earmarked for water and electricity investment expenditures, and the investment fund, which receives resources from the operating budget. Annex 3 provides detailed data on revenues and expenditures of municipalities in Niger. I1. The Government has defined a set of basic principles for urban development (Annex 4), which focus on: (a) transferring some State responsibilities to the local governments; (b) strengthening the mobilization of local resources with a revised tax system resulting in a better recovery of urban development and management costs, a better control of the tax base, and a better recovery of taxes; (c) improving the sustainability of development programs through a better adequacy of existing or generated revenues to cover investment and recurrent costs; (d) developing a public/private partnership in the implementation of urban development plans; (e) strengthening the organizational and conceptual capacity of sector institutions; (f) shifting the role of the State from direct involvement to support to local governments in management, planning and programming; and (g) developing simplified tools to be used by local governments to prepare urban development plans compatible with their human and financial capacity. 12. To overcome the social effects of the economic crisis which has resulted in increased unemployment in urban areas, the Government has established with IDA's assistance a framework to promote labor-based methods and small and medium enterprises in the execution of small urban civil works. This framework was initiated under the Public Works and Employment Project (Cr. 2209-NIR, approved in 1991). An autonomous, not-for-profit and independent agency, NIGETIP, was created to manage the execution of works programs. Since its creation, NIGETIP has executed a portfolio totaling CFAF21 billion. Payment of salaries have totaled CFAF4.3 billion, representing about 23 percent of the amount of the works contracts and about two million person-days of employment. NIGETIP has an on-  Niger - Urban Infrastructure Rehabilitation Project S going portfolio amounting to CFAF10 billion. Other donors (Caisse Francaise de Developpement, European Union, Kreditanstalt fur Wiederaufbau, the OPEC Fund) have used NIGETIP's services. NIGETIP has executed sub-projects in several secondary cities. NIGETIP also promotes the use of local materials in most of the sub-projects, such as buildings or fences using prestressed banco (dry mud). A summary of NIGETIP activities is presented in Annex 5. 13. Few urban development projects are included in the Public Investment Program (PIE). They consist in a sanitation project financed by the European Union in Agadez, the rehabilitation of old suburbs in Niamey financed by the United Nations Development Program which is a follow-up to a similar operation completed in 1993, a NIGETIP operation financed by Caisse Francaise de Developpement in 11 secondary cities, and the preparation of urban development plans financed by the Treasury. Urban development projects in the PIE total about CFAF3 billion during the 1997-1999 period representing a low 1 percent of the total PIE. Projects and annual amounts are detailed in Table 1. Table 1: Urban Development Projects in the Public Investment Program (CFAF million) Project 1997 1998 1999 2000 Sanitation project in Agadez 580 Rehabilitation of old suburbs in Niamey 275 130 Small urban works in secondary cities 1,000 1,000 Preparation of urban development plans 30 30 30 30 Total 610 1,305 1,160 30 C. PREVIOUS BANK EXPERIENCE AND LESSONS LEARNED 14. The NIGETIP experience and similar experiences of executing agencies (known as AGETIPs) in several sub-Saharan countries (Senegal, Mali, Burkina Faso, Togo, Madagascar, Gambia, Benin and Mauritania) have demonstrated that the objectives of poverty reduction and management efficiency promoted by these agencies have been achieved. The ratio of labor cost versus total cost exceeds 20 percent, which was the revised targeted ratio after the CFAF devaluation in January 1994. This ratio evidences the strong impact on poverty reduction and employment generation. Like similar agencies, NIGETIP has proved to be an efficient tool for the management of large number of contracts with short payment times to contractors. NIGETIP uses streamlined procedures to speed up project implementation. The impact on the construction industry has been significant. In 1996, 222 contracts were awarded to small and medium enterprises, 51 contracts awarded to local consulting firms for the engineering studies and 198 for the supervision of works. 428 small and medium enterprises and 84 consulting firms had been preselected by NIGETIP. 15. The portfolio of AGETIP projects in Africa was audited by the Operations Evaluation Department of the Bank in 1997. The overall conclusion was that such projects are generally well controlled, but there are areas for improvement: (a) The preparation and supervision of the projects are in line with Bank policies and generally reflect a more consistent application of promoted "best practices". (b) IDA credit agreements contain appropriate safeguards concerning project staffing and administration. However, project supervision should ensure that agencies do not substitute borrowed or surplus funds for delayed counterpart funds in order to commence  6 Niger - Urban Infrastructure Rehabilitation Project sub-projects in an effort to maintain operating targets. Agency workload and work mix need also to be carefully monitored. (c) The projects have good output and efficiency indicators but suffer lack of impact measurement. Output indicators focus on quantitative results (completion, timeliness), but the quality of works completed should also be considered. (d) The control environment for NIGETIP-type projects promotes responsive, efficient and ethical performance. The internal control structure within the agencies generally emphasizes transparency and accountability. (e) Procedures for procurement of goods and works stress efficient, effective and transparent practices. However, consultant selection could be made more transparent. The process of registering consultants and contractors in rosters should be subject to audits. (f) Many aspects of project financial management and auditing reflect good practices. Agencies have adequate accounting and operational informnation system but financial statements and quality of audits need to be improved. An internal auditing/monitoring function is desirable. 16. The Public Works and Employment Project in Niger was subject to a technical audit in May 1995. The mission concluded that the manual of procedures was generally well applied. Project selection, procurement of works and payments were transparent and fast. The mission recommended several improvements which have been progressively implemented. The quality of the works was found satisfactory. Maintenance of infrastructure was generally satisfactory, although maintenance of roads built under the project was insufficient. 17. Apart the NIGETIP experience, IDA experience in Niger's urban development has been limited to the preparation of the first urban project which started in 1990. The project was ambitious and aimed at reforming the urban sector institutions in conjunction with the decentralization process which was envisaged by the Government, and at addressing urban management issues related to collection of solid waste and refusals, traffic plan and urban transport, housing, and urban infrastructure. However, due to the slow progress of the Government in taking actions in the areas of decentralization, management of local governments, legal status of urban communities, and municipal finances, the preparation of the project was canceled in mid-1994 and replaced by the preparation of a more focused Infrastructure Rehabilitation Project instead. 18. The experience of the urban data bank implemented in Niger with French financing, has demonstrated that consultation between the different parties involved is key to improving urban development management. The NIGETIP experience as well as the UNDP project to restructure old suburbs has led to the same conclusion regarding consultation between the different parties involved in maintenance of urban infrastructure. D. PROJECT RATIONALE 19. The proposed project is consistent with the Country Assistance Strategy (CAS) discussed by the Board on May 9, 1994. The strategy is based on four major building blocks: (a) addressing long-term human capital (including poverty alleviation) and natural resource issues; (b) building public and private sector institutions to promote private sector based growth; (c) increasing efficiency of public resource  Niger - Urban Infrastructure Rehabilitation Project 7 management; and (d) supporting actions to facilitate supply response in the wake of the CFAF devaluation. The proposed project will contribute to poverty alleviation through employment generation in urban areas. It will also contribute to increase efficiency of public resource management by improving the use of scarce resources available for urban infrastructure development, by improving the quality of preparation of urban projects and focusing on revenue-generating investments, and by using transparent procedures and delegation of authority in project execution for urban works. The project will develop the use of local contractors and consulting firms in support of the private sector based growth CAS objective. 20. IDA will have a critical role through its participation in the project in assisting the Government and municipalities in establishing a new framework for urban infrastructure development and future donor interventions in the sector. No other donors are involved currently in the strengthening of the local capacity to manage urban infrastructure development. Caisse Fran,aise de Developpement and GTZ have included in their NIGETIP projects under preparation mechanisms to ensure that municipalities earmark resources for future investments including the rehabilitation of infrastructure financed under the projects. UNDP's assistance aims at creating a sustainable mechanism for financing the rehabilitation of old suburbs. Other donors' involvement in the past in the urban sector has been limited mostly either to provision of assistance to the central government or to physical works and other activities directly related to their project. Little assistance has been provided directly to municipalities until now, this being explained by centralized management at the State level and the absence of elected mayors. 21. Project activities related to decentralization have been limited to those consistent with the urban focus of the project. This is justified by the risk of slow implementation of the overall decentralization framework, especially fiscal measures taking into account the scarcity of State revenues and consequently the Government reluctance to transfer some of these revenues to the municipalities. To help the Government address these issues, the Government is preparing the proposed Public Sector Management Project (PSM; FY98), which will provide assistance to the Government to decentralize its responsibilities and resources in a coherent macro-economic perspective. The present operation will coordinate with the PSM project in this respect. 11. THE PROJECT A. PROJECT OBJECTIVES 22. The development objectives are (a) to reduce poverty in urban areas by creating employment; (b) to provide municipalities with skills to develop and manage their infrastructure; and (c) to promote local engineering firms and contractors, labor-based niethods and local materials. B. PROJECT DESCRIPTION 23. The project will include three components: (a) civil works: execution of a program of small urban works; identification of sub-projects including economic/financial analysis, environmental impact assessment and consultation with beneficiaries; and engineering studies and supervision of works;  8 Niger - Urban Infrastructure Rehabilitation Project (b) institutional building: (i) support to municipalities: study to establish simplified tools to plan urban infrastructure development; definition of a methodology to help urban municipalities to develop a strategy for urban development including provision of urban services and mobilization of resources and application to Niamey and one secondary city; basic cartography of Niamey and Dogondoutchi; prefeasibility, feasibility and preparation of a pilot operation of integrated urban development in association with a private property developer; technical assistance and consulting services to assist the Government and the municipalities in implementing the studies' recommendations; periodic ex-post environmental assessments of NIGETIP projects and establishment of a guide for environmental assessment of small urban works including training; definition of a methodology for the economic/financial analysis of small urban works; training and sensitization of executing agencies to the use of autonomous implementing agencies such as NIGETIP; preparation of an urban environment management strategy; assistance to define the new legal framework for the communes; revision of the budget structure and study of new resources for the urban communes; restructuring study of the urban development agency in the Ministry of Equipment and Infrastructure; equipment; and (ii) promotion of the private sector: promotion of local materials used in the local construction industry; training of local consulting firms and local contractors; (c) project execution: improvement of NIGETIP's management information system; audits of the project accounts and NIGETIP; technical audits of biannual works programs executed by NIGETIP; incremental operating costs of the project's coordination unit (NBC) including local staff under contract; short-term missions of technical assistance; provision of an accountant to NBC; and equipment. 24. The small urban works component will finance a three-year program of construction or rehabilitation of infrastructure and municipal assets at the request of the promoter-beneficiary municipalities. The project will help develop integrated sub-projects including both income-generating and non income-generating sub-projects. By improving the physical environment of income-generating projects, this approach would increase their attractiveness and profitability. Typical municipal income- generating sub-projects include markets, slaughterhouses, parking lots, road stations and public latrines. Sub-projects to improve the physical environment of the income-generating sub-projects include road paving, sidewalks, drainage. The list of typical sub-projects eligible to project financing is included in NIGETIP's Manual of Procedures although it is not a restriction. The ratio of income-generating sub- projects versus non income-generating sub-projects will be monitored during project execution. The percentage of income-generating sub-projects targeted is 60 percent or above. 25. The institutional component is designed to provide tools and skills to municipalities to develop urban infrastructure through a mix of activities which have immediate results applicable to the preparation of sub-projects financed under the project or will help municipalities to develop a framework from which future infrastructure projects will be conceived. Activities such as economic/financial analysis, environmental impact assessments and willingness-to-pay surveys will be used to improve the quality of projects proposed to IDA financing as well as to build a capacity in the municipalities on themes which are necessary to them to develop and apply urban infrastructure development strategy in the future. Other activities such as the definition of a methodology to develop urban strategies, establishment of simplified planning tools and preparation of an urban environment management strategy will provide the capacity to address broader urban development issues that cannot be addressed through the small-size sub-projects which are executed under the project.  Niger - Urban Infrastructure Rehabilitation Project 9 26. Training and sensitization is an important component of the project. Although training was provided under the Public Works and Employment Project, it was mostly limited to the Niamey area and needs to be extended to secondary cities to broaden the pool of small and medium enterprises. The studies listed above will be carried out in a participatory way leading to training. Training will be provided in the following fields: environmental issues in urban management, economic/financial analysis and environmental impact assessment of sub-projects, use of simplified tools to plan urban infrastructure development, methodology to develop a strategy for urban development, supervision of works, management of works execution, use of local materials. Training will be aimed at staff in central and local governments and municipalities, consulting firms and contractors. The project will include an Information, Education, Communication component aimed at beneficiaries to develop their involvement in the identification, preparation and operation of sub-projects. A continuous campaign during project execution will sensitize municipalities and other potential contracting authorities to the use of autonomous implementing agencies. A workshop will be organized to launch the project. Missions will be sent to foreign countries to review experiences in the use of simplified tools for planning urban infrastructure development. As several training activities will be aimed at the private sector, the possibility of full or at least partial cost recovery will be investigated during the preparation of the detailed training programs in consultation with the beneficiaries. C. PROJECT COST AND FINANCING 27. The total project cost is estimated at US$28 million. IDA's contribution will amount to US$20 million. Central Government and municipalities will provide counterpart funds equivalent to US$2.2 million and taxes equivalent to US$2.3 million. The project is exempt of the value-added tax and custom duties on imported materials used for the works and equipment imported for NBC and NIGETIP. The Government will finance the preparation of urban strategies and infrastructure development plans for one secondary city per year starting in 1999 at a cost estimated at US$55,000 per year, and incremental operating costs of the project coordination unit, including salaries of civil servants, estimated at about US$12,000 per year. Other donors' financing is sought for the equivalent of US$3.5 million including indirect taxes. If this financing is not forthcoming, the physical scope of the project will be reduced. Table 2 summarizes the distribution of project costs per component and foreign currency, local currency and taxes. Project costs are detailed in Annex 6. Table 2: Project Cost Summary (US$ million) Component Foreign Local Taxes Total % Foreign % Base Currency Currency Currency Costs 1. Civil Works 5.7 9.7 1.5 16.9 34 71 2. Equipment 0.2 0.0 0.0 0.2 90 1 3. Institutional building A) NIGETIP's fees 0.3 0.5 0.0 0.8 35 4 B) Component managed by 0.8 0.9 0.5 2.2 34 9 NIGETIP C) Component managed by the 0.8 0.4 0.1 1.3 58 5 Bureau of Coordination 4. Training and Seminars 0.1 0.2 0.1 0.4 15 1 5. Incremental Operating Costs 0.2 0.2 0.0 0.4 37 2 6. PPF 1.0 0.5 0.0 1.5 68 6 Total Base Costs 9.1 12.6 2.3 23.9 38 100 Physical Contingencies 0.6 1.0 0.2 1.7 34 7 Price Contingencies 0.4 1.7 0.2 2.4 17 10 Total Costs 10.1 15.3 2.6 28.0 36 117  10 Niger - Urban Infrastructure Rehabilitation Project 28. Counterpart funds will be provided in cash or in kind. Counterpart funds provided in cash will be deposited in a project account owned by NIGETIP, half before NIGETIP signs the convention with the contracting authority and half before NIGETIP contracts out the works. Contribution in kind will consist in works executed by force account before NIGETIP signs the convention with the contracting authority. Execution of works will be managed by NIGETIP and supervised by independent consulting firms. NIGETIP will value the contribution in kind. For the first year of project execution, the Government will deposit counterpart funds to the financing of equipment and incremental operating costs, on the project account before Credit effectiveness. Graph 1: IDA Disbursement Forecasts (calendar years) 10- I1Pro I 100% - 8- 80% J US$ 6 600/ - . Proje I million 4. 40A -*Rg 2- 20% ~eea 2 ; 1 2 0LT- _ -Firt CreditI 0 ~~~~~~~~0% FY97 FY98 FY99 FYOO FY01 FY02 FY97 FY98 FY99 FYOO FYO1 FY02 FY03 FY04 Annual Disbursements Total Disbursements Project: Proposed Urban Infrastructure Rehabilitation Project; First Credit: Public Works and Employment Project in Niger; Senegal: Public Works and Employment Project (Cr. 2075); Region: Standard disbursement profile for urban projects in the Africa Region. 29. Based on an effectiveness date of August 31, 1997, the project is expected to be completed within a five-year period by June 30, 2001 with a closing date of December 28, 2001. Graph I above compares expected disbursements to standard disbursement profiles for urban projects in the Africa Region, disbursements under the on-going Public Works and Employment Project and under a similar operation in Senegal. The highest amount of annual disbursements for works managed by NIGETIP, estimated at about US$6 million in 1998 and 1999, represent less than half of the total amount of funds managed and disbursed by NIGETIP in 1994, thus far below the absorptive capacity of the agency. D. PROJECT IMPLEMENTATION 30. The Prime Ministry will be responsible for the overall coordination of the project through the project's Steering Committee. The Steering Committee coordinates both transport (proposed Transport Infrastructure Rehabilitation Project, FY98) and urban infrastructure rehabilitation projects. It is composed of representatives of the Ministry of Finance, Ministry of Planning, Ministry of Infrastructure and Equipment, and the Secretary to Decentralization and Administrative Reform. It consults the municipalities with respect to their participation in the project and the National Council of Environment for Sustainable Development and the Environment Department in the Ministry of Hydraulics and Environment on environmental matters. A sub-committee composed of staff of the Steering Committee concerned with the urban project will be responsible for other procurement than that under NIGETIP's responsibility (see below). The staff in the Steering Committee will be trained to use Bank procurement guidelines as part of the project activities. 31. Because of the large number of institutions involved in the urban sector, the National Bureau of Coordination (NBC), located in the Prime Ministry, will be responsible for the coordination of technical  Niger - Urban Infrastructure Rehabilitation Project 11 assistance provided in the institutional development component of the project. NBC has coordinated project preparation. NBC's staff consists of one civil servant, who is chief of the Bureau, and one accountant under contract. Capacity of the accountant is being verified in conjunction with the implementation of the new computerized management information system. NBC's chief has performed his duties satisfactorily; he is well accepted by other executing agencies. 32. NIGETIP will be executing agency for the civil works component of the project. The Agency will be responsible for: (a) the execution of the program of works, including selection of consultants for the design of sub-projects and supervision of works, procurement of civil works contractors and management of the contracts; and (b) activities to promote the private sector, sensitize contracting authorities (municipalities, ministries) and develop participation of beneficiaries. The program of works will be defined by the contracting authorities in consultation with beneficiaries. Each contracting authority will prepare a short brief for each sub-project, giving a description of the project, its type (revenue-earning or non revenue-earning), its cost, its social, economic or financial justification, the type of management of the infrastructure (public or private), the amount of revenues expected to be generated for the municipality, the impact on the population and the environment, the ratio of salaries and local materials versus the total cost of works, the cost of maintenance and the arrangements for maintaining the infrastructure, and the arrangements for providing counterpart funds (in cash or in kind). Local consultants will assist in the preparation of sub-projects and NIGETIP will review and help finalize them. Twice a year, NIGETIP will draw up a list of sub-projects presented by the municipalities after having verified their eligibility in accordance with the criteria defined in its Manual of Procedures. The portfolio of sub-projects will then be submitted to the Government and to IDA for no-objection. Submission of a first portfolio of sub-projects is a condition of Credit effectiveness. 33. The Government and NIGETIP should enter into a General Agreement on terms and conditions satisfactory to IDA. The General Agreement was agreed during negotiations and should be signed before Credit effectiveness. It includes: (a) provisions for the transfer of the proceeds of the Credit on a non-reimbursable basis for financing small urban works contracts, contracts with consultants for engineering studies and supervision of works, and NIGETIP's management fee; (b) the Manual of Procedures specifying the obligations of NIGETIP related to the execution of the Project, selection of sub-projects, procurement and disbursement procedures, auditing, accounting and reporting; (c) the obligation of NIGETIP to keep the positions of Director General, Technical Director, Financial Director and civil engineers responsible for the management of contracts filled by persons having experience and qualifications acceptable to the Government and IDA; (d) a sample of agreement to be entered into between NIGETIP and a contracting authority to execute a sub-project; and (e) the obligation of NIGETIP to submit to IDA for its approval not later than June 30 and December 31 of each year a program of proposed sub-projects representing an aggregate cost of US$17.5 million. During negotiations, IDA was satisfied that the General Agreement and the Manual of Procedures will ensure the independence of the Agency.  12 Niger - Urban Infrastructure Rehabilitation Project 34. NIGETIP's Manual of Procedures was revised to take into account similar experiences in other countries and lessons learned from the NIGETIP experience in Niger. The final manual of procedures was agreed during negotiations. Among all the revisions which have been identified, the following are the most important: (a) to improve the sub-project briefs; (b) to clarify delays between the approval of a sub-project and the start of works to give enough time for the engineering studies and thus improve their quality; (c) to improve procedures to award works contracts; (d) to improve the preselection procedure of entrepreneurs; (e) to improve the procedure to select consulting firms which carry out studies and supervise the execution of works. The Manual includes draft contracts for works, engineering studies and supervision of works and standard terms of reference for engineering studies and supervision of works. 35. NBC will consolidate project accounting information for activities it is responsible for and for activities carried out by NIGETIP. NBC will employ an accountant acceptable to IDA during the project life. NIGETIP will employ a Chief Accountant during the project life. Financial responsibilities will be carried out on a continuous basis throughout project implementation. NIGETIP management fees will be paid upfront on the basis of the works for which NIGETIP is appointed as executing agency. The ratio of management fee versus total costs will be monitored during project execution. The Government and NIGETIP agreed during negotiations that the targeted ratio is less than 5 percent for works in the departments of Tillabery and Dosso and in Niamey, and 7 percent in other departments. 36. The Project Implementation Plan was agreed during negotiations. The project implementation schedule is presented in Annex 7. E. PROCUREMENT 37. During negotiations, the Borrower agreed to the procurement procedures described hereafter. All goods and works financed under the IDA credit will be procured in accordance with the Guidelines for the Procurement under IBRD Loans and IDA Credits (January 1995, revised January 1996 and August 1996). Consultants will be selected in accordance with the Guidelines for the Use of Consultants by World Bank Borrowers, and by the World Bank as Executing Agency" (January 1997). NCB procedures will provide for the following elements: (a) participation of foreign bidders will be permitted; (b) evaluation and award criteria will be included in the bidding documents; (c) bidding will be advertised locally and bids will be opened in public; and (d) the contract will be awarded to the lowest evaluated responsive bidder. Table 3 summarizes the project elements, their estimated cost and procurement methods. Procurement of Civil Works 38. Procedures for procurement of small urban works are detailed in NIGETIP's Manual of Procedures. The Manual includes standard bidding documents acceptable to IDA. It is anticipated that most contracts will be below CFAF 125 million (about US$ 250,000) and will be procured using national competitive bidding (NCB) procedure. In case any contract is higher than this threshold, international competitive bidding (ICB) procedure will be used. As in the Public Works and Employment Project, NIGETIP will continue to maintain a roster of entrepreneurs eligible for participation in NCB procurement under the project. This roster will remain open during the project so that new candidates can be admitted at any time. Eligibility criteria for admission are spelled out in NIGETIP's Manual of Procedures. The roster was revised in 1995 after broad advertising. The number of enterprises was reduced from 865 to 395 by removing enterprises which were unable to provide the required information (categories of works for which the enterprise applies, geographical area in which the enterprise is interested, similar references to the types of works in which the enterprise is interested). The roster of  Niger - Urban Infrastructure Rehabilitation Project 13 contractors was examined by IDA during appraisal and will be examined again at mid-term review to ensure that the procedures are in conformity with NIGETIP's Manual of Procedures. The bidding procedure will consist of local advertising of a proposed contract for a given sub-project to the enterprises listed in the roster. Procurement notices will be published in local newspapers informing potential bidders that have not yet asked to be registered by NIGETIP. Table 3: Proposed Procurement Methods (Amounts in US$ million) Project Element ICB NCB Other N.B.F. Total Cost 1. Works - 17.5 - 3.0 20.5 - (13.1) - (0.0) (13.1) 2. Goods - 0.1 0.1 - 0.2 - (0.1) (0.1) - (0.2) 3. Institutional building A) NIGETIP's fees - - 0.8 0.1 0.9 - - (0.8) (0.0) (0.8) B) Component managed by - - 2.2 0.3 2.5 NIGETIP - - (2.2) (0.0) (2.2) C) Component managed by - - 1.5 - 1.5 NBC - - (1.3) - (1.3) 4. Training and Seminars - - 0.4 - 0.4 - - (0.4) - (0.4) 5. Operating Costs - - 0.5 - 0.5 - - (0.5) - (0.5) 6. PPF Refinancing - - 1.5 - 1.5 (1.5) (1.5) TOTAL - 17.6 7.0 3.4 28.0 (13.2) (6.8) (0.0) (20.0) N.B.F.: Not-IDA Financed. Project executing agencies will follow procedures specific to other donors. ICB: International Competitive Bidding; NCB: National Competitive Bidding. Note: Figures in parentheses are the amounts financed by the IDA Credit. Rem: Figures may not add up to total due to rounding. Procurement of Goods 39. Goods (cars, computers) estimated to cost less than US$ 50,000 equivalent per contract, up to an aggregate amount not to exceed US$ 100,000 equivalent will be procured under contracts awarded on the basis of NCB, advertised locally, in accordance with procedures acceptable to IDA, including: (a) bids will be opened in public in the presence of bidders or their representatives; (b) there will be no negotiation with bidders between bid opening and contract award; (c) bid evaluation and post- qualification criteria will be defined in precise quantitative and monetary terms; and (d) award will be made to the lowest evaluated responsive bidder. Employment of Consultants 40. The Borrower agreed during negotiations that qualifications, experience, and terms and conditions of employment of consultants shall be satisfactory to IDA. The model contract in NIGETIP's Manual of Procedures will be used to contract consulting firms for the engineering design and supervision of small urban works. For other consulting services, the model letter of invitation and the standard forms of contract issued by the Bank Group shall be used with such modifications as shall have been agreed by IDA. Where no relevant standard contract documents have been issued by the Bank Group, the Borrower will use other forms agreed with IDA prior to inviting proposals. Consultants for  14 Niger - Urban Infrastructure Rehabilitation Project identification of sub-projects, engineering studies and supervision of works executed by NIGETIP, totaling US$1,800,000 and estimated to cost less than US$25,000 equivalent per contract, cartography of two cities (US$116,000) and project audits (US$121,000) will be procured using the least-cost selection services method. Would the project coordinator be detached from the administration during project execution, its contract (about US$20,000 per year) would be a sole-source contract. Short-term missions of technical assistance to follow up on the implementation of studies' recommendations will be procured under contracts awarded to individual consultants in accordance with the provisions of the guidelines. Other consultants will be selected on the basis of the quality and cost-based selection method. The short- lists of consultants for identification of sub-projects, engineering studies and supervision of works executed by NIGETIP will comprise entirely national consultants in accordance with the provisions of the guidelines. Review by IDA of Procurement Decisions 41. Prior review by IDA of bid and contract documents will be required for consultant services estimated to cost more than US$100,000 equivalent for firms (five contracts) and US$50,000 equivalent for individual consultants (two contracts), for civil works contracts above US$ 250,000 equivalent (none expected), and for goods contracts above US$50,000 equivalent (one contract). Documentation for contracts under these thresholds will be maintained for ex-post reviews by auditors and IDA supervision missions. For the selection of consultants, prior review will be required for terms of reference, single- source hiring of consulting firms, amendments of contracts raising the contract value above US$100,000 for firns and US$50,000 for individual consultants. For all civil works contracts for which there are less than three bidders or for any decision not to select the lowest evaluated bidder, the Borrower will submit its proposal to IDA for no-objection prior to notifying the winning bidder. Additional Arrangements 42. Contracts will be awarded within the agreed bid validity period and only exceptionally, bid validity extension may be requested. In the case of fixed price contracts, requests for second and subsequent extensions will be permissible only if the request for extension provides for an appropriate adjustment mechanism of the quoted price to reflect changes in the cost of inputs for the contract over the period of extension. Standard procurement times were agreed during negotiations. A procurement plan for the project is proposed in Annex 7, based on these procurement times (see table 6 below). F. DISBURSEMENT 43. The proposed IDA credit would be disbursed on the following basis.  Niger - Urban Infrastructure Rehabilitation Project 15 Table 4: Allocation of Credit Proceeds (US$ million) Category Amount Percent of Foreign Percent of Local Allocated Expenditures to be Financed Expenditures to be Financed 1. Civil Works 11.5 100 percent see below 2. Goods 0.2 100 percent 95 percent 3. Institutional building A. NIGETIP's fees 0.8 100 percent 100 percent B. Component managed by 2.2 100 percent 100 percent NIGETIP C. Component managed by 1.3 100 percent 100 percent NBC 4. Training and Seminars 0.4 100 percent 100 percent 5. Operating Costs 0.5 100 percent 95 percent 6. PPF Refinancing 1.5 N/A N/A 7. Unallocated 1.6 N/A N/A Total 20.0 44. IDA will finance a percentage of the works in addition to the local contribution to the cost of investment shared between municipalities and the Government. This contribution depends of the type of sub-project and the financial wealth of the municipalities defined by their annual actual operating revenues. Three categories have been defined on the basis of actual revenues between the 1990-1995 period (Annex 3). Table 5 details the proposed local contribution. Percentages are also defined when the Government is the contracting authority. These percentages have been discussed with most of Nigerien municipalities and were confirmed during negotiations. Accuracy of disbursement percentages applied by NIGETIP when preparing the withdrawal applications sent to IDA will be verified by the project auditor. Table 5 : Local contribution to the financing of small urban works (percentages of sub-project costs net of taxes and custom duties) Annual actual Number of Revenue-earning projects Non revenue-earning projects operating revenues municipalities Above CFAF500 M 3 15 percent 12 percent Between CFAF500 M 5 12 percent 7 percent and CFAF100 M Below CFAF100 M 14 7 percent 5 percent Government - 25 percent 15 percent 45. To facilitate project implementation and reduce the volume of withdrawal applications, two Special Accounts will be opened in CFAF in a commercial bank on terms and conditions acceptable to IDA. The authorized allocation for Special Account A (NBC) and Special Account B (NIGETIP) will be CFAF 125 million and CFAF 800 million, respectively and cover about four months of eligible expenditures. Upon effectiveness, an amount of CFAF 60 million representing 50% of the authorized allocation will be deposited in the NBC Special Account, while CFAF 400 million will be deposited in the NIGETIP Special Account. The remaining balance of Special Accounts A and B will be made available, when the total amount withdrawn from the credit account and/or Special Commitments issued amount to $1.2 million equivalent for Special Acount A and US$4 million equivalent for Special Acount B. The Special Account will be used for all payments below CFAF 25 million for NBC and CFAF 160 million for NIGETIP. Replenishments will be submitted monthly. All replenishments should be fully documented except for: (a) contracts of less than $250,000 equivalent for civil works and $100,000 for goods, (b) contracts of less than $100,000 for consulting firms and $50,000 for individual consultants,  16 Niger - Urban Infrastructure Rehabilitation Project training and seminars, which will be claimed on the basis of Statements of Expenditures (SOEs). All supporting documentation for SOEs will be retained for review by periodic Bank supervision missions and external auditors. G. ACCOUNTING AND AUDITING 46. Accounting. NBC and NIGETIP will maintain records and accounts adequate to reflect, in accordance with sound accounting practices, the operations, resources and expenditures in respect of the IDA credit. With PPF funds, a computerized management information system is being put in place in NBC and NBC's staff is being trained to use the system. NIGETIP accounting procedures are being updated and the computerized management information system upgraded with PPF funds. Analytical accounting is being implemented to provide detailed information on the actual cost of NIGETIP services for each contract of works. Implementation of the analytical accounting should be completed before Credit effectiveness. Accounting procedures will be defined in the Project Implementation Plan. 47. Auditing. The contract with the auditor of the project and NIGETIP accounts should be signed before Credit effectiveness. During negotiations, the Borrower agreed to: (a) have the records and accounts referred to in the preceding paragraph including those for the Special Accounts audited for each fiscal year every semester, in accordance with appropriate auditing principles consistently applied, by independent auditors acceptable to IDA; (b) furnish to IDA as soon as available, but in any case not later than six months after the end of each semester, a certified copy of the report of such audit by said auditors, of such scope and in such detail as IDA shall have reasonably requested; and (c) furnish to IDA such other information concerning said records and accounts and the audit thereof as IDA shall from time to time reasonably request. 48. For all expenditures with respect to which withdrawals from the Credit Account were made on the basis of statements of expenditure, the Borrower shall: (a) maintain or cause to be maintained, in accordance with paragraph 46 records and accounts reflecting such expenditures; (b) retain, until at least one year after IDA has received the audit report for the semester in which the last withdrawal from the Credit Account or payment out of the Special Accounts was made, all records (contracts, orders, invoices, bills, receipts and other documents) evidencing such expenditures; (c) enable IDA's representatives to examine such records; and (d) ensure that such records and accounts are included in the audits referred to in paragraph 47 and that the report of such audit contains a separate opinion by said auditors as to whether the statements of expenditure submitted during each semester, together with the procedures and internal controls involved in their preparation, can be relied upon to support the related withdrawals.  Niger - Urban Infrastructure Rehabilitation Project 17 H. REPORTING AND MONITORING 49. Reporting. NIGETIP will issue periodic reports as follows: (a) summary monthly bulletins within six days after the end of each month; (b) quarterly reports within six days following the end of the trimester; (c) annual reports within three months following the end of the year; (d) a detailed report to prepare the mid-term review; and (e) a project completion report within sixth months after the closing date. Standard forms for the progress reports are included in the Manual of Procedures of NIGETIP. NBC will prepare progress reports semiannually and in advance of each IDA's supervision mission. The content and timing and a draft form of progress reports has been included in the Project Implementation Plan. The Borrower should submit an Implementation Completion Report to IDA no later than six months after the closing date of the credit. 50. Performance Indicators. Two types of indicators have been defined: (a) Key project performance indicators based on which IDA will decide at the mid-term review whether to continue the project as appraised, restructure or cancel project's components which are non performant. These indicators will reflect the degree with which the project objectives are achieved. The value/target for these indicators as agreed during negotiations are provided in table 6 below. (b) General project performance indicators will characterize progress in project execution, project activities and outputs. A detailed list of indicators to be monitored is provided in Annex 8. 51. In addition to the financial audit mentioned above, NIGETIP's technical performance will be audited every semester. The audit will assess the quality of the works, NIGETIP's compliance with its Manual of Procedures and NIGETIP's overall performance, and make recommendations when necessary. Although NIGETIP's performance has been satisfactory under the Public Works and Employment Project, close monitoring of its performance is justified because NIGETIP is awarded a management contract on a sole source basis. The Government of Niger, IDA and other donors using NIGETIP as executing agency have to be satisfied that NIGETIP performs continuously well in planning, managing, budgeting, procurement, supervision, reporting activities and that NIGETIP's staff has the necessary capability and competence. The audit will also review the roster of consultants and contractors to confirm that firms are registered in accordance with the criteria spelled out in NIGETIP's Manual of Procedures. The technical audit will be carried out by an independent consultant. Terms of reference of the audit are available in the project's files. 52. Supervision Plan. The project will be supervised three times a year by IDA missions. Mission activities will consist of field visits to work sites, review of financial and management practices, bidding and disbursement procedures, and performance indicators. The missions will also evaluate the project impact on the development of local contractors and consulting firms, on employment and on environment. A particular emphasis will be put on the monitoring of the participation of beneficiaries in the identification and design of sub-projects as well as on their operation and maintenance after their execution. The supervision schedule and mission composition are presented in Annex 9.  18 Niger - Urban Infrastructure Rehabilitation Project Table 6: Key Performance Indicators Component Key performance indicators Value/target Civil works Percentage of revenue-earning sub-projects Above 60 percent Ratio of labor costs versus total costs Above 20 percent Economic/financial rate of return - Revenue-earning sub-project Above 12 percent - Non revenue-earning sub-projects Above 10 percent Number of projects subject to 100 per cent economic/financial analysis and environmental impact assessment Percentage of works contracts with delays 1997: 20%; 1998: 15%; 1999 and beyond: 10% Percentage of works contracts with budget 1997: 10%; 1998: 5% overruns 1999 and beyond: 0% Percentage of engineering contracts with delays 20 percent Ratio of NIGETIP's expenditures versus total less than 5 percent on average amount of works during the period of project execution and below seven percent annually Ratio of counterpart funds actually received on 1997: 50%; 1998: 60% time by NIGETIP versus counterpart funds 1999: 70% estimated for the bi-annual programs of works 2000 and beyond: 80% Institutional building Support to Adoption of urban infrastructure development One per year starting in 1999 municipalities strategies by secondary cities Extension of the urban data bank to other Three municipalities in 1998 municipalities than Niamey and five municipalities per year afterwards Institutional building Promotion of local Share of local materials in contracts' amounts Above 35 percent materials Project execution Financial and technical audits of the project Every six months Disbursement lag Below 10 percent 53. Mid-term Review. A mid-term review will be carried out no later than two years after credit effectiveness. The review will be an opportunity to discuss with a larger group of stakeholders in the urban sector (mayors, central and regional government authorities, communities, NGOs). The review will include an ex-post environmental impact assessment of all sub-projects. The review will assess the Government's continued commitment to the project's objectives. The Government agreed during negotiations to the carrying out of the mid-term review. The Government's basic principles for urban development are described in Annex 4. They were agreed during negotiations and should be confirmed by the Government before Board presentation. I. ENVIRONMENTAL ASPECTS 54. The project is rated category B. An action plan to develop environmental protection with the project's assistance is provided in Annex 10. The cumulative impact on the environment of small urban  Niger - Urban Inftastructure Rehabililation Project 19 civil works is expected to be positive. The NIGETIP Manual of Procedures stipulates that sub-projects judged harmful to their social end physical environment will not be eligible for execution to ensure that they will not have a negative impact on the environment. Any environmental impact will be described in the summary project sheet prepared by the municipalities. An environmental impact assessment will be mandatory for all revenue-earning projects. The proposed mid-term review will include a post-evaluation of the environmental impact of the project and formulate recommendations, if necessary, for the second half of the project. The environmental impact of the project will be assessed during the preparation of the Implementation Completion Report. 55. An ex-post environmental assessment of small urban projects executed by NIGETIP in the past was carried out with PPF financing. Based on this assessment, a guide was prepared to provide guidelines for the carrying out of future environmental assessments. Training will be provided to sector institutions, local consulting firms and NIGETIP in the use of the guide. Supervision missions will monitor the compliance with the guide. 56. In 1997, the Government has adopted a law which institutionalizes environmental studies for economic development projects. The National Council for Environment (CNEDD) is the Coordinating body for environmental management of economic development. With the creation of CNEDD, directives were given requesting all governmental institutions to assign focal points for the environment. In the Ministry of Equipment and Infrastructure, the Department of Urban Development and Housing is responsible for planning and execution of urban sanitation investment programs. Municipalities are responsible for the operation and maintenance of sanitation infrastructure and collection of solid waste. Services are provided using force account. 57. There is no strategy to prevent urban environment from deteriorating. Such deterioration results from lack of resources for investment and maintenance of infrastructure and lack of capacity in the Ministry and the municipalities. The project includes an urban sector environmental assessment, which encompasses broader sector issues than those related to the small urban works carried out during the project execution. The assessment will provide the basis to establish a strategy to manage environmental issues and will identify capacity building requirements in the sector institutions to meet the requirements of the 1997 legislation on mandatory environmental assessment of all development projects. A summary of urban environmental issues is provided in Annex 11. J. BENEFITS 58. Benefits are: (a) In the short-term, poverty reduction by creating employment for unskilled workers who are most represented among the urban poor, and a boost to the local economy due to the multiplier effect resulting from the payment by the project of expenditures covering mostly local costs: About 730,000 person-days of employment are expected to be generated over the project execution. A minimum ratio of 20 percent will be required for the amount of wages versus the amount of the works financed under the project. Annual surveys will be carried out to monitor the ratio of salaries for unskilled employees versus the total amount of salaries. (b) In the short-term, inhabitants of municipalities will benefit from the infrastructure financed under the project. Environmental impact assessments, involvement of beneficiaries in the identification and design of the projects, willingness-to-pay surveys  20 Niger - Urban Infrastructure Rehabilitation Project will aim at ensuring that those who ultimately pay for the projects are the ones who will benefit from it. (c) In the medium-term, an improved capacity of local contractors and engineering firms: The project includes a training component aimed at strengthening the capacity of local contractors and consulting firms in several areas related to planning, design and execution of infrastructure projects with the objective of creating a work force available for local governments instead of calling on the central government services; and (d) In the long-term, improved planning methods and capacity of municipalities to anticipate instead of lagging behind uncontrolled urban development: (i) All sub-projects will be subject to an economic or financial analysis and environmental impact assessment. Municipalities' staff and local consulting firms will be trained in this respect. (ii) The project will help to develop simple tools tailored to the human and financial capacities in the local governments. 59. A minimum economic or financial rate of return of 12 percent will be required for revenue- earning sub-projects and 10 percent for those non revenue-earning sub-projects where a rate of return can be estimated. During project preparation, simple standardized procedures were set up to calculate rates of return of sub-projects. Staff in Niamey's municipalities, the Ministry of Equipment and Infrastructure and NIGETIP were trained to use the software used for the calculations. Staff of other municipalities and local consulting firms will be trained during project execution. For the purpose of sensitivity studies, shadow pricing of 50 percent was used for the wages of unskilled workers. Annex 12 provides the economic and financial justification of a set of sub-projects already executed under various financing. This sample has demonstrated the need to use economic or financial criteria in the preparation of sub- projects as some sub-projects have been found to have rates of return below the thresholds in table 6 above. This results in particular of the low level of revenues generated by the contracting out to private operators of revenue-earning infrastructure compared to the investment cost. Preparation studies will have to be carried out in consultation with beneficiaries of revenue-earning sub-projects in order to ensure that there is enough potential of revenues to cover at least the depreciation cost of the infrastructure financed under the project or that the project is redesigned in order to meet this criterion. 60. Because of the low level of municipal resources and the need to increase these resources to better cover urban investment requirements, priority will be given under the project to revenue-earning sub- projects. To reflect this priority, a percentage of 60 percent is targeted for revenue-earning sub-projects at project completion. Compliance with this target will be monitored during supervision missions. Supervision missions will also monitor the amount of revenues collected from revenue-earning projects financed under the project. Non revenue-earning sub-projects will include some social sub-projects for which an ERR will not be calculated. These sub-projects should meet sectoral priority criteria and follow procedures of sector programs that have an average ERR above 10 percent. Taking into account the limited amount of resources available under the project, emergency sub-projects and non revenue- earning sub-projects which do not meet the above criteria will not be eligible to IDA financing. The amount of sub-projects not subject to an economic or financial analysis should not exceed one twelfth of the total amount of works.  Niger - Urban Infrastructure Rehabilitation Project 21 K. RISKS 61. Several risks have been identified: (a) Poor quality of sub-projects is a risk that occurred in the on-going Public Works and Employment Project as demonstrated by ex-post rates of return below the thresholds established for this project or by urban infrastructure which is not in service several years after works were completed. This risk will be mitigated by a greater involvement of beneficiaries in the identification, design and operation of sub-projects and increased emphasis given to project preparation including the carrying out of economic or financial analysis and environmental assessments of sub-projects. The quality of the studies and works execution will be reviewed by the semi-annual technical audits of the project. Contractors and consultants will be trained on the basis of the recommendations of the audits. (b) Revenue-earning infrastructure might fail to generate revenues as expected, thus increasing the municipalities' financial burden. This risk will be mitigated by involving users of the infrastructure in the design of the project and carrying out willingness-to-pay surveys. (c) To mitigate the risk of lack of counterpart funds, the Government and the municipalities will be requested to provide their contribution to any works contract financed from the IDA credit prior to the signature of the contract. The multiplier effect of counterpart funds is expected to generate competition between the municipalities to access to limited IDA resources, therefore to reduce the risk of lack of counterpart funds. (d) Lack of maintenance of infrastructure is a risk that occurred mostly only for the maintenance of roads financed under the Public Works and Employment Project. Although proper maintenance of infrastructure was a criteria of eligibility for new sub- projects identified by contracting authorities, the terms of the Manual of Procedures were such that NIGETIP was not actually entitled to enforce the criteria. The Manual of Procedures has been revised to include a clause which makes mandatory one visit of the infrastructure by the contracting authority and NIGETIP every year to identify maintenance works and one visit to control the satisfactory execution of the maintenance works. In the case where 25 percent of the portfolio of sub-projects executed under the project is not maintained, the municipality will become ineligible to the financing of additional portfolios until its entire portfolio is properly maintained. Compliance with this criterion will also be monitored by the technical audits of the project. (e) Contractors and consulting firms may not survive if the project is not followed up by a similar operation after its completion. If the proposed project is well managed and achieve its objectives, it is highly likely that donors will be keen on financing a follow up. (f) The Government may seek, for political reasons, to influence NIGETIP in the definition of the biannual portfolios of sub-projects. This risk will be mitigated by the emphasis put on beneficiary participation and economic justification of sub-projects  22 Niger - Urban Infrastructure Rehabilitation Project III. AGREEMENTS REACHED, CONDITIONS AND RECOMMENDATION 62. During negotiations, the Government agreed: (a) the revised Manual of Procedures and General Agreement between the Government and NIGETIP(paras. 34 and 35); (b) the project implementation plan including key performance indicators (paras. 36 and 50); (c) the set of basic principles for urban development (para. 53); (d) the amount and the arrangements for the financial participation of municipalities in the project (para. 44); (e) the carrying out by IDA of a mid-term review to assess the Government's continued commitment to the objectives listed in the letter of sector policy and to the project's objectives (para. 53); (f) procurement (paras. 37 to 42), accounting and auditing (paras. 46 to 48) and other implementation arrangements. 63. As a condition for Credit effectiveness, the Government and NIGETIP should sign the General Agreement (para. 33). NIGETIP should: (a) revise its computerized management information system in order to implement analytical accountings (para. 46); and (b) submit to IDA the portfolio of urban sub- projects for the first semester (para. 32). The Government should: (a) appoint the auditor of the project's accounts (para. 47); and (b) deposit on NIGETIP's project account the initial amount of CFA3 million (para. 28). 64. Subject to the above conditions, the proposed project is suitable for an IDA credit of SDR 14.5 million (US$20 million equivalent) to Niger on standard IDA terms.  Annex 1 23 Annex 1: Project Design Summary Narrative Summary Key Performance Monitoring and Critical Assumptions Indicators Supervision and Risks CAS Objective [CAS Objective to Bank Mission] Restore order in public Political stability finances, deepen policy allowing implementation reforms and strengthen of adjustment reforms competitiveness, and return of donors capacity building and which have left after the governance January 1996 military coup. Promote Human Resource Development, employment creation, and alleviate poverty Promote private sector development, support agriculture and infrastructure development, development of mineral resources Ensure that development is environmentally sustainable  24 Niger - Urban Infrastructure Rehabilitation Project Project Development [Development Objectives Objectives to CAS Objective] 1. Reduce poverty in Amount of wages Progress reports Positive economic urban areas by creating distributed. prepared by NIGETIP growth which prevents employment Share of salaries for Biannual surveys the number of poor to unskilled employees increase 2. Provide Adoption of urban Approved plans Little political municipalities with infrastructure interference skills to develop and development strategies manage their for one secondary city infrastructure per year starting in 1999 3. Promote local Number of contractors Progress reports External financing for engineering firms and and engineering firms prepared by NIGETIP urban projects available contractors, labor- registered by NIGETIP Roster of contractors after project completion based methods and the Share of local materials and consulting firms to compensate lack of use of local materials in contracts' amounts local resources  Annex 1 25 Project Outputs [Outputs to Development Objectives] 1. Employment 740,000 person-days of Progress reports creation employment created prepared by NIGETIP 2. Improved quality All sub-projects subject Project briefs prepared NIGETIP continues to in preparation of sub- to environmental by Niamey's improve its performance projects assessment and economic municipalities analysis Technical audit Economic rate of return Project briefs prepared above 12 percent for by Niamey's revenue-earning sub- municipalities and projects and 10 percent progress reports for non revenue-earning prepared by NIGETIP sub-projects 3. Improved Results of willingness-to- Progress reports Local administration sustainability of pay surveys and prepared by NIGETIP accountable for urban infrastructure beneficiary consultations performance investments Revenues collected by Contracts with private municipalities for the operators management of revenue- earning sub-projects contracted out to private operators cover the depreciation costs Urban infrastructure Reports of annual visits Municipalities will maintained by NIGETIP and maintain infrastructure contracting authority to in order to remain identify maintenance eligible to project needs and control their financing execution Technical audit 4. Availability of Simplified tools applied Consultants' report An incentive frame- tools to help to one of Niamey's work is put in place by municipalities to plan municipalities and the Government to urban infrastructure Tillaberi encourage municipa- development Basic cartography Consultant's report lities to prepare urban applied to Niamey and infrastructure Dogondoutchi development strategies  26 Niger - Urban Infrastructure Rehabilitation Project Project Components [Components to Outputs] 1. Civil works component: 1.1 Execution of a Annual disbursements Progress reports Counterpart funds made program of small urban of IDA funds: prepared by NIGETIP available by works 1997: US$2.4 million Government and 1998: US$5.9 million municipalities 1999: US$6.1 million 1997: 50%; 1998: 60% 2000: US$4.3 million 1999: 70%; 2001: US$1.3 million 2000 and beyond: 80% Less than two months after signing the convention between NIGETIP and the contracting authority to deposit counterpart funds on the project account Standard times for procurement complied with No Government intervention in the definition and execution of the portfolio of sub- projects 1.2 Studies to identify Progress reports sub-projects, including prepared by NIGETIP economic analysis and environmental impact assessment 1.3 Engineering studies Progress reports prepared by NIGETIP 1.4 Supervision of Progress reports works prepared by NIGETIP 1.5 Management of the NIGETIP's fees below Progress reports program of works 7 percent of the amount prepared by NIGETIP of works  Annex 1 27 2. Institutional building: 2.2 Support to municipalities 2.2.1 Study to establish Consultants' report simplified tools to plan urban infrastructure development and training 2.2.2 Definition of a Consultants' report methodology to help urban communities to develop a strategy for urban development and training 2.2.3 Preparation of a Consultants' report Existence of local pilot operation of private developers integrated urban development in association with a private property developer 2.2.4 Ex-post Consultants' report environmental assessment of NIGETIP projects 2.2.5 Establishment of Guide for NIGETIP's manual of Willingness of contrac- a guide for environmental procedures ting authorities to use environmental assessment of sub- environmental criteria in assessment of small projects the definition of their urban works investment programs 2.2.6 Training to the Number of trainees Consultant's report Willingness of use of the guide contracting authorities to 2.2.7 Definition of a Consultant's report use economic criteria in methodology for the the definition of their economic analysis of investment programs sub-projects 2.2.8 Training to the Number of trainees Consultant's report and use of the methodology NIGETIP's progress for the economic reports analysis of sub-projects  28 Niger - Urban Infrastructure Rehabilitation Project 2.2.9 Training and Consultants' report Willingness of sensitization of contracting authorities to contracting authorities use NIGETIP as to the use of implementing agency autonomous implementing agencies such as NIGETIP 2.2.109 Assistance to Draft Code of Consultant's report define the new legal Communes framework for the territorial administration 2.2.11 Revision ofthe Proposed budget Consultant's report budget structure and structure and new study of new resources resources identified for the local governments 2.2.12 Definition of an Strategy and action Formal adoption of urban environment plan to manage urban strategy and action plan management strategy environment by Government 2.3 Promotion of the private sector 2.3.1 Promotion of Consultants' report and local materials used in NIGETIP's the local construction industry 2.3.2 Training of local Number of contractors Consultant's report consulting firms and and consulting firms local contractors trained 3. Project management 3.1 Improvement of System implemented Consultant's report and NIGETIP's before Board NIGETIP progress management presentation report information system 3.2 Audit of the project Every six months Auditors' reports accounts and NIGETIP 3.3 Support to US$50,000 per year operation of the National Bureau of Coordination 3.4 Provision of an Accountant's contract NBC's progress reports accountant to NBC 3.5 Technical audit of Every six months Consultant's report the project  OBJECTIVES EXPECTED RESULTS ACTIONS Decentralization Component Implementation of the Findings of the Special Commission on Administrative Reforimi and the National Workshop on Decentralization ; 1. Reach a national consensus on reorganizing Conditions provided for establishing * Organize a national workshiop to validate the work ofCSRA. local administration, as proposed by CSRA. the new administrative bodies * Disseminate findings. necessitated by the new divisions. * Organize round table on decentralization. 2. Codify legislation relating to CTs (local All parties provided with the * Finalize all laws and regulations relating to CTs. governments). necessary legislative instriments for * Prepare suipplementary texts and possible amendments.