Burkina Faso - Community-Based Rural Development Project

Document of The World Bank Report No: 20722-BUR PROJECT APPRAISAL DOCUMENT ON A PROPOSED CREDIT IN THE AMOUNT OF SDR 50.5 MILLION (US$ 66.7 MILLION EQUIVALENT) TO BURKINA FASO FOR THE COMMUNITY-BASED RURAL DEVELOPMENT PROJECT IN SUPPORT OF THE FIRST PHASE OF THE NATIONAL PROGRAM FOR DECENTRALIZED RURAL DEVELOPMENT October 31, 2000 Rural Development III Country Department 15 Africa Region  CURRENCY EQUIVALENTS (Exchange Rate Effective January 2000) Currency Unit = CFA Franc (CFAF) 650 CFAF = US$ US$ 0.0015 = 1 CAFF FISCAL YEAR January I - December 31 ABBREVIATIONS AND ACRONYMS AfDB African Development Bank APL Adaptable Program Loan CAS Country Assistance Strategy CAS Comite d'Action Spdcifique (Special Action Committee) CBRDP Community-Based Rural Development Project (PNGT2) CCTP Cadre de concertation technique provincial (Provincial Technical Coordination Committee) CFAF Franc de la Comm unaute Financiere Africaine (West African Franc) CVGT Commission Villageoise de Gestion de Terroir (Village Land Management Committee) CIVGT Commission Inter- Villageoise de Gestion de Terroir (Inter-Village Land Management Committee) CND Commission Nationale de la Decentralisation (National Commission on Decentralization) DOS Document d'Orientation Strategique (Sector Strategy for Agriculture) DGCL Direction Generale des Collectivites Locales (Department for Local Governments) DREP Direction Regionale d'Economie et de Prospection (Regional Of fice of the Ministry of Economy and Finance) EIA Environmental Impact Assessment EO Equipe Opdrationnelle (Operational Team) EU European Union FAO Food and Agriculture Organization GOBF Government of Burkina Faso IDA International Development Association IFAD International Fund for Agricultural Development INERA Institut National de l'Environnement et des Recherches Agricoles (National Institute of Environmental and Agricultural Research) LIF Local Investment Fund LPDRD Lettre de Politique de Developpement Rural Decentralise (Policy Letter for Decentralized Rural Development) MAT Ministere de l'Administration Territoriale (Ministry of Land Management) M&E Monitoring and Evaluation NGO Non-Governmental Organization NRM Natural Resource Management PAGIS Plan d'Action pour la Gestion el Investissement du Sol (National Soil Fertility Action Plan) PANALCD Plan d'Action National pour la Lutte Contre la Desertification (National Action Plan for the Fight Against Desertification) PCU Project Coordinating Unit (Coordination Nationale du Projet) PNGT Progranime National de Gestion des Terroirs PNDRD Programme National de Developpement Rural Decentralise (National Program for Decentralized Rural Development) PRSP Poverty Reduction Strategy Paper PSO Plan Strategique Operationnel (Operational Strategy for Agricultural Sector) TOD Textes d'Orientation sur la Decentralisation (Decentralization Laws) UGO Unite de Gestion Operationnelle (National Project Coordination Unit) UNDP United Nations Development Program Vice President: Callisto E. Madavo Country Director: Hasan A. Tuluy Sector Manager: Jean-Paul Chausse Task Team Leader/Task Manager: Jane C. Hopkins/Emmanuel Nikiema  BURKINA FASO COMMUNITY-BASED RURAL DEVELOPMENT PROJECT CONTENTS A. PROGRAM PURPOSE AND PROJECT DEVELOPMENT OBJECTIVE ..................... .............................. 1 1. PROGRAM PURPOSE AND PROGRAM PHASING ........................................................................I 2. PROJECT DEVELOPMENT OBJECTIVE ....................................................................... 2 3. KEY PERFORMANCE INDICATORS ....................................................................... 2 B. STRATEGIC CONTEXT ....................................................................... 2 1. SECTOR-RELATED COUNTRY ASSISTANCE STRATEGY (CAS) GOAL SUPPORTED BY THE PROJECT ...................... 2 2. MAIN SECTOR ISSUES AND GOVERNMENT STRATEGY .......................... ............................................. 3 3. SECTOR ISSUES TO BE ADDRESSED BY THE PROJECT AND STRATEGIC CHOICES ....................... ............................. 8 4. PROGRAM DESCRIPTION AND PERFORMANCE TRIGGERS FOR SUBSEQUENT LOANS ............................................ 1 0 C. PROJECT DESCRIPTION SUMMARY ................................. 12 1. PROJECT COMPONENTS ................................. 12 2. KEY POLICY AND INSTITUTIONAL REFORMS SUPPORTED BY THE PROJECT .................................................... 18 3. BENEFITS AND TARGET POPULATION .......................... 19 4. INSTITUTIONAL AND IMPLEMENTATION ARRANGEMENTS ........................................ 20 D. PROJECT RATIONALE .................... 22 1. PROJECT ALTERNATIVES CONSIDERED AND REASONS FOR REJECTION ............................................................... 22 2. MAJOR RELATED PROJECTS FINANCED BY THE BANK AND/OR OTHER DEVELOPMENT AGENCIES ....................... 23 3. LESSONS LEARNED AND REFLECTED IN THE PROJECT DESIGN ...................................................................... 24 4. INDICATIONS OF BORROWER COMMITMENT AND OWNERSHIP ...................................................................... 25 5. VALUE ADDED OF BANK SUPPORT IN THIS PROJECT ....................... ............................................... 25 E. SUMMARY PROJECT ANALYSIS ...................................................................... 25 1. ECONOMIC ...................................................................... 25 2. FINANCIAL ...... ................................................................ 27 3. TECHNICAL ...... ................................................................ 28 4. INSTITUTIONAL ...... ................................................................ 28 5. ENVIRONMENTAL: CATEGORY B (PARTIAL ASSESSMENT) ...................................................................... 29 6. SOCIAL ...... ................................................................ 30 7. SAFEGUARD POLICIES .................................3.......1................... ....... 31 F. SUSTAINABILITY AND RISKS ................................. 32 1. SUSTAINABILITY ................................. 32 3. POSSIBLE CONTROVERSIAL ASPECTS ................................. 33 G. MAIN CREDIT CONDITIONS ................................. 34 1. EFFECTIVENESS CONDITIONS ................................. 34 2. DATED COVENANTS ................................. 34 H. READINESS FOR IMPLEMENTATION ................................. 35 I. COMPLIANCE WITH BANK POLICIES ................................... 35  Annexes ANNEX 1: PROJECT DESIGN SUMMARY ............................................. 36 ANNEX 2: PROJECT DESCRIPTION ............................................. 41 Proect Organizational Chart ............................................. . 52 Flow Chartfor the Local Investment Fund .............................................. 53 ANNEX 3: ESTIMATED PROJECT COSTS ............................................. 54 ANNEX 4: ECONOMIc AND FINANCIAL ANALYSIS ............................................. 55 ANNEX 5: FINANCIAL SUMMARY ............................................. 63 ANNEX 6: PROCUREMENT AND DISBURSEMENT ARRANGEMENTS ............................................. 64 ANNEX 7: PROJECT PROCESSING SCHEDULE ............................................. 77 ANNEX 8: DOCUMENTS IN THE PROJECT FILE ............................................. 78 ANNEX 9: STATEMENT OF LoANS AND CREDITS ............................................. 79 ANNEX 10: COUNTRY ATAGLANCE ............................................. . 80 MAP: IBRD 30893  BURKINA FASO COMMUNITY-BASED RURAL DEVELOPMENT PROJECT Project Appraisal Document Africa Regional Office AFTR3 Date: October 31, 2000 Team Leader: Jane C. Hopkins Country Manager/Director: Hasan A. Tuluy, AFC15 Sector Manager/Director: Jean-Paul Chausse, AFTR3 Project ID: P035673 Sector(s): MC - Community Action Program, BD - Decentralization, VM - Natural Resource Management, BI - Institutional Development Lending Instrument: Adaptable Program Loan (APL) Theme(s): Rural Development Poverty Targeted Intervention: Y Program Financing Data Estimated APL Indicative Financing Plan Implementation Period Borrower (Bank FY) IDA . Others Total Commit- Closing US$ m % USS m US$ m ment Date Date APL 1 66.70 58.1 48.15 114.85 FY2001 06/30/2006 Government of Loan/ Burkina Faso Credit ______. APL 2 50.00 25.0 150.00 200.00 FY2006 06/30/2011 Government of Loan/ Burkina Faso Credit APL 3 50.00 25.0 150.00 200.00 FY2011 06/30/2016 Government of Loan/ Burkina Faso Credit _ _ _ _ _ Total 166.70 32.4 348 15 514.85 _ Project Financing Data Amount (USS millions): 66.7 Proposed Terms: Standard Credit Grace period (years): 10 Years to maturity: 40 Commitment fee: variable (not to exceed 0.5%) Service charge: 0.75% Financing Plan Source Local Foreign Total GOVERNMENT 14.30 0.00 14.30 BENEFICIARIES 9.15 0.00 9.15 IDA 56.30 10.40 66.70 INTERNATIONAL FUND FOR AGRICULTURAL DEVELOPMENT (IFAD) 9.50 2.00 11.50 GOVERNMENT OF DENMARK 3.20 1.00 4.20 GOVERNMENT OF THE NETHERLANDS 8.00 1.00 9.00 Total: 100.45 14.40 114.85  Borrower: GOVERNMENT OF BURKINA Responsible agency: MINISTRY OF AGRICULTURE (PNGT) Address: Deuxieme Programme National de Gestion de Terroirs B.P. 1487 Ouagadougou 01 Burkina Faso Contact Person: Albert Djigma, Project Coordinator Tel: 226-32-47-53/54 Fax: 226-31-74-10 Email: albert.djigma@ agriculture.gov.bf Estimated disbursements (Bank FYIUS$M): FY 2001 2002 2003 2004 2005 2006 Annual 10.1 10.2 13.3 14.9 14.9 3.3 Cumulative 10.1 20.3 33.6 48.5 63.4 667 _ Project implementation period: 01/01/2001 - 12/31/2005 Expected effectiveness date: 01/01/2001 Expected closing date: 06/30/2006  1 A. Program Purpose and Project Development Objective 1. Program purpose and program phasing 1.1 The Government of Burkina Faso's Poverty Reduction Strategy Paper (PRSP) places its emphasis on improving the revenues and living conditions of the rural population, particularly food crop producers who account for 75 percent of the rural poor. The strategy focuses on: (i) accelerating broad-based, equitable growth; (ii) increasing the access of the poor to basic social services (health, education, safe drinking water); (iii) increasing the employment and income generating potential of the poor; and (iv) promoting good governance. 1.2 The Programme National de Developpement Rural Decentralise (PNDRD) is a key program in support of the PRSP. It will have a direct and immediate impact on poverty reduction by accelerating the pace of public transfers to rural areas for much needed socio-economic and productive infrastructure. In addition, it will have an indirect impact on sustainable development by building: (i) the local-level capacity to prioritize, plan, implement and manage local development efforts; and (ii) the institutional capacity at local, provincial and national levels to operationalize and support the decentralization process. 1.3 The recent Lettre de Politique de Developpement Rural Decentralise (LPDRD), endorsed by the Government of Burkina Faso (GOBF) and supported by its development partners, confirms and embodies the fundamental principles adopted in 1998 in the Textes d 'Orientation de la Decentralisation (TOD) -- decentralization and participation are heralded as pillars of sustainable development. The PNDRD will promote decentralized rural development and reinforce the capacity of local institutions to sustainably deliver a number of services selected by and for their populations. The long-term vision is one of participatory and representative local Governments and institutions planning and managing their own development programs and mobilizing the necessary resources through increased local revenues and Government fiscal transfers. To achieve these goals, the program will: (i) strengthen the capacity of villages and local Governments to prioritize, plan, implement, and maintain community-based investments; (ii) provide decentralized funding for demand-driven and community-managed rural infrastructure and services; and, (iii) support the ongoing decentralization process. 1.4 The PNDRD intends to reach all rural communities in the country and implement a harmonized, multi-donor funded, decentralized rural development framework. It will be implemented over a 15-year period, consisting of three 5-year phases. Each of these phases will be designed flexibly in order to adapt to the country's decentralization choices, the pace of resulting institutional reforms, and the need to harmonize various approaches (see detailed Program Description below). 1.5 Phase I represents the Project and is called hereafter the Community-Based Rural Development Project (CBRDP). Phase I will initiate the process, develop the capacity of rural inhabitants to manage their own development in a sustainable, equitable and productive manner, and facilitate the emergence of rural municipalities (communes rurales). To that effect, it will couple capacity building activities and a demand-driven local investment fund to enable communities to learn by doing. The CBRDP will also make a significant contribution to the debate over rural municipal institutions, the transfer of responsibilities to rural municipalities, fiscal decentralization, and participatory and decentralized management of village and municipal assets. Phase 11 (2006-2010) will build upon and expand the achievements of Phase I and allow the Program to reach national coverage. One of the greatest challenges during this phase will be to build rural municipalities that are truly participatory and accountable to their population. During this second phase, the CBRDP will be part of a harmonized PNDRD that will reach all villages, either individually or grouped together in rural municipalities. Phase III will consolidate what has been achieved and prepare an exit strategy.  2 2. Project development objective (see Annex 1) 2.1 The overall Program objective is to reduce poverty and promote sustainable development in the rural areas. Specific phase I (Project) objectives are to (i) build local capacity to plan and implement rural development, accelerate the pace of public transfers for decentralized rural development, and (ii)support the implementation of the country's decentralization framework. 2.2 The Project development objective is to increase the productive capacity of the rural sector and improve the effectiveness of public investments by developing the institutional and organizational capacity necessary to enable local communities to plan, implement and manage their own development process. The end of the first phase will see the emergence of rural municipalities with functioning provincial level coordination forums and a facilitating framework (regulatory, institutional, and fiscal) at the national level. 3. Key performance indicators (see Annex 1) 3.1 Key performance indicators and triggers for the Program's successive phases are presented in detail in Annex I and paragraph B.4.2 below. They include: (i) the establishment of an efficient overall framework for decentralization in rural areas and the creation of rural municipalities; (ii) the strengthening of rural communities' capacities for prioritizing, planning and managing their own development; (iii) the actual development and implementation, in a representative and participatory manner, of local development plans by a significant proportion of the country's villages; (iv) the establishment of an efficient mechanism for funding these development plans through the mobilization of local resources and fiscal transfers. B. Strategic Context 1. Sector-related Country Assistance Strategy (CAS) goal supported by the project (see Annex 1) Document number: R96-140 Date of latest CAS discussion: 07/11/96 1.1 Burkina Faso is one of the poorest countries in the world with a GDP per capita of US$ 240 (1998) and human development indicators lower than those of most other Sub-Saharan Africa (SSA) countries. It was ranked number 172 out of 175 countries in the UNDP's 1997 Human Development Index. Literacy is 36 percent versus 57 percent for SSA, life expectancy is 44 years versus 51 years for SSA, infant mortality is 99/1000 versus 91/1000 for SSA, and maternal mortality is 930/100,000 versus 822/100,000 for SSA. 1.2 With multi-donor support (UNDP, AfDB, EU and IDA), the Government of Burkina Faso carried out a Living Standards Priority Survey in 1994 and again in 1998.The results confirm that the overall incidence of absolute poverty (based on minimal nutritional requirements) remains high. According to the 1998 survey, 45 percent of the population falls below the poverty threshold, with annual incomes of US$74 per capita (less than 35 cents per day) to cover basic caloric requirements and non-food expenditures. For the lowest quintile, the average annual income is less than US$50. Poverty is largely a rural phenomenon -- 95 percent of the poor reside in rural areas and 51 percent of the rural population live below the poverty line (versus 16 percent of the urban population).  3 1.3 While Burkina Faso's macroeconomic performance has been good since the 1994 CFA Franc devaluation -- achieving a per capita real income growth rate of 1.6 percent per year -- it is fragile and below what is needed to reduce poverty substantially. At its current pace, it will take 44 years to double the country's real per capita income of $145 in 1997 (using 1985 as a base year). With almost half of its population living under the poverty line, it will take even more time to reduce poverty and meet the 2015 targets. 1.4 In pursuit of accelerated and sustainable poverty reduction, the 1996 Country Assistance Strategy (CAS) emphasized three goals: (i) maintaining a sound macroeconomic environment in which equitable growth can lead to poverty reduction; (ii) expanding the provision of social services, particularly in health and education, to the poorest regions to provide the basis on which all Burkinabe can take advantage of growth opportunities; and (iii) improving productive opportunities to raise incomes and increase employment. A new CAS is under preparation to support the Government's recently completed PRSP which focuses on reducing rural poverty by: (i) accelerating broad-based, equitable growth; (ii) ensuring access of the poor to basic social services (health, education, water); (iii) increasing the employment and income generating opportunities of the poor; and (iv) promoting good governance. The PNDRD will be one of the Government's principal instruments to reduce poverty in rural areas and in the country as a whole. 2. Main sector issues and Government strategy Rural sector issues 2.1 The agricultural sector (crop and livestock) is the main source of employment and income for about 80 percent of the Burkinabe population and generates important growth and employment linkages with the potentially dynamic non-agricultural rural economy. The sector is made up of around 1.3 million farm households, largely subsistence oriented, with limited access to services, markets and basic socio- economic infrastructure. The sector is also the principal source of growth for the economy -- contributing 32 percent to GDP and 60 percent to export earnings in 1998. 2.2 Performance of the agricultural sector was erratic in the 1980s, but maintained an average annual growth rate of four percent. During the first half of the 1 990s, growth was lower (around 2 percent), but increased in the post devaluation period, to more than 6 percent, largely as a result of a tremendous boom in cotton output and livestock exports. Real GDP growth reached 4 percent in 1995, 6 percent in 1996, 4.7 percent in 1997, and 6.2 in 1998. 2.3 In spite of these relatively positive 'macro-level' indicators, the incidence of poverty in rural areas remains high, particularly among food crop producers. Fifty-one percent of the rural population lives below the poverty line (versus 16 percent of the urban population); the incidence is higher among subsistence farmers (77 percent) than commercial farmers (42 percent). With a population of 11 million growing at about 2.7 percent per annum, intense pressure is being placed on the country's limited arable land resources. Shortened fallow periods, low use of organic and inorganic fertilizers, and overgrazing threaten an already fragile resource base and have resulted in serious soil degradation and increased conflict among different user groups. With limited arable land and rising population pressures, it is clear that intensification and technological change will be necessary to restore and increase the productive potential of the resource base. Yet, policy and institutional constraints (such as land tenure insecurity) often discourage farmers from making the productive investments necessary to reverse resource degradation, resulting in continued low productivity and increased poverty, rural and urban. 2.4 In addition to their natural resources, the income earning potential of small farmers and wage laborers is strongly affected by their human capital. Improving the health status and cognitive skills of the  4 rural population should be a top priority -- not only as a goal in itself, but as a cost-effective way of raising their productivity and incomes. The literacy rate in rural Burkina Faso is only seven percent compared with a national average of 20 percent and rural primary school enrollment is 19 percent compared with the national average of 36 percent. Health indicators place Burkina Faso among the lowest in Sub-Saharan Africa (SSA). More than one third of the children under five years of age suffer from malnutrition and Burkina Faso is strongly affected by the HIV/AIDS epidemic -- the prevalence is 7 percent among the general population; 13 percent in the transport sector. An analysis of these health indicators by socio-economic strata suggest large urban-rural disparities. 2.5 A poverty reduction strategy must give highest priority to rural development and its engine -- agricultural growth -- not because this is where the bulk of the poor reside, but rather because this is where the productive potential resides, where linkages with the local economy are strongest, and where growth can yield the largest impact on both rural and urban poverty. Efforts to improve thecompetitivity and productivity of the rural sector are at the core of the country's accelerated growth and poverty reduction strategy. However, the sector remains severely constrained by: (i) poor infrastructure (social and economic) leading to high input costs and low labor productivity, (ii) limited access to and use of improved technologies, (iii) land tenure insecurity, (iv) inadequate access to financial services, and (v) ineffective agricultural and social service delivery mechanisms. 2.6 Recent economic reforms have been favorable to rural development and agricultural growth through their price effects. However, they have been unfavorable through their public expenditure effects (reduced funding for rural infrastructure, agricultural research and extension). Coupled with reductions in foreign aid allocations to agriculture, the net impact has been a slowdown in rural growth and hence in poverty reduction. It is often assumed that opening the economy to market forces is sufficient to ensure rapid growth of the agricultural sector. Although reforms that facilitate the expansion of the export sectors are essential, specific characteristics of the rural sector such as: (i) a large number of smallholder farmers who are geographically dispersed and poorly organized; (ii) high exposure to multiple sources of co-variate risks (climate and market-related); (iii) complex institutional arrangements governing the markets for productive factors (e.g., land); and (iv) numerous market failures preventing their efficient operation suggest that, in addition to market reform, judiciously chosen public investment is needed. Specifically, public expenditure on rural infrastructure (hard and soft), technology generation, and institutional development/reform will be necessary for rural and agricultural growth to accelerate. 2.7 The challenge, in an era of limited and shrinking resources, will be to increase the relevance and cost effectiveness of public sector expenditures. Past efforts to tackle the policy, institutional and technological constraints facing the rural poor have been centrally driven and sectorally focused. As a result their effectiveness has been low. Decentralized decision-making and economic empowerment of beneficiary communities is expected to improve the choice, relevance, cost effectiveness, and maintenance of rural infrastructure (see box below for overview of decentralization in Burkina Faso). In addition, to meet the demands of the local population, the deconcentration of sectoral ministries (and engaging in public/private partnerships where appropriate) will improve the delivery mechanisms of public goods and services and make them more demand-responsive. Such a vision is described in the Government's Poverty Reduction Strategy Paper and the Letter of Decentralized Rural Development Policy.  5 Decentralization in Burkina Faso Backsround Decentralization in Burkina Faso has a long and arduous history. The first, closely controlled, communes were crated under the colonial regime. Attempts at consolidating local organizations succeeded, but none managed to institutionalize locally elected councils and mayors. The process started anew in 1991 with the adoption of Constitutional reforms. The Commision Nationale de la D4centrailsation (CND) was created and charged with developing a framework for the decentralization process and advising the Government on its implementation. In 1998, after five years of preparation and national debate the National Assenbly passed the Textes d')rientation de la Dcentralisation (TOD). The TOD sets up the fundamental principles guiding the organization and implementation of decentralization in Burkina. Decentralization, or the right for decentralized entities to freely manage their own affairs, has become an organizing principal for promoting development and democracy. The TOD envisions two levels of decentralization: the province and the municipality. The provincial territory will include departments, municipalities, and villages. As a decentralized entity, the province will be headed by an elected provincial council and a presidet. As a deconcentated entity, it will continue to be administered by a haut- commissaire, assisted in his/her work by a consultative body named the Confirece des Cadres de la Province. The departnental territory will include municipalities and villages. It is administered by aprifel. Both urban and rural municipalities will exist, each headed by its own elected officials (mayor and council). An urban municipality is a community of at least ten thousand people able to mobilize a budget of at least fifteen million FCFA. A rural municipality is defined by a population of, at least, five thousand people and a minimun budget of five million FCFA. Ktitutions National Commission on Decentralization (Commission Nationale de la