Madagascar - Third Social Fund Project (Supplemental Credit)

Report No. PID9313 Project Name Madagascar-Third Social Fund (@) ... Follow-Project-Supplemental Credit for Cyclone Rehabilitation Activities Region Africa Sector Poverty Project ID MGPE70985 Borrower Government of Madagascar Implementing Agencies The Office of the Prime Minister through the Fonds d'Intervention pour le Developpement Antananarivo, Madagascar Contact Name: Mr. ArsOne Randriamamonjy Tel: (261-20) 22 423 77 Fax: (261-20) 22 426 89 & 22 420 74 Date PID Prepared June 30, 2000 Project Mid-Term Review June 30, 2001 Project Board Date July 2000 Country Economic and Sector Background 1. Madagascar was struck by Cyclones Eline, Gloria and Hudah on February 16, March 2 and April 2, respectively. Eline struck the central east coast between Vatomandry and Mahanoro, east of Antananarivo, and crossed the central part of the country with average wind speeds of 146 km/hr and gusts of up to 208km/hr. Gloria struck the northeast coast near Sambava and snaked southwards, crossing the same low-lying areas near the mouth of the Tsiribihina river on the west coast that were previously inundated by Eline, before finally dying out east of Morombe on the southwest coast. The third cyclone, Hudah, made landfall in the same area as Gloria but proceeded west across the northern tip of the country. Rainfall lasting an average of 18 hours was reported in some areas surveyed by the National Relief Council (CNS). Nearly all of the national territory was at least lightly affected by at least one of the three cyclones. This impact was compounded by an on-going drought that began a few months prior to the passage of the cyclones. 2. The combined impact of winds and rains caused significant damage across sectors and is a serious blow to the economy of Madagascar. More than 1 million inhabitants were affected, resulting in over 200 people dead and almost 400,000 people in need of emergency aid assistance. Impacts included flood damage to roads and irrigation systems, and extensive wind damage to buildings, including schools and health centers. Many people lost shelter or were isolated due to road damage and flooding from heavy rains. Depending on the human impact and physical damage looked at, between 9 and 20 administrative districts (of 111 total) were classified by  the Government as very affected, with 33 more affected by wind, rain and flooding. Details of the cyclone damages, reconstruction costs and human and poverty impact are outlined in the President's Report on the Supplement to the Second Structural Adjustment Credit (SAC-2) (Report No. P7382-MAG), which is being presented to the Board at the same time as this Report. 3. The majority of Madagascar's 15.3 million people live in a state of significant deprivation. Seven out of ten Malagasy are poor (i.e., they cannot purchase a minimum 2100-calorie food basket and essential non-food items). Over 85 percent of the poor live in rural areas, where poverty is deeper; the remaining poor are urban, accounting for nearly half of that population. Over the past three decades, the country's real per capita income has fallen by almost 50 percent, largely as a result of macroeconomic mismanagement and extensive state intervention in the economy. The country has also experienced declines in education, nutrition and life expectancy, with social indicators at or below the unsatisfactory averages for sub-Saharan Africa. Reform policies since 1997 have triggered annual growth rates averaging slightly above 4 percent, consolidating three years of growth in excess of population growth for the first time in a decade. The Government's central objective is now to steadily reduce the incidence of poverty by half from about 70 percent in 1996 to 35 percent in 2015. 4. The impact of the cyclones and the on-going drought on the already poor rural population in the affected areas is severe. Thus, a key need of the government and its partners in the short-run is to mitigate the urgent needs of these poor populations. The rural poor rely mainly on subsistence agriculture, activities which are now affected by drought or flooding, and crop destruction. In some cases, these crops require several years to reach their maturity, such as in the case of coffee and vanilla plants. This, together with the destruction of rural infrastructure, implies that the means of living of some of the population have been destroyed. To complicate matters, an already sparse distribution of education and health centers is now further hampered by the destruction of the limited existing infrastructure. If Government and donors do not respond swiftly and effectively to this emergency, the poor of affected regions may continue to be negatively affected long after the floods recede, in turn compromising the accumulation of human capital required for Madagascar's sustained growth. 5. IDA's Response to the Cyclone Emergency. Following the passage of the cyclones, a Bank mission visited Madagascar in May 2000 to assess ways in which the Bank could provide emergency assistance. The Bank team also conducted a joint damage and reconstruction assessment with the Government and several international partners. Total infrastructure and asset damages are estimated at US$137 million, of which US$76 million is private and US$61 million public; and income losses are estimated at US$77 million for 2000. Roads, bridges, ports, railroads and two airports record the highest damage in the public sector totaling US$31 million. In the social sectors, 1727 primary schools, 173 secondary schools, 82 primary health centers (CSB1) and 86 district health centers (CSB2) were damaged or destroyed. Agricultural infrastructure was damaged in a large part of the country. 6. In close coordination with its international and national partners, IDA developed a multi-pronged approach to assist Madagascar in its - 2 -  rehabilitation efforts, including: a) assistance to the Government in assessing the damage and its impact; b) portfolio restructuring to meet short- and medium-term reconstruction needs; c) supplemental financing for the Third Social Fund (Report No. 18967-MAG) and the Second Structural Adjustment Credit; and (d) assistance to the Government to develop a long- term cyclone vulnerability mitigation strategy. Project Objectives 7. The supplemental credit will assist in the post-cyclone reconstruction efforts, targeting communities in areas stricken by the three cyclones. The supplemental will further the project's original objectives, namely to improve access of poor rural population to social and economic infrastructure; empower poor rural communities and/or communes to identify, organize, manage funds and implement sub-projects responsive to community needs; create employment; and improve the capacity of private sector, small local contractors and consultants, artisans, skilled labor and NGOs. Project Description 8. The supplemental credit would support the following activities in areas affected by the cyclones: ? rehabilitation/ construction of community infrastructure (primary schools, health posts, micro-irrigation systems, feeder roads and other access infrastructure, water supply, etc.); ? service provision activities; and ? capacity building activities to continue training beneficiary associations, communes, non-governmental organizations, local consulting firms and contractors. Project Financing 9. The total cost of Supplemental credit is estimated at 24.0 million over a period of 2 years. IDA will finance US$ 18 million, the Government of Madagascar is expected to contribute US$ 3.0 million, and communities will contribute US$ 3.0 million. Project Implementation 10. Implementation modalities defined under the on-going Third Social Fund Project will continue to be used in this supplemental credit. The project will continue to be implemented by the FID which is a non-profit association for public service (une association a but non lucratif reconnue d'interot public). FID operates in accordance with the provisions of its Articles of Agreement, by-laws, and Manuals of Procedures and of the Framework Agreement (Convention) between FID and the Government. 11. The maximum amount of FID financing or grant for an infrastructure sub-project is US$50,000 equivalent, with the exception of transport infrastructure sub-projects such as feeder roads for which the ceiling is US$100,000 equivalent. The modalities of implementation vary, depending on the type and cost of sub-projects. FID has Manuals of Procedures which clearly define identification, preparation, appraisal, selection and -3 -  implementation modalities for each type of sub-project. Beneficiaries are expected to contribute a minimum of 20 percent of the cost of each sub- project in kind (materials and labor), except for the transport infrastructure sub-projects for which the beneficiary contribution can be only 10 percent. The same beneficiary contributions will also be required for the cyclone rehabilitation but there could be flexibility built into the system in terms of timing, types of contributions, etc. Financial management arrangements will be the same as for the original project and are working satisfactorily. FID has a computerized accounting/financial management system and thus can provide up-to-date accounting and financial information for each regional office. Benefits of the Supplemental Credit 12. This supplemental credit will ensure that FID has sufficient funding for repairing part of the damages caused by the cyclones. With community and Government support, this will restore delivery of basic social and economic services. The economic benefits include an improved standard of living in cyclone-damaged beneficiary areas due to returns from sub-project investments in social and economic infrastructure, the creation of income earning opportunities through employment creation, and increased productivity and sustainability through increased ownership by communities of created communal assets. Past experience shows that through the financing of FID sub-projects, about 1.2 million person days of temporary and 500 permanent jobs are created annually. Participatory Approach 13. The rehabilitation of cyclone damaged areas will be undertaken with maximum community involvement at all stages of the sub-project cycle. Communities will be responsible for selecting sub-projects, and will also be responsible for procurement and for supervision of construction activities as is the case for the on-going project. They also assume responsibility for maintaining the completed works. 14. The FID requires that no works begin until a community association which truly represent beneficiaries and can build consensus is in place. Project Sustainability 15. The sustainability of FID's sub-projects will be achieved by ensuring maximum community involvement in the identification, preparation, appraisal, selection and implementation of a sub-project. In addition, FID will ensure that the beneficiaries actually contribute in cash, in-kind, through labor, or a combination thereof. Experience shows that the more substantial the beneficiary contributions, the better the chance that the sub-project will be properly and efficiently utilized by the community and the better the chances that sufficient funds are allocated towards maintenance. 16. The Government considers the FID an integral part of Madagascar's Rural Development Strategy. With the decentralization process currently underway, communes have become the "owners" of the community based infrastructure which FID will be financing. As a result of this new process, communes should put FID's sub-projects on their top list of - 4 -  priorities for the financing of maintenance through their operating budgets. Lessons learned from Social Funds in Madagascar 17. The Fonds d'Intervention pour le Developpement (FID), which is currently supported by the Third Social Fund Project, is the ideal vehicle for responding rapidly to the stricken rural population. FID has developed into a key instrument for intervention in the health, education, micro- finance, nutrition, transport, and agriculture and other sectors. The benefits of these social fund projects are well documented and include improved standards of living in beneficiary areas as a result of sub- project investments in social and economic infrastructure; increased income opportunities through employment; increased productivity and sustainability of communal assets; and improved in-service delivery. 18. IDA has financed three social fund projects in Madagascar which have specialized in the rehabilitation of community infrastructure. Moreover, buildings rehabilitated by FID in recent years have not been destroyed by the cyclones because the FID was able to enforce adequate quality standards for design and workmanship. The FID has intervened in over 1,500 poor rural communities and has completed 1,534 sub-projects. To date, approximately 600 primary schools, 250 health facilities, 1500 km of feeder roads, and 15,000 hectares of agricultural lands have been rehabilitated. As a result, 10 million person days of temporary, and 2000 permanent, jobs have been created. Currently, there are another 500 sub-projects underway. Environmental Impact 19. To the extent feasible, the design of all sub-projects will continue to include small additions to improve or protect the environment, such as fences around wells or reforestation, which will be undertaken by the communities and will count as their contribution to the project costs. FID intends to build on its relations with village committees to make sure the communities are aware of the disastrous consequences of deforestation and other actions that contribute to the destruction of the environment. Program Objective Categories 20. The proposed project will contribute to enhance human resources development and reduce proverty. Contact Point The InfoShop The World Bank 1818 H Street NW Washington, DC 20433 Telephone: (202) 458-5454 Fax: (202) 522-1500 Processed by the InfoShop week ending July 21, 2000. - 5 -  Although Gloria is classified as a tropical storm, for purposes of presentation we do not distinguish it from the two cyclones, Eline and Hudah. A list of the districts affected by the cyclones is included in Annex 6. Note: This is information on an evolving project. Certain components may not be included in the final project. - 6 -