Documentof The World Bank FOR OFFICIAL USEONLY ReportNo: 33534-TD PROJECTAPPRAISAL DOCUMENT ONA PROPOSEDGRANT INTHEAMOUNT OF SDR 10MILLION (US$15.O MILLIONEQUIVALENT) TO THE REPUBLICOF CHAD FORAN URBANDEVELOPMENT PROJECT January 3,2007 Water andUrbanI1 CentralAfrica 1 Africa Region This document has a restricteddistributionandmay be usedbyrecipientsonly inthe performance of their official duties. Its contents may not otherwise be disclosedwithout World Bank authorization. CURRENCYEQUIVALENTS (ExchangeRate EffectiveNovember 30, 2006) Currency Unit = CFA franc (CFAF) US$l.O = CFAF 510 SDR 1=US$1.50435 Euro 1=US$1.25 FISCAL YEAR January 1 - December 3 1 ABBREVIATIONS AND ACRONYMS AAP Africa Action Plan AFD FrenchDevelopment Agency (Agence FranGaise de Ddveloppement) AfDB African DevelopmentBank APL Adaptable ProgramLoan CA District SanitationCommittee (Comitd d 'Assainissement) CAS CountryAssistance Strategy CCSRP Committee for Control and Oversight of Petroleum Revenues (Collbge de ContrGle et de Surveillance des Revenus Pdtroliers) CFPB PropertyTax for DevelopedLand(Contribution Foncibre sur les Propridtks Bdtis) CFPNB PropertyTax for Undeveloped Land(Contribution Foncibre sur les Propridtds Non-Bdtis) COJO National Bid Opening and Evaluation Committee (Commission d'ouverture et de Jugement des Osfyes) CPAR CountryProcurement Assessment Report CQ Consultant Qualification dgMarket DevelopmentGateway's portal for tenders and consultingopportunitiesworldwide DGI GeneralDirectorateof Taxes (Direction Gknkrale des ImpGts) DGCL GeneralDirectorateof Local Governments (Direction Gdndrale des Collectivitks Locales) DTG DecentralizedTerritorial Government DU UrbanDepartmentof MATUH(Direction de I'Urbanisme) DURAH Urban Development and Housing Project (Projet de Ddveloppement Urbain et d 'Amklioration de I'Habitat) EC EuropeanCommission EIA EnvironmentalImpactAssessment EO1 Expressionsof Interest ERR EconomicRate ofReturn ESMF Environmentand SocialManagementFramework EU EuropeanUnion FBS FixedBudget Selection FMR FinancialManagementReport GDP Gross Domestic Product GNI Gross NationalIncome GPN GeneralProcurementNotice GTZ GermanAgency for TechnicalCooperation(Deutsche Gesellschaftflr TechnischeZusammenarbeit) IC Individual Consultant ICB InternationalCompetitiveBidding IDA InternationalDevelopment Association IDB Islamic Development Bank IEC Information, Education, andCommunication IGF GeneralInspectorateof Finance (Inspection Gdndrale des Finances) 11 FOROFFICIAL USE ONLY IGL General Lump Sum Tax (Imp6t Gtndral Libtratoire) IMF International Monetary Fund IRR Internal Rate of Return LCS Least Cost Selection LSC Local Steering Committee MAT Ministryof LandAdministration (Minist2re de 1iidministration du Territoire) MATUH Ministry of Land Planning, Urban Development, and Housing (MinistGre de 1'Amtnagement du Territoire, de I'Urbanisme et de 1'Habitat) M C D MinistryinCharge ofDecentralization M D G Millennium Development Goal M&E Monitoring and Evaluation MFEP MinistryofFinance, Economy, andPlanning (Ministke desFinances, de 1'Economieet du Plan) MI MinistryofInfrastructure (Minist2re des Infiastructures) MME Ministry ofMining and Energy (MinistGre des Mines et de 1'Energie) M o U Memorandumo f Understanding MSP MinistryofPublic Health(Ministke de la Santd Publique) NCB National Competitive Bidding NPV Net Present Value OED Operations Evaluation Department OHADA Organization for the Harmonization of BusinessLaw inAfrica PAD Project Appraisal Document PAMFIP Capacity Buildingfor Modernization of Public Financial Management PER Public Expenditure Review P I M Project ImplementationManual PROADEL Local Development Program Support Project (Projet d'Appui au Ddveloppement Local) PRML Petroleum RevenueManagement Law PRMP Petroleum Revenue Management Program PRSP Poverty Reduction Strategy Paper QCBS Quality- and Cost-Based Selection RAP Resettlement Action Plan RPF Resettlement Policy Framework SA Special Account SCAC French Cooperation (Service Franqais de Coopdration et d 'Action Culturelle) SDR Special Drawing Rights SIL Sector Investment Loan SME Small and MediumSized Enterprise SOE Statement o f Expenditures SPN Specific Procurement Notice sss Single Source Selection STEE National Water and Electricity Company (Socie'td Tchadienne d 'Eau et d'Electricitd) TCAI Domestic Turnover Tax TVLP Tax on Value o f Business Premises (Taxe sur la Valeur Locative des Locaux Professionnels) UNDB UnitedNations Development Business UNDP UnitedNations Development Program VAT1 Value Added Tax on Imports Acting Vice President: Hartwig Schafer Acting Country Director: Marie Franqoise Marie-Nelly Sector Manager: Eustache Ouayoro Task Team Leader: Franck Bousquet This document has a restricted distribution and may be used by recipients only in the performance o f their official duties. Its contents may not be otherwise disclosed without World Bank authorization. CHAD URBAN DEVELOPMENTPROJECT CONTENTS I STRATEGICCONTEXTANDRATIONALE . .............................................................Page3 A. Country and sector issues.................................................................................................... 3 B Rationale for Bank involvement ......................................................................................... . 6 C. Higher level objectives to which the project contributes .................................................... 8 I1 . PROJECTDESCRIPTION ............................................................................................. 9 A. Lendinginstrument ............................................................................................................. 9 B. Project development objective andkeyindicators.,............................................................ 9 C. Project components........................................................................................................... 10 D Lessons learned andreflectedinthe project design . .......................................................... 15 E. Alternatives considered and reasons for rejection ............................................................ 17 I11 . IMPLEMENTATION .................................................................................................... 18 A. Institutional andimplementation arrangements................................................................ 18 B Monitoring and evaluation ofoutcomes/results................................................................ . 20 C. Sustainability..................................................................................................................... . . . 20 D. Critical risksandpossible controversial aspects............................................................... 22 E Grant conditions and covenants ........................................................................................ 24 IV.. APPRAISAL SUMMARY ............................................................................................. 25 A. Economic and financial analyses ...................................................................................... 25 B Technical., . ......................................................................................................................... 26 C. Fiduciary ........................................................................................................................... 27 D Social . ................................................................................................................................. 29 E. Environment.,.................................................................................................................... 30 F. Safeguard policies ............................................................................................................. 31 G Policy exceptions andreadiness . ........................................................................................ 31 Annex 1: Country and Sector or ProgramBackground ......................................................... 32 Annex 2: Major RelatedProjectsFinancedby the Bank and/or Other Agencies...........A. 48 Annex 3: ResultsFrameworkandMonitoring ........................................................................ 50 Annex 4: ProjectDescription ..................................................................................................... 55 Annex 5: ProjectCosts ............................................................................................................... 65 iv Annex 6: ImplementationArrangements ................................................................................. 67 Annex 7: FinancialManagementandDisbursementArrangements ..................................... 71 Annex 8: ProcurementArrangements ...................................................................................... 81 Annex 9: EconomicandFinancialAnalysis ............................................................................. 89 Annex 10: SafeguardPolicyIssues ............................................................................................ 95 Annex 11:ProjectPreparationandSupervision ..................................................................... 97 Annex 12: Documentsin the ProjectFile ................................................................................. 98 Annex 13: Statementof LoansandCredits .............................................................................. 99 Annex 14: Country at a Glance ............................................................................................... 101 Annex 15: Map IBRD 34221 .................................................................................................... 103 V REPUBLIC OF CHAD URBANDEVELOPMENT PROJECT PROJECTAPPRAISALDOCUMENT AFTU2 Date: January 3,2007 Team Leader: Franck Bousquet Acting Country Director: Marie Franqoise Marie- Sectors: General water, sanitation, and flood Nelly protection sector (40%); Sub-national government Sector Manager: Eustache Ouayoro administration (40%); Other social services (20%) Themes: Municipal governance and institution building(P); Other urban development (S) Project ID: PO72030 Environmental screening category: B Lending Instrument: Specific Investment Loan Safeguard screening category: B - Limited impact Project FinancingData 1 [ 3 Loan [ 3 Credit [XI Grant [ ] Guarantee [ 3 Other: For Loans/Credits/Others: Total Bank financing (US$m.): 15.00 ASSOCIATION Total: 21.oo 6.00 27.00 Recipient: The Government of Chad N'Djamena Chad Tel: (235) 52 47 10 Fax: (235) 52 47 11 ResponsibleAgency: Ministryo fLandPlanning, UrbanDevelopment and Housing(MATUH), Implementation Unit within the Urban Department. 1 Does the project depart from the CAS in content or other significant respects? Re$ PAD I.C [ No Does the project require any exceptions from Bank policies? Re$ PAD I K G Have these been approved by Bank management? I s approval for any policy exception sought from the Board? Does the project include any critical risks rated "substantial" or "high"? Re$ PAD III.D [XIYes [ ] N o Does the project meet the Regional criteria for readiness for implementation? Re$ PAD I K G [XIYes [ ] N o Project development objective Re$ PAD II.B, Technical Annex 3 The project development objective i s to increase sustainable access to municipal services for residents in targeted project cities (N'Djamena, Moundou, Sarh, AbCchC, and Doba). Project description [one-sentence summary of each component] Re$ PAD ILC, TechnicalAnnex 4 The proposed project will finance priority infrastructure (water, drainage, and economic infrastructure) in N'Djamena, Moundou, Sarh, AbCchC, and Doba to address partially the significant infrastructure gaps these cities are facing. By packaging public works appropriately and using labor-intensive methods whenever possible, the project will create employment opportunities for unskilled and semi-skilled labor and promote SMEs in construction and urban services. Further, the project will improve capacity at the local level to plan, manage, and maintain infrastructure and services, and will support capacity to foster urban development at the central level. Which safeguardpolicies are triggered, ifany? Re$ PAD I K F, TechnicalAnnex 10 The Environmental Assessment and Involuntary Resettlement safeguard policies are triggered by the Project. However, the Project will not fund activities that would cause serious adverse effect on the environment or any form o f land acquisition or restriction o f access to sources o f livelihoods. Significant, nonstandard conditions, if any, for: Re$ PAD III.E Board presentation: None. Negotiation conditions Cfulflled): Decree setting up the Inter-Ministerial Committee o f the proposed project sent to IDA. Draft agreements between the State and the participating cities sent to IDA. Draft Conventions de MaPtrise d 'Ouvrage Diligue` between the Implementation Unit o f the MATUHand eacho fthe beneficiary Cities sent to IDA. Sector Policy Letter finalized and sent officially to IDA. Draft Project ImplementationManual (PIM) sent to IDA. Draft Project Administrative, Financial, and Accounting Manual sent to IDA. Government letter confirming its commitment to make available counterpart funds amounting to US$12 million during the project's cycle and budgeted on oil revenues. Appointment o f IGF as Internal auditor o f the Project. Grant effectiveness conditions: (a) The Recipient's Project Account has been opened and the initial contribution o f CFAF 160million has been deposited therein. (b) The Government has adopted the Project Implementation Manual (PIM), and the Project Administrative, Financial, and Accounting Manual, both in form and substance satisfactory to IDA. (c) At least one Convention de Maitrise d 'OuvrageDiligui and relatedProtocole d'Accord, in form and substance satisfactory to the Association have been executed between the relevant Beneficiary City and the MATUHand the Recipient, respectively. 2 I.STRATEGICCONTEXTANDRATIONALE A. Country and sector issues 1. Background. With 80 percent o f the population o f about 9.7 million' living on less than $1 a day, Chad i s one o f the poorest countries inthe world and faces enormous development challenges. The 2005 Human Development Report ranks Chad as 173 out o f 177 countries surveyed. The Gross National Income (GNI) per capita (2005) i s estimated at US$400. There i s a significant lack o f infrastructure services and capacity at all levels o f the administration to finance, plan, and implement development efforts to improve the living conditions for the population. The challenges are illustrated by what it will take to achieve the Millennium Development Goal (MDG) that 60 percent o f the population have access to an improved water source in 2015 - from the current situation where only 34 percent have access (compared to 58 percent in sub-Saharan Africa). 2. Expectations that large increases in financial resources could buttress and accelerate economic growth and development efforts in the country are on the rise and widespread since oil production started in the Doba basin in 2003. Oil revenues are a major source o f funding. In2004, net oil revenues o f US$131 million (CFAF 66.8 billion) represented 42 percent o f total revenues in the national budget, excluding foreign financing. In 2005, net oil revenues had increased to US$250 million (CFAF 130.4 billion), representing 45 percent o f the national budget. And by 2006, net oil revenues had grown to US$800 million (CFAF 416.2 billion), representing 73.5 percent o f total revenues inthe national budget, excluding foreign financing. 3. Management of oil revenues. The impact on the lives o f the ordinary Chadian as a result o f the increased revenues from oil production depends crucially on a transparent and effective management o f these revenues. Following amendments to the Petroleum Revenue Management L a w (PRML) (a precondition for World Bank backing o f the oil production project), which would substantially weaken poverty-targeted programs in favor o f more resources for fiscal deficit and unplanned expenses (most o f which were security related), the World Bank withheld new loans and suspended disbursements o f IDA funds allocated to Chad. 4. However, an accord was reached after discussions between the two parties, and a Memorandum o f Understanding (MoU) was signed on July 13, 2006 committing the Government o f Chad to spend 70 percent o f its 2007 budget (all spending) on priority poverty reductionprograms. The Government agreed with donors on short- and medium-term steps to be undertaken to strengthen budget management within a comprehensive plan for the modernization o f public finances. 5. Development Agenda. The Poverty Reduction Strategy, adopted by the Government in June 2003, outlines Chad's development agenda and strategic objectives. The strategy aims at cutting the number o f people living inpoverty in half by 2015. To reach this aim, a macroeconomic framework has been developed, with focus on five strategic orientations: 1) promoting good governance; 2) ensuring strong and sustainable growth; 3) improving human capital; 4) improving the living conditions o f vulnerable groups; and 5) restoring and safeguarding ecosystems. 6. At the political and institutional level, the focus will be on consolidating the foundations o f democracy by implementing the decentralization provisioned for in the Constitution o f 1996. In the economic and financial sphere, efforts will focus on national skill-buildingin both the private sector and in government departments, and on integration and internal organization of the productive system, ' World DevelopmentIndicators2006. 3 including overcoming the country's isolation. Increased public investment in infrastructure and human capital will contribute to increasing the rate o freal Gross Domestic Product (GDP) growth. 7. Political Decentralization. Decentralization will lay the ground for a democratic distribution o f power among citizens, and creation o f three sub-national levels o f Government: regional, departmental, and municipal, each with elected bodies. Local elections have been postponed several times, and are envisioned to take place by 2007. In parallel, the authorities are endeavoring to make arrangements for the deconcentrated services2o f the ministries to interact with the future elected local governments. 8. Involvement o f stakeholders at all levels o f society i s essential to better allocate the oil revenues and manage the impatience o f the communities to tap into the dividends o f the oil boom. This entails consulting the population on priorities and requires that all stakeholders concerned should actively participate in the development o f the country. The decentralization process will give more power to the local authorities in an otherwise very centralized state faced with high political uncertainties and fierce competition for power. 9. Current operational and legal framework for Chadian municipalities. Until local elections take place, the municipalities continue to be administered by Management Committees which include representatives o f various deconcentrated services as well as local traditional leaders. The Management Committees deliberate on the businesses o f the municipality, and in particular, discuss and adopt the budget. The President o f the Management Committee, a civil servant appointed by presidentialdecree, i s the Mayor, assisted by the municipal administration. 10. Supervision o f the municipalities i s carried out by the deconcentrated administrative authority, i.e. by the Prefects or sub-prefects or the Government's delegate in the case o f the municipality of N'Djamena. The municipalities' budgets are subject to a prior approval o f the Minister o f Land Administration and the Ministry o f Finance. 11, Fiscal decentralization and municipal finance. The fiscal regime o f the municipalities i s at the heart o f the development effort. While political decentralization i s being prepared, municipalities are suffering from an ongoing financial crisis and unpredictability o f available resources. As detailed in Annex 1, the main sources o f revenue o f Chadian municipalities include: (1) Taxes and fees allocated by the State for the municipalities (mainly custom duties, land, and fiscal taxes). The municipalities lack access to information on, and control of, the taxes managed by State agencies, which constitute a major part o f their revenue. Municipalities are faced with delays in transferring the refunds which have an adverse effect on municipal resources. (ii) Municipalrevenue(business fees,taxonrealestatetransactions, taxesonentertainment, etc.). Establishment and management o f these revenues i s not consolidated under one law, as municipalities establish them and set tariffs without specific guidance. For revenue from public space user fees, management tools constitute the main factor limiting their collection, e.g., fees for market space and roadway usage have not been subject to an exhaustive census, and the collection effort i s far below resource potential. (iii) Publicspaceuserfees(stallrentals,parkingfees,advertisingfees,etc.). Collectionisfar below resource potential, per above. Deconcentrated services are the local representations o f the line Ministries, while decentralization refers to the process of attributing more responsibilities and resources to local authorities. 4 e 12. There are major shortcomings in terms o f financial and account management, resource mobilization remains low, and Chadian municipalities are confronted with a resource crisis, preventing the development o f basic services and infrastructure. The level of municipal resources inthe five project cities (N'Djamena, Moundou, Sarh, AbCchC, and Doba) i s within the range o f CFAF 1,500 - 3,200 per capita (US$2.6 to US$5.8), which i s about one third to half o f that generally obtained in similar cities in sub-Saharan Africa. 13. Further hindrances to freeing resources for productive purposes are also caused by high administrative expenses. Staff costs account for approximately 47 percent of municipal expenses in N'Djamena, and between 17 and 46 percent in the other four municipalities. Debt accumulation weighs on the municipalities and so do charges or expenses carried forward from previous fiscal years. Various agencies o f the Ministry o f Finance are involved in assisting the municipalities in mobilizing resources and financial management, but they have very limitedcapacity to carry out these functions. 14. Characteristics of urbanization and urban management. Chad's urban population is currently about 2.4 million, representing 26 percent3o f the total population, up from an estimated 7 percent o f the total population in 1960. For the period 1990-2004, the average annual growth rate o f Chad's urban population was 4.5 percent, compared to 4.4 percent for sub-Saharan Africa and 2.2 percent worldwide. The cities o f Chad have to accommodate about 108,000 new residents every year, roughly corresponding to the population o f the third largest city of the country. 15. According to the latest estimates, only 41 percent o f the urban population has access to an improved water source (as compared to 27 percent in 1984), and 30 percent o f the urban population has access to improved sanitation (as compared to 27 percent in 1990). Incontrast, on average, 80 percent o f urban dwellers in sub-Saharan Africa have access to an improved water source (1990: 48 percent) and 55 percent have access to sanitation (1990: 53 per~ent)~. 16. Drainage o f storm water and sewage and the removal o f household waste are perpetual problems inmost Chadian cities. Humanwaste is often evacuatedvia the stormwater drainage system or ispoured in the streets or inopen lands throughout the year, with obvious health risks and malodorous smell as a result. 17. Figures from the Ministry o f Land Planning, Urban Development and Housing (MATUH) estimate that a maximum o f 10 percent o f houses in N'Djamena are constructed of durable materials. Globally, the living conditions inChadian cities are distressing. percent o f GDP' . It i s estimated that households headedby persons working inthe urban informal sector 18. Urban areas are engines o f economic growth in the country, and currently contribute to about 77 account for 32 percent o f GDP, while only making up 20 percent o f the population6. The urban sector relies heavily on external financing (95 percent of investment projects in the urban sector are being financed by the donor community), and the needs far outstrip available resources. For this reason, donor financing i s required to address the huge needs, provide more discipline inthe management o f the limited available funds, and provide know-how through technical assistance. 19. As detailed inAnnex 1, the main challenges o fthe urban sector can be summarized as follows: United Nations Department o f Economic and Social AffairsPopulation Division - World Urbanization Prospects: The 2003 Revision. 4 Most recent figures from World Development Indicators, figures from "Gender, Poverty and Environmental Indicators", African Development Bank, (2004), andUNDP's HumanDevelopment Index online. Combination o f the contribution o f industry and services, principally located inurban areas. Estimate from the PRSP. .) 5 Clear imbalance between the economic importance o f Chadian cities and their available resources. L o w resource mobilization is a serious hindrance on the ability o f municipalities to provide services for their populations. Rapid urbanization, lack o f urban planning, and very limited technical capacity result in unplanned settlements, high costs o f service delivery, low quality o f life, and hinders people from participating inincome-generating activities. Inefficient municipal resource utilization i s brought on by high administrative expenses and construction o f new infrastructure without plans about how operation and maintenance would be funded and managed. In Moundou, the second largest city in Chad, no municipal resources are spent on maintenance. Weak financial and account management at the municipal level i s due to the virtual non- existence o f financial management tools and scarcity o f human resources. Need for support to a nascent decentralization, which can act as a catalyst for local initiatives, given that the current planningregimen i s without democratic foundation. Lack o f capacity o f the central and deconcentrated administration to support the municipalities results inweak State support for revenue mobilization and budget management inthe municipalities. 20. Government strategy. The urban sector i s part o f the priority sectors that can benefit from the oil revenues. In MATUH's budget for 2007, oil revenues represent CFAF 5.15 billion out o f a total o f CFAF 14.879 billion (Le. 35 percent). The 2006 Letter o f Urban Sector Policy lays out the strategic orientations, with a strong focus on practical implementation and the means to do so, supporting the channeling o f oil revenues to the urban sector and providing an overall vision for the sector and the contributions o f the donor community. 21. A very important challenge for Chad, however, is to promote growth in the non-oil sectors and increase non-oil revenues to ensure that resources for implementing the Government's development agenda remain adequate. The Letter o f Urban Sector Policy specifies that investments are to be focused inthe cities with the largest economic potential. 22. Overview of targeted project cities. The project cities (N'Djamena, Moundou, Sarh, AbCchC, and Doba) have a special importance because o f their economic potential, population size, geographic distribution, and development needs. Based on the 1993 national census and the urban projections (data used for project preparation) o f the MATUH, these five cities, with a combined population o f over 1.5 million, account for about 65 percent o f the urban population o f the country. The technical expertise present in the municipal administrations i s very limited, and public urban investments have been focused on N'Djamena, which has received 80 percent o furban investments inthe past two years. 23. N'Djamena i s the only city in Chad capable o f carrying out planning and implementation to any significant extent. The preparation o f urban development plans, as those being co-financed under the proposed project, will clarify development needs for N'Djamena and the other cities and will set up clear priority investments, focusing on the immediate needs o f the population and on longer term local economic development. B. Rationalefor Bankinvolvement 24. Rationale for Bank involvement. Oil revenues have placed Chad in the spotlight o f the international donor community, and provide Chad with a unique opportunity to start on a positive 6 development trajectory. With the World Bank engagement inthe oil pipeline project and the reputational riskthat the Bankhas taken inadvocating that borrowing countries should develop their natural resources to help themselves escape from poverty, the Bank i s in a unique position to ensure that, contrary to experiences from other countries, oil revenues can benefit the entire population. The recent difficult dialogue between the Bank and the Chad government over the use o f the oil revenues testifies to the importance that the Bank and the Chadian government attached to the effective and targeted use o f resources generated by the oil sector for the benefit of all Chadians and the fight against poverty. Ensuringthat oil revenues are put to the best use for the benefit o f the country represent a major test for the Bank in its attempt to help countries make the best use o f their natural resources and unleash a beneficial cycle o f development. Using the oil revenues to fund urban infrastructure and improving the livingconditions o fthe poor represents one leg o fthe ongoingprocess o ftargeteduse o f oil revenues. 25. Considering the growing share o f the population that will be living in urban areas, the depth o f poverty in urban areas, and the risks that lack o f improvement in living conditions can create conditions for social disturbance, the engagement o f the Bank in the urban sector i s highly pertinent. With the Bank's extensive experience inthe urban sector, the Bank i s well positionedto support the urban sector in Chad, ensure that oil revenues benefit the population in general, and the urban population, inparticular, and facilitate the fostering o f accountability relationships between local governments and the local population. 26. Given the pressure on urban areas and the re-emergence o f urban areas as engines o f economic growth, the Bank has decided to renew its support to the urban sector in Chad. In line with the Government's urban program, Bank support will provide financing for urban infrastructure and capacity buildingto support economic growth and improve the quality o f life for urban residents. The proposed project i s based on previous sector experience in the region and will be prepared and implemented in close coordination with other donors to ensure complementarity o f interventions and maximum sector coverage. 27. Coordination with complementary projects. Inits preparation and its implementation design, the project provides a complement to three IDA-financed projects: (i)the Local Development Program Support Project (PROADEL), supporting decentralization in rural areas; (ii)the proposed Capacity Building for Modernization o f Public Financial Management Project (PAMFIF'); and (iii) Critical the Electricity and Water Services Rehabilitation Project (Credit 3714). 28. The PROADEL supports the Government, at both the national and local levels, in finalizing the decentralization framework. Inpreparation for full decentralization, the proposed project's activities are designed to promote "technical decentralization" by strengthening the technical and financial capacities o f the municipalities. 29. The PAMFIP's overall development objective i s to help, at the national level, the Government to improve the quality o f its Public Financial Management system to increase the efficient and transparent use o f public resources, inparticular the expected oil revenue, to attain the MDGs. Through component A of the proposed project which finances support to municipalities inthe area o f financial management, the proposed project will complement the PAMFIP's objective established at the central level. 30. Coordination with donor partners 'projects. The Bank's previous support to Chad's urban sector included the 1994 Public Works and Capacity Building Project, which financed priority urban infrastructure, capacity-building for small and medium enterprises (SMEs) in construction, community involvement in infrastructure maintenance, and procurement reform. In the interim, other donors have supported the urban sector, particularly the French Development Agency (AFD). AFD has financed four infrastructure projects in the urban sector (drainage and water provision), covering N'Djamena and some 7 other major cities (N'Djamena: 25.8 million; Moundou and Sarh: 3.9 million; total: 29.7 million). The main outcome o f the projects has been decreased flooding and increased and improved access to water. However, as detailed in Annex 1, the financing brought so far has not been able to keep pace with the demands generated by the rapid urban growth rate. The projects financed by the AFD have been instrumental in determining works included in the proposed project and the Bank has thus leveraged the various existing feasibility studies, focusing on updatingthem and ensuring, through workshops involving Government, cities, and the population, that those priority works remain valid today. During project preparation, the Bank team consulted other donors (GTZ, UNDP) to ensure that other activities in the sector would be fully taken into account. The proposed project will also complement other donors' support in the urban sector, including: (a) UNDP's, housing and land management activities in N'Djamena; (b) technical assistance provided by the French Cooperation to the Urban Department o f MATUH(Direction de 1'Urbanisme- DU);and (c) the initiatives o fthe sister-city program (N'Djamena- Toulouse, Sarh-Cherbourg, and Moundou-Poitiers), C. Higher level objectivesto which the project contributes 3 1, PRSP, MDG, and CAS objectives. The Bank's assistance is fully aligned with the agenda detailed in the country's Poverty Reduction Strategy Paper (PRSP) and the proposed urban development project itself supports three o f the five pillars o f the PRSP. The project supports the promotion o f good governance (first pillar) through building institutional capacity and promoting good governance at the local level (component A). It works to ensure strong and sustainable economic growth (second pillar) through investments in economic infrastructure (markets) and development o f transport infrastructure to support growth (component B). Finally, the project works to improve human capital (third pillar) by training and reinforcing the capacity o f staff at various levels o f government and by improving living conditions (increasing access to water and protection against flooding) inpoor areas. 32. The proposed interventions (especially component B) are central to achieving two o f the Millennium Development Goals (MDGs), to ensure that an increased proportion o f the population will have sustainable access to improved water sources and basic sanitation (Target lo), and to achieve a significant improvement in the lives o f slum dwellers (Target 11). Through its focus on drainage works and therefore eliminating breeding grounds for mosquitoes, the project will also contribute to reduce child mortality, improve maternal health, and combat diseases. 33. The overarching objective o f the Country Assistance Strategy (CAS) dated November 12, 2003 i s to help Chad make the best possible developmental use o f its new oil revenues (and public resources more broadly) as it strives to attain the MDGs. The project i s in line with the CAS'S two primary pillars: (i) strengthening governance, including public resource management and service delivery arrangements; and (ii)enhancing non-oil economic opportunities and ensure inclusive, broad-based growth, while reducing sources o f vulnerability, notably for the poor. The proposed Grant, amounting to US$15 million, i s expected to play a catalytic role in channeling oil revenues to identified priorities within the urban sector. Technical assistance and studies to be financed under component A o f the project will provide support to MATUHso that it can channel oil revenues inthe urban sector more effectively and on a longtermbasis. As a result, the Government will provide US$ 12 million counterpart hnding, which will represent 44 percent o f the total amount o f the project. Such a highlevel o f counterpart funding i s a testimony to the importance that Chadian authorities place in the development o f the urban sector and shows their commitment to use oil revenues to reduce poverty. 34. Africa Action Plan (AAP). The project has been developed to support the achievement o f the objectives laid out in the AAP. Focus 1 o f the AAP (Results Framework for Achieving Impact) i s supported through the project monitoring and evaluation (M&E) framework, which concretely reports on the proportiono fthe population with access to an improved water source and the improvement inlives of 8 slum dwellers. The project supports the AAP's second focus (Buildingo f Capable States and Increasing Transparency) through improved revenue mobilization and management at the municipal level, publishinglocal governments' budgets, and financing service satisfaction surveys from the population. The project supports the AAP's third focus (the Growth Agenda) on closing the infrastructure gap, by assisting the government in channeling oil revenues efficiently into infrastructure investments. The investment climate will be improved by providing economic infrastructure (roads and markets), which will also contributeto connecting the poor to markets (AAPFocus 4), andprivate sector development will be supported through packaging works contracts for SMEs. 35. The project has been prepared in close collaboration with other development partners, strengthening partnerships at the local level. As part of project preparation, regular meetings were held between the Bank and the French Cooperation (SCAC), the French Development Agency (AFD), the UNDP, and the German Agency for Technical Cooperation (GTZ) to inform about the project as well as collect feedback and guidance. Studies funded by other donors (such as AFD) were used under the preparation o f the project to avoid duplication o f work and to maximize aid impact. As a result, more than 85 percent o f all works to be funded under this project have been determined using updates o f feasibility studies already financed by AFD (the main actor inthe urban sector inChad). 11. PROJECTDESCRIPTION A. Lendinginstrument 36. Through its component A, the Project aims at: (i) ensuring the technical, environmental, and institutional viability o f the investment funded under component B, and (ii) supporting the reform o f specific policies that affect the productivity o f the investment (such as: focus on infrastructure maintenance and on better provision o f urban services and development o f urban plans leading to prioritized investments in the sector). A Sector Investment Loan (SIL) has therefore been chosen as the most appropriate lending instrument for the project. An Adaptable Program Loan (APL) was not considered at this time given the Bank's recent re-engagement inthis sector inChad. B. Projectdevelopmentobjectiveand keyindicators 37. The project development objective i s to increase sustainable access to municipal services for residents intargeted project cities (N'Djamena, Moundou, Sarh, AbCchC, and Doba). 38. The results for the project, linked to the two components o fthe project are: a) Strengthened capacity o f the local governments in N'Djamena, Moundou, Sarh, AbCchC, and Doba to plan and manage the development and delivery o f infrastructure and urban services and to increase their financial resources to maintain existing and new infrastructure. b) Increasedavailability o f urban infrastructure. 39. The key indicators for monitoring progress towards achieving the project development objective are: a) Number o f people intargeted cities protectedfromperiodic flooding. b) Number o f people intargeted cities having access to drinkingwater. c) Number o f people having access to the city center via roads that are usable all year. d) Annual increase inmunicipalities' own revenues. 9 40. With reference to the programmed works, the three tables below summarize the main impacts o f the proposed project. Table 1. Drainage works. Expectedproject impact population protected from periodic flooding. - I I % ofpop. IAdditional pop. % increasein# Estimatedpop. I I I % ofpop. City Population/I POP.currently ji currently 1 protected,end 1 ofpeople protected,end I I protected i 1 1i i I I I protected j ofproject j protected j ofproject ofproject Moundou 166,818 94,551 57% 20,688 12% I protected,end 1ii j 115,239 69% Sarh I 109,126 j 53,938 49% jj 32,195 30% 86,132 I 79% Abeche 87,546 i 55,389 63% i 19,213 i 22% i 74,602 85% Total 11 363,490 i 203,878 1 56% 1 72,096 1 20% i 275,974 11 76% Source: Project preparatory studies. Table 2. Water provision. Estimated project impact access to piped water. I pop. I currentlyI I % ofpop. - 1Additional pop. % increasein 1 #IEstimatedpop. 1 % ofpop. City 1i Populationjhaving I accesstojcurrently having!Igetting access j I 1 accessto !towater, end of having accessto! water, end of water, end of I j water water I ii 1I of people /havingaccess tojhaving accessto Moundou i 166,818 iI 1 project water project project 41,705 25% 1j 32,000 j 19% 73,705 /Ii 44% Sarh 109,126 41,468 j 38% 1 18% I 60,968 I 56% 43,773 1 19,500 Abeche II 87,546 f 1 50% I 12,000 14% 55,773 I 64% Total i 363,490 i 126,945 j 35% 63,500 17% 190,445 j 52% Source: Project preparatory studies. Table 3. Road works. Estimated project impact access to drained roads. - 1 I i I ! % ofpop. 1 Additionalpop. % increasein# Estimatedpop. % ofpop. City / Population POP.currently I havingaccess lcurrently having1 getting access,11 of people having access, having access, 11 i I I I access end of project having access end of project j end of project Doba 45,000 1 1,500 1 3% 1 10,056 i 22% Ii1 11,556 1 26% Source: Project preparatory studies. 41. The objective o f the project i s complementary to that o f the Bank-financed PROADEL, which financed studies and technical support to the Ministry in Charge o f Decentralization (MCD) to complete the decentralization framework ("political decentralization") and support democratically elected decentralized authorities. The PROADEL also supports decentralization through capacity building for decentralized entities, and finances small infrastructure in the rural areas around N'Djamena, Sarh, and Moundou. 42. Previous experience in the region (e.g. the Benin First Decentralized City Management Project) has shown that supporting the technical capacities o f the local governments' administrations ("technical decentralization", as carried out under the proposed project) provides a sound foundation for political decentralization. 43. Project development objective indicators, intermediary outcome indicators, and data collection methodology are specified inAnnex 3, C. Project components 44. Project design and preparation. The project design is based on: (i) project preparation the workshop held in N'Djamena on February 24 and 25, 2005; (ii) the studies financed by the Bank and 10 other donors, in the urban sector', in particular AFD; (iii) findings from studies financed under the the Japanese Policy and Human Resources Development (PHRD) Grant (TF05373 1); (iv) the project validation workshop held in N'Djamena on November 9 and 10, 2006; and (v) the lessons learned from other urban development projects in the Region. The PHRD Grant, amounting to US$960,000, has financed project preparation workshops, the environmental and social frameworks, a capacity and training needs assessment, a municipal finance study and detailed investment and engineering plans, as well as the project operational, administrative, and financial manuals. 45. Selection of cities to be included in the project. The project's activities will take place in N'Djamena, Moundou, Sarh, AbCchC, and Doba'. The main characteristics o f these five cities are provided in Annex 1. N'Djamena has the highest needs in terms o f investment. Sarh, Moundou, and AbCchC are the most populated secondary cities inChad and they are experiencingthe highest population growth rate (above 5 percent). They have a poor and limited infrastructure base to accommodate the needs o f their fast growing population. There are recurrent expectations from the population living inthe Doba area, the oil field o f Chad, to see large benefits trickle down inthe form o f improved infrastructure. On February 24-25, 2005, the MATUH organized a project preparation workshop, gathering 120 participants to be involved in the project preparation at the central and local levels. This workshop contributed to: (i)disseminate information on the project and ensure transparency in its preparation; and (ii)collect feedback on the project components and institutional arrangements from the various stakeholders and inparticular from the beneficiary cities representatives. 46. Project description and components. The proposed project will finance priority infrastructure (water, drainage, and economic infrastructure) in N'Djamena, Moundou, Sarh, AbCchC, and Doba to address partially the significant infrastructure gaps these cities are facing. By packaging public works appropriately and using labor-intensive methods whenever possible, the project will create employment opportunities for unskilled and semi-skilled labor and promote SMEs in construction and urban services. Further, the project will improve capacity at the local level to plan, manage, and maintain infrastructure and services, and will support capacity to foster urban development at the central level. 47. The project will have two components: (i)strengthening municipal and urban management capacity; and (ii) provision o f urban infrastructures and services (details are provided inAnnex 4). Component A: Strengthening municipal and urban management capacities (total estimated cost: US$4.96 millionentirely funded by IDA) 48. The objective o f this component i s to strengthen the capacity o f the local governments in N'Djamena, Moundou, Sarh, AbCchC, and Doba to plan and manage the development and the delivery o f infrastructure and urban services and to increase their financial resources inorder to maintain existing and new infrastructure. The use o f new or improved management tools and better identification and improved collection o f financial resources, in addition to capacity building, will be the main objectives of this component. Activities under this component will target changes that should happen at the municipal level and actions that will take place at the central level regarding the Ministries in charge o f urban affairs, decentralization, finance, and land planning. 7 Among the key reports are: c Etude defaisabilitd et de Programmation des travaux d'amdnagement des deux quartiers commerciaux des marchds M i l et Dembe", July 2003 ;and "Etude deplanijkation urbaine de Doba, Bdbkdjia et Moundou 'I,December2001. Population estimates: N'Djamena 1-1.2 million; Moundou 167,000-180,000; Sarh 107,000-139,000; AbCchC 88,000-100,000; Doba 45,000. Source: Project preparatorystudies August 2006. - 11 49. The preparatory studies identified the necessary measures to achieve the objective o f the componeht: (i) scale up municipalities' human resources and improve the functioning o f their key support units; (ii)strengthen the technical services o f the municipalities and provide them with the tools to carry out urban planning; (iii) establish a more transparent municipal management and reinforce accountability; (iv) strengthen capacity o f the central and deconcentrated administration to supervise and provide technical assistance to the municipalities; (v) increase the financial resources at the disposal o f the municipalities through improved collection o f taxes, better yield from municipal assets, and strengthened mechanisms for transfer o f resources from the State to the municipalities; and (vi) introduce efficient management o f expenditures with a focus on maintenance, to improve sustainability o f investments. 50. The Government has confirmed its intention to achieve these objectives through its 2006 Letter o f Urban Sector Policy prepared by MATUH and adopted by the Minister of Councils and sent to IDA before project negotiations (one o f the conditions for negotiations). 5 1. Sub-component A.1: Strengthening urban and municipal management capacities (estimated cost: US$2.28 million). The sub-component will strengthen urban and municipal capacities in the respective municipalities through workshops, technical assistance, studies, training, and provision of equipment. The objective i s to establish effective, accountable, and functioning local governments by encouraging the attitudes and behaviors o f officials and staff through appropriate incentive systems and penalties, and by clarifying the roles and responsibilities o f all actors. This sub-component will finance activities aimed at: (a) improving the internal functioning and organization of municipalities (estimated cost: US$O.38 million). Activities include: (i)organizational audit for local municipalities and adoption o f a municipal management manual; (ii)strengthening municipal technical services (training and equipment); and (iii) provision o f office equipment and logistics; (b) improving resource mobilization and financial management (estimated cost: US$1.05million). As detailed in Annex 1, a significant portion o f the municipalities' resources consists o f State taxes returning totally or partially to the communes. In this regard, the general lump sum tax (IGL) and the tax on the value o f business premises (TVLP) constitute a major source of taxes benefiting the communes. As for municipal finances, the project cities suffer from a weak finance framework, a lack o f appropriate management tools and inadequate system o f mobilizing resources, and non-regular transfer o f resources from the central government. The project will assist the government and the cities to improve their performance so that they can provide better urban services. This sub-component will finance the following activities: (i) improving resource mobilization (IGL/TVLP) leveraging the actions previously carried out in N'Djamena under AFD financing; (ii) improving management and yield o f municipal/property taxes; (iii)standardizing the budget nomenclature; (iv) modernizing the accounting and financial management; (c) improving urban management and planning (estimated cost: US$0.34 million). Activities include: (i)strengthening technical services in management and planning (training, equipment); and (ii) preparation o f a sanitation master plan for N'Djamena; (d) improving transparency and accountability of city managers to urban residents (estimated cost: US$O.I 4 million). With the objective o f increasing local governments' accountability to urban residents, this sub-component will finance the public reporting of: (i) municipalities' financial performance; (ii)progress reports on the project and identifying bottlenecks and actions to be taken at national and local levels for delivery o f urban services; (iii) publication o f cities' project performance indicators (this will done in a simplified manner and 12 usingthe most appropriate means o f local communication); and (iv) surveys on satisfaction o fthe urban population to ensure that municipalities take into account specific needs expressed by urbanresidents; (e) providing support to community integration and awareness on socio-environmental aspects (estimated cost: US$O.37 million). Activities include: (i)support to sanitation committees; (ii) support to the management o f public standpipes (sanitation committees or private structures); (iii)information, education, and communication (IEC) activities in the area o f environmental protection and health; and (iv) training for municipalities and key ministries including deconcentrated services inenvironment and social aspects. 52. Sub-component A.2: Strengthening the capacity of the central administration and deconcentrated ministries to support the municipalities (estimated cost: US$2.68million). The objective o f this sub-component i s to strengthen the capacities o f the central administration and deconcentrated ministries (MATUH, MCD, MAT, MFEP) to provide technical support to the municipalities to manage their responsibilities (financial and urban management, procurement, tax base identification and collection, reporting, etc..). This sub-component will finance activities for: (a) Ministry of Land Planning, Urban Development, and Housing (MATUH) and its deconcentrated services (estimated cost: US$2.55million). MATUH's capacity will be strengthened to: (a) better support cities, inparticular inthe development and use o f urban plans; and (b) ensure an optimal use o f oil revenues in the urban sector. Key activities to be funded under this sub-component include: (i)updating o f urban development plans for Moundou, Sarh, AbCchC, and Doba; (ii) preparation o f urban development plans for 12 other selected secondary cities; (iii) training and technical assistance to MATUH to complement actions already financed by the French Cooperation (SCAC) and AFD; (iv) project launch and mid-term review workshops; (v) information, education, and communication (IEC) activities for the project; (vi) functioning o f the Implementation Unit and transfer o f knowledge to staff o f the Urban Department; and (vii) strengthening regional departments o fthe Ministry. (b) Ministry of Finance, Economy and Planning (MFEP) (estimated cost: US$0.03million). Taxes and fees collected by State agencies and transferred to the communes represent the largest share o f revenues for the communes. Assistance to MFEP will include: (i)support to the deconcentrated departments o f MFEP o f the General Directorate o f Taxes (DGI) and the DecentralizedTerritorial Government (DGT) to improve tax collection and transfer o f resources; and (ii)support to the Ministry's local entities (DGI and DGT) incharge o f financial management inthe municipalities. (c) Ministry of Land Administration (MAT) (estimated cost: US$0.03 million). Assistance to MAT will include: (i) training o f staff involved with Project implementation; and (ii) to support the Regulatory Directorate o f the Ministry to improve budget supervision; (ii) support to entities in charge o f financial management in the municipalities; and (iii)training o f staff involved in project implementation. (d) Ministly in Charge of Decentralization (MCD) (estimated cost: US$O.07 million). Assistance will include studies for preparation o f decrees to support the on-going decentralization process, in collaborationwith other key Ministries. 13 Component B: Provision of basic urban infrastructure and services (total estimated cost: US$18.42 million) 53. The main objective o f this component i s to increase access to urban infrastructure. By implementing activities that are part o f the project, sanitary conditions will be improved and opportunities for unskilled and semi-skilled labor will be created. 54. Specific investments for the cities o f Moundou, Sarh, and Ab6ch6 are based on the priorities defined in preparatory feasibility studies financed by the PHRD Grant in 2006. These priorities were discussed during the preparation mission in each city through a comprehensive and participatory process with local officials, the representatives o f Central government (sewices d&concent&s de I'Etat), local NGOs, neighborhood associations, unions, and beneficiaries. These activities were confirmed by the municipalities during two workshops held at the time o f the pre-appraisal and appraisal missions (February 2005 and November 2006, respectively). Those workshops gathered all key stakeholders including local representatives and NGOs. The business communities in these cities highlighted the positive impact that the drainage works would have on their activities by generating economic benefits in the form o f less property damage, lowering loss in stocks o f goods, and preventing damage to infrastructure. These activities include: (i) drainage and rehabilitation o f roads; (ii) rehabilitation and extension o f the potable water distribution network; and (iii) provision o f economic infrastructures such as a slaughterhouse. 55. As detailed in Annex 4, the project's priority program: (i) pre-identified by the cities; (ii)s was i comprised solely o f investments having a sufficient economic rate o f return (IRR >12 percent for economic infrastructure, water supply system rehabilitation, and extension and drainage works); (iii) are complementary to existing networks. This component will be financed by the Government (60 percent) and IDA (40 percent). Municipalities' participation will focus on establishing priorities for infrastructure maintenance and financing recurrent costs for these investments to ensure their sustainability. This obligation would be part o f the city contracts to be signed between the Central Government and each o f the municipalities. The city contract will be an important tool that will set up the municipalities' contractual obligations to maintain the infrastructure built under the project. 56. Sub-component B.1: For the City of N'Djamena (cost: US$O.62million). Under this sub- component, the project will finance mainly drainage works for commercial areas, specifically inthe main market (marche` d mil) to allow the extension o f the market to accommodate new canteens and better access by the neighboring populations. Drainage works related primarily to the rehabilitation and reconstruction o f a storm water drain along the market will be carried outg. The identified works to be financed by IDA in N'Djamena will complement works (especially inside the market) financed by AFD (amounting to 6.5 million). 57. Sub-component B.2: For the City of Moundou (cost: US$3.74million). Under this sub- component, the project will finance: (i) extension o f the water supply network and rehabilitation o f the water pipelines; the construction o f two equipped boreholes and the installation o f 64 standpipes in densely populatedneighborhoods (59,000 inhabitants representing 40 percent o f the total population); (ii) the second phase o fdrainage works''. 9 Fundingfor investments inN'Djamena is limited(as comparedto other beneficiary cities) to take into account o f other donors' investments, inparticular AFD which has been funding 25.8 million o f works inthe capital city, with the latest urban project being approved in2006. lo first The phase was carried out in2002-2003 under financing fromAFD. 14 58. Sub-component B.3: For the City of Sarh (cost: US$5.16million). Under this sub-component, the project will finance: (i)the acquisition and installation o f 7.4 km o f network extension, installation o f 39 standpipes and construction o f three new equipped boreholes; and (ii) the second phase o f the drainage works". 59. Sub-component B.4: For the City of Abkchk (cost: US$5.31million). Under this sub- component, the project will finance: (i) construction o f two new equipped boreholes and extension on the 18,500 meters o f the water network to new outlying districts, the reinforcement o f the water pipeline in the extension zones and installation o f 24 standpipes on the network; (ii)drainage works; and (iii) constructiono f a slaughterhouse with sanitation facilities and waste management. 60. Sub-component B.5: For the City of Doba (cost: US$1.95million). Under this sub-component, the project will finance the construction o f earth roads and the associated drainage to provide access to dense neighborhoods in Doba. The program will include the construction o f 5.4 km o f primary urban roads, 1.6 kmo f secondary urbanroads, and 7.5 kmo f drains. 61. Sub-component B.6: M&E, Supervision of Works, and Audits (cost: US$1.64million). Under this sub-component, the project will finance: (i)monitoring and evaluation activities; (ii) environmental and social impact studies that may be required during implementation o f project component B; (iii) supervision of works; (iv) periodic technical audits for works and contract management procedures; (v) project financial audits; and (vi) training activities for the local private sector (SMEs) to strengthen their capacities inworks management. 62. Provisions for physical contingencies (10% o f works or US$1.8 million) and financial contingencies (8% o fproject costs or US$1.82 million) are included inthe total project costs. D. Lessonslearnedandreflected inthe project design 63. Lessons learned from previous World Bank financed urban development projects in West Africa, the Urban Sector Strategy, and the Operations EvaluationDepartment (OED) urban sector review point to the fact that to achieve project sustainability, projects should: (a) be simple and easily manageable, especially in an environment with weak institutions; (b) have well-defined objectives; (c) be owned by the local Governments and the stakeholders; (d) ensure capacity to maintain works; and (e) have good coordination with interventions financed by other donors. 64. The lessons learned from the 1994 Public Works and Capacity Building Project merit special attention. This project was suspended in 1997 due to poor performance o f the public works executing agency (Agence Tchadienned'Exdcution des Travaux d 'Intdrgt public - ATETIP), and eventually closed in 1999 with only 25 percent of the Credit (US$17.4 million) disbursed. ATETP was inefficient and ineffective incontract management (the fees were 15 percent o f investments compared to the normal level o f 5 to 10 percent for public works agencies), and it took on too many projects, which resulted in lack of control o f quality o f works. Competition for construction contracts was limited and the procurement process was not transparent. Lack o f Government support to restructure the Agency further jeopardized the project. The project showed that tasks and responsibilities need to be clearly defined, with emphasis on transparency and accountability and close supervision duringproject implementation. 65. The project design and implementation arrangements have taken into consideration the following: "Thefirstphasewascarriedoutin2002-2003underAFDfinancing. 15 (a) Ownership. A workshop involving project stakeholders was held in February 2005 to identify and confirm the participating cities and select project intervention priorities. A second workshop was held on November 9 and 10, 2006 during appraisal for the validation o f project components and sub-components. Duringproject implementation, local steering committees comprising representatives from the municipalities, line ministries, NGOs, and involved communities will: (i) review the proposed annual work program; (ii) review implementation status and progress; and (iii) on necessary decide corrective actions for project implementation (see Annex 6 on Institutional Arrangements). Counterpart funding has been inscribed in the program budget for MATUH, increasing the probability that counterpart funds will be made available on a timely basis. (b) Capacity building. Capacity buildingi s central to the project, ensuring that the necessary financial and technical capacities are available at the local level. This i s critical to the sustainability o f investments financed under the project as well as the capacity o f local governments to continue to improve service delivery to the population. Further, technical capacity will be built in the central and deconcentrated units o f MATUH to allow adequate support to the local governments for urban management. Additionally, by having a project technical secretariat at the central level, integrated project coordination and capacity buildingwill be strengthened. (c) Institutional arrangements. The project's institutional arrangements, which aim to develop tools at the central and municipal level to support the on-going decentralization strategy, are in line with the project's objective. Additionally, those institutional arrangements set up contractual arrangements between municipalities and the State, which, inter alia, will strengthen accountability at bothnational and local levels. (d) Simple project design. Simplicity i s achieved by only including activities central to the achievement o f the project development objective, as identified by high quality preparatory studies. The project has only two components. One component targets the financial and technical capacities necessary to plan, finance, implement, and maintain services. The other component targets infrastructure investments that will directly improve access to services, while at the same time strengthening the foundations for economic growth. The main project interventions are limited to five cities to avoid spreading the resources too thinly. The two components are linked to a well-defined monitoring and evaluation framework, which will enable tracking o f the impact o f the project on the beneficiary populations. (e) Donor coordination. Effective project design and efficient implementation necessitate strong donor coordination. The proposed project builds significantly on projects financed byother donors, especially AFD. ( f ) Transparency and sound supervision. Project implementation rests with an Implementation Unit o f the Urban Department o f the MATUH, ensuring that responsibility for implementation can be placed unequivocally. The establishment o f committees at the national and local levels, in charge o f reviewing the project's annual programs, contributes to enhance transparency o f actions. Competition for works i s a key determinant to ensuring transparency, and, to the extent possible, the works contracts will be packaged so that small and medium enterprises can compete. Project supervision will be strengthened by making use o f team members inthe country office. Technical audits, funded under component B, will be performed, one every 6 months for the first two years o f the project. Posting o f the procurement plan in local newspapers in addition to dgMarket, as well as the set up o f an anti-corruption hotline will contribute to strengthen 16 the governance framework within which this project will be implemented. As required, a governance note has been prepared for the project. (g) Supporting decentralization. Through the institutional strengthening o f the beneficiary cities, the proposed project supports capacity buildingat the local level, thereby preparing for the effective political decentralization, by which the local governments will be made directly accountable to the local populations. As the pace o f the decentralization process i s a matter o f political determination, the project design has been elaborated without being too far ahead o f certain stages o f this process. Regardless o f the exact date o f the local elections, it i s clear that assistance should be now provided to the communes to modernize their management tools and buildtheir capacity to mobilize their resources for urban services which are not being provided currently in a satisfactory manner. (h) HIV/AIDS coordination with the Bank $named Second Population and HIV/AIDS Prevention Project. The HIV prevalence rate in Chad has decreased over the last five years from about 7 percent in 2001, stabilizing at around 4 percent in2005 (based on the HIVPrevalence Study) and confirmedbyrecent sentinel surveillance data. However, the prevalence rate in certain urban areas still remains high. The national HIV/AIDS fight and the Bank-financed project are putting more emphasis on a decentralized and integrated approach (one o f the activities o f the Bank-financed project was reoriented at mid-term review to focus on decentralizing the fight against HIV/AIDS). This intensive approach i s being led by municipal authorities in close collaboration with civil society organizations active in HIV/AIDS prevention activities and i s being piloted in the cities o f Moundou, Sarh, and N'Djamena where the Urban Development Project will operate. Prevention and information, education and communication activities will be coordinated by the two projects to maximize the number o f beneficiaries. The two Bank teams have been working in close collaboration on this issue, quarterly meetings will be held, and an annual review of the implementation and outcomes o f these activities will be undertaken. E. Alternativesconsideredand reasonsfor rejection 66. Based on the lessons learned, the following alternative project design options have been considered and rejected: (a) Implementation Agency. As shown by the Public Works Project, using a delegated contract management agency outside Ministries can present significant risk in Chad. Therefore, this has been rejected, even though it has proven effective in some countries in the region. Another option was to have the project managed only by staff o f MATUH. However, as shown in the background chapter and in the Bank funded project PROADEL, there i s insufficient capacity in MATUH to manage the project. Project preparation on the client side was at a virtual standstill until the recruitment o f a project coordinator in April, 2005, and subsequent recruitment o f technical staff (procurement specialist, socio-environmental specialist, and accounting specialist). One o f the objectives o f the project i s precisely to buildthis capacity. The use o f an Implementation Unit within the Urban Department of the MATUH is a means of ensuring that the necessary capacity and competency are present inthe management o f the project from the line ministry. Appointed consultants will have in their terms o f reference specific performance criteria related to the way transfer o f knowledge i s provided to staff in MATUH. Additionally, two regular staff from the Urban Department o f MATUH (an urban expert and an engineer) will be part o f the ImplementationUnit. 17 (b) Sector Investment Loan (SIL) vs. Adaptable Program Loan (APL). An APL would have provided a flexible and medium-term implementation timeline for capacity building and infrastructure installation. However, as the Bank i s reengaging in the urban sector in Chad after some years o f absence and the decentralization framework i s not completed, an APL was not recommended. (c) Selected cities vs. nation-wide. Learning from the lessons o f other similar urban projects, the project focuses on a limited number o f cities (N'Djamena, Moundou, Sarh, AbCchC, and Doba), and uses a learning-by doing approach. Once the local urban management and financial tools are assessed as satisfactory and producing results, it would be possible to bringthis approach to the other cities. (d) Risks of not engaging. The current socio-economic conditions and country needs lend themselves to Bank's engagement. Bank engagement across a wide spectrum o f sectors can serve as a vessel for strengthening good governance at a time o f political tension and provide technical support for a productive use o f oil revenues. 111.IMPLEMENTATION A. Institutionalandimplementationarrangements 67. The institutional arrangements aim at developing tools and systems at the central and municipal level to support the on-going decentralization strategy. Development and Housing. The Urban Department (Direction de I'Urbanisme - DU) will be responsible 68. Project Management. The project will be managed by the Ministry o f Land Planning, Urban for the coordination o f the project through its Implementation Unit. This Urban Department's Unit will be the entity responsible for implementing the project over the five-year period. MATUH and the other key line ministries (Ministry o f Land Administration, Ministry o f Decentralization and Ministry o f Finance, Economy and Planning) are part o f an Interministerial Steering Committee in charge o f the overall supervision o f the project, as developed below. 69. Within the Urban Department o f the MATUH, an implementation unit was set up to prepare the proposed project and to manage various studies financed under the PHRD (including studies on municipal finance, social/environmental assessment, urban capacity strengthening, engineering (pre-feasibility and detailed engineering), project execution manual, administrative, financial and procurement procedures manual). The same Implementation Unit o f the MATUH will be responsible for the oversight and will ensure the day-to-day management o f the project. It will: (i) coordinate the overall implementation o f the project; (ii)ensure availability o f funds in a timely manner; (iii) manage project activities at the central level; (iv) maintain the books and accounts o f project activities and produce financial reports; (v) monitor and evaluate implementation and impacts o f the project; and (vi) report results to various stakeholders (administration, donors, civil society, projects, Local Steering Committees). The Implementation Unit has been staffed with adequate technical and financial professionals to ensure that quality support and advice are delivered to the MATUH. The project execution manual will detail key performance indicators (including meeting the deadlines set in the project procurement plan, quality o f terms o f reference (TORS) and requests for proposals (RFPs), involvement o f staff at the local and national administrative levels during project implementation), which will be used to follow up regularly with the performance o f the ImplementationUnit. 70. The institutional arrangements are defined to comply with the decentralization efforts (see details inAnnex 6): 18 (i) At the national level, the project will be supervised and coordinated by an Interministerial Steering Committee. This Steering Committee will be headed by the Minister o f Land Planning, Urban Development and Housing (MATUH), and include representatives o f the municipalities, the Ministry o f Finance, Economy, and Planning, the Ministry o f Infrastructure, Ministry o f Land Administration, Ministry in Charge o f Decentralization, Ministry o f Public Health, Ministry o f Energy, and the civil society. The Steering Committee will take overall decisions on project implementation. In particular, the Committee will review the annual program of activities o f the implementing Ministry (MATUH),review progress made on a regular basis, and assess the quality o fproject. (ii) At the local level, Local Steering Committees (LSCs), presided over by the City's General Secretary and comprising line representatives o f MCD, MAT, MATUH, MFEP and representatives o f local associations and Neighborhood Committees (such as the Comitis d'Assainissement already set up inN'Djamena) will be the institutions in charge o f overseeing day-to-day project implementation at the local level in each beneficiary city. As part o f the project preparation, these LSCs have been set up. The project will focus on the municipalities as the principal beneficiaries o f capacity building activities. Before effectiveness, at least one agreement (``ProtoCole d'accord") will be signed between the State and one o f the participating cities specifying the roles and responsibilities o f the cities, line ministries, and central government, and the policy reforms to be undertaken by each party (i.e. under these Agreements, the beneficiary cities will commit to set aside some o f their budget funds for maintenance o f the investments financed under the project). (iii) Project Component Implementation. Project components will be implemented by the participating cities through the Implementation Unit o f the Urban Department o f the MATUHaccording to the project implementationmanual (PIM), which includes terms o f reference for component activities and specifies their timing. Conventions de Maitrise d'Ouvrage Dilipi will be signed between the Implementation Unit o f the MATUH and each o f the beneficiary Cities. The P I M will specify the procedures for the development o f annual activity programs and include the procurement plan (slicing activities into contracts, type o f consultation chosen, tentative dates for bid launching), which was approved by the Bank on November 16, 2006. As agreed duringproject preparation, the Implementation Unit o f the Urban Department o f the MATUH will remain in charge o f project implementation, involving, at all stages, key unitso f the Ministryo f Infrastructure to ensure use o f the administration structure and to contribute to capacity building. In particular, for Component B, the Implementation Unit will work closely with the key Departments o f the Ministryo f Infrastructure. 71. The overall project funding will consist o f IDA grant and counterpart funds from the Government. IDA funds will flow through a designated account ina local commercial bank acceptable to IDA. Counterpart funds will flow throughout a local commercial bank account. These accounts will be managed by the ImplementationUnit o f the Urban Departmento f the MATUH. 19 B. Monitoringand evaluationof outcomes/results 72. The monitoring and evaluation (M&E) framework has been developed to reinforce the capacity strengthening activities o f the project, while at the same time giving a clear picture o f progress towards achieving the project development objective and objectives for each component. 73. Responsibility for collecting data will be assigned to the person in the Implementation Unit responsible for social and environmental aspects. This person has good basic knowledge inM&E, which will be strengthened via training at project startup. The data collection methodology i s based on simple on-site surveys and review o f municipal budgets, allowing for regular monitoring o f progress by the Implementation Unit, within the regular operating budget. This is combined with: (i)semi-annual technical audits o f the infrastructure financed under the project, which will give information on whether the infrastructure i s maintained and provide an opportunity for learning-by-doing for the technical departments o f the municipalities; and (ii) implementation o f service satisfaction surveys, which will provide information to the municipal administrations on their performance and serve as a tool for further improvements. The M&E framework has been developed to be SMARTI2. The level o f overall service satisfaction will not be an indicator for the project alone, as not all the services provided at the municipal level could be attributed to the project, but will give an indication o f the overall performance o f the municipal services. 74. The M&E framework i s not only a means of tracking project performance, but also an entry point for the municipalities to strengthen their capacity to measure their own performance. As an iterative process, the municipalities will be expected to produce high quality indicators while capacity in the administrations i s built up in the course o f the project. For example, while evaluation on budget management will only be done annually, the municipalities will be supported inproducing budget reports on an as-needed basis. It i s expected that the frequency and quality o f reporting will increase during the project. The Implementation Unit o f the Urban Department o f the MATUH will support the municipalities indeveloping their reporting capacities. 75. The M&E framework will further allow for reporting on progress on the Millennium Development Goals (MDGs) specifically targeted by the project. The project will track the increase in the population that has sustainable access to improved water sources (Target 10) and the number o f slum dwellers that experience a significant improvement intheir living conditions (Target 11). 76. The well established baselines and clearly defined data collection methodology will provide for a continuous flow o f information for project management purposes. The M&E framework i s supplemented by monitoring o fproject implementationperformance on procurement and disbursement and performance indicators o f MATUH, the implementation agency. The procedures will be specified in the Project Implementation Manual, which i s currently indraft form. 77. The Bank will conduct supervision missions at least two times per year, and team members inthe country office will be involved inregular project monitoring. C. Sustainability 78. The sustainability o f the project will come from: (a) secured funding for operation and maintenance through improved mobilization and utilization o f local resources; (b) improved local government management capacity, with a clear definition o f responsibilities; (c) better transparency and accountability o f city managers to urban residents through quarterly public reporting and information I 2Specific, Measurable,Attributable, Realistic/RelevantandTime-bound. 20 campaigns; and (d) stakeholder engagement and ownership. These four aspects o f sustainability are described below inmore details. Securingfunding for operation and maintenance through improved mobilization and utilization of local resources. Maintenance o f larger-scale works inthe participating cities, such as roads and drainage, i s the responsibility o f the cities. While past urban infrastructure maintenance in Chad has been poor, the project beneficiary cities will commit to set aside, on an annual basis, funds from their budget to fundmaintenance. Component A will continue to support improvements in central/local government finance for infrastructure maintenance through municipal management strengthening. Additionally, under the Agreements to be signed with the State, the municipalities will commit to set aside some budget funds for maintenance o f the investments financed under the project. To increase municipalities' incentives to perform according to the agreements, performance o f those municipalities will be periodically reviewed by the Steering Committee and results will be publicized locally {communication to urban residents being funded under sub-component A.1(d)}. (ii) Improved local government management capacity, with a clear dejinition of responsibilities. Component A aims at improving the organizational structure o f the municipalities with more qualified personnel in place, including technical officers and financial management personnel. Intheir Agreements to be signed with the State, the municipalities will commit to having qualified personnel in charge o f project follow -up and to keep key staff working on the project to avoid staff turnover and political interference. Information regarding performance o f specific units in the municipalities incharge o f these activities will also be reported to buildthe necessary incentives for the municipalities to hire or to position the most qualified staff for these positions. (iii) Transparency and accountability of city managers to urban residents. Local governments will be held more accountable to urban residents through budget monitoring and reporting for the beneficiary cities. The project will finance the publication o f project progress reports, identifying bottlenecks and actions to be taken at national and local levels for the delivery o f urban services. Communication on the project's progress will carried out locally, in a straightforwardmanner, so that urban residents are fully aware o f both the expectations and the actual results. This will bringadditionalpressure on the municipality to performadequately. Stakeholder engagement and ownership. Establishing a culture o f participation among involved communities will help share the burden o f delivery o f urban services and increase stakeholder ownership o f these services. Project ownership has been demonstrated during project preparation, in particular the organized workshops in which all key national and local players participated. Under sub-component A.1, the proposed project provides direct support to: (i)sanitation committees; (ii)the management o f public standpipes (sanitation committees or private structures); and (iii)IEC activities in the area of environmental protection and health. These activities are designed to contribute to engage local participants and increase the probability that funded infrastructure will be well maintained. Engagement o f local participants i s further enhanced through: (i)their participation in the Local Steering Committee (LSC), as detailed in the institutional arrangements; and (ii)the communication programs funded under the Project {sub-component A.1 (d)} which include surveys on satisfaction o f the urban population. 21 D. Criticalrisksand possiblecontroversial aspects 79. The overall risk rating of the proposed project i s estimated to be High after risk-mitigating measures have been taken into account. The proposed project will start with immediate capacity building activities at the local level and with a reasonably calibrated investment program in the first year (in all project cities, but with particular focus on N'Djamena). Risk RiskMitigatingMeasures Risk Rating w/ Mitigation TO PROJECT Lack of central Government commitment. The Letter ofUrbanSector Policy, which was The lack o f commitment interms o f (i) adopted by the Minister o f Councils before supporting municipalities with bothhuman and negotiations (a condition for negotiations), has financial resources; or (ii)devolving the powers confirmed the Government's commitment to to the local level which could hinder progress o f complete the decentralizationprocess. decentralization and local empowerment. Additionally, the project activities are designed to promote "technical decentralization" to strengthen local technical and financial capacity so that municipalities canprovide better urban services and improve residents' access to roads and water. By involving the stakeholder population and localparticipants and having tangible results on the ground, the project will contribute to support the decentralization process. Lack of timely provision of counterpart Through the PetroleumRevenue Management funding. There is a risk o f not receiving the Law and the M o U signed with the Bank on July requiredcounterpart funding intime due to 13,2006, the Government has committed to unwillingness or drastic reduction inoil channeling funds from oil revenues toward revenues and major macroeconomic shock. priority poverty reductionprograms, such as the Controversial use o f oil revenues (as described proposedproject. The Letter o f Urban Sector inthe CCSRP Report ofMay 2005) could Policy confirms this commitment. Additionally, contribute to cumulative negative effects for project disbursement conditions will ensure that country and community ifthese revenues are not Government counterpart funds, coming from oil usedas identified inthe memorandum for the revenues, are provided before project activities. social benefit o f the country. This would directly An additional condition was that IDA received a affect the project. letter from the Government c o d i n g its commitment to make available counterpart funds amounting to US$12 million duringthe Project's cycle andbudgetedon oil revenues. Lastly, communication on the project progress and outputs (fundedunderthe project) will be keyto engage all actors (at the national and local levels). 22 TO C(3 IPONENTRESULTS ComponentA Institutionalinstability and inadequate The proposedproject by design necessitates the M interministerialcoordination. MATUHis a engagement o f multiple sectors. These sectors relatively new Ministry. Cabinet reshufflings are directly being represented at the Steering are frequent, resulting inchanges inorientation, Committee incharge o f the overall supervision capacity, and coordination among Ministries o f the project, which will strengthenthe involved inurban development. coordination among Ministries. Decentralizationframework is not completed. As the decentralization timetable is not fm,the M Local elections are currently envisaged to take project design has been elaborated without place beginning 2007, but could be postponed, being too far ahead o f certain stages o f this as it has been the case several times. This could process. Regardless o f the exact date o f the cause disruption inproject's activities. local elections, assistance provided under the project is inline with Government's strategy, supporting the communes to modernize their management tools and buildingtheir capacity to mobilize their resources for urban services which are not being provided currently ina satisfactory manner. ComponentB Nontransparent procurement processand The bulk o fprocurement for vehicles, delays in signingcontracts leading to delays, equipment, infrastructure works or highcost and poor quality o f works. rehabilitation, consulting services, studies and training would be managedby the ImplementationUnito f the MATUH, ensuring that responsibility for implementation can be placedunequivocally. The contract value thresholds have been reduced compared to the Region's average (under the proposed project, the respective thresholds are: US$300,000 for works; US$200,000for goods; and US$lOO,OOO for consulting services. Posting o f the procurement plan (which includes the list o f activities to be funded under the project and their corresponding cost estimates) inlocal newspapers inaddition to dgMarket, as well as an anti-corruption hotline, will contribute to strengthening the governance framework in which the project will be implemented. Training on procurement usingthe Bank guidelines will be provided to staff o f the Implementation Unit o f the Urban Department o fthe MATUH as well as to key staff inthe Ministry. Progress reports on procurement will be published on a regular basis highlighting bottlenecks and regular interaction with respective ministries incharge o f approving and signing evaluation reports and contracts Lackof competitionfor works and weak The project will address these risksby capacity of local SMEs. The local private designing works packages to be accessible to sector is limited and has weak capacity; there i s SMEs, utilizing labor-intensive methods (where a lack o f competition and therefore choice o f possible), providing technical support to 23 competent and effective private firms in contractors and trainGi and technical assistance - ~~ consulting and construction. The construction to MATUH. industryis dominated by large local and international firms which do not have competitive prices and w h c h are often not interested insmall public works o f the type to be financed by the project. Inaddition, although contracting out public services i s widely done, there is a lack of procurement and contract management capacity at central and local levels. Incoming refugees from the Darfur area and Through its component A, the project directly M neighboring countries increase the urbanization contributes to strengthen capacity o f pressure. municipalities (such as inAb6chC) to provide better urban services to its urbanpopulation and address the need from incoming refugees, should the need arise. Component A will also finance an urban development plan inAbCche taking into account multiple scenarios. Component B will finance key urban infrastructure (water supply system, drainage) which will be even more necessary incase o f urbanization pressure. HIV/AIDS risk which has become, with rapid National HIV Bank-financed project is S urbanization, an urban phenomenon. addressing this risk, including its high prevalence inurban areas. Quarterly meetings among the two Bank project teams will be held and an annual review o f the implementationand outcomes o f these activities will be undertaken. Risk of a change innational policy on the use o f Mitigation of such a risk includes on-going H oil resources which may lead to a standstill of dialogue between the Bank and the the program. Government, and Banks' ability to suspend its operations inthe country, based o n the agreed framework. Overall risk rating H Riskrating:H(Highrisk), S (Substantialrisk),M(Mot st risk)N(Negligibleor lowrisk) E. Grant conditions and covenants Negotiation conditions CfuFlled): Decree setting up the Inter-Ministerial Committee o f the proposed project sent to IDA. Draft agreements between the State and the participating cities sent to IDA. Draft Conventions de Maitrise d 'Ouvrage Ddldgud between the Implementation Unit o f the MATUH and each o f the beneficiary Cities sent to IDA. Sector Policy Letter finalized and sent officially to IDA. Draft Project Implementation Manual (PIM) sent to IDA. Draft Project Administrative, Financial, and Accounting Manual sent to IDA. Government letter confirming its commitment to make available counterpart funds amounting to US$12 million during the project's cycle and budgeted on oil revenues. Appointment o f IGF as Internal auditor o f the project. 24 Grant effectiveness conditions: (a) The Recipient's Project Account has been opened and the initial contribution o f FCFAl60 million has been deposited therein. (b) The Government has adopted the Project Implementation Manual, and the Project Administrative, Financial, and Accounting Manual, both in form and substance satisfactory to IDA. (c) At least one Convention de Maitrise d 'OuvrageDdldgud and relatedProtocole d'Accord, in form and substance satisfactory to the Association have been executed between the relevant Beneficiary City and the MATUHand the Recipient, respectively. IV. APPRAISAL SUMMARY A. Economic and financial analyses 80. Incremental costs and benefits. Net incremental costs and benefits, "with" and "without" the project were considered. On the basis o f these scenarios, the net incremental financial benefits and costs o f the proposed investment programs are assessed. These are then adjusted for the impact of taxes, subsidies and externalities to arrive at the economic cost and benefit streams. Cash flows are discounted using a discount rate o f 12 percent. Costs include capital costs, operation and maintenance costs, and rehabilitation costs. 81. Benejts. Benefits o fprovision o f urban services are expected to improve the quality o f life o fthe poorest residents living in the peri-urban zones o f the cities where most o f activities will be implemented. It is important to note that many Economic Rate o f Returns (ERRS) calculated for the project are understating some o f the below-mentioned social and environmentalbenefits expected to be gained inthe targeted cities. The investments will have the following socio-economic quantifiable and non- quantifiablebenefits: (a) Improvement inthe quality o f life through improvedphysical living conditions and better environmental management. (b) Increased productivity and efficiency arising from reduced flooding and' avoided flood damages to economic and other properties. (c) Increasedproperty value due to improved overall amenities. (d) Increased local revenues through the construction o f economic infrastructures as well as improvement o f local finance. (e) Improvedhealth with reduction inwaterborne disease and reducedmedical costs. ( f ) Enhanced local government capacity to fulfill their service delivery mandate. (g) Employment generation, expand markets, promote increased private sector participation inthe provision o f services; bydimensioningpublic works appropriately and usinglabor- intensive methods, the project will create employment opportunities for unskilled and semi-skilled labor and promote SMEs inconstruction and urban services. (h) Decreased production costs due to lower vehicle maintenance and transport costs resulting from road improvements, 82. From a macro-economic perspective. By targeting the main cities in Chad, the project is expected to have a positive impact linked to economic growth and employment generation. Increased productivity and better possibility for trade opportunities would increase the overall production at the 25 national level and contribute to economic growth. The project would generate a considerable amount o f short-term employment (for SMEs and consultant firms) since labor (mainly unskilled labor) accounts for a significant part o f the project investment. Given the fact that the interventions in all five cities differ, as the access to services and physical characteristics are not homogenous, an overall ERR and Net Present Value (NPV) are not calculated. However, the program overall i s expected to be economically viable as the analysis o f the major components have positive results. A detailed economic analysis i s provided in Annex 9 for each o f the sub-components o f Component B o f the project. 83. Drainage works, accounting for CFAF 5,515 million or about 64 percent o f total project works, has an individual ERR of about 17.45 percent. Rehabilitatiodextension o f drinking water networks, accounting for 22 percent o f total project works, amount to CFAF 1,866 million and has an individual ERR o f about 12.76 percent. Investments ineconomic infrastructure (slaughter house inAbCchC) have an ERR of 14.50 percent. Investments inurbanroads inDobahave an ERR of 13.60 percent. Itis clear that these Economic Rates o f Returns calculated for the project (in particular those related to the drainage works) are very likely to understate some o f the above mentioned social and environmental benefits expected to be gained in the targeted cities. As detailed inAnnex 9, a full sensitivity analysis was carried investment costs. out during appraisal, relative to the main risk considered in the economic analysis, namely, higher 84. During project preparation, the economic analysis has also been used to support investment decisions: (a) The ERR o f an investment in the market o f Sarh, initially proposed for IDA funding, was estimated at 5 percent. As a result o f the economic analysis, it was decided that the proposed investment in Sarh (CFAF 424,000,000) could not be included in the overall project. Similarly, the ERR o f an investment in the market o f Moundou, initially proposed for IDA funding, was estimated at 6 percent. As a result o f the economic analysis, it was decided that the proposed investment in Moundou (CFAF 365,000,000) could not be included inthe overall project. B. Technical Technical evaluation 85. The proposed solutions take into account needs expressed by the municipalities and the list o f priorities for each city. Technical standards generally accepted for the design o f drainage and water supply networks will be used. The water network was designed to meet the demand o f water until the year 2020. To deal with potable water needs, it i s planned to reinforce the available water resources by building up new boreholes with depths ranging from 30 meters to 100 meters, according to the hydro geological characteristics o f each city. The anticipated capacities o f the boreholes are 80m3/h for Sarh, 100m3/h for AbCchC, and 60 m3/hfor Moundou. The nominal diameter o f the proposed drillings will be 300mm to help facilitate their future utilization by equipping them with rather wide diameter pumps. Standpipes will be installed on the various distribution networks o f the participating cities, according to a ratio o f one standpipe for 1,000 inhabitants. The management o f these standpipes will be delegated to the local communities organized in "GIE" (Groupement d 'IntGret Economique) through a participatory process and will generate some permanent employment, primarily among women. 86. Rainwater runoff collection facilities will be designed to evacuate water from decennial floods. For protection o f the drains, the use o f materials frequently employed in the construction in the different 26 regions will be encouraged. Protection by masonry i s recommended. The construction o f drains without protection i s not recommended given the risk o f erosion by the floods and siltation from sand coming from the non asphaltedroads. Pedestrian and commercial traffic will be eased through the construction o f passages at the drainage sites. The runoff collection facilities will be located primarily in the neighborhoods threatened by the floods. It is expected that the flooded areas in Sarh, AbCchC, and Moundou could be reduced by as much as 80 percent. A partnership will be developed between the municipalities and the sanitation committees to help ensure proper maintenance o f the drains. For the economic infrastructure, focus will be on the construction o f structuring equipments (platforms, drainage, hangars, roads, latrines...). The lack o f a competitive market for public works i s a major concern for the project, which will aim at promoting small- and medium-sized enterprises (SMEs). Insuch a context, project preparation has emphasized the use o f simple technologies with labor-intensive methods and to size works appropriately to attract SMEs. More transparent public works market management i s needed to promote the SMEs, through increasingly healthy competition among consulting services and entrepreneurs with expeditious payment to companies and consulting firms. All the technical studies necessary for the biddingdocuments were carried out duringthe preparation phase so that the requests for bidscan be launched and contracts awarded as soon as the grant becomes effective. C. Fiduciary 87. Financial Management and Disbursement Responsibilities. The Implementation Unit of the Urban Department o f MATUH will be responsible for the preparation o f technical and financial reports, as well as the annual work program, including the consolidated budget and financial statements for all project components. The Implementation Unit will also monitor project disbursements and ensure that they are in line with the IDA disbursement manual. The project financial management i s weakened by the absence o f an internal audit department. An internal auditor from the General Inspectorate o f Finance (IGF) was appointed to address this risk. 88. Flows of funds andfinancial reporting. The overall project funding will consist o f an IDA grant and national counterpart contribution using oil revenues. The contracts will be paid through the Designated Account for IDA'Sfinancing share and through the counterpart account for the Government's share. Contributions from cities will solely consist o f providing adequate resources for maintenance o f the infrastructure rehabilitated under the project and the existing local infrastructure network. The project work programs and related budgets will be updated on a regular basis, and the project budget has been programmed on a multi-year basis, including a first set o f operations commencing inall project cities. 89. The Country Financial Accountability Assessment (CFAA), carried out by IDA, IMF, EU, and AfDB in April 2006, shows that Government o f Chad has to improve its Public Financial Management Systems. The fiduciary risks associated with poor budget formulation, poor budget preparation and execution and cash management processes must be addressed. In terns o f appropriate legislation and regulatory frameworks, significant progress needs to be made to ensure that the risks associated with lack o f clear rules and regulations are mitigated. The assessment also identified a lack o f capacity in auditing institutions and a weak follow-up o f audit findings. The procurement system has to be improved (i) to reduce the long processes in evaluating bids and attributing contracts, and (ii) to avoid "off-record" bids attributions. In July 2006, the Government reached an agreement with the Bank in which it commits itself to provide 70 percent o f oil direct resources to priority ministries. The Government i s also very committed to the implementation o f the PAMFIP still at the appraisal stage. 90. At the level o f the proposed project, a certain number o f actions have already been taken. The financial management system i s running and comprises the following: 27 (a) Computerized accounting system software, which was tailored to respond to specific project issues. (b) A fiduciary team has been recruited and is comprised o f a financial management specialist and a procurement specialist, both well trained inIDAprocedures. (c) A consultant has been recruited to prepare the administrative, financial, and accounting procedures manual, a draft o f which was sent to IDA before negotiations. (d) An external auditor acceptable to the Bank has been recruited to carry out the first audit o f the PHRD grant. This audit was released to the Bank on July 25, 2006 and reviewed with no serious financial management accountability issues and no major internal control issues. The auditor's performance has been rated satisfactory by the Bank. 91. During the appraisal mission, the Implementation Unit and the Bank agreed on the Financial Management Report (FMR) format to be used during project implementation. As mentioned before, the appointment o f the General Inspectorate o f Finance as the internal auditor o f the project was a condition for negotiations. 92. The conclusion o f the assessment i s that the financial management arrangements satisfies the Bank's minimum requirements under OPh3P10.02 and therefore they are adequate to provide, with reasonable assurance, accurate and timely information on the status o f the project, as requiredby IDA. 93. Procurement. During the appraisal mission, a procurement capacity assessment o f the MATUH was carried out, as well as for the Implementation Unit o f the Urban Department o f MATUH. The assessment revealed that MATUH has the necessary human resources capacities to implement procurement activities o f the project. However, certain deficiencies identified include a lack o f computerized equipment and software for monitoring and contract management, need to update the training o f procurement specialists, and the slow process for contract approval. The assessment of the Implementation Unit o f the Urban Department o f MATUH noted that the unit's staffing includes a procurement specialist with procurement experience at both national and international levels (including experience with World Bank operations). The only deficiency noted i s the lack o f training o f the procurement specialist to operate the monitoring and contract management software. A detailed action plan has been prepared to strengthen procurement capacities in both MATUH and the Implementation Unit of the Urban Department, including acquisition o f computerized materials and software, software training, and training at specialized regional procurement training centers. 94. The Implementation Unit o f the Urban Department o f MATUHwill seek the no objection o f IDA for all contracts subject to prior review. The contract value thresholds have been reduced compared to the Region's average (under the proposed project, the respective thresholds are: US$300,000 for works, US$200,000 for goods, and US$lOO,OOO for consulting services). Posting o f the procurement plan (which includes list o f activities to be funded under the project and their corresponding cost estimates) in national newspapers with large distribution, in dgMarket, as well as in an anti-corruption hotline will contribute to strengthening the governance framework inwhich the project will be implemented. 95. As detailed inAnnex 8, one o f the risks for the project is at the Country Procurement Code level. Certain articles o f the Procurement code are in contradictionwith World Bank guidelines and procedures. Consequently, the Bank has reaffirmed to the Government during negotiations the primacy o f the provisions o f the Grant Agreement to those o f the national regulations. 96. The general implementation o f procurement activities will be prepared according to the World Bank Directives dated M a y 2004. A General Procurement Notice (GPN) will be published in the dgMarket soon after grant approval by IDA'SBoard o f Directors. A procurement plan for the first 18 28 months has been prepared by the Government and has been reviewed during the appraisal mission and approved by the Bank on November 16, 2006. The procurement plan will be published on the Bank's website after the Grant has been approved by IDA'SBoard o f Directors. Procurement procedures for works, goods, and consultant services are given indetail inAnnex 8. 97. The overall project risk for procurement i s ratedhighbecause o f country conditions, provisions o f the national procurement code, delays experienced in the past with approval o f evaluation reports and signing o f contracts, and the overall experience o fpoor contract management inthe past despite the fairly strong arrangements inplace at the level o f the Implementation Unit. D. Social 98. Key social issues relevant to theproject objectives. The project i s expected to deliver significant social benefits by improving the living and environmental conditions o f low-income communities in N'Djamena, AbCchC, Sarh, Moundou, and Doba. N'Djamena is the capital city and has the highest needs interms o finvestment. AbCchC, Sarh, and Moundouare the mostpopulatedsecondary cities inChad and they are experiencing the highest population growth rate (above 5 percent). They have a poor and limited infrastructure base to accommodate the needs o f their fast growing population. Further, by improving living and sanitary conditions and services inpoor areas and slums and reducingflooding, the project will also contribute to addressing human and social development issues. The potential social impacts (such as temporary resettlement o f households in targeted project areas) o f sub-projects under the project will be small-scale and site-specific typical o f Category B projects. 99. An Environmental and Social Management Framework (ESMF) was prepared as the environmental and social assessment instrument. It i s anticipated that project activities might not lead to land acquisition or restriction o f access to sources o f livelihood. However, in the event that there are resettlement concerns, a resettlement policy framework (RPF) has been prepared to cover N'Djamena, Moundou, Sarh, AbCchC, and Doba. It has been disclosed in Chad on June 7, 2006 and at the Bank's Infoshop on June 16, 2006, and this will be translated to Resettlement Action Plans (RAPS)as and when the need arises duringproject implementation. 100. Participatory Approach. Project ownership has been regularly demonstrated during project preparation, in particular through the project preparatory workshops in which all key national and local players participated. The MATUH organized a project preparation workshop, gathering 120 participants to be involved in the project at the central and local levels. This workshop served to: (i) disseminate information on the project and ensure transparency in its preparation; and (ii) collect feedback on the project components and institutional arrangements fiom the various stakeholders and in particular from the beneficiary cities' representatives. The project will increase community cohesion by using a participatory approach in involving communities and their participation through the existing district sanitation committees (Comith d Yssainissement - CA) in the planning and design process. At the local level, Local Steering Committees (LSCs), presided over by the City's General Secretary and comprising representatives o f local associations and Neighborhood Committees (such as the Comith d Yssainissement already set up in N'Djamena) are the institutions in charge o f overseeing day-to-day project implementation in each Beneficiary City (ArrStCs setting up the LSCs in each beneficiary city have been sent to the Bank). The project will also bringnet benefits, both social and economic, to the key stakeholders in the low-income neighborhoods. Public consultations with strong dialogue between Mayors and the local community took place during project preparation and will continue to take place duringimplementation. 101. Gender. The project will aim to involving women, youth, and marginalized groups in the planning process and in key decision-making, and to ensure equal benefits to women. The project's 29 participatory design will involve women in key decision-making processes within the existing "ComitLs d 'Assainissement" members by insuringthat women are well represented in these committees and that their voices are heard. The Social and Environment Specialist within the project will ensure that gender issues are adequately reflectedinthe project consultative process. 102. Project involvement of consultation or collaboration with NGOs, other civil society organizations, and other partners. The project design involves the beneficiary cities, local and international NGOs working in urban development and sanitation, and other intervening partners such as line ministries. The project coordinates with the French Development Agency and UNDP-financed infrastructureprojects, and the Bank-financed PROADEL, and includes beneficiaries directly in decision- making process. 103, Institutional arrangements provided to ensure the project achieves its social development outcomes. As previously described, the consultative and participatory design will be followed to ensure that financed activities are benefiting the entire community in participating subprojects. Project works (drainage and road works, in particular) have been designed in a way that they will generate significant local employment. The Project's Local Steering Committees (LSC) will ensure hllparticipation o f local communities in each o f the five beneficiary cities. A qualitative beneficiary assessment will be done if needed duringthe mid-term review. 104. How theproject will monitor performance in terms of social development outcomes. Most o f the project performance indicators are related to the improvement o f provision o f urban services to five selected cities. Baseline and performance indicatorshave been finalized duringappraisal. As presented in Annex 3, monitoring the outcomes o f the project is a key part o f the project and reporting on outcomes will be reviewed during supervision missions. E. Environment 105. The project has been classified as an environmental category B project. All activities identified under the project are deemed not to cause major adverse environmental impact. The provision of basic urban services component will target service and economic infrastructure priorities in the project cities. Sub-project activities include: (a) improving drainage, sanitation, and the associated rehabilitation o f affected roads; (b) rehabilitating and extending the potable water supply systems (including addressing waste water issues); (c) improving provisions o f economic infrastructure (e.g. slaughterhouse); and (d) provision o f access roads and drainddrainage to isolated poor neighborhoods. The potential environmental and social impacts o f these sub-projects under project will be small-scale and site-specific typical o f Category B projects. 106. An Environmental and Social Management Framework (ESMF) was prepared as the environmental and social assessment instrument. The objective o f the ESMF i s to establish a mechanism to determine and estimate the future potential environmental and social impacts o f the activities to be undertaken under the project, and to define mitigation, monitoring, and institutional measures to be undertaken during project implementation. The ESMF was prepared to cover N'Djamena, Moundou, Sarh, AbCchC, and Doba. It has been disclosed in Chad on June 7, 2006 and at the Bank's Infoshop on June 16, 2006. In line with the requirements o f the ESMF, projecthite specific Environmental Impact Assessments (EMS)will be prepared as and when necessary duringproject implementation. 30 F. Safeguard policies Safeguard Policies Triggered by the Prqject Yes No Environmental Assessment (OP/BP/GP 4.01) [XI [X 1 [I Natural Habitats (OP/BP 4.04) [I Pest Management(OP 4.09) [I [X 1 Cultural Property(OPN 11.03, beingrevisedas OP 4.11) [I [X1 Involuntary Resettlement(OP/BP 4.12) [XI [I IndigenousPeoples (OD 4.20, beingrevisedas OP 4.10) 11 [X 1 Forests(OP/BP 4.36) [I [X 1 Safety of Dams (OPBP 4.37) [I [X 1 ProjectsinDisputedAreas (OP/BP/GP 7.60)' [I [X 1 Projectson InternationalWaterways (OP/BP/GP 7.50) [I [X ] G. Policy exceptions and readiness 107. The project complies with all World Bank Policies and no exception is required. A procurement planfor the first 18 months of project implementationwas finalized by the Recipientduring appraisal and approved by the Bank. Pre-feasibility studies for civil works are completed and detailed engineering studies, along with bidding documents will be completed before Grant effectiveness. Civil works are expectedto begin during the first semester following Grant effectiveness. 'Bysupportingtheproposedproject,theBankdoesnotintendtoprejudicethefinaldeterminationof theparties'claimsonthe disputed areas 31 Annex 1: Country and Sector or ProgramBackground CHAD URBANDEVELOPMENT PROJECT A. Countryoverview 1. With 80 percent of the populationof about 9.7 million13living on less than $1 a day, Chad i s one o f the poorest countries in the world and faces enormous development challenges. The 2005 Human Development Report ranks Chad as 173 out of 177 countries surveyed. The Gross National Income (GNI) per capita (2005) is estimated at US$400. In spite o f a life expectancy of only 44 years, the population i s growing at a rate of 3.2 percent per year. There i s a significant lack of services and infrastructure and a lack o f capacity at all levels of administration to finance, plan, and implement development efforts to improve the living conditions for the population. 2. The Millennium Development Goal (MDG) for a population's access to potable water is 60 percent in 2015. According to the latest e~timatesl~,only 34 percent of the population in Chad has access to an improved water source (up from 20 percent in 1990); only 8 percent o f the population has access to improved sanitation (6 percent in 1990). The developmental challenges faced by Chad are put into perspective when compared to sub-Saharan Africa, with an average access to water of 58 percent (increased from 49 percent in 1990), and an average access to sanitation of 36 percent (32 percent in 1990). 3. The economy suffers from the disadvantages o f a landlocked country. The nearest port i s about 1000 kilometers away to the south and, with a vast and seasonally flooded territory, transport costs are extremely high. Industrial output i s stagnating, and Chad i s one of the most challenging countries in the world when it comes to doing business, ranked 172 out of 175 countries surveyed in the 2007 Doing Business Report. 4. Expectations that large increases inthe financial resources couldbuttress and accelerate economic growth and development effort in the country are on the rise and widespread since oil production started in the Doba basin in 2003. Oil revenues are a major source of funding. In2004, net oil revenues of US$131 million (CFAF 66.8 billion) represented 42 percent of the total revenues in the national budget, excluding foreign financing. In 2005, net oil revenues had increased to US$250 million (CFAF 130.4 billion), representing 45 percent of the national budget (total revenues excluding foreign financing). By 2006, net oil revenues had grown to US$800 million (CFAF 416.2 billion), representing73.5 percent of total revenues inthe national budget, excluding foreign financing. B. Management of oil revenues 5. The impact on the lives of the ordinary Chadian of the increased revenues from oil production depends crucially on a transparent and effective management of the revenues. A Petroleum Revenue Management Law (PRML) was passedin 1999, forming the basis for the World Bank co-financing an oil pipeline from the Doba oilfields to the Atlantic coast o f Cameroon. From the outset of the Chad Cameroon Pipeline Project, the PRML, and the revenue management program that it underpins, were designed to assure that the country's oil revenues would help finance badly needed development. An oversight body, the Committee for Control and Oversight of PetroleumRevenues(Collzge de Contrde et de Surveillance des Revenus Pdtroliers) (CCSRP), with participation from civil society organizations, l3World DevelopmentIndicators2006 32 was created under the revenue management program to monitor and oversee spending and ensure transparency. 6. The P R M L provides for allocation o f 80 percent o f direct oil revenues to key sectors (agriculture, education, health, and infrastructure) and 5 percent to the oil-producing area. Allocations under the 2004 and 2005 budgets were in line with the law, but due to a tight financial situation the Government decided to amend the PRML as a way to get more funding from oil resources to address its growing fiscal deficit and unplanned expenses (most o f which were security related). On December 29, 2005, the National Assembly passed amendments to the law. These amendments would substantially weaken programs that were intended to improve the lives o f poor people and instead allow for increased spending on justice, territorial administration, and security. The World Bank subsequently withheld new loans and suspended disbursements o f IDA funds allocated to Chad and froze the escrow oil account. 7. Following discussions between the World Bank and the Government o f Chad, a Memorandum o f Understanding(MoU) was signed on July 13,2006 committing the Government to spend 70 percent o f its 2007 budget (all spending) on priority poverty reduction programs. Chad will develop a Medium-Term Expenditure Framework to guide annual budgetary expenditures. Resources in excess o f these agreed annual needs will be reserved in a stabilization fund for future use, to finance investments and their maintenance when the oil revenues start to diminishinthe future. 8. The Government agreed with donors on short- and medium-term steps to be undertaken to strengthen budget management within a comprehensive plan for the modernization o f public finances. These steps include quarterly publication o f budget execution data and regular audits o f procurement contracts. The new agreement also provides for the continued allocation o f five percent o f oil revenues for projects benefitingthe people inthe Dobaregion itself, C. Developmentagenda 9. The National PRSP, adopted by the Government in June 2003, outlines Chad's development agenda and strategic objectives. The strategy aims at cutting the number o f people living in poverty in half by 2015. To reach this aim, a macroeconomic framework has been developed, with focus on five strategic orientations: 1) Promoting good governance; 2) Ensuringstrong and sustainable growth; 3) Improving human capital; 4) Improving the living conditions o f vulnerable groups; and 5) Restoring and safeguarding ecosystems. 10. The PRSP i s based on integrated policies aimed at establishing the basic conditions for a continuous expansion o f economic opportunities and at ensuring equal access to those opportunities by opening markets and strengthening skills. 11. At the political and institutional level, the focus is on consolidating the foundations o f democracy by implementingdecentralization as contemplated inthe Constitution o f 1996 and strengthening domestic capabilities in government institutions and among the representatives o f civil society. In the economic and financial spheres, efforts will focus on national capacity building in both the private sector and in government departments dealing directly with economic agents, and on integration and internal organization o fthe productive system, including overcoming the country's isolation, and the promotion o f domestic trade. Increased public investment in infrastructure and human capital will contribute to increasing the rate o f real GDP growth. 33 12. Some o f the concrete activities anticipated for implementing the agenda are a continuationo f civil service reform by conducting audits and applying merit-based promotion, completing the deconcentration and decentralization framework, conduoting public expenditure reviews in the priority sectors, and training public employees involved in infrastructure planning and management. 13, The decentralization agenda i s important in terms of promoting growth in the non-oil sectors and increasing non-oil revenues, to ensure that resources for implementing the Government's development agenda remain adequate in the long run. The PRSP integrates rural and urban development policy in order to respond to the needs o f people working inthe primary sector inrural areas and o f informal sector operators inurban areas. 14. This PRSP is being updated as part o f the M o U signed between the Bank and the Government o f Chad. The updated PRSP will form the basis for determining future expenditure priorities and will be enacted into law. D. Politicaldecentralization 15. Decentralizationi s part o f the institutional framework embedded in the 1996 Constitution, laying the ground for a democratic distribution o f power among citizens to even the most local level o f Government. Over the Country Assistance Strategy period covering FY04 to FY06, legislation was prepared to create three sub-national levels o f Government: regional, departmental, and municipal, each with elected bodies. Decentralizationwas the subject o f a body o f laws o f which the most important are: Law 002/PFU2000 o f February 16, 2000 (Organic law), defining the statutes o f decentralized territorial governments, and Law 11/PR/2004 o f M a y 24, 2004, establishing the general framework for municipal resources. Local elections have been postponed several times due to a lengthy process o f preparing and enacting the necessary legislation. According to the Government's expectations, elections should take place at the beginning 2007. 16. Progress has been made towards holding the first municipal elections, with most of the legal and regulatory framework already prepared: (i) the laws on allocation o f competencies between the State and municipalities, on transfer o f resources, on creation and functioning o f the services o f the decentralized levels of government, and on a localized civil service have all been prepared; (ii) the decrees defining the budget and accounting nomenclature for the municipalities, the support function o f the deconcentrated services o f the State vis-a-vis the decentralized levels o f government have been prepared; and (iii) the 50 department capitals have been delimited. 17. Inparallel, the authorities are working to make arrangements for the deconcentrated services of the ministries to interact with the future decentralized governments. A "High Level Committee for Decentralization", has been set in place, headed by the Prime Minister, with permanent membership comprised o f representatives o f the ministries dealing with finance, regional development planning, and administration. The Committee's function will be to coordinate the decentralization policy and sector policies, notably between the Ministry in Charge o f Decentralization (MCD) and the Ministry o f Land Administration (MAT), which i s the oversight ministry o f the new municipalities. 18. While the Government finalizes the legal and regulatory framework for decentralization, including laws on the transfer o f responsibilities and resources to the municipalities, it also intends to take measures to improve the effectiveness and efficiency of the municipalities to enable them to fully assume their new responsibilities. Moreover, since the municipalities cannot be expected to perform all o f the tasks under their responsibility, civil society and the private sector have an important role to play. Involvement o f stakeholders at all levels o f society i s essential to better allocate oil revenues and manage 34 the impatience o f the communities to tap into the dividends o f the oil boom. This entails consulting the population on priorities, and requires that all stakeholders concerned should actively participate in the planning, implementation, and especially maintenance of infrastructure and provision of services, and contribute to the local development effort (e.g. via paying taxes). The decentralization process will give more power to the local authorities in a very centralized state faced with highpolitical uncertainties and fierce competition for power. 19. Current operational and legal framework for Chadian municipalities. Under the Constitution o f 1996, the municipalities are decentralized territorial governments, but untillocal elections take place, the municipalities continue to operate under the Ordinance n017/PR/85 dated July 24, 1985. Currently, the municipalities are administered by Management Committees which include representatives o f various deconcentrated services (Ministry o f Land Administration, Ministry o f Finance, Economy, and Planning, Ministry o f Land Planning, Urban Development and Housing, Ministry of Public Health, Ministry o f National Education), as well as local traditional leaders. The Management Committees deliberate on the businesses o f the municipality and in particular discuss and adopt the budget. The President o f the Management Committee, a civil servant appointed by presidential decree, i s the mayor, and i s assisted by the Permanent Secretary and the municipal administration. Inaccordance with the principle of separation o f the directors and accountants, the accounts of the municipalities are prepared by a public accountant (attached to the Ministry o f Finance) who keeps the municipality's accounts and i s in charge o f collecting the municipality's taxes and executing expenses approved by the Mayor. 20. Supervision o f the municipalities i s carried out by the deconcentrated administrative authority, i.e. by the Prefects or Sub-prefects or the Government's delegate in the case o f the municipality o f N'Djamena. The municipalities' budgets are subject to a prior approval o f the Minister o f Land Administration ("Direction de la Tutelle des Collectivitb") and the Ministryo f Finance. E. Fiscaldecentralizationand municipalfinance 21. The fiscal regime of the municipalities i s at the heart o f the development effort. While political decentralization i s being prepared, municipalities are suffering from an ongoing financial crisis and unpredictability o f available resources. This i s rooted in a multitude o f shortcomings in the management o f finances, budget, accounts, and expenditure, combined with a low level o f resource mobilization and unreliable transfer o f funds from the State. The presentation o f the municipal fiscal system provides detailed background for the capacity buildingactivities included inthe proposed project. Legalframework for financial resources 22. Article 212 o f the Constitution defines the composition o f municipal financial resources as: (i) the portion o f proceeds from taxes and fees collected for the State's budget which returns to the municipalities; (ii)the revenue from allocations and subsidies provided by the State; (iii)the revenue from their assets; (iv) the revenue from loans taken out by decentralized sub-national authorities; and (v) the percentage o f revenue from soil and subsoil resources exploited in their territory. The Law 11/PR/2004 concerning the financial and tax system o f the decentralized sub-national authorities established broader provisions on municipal resources and lists the various resources and defines the system, as detailed below. 35 Overview of the municipalfinancial system 23. The main sources o f revenue o f Chadian municipalities are currently: (i) and fees allocated taxes by the State to the municipalities (mainly custom duties, land and fiscal taxes); (ii) municipal revenue the (business fees, etc.); and (iii) public space user fees (stall rentals, parking fees, advertising fees, etc.). These sources o f revenues, along with the difficulties encountered in maximizing their output, are presentedbelow. Breakdown of current revenues for beneficiary cities (in 2004) I 1 Total I 1 Taxesandfees i I I I recurent allocated by the I I 1 State to the Irevenue (business! fees (stall rentals, revenuecarried Communes i1(Million revenue i! Communal i Public space user Other revenue and FCFA)! communes ! fees,...) ! parking fees,...) i! forward Abeche I ! 158/ 25j 23j 47j 63 Moundou j 2761 2081 251 34j 9 Sarh I I 361 ! 2351 191 171 90 Doba I 143j 99 i 28! 91 7 N'Djamena 1 1823.21 797.7i 364.9/ 511.5[ 149.1 24. Taxes and fees allocated by the State to the municipalities. Taxes and fees collected include refunds from customs duties, and land and fiscal taxes on activities for which the revenue i s set aside for municipalities. Refunds from customs duties fall into the category o f national taxation - domestic turnover tax (TCAI) which has been replaced with the value added tax on imports (VATI) - 6.7 percent o f which i s refunded to the municipalities. The contribution o f this tax is significant, with revenue ranging from 12 to 71 percent o f the "taxes and fees allocated" category. The essential components o f local taxation, the proceeds o f which are fully allocated to the municipalities, are: (i) a land taxation system (property tax for developed and undeveloped lands (Contributions FonciBres sur les Propri&t&sBcitis et Non Bcitis )-CFPB, CFPNB); and (ii)a business taxation system (tax on activities), including: business license fees, (Impbt G&n&ralLiberatoire (general lump-sumtax) (IGL); tax on Rental Value o f Business Premises (Taxe sur la Valeur Locative des Locaux Professionnels (TVLP); and licenses. On average, for the five largest municipalities inthe country, including the capital, the business tax constitutes the essence o f direct local taxation, at almost 23 percent. The municipalities are not participants in the tax determination and collections processes. Collection i s carried out by issuingnotices or advance payment. The municipalities lack information or control over these taxes managed by State agencies, though the taxes constitute a major source o f their revenue. This lack o f information i s exacerbated by the public revenue department's tardiness in refunding the municipalities' quota. 25. One o f the main problems encountered i s that the tax roll does not reflect reality. In N'Djamena, for example, the general lump sum tax (IGL) has a total o f approximately 5,000 entries, though a partial census recently conducted indicates a,minimum o f 12,000 entries. This considerable deficit i s primarily a result o f the difficulties in capturing all (or at least the essential part) o f the tax base, as the procedure generally followed i s based on the voluntary filing o f returns by taxpayers using the PPA system. Without material resources for collection, tax control i s barely operational. The Tax Directorate i s even overwhelmed by carrying out collections using the existing rolls. For the 2006 IGL, the collection target o f CFAF 1.9 billion inN'Djamena was not realized, as only 25 percent o f that target had been attained by the beginning o fJune. 26. A number o f actions which relate to the IGL and the tax on the value o f business premises (TVLP) have been jointly initiated by the General Directorate o f Taxes (DGI) and the municipality o f N'Djamena under EUand AFD financing. Their objective i s to help the DGIhave a better grasp o f its tax base, and consists o f a generalized census (with GPS tracking) o f activities subject to the IGL and using 36 this census to revise the current rolls upwards. Although currently contributing in only a limited way to budgets, actual municipal revenue (those which are totally controlled by the municipality) experiences similar problems. 27. As the municipalities are not part o f the fiscal system for State taxes, they are not associated with the establishment o f their budget forecasts and tax collection. Furthermore, the delays in providing state refunds have an adverse effect on municipal resources: collection i s being done by the public revenue departments, which relay the information to the central revenue departments, which in turn distribute the shared taxes and redeposit the municipalities' portions in their respective accounts. It takes an average o f three months for the funds to be made available to the municipalities' accounts. For certain taxes instituted by the new decentralization laws, inaccuracies in their system and procedures for collection severely limit their scope and implementation. 28. Municipal fees. These mainly consist o f municipal taxes on infrastructure development, real estate transactions, gas pumps, taxis and manual vehicles, advertising and entertainment, electricity, and municipal port dues. These are the only municipal taxes that currently exist. They are diverse in their classification, content, and base, and in their relative importance among the different municipalities. Left to the initiative o f the municipalities, but with some amount o f regulatory control (especially in budgets where they appear in the annex), they are established through the deliberations o f the Management Committee. Tariffs are not guided by legislation; their setting i s at the discretion o f the municipality, which adjusts the level based on the specific features and circumstances o f the city, drawing from other municipalities' experience, especially N'Djamena. 29. Public space userfees. For revenue from public space user fees, management tools constitute the main factor limitingtheir collection. Fees for market space and roadway usage have not been subject to an exhaustive census, and the collection effort is far below resource potential owing to a lack o f work tools. InN'Djamena, the development o f a computerized management tool for municipal collections has remained at a standstill. In most o f the municipalities, stall rentals represent up to 50 percent o f this category o f revenue. InN'Djamena, revenue from public space user fees at "Marchk h mil" (the main market in the city where works are to be financed under the proposed Project) amounted to 160 million CFAF in 2004, while having a potential to generate 400 million CFAF. The number o f taxes and their variations give rise to a wide variety o f taxpayers, a handicap that compounds a low collection rate from the tax base identified. 30. Municipalities ' financial difficulties. A study'4funded under the PHRD grant and largely disseminated among key stakeholders (Ministry o f Finance, Economy and Planning, Ministry o f Land Administration, Ministryo f UrbanAffairs, municipalities) revealed the following key deficiencies. 3 1. Financial and accounting management. The major handicaps inthis context relate largely to the four secondary municipalities o f the project (Moundou, Sarh, AbCchC, and Doba): (i)the budget and accounting classification i s no longer suitable; (ii) the financial and accounting management tools are practically non-existent, and existing accounting systems are not reliable and cannot be used for budget follow-up or forecasting; (iii) the absence o f a written manual o fprocedures for the different departments o f the municipality and the public accountant, combined with weak management o f the financial services o f the municipalities; and (iv) severe inadequacy o f human resources infinancial management. Incertain cases, initial training i s clearly insufficient, and in all cases the absence o f training and upgrading are a serious handicap. The four secondary municipalities use a manual accounting system, which i s generally improperly kept and incapable o f reliably effecting commitment, verification, and payment. Furthermore, 14Preparatory study: Etude des finances et de la fiscalite locale des villes de N'Djamena, Moundou, Sarh, AbBchB et Doba. 2006 37 producing accounts for the fiscal year i s laborious and the periodic reconciliation o f accounts with the Comptroller General's Departmenti s equally difficult. 32. Weak resource mobilization. The above problems cause the Chadian municipalities to be confronted with a resource crisis, which inhibits all significant actions towards taking responsibility for developing basic services and infrastructure. The level o f resources in the five project cities i s very low, as evidenced by the ratio o f revenue per capita. For the past few years this has fallen within the range o f CFAF 1,500 - 3,200 per capita (i.e. US$2.6 to US$5.8 per capita)" which i s about one-third to halfo fthat generally obtained insimilar cities in sub-Saharan Africa. 33. Municipal expenditure. Budget and accounting process deficiencies are particularly significant for the four secondary municipalities o f the project. Aside from the issue o f reliability o f accounts, the major findings are: (0 High administrative expenses reducefunds available to provide public services in the urban sector. Staff costs account for approximately 47 percent inN'Djamena, and between 17 and 46 percent in the other four municipalities. As a result, few resources are available for the delivery o f services to the population. (ii) Debtaccumulation weighsonthemunicipalities. Theprecariousresourcesituationandthe accumulationo f unpaid debts have greatly impeded the municipalities' effort to invest. Inthe case o f N'Djamena, practically no funds are available for investment, pending external financing. The same phenomenon i s noted in the other municipalities, except in a limited number o f cases. (iii) Charges carriedforward (N'Djamena) or expenses carriedforward from previousfiscal years for the other four municipalities). Budgets for the fiscal years appear to be balanced, but in reality the municipalities pass on their debts to their creditors, including their own employees, not being able to objectively meet their deficit needs through the use o f funds or public revenue advances. The expenses carried forward include accounts payable from preceding years, unauthorized expenses, or even deficits in operational expenses. This seems to have been well contained in N'Djamena (average o f 4.2 percent o f municipal expenses over the last 5 years), but inthe other four municipalities, it accounted for 8 to 50 percent o f expenses. 34. Support and supervisionfunction of deconcentrated administration. Generally, the municipalities are subjected to weak regulation and supervision. Regulatory supervision is not exercised, with the exception o f budget approval, and there are many instances o f outstanding delays. For N'Djamena and Moundou, the 2005 and 2006 budgets have not yet been approved. Doba i s the only exception, as for some years now it obtains approval for its budget in the first quarter o f the fiscal year. Various agencies o f the Ministry o f Finance are involved in the mobilization o f resources and in terms o f financial management, including the regional public revenue official ("Trksoriers Gknkraux u) and tax collection agencies ("Sewices des Impots"). The lack o f resources o f the deconcentrated ministries in the area o f personnel, equipment, filing facilities, and funds to cover operational expenses i s pervasive. All works are done manually (documents are produced on old typewriters that are difficult to service). Supervision and support activities to the benefit o f the municipalities are very limited. As a result, the municipal administrations do not receive essential assistance to help them carry out their mandate and improve the living conditions for their populations. In2004, per capita revenues ineachofthe beneficiary cities were: US$5.8 for Doba, US$5.3 for Sarh, US$2.9 for Abkchk, US$2.7 for Moundou, and US$3.3 for N'Djamena. 38 F. Characteristicsof urbanizationand urbanmanagement 35. Chad's urban population, which was estimated at 7 percent of the total population in 1960, i s currently about 2.4 million, representing 26 percentI6 of the total population. The rapid growth in the urban population i s reflected in the increase in the population o f the capital city, N'Djamena. The population was 531,000 in 1993 (year of the latest general census), up from 100,000 inhabitants in 1964. Today, its population has surpassed 1 million with an estimated annual growth rate of about 6 percent. For the period 1990-2004, the average annual growth rate of Chad's urban population was 4.5 percent, compared to 4.4 percent for sub-Saharan Africa and 2.2 percent worldwide. This can be compared to a 3.2 percent population growth rate for the country as a whole and 2.8 percent for the rural population. Overall, the cities will have to accommodate somewhere in the area of 108,000 new citizens per year17, corresponding to the population o f the third largest city inthe country. 36. According to the latest estimates, only 41 percent of the urban population has access to an improved water source (27 percent in 1984), and 30 percent o f the urban population has access to improved sanitation (27 percent in 1990)l8. There are no sewerage systems or sewage treatment plants in Chadian cities. Inperi-urban areas, human waste is often evacuated via the storm water drainage, with obvious healthrisks and malodorous smell as a result. 37. The drainage o f storm water and sewage and the removal of household waste are perpetual problems in most Chadian cities, especially in low-income neighborhoods. In some poor neighborhoods of N'Djamena, sewage remains stagnant throughout the year. Household waste i s only collected sporadically and uncollected waste blocks the drains and aggravates the situation. There are only a few kilometers of paved urban roads outside of N'Djamena, and the unpaved urban roads turn into mud duringthe rainy season(two to three monthsper year). 38. All in all, the situation in Chadian cities is appalling and the quality of life for the urban population i s very low. Figures from the UN-HABITAT Global Urban Observatory indicate the percentage of people in urban areas living in slums'gat 99 percent (for 2001). Eventhough this figure i s based on a stringent definition o f "slum", it gives an indication o f the living conditions in Chadian cities. The dire conditions are also captured by figures estimating the proportion ofhouseholds living inmodern housing at only 3.9 percent in 1993 (year of the latest census) and figures from MATUH estimating that maximum 10percent of houses inN'Djamena are constructed of durable materials. 39. The highlevel ofpoverty and land-lockedsituationofthe country accords a special importance to the transport and urban sectors as supporters o f development inthe productive sectors and as mechanisms in the fight against poverty. Urban areas are engines of economic growth. Industry and services, normally located in urban areas, contributed to about 77 percent o f GDP in 200520. It i s estimated that l6 Source: UnitedNations Department o f Economic and Social AffairsPopulation Division-World Urbanization Prospects: 2003 revision 4.5 percent o f 2.4 million urban residents. Most recent figures from World Development Indicators, figures from "Gender, Poverty and Environmental Indicators", African Development Bank, (2004), and UNDP's Human Development Index online. UN-HABITATdefines a slumhouseholdas a group of individuals livingunder the same roofinanurbanarea who lack one or more o f the following: 1) Durable housing o f a permanent nature that protects against extreme climate conditions. 2) Sufficient living space (not more than three people sharing the same room). 3) Easy access to safe water insufficient amounts at an affordable price. 4) Access to adequate sanitationinthe form o f a private or ublic toilet sharedby a reasonable number o fpeople. 5) Security o ftenure that prevents forced evictions. This figure is up from 54 percent in2004, the year before the oilproduction effectively took offon a large scale. ' 39 households headed by persons working inthe urban informal sector account for 32 percent o f GDP, while only making up 20 percent o f the population2'. 40. Inspite of the importance of the urban sector to the economy, the housing and urban sector is characterized by an inadequate institutional and legal framework, and a dire lack o fresources. The public structures charged with the development o f the sector are suffering from lack o f organization, equipment, and human resources and the problem has been deepened by the lack o f a strategy for physical planning and urban development. As a response to this, the Government has recently begun the process o f developing an updated policy for the urban sector, highlighting the commitment to prioritizing urban development inproportion to its importance for the economy. 41. However, the urban sector relies heavily on external financing (95 percent o f investment projects inthe urban sector are being financed by the donor community), andhence the needto ensure generation o f revenues to enable the Government and the municipalities to carry a larger share o f the investment budget and to assure the maintenance o f the investments. The needs far outstrip the available resources and donor financing i s required to address the huge needs, provide more discipline inthe management o f the limited available funds, and provide technical assistance. Urban sector issues 42. Chad i s developing an appropriate institutional framework to implement the decentralization process currently underway and to manage its public resources. As this framework i s emerging, the following challenges to the development o f livable cities in Chadneedto be taken into consideration: 0 Clear imbalance between the economic importance o f Chadian cities and their available resources. 0 Rapid urbanizationresulting inunplanned settlements and low quality o f life e Lack o f urbanplanning. e Inefficient municipal resource utilization. e Weak financial and account management at the municipal level. 0 A nascent decentralization process inneed o f support. 0 Weak institutional structure and support capacity. 43. These key sector issues are developed below: (i) Imbalance between the economic importance of Chadian cities and their available resources. L o w resource mobilization i s a serious hindrance on the capacities o f municipalities to provide services for their populations, and exacerbates the challenges o f urban development. As mentioned above, Chadian municipalities are confronted with a resource crisis that i s out o f proportion with the importance o f cities for the economy. As a result, the level o f urban services provided by the municipalities i s low, municipalities' debt arrears are accumulating, and the development o f local infrastructures i s extremely limited. Investments are either put on hold pending availability o f external financing or carried out inan unstructured manner, except ina limited number o f cases. (ii) Rapid urbanization resulting in unplanned settlements and low quality of life. The urban population growth rate o f 4.5 percent poses enormous challenges to the planning capacity o f the municipal administrations and their ability to extend services to expanding urban 2'Estimate fromthe PRSP. 40 areas. Due to the economic difficulties for a large part o f the in-migrating population with no means, and different types o f land ownership that fuels land speculation, urbanization often takes place on land unsuitable for construction (e.g. subsidence, swamps). This situation i s perpetuated by the difficulty o f obtaining legal title to land and the high cost o f quality constructionmaterials, causing urbanization to take the shape o f unplanned, low-density sprawl. This, in turn, increases the cost o f delivering basic services (such as access to water, sanitation, drainage o f storm water, roads, and access to economic infrastructure, etc.), hinders people from participating in income-generating activities and contributing to economic growth, and reduces the quality o f life for urban residents. (iii) Lack of urban planning. From the early 1960s to the beginning o f the 1990s, no urban planning documents were elaborated in Chad. Urban planning has been an isolated and centralized process, undertaken without reference to the parallel task o f planning investments and often failing to consult with the people affected. Some master plans were developed for N'Djamena, Moundou, Sarh, and AbCchC duringthe 1990s, but there was no capacity to implement them. Other cities are developing from day to day, without control and without reference to any kind o f investment plans. Legislation on land ownership dates back to 1967. Under the leadership o f MATUH, efforts are under way to bring the legislation in line with current realities, and a new body o f law governing land ownership i s being prepared for technical validation. (iv) Ineficient municipal resource utilization. High staff costs, over 25 percent for all cities except Moundou (and even then probably underestimated), limit the resources otherwise available for public services. New infrastructure has been constructed without clarity about funding for operation and maintenance. As a result, budget allocation and expenditure on routine maintenance o f infrastructure has been insufficient, while municipalities seek funds for new investments. The resulting degradation o f infrastructure i s a waste o f resources, since this practice can result in up to ten times the lifetime cost o f infrastructure, compared to an optimal maintenance program. The minor maintenance works that are carried out are often undertaken by the population. The case o f Moundou, the second largest city in Chad, no resources are spent on the municipal budget for maintenance, and the task i s wholly passed on to the population. (v) Weakfinancial and account management at the municipal level. Municipalities face a number o f difficulties in financial and account management: (i) the budget and account classification i s no longer suitable; (ii) financial and accounting management tools are practically nonexistent; and (iii)there i s a scarcity o f human resources in financial management. The four municipalities o f Doba, Sarh, Moundou and AbCchC use a manual accounting system, which i s generally improperly kept and unable to produce a reliable report o f the required operations. Furthermore, producing accounts for the fiscal year i s laborious and periodic reconciliation o f accounts with the Comptroller General's Department i s equally difficult. Attempts to enter the accounting data into a spreadsheet have been made (e.g. inDoba) but are limited to individual efforts and do not in any way constitute a shared effort by the financial departments o f the municipality or the Comptroller General's Department. Establishment o f a sound basis for planning municipal expenditure will contribute to overcoming problems with current funding o f the municipalities. (vi) A nascent decentralization in need of support. Local elections, under the responsibility o f the Ministry o f Land Administration, have been postponed several times. Before the 41 recent eruption o f violence in Chad, they were expected to take place at the beginning o f 2007. After local elections, with elected bodies in place, the municipalities' statute will follow the law and be under the control o f L a w n0002 o f February 16, 2000 on decentralized government. Decentralization will act as a catalyst for local initiatives. With decentralization, the Government seeks to improve municipal management systems and to clarify the delegation o f authority betweenthe state and municipalities. (vii) Weak institutional structure and support capacity. The central administration lacks the capacity to support the municipalities. MATUH i s a recently created Ministry. The Department o f Urban Development only has 15 sector specialists, and the Cadastre has 25 technicians. The Ministry o f Finance, Economy, and Planning, and the Ministry o f Land Administration are equally suffering from lack o f organization, equipment, and human resources, so ministerial support to municipal revenue mobilization and budget management remains weak. G. Governmentstrategy 44. Inurban areas, the Poverty Reduction Strategy Paper (PRSP) supports the interconnection of medium-sized towns by a road network that can be used all year round and can be accessed from any satellite settlement. The PRSP further supports preparation o f national, regional, and urban development plans, and concentrates on developing infrastructure and urban services, specifically providing major urban centers with water production and distribution networks, creating sewer and drainage systems, and assuring evacuation o f waste out o f the cities. 45. The urban sector i s among the priority sectors which can benefit from the oil revenues. In MATUH's budget for 2007, oil revenues represent CFAF 5.15 billion out o f a total o f CFAF 14.879 billion (i.e. 35 percent). The Government i s committed to improving the provision and quality o f basic urban services, as indicated inthe 2006 Letter o f Policy for the Urban Sector, communicatedto the Bank. The urban policy has a strong focus on practical implementation and the means to do so, by channeling oil revenues to the urban sector and providing an overall vision for the sector and the contributions o f the donor community. 46. A very important challenge for Chad is to promote growth in the non-oil sectors and increase non-oil revenues to ensure that resources for implementing the Government's development agenda remain adequate. The urban sector policy specifies that investments are to be focused in the cities with the greatest economic potential, giving priority to critical infrastructures which can improve the productivity o f cities (roads, drainage, drinking water, removal o f waste, etc.), improving living conditions in poor neighborhoods, promoting employment creation, promoting delegation o f responsibilities by the State and local authorities, furthering growth o f municipal resources by improving their management systems, and promoting a participatory policy to involve the population inthe development effort. 47. Since the municipalities cannot be expected to perform all o f the tasks under their responsibility, civil society and the private sector should become increasingly involved inthe planning, implementation, and especially maintenance o f urban infrastructure, and the provision of services. This involvement entails consulting the beneficiary population on the services and infrastructure to be made available. 48. The proposed urban development project i s inline with the PRSP and the Government's strategy, with a focus on an efficient use o f oil revenues inthe urban sector. The preparation o furban development plans, as those being co-financed under the proposed project, will clarify development needs for the cities and will set up priority investments programs, focusing on the immediate needs o f the population and on longer term local economic development and poverty reduction. 42 H. Overview of targeted project cities 49. The project cities (N'Djamena, Moundou, Sarh, AbCchC, and Doba) are all subject to the challenges described above. In terms o f poverty reduction and economic growth, N'Djamena has a special importancebecause o f its economic weight, population size, and needs. AbCchC, Sarh, Moundou, and Doba are important because o f their geographic location, weight in the economy, and the rapid increase o f their populations. With combined populations o f over 1.5 million, these five cities account for about 65 percent o f the urban population o fthe country. 50. Due to the slow pace o f decentralization, only the most important urban municipalities (N'Djamena, Moundou, Sarh, and AbCchC) have experienced any significant development with the establishment o f operational technical services. The technical expertise present in the administration i s very limited, and some municipal departments are managed by persons with no formal professional training. 51. Public urban investments have been focused on N'Djamena, which has received 80 percent o f Chad's urban investments in the past two years. At the institutional level, N'Djamena i s the only fully functioning city, with an organizational structure, qualified staff, and financial resources to enable the city to carry out planning and implementation to any significant extent. The other cities largely depend on the central ministries' support (through deconcentrated units), especially in municipal finances. The administrations o f the project cities all suffer from a lack o f professional staff and appropriate management tools, the inadequacy o f the resource mobilization system, the irregularity o f transfers o f funds from the Treasury, and inefficientmanagement o fpublic expenditures. 52. The relevant characteristics o f these cities are outlined below. N'Djamena 53. Socioeconomic characteristics. The population o f N'Djamena i s estimated at between 1.0 and 1.2 million and has been growing at an estimated rate o f 6 percent during recent years, mainly due to in- migration from rural areas. The population was 531,000 in 1993 (year o f the latest general census), up from 100,000 inhabitants in 1964. Nearly 99 percent o f the population o f N'Djamena can be considered to be living in slums. 54. Water. There were 15,000 individual water connections in N'Djamena in 2002 and about 280 water standpipes, each serving about 500 persons. Counting 10 persons per individual connection, this gives a coverage o f only 29 percent o f the city's population o f one million people, thus lower than the national average o f 41 percent with access to water in urban areas (2004 figures). An AFD-financed urban development project inN'Djamena (12.5 million) includes a water provision component. 55. Roads. Under the AFD-financed project, N'Djamena has signed a city-contract with the Government to set aside CFAF 100 million per year for road maintenance. 56. Electricity. 12,000 individual electricity connections inN'Djamena result ina coverage o f about 14 percentz2o f the city's population. The Critical Electricity and Water Services Project, co-financed by the World Bank (US$54.8 million), as well as a project for the construction o f a new power station in Raracha and an extension o f the water and electricity network financed by the Islamic Development Bank 22Figures taken from the Project Appraisal Document of the Critical Electricity and Water Services Project (P077240). 43 (IDB) (32 million) aim to remedy some o f the infrastructure constraints by increasing electricity generating and water supply capacity, decreasing the number o f days with disruptions (250 days per year in2002), andincreasing thenumber ofpeople with accessto electricity andwater. 57. Drainage. Due to high levels o f donor investment, the city has 120 kilometers o f functional drains. As N'Djamena i s in a depressed area, it is necessary to pump rain water to the receiving basin by the Chari River. Dredging o f drains has been contracted out to a private operator since 2004, and in2006 the.first competitive bidding was launched in Chad in this sector. The city has an outdated drainage master plan from 1975. 58. Solid waste. The city produces about 600 m3o f solid waste per day. The material at the disposal o f the city i s dilapidated, and frequent breakdowns o f trucks result in an inefficient transport of solid waste out o f the city. Solid waste management i s the largest item on the municipal budget at CFAF 240 million budgeted per year (13 percent o f the budget), not including personnel expenses and depreciation o f equipment. The urban development project financed by AFD will construct an engineered landfill in N'Djamena and provide training and technical support to the neighborhoodpre-collectors. 59. Urban and municipal management. N'Djamena has an administration comprising 1,100 staff (corresponding to 0.97 staff per 1,000 residents). The rapid population growth has led to unplanned settlements and a lack o f services to the urban residents in general. The city needs tools to help plan urban development and strengthen municipal administration o f revenue generation and technical services. The Bank has been working with MATUH to prepare a proposal for a City Development Strategy to be submitted to the Cities Alliance Programz3. AbCchC 60. Socioeconomic characteristics. Current estimates place the population o f AbCchC between 88,000 and 100,000, with an estimated annual growth between 4.0 percent and 5.0 perced4. The city's population increased from 22,000 in 1964 to about 55,000 in 1993. Inadequately connected to the rest o f the country, AbCchC accumulated wealth through trade with Sudan, Libya and, to a lesser extent, the Central African Republic. As a result o f the decline o f that trade combined with influx o f refugees from the conflict in Darfur in neighboring Sudan, AbCchC faces serious economic problems. Because o f its isolation, AbCchC's commercial activity i s based on regional trade o f food crops and livestock. Urban development has mainly taken the form o f makeshift settlements. 61. Water. An estimated 61 percen?' o f the population has access to potable water, with 18 percent being served by an individual connection and 43 percent having access via a standpipe. Per capita consumption i s estimated at 79 liters per day for an individual connection and 19.8 liters per day for people using a standpipe. Investment in the city has been minimal, through an urban drinking water supply project funded by the German Agency for Technical Cooperation (GTZ). Failure to maintain the works and rapid populationgrowth results in severe drinkingwater shortages. 62. Roads. The local rainfall conditions contributeto the city's decay, as the roads are gullied and the embankments erode, threatening the residential areas. 23Cities Alliance is an alliance o f cities and their development partners committed to urban poverty reduction. 24Feasibility study for Component B: Avant-projet sommaire. September 2006 and Note sur 1'Cvolution de taux d'accts a l'eau saine des populations tchadiennes en regard de l'atteinte des Objectifs du Millhaire pour le D6veloppement (OMD). Ministtre de l'environnement et de l'eau. 2006. 25Feasibility study for Component B:Avant-projet sommaire. September 2006. 44 63. Urban and municipal management. The municipality employs 53 staff (equal to 0.57 staff per 1,000 residents). As with other regional capitals, AbCchC has limited support from deconcentrated services of the state. There i s a regional delegation o f the Ministry of Infrastructure, of the Urban Department of MATUH, of health and of hygiene and sanitation. These delegations have very limited transport means, and cooperation with the municipal departments is very limited. Sarh 64. Socioeconomic characteristics. Current estimates set the population at between 107,000 and 139,000 people, with an annual growth estimated at between 2.926percent and 5.0 percent. The city's population increased from 30,000 in 1960 to 75,000 in 1993. The city's industrial activity slumped as a result of the closure of the meat processing company o f Chad (SNIT), the closure o f the textile company o f Chad (STT), and the transfer o f the operation of the cotton company of Chad (COTONTCHAD) to Moundou. The only remaining major employer is the Chad Sugar Company. The increase in Sarh's population has exceeded all urban planning projections, partly due to a considerable inflow of migrants from all of the country's regions. 65. Water. There are about 60 standpipes inthe city (set up incentral districts), and the water supply network i s in a state of extreme disrepair. Access to potable water is estimated at 56 percen?' o f the city's population, with 9 percent being served by an individual connection and 47 percent having access via a standpipe. Per capita consumption i s estimated at 70 liters per day for an individual connection and 2.4 liters per day for people using a standpipe. The municipality's limited resources prevent it from meeting the population's demand for services, and the city faces a serious (qualitative and quantitative) water supply problem. 66. Roads. No roads in Sarh are pavedbut the roadnetwork seems to provide adequate access to the various neighborhoods. Sporadic road maintenance i s carried out with the assistance of the Sugar Company or by renting equipment from private operators duringperiods o f modest activity. 67. Drainage. Sarh suffers from a low run-off gradient towards the Chari-Bah Kh8, and the sandy soil clogs the drains. Sarh i s subject to recurrent flooding. The city benefitedfrom a drainage project financed by AFD in2003, but this i s the first drainage construction since 1942. The only planned project, apart from the proposed project, i s the construction o f soil trenches, with the assistance of sanitation committees. 68. Urban and municipal management. The municipality of Sarh employs 149 staff, corresponding to 1.23 staff per 1,000 residents. Sarh has signed a sister-city agreement with Cherbourg (France) in 2001, through which Sarh has received equipment for the sanitation committees, construction of public latrines, and a pilot operation of digging drains directly inthe soil. 26 ''Feasibilitystudyfor study for Component B:Avant-projet sommaire. September 2006. Feasibility Component B:Avant-projet sommaire. September 2006. 45 Moundou 69. Socioeconomic characteristics. As a result o f Moundou's proximity to the KomC oilfields, its populationo f between 167,000 and 180,000 i s increasing at a very rapidrate (4.4 to 5.5 percent annually). Moundou's population was 30,000 in 1964, and had grown to almost 100,000 by 1993. In view of its dynamic industrial and economic role, Moundou i s appropriately being referred to as "the economic *capital" of Chad. Location o f most of the industrial production o f the country, Moundou hosts the headquarters of many industrial companies, including COTONTCHAD, Chad's oil and soap production company (formerly DHS), the Lagone breweries (BDL), and the cigarette manufacturing company of Chad (MCT). Proximity to the Central African Republic and Cameroon has made Moundousomewhat o f a regional center, further reinforcedby economic activity linkedto oil productioninthe region. 70. Water and electricity. Access to potable water i s estimated at 58 percenf8 of the city's population, with 8 percent being served by an individual connection and 50 percent having access via a standpipe. Per capita consumption i s estimated at 45 liters per day for an individual connection and 1.9 liters per day for people using a standpipe. Six out of 10 public standpipes have been shut down because o f faulty management by the management committees. AFD has funded a rainwater drainage project for an amount of CFAF1.84 billion (US$3.6 million). Like other cities in Chad, Moundou suffers from severe drinkingwater and power shortages and inadequate access of the populationto basic services. 71. Roads. The city has a paved road going through the city, but apart from that the road network i s degradedby rainfall and badly maintained. The technical services have no material to maintainroads, so maintenance i s carriedout by sporadically hiringequipment at an elevated cost. 72. Drainage. Moundoui s situated ina somewhat elevated basin, with rather steep slopes toward the east and the northeast. The highly argillaceous soil leads to flooding at the peak of the rainy season, inundating roads in many neighborhoods. Waterborne epidemics occur every year. Despite the construction o f a drainage network under AFD financing in2004, the city has grown to an extent that it i s still disposed to flooding duringthe rainy season, makingmany neighborhoods inaccessible. 73. Solid waste. At most, 20 percent of solid waste i s transported out of the city, so the majority eventually ends up inthe drains and gutters. 74. Moundou i s a sister city with Poitiers (France), and has benefited from a variety of support, including twinningof hospitals inthe two cities and furnishing of a power generator, hospital equipment, school material, constructiono f five water standpipes, and support to sanitation committees. 75. Urban and municipal management. The municipality employs 152 staff (0.88 staff per 1,000 residents). Inthe absence o f an urban master plan, land use patterns are informal and do not meet urban planning standards. The cadastre documents are outdated and can be considered obsolete, and the municipality does not possess any aerial photographs. None of the departments has a copy of the urban development plan of 1997 or the updatedversion of 2001. The municipal services are housed inbuildings of varying quality, and there i s no roomto install additional staff. Maintenance of infrastructure i s wholly passedon to the population, and there i s no regular dredging of drains and gutters after the rainy season. The delays in payment o f invoices deter private providers from responding to solicitations from the municipality. Municipalresources are insufficient for the maintenance of existing infrastructure and, as a result, living conditions deteriorate steadily. Feasibilitystudy for ComponentB:Avant-projet sommaire. September 2006. 46 Doba 76. Socioeconomic characteristics. The city of Doba has a population of about 45,000.29. 77. Oil development in the Doba basin has created important expectations among communities. While the Government has tried to manage them, expectations remain highand challenge the Government to use the oil revenues to address poverty. US$18.8 million has been allocated to the oil-producingregion itself to support regional and community-driven development projects to benefit the local population. DespiteDoba's keyrole inChad's oil industry,its infrastructurei s not in good condition. 78. Doba has benefitedfrom numerous interventions from 2001-2003, to prepare for oil production in the region. Most notable are electrification and provision of public lighting in several neighborhoods, collection of solid waste, dredgingo f drains and gutters, construction of a school, a high school, a water tower, and extension of the water network. The construction of a market and asphalting o f the Koumra- Doba-Moundou road i s plannedfor 2006. 79. Water. The National Water and Electricity Company (STEE) has a reservoir of 500 m3,which supplies a network with 420 individual connections. The construction of a second borehole and two reservoirs of 50 m3each i s ongoing, to supply the northern parts of the city. There are 16 standpipes in the city, of which only 5 are operational, as the rest have been shut down becauseof faulty management. The functional standpipesare managedby leaseholdersinagreementwiththe mayor's office. 80. Solid waste. The municipality i s not able to transfer solid waste out of the city to any significant extent, due to the lack of equipment. Interventions financed by oil revenues managed to improve collection and transfer for a while in2000-2002, but without continued exterior support, the achievements couldnot be sustained. 81. Urban and municipal management. The municipal administration inDoba employs 32 staff (0.71 staff per 1,000 residents). The municipality does not have maps or aerial photographs, and the staff does not possess any skills in map reading. An urban development plan was elaborated in 2001, but needs to be updated and reviewed so that it can be used as a guide for planning investment decisions. The deconcentrated services o f the Urban Department of MATUH are located in Moundou, which hampers cooperation, but nevertheless there i s frequent communication between the two services. Since Doba's population i s expected to increase significantly as a result of its importance to the country's economy, the preparation o f an urban development plan now i s a prerequisite for planning the city's future economic and physical growth. At the same time, emergency measures neededto respond to the population growth includethe construction of a road network to enhance access to city districts, the prevention o f flooding, and the improvement o f city equipment and infrastructure. 29Preparatory study: Etude desfinances et de lafiscalit6 locale des villes de N'Djamena,Moundou, Sarh, Abe'che'et Doba. 2006. 47 Annex 2: Major RelatedProjectsFinancedby the Bankand/or OtherAgencies CHAD URBANDEVELOPMENTPROJECT Sector Issue Project LatestSupervision Summaryof sector-related (ISR) Ratings projects (Bank-financed projectsonly) IP DO Community PO66998 MU MU PROADELassists indesigning and Development Local Development implementing a decentralized and Program Support participatory financing mechanism Project that will empower local (PROADEL) communities and decentralized (active) authorities to manage development funds by: (i) strengthening the capacity and responsibility o f local communities and decentralized authorities; (ii)implementing demand-driven subprojects; and (iii) supporting the emerging process o f decentralization. Public Sector PO90265 Not rated Not rated The proposed operation (scheduled Management Under preparation: for Board presentation on March 6) Capacity Building will assist the Government o f Chad for Modernization inthe implementationofits o f Public Financial PAMFIP action plan to improve its Management public financial management system (PAMFIP). and increase the efficient and transparent use o fpublic resources. Education PO00527 Mu Mu The project aims to develop quality Education Sector universalbasic education and focus reform Project on buildingthe institutional capacity (active) for a more effective partnership between the State and communities. Health PO55122 U Mu The project will assist the Ministry Health Sector o f Public Health inthe process o f Support Project decentralizatioddeconcentrationand (active) will ensure that resources reach the regional and district levels in project-targeted areas. Energy PO48202 U U The project aimed to strengthen the PetroleumSector capacity o f the Government o f Chad Management to: (a) manage the development o f Capacity Building its petroleumresources inan (closed) environmentallyand socially sound 48 manner, beginning with the development o f the Doba oil fields; and (b) increase revenues from oil production. Infrastructure PO00533 U U The project objectives were to build Public Works and local capacity through private sector Capacity Building development, improve public Project (closed) procurement, assist the government inmaintaininginfrastructure assets and participate inreducing unemployment. Infrastructure PO77240 U U The project seeks to secure the Critical Electricity delivery o fbasic electricity and and Water Services water supply services, to prevent the Rehabilitation collapse o f the system, particularly Project (active) inN'Djamena, inadditionto reducing service delivery costs, through increased private sector participation inboth sectors. Other development agencies Agency Project Summary of sector-related projects French Services de base dans les Water provision and drainage inthe peripheral Development quartiers dCfavorisCs et areas o fN'Djamena, solid waste management Agency (AFD) environnement urbain ti and capacity building(12.5 million). N'Djamena. UNDP Projet de DCveloppement Housing project. CFAF 20,000 million (CFAF Urbain et d'AmClioration de 1,200 million UNDPtechnical assistance, the 1'Habitat (DURAH). rest national funds). CoopCration Support to developing and Technical assistance to MATUH(DU) CFAF 20 f r a yaise implementingan action plan in million at present, some limited financing (SCAC) MATUH foreseen for 2007. Islamic Water provision Water project focusing on Faya Largeau (US%5.2 Development million) Bank (IDB) European Community development, Technical Assistance through a DrinkingWater - Commission water Program (9th EDF). (EC) supply, infrastructure, health, education City twinning CoopCration dCcentralisCe N'Djamena: Support to municipal management, programs: solid waste management, health, culture. N'Djamena- Moundou: Extensiono f water network and Toulouse; installation o f standpipes (complimentary to the Poitiers- proposed Urban Project), health and culture. Moundou; Sarh: hygiene and health. Cherbourg-Sarh LPDO Ratings (Implementation ProgresdDevelopment Objective Ratings) HS (Highly Satisfactory), S (Satisfactory), M S (Moderately Satisfactory), MU (Moderately Unsatisfactory), U [Unsatisfactory), HU(Highly Unsatisfactory) 49 Annex 3: ResultsFrameworkandMonitoring CHAD URBANDEVELOPMENT PROJECT ResultsFramework PDO OutcomeIndicators Increased sustainable access to Number o f people intargeted cities To assess impact o f works on municipal services for residents protected from periodic flooding. improved urban services. intargetedprojectcities. Number o fpeople intargeted cities To assess increased access to urban having access to drinkingwater infrastructure. (based on users per standpipe and per individual connection). Number o fpeople having access to To assess increased access to urban the city center via roads that are infrastructure. usable all year. Annual increase inmunicipalities' T o assess the municipalities' ability ownrevenue (municipal taxes and to raise local revenues for service revenue from municipal assets). provision. IntermediateResults ResultsIndicatorsfor Each Use of ResultsMonitoring One per Component Component Component A: Component A: ComponentA: Strengthened capacity o f the Annual budget allocation and T o monitor municipalities' local governments in expenditure on routine road and progress ingenerating revenues. N'Djamena, Sarh, Moundou, drainage maintenance within AbCchC, and Doba to plan and appropriate range (percent o f total manage the development and annual budget). delivery o f infrastructure and urban services and to increase Technical review shows To assess whether budget their financial resources to satisfactory maintenance o f allocation i s assuring proper maintain existing and new infrastructure financed under the maintenance. infrastructure. project (percentage o f infrastructure). Number o fmunicipalities having To assess efficiency o f municipal adopted and usingtransparent, administration. standardized, and efficient budget management procedures as specified in administrative management procedures manual. 50 Number o f service satisfaction To assess ifmunicipal surveys carried out and published administrations are getting feed- intargeted cities. back on their performance. Number o f urban development and To assessthe capacity o f investment plans developed and municipalities to plan and execute adopted by key local stakeholders investments. intargeted cities. ComponentB: ComponentB: ComponentB: Improved availability o f urban Number o f man-days o f work To assess ifthe works are infrastructure. generated. benefiting the local population. Number o f kilometers o f newly To assess the actual constructedrehabilitateddrainage implementation o f drainage works. works. Number o f kilometers o f newly To assess the actual constructedrehabilitatedwater implementation o f water supply supply network. works. Number o f newly constructed To assess the actual water standpipes . implementation o f water supply works. Number o f kilometers o froads To assess the actual rehabilitatedinDoba. implementation o f road works. Number o f slaughterhouses To assess actual construction o f rehabilitatedinAbCchC. economic infrastructure. 51 s m 0 0 0 m 8 W 0 z- 0 03 m g m 2 m M 0 0 0 0 0 0 0 0 0 0 0 0 0 D O C0 0 0 0 0 0 3 o c `c! W CI 0 0 0 0 0 Annex 4: Project Description CHAD URBANDEVELOPMENT PROJECT 1. The proposed project i s based on previous sector experience and studies and will be implemented inclose coordinationwith other donors to ensure complementarities o finterventionsand maximumsector coverage. On February 24 and 25, 2005, the MATUH organized a project preparation workshop, gathering 120 participants to be involved in the project at the central and local levels. This workshop served to: (i)disseminate information on the project and ensure transparency inits preparation; (ii) collect feedback on the project components and institutional arrangements from the various stakeholders and in particular from the beneficiary cities' representatives. During the Bank appraisal mission, a project validation workshop was organized by the MATUH and held in N'Djamena on November 9 and 10, 2006. This workshop, which gathered all the key national and local stakeholders, led to the validation o f the project's activities and institutional arrangements for its implementation. 2. The project will improve basic infrastructure (component B) in the major cities o f Chad, thereby meeting some o f the needs that are obvious in light o f the unprecedented demographic pressure on those cities. To ensure the sustainability o f interventions and lay the foundation for continued improvement o f services, institutional support and capacity building(component A) are centralto the project, as illustrated by the share of project funds allocated for technical assistance. Given the acute lack o f infrastructure in a the major cities o f Chad, the two components will be implemented in parallel, with capacity to maintain infrastructure beingstrengthened concomitant with the construction o f infrastructure. Thus, the municipal technical departments will be able to follow the works as they are being implemented and be trained in practice. 3. The two components are mutually reinforcing, as the new infrastructure financed under the project will provide the basis for local economic growth, and the capacity building will enable maintenance o f infrastructure and continued service improvements. Increasing the financial resources at the disposal o f the municipalities and their technical capacity to plan and implement new infrastructure and services will strengthen this development. The project will finance urban development plans, which will in turn be used as basis for priority investment programs, and thus link available resources to infrastructure investments. 4. AFD and other donors are currently focusing their financing on infrastructure inthe capital city, N'Djamena. Thus, the proposed project will limit infrastructure investments in N'Djamena to priority storm water drainage, and concentrate infrastructure investments in the major secondary urban centers (Moundou, Sarh, AbCchC, and Doba, as agreed with the Government at an early stage o f project preparation). Moundou, Sarh, and AbCchC are the most populated secondary cities in Chad, with the highest urban population growth rate and significant infrastructure shortage. Oil production in the Doba Basin has created important expectations among local communities. In Doba, the Project will finance urban roads (and their corresponding drainage works) to improve accessibility to some city's highly populatedneighborhoods. 5. The project will provide capacity building activities for the urban sector as a whole, in conjunction with other donors' operations. The project will be complementary to the World Bank- financed Local Development Program Support Project (PROADEL), which supports decentralization in rural areas and to the project on Capacity-building for Modernization o f Public Financial Management (PAMFIP). Since the pace o f the ongoing decentralization process is uncertain (local elections have been postponed several times and may not take place at the beginning o f 2007 as anticipated by MAT and MCD), its was decided that the project would focus on activities that do not depend on the momentum o f 55 the decentralization process to be successful. By strengthening the municipalities, the proposed project i s preparing the ground for effective political decentralization, by which the local governments will be made directly responsible to the local populations. Beyond holding local elections, the Government i s committed to taking measures to improve the effectiveness and efficiency o f the municipalities to enable them to fully assume their new responsibilities. Component A o f the proposed project hlly fits into this strategy. COMPONENT A: STRENGTHENING MUNICIPAL AND URBAN MANAGEMENT CAPACITIES (estimated cost: US$4.96 millionto be entirely funded byIDA) 6. The objective o f this component i s to strengthen the capacity o f the local governments in N'Djamena, Sarh, Moundou, AbCchC, and Doba to plan and manage the development and delivery o f infrastructure and urban services, and to increase their financial resources to maintain existing and new infrastructure. The use o f new or improved management tools and better identification and improved collection o f financial resources in addition to capacity building will be the main thrusts o f this component. Activities under this component will target changes that should happened at the municipal level and actions that will take place at the central level regarding the Ministries in charge o f urban affairs, decentralization, finance, and land planning. 7. The preparatory studies identified the necessary measures to achieve the component objective: (i) scale-up municipalities' human resources and improve the functioning o f their key support units; (ii) strengthen the technical services o f the municipalities and provide them with the tools to carry out urban planning; (iii)establish a more transparent municipal management process and reinforce accountability; (iv) strengthen capacity o f the central administration and deconcentrated ministries to supervise and provide technical assistance to the municipalities; (v) increase the financial resources at the disposal o f the municipalities through improved collection o f taxes, better yield from municipal assets, and strengthen the mechanisms for transfer o f resources from the State to the municipalities; and (vi) introduce efficient management o f expenditures with a focus on maintenance, to improve sustainability o f investments. 8. The Government has confirmed its intention to achieve these objectives through a letter o f sector policy prepared by MATUH which was adopted by the Minister o f Councils and sent to IDA before project negotiations. This was a condition for negotiations. 9. This component is divided into two sub-components, one for activities directly targeted at the city level and one for activities directed towards the central administration and decentralized ministries. A.1: Strengthening urban and municipal management capacities (estimated cost: US$2.28 million) 10. Through this sub-component, the project will strengthen municipal and urban management capacity in the project cities. The component finances workshops, technical assistance, studies, training, and equipment. This component has five sub-components: (a) Improving the internal functioning and organization of municipalities (estimated cost: US$0.38million) (i) Organizational audit and municipal management manual. Based on organizational audits, municipal management manuals will be developed for the five cities o f the project, laying out a functional reorganization o f municipal departments (definition o f responsibilities, functional organizational chart, operational directives for technical, 56 administrative and financial departments, and job profiles). The manuals will be developed in coordination with the municipalities, MAT, MATUH and MCD, to facilitate the dissemination to other municipalities in Chad. Training for key personnel will be carried out during the first year o f the project. As part o f the agreements to be signed between the State and each o f the beneficiary cities, the latter ones will commit to using those manuals and apply their recommendations, which will be also subject to audits funded under the project. (ii) Strengthening municipal technical services. Support to cities' technical departments and MATUH's regional offices for programming infrastructure maintenance, programming and quality control o f works, and support to contract management and involvement o f the private sector inworks execution. (iii) Provision of ofice equipment and logistics. The project will finance office and information technology (IT) equipment for the technical departments o f the communes. (b) Improving resource mobilization andfinancial management (estimated cost: US$l.05 million) 11, The actions to be funded under this sub-component result from two preparatory studies funded under the PHRD. These actions have fully taken into account the needto: (i) prioritize financial problems and deficiencies faced by the communes, and subsequently target the most urgent actions and measures while ensuring their feasibility within the project's framework; (ii) ensure that the targeted actions are consistent with the advancement o f the decentralization process; and (iii) move ahead in collaboration with other programs and actions undertaken within the framework o f other projects or initiatives, in particular those supported by other donors working inthis area. 12. The following actions aim at improving the fiscal information database, reducing the cost of administration o f local taxes and reducing the time o f billing and collection o f taxes. Based on the preparatory studies, actions will be funded inthe following areas: (0 Improving resource mobilization (including IGL/TVLP). Training o f perwnnel to increase efficiency o f tax collection. The focus will be on direct taxation by transferring actions that have been carried out successfully in N'Djamena on the general lump sum tax (IGL) and the tax on the value o f business premises (TVLP) to the four other municipalities. (ii) Improvingmanagementandyieldof municipal/propertytaxes. Acensusoftheprincipal potential yield o f property taxes will be carried out in each o f the beneficiary communes o f the project. Management software for tax collection and recovery will be put inplace. A procedures manual specifyingthe official collection procedure will be elaborated. (iii) Standardizingthebudgetnomenclature. Thecommunesdonotuseanobligatoryunified budgetary nomenclature. Only the commune o f N'Djamena has, for a decade now, been using a more developed budgetary nomenclature, which takes into account the requirements for budgetary and accounting management, as well as the monitoring and analysis o f expenditure. Moreover, in the case o f N'Djamena, the accounting process i s computerized. In close coordination with key line Ministries (including Finance, and Land Administration), this sub-component will finance action plans (draft terms o f reference have been prepared as part o f project preparation) and technical assistance to: (i)determine and adopt a new budgetary nomenclature; (ii)computer applications 57 utilizing this nomenclature; (iii)provide training on the new nomenclature and its applications; (iv) computerize the budget and accounting process. (iv) Modernizing the accounting andPnancia1 management. The four communes, apart from N'Djamena, use a manual accounting system, which i s generally improperly kept and unable to produce a reliable report o f the required operations. Under this sub-component, focus will be on computerization o f accounting practices through development o f financial and administrative manuals, training o f financial departments' staff, and installing informationtechnology equipment. (c) Improving urban management andplanning (estimated cost: US$0.34million) (i) Strengthening technical sewices in management and planning. The urban development plans (to be funded under sub-component A.2-a) will form the basis for elaborating, in each o f the concerned municipalities, a priority investment plan clarifying the interventions that the Government and the municipalities must implement over the following five years, taking into account the budgetary resources actually available. This sub-component will finance training for municipal staff and representatives o f MATUH's regional offices incharge o f urbanplanning, investment programming, and topography. (ii) Sanitation master planfor N'Djamena. The terms o f reference of the study are finalized and the study will be launched during the first year o f project implementation. The preparation o f a sanitation master plan will enable the municipality o f N'Djamena to better program future investments such as rainwater drainage using funds from oil revenues and internationalhilateralaid. (d) Improving transparency and accountability of city managers to urban residents (estimated cost: US$O.14million) With the objective o f increasing local governments' accountability to urban residents, this sub- component will finance the reporting to the population of: (i)municipalities' financial performance, (ii)progress reports on the project, identifying bottlenecks and actions to be taken at national and local levels for delivery o f urban services, (iii)publication o f cities' project performance indicators (this will be done ina simple manner usingthe most appropriate means o f local communication); and (iv) surveys on satisfaction o f the urban population to ensure that municipalities take into account specific needs expressed by urban residents. (e) Providing support to community integration and awareness on socio-environmental aspects (estimatedcost: US$0.37million) Training and support to the district sanitation committees and the local steering committees, so that they can assist inmaintaining infrastructure. Training o f operators o f water standpipes (sanitation committees, NGOs or private operators). Public awareness campaigns on the effects o f dumping household waste inthe drains and o f lack o f maintenance o f water stand-posts, to mobilize community participation in maintenance and preservation o f public infrastructure. Training for municipalities, key ministries including deconcentrated services in environment and social aspects. 58 A.2. Strengthening the capacity of the central and deconcentratedadministrationto support the municipalities (estimatedcost: US$2.68 million) 13. The objective o f this sub-component i s to strengthen the capacities o f the central administration and deconcentrated ministries (MATUH, MCD, MAT, MFEP) to provide technical support to the municipalities to manage their new responsibilities (financial and urban management, tax base identification and collection, reporting, etc.). (a) M ATUHand deconcentratedsewices (estimated cost: US$2.55million) 14. This sub-component will finance: Updating o f urban development plans for Moundou, Sarh, AbCchC, Doba (incoordination with the Bank, the city o f N'Djamena is requesting funds from Cities Alliance for an update o f its urban development plan). Preparation o f urban development plans for 12 other selected secondary cities (population varying between 30,000 and 60,000), namely Mongo, Lay, Pala, Bongor, Bol, Mao, Am- Timan, Biltine, Ati, Fada, Faya, and LCrC (those cities have been selected by the Government during project preparation and in close coordination with the PROADEL). Inthe Letter ofUrban Sector Policy, the Governmenthas confirmed its intention to use a portion o f oil revenues to finance the priority infrastructures resulting, inparticular, from the urban development plans funded under this sub-component. Training and technical assistance to MATUH, to complement actions already financed by the French Cooperation (SCAC) and AFD, for: (i)strengthening technical support to municipalities for urban development; and (ii) assistance for implementing annual urban policy reviews and strengthening budget planning and execution, to facilitate focused and efficient use o f oil revenues (taking into account the long-term effect on the budget in terms o f operation and maintenance). Project launch workshop and mid-term review workshop. Information, education, and communication (IEC) activities for the project. Functioning o f the Implementation Unit and transfer o f knowledge to staff o f M A T U H ' s Urban Department to build capacity within the urban department and facilitate the dissemination o f lessons learned from the proposed project to other Chadian municipalities. Strengthening regional departments of MATUH. This includes support to recruitment o f qualified personnel, training, office and IT equipment and logistical means. (b) Ministry of Finance, Economy and Planning (estimated cost: US$0.03million) 15. It is important to reinforce the capacities o f the central services to assist and then to regulate the communes. The project will fund the publication o f the results o f the actions described above (such as standardized budget nomenclature, lessons learned interms o f improving tax collection) for dissemination to the communes, the training o f officers and managerial staff and agents, and the provision o f office equipment. The project will also finance: 59 (i) Support to the deconcentrated departments o f the General Directorate o f Taxes (DGI) and the DecentralizedTerritorial Government (DGT) to improve tax collection and transfer o f resources. (ii) Support to entities incharge o f financial management inthe municipalities. (e) Ministry of Land Administration (estimated cost: US$0.03 million) 16. The Regulatory Directorate ("Direction des Collectivitks Locales") in the Ministry o f Land Administration i s responsible for inquiring into, and making a determination on, the commune's most important financial matters, including the budget. The Directorate has insufficient human and basic physical resources available to it. The project will finance under this sub-component: (i) Support to the Regulatory Directorate o f the Ministryo f Land Administration to improve budget supervision. (ii) Support to entities in charge o f financial management inthe municipalities. (iii) Training o f staff involved with project implementation. (d) Ministry in Charge of Decentralization (estimated cost: US$O.O7million) 17. Assistance will include studies for preparation o f decrees in the framework o f the on-going decentralization process, and in collaboration with other key Ministries. Component B: Provision of basic urban infrastructures and services (estimated cost: US$18.42 million) 18. The main objective o f this component i s to improve access to urban infrastructure. More specifically, the project aims at supporting the project cities in acquiring the infrastructure needed to achieve the following objectives: (i) increase the population's access to basic urban services; (ii) improve sanitary and health conditions for the population; (iii)increase municipal revenue by improving market infrastructure; and (iv) generate employment opportunities for unskilled and semi-skilled labor, and promoting SMEs in construction and delivery o f services, by dimensioning public works appropriately and using, where possible, highly labor-intensive techniques. 19. Component preparation. The specific investments for the cities o f Moundou, Sarh, and Abtcht are based on the priorities defined in an extensive 1997 feasibility study financed by the World Bank3', which were adopted in the "Lettre de politique gbnkrale dans le secteur de 1'urbanisme et de 1'habitat" from 1999. These priorities remain valid today and were confirmed by the municipalities during a project workshop organized in N'Djamena in February 2005, gathering all the key national and local representatives. 20. The method used for identifying these investments "Inventaire pour la Programmation des Infrastructures et Equipements (IPIh`)" consists in establishing priorities among all investments, accounting for the current level o f access to infrastructures and services (roads, drinking water, etc.. .) in each city district. A ranking among districts and cities was then established providing the priorities (per type o f infrastructure) corresponding to the highest needs. The resulting proposed priority program was then confirmed by the cities during mission preparation and during the project workshop. These 30Projetde DeveloppementUrbainauTchad, Etudede faisabilitk, MinistBredes Travaux Publics, de 1'Habitat et des Transports.Directionde 1'Urbanismeet de l'Habitat, 1997. 60 investments will provide a significant complement to the investments being financed by other donors, as well as the IDA-financed Critical Electricity and Water Services Rehabilitation Project. Most o f the works identified in this component represent a complement to the works already carried out by other donors inthe past six years. 21. As a result o f the above-mentioned engineering study, a priority program will be finalized during appraisal, and will be: (i) validated by the cities; (ii) comprised solely o f investments having a sufficient economic rate o f return (IRR >12% for economic infrastructure, drainage, and potable water networks); and (iii)complementary to existing infrastructure financed by other donors. Additionally, beneficiary cities will have to commit funds intheir budget to finance recurrent costs for these investments as well as for the existing infrastructure. 22. The activities will include: (i)rehabilitation and extension o f the water supply network; (ii) construction o f primary drainage networks in neighborhoods not already served in the beneficiary cities and rehabilitation o f existing drainage networks; (iii)construction and rehabilitation o f economic infrastructure (markets and slaughterhouses); (iv) technical studies and supervision needed for implementation o f these works; and (v) periodic technical audits o f works and contract management procedures and financial audits o f works. Regarding rehabilitation and extension o f the water network, special attention will be paid to reducing leakage, eliminating illegal connections and maximizing efficiency o f the National Water and Electricity Company (STEE) in the project areas; and the national water company will submit an action plan before credit effectiveness to improve the Moundou, Sarh, and AbCchC networks and ensure sustainability o f the investments under this project. 23. Sub-component B.1: For the City of N'Djamena (estimated cost: US$0.62million). Under this sub-component, the project will mainly finance drainage works to be rapidly implemented duringthe first year o f project implementation. These works have been selected based on technical meetings with representatives o f the city o f N'Djamena and derived from the pre-feasibility study for rehabilitation works in N'Djamena, financed by AFD" in 2003. Drainage and road access works around the main market (march6 b mil) (the most important market in Chad, with 17,000 stalls) were identified as a priority. These drains would eliminate flooding around the market during rainy seasons, permit the extension o f the market, and would also contribute to increasing municipal revenues from the market operations, thus directly enhancing economic development o f the city. 24. The identified works consist o f rehabilitation and reconstruction o f a storm water drain along the market, at a length o f 1,500 meters. The works are comprised o f dredging, reinforcing, and covering 700 meters o f the storm water drain with reinforced concrete, and reprofiling, construction, and covering in masonry an 830 meter segment o f the drain. The identified works to be financed by IDA in N'Djamena would complement works (especially inside the market) financed by AFD for a total amount o f 6.5 million. 25. Sub-component B.2: For the city of Moundou (estimated cost: US$3.74million). Activities to be financed include: (i) Water network (estimated cost: US$O.72 million). (i)ExtensionofMoundou's water network for a total o f 7,400 meters and rehabilitation o f 1,000 meters o f water pipeline; (ii) construction and equipping o f two equipped boreholes (including power generating 3'Etude de faisabilitk et de Programmationdes travaux d'amhagement de deux quartiers commerciaux des Marches Mil et Dembe, Rapport DCfinitif.Ville de N'Djamena, Direction des Services Techniques Municipaux. July 2003. 61 units) and connecting them to the network; and (iii)installation of 64 standpipes in densely populated districts. (ii) Drainage (estimated cost: US2.8 million). This corresponds to the second phase of rainwater drainage works in Moundou (the first AFD-funded phase, carried out in 2002- 2003, consisted of setting up approximately 6 km o f primary rainwater drains). The works to be funded include: (i)construction of secondary drains inmasonry, total length o f 6.5 km; (ii)construction of a water detention pond at the site of the oldracecoursewith a total capacity o f about 90,000 m3;(iii) construction o f 40 culverts and 195 footbridges in reinforced concrete for secondary drains; (iv) installing safety edgings; and (v) backfillingrecessedareas and reshapingpavements. 26. Sub-component B.3: For the city of Sarh (estimated cost: US$5.16 million). Activities to be financed include: (i) Water network (estimated cost: US1.3 million). The water supply in Sarh is totally inadequate. It i s necessary to enhance the water resources available and to expand the network. Financing will be provided for: (i) replacement o f 5 kilometers of existing water pipeline; (ii) acquisition and installation of 7,400 meters of network extension; (iii) the installation of 39 standpipes in conformity with appropriate standards; and (iv) the construction of three new equipped boreholes (including power generating units) with a capacity of 80 m3each. (ii) Drainage (estimated cost: US3.8 million). This corresponds to the second phase o f rainwater drainage works (the first, AFD-funded phase, carried out in 2002-2003, consisted in setting up an approximately 2.3 km long main drain for the Paris Congo and Kamati districts). Works to be funded include: (i) extension of the existing secondary drain for 300 ml upstream; (ii)construction o f two drains in masonry parallel to the existing one for a total length of 6,070 ml for the drainage of the Bornou, Baguirmi, Yalnas, Paris Sara and Maroc districts; (iii)construction of 40 new culverts; and (iv) constructionof 175 footbridges for access byresidents. 27. Sub-component B.4: For the city of Abkchk (estimated cost: US$5.31 million). Activities to be financed include: (i) Water network (estimated cost: US$l.4million). Funded activities include: (i) constructiono f two new equippedboreholes (including power generating units) and their connection to the network; (ii) extension of the network to new outlying districts of a the length of 18,150 meters (N'Djamena road, Amir district, Ryad district, AdrC road, Goz Amir district, and Wara); (iii) reinforcement o f the water pipelinein the extension zones (water distribution network of N'Djamena road and the districts of Goz Amir and Wara); and installation of 24 standpipes at various points on the network. A system of participatory management of these standpipes will be established and i s expected to generate permanent employment opportunities, with extensive participation of women. (ii) Drainage (estimated cost: US$3.5million). The works will comprise: (i) upgrading land against erosion for the waterways (Ouadis) o f Am Soudourieh, Am Kame1 and Hayal Matar by protecting the banks eroded by gabion on a length o f approximately 1900 meters; (ii) installation of an area in gabions over approximately 70 meters behind the city hospital, to bringback the flows of the Oaudi Am Soudourieh towards its initial bed; 62 (iii)reduction o f the bed slope o f the Ouadi Am Soudourieh after crossing N'Djamena Road at the level of the Kamina 1district, by introducing a series of gabions installed 20 meters apart across the width of the bed; (iv) rehabilitation of existing drains on a length o f approximately 2150 meters; and (v) installation of a new drain in the north western part of the city on a lengthof approximately 830 meters. (iii) Economicinfrastructure(slaughterhouse)(estimatedcost:US$0.4million). Fundingwill beprovided for the construction o f a slaughterhouse with a capacity of about 40 oxen and 60 sheep or goats per day. This will comprise: (i) construction of a platform (surface area 10,000 m2and an access road o f a lengthof about 500 meters long and 6 meters wide in laterite (access road works are optional); (ii) rehabilitation of the drainage network of the slaughterhouse, including renovating works on the existing gutter for waste water drainage inside the slaughterhouse; (iii) installation of electricity in the slaughterhouse and electricity supply to existing constructions; (iv) provision of potable water and the construction of a feeding trough; (v) construction of a public latrine; (vi) provision of waste disposal facilities; and (vii) rehabilitationworks of hangars and existing buildings, 28. Sub-component B.5: For the city of Doba (estimated cost: US$1.95million). Under this sub- component, the project will finance the provision o f access roads to isolated poor neighborhoods inDoba. This will consist of the constructionof earth roads and the drainage associatedto provide access to dense neighborhoods in Doba and the industrial zone and improve access to the transportation area. The program will include the constructionof 5.4 km of primary urban roads (sections AA, CC and II), km 1.6 of secondary roads (sections DD and BB), and 7.5 kmof drains. 29. Sub-component B.6: M&E, Supervision of works and audits (estimated cost: US$1.64million). Underthis sub-component, the project will finance: (i) monitoring and evaluation activities; (ii) potential environmental and social impact studies that may be required duringimplementation of component B o f the project; (iii)supervision of works; (iv) periodic technical audits for works and contract management procedures; (v) financial audits o f works; (vi) service satisfaction surveys in the targeted cities; and (vii) training activities for the localprivate sector (SMEs) to strengthen their capacities inworks management. 30. Provisions for physical contingencies (10% of works or US$1.8 million) and financial contingencies (8% of project costs or US$1.82 million) are includedinthe total project costs. Technical evaluation 31, The proposed solutions take into account needs expressed by the municipalities and the list of priorities for each city. Technical standards generally accepted for design of drainage and water supply networks will be used. The water network was designed to meet the demand o f water until the year 2020. To deal with potable water needs, it i s planned to reinforce the available water resources by buildingup new drillings with depths varying from 30 meters to 100 meters, according to the hydro geological characteristics of each city. The anticipated capacities for the drillings are 80m3/h for Sarh, 100m3/hfor Abtcht, and 60 m3/hfor Moundou. The nominal diameter o f the proposed drillings will be 300mm to help facilitate their future utilization by equippingthem with rather wide diameter pumps. Standpipes will be installed on the various distribution networks o f the cities involved, with a ratio o f one standpipe for 1/500 inhabitants. The management of these standpipes will be delegated to the local communities through a participatory process and will generate some permanent employment, for women inparticular. 32. Rainwater runoff collection facilities will be designed to evacuate water from decennial floods. For the protection of the drains, the use o f materials frequently employed in the construction in the different regions will be encouraged. Protectionby masonry i s recommended. The constructionof drains 63 without protection i s not recommended given the risk from erosion by flooding and siltation from coming from the non-asphalted roads. Pedestrian and commercial traffic will be eased through the construction o f passages at the drainage sites. The runoff collection facilities will be mainly carried out in the neighborhoods threatened by the floods. It i s expected that flooded areas in Sarh, AbCchC, and Moundou could be reduced by as much as 80 percent. A partnership will be developed between the municipalities and the sanitation committees to help ensure proper maintenance o f the drains. For the economic infrastructure, focus will be on the construction o f structuring equipments (platforms, drainage, hangars, roads, latrines, etc.). The lack o f a competitive market for public works i s a major concern for the project, which will aim at promoting small- and medium-sized enterprises (SMEs). In such a context, it will be necessary to emphasize on the choice o f simple technologies using labor-intensive methods and to size works appropriately to attract small- and medium-sized enterprises. Clauses relating to the use o f high labor-intensive techniques will be included in the contracts o f the firms in charge o f carrying out the works as well as in the technical specifications. As detailed in Annex 3, the project will be able to generate 610,000 man-days equivalent duringthe five years of project implementation. 33. The management o f water standpipes will need to be defined in detail before their implementation. Two options will be considered, entrusting management to: (i) district committees; and (ii)to individuals who will be selected based on pre-established criteria or to legal community organizations (for example: women's association or sanitation committee). At this stage, it i s important that the attribution and management modalities o f the standpipes are clearly defined. Inthe definition o f the modalities, the Local Committees will have to play an important part. A consultative group including the main partners in the management o f water standpipes (communes, STEE, district representatives, consumer representatives) will be put in place by the local committees. The main missions o f this consultative group will be: (i) o f management protocol adapted to the standpipes; (ii) choice distribution o f the roles inthe management o f the standpipes among the various partners; (iii) definition o f the criteria for the selection o f the managers o f the standpipes; (iv) definition o f a mode o f follow-up and control o f the management o f the standpipes; (v) development o f a sample contract binding the different actors (STEE, communes, standpipes managers); and (vi) the settlement o f litigations. 34. During project appraisal, discussions were held with the national water and electric company (STEE) which committed to: (i) ensure proper maintenance o f the water supply network which will be funded under the project; and (ii) reduce technical and commercial losses in the areas where the project will be implemented. This commitment resultedina letter from STEE sent to MATUH,the line Ministry incharge o fthe proposedproject. 35. Component financing. Audits and studies for supervision o f works are financed at 100 percent by IDA. The Government's contribution (including oil revenues for the urban sector) will be used primarily to finance infrastructure works. It i s currently estimated that 40 percent o f this component will be fundedby IDA and 60 percent by the State. 64 Annex 5: ProjectCosts CHAD URBANDEVELOPMENT PROJECT li) Training for staff involved inproject implementation 10,200 20,000 (ii) IPreparation o f documents for implementationof decentralization 25,500 50,000 TOTAL COMPONENT A I 2,530,0431 4,960,8681 65 I I Amount I Physical Contingencies(10%) 939,449 1,800,000 Financial contingencies(8%) 953,963 1,818,563 TOTAL PROJET COSTS 13,817,945 27,000,000 66 Annex 6: ImplementationArrangements CHAD URBANDEVELOPMENT PROJECT A. Implementationarrangements 1. Project Management. The project will be managed by the Ministry o f Land Planning, Urban Development, and Housing (MATUH). The Urban Department (Direction de 1'Urbanisme- DU)will be responsible for the coordination o f the project through its Implementation Unit. This Unit will be the executing entity responsible for implementing the project over the five-year period. MATUH and the other key line ministries (Ministry o f Land Administration, Ministry o f Decentralization and Ministryo f Finance) are part o f Interministerial Steering Committee in charge o f the overall supervision o f the project, as developed below. 2. Within the UrbanDepartmento fthe MATUH,an ImplementationUnitwas createdto prepare the proposed project and to manage various studies financed under the PHRD (including study on municipal finance, social/environmental assessment study, engineering study (pre-feasibility and detailed engineering), project execution manual, administrative, financial and procurement procedures manual). The Government, through MATUH and the same Implementation Unit, will be responsible for ensuring that implementation o f the IDA project i s undertaken as planned. During project preparation the Government has agreed upon the following institutional arrangements to implement the project. B. Institutionalorganization 3. Given the proposed project's paralleling efforts in the urban sector to the Local Development Program Support Project's (PROADEL) efforts in the rural sector, both within MATUH, the implementation arrangements and institutional organization, when appropriate, have been aligned to parallel the PROADELproject. 4. Sections C and D below provide details on the project oversight and coordination at the central and local levels, as well details on the project component implementation, which were discussed and agreed during the project preparation workshop heldinN'Djamena on February 24-25,2005. C. Projectoversight and coordinationat the centralandlocallevels C.1 Overallcoordinationof the projectat the centraland locallevels 5. At the national level, the project will be supervised and coordinated by an Interministerial Steering Committee (in a way similar to the Bank-financed PROADEL project). This Steering Committee will be headed by the Minister o f Land Planning, Urban Development, and Housing (MATUH) and include representatives o f the municipalities, the Ministry o f Economy and Finance, the Ministry o f Infrastructure, Ministry o f Land Administration, Ministry in Charge o f Decentralization, Ministry o f Public Health, the Ministry o f Energy, and the civil society. The Steering Committee will take overall decisions on project implementation. Inparticular, the Committee will review the annual program o f activities o f the implementation Ministry (MATUH), review progress made on a regular basis, and assess the quality o f the project. This Committee will ensure both coordination o f donor activities at the various project levels and communication between ,the steering committee and the local neighborhoods. The decree establishing the Interministerial Steering Committee was a condition for negotiations. 67 6. This Committee platform is of particular importance for the proposed project which finances activities across sectors through its component B (water, transport, urban) thereby requiring agreements and complementary actions from other Ministries. Additionally, the Steering Committee represents a platform for discussion on urban sector reform using oil revenues, which naturally requires the adhesion o f other Ministries (inparticular Ministry o f Finance). 7. This Committee will meet twice a year to review activity reports o fthe implementing agency and local steering committees, discuss and act on institutional recommendations arising from project implementation, oversee application o f conventions between the State and each o f the cities, evaluate the progress report o f the project, and periodically brief the Council o f Ministers on the project's implementation status and communicate its recommendations, as well those o f the Council o f Ministers, to the implementing agency. This Committee will organize at least one annual meeting with IDA and involved bilateral donors and co-financing institutions, involved line ministries, heads o f participating cities, NGOs, and involved communities to: (i) review the proposed annual work program; (ii) review implementation status and progress towards achievement o f the project's performance indicators and overall objectives; (iii)decide on necessary corrective actions for project implementation; and (iv) coordinate with other related projects and the various interventionso f other donors. 8. The Interministerial Steering Committee has a Secretariat (Comitd Technique de Suivi) gathering the General Secretaries o f key Ministries involved in the project. The main functions o f this Secretariat will consist of: (i) agreeing on key actions to be taken to facilitate project implementation and smooth coordination among Ministries; (ii) preparing all necessary documents for the Inter-Ministerial Steering Committee Members; and (iii) summarizingrecommendations coming from financing institutions. 9. At the local level, Local Steering Committees (LSCs), presided over by the City's General Secretary and comprising line representatives o f MCD, MATUH, MF and representatives o f local associations and Neighborhood Committees (such as the Cornit& d 'Assainissement already set up in N'Djamena) will be the institutions incharge o f overseeing day-to-day project implementation at the local level in each beneficiary city. Arrgtds setting up the LSCs in each beneficiary city have been sent to the Bank. C.2 Day-to-dayimplementationof the project 10. For implementation o f the project, the Implementation Unit of the MATUH, set up within the Urban Department, will be responsible for the management o f the project, focusing on the following main functions: (i) coordinating the overall implementation o f the project; (ii) ensuring availability o f funds in a timely manner; (iii)managing project activities at the central level; (iv) maintaining the books and accounts o f project activities and producing financial reports; (v) monitoring and evaluating implementation and impacts o f the program; and (vi) reporting results to various stakeholders (administration, donors, civil society, projects, Decision Committees). The Implementation Unit has been staffed with adequate technical and financial professionals to ensure that quality support and advice are delivered to the beneficiaries. The key staff o f the Implementation Unit consists o f a coordinator specialized inurban development, an environmental and social expert, an engineer, an administrative and finance director, and a procurement specialist. The environmental and social expert will also carry out monitoring and impact evaluation o f the project. To reinforce project sustainability, two civil servants from the Urban Department o f the MATUH will be assigned to the Implementation Unit during the project implementation period. The two civil servants should be specialists in urban development and engineering. This arrangement will ensure that the project's activities carry their benefits beyond the project implementationperiod and that the funded activities are directly benefitingthe Ministry.A Project Implementation Manual (PIM) will be finalized before effectiveness with detailed institutional arrangements, financial and accounting procedures, procurement, monitoring, evaluation, and other 68 administrative and organizational arrangements for the implementation o f the project In particular, the P I M will detail key performance indicators (including: meeting the deadlines set in the project procurement plan, quality o f terms o f reference (TORS) and requests for proposals (RFPs), and involvement o f urban staff at the local and national level during the implementation process) to follow regularly with the performance o f the Implementation Unit. 11. The Implementation Unit i s not seen as an entity on its own, but will be a strengthened unit within the Urban Department, assisting it to develop and operationalize the national urban program. For the institutional capacity building component, the Implementation Unit within the Urban Department of MATUH will be responsible for: (i)providing technical and financial advice to city and district beneficiaries; (ii)follow-up o f monitoring and evaluation o f implementation; (iii) operating a data-base with financial ratios o f eachbeneficiary; (iv) preparingterms o freference for sector studies and activities, and performing associated procurement tasks; (v) reviewing the quality o f sector studies; (vi) defining and monitoring training programs for beneficiaries; (vii) organizing necessary events, workshops; (viii) ensuring adequate communication between stakeholders; and (ix) ensuring dissemination o f learning from the project to the entire MATUH. The involvement o f urban staff at the local and national level during the implementation process o f the project will be a key criteria for the Government and the Bank when assessing, on an annual basis, the performance o f the Implementation Unit's staff. T o reinforce the project's sustainability, two government civil servants (whose salaries and/or indemnities are not to be paid out o f the project) from the Urban Department will be assigned to the ImplementationUnit for the duration o f the project. The qualifications o f the two civil servants will be those o f experts in urban development and in engineering. This arrangement will ensure sustainability o f the activities financed by the project well beyond the project implementation period. D.Projectimplementationframework and componentimplementation 12. The project will be oriented by the municipalities as the principal beneficiaries o f capacity building activities and as managers o f works to be completed under the project. The municipal local Governments will be responsible for implementing priority investments and city management programs. 13. Before effectiveness, agreements ("Protocoles d 'accorcf') will be signed between the State (MATUH,MFEP, MCD,MAT) and the participating cities specifyingthe roles andresponsibilities o fthe cities, line ministries and central government, and the responsibilities o f each party (i.e., under these agreements, the beneficiary cities will commit to set aside some funds o f their budget for maintenance o f investments financed under the project). IDA funding for project components will be made available to the Implementation Unit by the Recipient (Government o f Chad) with conditions o f delegation specified in project agreements. These agreements' covenants will be legally binding and monitored by the Implementation Unit. 14. Project Component Implementation. Conventions (Conventions de Maitrise d 'OuvrageDdldgue? in form and substance satisfactory to IDA will be signed between the Implementation Unit o f the MATUH and each o f the beneficiary cities. As a result, project components will be implemented by the participating cities through the Implementation Unit (for studies, technical assistance, advice, training, equipment purchase, and works), according to the project implementation manual (PIM), which provides details on the implementation timetable and terms o f reference for component activities. The PIM will be a working base for development o f annual activities programs and include a procurement plan (dividing activities into contracts, type o f consultation chosen, tentative dates for bid launching) which was reviewed during the negotiations. As agreed during project preparation, the Implementation Unit will remain in charge o f project implementation, involving, at all stages, key units o f the Ministry o f Infrastructure to ensure use o f the administration structure and to contribute to building capacity. Together with the Implementation Unit o f the MATUH, the departments o f the Ministry o f Infrastructure 69 will prepare and technically validate the procurement documents (terms o f reference, request for proposals, etc.) for component B (provision o f basic urban infrastructures and services) o f the project, and also provide support for monitoring and supervision o f the works. 15. The Implementation Unit will develop annual activities programs in close consultation with, and subject to the final approval of, the beneficiaries (cities and the Interministerial Steering Committee). The annual programs specify activity, target costs, financing (IDA grant and counterpart funding), terms o f reference, procurement plan, draft implementation timetable and respective roles and responsibilities o f the parties. These annual programs will be subject to prior review by IDA and must be approved by the project's Interministerial Steering Committee. The following chart provides a description o f the institutional arrangements. 1 InstitutionalArrangements-Urban DevelopmentProject 1 REPUBLICOF CHAD ("STATE") -- MAT, MATUH MFEP -MI, MCD -MSP, MME -- Civil Participatingcities Society Signed Agreements between State and cities MATUH L URBANDEPARTMENT Implementation Unit 0c . f l 4 K, Signed 0 0 1 \\ Conventions I \ '\, 0 0 0 ` \ (Conventions de 0 paitrise d'ouvrage 0 0 II \ \ 0 .`'` 0 00 I E Reporting and supervision Report Frequency Responsibility Monthly Report Monthly Implementation Unit Quarterly Progress Report on implementation and budget 4/year Implementation Unit execution Annual Reviews (incl. financial reporting) Yearly IImplementation Unit Annual Activity Work Plan and Budget Yearly Implementation Unit Mid-Term Review llproject period Implementation Unit Supervision Report 2lyear Implementation Unit 70 Annex 7: FinancialManagement andDisbursementArrangements CHAD URBANDEVELOPMENT PROJECT Summary of the FinancialManagementAssessment Introduction 1. The financial management assessment i s done in line with the Financial Management Practice Manual issued by the Financial Management (FM) Board on November 3, 2005. The objective o f the assessment i s to determine whether the implementing entity has acceptable financial management arrangements which will ensure: (i) the funds are used only for the intended purposes in an efficient and economical way; (ii)the preparation o f accurate, reliable and timely periodic financial reports; and (iii) the safeguard o f the entities' assets. Executivesummary Summary of projectdescription 2. The project development objective i s to increase sustainable access to municipal services for residents in N'Djamena, Moundou, Sarh, AbCchC, and Doba. It will be achieved by: (i) strengthening urban management capacity; and (ii) providing basic urban infrastructures and services. 3. The intermediate results are as follows: (i)strengthened urban management capacity and improved management tools and financial resources enabling municipalities to better provide basic services and maintain implemented infrastructure, with support o f relevant line ministries and deconcentrated administration; and (ii) improved access to urban infrastructure. Country issues 4. Chad i s currently in the process o f major public financial management transformation. In2005, with the collaboration o f IDA and other donors, the Government created what is now called the PAMFIP32officially adopted in 2005. A review o f public finance management was organized in April 2006 by a multi-donor team and the conclusions are the following: Budget preparation 5. Significant efforts have been made. A framework for medium term expenditures and a programmatic budget has been adopted in priority ministries. Functional and economic nomenclatures have been adopted. However, some weaknesses still need to be addressed: (i) the link between the PRSP and the budget i s not yet satisfactory; (ii) management continues to be operated throughout four budget (4) financial resources procedures not linked to one another: ordinary budget, HIPC budget, petroleum revenues budget and foreign aid budget; and (iii) the Computerized Integrated Expenditures framework does not cover the whole expenditures o f the Government so that budget consolidation needs manual updates to be completed. 6. Under these conditions, it becomes difficult to follow up on budget execution. 32(Projet d'Appui a la Modernisation des Finances Publiques) 71 Budget execution 7. Although the finance law i s adopted by parliament before the end o f the fiscal year, authorization to use the budget allocation generally comes late. This creates a weak budget execution rate. The ministries then concentrate their expenses on the last quarter, and cash management becomes complicated. Some important budget lines are not completely mastered either in cash or in expenses. The tax office does not completely master how to verify petroleum corporations accounts. And the customs office has very heavy procedures not in line with international standards. As far as expenses are concerned, the follow up i s not based on acceptable and reliable practices. So the Government does not really master the exact volume either o f wages o f civil servants or common expenses like electricity and water. A procurement code was adopted in 2003, but the implementation i s still problematic. There i s not yet a procedure manual specifying the role and duties o f each stakeholder. The percentage o f contracts awarded under direct contracting i s still significant. Inaddition, the procedures to attribute the bidsare still too long. Inthe end, there is a lack o ftraining inprocurement methods. Cash management 8. There i s not a single treasury account. Treasury accounts are scattered across local commercial banks and are not systematically reconciled. Inorder to master its treasury gaps, the Government requests frequent overdrafts at these banks, and this generates high bank charges. In fact, coordinated cash management does not exist and the Government frequently uses the system called "pay before verification". This means there is still a significant rate o f operations paid without following the legal procedures. This situation jeopardizes priority expenses related to poverty reduction and gives way to corruption. Accounting and auditing 9. The accounting system o f the Treasury was modernized in 2001 but is still unable to deliver reliable and complete information on government financial operations. The chart o f accounts i s not harmonized with budget schedules, The Computerized Integrated Expenditures Framework i s not inline with the computerized public accounting system. There is no way, therefore, to assess a follow up o f expenditures from authorization to payment. Finally, there are important delays for the accounting department o f the Treasury to produce government financial statements. 10. The main institution in charge o f internal audits i s the General Inspectorate o f Finance (IGF) which does not intervene in Bank funded projects. Since July 2006, the Bank has initiated a partnership with IGF which jointly intervenes in statement o f expenditures (SOEs) reviews and plays the role o f internal auditor inall newly created Bank-funded projects including the Urban Development Project. 11. The external audit profession i s yet to be organized. The Supreme Audit Institution (SAI) i s located in the Ministry o f Justice. The short term goal is to shift the S A I from the Ministry o f Justice so as to improve its independence. 12. World Bank funded projects are thus far audited by external private auditors coming mainly from abroad (Cameroon, France, Mauritius). There i s not yet an external audit professional body inChad. The most significant event these recent years i s the creation in 2001 o f the Committee for Control and Oversight o f PetroleumRevenues (College de Contrde et de Surveillance des Revenus Pe`troliers) on one hand and the Ministry o f State Control and Moralization on the other hand. Auditing weaknesses to be addressed include: (i) lack o f coordination o f audit activities; (ii) duplication o f audit works; (iii) o f lack audit capacity; and (iv) lack o f follow up o f audit recommendations. 72 RiskAssessment andMitigation Remarks Being addressed by the This risk arises from weak capacity, Government outside this Project including shortage o f qualified through the ongoing PAMFIP accountants and auditors. which is supported by the Bank. Being addressed by the N MATUHis part ofthe Government Government outside this Project line ministries. through the ongoing PAMFIP which is supported by the Bank. N Close supervision to be carried N Budget preparation for each N The ImplementationUnitprepares exercise at least 3 months ahead annual budgets and expenditures to ensure that counterpart funds are incurred inline with the budget. are included inthe State budget for the coming exercise and that the budget program o f MATUH includes counterpart funds for the UrbanDevelopment Project. Accounting S Substantial supervision and The ImplementationUnithas a recruitment o f an assistant good system o f accounting, which accountant to the Administrative i s capable o f recording and and Finance Director. reporting financial transactions, but needs to be reinforced through the recruitment o f an assistant accountant. Internal Control S IGFwill assume the role o f A letter formally designating IGFto Internal audit and IGF's capacity perform internal audit is signed by to assume this responsibility is the Government. This was a ' acceptable. condition for negotiations (held o n December 6 and 7.2006) FundsFlow S N Financial S The format for the FMRs has N Financial statements o f the PHRD Reporting already been delivered by the for FY05 were ready before June Preparation team for 30,2006. implementation. The Bank has discussed the format with the Implementation Unit. Auditing An external auditor needs to be N 7 recruited based on terms o f reference acceptable by IDA. Overallcontrol 73 Remarks 5 Overallrisk The country corruption environment, the weakness o f the public finance management system, and issues linked to procurement highly jeopardizes the FM system H-High, S-Substantial, M-Moderate, L-Low o f the txoiect. Strengths 13. The country's commitment to implement the proposed Bank-financed Capacity Building for Modernization o f Public Financial Management Project (PAMFIP) and put into force the recommendations o f the April 2006 multi donors' Country Financial Accountability Assessment (CFAA) i s one o f the major strengths in implementing this project. Counterpart funding will equal about 50 percent o f the project financing. This project i s implemented by MATUHand the project team has well- trained and experienced staff. The Finance Unitincharge o f financial management inthe Implementation Unit has also qualified and experienced staff to handle the financial transactions o f the project. The accounting system i s computerized and is already running. Weaknesses and ActionPlan Significant Weaknesses Action Responsiblebody Counterpart funding i s Have the Government insufficient, not include all counterpart MATUH Before Negotiations provided, or provided fundinginthe budget (done) with delav. programme o f MATUH Long delays in Prepare the bids and the procurement procurement plan long Implementation before the beginning o f the Unit exercise and begin the necesssary process with the Financial Controller and the Treasury. Implementing entity 14. The Implementation Unit located inthe MATUHi s the implementingentity o f the project. Budgeting 15. Since the project obtains funds from the Government, it presents its budget request to the Government via MATUH. MATUH follows the Government budget calendar inpreparing its budget and submitting the same to the Ministry o f Finance. The project then prepares a consolidated budget comprising IDA funds and counterpart funding. The budget needs to be integrated in the accounting system so as to facilitate a good follow-up o f budget execution. 74 Accounting 16. The project uses the accrual basis o f accounting with a double entry accounting system. The OHADA (Organization for Harmonization of Business Law in Africa) system o f accounting based on International Financial Reporting Standards (IFRS) in recording and reporting financial transactions o f the project are inforce. To alleviate this risk, it was agreed that the following actions would be taken: (i) Establish a computerized financial management system, acceptable to IDA which would provide the recipient and IDA with accurate and timely information regarding resources and expenditures; and (ii) Maintainbooksofaccounts. 17. The computerized accounting system will have to perform journal processing, budgeting, financial reporting, bank reconciliation, general and auxiliary trial balances, general and auxiliary ledgers. 18. Inaddition to the computerized accounting system installed, and the books neededto maintainan accurate and complete record o f transactions, the project will maintain a set o f additional books o f registry, either within its system or outside it, for control purposes. These books include: (i)a fixed assets register; (ii)a contract register; and (iii)a book o f control for document deliveries and controlled stationery such as checks, bills, invoices and forms. The actual system operates individually using the c TOMPRO software. Before grant implementation, there i s a need to reinforce the system based on a network o f four client workstations and a mainnetwork. Main H Client workstation Coordinator Client workstation Client workstation Client workstation 19. The project coordinator will have exclusive "consultative" access on financial and procurement modules. The Administrative and Finance Director will have all necessary access to the accounting modules to enter and review the accounts. The Director will have access to the procurement module for consulting only. The assistant accountant will only be able to enter data, and will not have access to review/modify the accounts. The procurement specialist will have access to all procurement modules but not to the financial modules. 20. It is recommended that an assistant accountant be recruited to support the Finance Director o f the ImplementationUnit duringproject implementation. 75 Internal control 21. Internal control comprises the whole system o f control, financial or otherwise, established by management to: (i)carry out the project activities in an orderly and efficient manner; (ii)ensure adherence to policies and procedures; and (iii) safeguard the assets o f the project and secure, as far as possible, the completeness and accuracy of the financial and other records. 22. The main focus o f internal control i s placed on the following: segregation o f duties, physical control o f assets, authorization and approval, clear channels o f command, arithmetic and accounting accuracy, integrity and performance o f staff at all levels, supervision, with all this clearly explained and described in the administrative, accounting and financial procedures manual. The draft accounting and financial administrative manual o f procedures was sent to IDA before negotiations, and it will have to be finalized before grant effectiveness. Fundflows and disbursementarrangements Flow of funds 23. The overall project funding will consist o f IDA grant and counterpart funds from the Government. 24. Designated Account (DA). To facilitate project implementation and reduce the volume of withdrawal applications, the project will have one Designated Account in CFAF in a commercial bank acceptable to IDA. The DA will be managed by the ImplementationUnit. The authorized allocation for the DA will be CFAF 500,000,000 representing an average o f four months o f operating costs and direct payments. The DA will be replenished through the submission o f withdrawal applications (WA) on a monthly basis. All disbursements will be channeled through the DA, except for direct payments and special commitments based on irrevocable documentary credits which will be paid directly out o f the grant account. The Recipient may choose to prefinance project expenditures and seek reimbursement from IDA. The provisional list o f expenditures (approved at negotiations) to be prefinanced by the Recipient before grant effectiveness may be eligible for retroactive financing and are subject to IDA procurement procedures. 25. Government Counterpart Fund. The Recipient will open a Project Account ina commercial bank inaccordance with terms and conditions acceptable to IDA, to receive the counterpart funds necessary to cover the part o f the Recipient with respect to the total cost o f the project and under the different categories whenever necessary. Before effectiveness, the Government will deposit an initial contribution o f CFAF160 million in the Project Account and will replenish it regularly through deposit of CFAF 35 million per month for the first year, CFAF 120millionper month for the following two years, CFAF 150million per month for the fourth year and CFAF 100million per month for the fifth year o f project implementation. The Government must ensure that amounts deposited inthe Project Account are used for the expenditures relating to goods, services, and works as part o f the different components o f the project. Based on the commitments o f the Government planned in each annual budget, the Implementation Unit will initiate as need may arise, a replenishment application to be submitted to the Government inaccordance to the procedures o f the public expenditure cycle. 76 FUNDSFLOW CHART Chad Counterpart Funds inalocalcommercialbank Project account in CFAF inCFAF 7 f Project transactions paid inCFAF Disbursementmethods 26. The disbursement for the project will be transacted based on Designated Account, Advance, Direct Payment, and Special Commitment methods. These methods will be used in the beginning o f the project. It i s expected to shift to the quarterly un-audited financial report-based disbursement as soon as the Bank i s satisfied with the capacity o f the implementing entity. All disbursements are subject to the conditions o f the Grant Agreement and the procedures defined in the Disbursement Letter. Minimumvalue of applications 27. The minimum value for direct payments and special commitments will be at least 20 percent of the authorized allocation inthe DA not yetjustified. Reportingon use of grant proceeds 28, The supporting documentation for reporting eligible expenditures paid from the Designated Account should be a summary report o f the Statement o f Expenditures (SOEs) and records evidencing eligible expenditures for payments against contracts valued at US$200,000 for goods, US$ 100,000 for consulting firms, and US$50,000 for individual consultants, and a list o f payments against contracts that are subject to the Bank's prior review. The supporting documentation for requests for direct payment should include records evidencing eligible expenditures (copies o f receipt, supplier's invoices, etc). The project will submit a Bank statement and a reconciliation o f the Designated Account together with the withdrawal application on a monthly basis. All supporting documentation for SOEs will be retained at the project's office and will be made available for review by periodic World Bank review missions and external auditors. 77 Designatedaccount 29. The Designated Account will be managed by the ImplementationUnit. The Minister in Charge of Economy and Planning, also the Chad Governor for World Bank-funded operations, will delegate staff from the Implementation Unit to manage the Designated Account. The coordinator o f the Implementation Unit will necessarily be included among the Designated Account management staff. The , currency for the Designated Account will be CFA Francs (CFAF). The authorized allocation o f the Designated Account will be CFAF5OO million. Counterpartfunding Counterpart funds for the project will be budgeted by the Government and will be made available as needed through a replenishment applicationprocessedby the Government. Amount of Grant YOof expendituresto be Category Allocated(in SDR) Financed 1. Works Component B 4 460 000 40 % 2. Goodsand equipment 310 000 100 % 3. Consultant services andtraining 3 300 000 100% I I I I I 4. OperatingCosts under A.2(a)(vii) of the Project 800 000 100% 5. Unallocated 1130000 TOTAL 10 000 000 Financialreporting 30. Separate financial statements will be prepared for the project. They will comprise: (i) statement a o f sources and application o f funds for the project during the current financial year and cumulative since the start o f the project; and (ii) a balance sheet. These two financial statements will be prepared annually. 31. Inaddition, the project management unit will submit within 45 days o f the end of the reporting period a Financial Management Report (FMR) based on the following format as agreed with the Implementation Unit: (i) Financial reports. These reports provide information on resources and expenditures by disbursement categories or project activities, the provisions for future expenses, disbursements, and reconciliation o fthe special account. (ii) Technical progress reports. These reports provide information on technical progress on the physical and financial aspects o f the project, based on monitoring indicators. 78 (iii) Procurement reports. These reportsprovideinformation onthe acquisitionofgoods, works, and services for project activities and on the selection of consultants indicatingthe respect o f procurement guidelines. They also provide the status o f contracts, commitments, and disbursements, as well as prior review contracts and others subject to post review (Le. for amounts less than US$lO,OOO). The reports provide a comparison o f activities implemented as against the approved procurement plan, indicating any issues such as staffing or capacity building. The report should indicate any modifications made to contracts, complaints from bidders, contract implementation, and other major contractual concerns. 32. The format and contents o f the FMR have been discussed and agreed with the Implementation Unit duringappraisal. A copy of the FMR for Bank-financed projects "Rapport de Suivi Financier des Projets Pnancb par la Banque mondiale: Directives Ci l'intention des Emprunteurs" was given to the Implementation Unit. It has been agreed that the project will use the option "Appletonia" Annex 2 - example 2 o f the document. components o f the project in order to facilitate easy automatic production o f FMRs - financial reports- 33. The budget accounting and general accounts plans should follow the components and sub- and technical progress reports. 34. The FMR should be submitted in the format indicated above within 45 days o f the end o f the reportingperiod and should not be delayed. Auditing 35. Internal audit. MATUHdoes not have an internal audit department. To remedy this and to start using the country system, the internal audit will be carried out by the General Inspectorate o f Finance (IGF) on a quarterly basis. A copy o f the reports o f the IGF shall be sent to the Bank no later than 30 days after the end o f the mission. The Bank made a request to the Minister o f Finance during the appraisal mission for the official nomination o f the IGF as internal auditor for the project. The nomination o f the IGF as internal auditor for the project was a condition for negotiations. 36. External audit. The Recipient will appoint an independent auditor acceptable to IDA. The audit will be conducted inaccordance with international auditing standards acceptable to IDA and under terms o f reference acceptable to IDA. The auditor will be responsible for the annual audit o f project consolidated financial statements, and provide an opinion on: (i) project accounts; (ii)transactions on the Designated Account and project account; and (iii) statement o f expenditures (SOE) and the eligibility of the expenses withdrawn on the basis o f SOEs. The auditor will also prepare a Management Letter giving observations and comments, and providing recommendations for improvements in accounting records, systems, controls, and compliance with financial covenants in the IDA Agreement. The project audit report shall be submitted to IDA within six months o f the end o f the project fiscal year, and should not be delayed in any case. Terms o f reference for recruiting the external auditors have been finalized, and reviewed by IDA. Recruiting the auditors i s not a condition for effectiveness but shall be carried out duringthe first six months o fproject implementation. 37. The required audit reports to be submitted by the project and their due dates for submission are: 79 Audit Reuort Due Date Project specific financial Submitted within six months after the end o f each fiscal year, i.e. June 30, at statements, i.e., annual latest. The first audit report will be due on June 30, 2008 at the latest if the audited accounts and Grant becomes effective before June 30, 2007. However, if the Grant Management Letter effectiveness takes place after June 30, 2007, the first audit report will then be due on June 30, 2009 at the latest and will report for a maximum period o f 18 months. Quarterly Financial (i) Granteffectiveness: within45 days after the endofthe quarter After ManagementReport following effectiveness; (ii) during project execution: within 45 days after the end o f each quarter. Supervision plan 38. Besides regular supervision missions carried out by the Bank, a site visit will be conducted at least three times per year to assess financial execution o f the project. The objectives o f these site visits will be to review the financial management system in place and to ensure that it i s functioning satisfactorily. A review will be carried out regularly to ensure that expenditures incurred by the project remain eligible for IDA funding. The Implementation Status Report (ISR) will include a financial management rating for the component. This will be done by the country office Senior Financial Management Specialist after an appropriate review. execution Finalize the procurement action plan for the next 18 Done Project team months o fthe Grant execution "Comprises configuration of the chart of accounts, configuration of analytical and budgetaiy charts 80 Annex 8: ProcurementArrangements CHAD URBANDEVELOPMENT PROJECT A. General 1. A Country Procurement Assessment Report (CPAR) for Chad carried out in 1993 and 2000, and the audit o f five large contracts carried out by the Audit Office o f the Supreme Court in 2002, together highlighted the dysfinction o f the procurement procedures inChad. The principal deficiencies identified in the CPAR were: (i)absence of a procurement regulatory body; (ii) lack of a formal recourse the available to the tenderers to allow them to dispute the decisions o f contract awards; (iii) very low procurement thresholds lack o f their harmonization; (iv) very cumbersome and time consuming approval process o f contracts, compromising the rapid disbursements o f national and external resources; and (v) excessive recourse to direct contracting. Following the recommendations o f these reports, the Government, with technical and financial support from the World Bank, undertook a procurement reform, and a new Procurement Code was published in December 2003. The Procurement Code and its implementation decrees took into account most o f the recommendations o f the CPAR. The Code, inLine 2 o f Article 5, recognizes the primacy o f international agreements in the event o f a conflict with the provisions o f the Code and the implementation decrees. The present key deficiencies o f the national procurement system are: (a) the requirement that foreign bidders have to associate with national bidders or subcontract to national bidders, (b) the obligation for all bidders (national and foreign alike) to obtain a qualification certificate prior to the submission o f a bid, and (c) a cumbersome procedure for the award and signature o f contracts, involvingthe Minister o f Finance and the President o f Republic incontracts o f relatively low value. The deficiencies have been extensively discussed with the Government, including duringappraisal, and their rectification in the Code and the regulations is part o f the broader governance dialogue. For ICB, the procedures specified in the Procurement Guidelines and the use o f the Bank's standard bidding documents i s mandatory. For NCB, the Government agreed duringnegotiations to the primacy o f the provisions o f the Bank's Guidelines over the national regulations, as recorded in the Minutes o fNegotiations dated December 7, 2006. Use of BankGuidelines 2. Procurement for the proposed project would be carried out in accordance with the World Bank's "Guidelines: Procurement under IBRD Loans and IDA Credits" dated M a y 2004; and "Guidelines: Selection and Employment o f Consultants by World Bank Borrowers" dated M a y 2004, and the provisions stipulated in the Legal Agreement. The various items under different expenditure categories are described in general below. For each contract to be financed by the Grant, the different procurement methods or consultant selection methods, the need for prequalification, estimated costs, prior review requirements, and time frame will be agreed between the Recipient and the Association in the Procurement Plan. The Procurement Plan will be updated at least annually or as required to reflect the actual project implementation needs and improvements ininstitutional capacity. 3. The procurement process and the Standard Bidding Documents (SBD) that will be used by the implementing agencies will be defined in the Project Implementation Manual (PIM) and in the Procurement and Financial Management Manual. The adoption o f these manuals by the Government, satisfactory to IDA, i s a condition o f effectiveness. Advertising 4. A General Procurement Notice (GPN) will be prepared and published in United Nations Development Business (UNDB), in Development Gateway's (dgMarket) and in at least one national 81 newspaper after the project i s approved by the Association. The GPN will show all International Competitive Biddings (ICB) for works and goods contracts and all international consulting services. Specific procurement Notices (SPN) for all goods and works to be procured under ICB and Expressions o f Interest (EOI) for all consulting services to cost the equivalent of US$200,000 and above would also be publishedinthe UNDB,dgMarket, as well as inthe national press. Procurement methods 5. Procurement of civil works. Civil Works procured under this project would include: (i) improving drainage and sanitation; (ii)rehabilitation and extension of the water supply system; (iii) provision of economic infrastructures (e.g. constructionhehabilitation of markets, slaughterhouses, depot, etc.); and (iv) provision of access roads to isolated neighborhoods. Each civil works contract package estimated to cost US$300,000 and more would beprocuredthrough International Competitive Bidding. 6. National Competitive Bidding (NCB) would be advertised locally and carried out in accordance with Chad's procurement laws and regulations, with the qualifications described in paragraph 1 above. Each civil works contract package estimated to cost more than US$50,000 equivalent but less than US$300,000 equivalent may be procuredusingNational Competitive Biddingprocedures. 7. Shopping procedures. Smaller works contracts estimated to cost less than US$50,000 equivalent each may be procured through shopping procedures on the basis o f three written price quotations. The contract award will be made to the lowest evaluated responsive bidder who has appropriate experience and financial resources to complete the works successfully. 8. Procurement of goods. Goods procured under this project would include: procurement of computer equipment, office equipment and furniture, vehicles, motorcycles etc. Each goods contract package estimated to cost US$200,000 equivalent or more per bid package would be procured through International Competitive Bidding. Contract estimated to cost less than US$200,000 equivalent would be advertised locally and carried out in accordance with Chad's procurement laws and regulations, with the qualifications described inparagraph 1 above. Procurement for readily available off-the-shelf goods that cannot be grouped, or standard specification commodities for individual contracts for less than US$50,000 equivalent may be procured through shopping according to procedures detailed inparagraph 3.5 and 3.6 of the "Guidelines: Procurement under IBRD Loans and IDA Credits'' and Memorandum dated June 9,2000 "Guidance on Shopping" issuedby the Bank. 9. Selection of consultants. Consultancy services may include engineering studies, technical assistance, specialized studies, control and supervision o f works, financial studies etc. The selection method would include Quality and Cost Based selection (QCBS), Fixed Budget Selection (FBS), Consultant Qualification (CQ), Least Cost Selection (LCS), and Single Source Selection (SSS) as appropriate. All consultancy services contracts estimated to cost US$lOO,OOO equivalent or more for f i r m s would be awarded through Quality and Cost Based Selection (QCBS) method. In case of assignment requiring Individual Consultants (IC), the selection will follow the procedures stipulated in Section V of the Consultants Guidelines. Short lists of consultants for services estimated to cost less than US$50,000 equivalent per contract may be composed entirely of national consultants in accordance with the provisions of paragraph2.7 of the Consultant Guidelines. 10. Single Source Selection (SSS). In exceptional cases, this method would be used in accordance with the provisions ofparagraphs 3.9 to 3.13 o fthe Guidelines, with IDA'Sprior agreement. 11. Training, workshops, seminars and conference. The expenditure of these activities will be carriedout on the basis of approved annual programs. 82 12. Operating costs. The Grant would finance the operating costs associated with the project implementation. Operating costs would be procured using the implementing agency's administrative procedures which were reviewed and found acceptable to the IDA. B. Procurementcapacity assessment duringthe appraisal mission. . 13. A procurement capacity assessment o f the MATUHand the Implementation Unitwas carried out Ministry of Land Planning, Urban Development, and Housing (MATUH) 14. The assessment revealed that a body in charge o f bids opening and award (Commission d 'Ouverture et de Jugement des Oflres - COJO) exists in MATUH, and i s composed o f the following members: The General Secretary o f MATUH- President The Representative o f the MinistryinCharge o f Economy and Planning-Vice-president The Administrative, Financial, and Equipment Director o f MATUH-Member The Procurement Specialist o f MATUH - Member The Urban Director o f MATUH-Member The Director o f Financial Control inthe Ministry o f Economy, Finance and Planning-Member The Public Procurement Body- Observer 15, Inadditionto the COJO, there is aprocurement unitinthe MATUHwhichprepares and monitors all procurement activities. The unit i s staffed with a chief procurement specialist with solid experience in the country's procurement procedures and other donors' including the Bank. This unit also provides services to the secretariat o fthe COJO. 16. The assessment did not reveal any anomaly in the functioning o f COJO and MATUH's procurement unit. The submission o f evaluation reports by the sub-commission in charge o f bids evaluation does not exceed 10 days, and COJO's rules on the evaluation report within 3 days. However, certain deficiencies which may affect project implementation were reported during the assessment, including: (i)slow process for contract validation and approval; (ii)insufficient information technology equipment and programs for monitoring; and (iii) insufficient training for the two procurement specialists. To address these deficiencies, the project will: (i) ensure that training i s provided to the two procurement specialists at the specialized Regional procurement training Centers; (ii)computerize procurement monitoring and management in the MATUH through the purchase o f computer notebooks with procurement monitoring and management programs); and (iii) training on these programs. ensure 17. The following i s a schedule o f actions to be carried out for the strengthening o f procurement capacities inthe MATUH: 83 Action to beundertaken Dates Responsible Institution Purchase o f computer notebooks with At the latest 6 months after Implementation Unit procurement monitoring and management Grant effectiveness and MATUH programs Training inthe use o f procurement At the latest 6 months after Implementation Unit monitoring and management programs Grant effectiveness and MATUH Participation for the 2 procurement At the latest 6 months after Implementation Unit specialists inprocurement workshops at the Grant effectiveness and MATUH specialized regional procurement training centers Implementation Unit within the Urban Department of MATUH 18. The Implementation Unit within the Urban Department o f MATUH satisfactorily carried out all the preparatory studies for the project. The staff in the Implementation Unit includes a procurement specialist who has procurement experience at both national and international levels (including World Bank experience). A procurement plan for the first 18 months o f project implementation was prepared by the procurement specialist in the Implementation Unit and was found acceptable to IDA. This procurement plan will be posted on the Bank's website after Grant approval. The procurement filing and archiving system in the Implementation Unit was found to be acceptable by IDA and the same system will be maintained during the project's life. The assessment did not reveal any anomaly within the procurement unit o f the Implementation Unit, except for the need o f training in the use o f procurement monitoring and management programs. Under the project, the procurement specialist will benefit from procurement training organized by specialized regional procurement training centers or at the Bank's country office inN'Djamena. At the latest 6 months Implementation Unit Implementation Unit the specialized regional procurement training centers 20. During the appraisal mission, the Bank discussed with the Government (i) possibility o f the setting up an ad-hoc committee which will facilitate the procurement process for the project; and (ii) an exception to Article 7, line 2 o f the Country Procurement code, Articles 1 and 3 o f Decree 462 establishing the procurement thresholds and approval responsibilities, and Decree 465 establishing the conditions for firms to obtain a qualification certificate. In this sense, the Secretary General o f the Presidency has indicated that the Government i s not ready at this stage to accept such exceptions. However, it was suggested during the meeting that MATUH addresses a letter explaining the request for this exception. 21. The overall project risk for procurement i s rated h& because o f the country conditions, the provisions o f the national procurement code, delays experienced in the past with approval o f evaluation 84 reports and signing o f contracts, and the overall experience o f poor management o f contracts in the past despite the fairly strong arrangements inplace at the level o f the ImplementationUnit. C. Procurementimplementationarrangements 22. The bulk o f procurement for vehicles, equipment, infrastructure works or rehabilitation, consulting services, studies, and training would be managed by the Implementation Unit within the Urban Department o f MATUH. The Implementation Unit will seek the no objection from IDA for all contracts subject to prior review. The Implementation Unitwould use consultants as necessary to carry out specific tasks inprocurement in compliance with Bank's Guidelines. D. Procurementplan 23. The Recipient, at appraisal, has prepared a procurement plan for project implementation that provides the basis for the procurement methods. This plan covering the first 18 months o f project implementation has been reviewed and agreed between the Recipient and the project team during the appraisal mission. It will be updated in agreement with the project team at least once a year reflecting the proposed activities for the following 18 months o f project implementation as required to reflect the actual project implementation needs and improvements in institutional capacity. It will also be available in the project's database and in the Bank's external website once the Grant i s approved by IDA Board o f Directors. E. Frequencyof procurementsupervision 24. In addition to the prior review supervision to be carried out from Bank offices, the Recipient and the Bank team have agreed to at least three missions per year for the first two years of project implementation to minimize the risk o f failing to follow procurement procedures as well as for supervision o f project activities. The Recipient and the Bank have also agreed to two supervision field visits to carry out post-review o fprocurement activities. F. Details of the procurementarrangementsinvolvinginternationalcompetition 25. A detailedprocurement plan for the 18months o f implementation has been prepared at appraisal. The thresholds for procurement methods and Bank prior review have been agreed upon and are as follows: Thresholdfor procurementmethodsand prior review ExpenditureCategory Contractvalue Procurementmethod Contract Subjectto Threshold(US$) Prior Review 1.Works >= 300,000 ICB All <300,000 NCB None, except first 5 contracts <50,000 Three quotations None (Post Review) 2. Goods >=200,000 ICB All 200,000 1 NCB None, except first 5 contracts <50,000 Shopping None (Post Review) 85 3. Services >= 100,000 QCBS All a. Firms < 100,000 CQ, Other None(Post Review, except first 3 contracts and all contracts for audit) All b. Individuals >=50,000 IC All <50,000 IC None (Post Review) Single SourceGelection All Details of the procurement arrangements involvinginternationalcompetition 1. Goods, works, and non-consulting services (a) List o f contract packages to be procured following ICB during the first 18 months o f project implementation: 1 2 3 4 5 6 7 8 9 Ref Contract Estimated Procure P-Q Domestic Review Expected Comments No. (Description) cost -ment Preference by Bank Bid-Opening (US$) Method (yeslno) (Prior I Date Post) - Waternetwork 01 3,658,824 ICB NIA NIA Prior review May 26 2007 - Stormdrainage 02 617,647 ICB N/A NIA Prior review May 13 2007 works in N'Djamena - Stormdrainage 03 10,196,078 ICB NIA NIA Prior review May 122008 works - Moundou, Sarh, AbBche - Rehabilitation 04 356,863 ICB NIA NIA Prior review May 25 2008 of slaughter- house inAbechC - Acquisitionand 05 204,000 ICB NIA NIA Prior review June 15 2007 installationof IT equipment andphotocopy machines (a) Goods, works, and non-consulting services ICB contracts estimated to cost US$300,000 and above for civil works, and US$200,000 and above for goods per contract and all direct contracting, will be subject to prior review by the Bank. 86 2. Consultingservices (a) List of consulting assignmentswith short-list of international firms -1 2 3 4 5 6 7 N O Descriptionof Assignment Estimated Selection Review Expected Commen rCf. cost (US$) Method by Bank Proposals ts (PriorI SubmissionDate - Post) 01 Preparationof an organizational 150,000 QCBS Prior review June 3,2007 audit and municipal management - manual 02 Standardizationo fthe budget 200,000 QCBS Prior review August 1,2007 nomenclature and preparationof - a users guide and training 03 Modernization of the financial 100,000 QCBS Prior review August 16,2007 management and accounting, technical assistance, and preparationof a manual of ~~ - procedures and training 04 Improvingand collection of 230,000 QCBS Prior review September 15, municipal taxes, census, setting 2007 up software,preparationofa manualofproceduresand - training 05 Householdsatisfactionsurveys 100,000 Individual Prior review August 15,2007 - inthe targetedcities consultant 06 Update/preparationofurban 360,000 QCBS Prior review September 28, developmentplans for Moundou, 2008 Sarh, Mongo, Pala, Bongor, and - Bo1 07 Update/preparationof urban 470,000 QCBS Prior review October 28,2008 developmentplans for Doba, AbechB, Mao, Amtiman, Biltine, - Ati, Fada, and Faya 08 Control and supervisionof 55,000 Individual Prior review July 31,2007 - drainageworks inN'Djamena consultant 09 Control and supervisionof 740,000 QCBS Prior review August 13,2007 drainage works inMoundou, Sarh, and AbechB, and rehabilitation of slaughterhouse - inAbBchB 10 Control and supervisionofwater 256,118 QCBS Prior review August 5,2007 works inMoundou, Sarh, and AbBchC - 11 Socio-environmentalstudy 117,647 QCBS Prior review May 30,2007 12 Technical assistance for 55,000 Individual Postreview July 31,2007 - MATUH consultant - 13 Training inurbanplanning 90,000 QCBS Prior review April 29,2008 14 Technical assistance inlocal 90,000 Individual Prior review March2008 - taxation consultant 15 Project auditing for the first 2 60,000 SMC Prior review February 14,2007 - years ofproject implementation 87 @) Consulting services Consulting services estimated to cost above US$lOO,OOO equivalent per contract for firms, and US$50,000 and above for individuals, and all single source selection of consultants will be subject to prior reviewby the Bank. Short lists composed entirely of national consultants: Short lists o f consultants for services estimated to cost less than US$50,000 equivalent per contract may be composed entirely of national consultants in accordance with the provisions of paragraph 2.7 of the Consultant Guidelines. 88 Annex 9: Economic and Financial Analysis CHAD URBANDEVELOPMENTPROJECT 1. Project objectives. The project development objective i s to increase sustainable access to infrastructure and basic services for residents in targeted project cities, namely: N'Djamena, Sarh, Moundou, AbCchC, and Doba. 2. Component A: Strengthening urban management capacity (estimated cost: US$4.9million). The project will improve capacity at the local level to plan and manage urban services and at the central level to support urban development. Returns on investment in institutional development are included in the analysis, as they are considered the basis for service sustainability and are ultimately seen in improved access to urban services. 3. Component B: Provision of urban service delivery (estimated cost: US$ 18.4million). The proposed project will support priority infrastructure (water, sanitation, drainage and economic infrastructure) in the cities o f Moundou, Sarh, AbCchC, and Doba for which infrastructure priorities have been identified and reported inTable 1below (prices are without contingencies). Abkchk Sarh Moundou Doba N'Djamena Total Drainage, Sanitation 1,800 1,950 1,450 315 5,515 Rehabilitation and Extension of 725 681 460 1,866 Potable Water Supply System Roads 994 994 Rehabilitatiodconstruction economic infrastructure (markets,. ..) 182 182 TOTAL 2,707 2,631 1,910 994 315 8,557 NB:Exchange rate used:US$l.OO =FCFA 510. 4. Most o f the investments (drainage works, road works to improve access to poor neighborhoods, slaughterhouse, etc.. .) included in the proposed project bring economic advantages consisting o f social and environmental benefits expected to be gained in the targeted cities which cannot be quantified. However, an economic analysis was carried out on the basis o f some key impacts below outlined. 5. Incremental costs. To determine net incremental costs and benefits, "with" and "without" project were considered. On the basis if these scenarios, the net incremental financial benefits and costs o f the proposed investment programs are assessed. These are then adjusted for the impact o f taxes, subsidies, and externalities to arrive at the economic cost and benefit streams. Cash flows are discounted using a discount rate o f 12 percent. 6. Costs include capital costs, operationand maintenance costs, andrehabilitation costs. 7. Benefits o f provision o f urban services are expected to directly improve the quality o f life o f about 53,000 urban residents in Moundou, 52,000 o f urban residents in Sarh, 31,000 urban residents in AbCchC, and 10,000 urban residents inDoba. 89 8. The investment will have the following socio-economic quantifiable and non-quantifiable benefits. (a) Improvement in the quality o f life through improved physical living conditions and environmentalmanagement; (b) Increased productivity and efficiency arising from reduced flooding and avoided flood damages to economic property; (c) Increases inproperty value due to improved overall amenities; (d) Improvedhealth with reduction inwaterborne disease and reducedmedical costs; (e) Enhanced local Government capacity to fulfill its public service delivery mandate; (f) Employment generation, openedexpanded markets, promotion o f increasedprivate sector participation in the provision o f services; creation o f employment opportunities for unskilled and semi-skilled labor (estimated at 610,000 man-days as detailed in Annex 3) and promotion o f SMEs in construction and urban services, by sizing public works appropriately and using labor-intensive methods; and (g) Decreased production costs due to lower vehicle maintenance and transport costs resulting from road improvements. 9. It is clear that manv Economic Rates o f Return calculated for the project are likely to understate some o f the above-mentioned social and environmental benefits expected to be gained in the targeted &. 10. From a macro-economic perspective. By targeting the main cities in Chad, the project is expected to have a positive impact linked to economic growth and employment generation. More opportunities for trade and better productivity to benefit from the trade opportunities could increase the overall production at the national level and contribute to economic growth. The project i s expected to generate a considerable amount o f short-term employment (SMEs and consultant firms) since labor (mainly unskilled labor) accounts for a significant part o f the project investment. As detailed inAnnex 3, it is estimated that the proposed project will create approximately 610,000 man-days over the five years o f project construction. 11. Given that the interventions in all five cities differ, as the access to services and physical characteristics are not homogenous, an overall ERR and Net Present Value (NPV) are not calculated. However, the program overall i s expected to be economically viable as the analysis o f the major components have positive results. A detailed economic analysis i s provided in this Annex for each o f the sub-components o f Component B o f the project. 12. Drainage works, accounting for 5,515 million CFAF, or about 64 percent o f total project works, has an individual ERR o f about 17.45 percent. Rehabilitatiodextension o f drinking water network, accounting for 22 percent o f total project works, amount to 1,866 million CFAF and has an individual ERR o f about 12.76 percent. Investments ineconomic infrastructure (slaughterihg house inAbCchC) have an ERR o f 14.50 percent. Investments in urban roads in Doba have an ERR o f 13.60 percent. It i s clear that those Economic Rates o f Returns calculated for the project (inparticular those related to the drainage works) are very likely to understate some o f the above mentioned social and environmental benefits expected to be gained inthe targeted cities. Table l(b) presents a summary o f the results o f the economic analysis carried out for each main project's activities. 90 AbCchk Sarh Moundou Doba N'Djamena Total Drainage, Sanitation 1,800 1,950 1,450 315 5,515 IRR 15.60% 12.10% 26.10% 21.30% Rehabilitationand Extension of Potable Water Supply System 725 681 460 1,866 IRR 12.60% 13.30% 12.20% Roads 994 IRR 13.60% Rehabilitationeconomic infrastructure (slaughterhouse) 182 IRR 14.50% TOTAL 2,707 2,631 1,910 994 315 8,5571 13. The Project's economic analysis has also been used to support investment decisions: (i) The ERR o f an investment in the market o f Sarh, initially proposed for IDA funding, was estimated at 5 percent. As a result o f the economic analysis, it was therefore decided that the proposed investment in Sarh (CFAF 424,000,000) could not be included inthe overall project. (ii) Similarly, the ERR of an investment in the market o f Moundou, initially proposed for IDA funding, was estimated at 6 percent. As a result o f the economic analysis, it was therefore decided that the proposed investment in Moundou (CFAF 365,000,000) could not be included inthe overall project Drainage and sanitation works 14, Costs used in the economic analysis include capital costs and maintenance costs duringlife o f the assets. The main quantifiable benefits o f the drainage works inN'Djamena, Sarh, Moundou, and AbCchC include: (i) reduced flood damage, (ii) loss and medical expense; and (iii) income business development. Additionally, inthe case o fN'Djamena, the drainage works will enable the opening o f 225 stalls currently closed duringthe rainy season. 15. Reducedflood damage. In the case o f AbCchC, works will significantly reduce risks o f flood damage on the houses located on the waterways (Oaudis) o f Am Soudourieh and Am Kamal Inthis case, the analysis therefore includes both direct and indirect damages to private houses and household goods. Assessment o f flood damages i s based on the actual number o f households identified as affected during storm rain either because o f lack o f drainage or local depression. Based on historical data, it i s assumed that on an average a household in flooded areas has cleaning up expense and repairs o f CFAF 2.5 million per household (furniture, equipment, food) and the cost o f actual reconstruction amounts to CFAF 5 million. 16. Income loss and medical expenses. An expected benefit o f the project's component B i s the reduction in the incidence o f sickness due to decrease in the prevalence o f disease. Increasing incidence o f diarrhea, malaria, skin and eye diseases are associated with poor storm water drains, environmental air pollution due to uncollectedwaste and dust, water and sanitation services and lack o f hygiene. Reduction in the prevalence of these diseases would result in the loss of fewer working and school days due to sickness, and may result in lower medical expenses. In2005, the three municipalities o f Moundou, Sarh and AbCchC had a total populationo f 415,000 people. 91 17. According to statistics from the Ministry o f Health (Division du Syst2me d'hformution Sunituire),the probabilities for urbanresidents o fbeing infectedby waterborne diseases are as follows: ---- Diarrhea: Malaria: 10 percent Cholera: 1percent (as cholera is an epidemics, this percentage represents an indicative average) 12percent Others:3 percent 18. Most o f the incidents o f disease are among the poor. According to city statistics: (i) outpatient an with diarrhoea inmild case losses three days and spends an average o f CFAF 3,375 for medical expense; (ii) outpatientwithmalariainmildcaselossesfivedaysandspendsanaverageofCFAF3,500 for an medical expense; (iii) an outpatient with cholera inmild case losses seven days and spends an average o f CFAF 4,500; (iv) for other diseases, an outpatient losses two days and spends an average o f CFAF 1,500. 19. The daily average household income has been estimated to CFAF 3,200. 20. The populationbenefiting form the works inAbCchC, Sarh, Moundou are indicated inthe Table 2 below: ITable2: Drainageworks inSarh. MoundouandN'Diamena I Beneficiarycities Area (km') Populationbenefiting AbCchC 1.62 19,213 Moundou 8.93 59.989 Sarh 9;29 45,013 N'Djamena 30,000 21. Lastly, the project has been designed in a way that each sub-project works (drainage, water supply or road works) are expected to generate local employment during their implementation. As detailed inAnnex 3, the number o f man-days generated amounts to 610,000. The average daily worker's salary amounts to CFAF 2,750. 22. As a result, the following advantages (avoided costs) can be expected from the proposeddrainage works: - AbCchC: CFAF 203,870,479 /year -- Moundou : CFAF 240,720,740/year Sarh: CFAF 180,625,571/year 23. Economic Growth. Value added based on business profit and wages is taken as a measure of the project's contribution to economic growth. The improved amenities due to the drainage works as well as rehabilitation o f associated roads create a favorable business environment. For the city o f N'Djamena, in addition to the advantages presented above, it i s estimated that works completion will enable 225 stalls to remain opened during the rainy seasons. This represents additional revenue to the management o f the "Murchd d Mil" which collects an average o f CFAF 50/stall/day. As a result, the advantage o f drainage works in N'Djamena amount to CFAF 47,242,896Iyear. Based on the foregoing, the sub-project's economic rate o freturn on the investment i s 21.30 percent. 92 Rehabilitation and extension of thepotable water supply system 24. The major benefits of the works on the rehabilitation and extension o f the water supply system are improved water services to approximately 44,250 beneficiaries inthe three municipalities of AbCchC, Moundou, and Sarh. These include direct user benefits: resource savings (time savings and savings that result from the elimination of individual water treatment, e.g. the cost of boiling water), health benefits (estimated as reduction in costs for coping with water borne diseases) and benefits from increased water consumption estimated by the willingness to pay for the increased consumption, for users who without the project would use less effective and more costly alternatives (such as bottled water, etc). The proposed project also focuses on achieving sustainability by financing training for the population in the management and a better use o f public drinkingfountains. (9 Moundou (189,000 inhabitants). The works will consist of: (i)rehabilitation and extension o f the network for at total of 8,400 meters; (ii) construction and equipping of two boreholes and connecting them to the network; and (iii) installation of 64 standpipes indenselypopulateddistricts. Works inMoundouamount to US$0.72 million. (ii) Sarh (126,000 inhabitants). The water supply in Sarh i s totally inadequate. It i s necessaryto enhance the water resources available and to expand the network. Financing will be provided for (i) replacement o f five kilometers of existing water pipeline; (ii) acquisition and installation of 7,400 meters of network extension; (iii) installation of the 39 standpipes in conformity with appropriate standards; and (iv) the construction o f three new equipped boreholes (including power generating units) with a capacity of 80 m3 each. Works in Sarh amount to US$1.3 million. (iii) AbCchC(100,000 inhabitants). Theprojectwillconsistof:(i) construction and equipment for two new boreholes and connecting them to the network; (ii) the extension o f the network to new outlying districts of a length of 18,150 meters (N'Djamena road, Amir district, AdrC road, Goz Amir district and Wara); (iii) reinforcement of the water pipeline inthe extension zones (water distributionnetwork ofN'Djamena roadand the districts of Goz Amir and Wara); and (iv) installation o f standpipes at various points on the network. A system of participatory management of these standpipes will be established and is expected to generate permanent employment opportunities, with extensive participation o f women. The amount of works i s US$1.3 million. 25. Economic analyses were carried out for each o f the cities of Moundou, Sarh and AbCchC, and found that over a period of 15 years, the additional revenues brought by the project, due to new connections, decreased leakage and increased the quantity of water sold. The data were gathered at STEE, the company in charge o f operating the network, which will be benefitingfrom the investment financed under this project. Production cost savings (fuel, chemical, electricity, personnel) i s also assessed. The following water sale prices were used: CFAF 230/m3 in Sarh, CFAF 215/m3 inMoundou, and CFAF 290/m3inAbCchC. Provision of economic infrastructure (slaughterhouse) 26. InAbCchC, the project will finance the constructionof a new slaughtering house, with a capacity of about 40 oxen and 60 sheep or goats per day. This works comprise: (i) construction of a platform for storing water for the animals and of the access road; (ii)construction o f a drainage network; (iii) provision of potable water; (iv) installation of electricity; (v) provision of sanitation and waste disposal facilities (one wetcore and two waste compartments); (vi) and provision of small additional structures (a slaughter house and rooms for skinningand cutting). Operation o f the slaughtering house inAbCchC will generate revenues, according to Table 3 below: 93 Number/day Fee (CFAF/head) AnnualRevenue(CFAF) Oxen 50 200 3,650,000 Sheep 250 50 4,562,500 Camel 3 500 547.500 27. Using the current price, the total revenues generated by the slaughtering house o f AbCchC amount to CFAF 8,760,000/year. However, current prices are assessed very l o w (compared to other Chadian cities) and the municipality intends to multiply by two the price for oxen, sheep and camel after rehabilitation o f the slaughterhouse. Based on the above, the economic rate o f return on the investment i s 14.5 percent. Provision of access roads to isolatedpoor neighborhoods in Doba 28. InDoba, the project will finance the construction of earth roads and the drainage associated in order to provide access to dense neighborhoods in Doba and the industrial zone and improve access to the transportation area. The program will include the construction o f 54 km o f primary urban roads (sections AA, CC and II), kmo f secondary roads (sections DDand BB), and 7,550 kmo f drains. The works' 1,575 estimated cost is: US$1.9 million. As detailed in Annex 3, the road investment in Doba i s expected to bringto 11,556 the number o fpeople having access to the city center via roads that are usable all year. 29. It should be noted that one o f the main obiectives o f the road investments inDoba is to improve access to the city for urban residents living in poor neighborhoods. The expected outcome o f the proposed investment in Doba (provision o f access roads to isolated poor neighborhoods) cannot be quantified and inteerated into the economic analysis. However, an economic analysis was still carried out on the basis o f some o f other projects' impacts as developed below. 30. The main advantages o f the investments are three folds: (i) Health related advantages directly linked to drainage works. Reduction in the incidence o f siclcness due to decreases in prevalence o f diseases. Increasing incidence o f diarrhea, malaria, skin and eye diseases are associated with poor storm water drains, environmental air pollution due to uncollected waste and dust, water and sanitation services and lack of hygiene. Based on the same data used above, the economic advantages o f drainage works inDoba amount to CFAF 40,127,423/year. (ii) Advantages associated with vehicle operating costs. The cost o f congestion on existing roads that will be relieved once the roads are improved was not taken into account, nor the benefits derived from diverted traffic from alternative roads. These conservative assumptions allow for a cautious economic evaluation. Current traffic inDoba i s low but i s expected to increase due to economic development in Doba region benefiting from oil production. For the analysis, an annual traffic growth i s estimated at 6 percent. Based on these data, the economic advantages o f the road investment amount to CFAF70,411,073/year duringthe first year and CFAF159,192,674 /year at the year 15. (iii) Employment generation in Doba. The road and drainage works are expected to generate short-term employment (SMEs and consultant firms) since labor (mainly unskilled labor) accounts for a significant part o f the project investment. 31. The economic rate ofreturno f the investment is 13.6percent. 94 Annex 10: SafeguardPolicyIssues CHAD URBANDEVELOPMENT PROJECT Potentiallong-termimpacts 1. This project falls into Environmental Category B because no adverse long term impacts are anticipated. No long term adverse impacts were identified in the Environmental Assessment instrument: Environment and Social Management Framework (ESMF). This project will not fund activities that would cause an adverse effect on the environment or any form of land acquisition or restriction o f access to sources o f livelihoods. 2. The provision o f basic urban services component will target service and economic infrastructure priorities in the project cities. Sub-project activities include: a) improving drainage, sanitation, and the associated rehabilitation o f affected roads; b) rehabilitating and extending the potable water supply systems; c) improving provisions o f economic infrastructure (e.g. constructionhehabilitation of slaughterhouses, etc); and d) provision o f access roads to isolated neighborhoods. The potential environmental and social impacts o f sub-projects under this component will be small-scale and site- specific typical o f Category B projects. 3. The ESMF and Resettlement Policy Framework (RPF) carried out during project preparation have provided mechanisms to identify impacts beyond the generic ones for which standard mitigation measures are built and to be applied duringthe implementationphase. Projectlocationand salient physicalcharacteristicsrelevantto the safeguardanalysis 4. The proposed project i s expected to take place in five major towns: N'Djamena, Doba, AbCchC, Moundou, and Sarh. Inaddition, the project will finance the preparatiodupdate o f urban development plans in the following selected cities: Mongo, KClo, Pala, Bongor, Bol, Mao, Am-Timan, Biltine, Ati, Fada, Faya, and LCrC. 5. The ESMF report for this project contains an Analysis o f Alternatives " " section, and concludes that the project, as presently designed, adequately addresses its development objectives, while not placing irreversible adverse impacts on the bio-physical and social environment. The report further maintains that the 'do nothing' scenario would worsen the present situation in the proposed intervention sites and worsen poverty. Measurestakenby the Recipientto addresssafeguardissues 6. An ESMF and an RPFwere prepared as the Safeguards instruments. The objective o f the ESMF i s to establish a mechanism to determine and estimate the future potential environmental and social impacts o f the activities to be undertaken under the project, and to define the mitigation, monitoring, and institutional measures to be undertaken duringimplementation o f the project. The ESMF was prepared to cover Moundou, N'Djamena, Doba, Sarh, and AbCchC. As stated in paragraph 1, it i s anticipated that project activities might not lead to land acquisition or restriction o f access to sources o f livelihood. However, in the event that there are resettlement concerns, a resettlement policy framework (RPF) has been prepared, and this will be translated to RAPSas and when the need arises during project implementation. 95 7. Involuntary resettlement. The proposed project i s expected to deliver significant social benefits by improving the living and environmental conditions o f low-income communities inthe form o f better health, improved water and sanitation services, easier access, reduced flooding, and generally a more pleasant living space. It will increase community cohesion by taking a participatory approach ininvolving communities. Communities engaged in the district sanitation committees "Comitb d 'Asssainissement" during project planning and design, thereby bringingthe community together for a common cause. In addition, this effort aims to involve women and youth in the planning process and ensure equitable benefits. The two main objectives o f the RPF are to: (i) minimize resettlement; and (ii) displaced assist people and the most vulnerable inhabitants, improving their living conditions (return, at a minimum, to the same conditions before being displaced). 8. The RPF, prepared by the Government, addresses the issue o f resettlement o f the affected people and this will cover the five cities o f N'Djamena, Moundou, Sarh, Doba, and AbCchC. The scope o f the RPF is to provide details on: (i) populations to be affected by the project; (ii)the most vulnerable populations; (iii)legal regulatory framework; (iv) methods used for identification and evaluation o f the affected people; (v) methods and planning o f resettlement and compensation packages; and (vi) external and internal monitoring. Although a governing principle o f development i s to minimize relocation and resettlement, engagement in minor land acquisitions and resettlement will be unavoidable in Component B, inclusive o f tertiary infrastructure upgrading, primary and secondary infrastructure etc. RAPSin accordance with the OPBP 4.12 will be developed during the implementation phase. The RFP provides principles and instructions on: (i) minimizing land acquisition and subsequent displacement; and (ii) compensation to all project-affected persons including non-title holders etc. The RPF provides the principles and procedures for the preparation o f RAPs related to investment works funded under the project, as and when the need arises. Stakeholders and potential project-affected persons were consulted during the preparation o f the ESMF and RPF. The Safeguards Instruments of RPF and ESMF were disclosed to the public within the country on June 7, 2006 and at the World Bank Info shop on June 16, 2006. 9. The Implementation Unit will be responsible for the implementation o f the ESMF and RPF recommendations. Consultants will be recruited to prepare RAPs as and when necessary. Project- specific Environmental and Social Impact Assessments (ESIAs) will be prepared if and when necessary duringproject implementation. The ImplementationUnitwill have an environmentaland social specialist on a retainer basis. This specialist will be responsible for implementing the recommendations contained in these safeguard instruments, and will be supported with short-term national social/environmental safeguards consultants as and when the need arises. Provisions have been made inthe ESMF and RPF for capacity building (training, workshops, and seminars) for key actors (central ministries, municipal administrations, municipal technical services, civil society and NGOs, and the populations) involved in implementation. 96 Annex 11:ProjectPreparationand Supervision CHAD URBANDEVELOPMENTPROJECT Planned Actual PCNreview 1011412004 10/28/2004 Initial PID to PIC 10121/2004 11/29/2004 Initial ISDS to PIC 1012112004 01/07/2005 Appraisal 12/05/2005 10/30/2006 Negotiations 12/04/2006 12/06/2006 BoardmVP approval 01/30/2007 Planneddate o f effectiveness 04/30/2007 Planned date o f mid-term review 05/01/2009 Planned closing date 10/30/2011 Key institutionsresponsible for preparation o f the project: Ministryo fLandPlanning, UrbanDevelopment, andHousing(MATUH) UrbanDepartment (DU) within MATUH Bank staff and consultants who worked on the project included: Name Title Unit Bousquet, Franck Senior Financial Specialist, TTL AFTU2 Diop, Mahine Municipal Engineer AFTU2 Vang Eghoff, Christian Urban Development Specialist, Consultant AFTU2 Olojoba, Africa Eshogba Senior Environmental Specialist AFTS3 Munzberg, Nathalie Counsel LEGAF Chadab, Wolfgang Finance Officer LOAG2 Desclaux, RenCe Finance Officer LOAG2 Cave, Alison Senior UrbanPlanner S A Seyni, Abdoul-Wahab Social Development Specialist AFTS3 Donang, Charles Senior Procurement Specialist AFTPC Zerbo, Aissata Procurement Analyst &'TU2 Nkoa, Etienne Senior FinancialManagement Specialist AFTFM KokShun, Connie Senior Program Assistant AFTU2 Jarosewich-Holder, Martha Environment and Water Resources Consultant AFTU2 Ortiz, Alexandra Senior Urban Economist, Peer Reviewer LCSFU Fallert Kessides, Christine Senior Adviser, Peer Reviewer TUDUR Glasser, Matthew Senior UrbanDevelopment Specialist, Peer AFTU1 Reviewer Louani, Mahamat Goadi Senior Human Development Specialist, Peer AFTH3 Reviewer Bank funds expended to date on project preparation: Bank resources: US$401,371 EstimatedApproval and Supervisioncosts: Remaining costs to approval: US$150,000 Estimatedannual supervision cost: US$90,000 97 Annex 12: Documentsinthe ProjectFile CHAD URBANDEVELOPMENT PROJECT 1 Feasibility study report prepared by Groupe Huit-BCEOMon the Urban Development Project in Chad -IDA-financed (1997) 2. N'Djamena - Center City engineering report (AFD) 3. Etude de faisabilitk et de programmation des travaux d'amtnagement de deux quartiers commerciaux des march& Milet Dembe -ACT consultants -Financement AFD, Juillet 2003 4. Etude de Planification Urbaine de Doba, BCbCdjia et Moundou - Groupe Huit- SIRUS-ATAUD -FinancementIDA Dtcembre2001 - 5. Revue des DCpenses Publiques du Secteur des Travaux Publics et des Transports et du Secteur de 1'Habitat et de 1'Urbanisme (1995-2001) D,MPTPT,MATUH, Octobre 2002 6. Mission sur Sites des Projets FinancCs sur Ressources PCtrolikres, CCSRP, M a i 2005 7. Cadre politique de rkinstallation des populations dCplacCes - Rapport final - M a i 2006 - SOFRECO (financement donjaponais TF05373 1) 8. Cadre de gestion environnementale et sociale - Rapport final - M a i 2006 - SOFRECO (financement donjaponais TF05373 1) 9. Etudes d'identification des besoins en renforcement des capacitts de gestion urbaine - Urbaplan -Septembre2006(financementdonjaponaisTF053731) 10. Etude des finances et de la fiscalit6 locale -Rapport final -URAM- Juin 2006 (financement don japonais TF053731) (i) de la commune de N'DjamCna ; (ii) de la commune d'AbCchC ; (iii) de la commune de Moundou ; (iv) de la ville de Sarh ;et (v) de la ville de Doba. 11. Rtalisation des Ctudes techniques pour le programme des travaux pour les villes de Moundou, Sarh, N'DjamCna, Doba et AbCchC - STUD1 International - Septembre 2006 (financement don japonais TF053731) 98 Annex 13: Statementof LoansandCredits CHAD URBANDEVELOPMENTPROJECT Difference Original Amount in US$ between Millions expected and actual disbursements Project FY Purpose IBRD IDA SF GEF Cancel. Undisb. Orig. Frm. ID Rev'd PO66998 2005 TD-Local Dev Prog Sup 0.00 0.00 0.00 0.00 0.00 24.07 0.00 0.00 APL (FY05) PO74266 2004 CHAD: Agricultural 0.00 20.00 0.00 0.00 0.00 20.12 -1.02 0.00 Services & POs Project PO77240 2003 TD CRITICAL ELEC & 0.00 54.80 0.00 0.00 0.00 37.34 23.41 0.00 WATER Services PO00527 2003 Education Sector Reform 0.00 19.13 0.00 0.00 0.00 45.21 8.25 4.65 PO72226 2002 2nd Pop. & AIDS 0.00 24.56 0.00 0.00 0.00 16.12 3.73 -1.33 PO35672 2001 TD Nat. Transp. Program 0.00 67.00 0.00 0.00 0.00 44.11 36.96 0.00 Support Project PO62840 2000 TD-Petroleum Economy 0.00 17.50 0.00 0.00 0.00 1.63 0.73 0.00 Mgmt (FYOO) PO44305 2000 TD/CM PIPELINE 39.50 0.00 0.00 0.00 0.00 3.05 -1.95 0.00 PO48202 2000 TD-Petroleum Sec Cap Bldg 0.00 23.70 0.00 0.00 0.00 1.38 7.64 0.00 Prj (FYOO) PO55122 2000 Health Sector Support 0.00 41.51 0.00 0.00 0.00 15.89 12.64 -2.99 Total: 39.50 0.00 0.00 0.00 208.92 90.39 0.33 268.20 99 CHAD STATEMENTOFIFC's Heldand DisbursedPortfolio InMillionsof US Dollars Committed Disbursed IFC IFC FY Company Loan Equity Quasi Partic. Loan Equity Quasi Partic. Approval 2002 FinadevTchad 0.00 0.19 0.00 0.00 0.00 0.00 0.00 0.00 2003 FinancialTchad 1.23 0.00 0.00 0.00 1.23 0.00 0.00 0.00 2000 TOTCO 13.90 0.00 0.00 13.90 13.90 0.00 0.00 13.90 Totalportfolio: 0.19 0.00 0.00 0.00 15.13 13.90 15.13 13.90 ApprovalsPendingCommitment FY Company Loan Equity Quasi Partic. Approval 2002 FinadevTchad 0.00 0.00 0.00 0.00 Total pending 0.00 0.00 0.00 0.00 commitment: 100 Annex 14: Countryat a Glance CHAD URBANDEVELOPMENT PROJECT LII13IV6 Sub- POVERTYand SOCiAL Saharan LOW- Chad Africa income levelopment diamond. 2005 Population. mid-year (millions) 9.7 741 2,353 GNI per capita (Atlas method, US$) 400 745 580 Life expectancy GNi (Atlas method, US$ billions) T 3.9 552 1,364 Average annual growth, 1999-05 Population (%) 3.4 2.3 1.9 Laborforce (%) 3.0 2.3 2.3 Gross prima4 Most recent estimate (latest year available, lSSS-05) :ita enroiimen, Poverty(% ofpopulationbelownationalpovertyline) Urban population (% of totalpopulation) 25 35 30 Lifeexpectancyat birth (years) 44 48 59 infant mortality (per 1,000live births) 117 100 80 Child malnutrition (% of children under 5) 37 29 39 Access to improvedwater source Access to an improvedwater source (% ofpopulation) 42 56 75 Literacy(% ofpopulation age 15+) 26 62 Gross primary enrollment (% of school-agepopulation) 71 93 104 Male 86 99 110 -Chad -Low-incomegroup Female 56 87 99 KEY ECONOMIC RATiOSand LONG-TERMTRENDS 1985 1995 2004 2005 Economicratios' GDP (US$billions) 1.o 1.4 4.3 5.5 Gross capital formationlGDP 7.3 13.2 24.9 17.4 Exportsof goodsand services/GDP 11.9 21.9 52.8 58.9 Trade Gross domestic savings/GDP -12.1 1.4 30.5 37.0 Gross national savings/GDP -2.1 4.8 18.3 20.7 Currentaccount baiance/GDP -10.2 -8.4 -6.6 3.2 Interest payments/GDP 0.2 0.3 0.3 Total debVGDP 21.0 83.1 39.5 Total debt servicelexports 13.9 4.7 2.0 Presentvalue of debVGDP 18.1 I Presentvalue of debtiexports 34.1 indebtedness 1985-95 1995-05 2004 2005 2005-09 (average annualgrowth) GDP 2.3 7.7 29.5 5.6 2.6 GDP per capita 0 . 7 4.2 25.2 2.3 0.4 -Chad Low-income group Exportsof goods and services 1.9 17.2 170.4 17.7 -0.9 STRUCTUREof the ECONOMY (% of GDP) 1985 WS5 2004 2005 IGrowth of capital and GDP (Oh) 1 Agriculture 38.1 35.8 24.1 industry 13.1 13.6 45.5 Manufacturing 10.4 11.2 5.2 Services 48.9 50.5 30.3 26.1 0 Householdfinal consumption expenditure 100.4 91.4 64.5 58.1 5 0 Generalgov't lnai consumption expenditure 11.7 7.3 5.0 4.9 importsof goods and services -GCF -GDP (average annualgrowth) 1s85-s5 19s5.05 2004 2005 /Growthof exports and importa('h) I Agriculture 4.1 2.7 -5.3 6.1 2w industry 1.0 18.9 126.5 5.0 j50 Manufacturing .. 1w Services 1.6 5.6 7.8 6.2 50 Householdfinal consumption expenditure 1.0 3.9 13.2 -4.9 General gov't final consumption expenditure -6.5 5.3 -16.3 3.6 Gross capital formation 1.5 18.7 -39.7 -26.2 -Exports -imports imports of goods and services Note:2005 data are preliminaryestimates. This table was producedfrom the DevelopmentEconomics LDB database. The diamonds show four key indicators in the country (in bold) comparedwith its incomegroup average. if data are missing. the diamond wiii be incomplete. 101 PRICESand GOVERNMENTFINANCE I 1985 1995 2004 2005 Domesticprices lnflatlon (%) (% change) Consumerprices 5.2 9.2 -5.4 "OT ImplicitGDPdeflator -5.1 8.8 13.3 20.0 Government finance (% of GDP, includes currentgrants) Currentrevenue 4.6 8.2 8.2 9.6 Cunent budgetbalance -0.7 1.5 3.4 -GDP deflator -0'CPI Overallsurplus/deflcit -9.8 -6.5 -5.9 TRADE 1985 1995 2004 2005 (US%millions) Exportand Import levels (US$ mlll.) Total exports (fob) 86 243 2,184 2,955 Cotton 44 126 46 66 Cattie 26 50 302 305 3 . m Manufactures 5 Total imports(cif) 185 277 738 719 2.m Food 22 Fueland energy 19 22 57 76 1.m Capitalgoods 54 126 I 0 Exportprice index (2000=100) 159 241 285 m M 01 02 03 04 06 Importprice index (2000=100) 142 118 118 Exports Imports Terms of trade (2000=100) 113 205 241 BALANCEof PAYMENTS 1985 1995 2004 2005 (US%millions) Currentaccount balanceto GDP ('h) Exportsof goods and services 123 317 2,274 3,219 Importsof goodsand services 324 488 2,034 2,150 25 T Resourcebalance -201 -171 241 1,069 Net income -5 -5 -694 -1.026 Net currenttransfers 101 55 168 133 Currentaccountbalance -105 -121 -286 176 Financingitems (net) 87 165 341 -128 Changesin net reserves 18 -63 -55 4 8 1.1251 Memo: Reservesincludinggoid (US%millions) 282 371 Conversionrate (DEC, /ocaWUS$) 449.3 499.2 527.7 526.6 EXTERNALDEBT and RESOURCE FLOWS 1985 1995 2004 2005 (US%millions) :ompositlonof 2004 debt (US$ mlll.) Total debt outstandingand disbursed 217 912 1,701 IBRD 0 0 37 35 G:23 ~ : 3 7 IDA 40 379 874 864 F:33 Total debt service 17 16 46 IBRD 0 0 1 4 IDA 5 4 11 16 Compositionof net resourceflows Officialgrants 128 121 211 Officialcreditors 5 58 94 Privatecreditors -6 0 0 Foreigndirect investment(net inflows) 54 33 478 PoMolio equity(net inflows) 0 0 0 c:96 World Bank program Commitments 0 67 25 , IBRD E Bilateral Disbursements ~ 4 42 80 64 B IDA .. D Othermultilateral . F Private - Principalrepayments 4 1 4 12 IC-IMF G Short-ten . Netflows 0 41 76 52 Interestpayments 1 3 8 8 Nettransfers -1 38 68 44 Note:This tablewas producedfrom the DevelopmentEconomicsLDB database. 8/13/08 102 Annex 15: Map IBRD 34221 103 IBRD 34221 15E 20E 25E To 0 100 200 300 Kilometers Akhaltsikhe 0 100 200 Miles CHAD LIBYA Aozou Aozou Tarso Emisou Pic Touside (3,376 m) (3,315 m) st i T i b e Zouar Zouar 20N To 20N Séguédine Emi Koussi (3,415 m) S a h a r a D e s e r t u B o r k o NIGER B O R K O U - E N N E D I - T I B E S T I Faya-LargeauFaya-Largeau FadaFada é lé E n n WadiHowar d ed o i B Koro Toro Koro oro Oum-Chalouba Oum-Chalouba OFama 15N K A N E M B I L T I N E 15N BiltineBiltine BahSalal r el Ghazal (Soro) MaoMao Salal B AT H A L A C SUDAN Abéché Abéché BolBol Moussoro Moussoro Oum Oum To Mouzarak Mouzarak AtiAti Hadjer Hadjer 1963 Level Nyala 1973 Level Batha 2001 Level Lake Chad This map was produced by Massaguet Massaguet the Map Design Unit of The Bokoro Bokoro Mangalmé Mangalmé O U A D D A Ď World Bank. The boundaries, To N´DJAMENAN´DJAMENA MongoMongo NIGERIA Goz Beďda Goz Beďda colors, denominations and Fotokol C H A R I - any other information shown Masalasef Masalasef on this map do not imply, on B A G U I R M I the part of The World Bank Abou Deďa Abou Deďa Group, any judgment on the Massenya Massenya legal status of any territory, To or any endorsement or Maroua Gélengdeng Gélengdeng Bahr Ergig Am Timan Am iman Melfi Melfi G U E R A a c c e p t a n c e o f s u c h S A L A M AT Bousso Bousso To BongorBongor Chari Maroua 10N BahrSalamat boundaries. CHAD Harazé Harazé MAYO- KEBBI MAYO- KEBBI TANDJILE ANDJILE Mangueigne Mangueigne URBAN DEVELOPMENT To Kélo Kélo LaiLai MOYEN- CHARI MOYEN- CHARI Birao PROJECT Pala Pala PROJECT CITIES LOGONE LOGONE Logone Koumra Koumra SarhSarh Bahr Aouk SELECTED CITIES AND TOWNS OCC.OCC. Doba Doba PREFECTURE CAPITALS CAMEROON Moundou Moundou Bangoran LOGONE ORIENTAL LOGONE ORIENTAL NATIONAL CAPITAL Vina To Kaga Bandoro briGingui Bamingui RIVERS To To MAIN ROADS Bozoum Bossangoa CENTRAL AFRICAN RAILROADS REPUBLIC PREFECTURE BOUNDARIES Mbakaou Res. 15E 20E INTERNATIONAL BOUNDARIES SEPTEMBER 2005