Report No. PID11601 Project Name INDIA-ANDHRA PRADESH URBAN REFORM & MUNICIPAL SERVICES PROJECT Region South Asia Regional Office Sector Other social services (50%); General water; sanitation and flood protection sector (50%-) Project ID P071250 Borrower(s) GOVERNMENT OF INDIA Implementing Agency Address GOVERNMENT OF ANDHRA PRADESH Department of Municipal Administration and Urban Development Address: L-Block Secretariat, Hyderabad 500-022 Contact Person: Mr. A.K. Goyal, Principal Secretary Tel: 91-40-2345-2499 Fax: 91-40-2345-0622 Email: goyalak@yahoo.com Andhra Pradesh Urban Development & Infrastructure Finance Corporation, Address: #6-3-634 Green Channel House, Khairatabad, Hyderabd, 500-004 India Contact Person: Somesh Kumar, MD, APUDIFC Tel: 91-40-2337-1055 Fax: 91-40-2337-8955 Email: someshkumar@apusp.org Directorat of Municipal Administration Address: 4th Floor MCH Complex, Tank Band, Hyderabad 500-063 Contact Person: Ms. Y. Srilakshmi Tel: 91-40-2322-1569 Fax: 91-40-2322-0876 Email:c&dma@ap.gov.in Environment Category A Date PID Prepared February 27, 2003 Auth Appr/Negs Date October 2, 2003 Bank Approval Date March 27, 2004 1. Country and Sector Background Structure of Urban Sector The overall structure of urban administration, under GoAP's Department of Municipal Administration and Urban Development (MA&UD), is presented below: Table 1: Institutional Arrangements for Urban Management in Andhra Pradesh Agency Activities Governing Regulations Directorate of Municipal Administration I Overall administration of 4 Municipal Corporations (except Hyderabad, Vishakapatnam, and Vijaywada) and 109 Municipalities in the state, I Review and monitoring of programs, performance, municipal functions I Release of plan and non-plan grants I Conduct elections The Andhra Pradesh Municipalities Act, 1965 and Andhra Pradesh Municipal Corporations Act. Public Health Engineering Department Design, planning, and implementation of water and sanitation facilities in urban AP, except in Hyderabad Hyderabad Metropolitan Water Supply and Sewerage Board Design, planning, and implementation of water and sanitation facilities in Hyderabad. The Hyderabad Metropolitan Water Supply and Sewerage Act, 1989. Andhra Pradesh Urban Finance & Infrastructure Development Corporation Management of centrally sponsored low-cost sanitation programs and is the implementing agency for the DfID-funded Andhra Pradesh Urban Poverty Support Project. Companies Act, 1956 Directorate of Town Planning Preparation of General Town Planning Schemes for notified areas, regulation of planning permissions, and implementation of the Master Plan in notified areas. In addition to its planning function, it administers the centrally sponsored Integrated Development Of Small and Medium Towns. AP Town Planning Act, 1920 Urban Development Authorities Preparation of Master Plans for notified areas and implementation of the Master Plans beyond specified regulations. Hyderabad UDA, in addition to its planning function, is administering the centrally sponsored Mega City Project. The Andhra Pradesh Urban Areas Development Act, 1975. Urban Local Bodies I Public health, sanitation, conservancy, and solid waste management I Slum improvement and upgrading I Provision of urban amenities and facilities, such as parks, gardens, playgrounds I Burials and burial grounds; crematoriums and cremation grounds I Cattle ponds and prevention of cruelty to animals I Collection of statistics, including registration of births and deaths I Public amenities including street lighting, parking lots, bus stops, and public conveniences I Regulation of slaughter houses and tanneries I Planning for economic and social development I Urban forestry, protection of the urban environment and ecology I Urban poverty alleviation Source: World Bank, Urban Poverty and Access to Urban Services in Andhra Pradesh, unpublished mimeo, March 2002. Main Sector Issues a) Disproportionate number of urban poor compared with other states. Andhra Pradesh (AP), with a population of 76 million (Census 2001), is the fifth most populous state of India. Its urban population of around 21 million makes up around 27 percent of the total, with a majority of urban dwellers in its Class I towns (urban areas with more than 100,000 population). As the number of Class I towns of Andhra Pradesh increases, so does the population of the urban poor. The recent (corrected) estimates by the Planning Commission of India indicate that around 27 percent of AP's urban population (around 6 million people) earn less than US$1 per capita per day (Table 1). A more worrisome indicator of urban poverty is that despite not being a particularly urbanized state, AP has the second largest population of slum-dwellers in the states in India. - 2 - Table 2. Trends in Poverty, Official Poverty Lines By all accounts this is an underestimate because it only includes those who live in what the Census of India (2001) categorized as "notified" slums. There are clear indications that there are as many people living in "non-notified" slums. Moreover, several cities which have grown in population to more than 50,000 persons in the interim period of the two Censuses (1991 and 2001) and which are most likely to house large numbers of the urban poor in slums have not been considered. This is a serious issue since "non-notified" slums do not receive any official assistance in terms of service provision or slum upgrading. At the same time, there is no clear policy of denotifying slums which have been provided with upgrading assistance. Table 3. Distribution of Population by Size of Class of Urban Centers in AP (Percent) Class Population 1971 1981 1991 2001 Number of centers 1991 Number of centers 2001 I 100.000+ 48.4 53.8 66.9 75.30 32 39 II 50,000-99,999 13.4 16.2 12.6 13.94 34 43 III 20,000 - 9,999 21.2 20.8 16.5 8.35 91 46 IV 10,000-19,999 13.2 7.4 3.3 1.69 39 23 V 5,000 - 9,999 3.6 1.7 0.6 0.68 14 20 VI Less than 5,000 0.2 0.1 0.1 0.04 3 2 Total 100.0 100.0 100.0 100.00 213 173 Source: Census of India 2001, various. b) Inadequate urban services: Continuing urban growth, especially among cities with 100,000-500,000 population, is not matched with the provision of basic urban services, especially water supply and sanitation and solid waste management. In an effort to provide needed services, attention is focused on creating additional supply rather than optimizing the production of current systems and upgrading maintenance of existing assets. A number of urban services, particularly those related to sanitation in all its forms, are not subject to user charges-with consequent loss of revenue. c) Weak urban governance and management: The fiscal health of many of Andhra Pradesh's Urban Local Bodies (ULB) is suffering because of poor cost recovery policies and inadequate revenue generating procedures. Until recently property tax systems were out of date and based on principles of taxation which do not reflect economic values of real property. Municipal accounts are based on single entry systems prepared manually and often are produced too late to serve the management information needs of ULB officials. These institutional weaknesses limit the accountability of ULBs to their citizens. The capacity of local governments for urban administration in general, and for implementing poverty reduction programs in particular, is seriously hampered by: (i) limited authority; (ii) inadequate management capability; (iii) the lack of performance incentives; and (iv) the absence of strategic planning for city development in general, and for urban upgrading in particular. d) Lack of conducive infrastructure financing systems. Heretofore, -3 - development of urban infrastructure has typically been supported by public sector funding. Resources mobilized by municipalities through the levying of octroi (a local levy on goods entering a municipal area amounting to as much as 50t of total revenue) have been sharply curtailed by the recent abolition of the tax. No suitable replacement source of income has been identified. State funds are allocated to ULBs based on criteria which do not necessarily bear any relationship with local priorities, let alone return on investment. State guarantees of local level borrowing from any source have placed an unsustainable contingent liability on the state. Only the largest ULBs are accessing the domestic capital markets and commercial banks and then only in an ad hoc manner. At least half of all ULBs are not financially sound with no capacity to borrow. However, an assessment of the financial status of all 117 ULBs in the state indicated that about 52 amongst them had a current borrowing capacity exceeding Rs. Crores 807 ($168 million) in aggregate. The analysis is based on financial data for FY 2001-2002 at gross level collated at the DMA's office for all 117 ULBs. Only those ULBs, that have a revenue surplus after meeting current revenue expenditures (including debt servicing) have been considered to have capacity to borrow, due to their being in a position to service debt out of such surplus. To that extent, this is an assessment of "residual borrowing capacity". Such cash-flows have been discounted to arrive at a Net Present Value (NPV), assuming a "margin" (50w of such cash-flows have been considered being available for debt servicing obligations ) and a loan of 15 years at cost of 12t per annum. The current levels of surplus have been assumed to continue over this tenure. Further this has been analyzed under two scenarios: (i) assuming current levels of debt; and (ii) after accounting for additional debt which has been sanctioned by HUDCO and likely to be drawn down by GoAP over the short-term to the extent of about Rs. 180 crores (mainly for water supply sub-projects in various ULBs, excluding Hyderabad, for which sanctions from HUDCO are also in place). Assuming current debt levels After including balance draw-down of debt from HUDCO Category of ULB based on population Number of ULBs Number of ULBs with Borrowing Capacity Aggregate Borrowing Capacity (Rs. Crores) Number of ULBs with Borrowing Capacity Aggregate Borrowing Capacity (Rs. Crores) ULBs<1 lac 72 31 64.6 22 44.2 ULBs>1 lac (except Hyderabad) 44 33 523.5 29 487.5 Hyderabad 1 1 358.6 1 276.1 TOTAL 117 65 946.7 52 807.8 e) Perverse incentives created by intergovernmental fiscal system for poor ULB performance. Many of the state's programs requiring intergovernmental fiscal transfers do not provide incentives for improved financial and managerial performance by urban local bodies. A number of perverse incentives are created. These include fiscal transfers linked to revenue gaps rather than revenue performance, the absence of an appropriate framework for local authority borrowing, e.g., no explicit debt ceiling, no mandatory credit rating (for bonds), and the lack of reform orientation in plan allocations which encourages construction of additional capacity in key sectors such as water and sanitation, without adequate emphasis on improving operational performance. In addition, the Government of India (GOI) and State funded programs do not require adequate emphasis on local - 4 - authority contributions, and do not insist on appropriate cost recovery norms which would ensure demand responsive approaches. While many social programs may have had an impact on the livelihoods of the poor, including women, the state's ability to continue providing resources for these programs (leave alone expanding them to reach larger segments) is limited and has in fact become a major concern. Over the past three years, there has been a decline in allocations for centrally funded self-employment and wage employment schemes (SJSRY). The number of self-help groups has increased but only a little over a third of them are assisted by these public programs. f) Ineffective land management. With increased urbanization and industrialization, land markets are under tremendous pressure. Land supply has been affected by i) extensive public ownership of land and unclear transfer procedures; ii) unrealistic land development and infrastructure standards; iii) complex procedures for urban planning and iv) unclear responsibilities among public agencies. To enable markets to work better it will be necessary to support measures such as: improved land registration and titling, revision of building rules and regulation to reduce procedural delays, simplification and acceleration of procedures for tenure regularization. Table 4. Legislation Governing Land Development Municipal Laws 1. Andhra Pradesh Municipalities Act, 1965 2. Hyderabad Municipal Corporation Act, 1955 3. Andhra Pradesh Municipal Corporations Act, 1994 Town Planning Laws 4. Andhra Pradesh Town Planning Act, 1920 5. Andhra Pradesh Urban Areas (Development) ACT, 1975 Slum Improvement Law 6. Andhra Pradesh Slum Improvement (Acquisition of Lands) Act, 1956 Social Legislation 7. The Urban Land (Ceiling and Regulation) Act, 1976 and Rules 8. Andhra Pradesh Buildings (Lease, Rent & Eviction) Control Act 9. Andhra Pradesh Occupants of Homesteads (Conferment of Ownership) Act, 1976 Property Laws 10. Transfer of Property Act, 1882 11. Indian Registration Act, 1908 12. Land Acquisition Act, 1894 13. Stamp Act Other Related Laws 14. Andhra Pradesh Assigned Lands (Prohibition of Transfer) Act, 1977 15. Andhra Pradesh Land Reforms (Ceiling on Agriculture Holdings) Act, 1973 Source:World Bank, Urban Poverty and Access to Urban Services in Andhra Pradesh, unpublished mimeo, March 2002. Government Strategy The Government of Andhra Pradesh (GoAP) recognizes the poor performance of the urban system and the nature and magnitude of urban poverty. Poverty reduction forms an overarching objective of the state's Vision 2020 of a "Swarna (Golden) Andhra Pradesh." As a step towards implementing this strategic vision, the GoAP set up a Working Group on Urban Poverty to develop an Urban Development and Urban Poverty Reduction Strategy for the - 5 - state. AP has also formulated its Poverty Reduction Strategy, 2001 (PRS-2001), outlining the broad issues and focal areas of poverty reduction efforts in rural and urban AP. A primary focus of PRS-2001 is on direct poverty reduction measures, including improving the poor's access to basic infrastructure and services within the framework of a transparent and responsive administration reaching out to poor communities under a systematic program of participation. Andhra Pradesh has a history of community-based development beginning with the Urban Community Development Project (UCDP) in Hyderabad in the 1980s. The Urban Basic Services Program (UBSP) began work in 13 cities. Several components of the program later became part of a statewide community movement, the Swarna Jayanthi Sahari Rozgar Yojana (SJSRY), a centrally sponsored employment program. Through the SJSRY and other programs, the state has assisted in the formation of community groups and has supported them with livelihood opportunities. The GoAP has made it mandatory for any intervention in lower income areas of the state to utilize these community structures. The ongoing DfID-sponsored Andhra Pradesh Urban Services for the Poor (APUSP) project is also community-oriented and supports investments in basic infrastructure and services undertaken with urban local bodies. A key feature of APUSP is the introduction of a planning process based upon a partnership between communities and muncipal authorities. The consultative/participatory process leads to the production of a Municipal Action Plan for Poverty Reduction (MAPP), which outlines priority interventions for improving services in poor areas as well as activities designed to improve the institutional performance of the municipality. The MAPP aims to provide i) poor people with an effective way to express their needs and ii) municipalities with a way of incorporating these needs into planning and budgeting. MAPPs provide the framework for deciding on measures to improve performance and to request State-level support for those aspects under GoAP control, providing an opportunity for convergence with other programs. MAPPs are intended to be three-year rolling plans incorporating lessons from the process as implementation progresses. MAPPs are approved by Municipal Councils which will ensure political support at the municipal level. Under the proposed project, MAPPs would be appraised by appropriate state level authorities and, if accepted, funded in accordance with procedures to be detailed during project preparation.' 2. Objectives The project development objective is to support urban sector reforms and improve city management and municipal services with a view to addresing urban poverty. 3. Rationale for Bank's Involvement The Bank has a long history of involvement in India's urban sector, some experiences better than others. The lessons learned will be put to good use in the proposed project. The Bank has done a substantial amount of "best practice" urban sector work in the areas of infrastructure provision and land management. The Government of India has requested the Bank to assist in a few select states in operationalizing sector reforms mandated under the 74th Constitutional Amendment. The Government of India believes the successful - 6 - implementation of the project will have a substantial demonstration effect nation wide. Furthermore, given the long-term nature of implementing institutional reform statewide and the sizable investments required to meet the needs of states in this sector, the Bank is uniquely positioned to support both the reform process and the associated investment. 4. Description The project has two main components, one providing technical assistance and training to support state and local level urban reforms and project implementation and a second devoted to urban investment in the best performing urban local bodies in the state: a) Techncial Assistance and Training: Financial resources for technical assistance and training activities will be provided to both state and local governments for the design and implementation of reform items on the urban agenda and to support project implementation including the following: design and implementation of computerized municipal budgeting and accounting systems reform of land planning systems, including repeal of Urban Land Ceiling Act and the Rent Control Act preparation and implementation of capacity enhancement programs at state and local level implementation of APUDIDC's business plan implementation of the community planning process (MAPP) in up to 20 towns preparation of borrowing framework to govern muncicpal access to domestic credit markets provide project support for appraisal, procurement and supervision processes b) Urban Investment: Financial resources for urban infrastructure investment as identified in MAPPs would be provided to each participating urban local body and associated low-income communities, after achieving required eligibility criteria. Items of physical infrastructure eligible for funding would include: area upgrading, including on-site water supply and on-plot sanitationb) secondary and tertiary roads storm water drainage water supply and sewage disposal (under a program of reform for the sector, including establishing an adequate tariff policy sanitation footpaths solid waste management, including disposal street lighting parks/green spaces serviced areas for informal and formal urban markets bus stops off-site infrastructure linking slums to city networks, subject to adequate bulk supply capacity where required critical city-wide infrastructure. Sequencing of Implementation Activities. The initial activities to be implemented under the project would focus on the State and local reforms -7 - identified in the URIF agenda. Priority actions areas would include the introduction of computerized accounting systems, property tax reform, reform of the Rent Control Act, and expansion of the coverage of computerized registration processes through out the State. The consultative planning process at the community level would proceed in parallel with the initial reform process, leading to the identification and design of prioritized local infrastructure investments for inclusion in the MAPP. Municipalities would also identify additional reforms and critcial city-wide infrastructure investments to be included in the MAPP. Proposals for managerial improvement would be assessed by the Directorate of Municipal Affairs. Infrastructure investment proposals would be appraised by APUDIFC. Once satisfactory progress had been achieved on the priority reform agenda at the State and local level, additional project funds would be provided to eligible ULBs to support infrastructure investments approved within their respective MAPPs. A schematic illustration of the MAPP process is given below. Selection of Participating ULBs. All interested ULBs would be assisted to achieve improved financial and managerial performance under the reform agenda outlined above. Only those ULBs which achieved predetermined levels of performance measured against eligibility criteria would be permitted to participate in urban infrastructure investment activities funded under the project. Eligibility criteria, to be refined during project preparation, would include: a measure of the severity of urban poverty of the ULB, a benchmarked collection level of property tax for both current demand and some proportion of arrears, adoption of a financial operating plan (positive cash flow), a commitment to maintain an operating ratio of less than 1 and a debt service ratio of less than 30w, including proposed investment, and satisfctory implementation of the priority urban reforms . Project Development and Advisory Facility. The project would include a Project Development and Advisory Facility (PDAF) governed by an Empowered Committee. Specific guidelines on accessing the PDAF would be developed and distinguished from the procedures required to access the urban investment fund. The PDAF would provide financial support to ULBs to support project design, supervision and management, possibly on a matching fund basis. In addition, it would finance consultant services required to advise ULBs on Private Sector Participation. All ULBs in the state could access funds from the PDAF, providing they demonstrate a commitment to implement core infrastructure projects for which land is available and relevant approvals obtained from the Council. The proper institutional location of the fund would be determined during project preparation. a. State and local urban reform measures b. Urban infrastructure investment 5. Financing Total ( US$m) BORROWER $25.00 IBRD $100.00 IDA LOCAL COMMUNITIES $5.00 Total Project Cost $130.00 6. Implementation -8- The overall responsibility for the project would rest with the Municipal Administration and Urban Development Department (MAUD). Policy decisions, including approval of MAPPs, would be made by an Empowered Committee, chaired by the Chief Secretary or other senior official outside of MAUD. Specific responsibility for day-to-day management of the project would fall to the Directorate of Municipal Administration (DMA). The DMA is the most appropriate vehicle for managing activities relating to the municipal strengthening activities, appraisal of MAPPs, and monitoring of project implementation on the ground. As the project rolls out, the role of Regional Directors of Municipal Administration will become more important in that it is proposed that the responsibility for DMA's functions be devolved to the Regional level. Wherever necessary, services of non-governmental organization and the private sector will be procured in project implementation. This is in line with the State's view on delivery of services. APUDIFC is the nodal agency for channeling funds to ULBs and hence would be the conduit for the flow of project funds from the state to ULBs. It will be strengthened to take on an authorative role with respect to urban infrastructure investment appraisal. Monitoring and Evaluation will form an important part of project implementation requiring the services of NGOs / private sector. The role of community-based organizations in implementing the slum upgrading component, possibly by way of community contracting, would be included. Finally, the Public Health Engineering Department (PHED) will be involved in activities concerning water supply and sanitation. 7. Sustainability Urban sector reforms are currently underway in Andhra Pradesh. The project intends to build on the on-going process by strengthening the enabling environment to improve financial, managerial, administrative and technical performance of participating ULBs - moving them in the direction of creditworthiness. The project would also support the creation of clear rules for accessing capital on terms that would require rigorous financial and economic analysis, thus increasing the likelihood of sustainable urban investments. The participatory MAPP process is designed to develop consensus at the community level around a set of priority investments in a transparent manner that provides a degree of insulation from changes sought by a change of political leadership at the local level. Beneficiaries under the project, mainly slum dwellers, would be able to sustain their gains under the project because of their involvement in decision-making on issues of standard of services. Improved security of tenure will contribute to the sustainability of benefits enjoyed by the urban poor. 8. Lessons learned from past operations in the country/sector Evaluation of past performance of many Bank projects in India's urban sector has provided a number of lessons: Urban policy reforms are essential in order to improve the financial performance and administrative/managerial capacity of the ULBs; The sobering experience with urban lending in India has been the Borrowers' lack of absorptive capacity. Generally speaking, most past urban development projects were both too large and too complex for the limited planning, engineering and implementation capacity of both state -9- and local governments. (World Bank, Urban Infrastructure Services Review Report, 1997); The Bank needs to be highly selective about where it operates. More up-front actions by the Borrower during preparation are needed to demonstrate its commitment and to give impetus to the change process when a minimum of policy reform and institutional improvement is critical to project success; The low-income population represents more than 209 of the urban population in Andhra Pradesh. It is important to consider the poverty issue through appropriate project design and the possible inclusion of a specific project component, such as the Grant Fund, which finances the sub-projects targeted to the urban poor (Tamil Nadu Urban Development Project I - Implementation Completion Report); and A demand-based approach requires that implementing agencies find out what potential users want and what resources they are willing to apply to finance and manage installed systems. There is a need to design systems, financing mechanisms, and support structures that are best suited to their needs. A review of the Andhra Pradesh Urban Services for the Poor Project (APUSP) identified a number of issues which have direct relevance for the design of the World Bank investment loan. These include: Linkage of reform with investment - the "challenge" approach: The APUSP project was designed to promote a challenge fund approach, linking reforms at the municipal level with funds for poverty-focused investment in Class I towns of the State. An early decision to undertake reform and investment in all 32 Class I towns, through a Basic Municipal Action Plan for Poverty Reduction, "Basic MAPP", thwarted this challenge-approach early in the project implementation. The large-scale effort that was needed to facilitate the MAPP process in all 32 towns, combined with some delays in decision-making and procurement at the State level, resulted in the reform component of the project being behind schedule. Needs-based and resource-based planning: Where it has been successfully implemented, the MAPP process has facilitated a significant attitudinal change away from the normal process of simply allocating resources equally to each Ward or else responding to politically-driven demands. Participatory processes to map levels of poverty and service-deficit in slums, involving both councillors and poor people, has developed into a simple, transparent and easily accepted matrix upon which to prioritise investments. The simple Strengths - Weaknesses - Opportunities - Threats (SWOT) approach to prioritise reforms has also been well accepted by many ULBs. The need to use a similar approach to converge and allocate all available resources (own resources, GoAP and Central Government plan funds, NSDP, SJSRY, other donor resources etc.) was noted. Citywide investments: APUSP has shown that a number of prioritized in-slum investments (particularly water and drainage) cannot be undertaken without citywide infrastructure improvements. This was a risk that was identified during project design. It requires a combination of more far-reaching reforms, both at municipal and State level, to facilitate more effective decentralization, enhancing the abilities of ULBs to raise and allocate their own revenues. to enhance the financial viability of the towns, combined with facilitated access to other sources of funds. This - 10 - conclusion has implications for the Bank project design while also clarifying the potential poverty linkages of citywide investments. Capacity constraints have been identified at a number of levels. A The project implem,entation units under APUSP are yet to be fully staffed by Government. A Government or consultant resources are not available, in the requisite scale and quality, to either train local government staff and/or directly facilitate activities at the local level (eg. consultative planning, reform initiatives or technical support). A There are engineering staff vacancies in a number of ULBs A At both the Government level and in the ULBs there are neither sufficient community development staff nor any focused cell to promote and monitor the specific poverty and/or gender dimensions of investments. Town-wide approach: At a local level, there is an expressed need for the Municipality to deal with service deficits on a town-wide basis. This was presented in two ways : all poor citizens should be included, irrespective of whether they live in notified, non-notified or other settlements; and service deficiencies in non-poor areas also need addressing to ensure middle and upper-class citizens support enhanced taxation and on-going reforms. Town-level data: Problems of inaccurate, out-dated or incomplete data on both poverty and service provision, was noted. Information: A need for more effective local communication strategies to broaden town-level ownership of the reform and resourced-based planning processes was noted. A comprehensive MIS and monitoring and evaluation system at State level is pending. 9. Environment Aspects (including any public consultation) Issues The project aims to contribute to sustainable urban development by way of reforming urban planning and management, expanding/upgrading municipal services, and providing basic infrastructure with a particular focus on the poor and vulnerable sections of society. The project is expected to contribute to overall improvement of the environmental situation in urban areas by making additional financial resources available for improving existing infrastructure, providing/expanding basic infrastructure, undertaking strategic planning/management for urban development, and improving the quality of service delivery, especially for (and in consultation with) the urban poor. In addition to the project implementation agencies at the state and local/municipal, other important stakeholders for meeting the projects environmental objectives would be NGOs who work with the urban poor and CBOs with urban poor as the members, particularly in those municipalities that qualify for the investment component of the project. Given that the project would finance investment in urban basic services, most of the significant environmental issues would relate to direct environmental impacts if the investments are not properly planned, sited, designed, constructed, and operated and maintained. In addition, significant environmental issues could also arise over the long-term due to cumulative/induced impacts of a large number of investments. For - 11 - example, connecting a large number of slums to citywide infrastructure may exceed the future capacity requirements of the citywide infrastructure. As for the reform component of the project, significant indirect environmental issues could be avoided through good town planning and land management, adequate budgets for operation and maintenance of basic infrastructure, the ability of the urban poor to pay for services, and adequate capacity of the municipal bodies and CBOs to prepare and implement subprojects. All potential social and environmental impacts -- including induced, cumulative and long-term impacts -- related to the various project components will be identified in a Social and Environmental Assessment and Management Framework. In addition, environmental issues pertaining to potential private sector participation in urban infrastructure and environmental management - such as municipal solid waste disposal and sewage treatment and disposal, would need to be examined, particularly with respect to contractual obligations and regulation. The disposal of municipal solid waste and sewage treatment and disposal are two environmental issues which will need to be dealt with explicitly, also because the GoAP is under legal and regulatory obligation to address these issues. 10. Contact Point: Task Manager Richard M. Beardmore The World Bank 1818 H Street, NW Washington D.C. 20433 Telephone: (202) 458-7996 Fax: (202) 522-2427 11. For information on other project related documents contact: The InfoShop The World Bank 1818 H Street, NW Washington, D.C. 20433 Telephone: (202) 458-5454 Fax: (202) 522-1500 Web: http:// www.worldbank.org/infoshop Note: This is information on an evolving project. Certain components may not be necessarily included in the final project. This PID was processed by the InfoShop during the week ending March 7, 2003. - 12 -