Page 1 PROJECT INFORMATION DOCUMENT (PID) CONCEPT STAGE Report No.: AB6287 Project Name Tanzania: Second Local Government Support Project Region AFRICA Sector Sub-national government administration (100%) Project ID P118152 Borrower(s) UNITED REPUBLIC OF TANZANIA Implementing Agency Office of the Prime Minister – Regional Administration and Local Government (PMO-RALG) Government of Tanzania Dar es Salaam Tanzania Tel: (255-22) 724-951 Fax: (255-22) 121-981 ps@pmo.go.tz Environment Category [ ] A [X] B [ ] C [ ] FI [ ] TBD (to be determined) Date PID Prepared January 20, 2011 Estimated Date of Appraisal Authorization September 27, 2011 Estimated Date of Board Approval January 31, 2012 1. Key development issues and rationale for Bank involvement Decentralization by devolution (D by D) has been underway in Tanzania since 1999 and has had positive impacts on governance and service delivery outcomes. The system through which funds are transferred from the centre to local governments has evolved from an ad hoc, discretionary system to one in which horizontal allocations to LGs are made on the basis of formulae determined by equity and efficiency principles. An increasing range of service-delivery functions have been transferred to local governments. However, three challenges remain. First, sufficient support needs to be provided to the system over the next 4-5 years to ensure that it remains funded at appropriate levels while GoT takes it completely onto its own budget and Development Partner support on a projectised basis is phased out. Moreover, weaknesses in the system as it currently functions (e.g. in the timeliness of grant transfers; in the annual performance assessment) need to be rectified and now that a certain base level of institutional capacity has been established at the local level, the system needs to be enhanced in order that higher levels of LG institutional performance can be leveraged. Second, public financial management (PFM) systems at local government levels require strengthening. Increased transfers to LGAs have highlighted systemic weaknesses in PFM systems such as -- multiple planning processes, multiple reporting requirements, lack of harmonization of stand-alone IT solutions such as PLANREP2 and IFMI, poor co-ordination with Central Government Ministries, lack of comprehensive monitoring of fund flows, multiple bank accounts, and poor management of carry forward balances. Page 2 Third, the current fiscal framework does not accommodate the needs to cover either the backlog of urban infrastructure investments or the constantly increasing demand for such financing. This is particularly critical because during the past decade, Tanzania's urban population has grown at over five percent per annum (more than twice the rate for the national population), a trend which is expected to continue such that by 2030 it is estimated that more than 25 million Tanzanians will be living in urban areas. The Bank is well and uniquely positioned to assist the country in the above mentioned areas because of its involvement in the establishment of the LGDG system through the Local Government Support Project (LGSP) and in working with urban LGAs for the provision of municipal infrastructure through the on-going Tanzania Strategic Cities Project (TSCP). 2. Proposed objective(s) The proposed long-term development program objective is to establish a progressive system which enables urban LGAs to deliver and maintain urban infrastructure. The proposed specific objective of the project is to strengthen public financial management in all LGAs and ensure improved infrastructure in urban local governments. The higher level goal the proposed program supports are increased urban economic productivity, service-delivery and governance in these areas. The key result areas for the proposed project are: (a) strengthened public financial management systems in LGAs; (b) a transparent performance-based urban infrastructure grant system established; (c) increase in upgraded urban infrastructure -- urban roads, storm water drains, street lighting: in Kms; bus stands: numbers and number of passengers served/day; solid waste: collection and transportation in tones/day ); and (d) the number and gender of direct project beneficiaries. 3. Preliminary description The first phase of the proposed Adaptable Program Loan (APL) may consist of four components: (1) Support to Decentralization by Devolution (D by D), which will focus on: strengthening public financial management systems at LGAs and enhancing the existing performance-based development grant financing mechanism for all LGAs in Tanzania; (2) Urban Infrastructure Grant (UIG), which will focus on supporting the specific infrastructure financing needs of Tanzania's Municipal and Town Councils; (3) Institutional Strengthening of LGAs, which will provide the inputs required by LGAs covered by both LGDG and UIG to enhance their institutional capacities; and (4) Program Support, which will provide PMO-RALG with the resources required to manage the LGDG, UIG and LGA-CB effectively. 4. Safeguard policies that might apply LGSP 2 is designed to be an Environment and Social Category B project. This is because it will follow and build on systems and implementing arrangements established under LGSP and TSCP (which are both category B projects). However, all participating LGAs have to adhere to: (a) an Environmental and Social Management Framework (ESMF); (b) a Resettlement Policy Framework (RPF); and (c) alignment with national procurement requirements. Capacity to undertake these activities is variable. Therefore, the project will provide for supportive and LGA-focused institutional strengthening inputs. Page 3 5. Tentative financing Source: ($m.) BORROWER/RECIPIENT 0 International Development Association (IDA) 200 Total 200 6. Contact point Contact: Barjor E. Mehta Title: Senior Urban Specialist (AFTUW) Tel: 5355+3250 Email: bmehta@worldbank.org Location: Dar Es Salaam, Tanzania