The World Bank Second Kenya Urban Support Program (P177048) Program Information Documents (PID) Appraisal Stage | Date Prepared/Updated: 30-Mar-2023 | Report No: PIDA265119 Mar 30, 2023 Page 1 of 9 The World Bank Second Kenya Urban Support Program (P177048) BASIC INFORMATION OPS_TABLE_BASIC_DATA A. Basic Program Data Country Project ID Program Name Parent Project ID (if any) Kenya P177048 Second Kenya Urban Support Program Region Estimated Appraisal Date Estimated Board Date Practice Area (Lead) EASTERN AND SOUTHERN AFRICA 20-Mar-2023 31-May-2023 Urban, Resilience and Land Financing Instrument Borrower(s) Implementing Agency Program-for-Results Financing The National Treasury Ministry of Lands, Public Works, Housing and Urban Development Proposed Program Development Objective(s) To strengthen the capacities of urban institutions to: (i) improve the delivery and resilience of urban infrastructure and services; (ii) enhance the private sector engagement in urban planning; and (iii) support the transition of refugee camps into integrated host community and refugee settlements COST & FINANCING SUMMARY (USD Millions) Government program Cost 1,000.00 Total Operation Cost 386.00 Total Program Cost 346.00 IPF Component 40.00 Total Financing 386.00 Financing Gap 0.00 FINANCING (USD Millions) Total World Bank Group Financing 250.00 World Bank Lending 250.00 Total Government Contribution 136.00 Mar 30, 2023 Page 2 of 9 The World Bank Second Kenya Urban Support Program (P177048) Decision The review did authorize the team to appraise and negotiate B. Introduction and Context Country Context 1. With a population of about 53 million (2021) and a Gross Domestic Product (GDP) of about US$110 billion (2021), Kenya has one of the largest economies in Sub-Saharan Africa (SSA). Kenya achieved lower middle-income status in 2014. From 2011 to 2019, GDP growth averaged a robust 4.7 percent, well above the average for SSA (3.7 percent). In 2020, GDP contracted by 0.3 percent due to COVID-19, before rebounding by 7.5 percent in 2021, and it is expected to grow at around 5 percent over the medium-term. 2. Kenya is urbanizing rapidly at a rate of 4.3 percent a year; the share of Kenya’s population living in urban areas in 2019 stood at about 31 percent and is projected to reach 50 percent by 2050. 1 This offers the potential to harness urbanization to drive economic growth. Further, Kenya is highly exposed to various climate hazards, which will become more intense and more recurrent due to climate change. Changes in temperature and rainfall patterns have resulted in more frequent and more intense weather- related disasters such as floods, droughts, and landslides with a major impact on Kenya’s economy, people’s livelihoods and infrastructure. These effects further exacerbate pressures related to population growth, deforestation, and land use change, increasing water scarcity risks throughout the country.3,4 Sectoral and Institutional Context 3. Urbanization has proven vital to economic growth and better living standards in Kenya, but such gains are unevenly distributed. Urban areas contribute over 50 percent of Kenya’s GDP, with the four most urbanized counties accounting for 38 percent of the country’s GDP.2 These gains, however, are not equally distributed. A large share of the urban population is unemployed, underemployed or works in the informal sector.3 Access to urban services is also uneven, with informal settlements being severely underserved. Kenya Vision 2030, the National Urban Development Policy (NUDP) and subsequent urban policies recognize sustainable urbanization as key to overall national economic growth. The draft Fourth Medium Term Plan (2023 – 2027), identifies urbanization among the six sectors under the Social Pillar to drive socio-economic development. 4. Kenya adopted a devolved system of governance in 2010, which abolished the previous local government authorities that managed urban areas, translating to urban governance deficits . The 2010 Constitution provides for two distinct but interdependent levels of government - the national government and 47 county governments. The national government is responsible for policy formulation and strategic national investments while the county governments are responsible for most basic service delivery including in urban areas. The Urban Areas and Cities Act (UACA) 2011, gives effect to Article 184 of the 1 2019 Kenya Population and Housing Census,; World Bank (2016). Kenya Urbanization Review. 2 Kenya Institute for Public Policy Research and Analysis (2020). Kenya Economic Report 2020, Creating an Enabling Environment for Inclusive Growth in Kenya 3 GoK. Economic Survey 2021, Kenya National Bureau of Statistics Mar 30, 2023 Page 3 of 9 The World Bank Second Kenya Urban Support Program (P177048) Constitution by providing procedures for establishing cities and municipalities and urban management institutions. To date, 69 municipalities have established urban boards. 5. In line with the new Refugees Act, in April 2022, the Government announced a shift in policy to transition away from the camp-based models to integrated settlements and both Turkana and Garissa intend to establish municipalities in the refugee hosting areas of Kakuma-Kalobeyei and Dadaab. The aims are to encourage the shared use of public facilities and institutions by refugees and host communities and to ensure refugees are better included in national health, education and social systems to facilitate self-reliance. With the inflow of refugees into Garissa and Turkana, towns/wards and refugee camps have become interdependent,4 qualifying for municipal status as they have reached the required population thresholds. They are, however, managed separately in spite of their growth into an urban agglomeration. 6. Urban services and infrastructure, while better than in rural areas, have not kept pace with demand, negatively impacting spatial growth, businesses, community resilience and livability. Many urban areas including in the refugee hosting areas are characterized by traffic congestion, poor road networks and non-motorized transportation facilities, unreliable public transport, inadequate water and sanitation facilities, unreliable energy supply, absence of green areas and safe public spaces, and unorganized vending areas and markets. Further, lack of integrated spatial and economic development plans combined with weak implementation and enforcement capacity, undermine urban development and service provision. Kenya has nonetheless put into place several legal and policy measures to address the urban development and planning challenge, climate change and promote resilient development. For successful implementation of these frameworks and policies, private sector involvement will be critical to urban area development, job creation and economic transformation. Further, supporting growth of businesses around areas hosting refugees could contribute to the economic development of the surrounding communities. PforR Program Scope 7. The GoK´s program (p) is the Second Kenya Urban Program (KenUP2, 2022 - 2026). KenUP2’s goal is to leverage urbanization as the road to national modernization, promoting effective urban planning and management systems, through Counties, as primary providers of public service delivery. Therefore, its core objectives are to (i) deliver locally determined urban Integrated Development Plans and town plans, (ii) ensure effective development control; and (iii) provide investment frameworks with resulting infrastructure and supporting services. Further, in line with the new Refugees Act, in April 2022, the Government announced a shift in policy to transition away from the camp-based models to integrated settlements. 8. The State Department of Housing and Urban Development (SDHUD) is responsible for the implementation of KenUP2. However, as per their legal mandate, the Counties and their urban institutions, are responsible for implementation of the investments in their respective jurisdictions and with their respective budget allocations. KUSP2 will support elements of KenUP2, focusing on secondary cities and municipalities, and excluding, amongst others, investments in Nairobi and Mombasa as well as those related to upgrading of informal settlements. KUSP2 will build on the foundations established through the KUSP which supported the implementation of the first KenUP. Further, in line with the new Refugees Act, in April 2022, the Government announced a shift in policy to transition away from the camp- based models to integrated settlements. The aims are to encourage the shared use of public facilities and 4 The World Banks White Paper on Urban Forced Displacement classifies 5 urban forced displacement ‘city’ typologies. Interdependent is Type 4 and describes camps within commuting distance or at the periphery of towns. Mar 30, 2023 Page 4 of 9 The World Bank Second Kenya Urban Support Program (P177048) institutions by refugees and host communities and to ensure refugees are better included in national health, education and social systems to facilitate self-reliance. 9. KUSP2 will support reforms, interventions, and actions in five Results Areas (RAs): RA 1: Strengthened institutions for urban service delivery. Strengthening the management of urban institutions for improved urban service delivery, through inter alia, institutional capacity building, enabling the delegation of functions, enhancing of municipal human resources management, and financing, and improving citizen participation. RA 2: Integrated planning for inclusive5 and resilient urban areas. Enhancing the planning and development control capacity of urban institutions, through inter alia, strengthening of planning instruments, including climate change and gender considerations, and improving their implementation and monitoring through appropriate development control tools and capacity. RA 3: More inclusive31 and resilient urban services and infrastructure. Improving the delivery of urban infrastructure and services, as well as strengthening their resilience and sustainability through inter alia, enhancing the capacity for planning, design and implementation of climate- resilient and inclusive urban investments, developing asset registries and management plans, and enhancing the operations and maintenance capacities of urban institutions. RA 4: Improved private sector engagement. Enhancing the private sector’s contribution to urban planning through inter alia, supporting the development and implementation of an engagement framework and promoting urban development plans being informed by dialogue with the private sector. RA 5: Improved integrated development for refugees and host communities. Supporting the transition of refugee camps into integrated host community and refugee settlements, through inter alia, the establishment and capacity building of unified urban institutions to lead joint planning, infrastructure and service delivery and interventions supporting economic activity and social cohesion. 10. KUSP2 is structured into three Components aligned towards delivering outcomes in all the RAs: a. Component 1 – Urban development national policies, capacity building and program management (IPF) will support implementation at the national level by directly financing activities that contribute towards the delivery of the Program outcomes. This Component will provide support for: (i) program management; (ii) policy and regulation development; and (iii) technical and capacity development support to counties and urban institutions. b. Component 2 – Subnational urban development capacity building and investments (PforR) will finance urban infrastructure and service delivery and institutional and capacity development. It will incentivize counties and urban institutions to undertake interventions that contribute to achieving the Program outcomes through performance grants accessed on the basis of their compliance with Minimum Conditions (MCs) and the extent to which they are able to achieve Performance Standards (PSs). c. Component 3 – WHR Urban Institutional development and investments (PforR) will establish and strengthen urban institutions and improve access to infrastructure services in refugee hosting areas, through performance grants accessed on the basis of their compliance with MCs and PSs. 5Inclusive planning is a form of integrated planning that supports the creation of cities that accommodate everyone (regardless of their economic status, gender, ethnicity, disability, age, religion, nationality etc) Mar 30, 2023 Page 5 of 9 The World Bank Second Kenya Urban Support Program (P177048) C. Proposed Program Development Objective(s) Program Development Objective(s) 11. The Program Development Objective is to strengthen the capacities of urban institutions to (i) improve the delivery and resilience of urban infrastructure and services, (ii) enhance the private sector engagement in urban planning; and (iii) support the transition of refugee camps into integrated host community and refugee settlements. 12. Proposed PDO level results indicators are as follows: Table 1. PDO-level indicators PDO-Level result PDO-level indicators Strengthened urban institutions 1. Urban boards that have strengthened institutional performance capacities as demonstrated in the Annual Performance Assessment [Percentage] Improved delivery and resilience of 2. People provided with improved infrastructure and services urban infrastructure and services delivered under the Program (Number) • People provided with improved infrastructure and services delivered under the WHR window (Number) • People provided with improved infrastructure and services delivered under the Program (% being Women) (Percentage) 3. Infrastructure completed under the Program that complies with design standards to ensure they are inclusive and climate resilient (Percentage) Enhance the contribution of the 4. Participating urban boards with Urban Integrated Development private sector to urban planning and Plans (IDePs) informed by private sector diagnostic (Percentage) development Transition of refugee camps into 5. Established municipalities which include refugee camps and integrated host community and settlements, and host community areas (Number) refugee settlements D. Environmental and Social Effects 13. The operation is a hybrid of Program for Results (PforR) and Investment Project Financing (IPF) instruments. KUSP2 activities are expected to have positive impacts as they contribute to strengthening the county, city, municipality and urban institutions’ capacities to improve urban service delivery, private sector engagement and support the transition of refugee camps into integrated host community and refugee settlements. 14. The IPF component will support technical assistance (TA) activities, the Environmental and Social Framework (ESF) will apply. The TA activities under component 1 will include: (i) program management; ii) urban development policy support, technical assistance and capacity building; and (iii) WHR policy support, technical assistance and capacity building. Based on the identified E&S risks, the ESF Mar 30, 2023 Page 6 of 9 The World Bank Second Kenya Urban Support Program (P177048) instruments have been prepared. These include the; (i)Environmental and Social Commitment Plan (ESCP) incorporating elements of Stakeholder Engagement Plan (SEP) and Labour Management procedures (LMP), and (ii) Appraisal Environment and Social Review Summary (A-ESRS) cleared on March 27th, 2023. Thus, the overall environmental and social risk classification is considered as Substantial; with environment risk rating as Moderate and social risk rating as Substantial due to the nature of the proposed IPF component interventions related to the TA activities. 15. For the PforR component, the Bank has conducted an Environmental and Social System Assessment (ESSA), and a stakeholder validation workshop was held on March 14, 2023. Feedback received during the workshop, and comments from the Environment and Social Standard Advisor (ESSA), are being incorporated in the draft ESSAThe draft ESSA reviewed the existing Kenyan legal, regulatory and policy frameworks, national and county systems for Environmental, Social, Health and Safety (ESHS) management, capacities of the SDHUD and relevant MDAs, the Program system performance against the PforR’s six core principles and findings incorporated in Program design and Program Action Plan (PAP). The final ESSA report will be publicly disclosed in-country on the SDHUD website and the World Bank external website, prior to Board approval. 16. Eligible investments to be financed include a range of infrastructure items, which are not likely to have significant environmental and social risks and impacts. The Program will not finance sub-projects that are assessed as substantial and high risk. Certain types of infrastructure have been considered ineligible and placed on a “negative� (or proscribed) investment menu/list. Further MCs and PSs have been introduced specifically under RA 2 and RA 3 to enhance the performance of urban institutions on ESHS Risks and Impact Management. Detailed procedures and templates shall be provided in the ESHS Management Manual in the POM. The Program Action Plan (PAP) recommends; (a) counties receive training for the implementation of the ESHSM manual for managing ESHS risks and impacts of conditional grants to counties/cities/municipalities as part of the Program Operational Manual (POM); (b) adequate deployment of full-time environmental and social safeguards staff at participating city/municipalities; (c) Municipalities to develop GRM structures based on guidelines provided in the ESHSM manual to facilitate improvement on grievance management; d) include the ESHS clauses in the bidding and contract documents for civil works, and (e) Program to partner with relevant lead agencies in the ESHS risks management, that include the DOSHS, NEMA, NCA and NLC, to deliver capacity building to municipalities and contractors. . . ESF_LEGAL_T BL Legal Operational Policies Triggered? Projects on International Waterways OP 7.50 No Projects in Disputed Areas OP 7.60 No Summary of Assessment of Environmental and Social Risks and Impacts (With IPF Component for PforR) . Mar 30, 2023 Page 7 of 9 The World Bank Second Kenya Urban Support Program (P177048) E. Financing Program Financing (Template) Sources Amount % of Total (USD Million) Counterpart Funding 136.00 35.23 Local Govts. (Prov., District, City) of Borrowing Country 126.00 32.64 National Government 10.00 2.59 International Development Association (IDA) 250.00 64.77 IDA Credit 200.00 51.81 IDA Grant 50.00 12.95 Total Program Financing 386.00 . CONTACT POINT World Bank Name : Beatriz Eraso Puig Designation : Senior Urban Specialist Role : Team Leader(ADM Responsible) Telephone No : 254-11-06488 Email : berasopuig@worldbank.org Name : Christine Anyango Owuor Designation : Senior Public Sector Specialist Role : Team Leader Telephone No : 5327+6368 Email : cowuor@worldbank.org Borrower/Client/Recipient Borrower : The National Treasury Contact : Dr. Chris Kiptoo Title : Principal Secretary Telephone No : 2252299 Email : ps@treasury.go.ke Implementing Agencies Mar 30, 2023 Page 8 of 9 The World Bank Second Kenya Urban Support Program (P177048) Implementing Ministry of Lands, Public Works, Agency : Housing and Urban Development Contact : Charles Hinga Title : Principal Secretary Telephone No : 2713833 Email : ps@housingandurban.go.ke FOR MORE INFORMATION CONTACT The World Bank 1818 H Street, NW Washington, D.C. 20433 Telephone: (202) 473-1000 Web: http://www.worldbank.org/projects Mar 30, 2023 Page 9 of 9