PROJECT INFORMATION DOCUMENT (PID) APPRAISAL STAGE Report No.: PIDA878 Public Disclosure Copy Project Name Benin Cities Support Program (P122950) Region AFRICA Country Benin Sector(s) Rural and Inter-Urban Roads and Highways (31%), Sanitation (31%), Sub-national government administration (16%), Solid waste manageme nt (15%), Other social services (7%) Theme(s) Urban services and housing for the poor (50%), Municipal governance and institution building (24%), Decentralization (13%), Particip ation and civic engagement (13%) Lending Instrument Specific Investment Loan Project ID P122950 Borrower(s) Republic of Benin Implementing Agency Ministry of Urban Development, Housing and Environment Environmental Category B-Partial Assessment Date PID Prepared/Updated 19-Apr-2013 Date PID Approved/Disclosed 20-Apr-2013 Estimated Date of Appraisal 22-Apr-2013 Completion Estimated Date of Board 30-May-2013 Public Disclosure Copy Approval Decision I. Project Context Country Context Benin is a coastal country with a population of 9 million people and a per capita annual income of US$753 (Atlas method, 2012). The agricultural sector accounts for 32% of the GDP and provides employment to about 70% of the workforce. Annual GDP growth averaged 4.3 % between 1996 and 2006, peaked at about 5% in 2008 but retracted to 2.3% in 2009 due to the global recession and picked up to 4.1% in 2012. Poverty is high with one third of Beninese living below the poverty line. Benin ranks 160 out of 182 countries according to the 2010 UNDP Human Development Report. Compared to other African countries of similar size and development, Benin’s urbanization rate is rapidly increasing with nearly 41% of the population living in urban areas and half of the urban population residing in the three major municipal centers of Cotonou, Porto Novo, and Parakou. The Environment Performance Index (EPI) benchmarks environmental sustainability performance of a country relative to other countries and ranks Benin 154 among 161 countries (Yale University, 2011) reflecting the country’s weak capacity to preserve the quality of its natural resources and ensure the well-being of the population. Page 1 of 6 Benin population is growing at the rate of about 3.5% per annum. An urban transition process is well underway with people moving from the rural areas in response to difficult living conditions, Public Disclosure Copy search for jobs and need for basic services, to urban centers. Majority of the rural-urban migrants are ending up in the already crowded and poorly serviced parts of urban centers, further straining the already poor services in these areas. This rapid growth is being accompanied by significant problems with respect to the disposal of solid waste; degradation of water quality; urban air pollution; building in ecologically sensitive areas that are prone to seasonal flooding and an overall degradation of environmental quality. The urbanization rate stands at 41 percent but is rapidly increasing, with an annual urban population growth rate of 5 percent. Limited infrastructure and poor access to basic services affect living conditions in many neighborhoods and constrain the ability of Benin's municipal centers to reap the benefits of economies of scale normally linked with increased urbanization. Benin has made important economic and political gains over the last two decades. A radical shift from a centrally-planned to a market-based economy took place in 1990 following a National Conference which marked the beginning of a new era of openness, multiparty democracy and a new constitution. The shift in focus of economic and political management of the country saw an immediate change to real GDP growing by an annual average rate of 4.4 percent during the decade of the 1990s and thereafter by 4.3 percent between 2001-2008, compared with 0.3 percent between 1986 and 1989. For an economy that is so dependent on cotton and re-export of goods cleared at its main harbor in Cotonou, the global economic & financial crisis of 2008 and thereafter led to a deceleration in growth—from 5% in 2008 to 2.8% in 2011 and an estimated 2.65% in 2013. Heavy rain falls resulting in flooding in 2010 and 2012 which negatively affected core infrastructure and services delivery also contributed to the slowdown in the economic development of the country. Democratic processes have been fairly well entrenched in Benin since the 1990s as regular elections both at central and local levels have been held and mostly declared “free and fair’ by many Public Disclosure Copy observers. The latest presidential election held on March 13, 2011 was uneventful and the incumbent won a second and final mandate with 53 percent of the vote. Legislative elections were held on April 30, 2011. These elections represent the fifth presidential and sixth legislative elections since the new Constitution came into effect in 1990. The country also began holding local elections in 2002, building the foundations for decentralization. The next local elections are scheduled to be held in November of 2013. Sectoral and institutional Context A clear shift in the 1990 Constitution was the recognition of the freedom of “territorial collectives� to administer themselves under specific conditions supervised by the central government. The role of the State was specified as ensuring “the harmonious development of territorial collectives on the basis of national solidarity, regional potentialities and interregional balance.� (Article 153 of the Constitution). While this was clear in the constitution, the operationalization of the assigned roles for the collectivities or local governments including municipal government did not move forward till 1999 when a new set of laws was adopted to define the legal and institutional framework within which the decentralization process was to be organized. In all, 77 communes and 12 Administrative Regions were created by the 1999 Law and the status of Cotonou, Parakou and Porto Novo assigned as "Special Municipalities" thus allowing them even more freedom to decide local taxes and special planning rights. Page 2 of 6 From 1999 until recently, the process of decentralization was slow, as in many African countries, but the pace of decentralization has increased in recent years. As has happened in other countries, Public Disclosure Copy the speed of transfer of political power to the communes was initially faster than transfer of fiscal power. Two communal elections were held (in 2003 and 2008) during which Councilors and Mayors have been elected through universal suffrage. Efforts to strengthen fiscal decentralization were boosted by the setting up of the Fonds d’Appui au Développement des Municipalities (FADeC), the Commission Nationale des Finances Locales (CONAFIL) in 2008 and 2009. In October 2009, Government launched the Politique Nationale de Décentralisation et de Déconcentration (PONADEC), Government’s strategic framework aimed at creating the institutional conditions for broad and sustainable development based on coordinated local governance, transparency, and local empowerment. FADeC is a transfer mechanism that seeks to equalize and consolidate all transfers to communes. FADeC transfers are made up of: (i) an operational allocation to cover recurrent costs of communes’ decentralized responsibilities; and (ii) an investment allocation to cover costs of capital expenditures related to decentralized services. The investment allocation is further broken down into non- earmarked and earmarked portions; the former determined on the basis of the size of a commune, its population and poverty level, and its performance, and the latter on the basis of specific sectoral needs. CONAFIL is charged with examining the modalities, mechanism, criteria and amount of transfers to communes; setting up monitoring and evaluation of the performance of FADeC; and ensuring the proper functioning of FADeC, especially regarding the swift disbursement of budgeted funds. Since its inception, the Government has shown a strong commitment to FADeC, with non- earmarked transfers rising from FCFA 7.97 billion (USD 15.94 million) in 2008 to FCFA 16.68 billion (USD 33.36 million) in 2012. Still, this represents a low level of national resources (only about 4.0% of government expenditures or the equivalent of 0.9% of GDP). The responsibilities delegated to communes are specified in Law 97-029 of 1999, which provides Public Disclosure Copy broad framework for the transfer of operational responsibilities in three areas (water management, health care and primary education) to communes, and more specifically: - Planning, - Infrastructure development (building/maintenance of roads, street lighting), - Environmental management, - Hygiene and sanitation provision (drinking water and waste management), - Literacy, early childhood and primary education (building, equipment and maintenance of schools), - Health and social education provision (building, equipment and maintenance of public health centers), - Economic services and investments management (building, equipmen t and maintenance of markets and abattoirs). At present, communes are able to discharge these responsibilities with varying levels of performance. Those with special status, considered by the State as engines of growth and therefore given preferential allocation of State resources (Cotonou, Porto Novo, and Parakou), perform better, while others (mostly the rural and isolated ones) struggle to do so. Sectoral ministries, who had previously been responsible for many of the services listed above, were to relinquish their old role of delivery of such services, and instead focus on setting and maintaining standards of performance and technical supervision. However, due to low capacity of communes and reluctance of ministries Page 3 of 6 to accept a more limited role, this has proceeded slowly in some sectors, as evidenced by the low levels of resources flowing through the FADeC earmarked windows for basic service delivery sectors. Public Disclosure Copy For urban communes, Benin adopted a National Housing and Urbanization Policy in 1999 which aims to support the municipal centers as socio-economic growth poles, and improve levels of services and infrastructure. Specific actions to support the successful implementation of this policy have been identified, including: (i) improvement of the local taxation system, (ii) delegated management of economic facilities and increased private sector involvement, (iii) labor intensive work programs emphasizing the use of local materials, (iv) delegated contract management and delivery of communal services, and (v) increased expenditures for investment and maintenance. So far the results of the implementation of these policies have not been as satisfactory as Government would have liked mainly as a result of the weak regulatory framework implementation as well as lack of resources availability. Government has therefore requested support to strengthen its improvement and implementation. Most municipalities have yet to fully apply the policy’s drive towards the use of private sector agents for carrying out some functions, for example, maintenance of infrastructure that the State had carried out for the last several years on behalf of the Municipalities. Urban infrastructure and services have been under-funded and infrastructure development has been hampered by incoherent asset management and maintenance. The level of service delivery varies considerably among urban centers. In Cotonou, most basic services are available to about 55 percent of households within a 15 minute-walking distance. In other cities, this ratio falls to 20 percent. Maintenance of infrastructure assets is most often sporadic and not clearly regulated and managed in commune planning and management. Overall, more than a decade of lack of structured infrastructure assets maintenance has resulted in the destruction or deterioration of existing facilities that, compounded with an absence of regular investments in most Municipalities, has negatively impacted the urban areas. The absence of reliable/regularly-updated data on urban activities Public Disclosure Copy (infrastructure, services, municipal finance, and population) seriously handicaps sound planning and programming at the local level as well as at the national level and the project proposes to start off a process of putting an urban services data system in place. II. Project Development Objectives The Project's development objective is to increase access to urban services and improve urban management in selected cities of Benin. III. Project Description Component Name Service Delivery Improvement Municipal and Urban Management and Deepening Decentralization Institutional Strengthening, Capacity Building, M&E and Project Management IV. Financing (in USD Million) For Loans/Credits/Others Amount BORROWER/RECIPIENT 0.00 International Development Association (IDA) 60.00 Page 4 of 6 Total 60.00 Public Disclosure Copy V. Implementation The project will be implemented by a Technical Secretariat (TS) of the Inter-Ministerial Steering Committee that will act as the main project management unit (PMU) that will supervise the work of the implementing entity. The TS will have overall day to day implementation responsibilities including managerial, liaison and coordination, evaluation, supervision and dissemination functions. Up until mid-term review, as with PGUD-2, the GOB will delegate contract management to an implementing entity (IE) that will be competitively selected, and which shall have at least up to ten years’ project management experience, a proven track record in implementing IDA-financed projects, are familiar with the nature of the proposed works and have the best capacity in terms of procurement, financial management and supervision of comparable activities. At mid-term review, the Government and Bank will examine the progress in capacity building of the 10 urban municipalities on procurement, financial management, and safeguards. On the basis of each municipality's performance against a set of agreed objective criteria relating to procurement, financial management, and safeguards, a decision will be made for each municipality as to whether it is capable of executing the investments in the second half of the project. An implementing agency/entity will continue to carry out the project in those municipalities that are not assessed to have sufficient capacity. VI. Safeguard Policies (including public consultation) Safeguard Policies Triggered by the Project Yes No Environmental Assessment OP/BP 4.01 ✖ Natural Habitats OP/BP 4.04 ✖ Forests OP/BP 4.36 ✖ Pest Management OP 4.09 ✖ Physical Cultural Resources OP/BP 4.11 ✖ Public Disclosure Copy Indigenous Peoples OP/BP 4.10 ✖ Involuntary Resettlement OP/BP 4.12 ✖ Safety of Dams OP/BP 4.37 ✖ Projects on International Waterways OP/BP 7.50 ✖ Projects in Disputed Areas OP/BP 7.60 ✖ VII. Contact point World Bank Contact: Kwabena Amankwah-Ayeh Title: Sr Urban Spec. Tel: 458-2782 Email: kamankwahayeh@worldbank.org Borrower/Client/Recipient Name: Republic of Benin Contact: Title: Tel: Email: Page 5 of 6 Implementing Agencies Name: Ministry of Urban Development, Housing and Environment Contact: Public Disclosure Copy Title: Tel: 229 300 209 Email: VIII. For more information contact: The InfoShop The World Bank 1818 H Street, NW Washington, D.C. 20433 Telephone: (202) 458-4500 Fax: (202) 522-1500 Web: http://www.worldbank.org/infoshop Public Disclosure Copy Page 6 of 6