Page 1 INTEGRATED SAFEGUARDS DATASHEET APPRAISAL STAGE I. Basic Information Date prepared/updated: 12/02/2009 Report No.: AC4448 1. Basic Project Data Country: Bhutan Project ID: P090157 Project Name: Urban Development II Task Team Leader: Toshiaki Keicho Estimated Appraisal Date: December 7, 2009 Estimated Board Date: April 29, 2010 Managing Unit: SASDU Lending Instrument: Specific Investment Loan Sector: Water supply (100%) Theme: Access to urban services and housing (50%);Municipal governance and institution building (25%);Other urban development (25%) IBRD Amount (US$m.): 0.00 IDA Amount (US$m.): 10.00 GEF Amount (US$m.): 0.00 PCF Amount (US$m.): 0.00 Other financing amounts by source: BORROWER/RECIPIENT 1.00 1.00 Environmental Category: B - Partial Assessment Simplified Processing Simple [] Repeater [] Is this project processed under OP 8.50 (Emergency Recovery) or OP 8.00 (Rapid Response to Crises and Emergencies) Yes [ ] No [X] 2. Project Objectives The proposed project development objectives are to: (i) support Bhutan's municipal reform program to achieve a more decentralized and accountable urban local government system, starting from Thimphu; and (ii) improve infrastructure services in northern Thimphu. The first objective is about helping RGOB and TCC/PCC implement the recently-passed Bhutan Municipal Act of 2007 through a series of technical assistance, training programs, policy dialogue, and research/studies and if needed funding of an effective intergovernmental fiscal transfer system. The second objective addresses an urgent need for serviced urban land, given the already substantial and increasing migrant population settling in the peripheries of Thimphu. The process of attaining these objectives would help develop models and capacity for broader urban management in Bhutan. 3. Project Description The Project will consist of two components: (i) a municipal reform/institutional development component; and (ii) Thimphu Northern Area Development. A summary of these components are described below. Page 2 Municipal Reform/Institutional Development Strengthening Municipal Finances: This component aims at strengthening the institutional systems and processes of the two city corporations of Thimphu and Phuentsholing to enable them to function effectively as transparent and accountable local governments capable of providing urban services in a sustainable manner. It will also support RGoB to undertake policy reforms relating to the strengthening of municipal finances. The support for the city-specific reform measures will comprise of two broad areas, namely; (i) strengthening the own source revenues and revenue administration systems of TCC and PCC and, (ii) strengthening the expenditure management systems and financial accountability of TCC and PCC. The support for policy reforms will enable RGoB in the design and implementation of an inter-government fiscal transfer system to the cities that is based on sound principles and is rational, predictable and transparent. Capacity Building: This component will necessarily aim at significant upgrading of the capacities of each city corporation(s) in various aspects of their internal work processes and service delivery to citizens. Taking into consideration the respective requirements of each city corporation, the capacity-building activities will focus primarily on improving the efficiencies of different services to be delivered by each city. The institutional development of Thimphu and Phuentsholing city corporations will be designed and implemented under the general ambit of the the new Thromde Act of 2007 and the ongoing decentralization/democratization process in the country, including the municipal finance policy support component (as above). Thimphu Northern Area Development RGOB/TCC has been planning to develop the Northern areas, consisting of five Local Area Plans (LAPs), through a land-pooling approach. Earlier, RGOB made it clear to IDA that given the history of planning and community consultation processes that have taken place for the past many years in these areas, there would be no alternative to the land-pooling approach. RGOB prepared the Bhutan Land-Pooling Rules, and the Cabinet approved the Rules on March 17, 2009. As per the new rules, at least two thirds of the landowners have to support the land pooling in order for the development plans to proceed. This component will focus on two LAP areas in northern Thimphu, where the preparation for land-pooling is most advanced (Dechencholing and Langjophakha). The project will finance development of basic infrastructure systems in these areas, including roads, stormwater drainage, water supply, sewerage, and street lighting. 4. Project Location and salient physical characteristics relevant to the safeguard analysis The physical component of the project will be implemented in Northern Thimpu area covering two Local Area Plans (LAPs) at Dechencholing and Langjophakha. The Page 3 proposed implementation area is developed through land pooling and is generally depicts rolling terrain. 5. Environmental and Social Safeguards Specialists Mr Sita Ramakrishna Addepalli (SASDI) Ms Asta Olesen (SASDI) 6. Safeguard Policies Triggered Yes No Environmental Assessment (OP/BP 4.01) X Natural Habitats (OP/BP 4.04) X Forests (OP/BP 4.36) X Pest Management (OP 4.09) X Physical Cultural Resources (OP/BP 4.11) X Indigenous Peoples (OP/BP 4.10) X Involuntary Resettlement (OP/BP 4.12) X Safety of Dams (OP/BP 4.37) X Projects on International Waterways (OP/BP 7.50) X Projects in Disputed Areas (OP/BP 7.60) X II. Key Safeguard Policy Issues and Their Management A. Summary of Key Safeguard Issues 1. Describe any safeguard issues and impacts associated with the proposed project. Identify and describe any potential large scale, significant and/or irreversible impacts: a. The project has triggered three safeguard policies as indicated above. The physical interventions proposed under the project could result in limited environmental impacts relating to construction of municipal services in the designated local areas. Though limited, the expected environmental impacts identified by Environmental Screening undertaken by RGoB, include: clearing of trees, limited slope disturbances and soil erosion at various spots by construction activities, possibility of Wang Chhu River water quality degradation due to project generated spoils/ surplus as well as from disposal of wastes, air quality and noise related impacts from construction activities and increased vehicle impacts due to location of labour and contractor camp sites, temporary disturbance to local traffic, and operation stage impacts due to sewage disposal. However, the proposed project activities will not have any adverse impacts on Natural Habitats and forest resources. Since the current project is one of the pilots for Country Systems (CS) on environmental safeguards, the provisions under OP 4.00 have been applied. As part of CS assessments, Bhutan#s environmental policies applicable for urban projects have been determined to be equivalent to the corresponding requirements of OP 4.00 with relevant acceptability measures agreed with the client. The Sectoral Environmental Assessment prepared considering Bank policies as well as Bhutan country systems has provisions to address environmental impacts. b. A Social Assessment has been carried out for both LAPs. The land pooling approach applied in BUDP II is based on the Land Pooling Rules and Regulations (2009), which places emphasis on in situ development, minimizes resettlement and enables Page 4 original owners to retain title to the majority of the land. The land pooling approach is based on voluntary agreement with affected landowners and the Regulations stipulates that at least two third of land owners in a given area should sign Land Pooling Agreements. For a land owner, the net economic benefit due to land pooling is calculated to be typically be in the range of a 15 times increase of the economic value of the remaining land. While land will be voluntarily contributed to the LAP, Project Affected Families will receive compensation for loss of structures, other assets, livelihood and resettlement assistance plus additional assistance to the most vulnerable according to an Entitlement Framework developed by TCC, compliant with OP 4.12. The Resettlement Action Plan (RAP) for Dechencholing identified a total of 52 Project Affected Families (out of the total of 187 families) of which 32 are landowners. Twenty tenant families will also be affected and have to relocate. A RAP has not yet been carried out for Langjopakha. 2. Describe any potential indirect and/or long term impacts due to anticipated future activities in the project area: The proposed project interventions and or activities would not lead to adverse long-term environmental impacts as the project interventions relate to improving services in pre- identified LAPs where land use regulations are enforced effectively. The proposed project is not expected to have any long term negative social impact. On the contrary, the improved provision of services is expected to have considerable positive impact on the living conditions of and services enjoyed by the population in the LAPs. 3. Describe any project alternatives (if relevant) considered to help avoid or minimize adverse impacts. With reference to water supply for the LAPs, the EA has considered 6 options for the source of water supply. As part of the alternative analysis, the significant impacts were noted in one of the source options located in a National Park. This option has been eliminated to minimize impacts. The alternatives analysis for secondary roads, sanitation, and street lighting relates to technical options minimizing the environmental impacts. The alternative to the land pooling approach applied would be #ordinary# land acquisition which would have far greater impact on project affected people, resulting in a larger number of people losing title to their land and having to relocate, thus causing greater social disturbances than the land pooling solutions. According to the Social Assessment (July 2009), 97% of land owners in Dechencholing and 80% of landowners in Langjopakha have signed the land pooling agreements so far, i.e. fulfilling the requirements for application of the land pooling approach whereby they will contribute about 25% of their land in exchange for provision of infrastructure services in the LAP. However, the government is still trying to reach a 100% acceptance of the land pooling approach among the land owners of these LAPs. Page 5 4. Describe measures taken by the borrower to address safeguard policy issues. Provide an assessment of borrower capacity to plan and implement the measures described. Environment: RGoB has prepared Environmental Screening and Sectoral Environmental Assessment following Bank policies as well as Bhutan Country System. The Screening Report identifies potential environmental impacts related to subcomponent/ subproject types, and Sectoral Environmental Assessment describes and recommends provisions such as institutional mechanism, environmental management guidelines including management framework, and generic Environmental Management Plan for various subcomponent/subproject types to address environmental impacts. During implementation, these will be adapted to the specific subproject/ subcomponent through preparation of specific environmental management plan as well as through Contractor#s Site Environmental Management Plan. The physical component of the project will be implemented by TCC with DUDES of MoWHS providing an oversight and monitoring function. The city#s engineering division will be responsible for procurement and construction of civil works in coordination with its urban planning division, and the project will finance TA consultants, including environmental specialists to assist them. TCC, although has environment division, has limited number of qualified staff in the environmental field and little experience related to environmental management. There is no environmental specialist within DUDES as well. However, the Policy and Planning Division (PPD) under MoWHS has two qualified environmental professionals who will be providing an oversight and monitoring of implementation of environmental management plans for the project. The Bank assessment on Equivalency and Acceptability of RGoB#s System found equivalence of Bhutan Country System with corresponding World Bank safeguard for EA and PCR subject to provision in the ToRs of subcomponent EA/ screening or EMP/ Contractors Site EMP for the protection of physical cultural resources discovered during implementation and operation. The Bank assessment emphasizes on the need for improving implementation effectiveness of the Bhutan System in order to achieve good environmental safeguard results in BUDP II. Implementation effectiveness could be constrained due to ambiguities in some of the mandates, roles and responsibilities; low capacity and awareness and shortage of human and other resources in the involved institutions for environmental safeguard works; issues related to coordination among various agencies and stakeholder consultations; and weak monitoring of the compliance with and enforcement of legal provision as well as lack of system for urban environmental information collection, use and disclosure. Considering the above, the following measures have been recommended to attain and sustain Acceptability as part of Safeguards Diagnostic Review under Country Systems Piloting. The recommended measures below are due for reaching agreement: Page 6 a. Clarifying mandates, roles and responsibilities: Defining the roles and responsibilities of NECS, MoWHS, DUDES and TCC as well as other relevant agencies such as MoEA, department of Forest etc, minimizing overlaps and/or gaps with adequate relevance to regulation, environmental codes of practices and guidelines. Such activities shall form part of Municipal Reforms and Institutional Development component of the project and will be coordinated with ongoing IDF grant support for Strengthening Institutions Capacity for Implementation of Environmental Safeguard. Before implementation, the involved agencies, at least in the context of BUDP II, will agree with regard to who is responsible for what environmental function/ responsibility and the project will provide necessary support, if and when required. b. Capacity and awareness building: In the short term, the project proposes to build capacity of TCC by providing TA consultants. Further in the medium and long term, beyond the project: (i) TCC will strengthen their environmental cell by appointing qualified environmental professionals, (ii) the existing environmental specialists at PPD, MoWHS will take active role in building capacity and awareness on streamlining environmental management at TCC with adequate oversight and monitoring function. This function would also include effective involvement of all the stakeholders including DUDES, citizens groups, etc. Need for strengthening PPD/MoWHS and DUDES with additional human resources, which is suggested by Sectoral Environmental Assessment, will be re-assessed in the early stage of BUDP II implementation; and (iii) National Environmental Commission Secretariat (NECS) will take up long term responsibility with relevant training programs for urban managers across the country. During BUDP II implementation and with support from the project, NECS will design and conduct environmental training and awareness program tailored to the needs and responsibilities of agencies involved in BUDP II. c. Improving Consultation Process: The current consultation process will be improved by: i) holding consultations with general public and civil society also (not only with directly affected party/ person), ii) consulting with stakeholders/ interest groups during different phases of environmental assessment and management, including at the time of approval of drafting ToR for EA, in the process of issuing EC, during compliance monitoring, etc. d. Enhancing coordination: MoWHS will utilize its monthly coordination meeting for improving coordination for better environmental management in urban areas including reviewing BUDP II environmental activities. Ways to improve coordination with agencies external to MoWHS (such as TCC, NECS, MoEA, DEC etc) will be explored and implemented in the early stage of BUDP II implementation. e. Piloting Urban Environmental Information System in Thimphu City. During BUDP II implementation and with project support, RGoB/ TCC will introduce/ pilot an Urban Environmental Information Management System for Thimphu City. This will build on the existing Environmental Information Management software and draft strategy for Environmental Information Management System. Social: A Resettlement Action Plan (RAP) has been prepared for the Dechencholing LAP to address issues related to involuntary resettlement and/or the loss of assets or income as a result of the land pooling approach and the demarcation and location of facilities in the LAP. This RAP identifies the broad scope of the project and outlines the Page 7 policy, procedures for acquisition of land, compensation and other assistance measures for affected persons, as well as required institutional arrangements. While the RGOB#s compensation rates are based on the below-market, government land value, the RAP, in order to mitigate this risk, is proposing to give resettlement allowance in cash equivalent to the difference between the Urban Land Compensation rate (2006) and full replacement value as per current values in the same vicinity, plus value of all land transaction fees and charges. The RAP provides guidelines for how to address Land Acquisition in case of titleholders who may not agree to land pooling. Their lands would be subject to full land acquisition based on the Bhutan land acquisition policy (2007) and complaint with OP4.12. The TCC/SDRC is responsible for the implementation of the RAP, and capacity building of SDRC is part of the RAP Implementation schedule. While SDRC will carry out internal monitoring of RAP, an independent agency will undertake periodic review of RAP implementation. 5. Identify the key stakeholders and describe the mechanisms for consultation and disclosure on safeguard policies, with an emphasis on potentially affected people. The stakeholder consultations conducted as part of preparation of EA include, consultations with NGOs, citizens groups, and population near to the proposed facilities. The draft final EA has been disclosed in the country for comments and suggestions. The Land Pooling Rules and Regulations (2009) comprises the provision of information and public consultations as standard procedures. The population in the two LAPs has been informed about the project and the land pooling approach through a number of public meetings and consultations since 2003. The planners developing the new area plans have undertaken very close consultations with titleholders and made a number of adjustments to the plans in order to minimize negative impact and in order to accommodate the concerns raised by the PAPs. During the implementation of the RAP, consultations will continue in the form of a series of Focus Group Discussions among stakeholders regarding RAP implementation and entitlement framework. The draft RAP will be disclosed in the country for comments and suggestions. The final RAP (Executive Summary and Entitlement Framework) will be translated into local language (Dzongkha) and copies will be provided to public representatives, the library and the local school. In addition, the RAP will be available at the MoWHS and TCC offices as well as on the TCC website. B. Disclosure Requirements Date Environmental Assessment/Audit/Management Plan/Other: Was the document disclosed prior to appraisal? Yes Date of receipt by the Bank 11/10/2009 Date of "in-country" disclosure 12/04/2009 Date of submission to InfoShop 12/03/2009 For category A projects, date of distributing the Executive Page 8 Summary of the EA to the Executive Directors Resettlement Action Plan/Framework/Policy Process: Was the document disclosed prior to appraisal? Yes Date of receipt by the Bank 11/17/2009 Date of "in-country" disclosure 12/04/2009 Date of submission to InfoShop 12/03/2009 Indigenous Peoples Plan/Planning Framework: Was the document disclosed prior to appraisal? Date of receipt by the Bank Date of "in-country" disclosure Date of submission to InfoShop Pest Management Plan: Was the document disclosed prior to appraisal? Date of receipt by the Bank Date of "in-country" disclosure Date of submission to InfoShop * If the project triggers the Pest Management and/or Physical Cultural Resources, the respective issues are to be addressed and disclosed as part of the Environmental Assessment/Audit/or EMP. If in-country disclosure of any of the above documents is not expected, please explain why: C. Compliance Monitoring Indicators at the Corporate Level (to be filled in when the ISDS is finalized by the project decision meeting) OP/BP/GP 4.01 - Environment Assessment Does the project require a stand-alone EA (including EMP) report? Yes If yes, then did the Regional Environment Unit or Sector Manager (SM) review and approve the EA report? Yes Are the cost and the accountabilities for the EMP incorporated in the credit/loan? Yes OP/BP 4.12 - Involuntary Resettlement Has a resettlement plan/abbreviated plan/policy framework/process framework (as appropriate) been prepared? Yes If yes, then did the Regional unit responsible for safeguards or Sector Manager review the plan? Yes The World Bank Policy on Disclosure of Information Have relevant safeguard policies documents been sent to the World Bank's Infoshop? Yes Have relevant documents been disclosed in-country in a public place in a form and language that are understandable and accessible to project-affected groups and local NGOs? Yes All Safeguard Policies Have satisfactory calendar, budget and clear institutional responsibilities Yes Page 9 been prepared for the implementation of measures related to safeguard policies? Have costs related to safeguard policy measures been included in the project cost? Yes Does the Monitoring and Evaluation system of the project include the monitoring of safeguard impacts and measures related to safeguard policies? Yes Have satisfactory implementation arrangements been agreed with the borrower and the same been adequately reflected in the project legal documents? N/A D. Approvals Signed and submitted by: Name Date Task Team Leader: Mr Toshiaki Keicho 11/30/2009 Environmental Specialist: Mr Sita Ramakrishna Addepalli 11/30/2009 Social Development Specialist Ms Asta Olesen 11/30/2009 Additional Environmental and/or Social Development Specialist(s): Approved by: Regional Safeguards Coordinator: Mr Sanjay Srivastava 12/02/2009 Comments: cleared. Sector Manager: Mr Junaid Kamal Ahmad 12/02/2009 Comments: cleared