Report No. PIC1937 Project Name Mali-Decentralization and Urban Infrastructure Project Region Africa Sector Urban Development / Infrastructure Project ID MLPA1750 Borrower Government of Mali Implementing Agencies Ministry of Urbanism and Housing Contact: S.E. Mme Sy Kadiatou Sow, Minister of Urbanism and Housing Bamako, Mali Tel: 22 29 02 Fax: 23 06 33 AGETIP-MALI (Agence d+execution de Travaux d+interet Public pour l+Emploi) Contact: Mr. Lamine Ben Barka, Directeur General Bamako, Mali Tel: 223 22 09 60 Fax: 223 22 09 71 ACI (Agence de Cession Immobiliere) Contact: Mr. Traore Bamako, Mali Tel: 22 88 08 Date PID Prepared March 29, 1995 Projected Board Date May 28, 1996 Country/Sector Background 1. Mali's urban population has grown rapidly, at an average rate of 6.49 annually between 1960 and 1990, compared to a total population growth rate of 2.7w annually, even though Mali remains a predominantly agricultural country with the rural population representing around 75t of the total which is 9,000,000. Nevertheless, trends over the past 35 years show urban areas growing faster than the rural sector. In 1960, the urban population was 270,000 (59 of the total population); this reached 1,860,000 (23w of the total) in 1990, and is estimated to grow to 5,600,000 (38w of the total) by 2020. The capital, Bamako, which had a population of 320,000 in 1972 and which has reached now 900,000, is estimatyed to reach 1,370,000 in 2005. Only a few other towns have more than 40,000 inhabitants: Sbgou (88,000), Mopti (75,000), Sikasso (74,000), Gao (55,000), Kayes (51,000) and Koutiala (49,000). 2. More than half of the total GDP is generated within urban areas. It is estimated that the contribution of secondary and tertiary sectors to GDP grew at an average rate of about 10t in real terms between 1987 and 1992, versus 3.6w for the total. However, given the high rate of urban population growth, per capita urban productivity is increasing slower than that of the primary sector. 3. Municipal revenues are very low with an annual budget average of about CFAF 50 million (US$ 100,000) in the main cities, except for the District of Bamako that has a budget of CFAF 1.5 billion (US$ 3 million). Revenues are insufficient because of a narrow tax base combined with massive tax evasion and inadequate cost recovery of municipal services provided by local governments. Municipal expenditures are not managed efficiently, first, because municipal governments do not have adequate technical and managerial resources, and second, because they do not have an institutional framework with well- defined responsibilities and resources delineated between the central and local governments. 4. Housing markets function poorly as demonstrated by chronic housing shortages. This results mainly on complicated juridical status and/or inadequate institutional capacity to develop land. It results too from non-transparent land rationing mechanisms, a lack of incentives for privately owned rental housing projects, and a shortage of medium and long term financing for home buyers. It results also from informal and anarchic land market, insufficient cost recovery from previous urban land developments, or non reinvestment of cost recovered in land development. 5. As a result, Mali's cities are under-managed and lack basic infrastructure and services. The gap between demand for and supply of all types of municipal services is increasing: water, roads, drainage, garbage collection, electricity, land management, housing, transportation, etc. Unauthorized settlements in peripheral urban areas, which lack basic services and infrastructure, are absorbing the most important part of the population increase and suburban land available. Furthermore, existing infrastructure is falling increasingly into disrepair exacerbating the degradation of the urban environment. 6. The urban centers will continue to grow faster than the country as a whole. As a result, their relative economic importance will continue to increase. It is crucial that the productivity of urban centers be increased to enable them to contribute to the country's economic development. Two urban projects financed by IDA (Cr. 943-MLI and Cr. 1677-MLI) have already helped move towards this goal. Government is seeking to decentralize authority. During the stage of decentralization, with the newly elected municipalities, efforts are needed to strengthen institutions, municipal, and housing finances, and improve urban infrastructure and environment, with a sound decentralization and urban sector strategy. Project Objectives 7. The project will help the central and local governments implement a decentralization strategy, and a policy of capacity building to manage urban infrastructure. The project main objectives would be: (a) to strengthen local governments+ management and performance in the main cities, to increase municipal revenues through improved collection mechanisms, emphasing cost recovery service by service; to increase the efficiency of municipal urban management and expenditures through strengthened managerial and technical resources, and greater reliance on contracting out municipal services to the private sector; (b) to improve the urban infrastructure and environment in Bamako and in the region - 2 - capital cities; and (c) to pursue the development of local enterprises, and the alleviation of poverty by creating employment through the execution of urban civil works using labor-intensive methods. Project Description 8. The proposed project is designed around the Government+s policy of decentralization, supported by a parallel donor-assisted program of investments in the urban sector (in the region and nation capital cities). The program would include three main components: (a) an institutional development, capacity building and training component; (b) an investment component to improve the urban infrastructure and environment including small urban civil works using labor-intensiver methods (to be delegated to AGETIPE by the Municipalities); and (c) a land development component (serviced land for housing, marketplaces, road transport stations). Project Financing 9. The total project cost is provisionally estimated at US$ million for a five-year investment program in the urban infrastructure sector. IDA funding will amount to (US$ 80 million). The central and local governments will finance counterpart funding equivalent to US$ 7 million. Additional funding may be expected from other donors (AfDB, EFD, Canada, France, Germany, Japan) to finance the equivalent of the remaining of US$ million gap. This financing will be secured by increasing taxes and enhancing their collection (specially for municipal taxes), increasing user charges, and auctioning serviced plots for housing, marketplaces, and road transport stations. Part of the credit will be onlent to the District of Bamako, another part to three (or all) municipalities (Mopti, Segou, Sikasso), and the land development component to ACI (Agence de Cession Immobilijre, set up during the Second Urban Project). Project Implementation 10. The institutional development component will be implemented by the Ministry of Urbanism and Housing; part of the second component will be implemented by the District of Bamako (by the technical unit which was set up during the Second Urban Project), the other part will be implemented by the municipalities concerned (included the municipalities of Bamako), with AGETIPE as management consultant (and probably as executing agency for the small urban civil works); the land development component will probably be implemented by ACI. Institutional arrangements will be agreed upon at appraisal. A master urban plan (plan durbanisme de reference), and a program of urban infrastructure development (programme de dbveloppement des infrastructures urbaines) will be established for each of the concerned cities before appraisal. The main infrastructure subprojects will be clearly identified; the other subprojects will be proposed annually, by the municipalities, in reference to the program of development. IDA will sign project agreements with the municipalities (Bamako, Mopti, Sbgou, Sikasso), so that they commit themselves to improving their management and resources. Project Sustainability -3- 11. The project sustainability will be assured by: (a) institutional reforms and instruments to be introduced to strengthen the local governments+ management and performance in the main cities, to increase municipal revenues through improved collection mechanisms and emphasing cost recovery service by service; the efficiency of the municipal urban management and expenditures will be increased by strengthening managerial and technical resources, and relying more heavely on contracting out municipal services to the private sector; (b) cost recovery for the serviced land and reinvestment in land development; and (c) development of the Malian construction industry and strengthening the existing agencies. Lessons Learned from past Operations in the Sector 12. IDA has already been involved in two urban development projects in Mali. The First Urban Development Project (Cr. 943-MLI, approved on June 26, 1979, and completed on December 31, 1986) concerned Bamako, Kayes, and Mopti. This project met its objectives in assisting the Government in providing affordable urban services, particularly shelter, water supply, garbage collection, drainage, schools and health care to low- income residents. However, problems in cost recovery and institutional development (introduction of several new agencies at once) resulted from project design. One of the other lessons of the project was the need for a general financial office within each municipality. This will be a project conditionality. 13. The Second Urban Development Project (Cr. 1677-MLI, approved on April 1, 1986, and completed on March 31, 1994) concerned Bamako. The project+s major objectives were: removing the major citywide infrastructure constraints, large increase in the supply of serviced land with security of tenure, improving local resource mobilization, strengthening the capacity of urban institutions. The project met its principal objectives and opened the way for the auctioning of serviced plots through ACI. The sales of plots have already covered the full cost of the operation. Furthermore, taxes on these sales procured the District and the State important resources, and a profit about more than FCFA 1.0 billion has been deposited into an investment fund. Unfortunately, this fund has not been used to prepare new serviced plots, ACI having been only an auctioning agency. The amendment of ACI+s statutes to make it a land development agency is underway. The massive serviced lot project failed as a poverty alleviation measure, because the prices, with cost recovery, became unaffordable to many families below the poverty line. Cost recovery for urban services remained problematic. The resources of plots sales will be reinvested in land development. Part of the plots will be amenaged with a low level to be affordable for the low income population. 14. The Public Works and Capacity Building Project (Cr. 2371-MLI, approved on May 12, 1992 and a Supplemental Credit approved in November 1994) is going very well. The high performance of the executing agency, AGETIPE-MALI, is well known. The Project+s objectives have been reached, indeed surpassed. To make the mayors more responsible in programming their investments in urban infrastructure, and in managing and maintaining it, part of the credit should be onlent to the municipalities. The previous public works should be part of the program - 4 - of urban infrastructure development, thus part of the urban project. The execution of works would be delegated to AGETIPE as management consultant or as executing agency, and the use of labor-intensive methods, where appropriate, should continue. Poverty Category 15. The poverty category is to be determined. Special investments will be oriented toward poor and disadvantaged neighborhoods. Furthermore, one of the criteria for the selection of small civil work subprojects to be proposed by the municipalities, will be the direct impact on poverty and employment creation. It is expected that at least 70- of the temporary jobs created, particularly for the small urban civil works, will be offered to unskilled workers. In addition, the inclusion of the secondary cities will make it possible to reach people who have not previously been able to benefit from government investments, specially in the poorest regions of the country in the North ( Kidal, Timbuktu, Gao). Environmental Aspects 16. A category B is proposed for this project. This classification will be confirmed during appraisal, when the final program and preliminary studies of works will be confirmed. Water supply and sanitation subprojects, especially in Bamako and Mopti, will improve the environment and conditions of living. An assessment of the impact on environment of the two previous urban projects, and of this project, will be carried out before appraisal. All the components will include actions for protecting and improving the environment. There will be probably no resettlement issues involved. Program Objective Categories 17. This project will support the improvement of the cities' productivity by promoting local governments and population participation in development projects, better local governments+ urban and municipal management, and improvement of the urban infrastructure and environment. It will reduce poverty by creating employment, particularly through labor-intensive methods in executing the civil works. It also improves the development of the private sector in executing the civil works, providing municipal services, and in land development. Project Benefits 18. The project main benefits would be: (a) strengthening the role of local governments in projects development; (b) improvement of the municipalities financial resources and cost recovery, to move to more sustainable development; (c) a high economic return of the planned investments and improvement of the living conditions; (d) high economic and social impact on the population through the jobs the project will create; and (e) development of the private sector. Risks -5- 19. The principal project risks stem from the fact that the central government may be unable to implement the decentralization and urban policy reform, or to remove the obstacles to the mobilization and allocation of adequate financial resources to the municipalities. They stem also from the unability of the local government to implement the reforms affecting the mobilization of adequate financial resources for counterpart funding and infrastructure maintenance. These risks are minimized by the strong ownership demonstrated by the central and local governments during project preparation, the close monitoring of performance indicators of the municipalities and public investment programs, and prolonged and close coordination with other donors. Contact Point: Public Information Center The World Bank 1818 H Street N.W. Washington D.C. 20433 Telephone No.: (202)458-5454 Fax No.: (202)522-1500 Note: This is information on an evolving project. Certain components may not necessarily be included in the final project. - 6 -