ICRR 12191 Report Number : ICRR12191 ICR Review Operations Evaluation Department 1. Project Data: Date Posted : 07/27/2005 PROJ ID : P002365 Appraisal Actual Project Name : Urban Development & Project Costs 110.6 114.5 Decentralization US$M ) (US$M) Country : Senegal Loan/ Loan US$M ) 75.0 /Credit (US$M) 81.4 Sector (s): Board: UD - General public Cofinancing 10.0 10.0 administration sector US$M ) (US$M) (36%), Other social services (16%), Health (16%), General water sanitation and flood protection sec (16%), General transportation sector (16%) L/C Number : C3006 Board Approval 98 FY ) (FY) Partners involved : AfDB Closing Date 06/30/2003 12/31/2004 Prepared by : Reviewed by : Group Manager : Group : Roy Gilbert John R. Heath Alain A. Barbu OEDSG 2. Project Objectives and Components a. Objectives a) To improve the financial and organizational management of municipalities . b) To improve the programming of priority urban investments . c) To rationalize and simplify the financing of urban infrastructure -related investments. d) To rehabilitate and upgrade the basic infrastructure in urban and rural communities . b. Components 1. Institutional Development (appraisal cost - US$10.0 million; actual cost - US$16.7 million) - including: a Municipal Action Program (MAP) based upon a Municipal Contract (MC); technical advisory services to eligible municipalities; acquisition of vehicles and equipment; urban, financial and organizational audits of participating municipalities; training, and studies to help central government mobilize and transfer resources to municipalities . 2. Municipal Physical Investments (appraisal cost - US$100.6 million; actual cost - US$97.8 million) - including: roads; education and health facilities; socio -collective facilities (schools, sports centers ); administrative buildings; revenue generating facilities (markets, bus stations); environmental sub-projects (on-site sanitation and solid waste management stations); and rehabilitation of historic buildings . c. Comments on Project Cost, Financing and Dates Actual costs exceeded planned costs in US dollars thanks to the declining value of the latter . The IDA credit was fully disbursed, as was cofinancing, and central and local government counterpar . Loan closing was extended by one year to make up for initial delays at start -up when new regulations of local finance had to be approved by the Ministry of Finance. 3. Achievement of Relevant Objectives: a) Fully achieved: - Through implementing the project's MAP's, municipalities were able to reduce the payroll share of their current revenues from 37% in 2001 to 28% in 2003 (the project's ceiling of 40% meant a radical change for some municipalities that had even exceeded 100% beforehand). Municipal financial budgeting was placed on a sound footing and adhered to, as confirmed by financial audits . b) Fully achieved: - municipal capacity to invest increased, as measured by the capital investment as a share of current revenues, that rose from 10% in 2001 to 17% in 2003. Priorities among investments were made explicit for the first time. c) Fully achieved: - Municipalities have fully adopted the principles and procedures of borrowing for infrastructure investment, and the record of loan repayment is good (above 95%). Also, municipalities accept their counterpart funding obligations and have financed them fully, from increased resource mobilization from local sources in particular. d) Fully achieved: - the project financed 310 infrastructure projects in 212 rural districts throughout Senegal . Additionally, it financed 421 sub-projects--mostly of basic infrastructure and commercial facilities (markets)--across Senegal's 67 urban municipalities. 4. Significant Outcomes/Impacts: First time introduction into the Africa region of working "municipal contracts", participating agreements between local governments and central authorities for municipal reform . Project exposed municipalities to borrowing that had to be repaid . The project succeeded in closing down the dysfunctional "Compte de Crédit Communal". All 67 urban municipalities in Senegal received some benefits from the project . None was left outside the new institutional framework created by the project . Openness of municipalities toward reform and receiving outside advice (particularly from the Municipal Development Agency (MDA) set up under the project). Project stimulated the development of the local consulting industry in Senegal . Beyond the results originally intended, the project succeeded in introducing systematic street address systems for the first time into 11 municipalities--some of which were part of the agglomeration of the capital Dakar--together street name plaques . 5. Significant Shortcomings (including non-compliance with safeguard policies): (none) 6. Ratings : ICR OED Review Reason for Disagreement /Comments Outcome : Highly Satisfactory Highly Satisfactory Institutional Dev .: Substantial High The project helped completely re -tool and decentralize the way urban development business is done in Senegal, by bringing municipalities fully on-board in ways that helped ensure the country's effective use of limited resources for urban development. Sustainability : Likely Likely Bank Performance : Highly Satisfactory Highly Satisfactory Borrower Perf .: Satisfactory Satisfactory Quality of ICR : Satisfactory NOTE: NOTE ICR rating values flagged with ' * ' don't comply with OP/BP 13.55, but are listed for completeness. 7. Lessons of Broad Applicability: Assisting a large number of municipalities at the same time can work effectively if sound mechanisms of support on a robust institutional foundation are in place . In other words, when the objective of improving urban infrastructure and different agencies' responsibilities are clear in this "wholesale" approach. Achievements of a successful municipal development project such as this one can be undermined if municipalities are offered funding from other sources --or even World Bank funding that comes with weaker policy requirements on cost recovery, for instance --that do not demand the same institutional responses by the borrowing local governments. It is essential for project implementation arrangements to be clearly defined and for responsibilities to be legally and contractually assigned for a municipal development program such as this to be successful . Municipal contracts or participation agreements can work even where municipalities have traditionally been weak and in existence for only a short time, such as Senegal . Capacity building and institutional strengthening at the local level especially works best when institutional progress is rewarded by financial assistance for investments in infrastructure, that generally have a higher priority locally. Beyond learning to invest effectively in infrastructure, the next step for municipalities will be to learn more about how to operate and maintain these assets efficiently . 8. Assessment Recommended? Yes No Why? To learn more lessons from this successful operation that could be applied to countries with little tradition of municipal government. 9. Comments on Quality of ICR: Overall this is a satisfactory ICR that, for the most part, adequately documents the project experience leading to the very successful outcome . Despite being twice the length recommended by ICR guidelines, though, the report does not fully clarify: (i) why actual institutional development spending was 67% more than expected at appraisal and exactly what items this money was spent on; (ii) what the institutional development components actually were (the ICR's description of "activities" under this component does not help, since it lists the results of the activities (e.g. "improved financial health") rather than showing the "activity" or component upon which project expenditures were made) ; (iii) the role (if any) of the project in setting up the MDA; (iv) the participation of the municipalities (if any) in setting up the project's institutional arrangements; (v) infrastructure project investments by type of municipality (large/small; region etc.); (vi) links between the degree of a municipality's participation in the project and its institutional progress; (vii) between exactly which parties the municipal contract (or participation agreement) is made. Finally, the values of project costs reported in Annex 2 are different from those in the text .