The World Bank Inclusive Rural Connectivity and Development Project (P176164) Project Information Document (PID) Concept Stage | Date Prepared/Updated: 15-Feb-2021 | Report No: PIDC31295 Jan 31, 2021 Page 1 of 9 The World Bank Inclusive Rural Connectivity and Development Project (P176164) BASIC INFORMATION A. Basic Project Data OPS TABLE Country Project ID Parent Project ID (if any) Project Name Sri Lanka P176164 Inclusive Rural Connectivity and Development Project (P176164) Region Estimated Appraisal Date Estimated Board Date Practice Area (Lead) SOUTH ASIA May 25, 2021 Aug 26, 2021 Transport Financing Instrument Borrower(s) Implementing Agency Investment Project Financing Democratic Socialist Ministry of Highways Republic of Sri Lanka Proposed Development Objective(s) To improve rural connectivity and economic opportunities for the people of Sri Lanka with a focus on transport network and agriculture logistics through inclusive, safe, and integrated rural infrastructure and service development as well as capacity building. PROJECT FINANCING DATA (US$, Millions) SUMMARY-NewFin1 Total Project Cost 500.00 Total Financing 500.00 of which IBRD/IDA 500.00 Financing Gap 0.00 DETAILS -NewFinEnh1 World Bank Group Financing International Bank for Reconstruction and Development (IBRD) 500.00 Environmental and Social Risk Classification Concept Review Decision Substantial Track II-The review did authorize the preparation to continue Jan 31, 2021 Page 2 of 9 The World Bank Inclusive Rural Connectivity and Development Project (P176164) Other Decision (as needed) B. Introduction and Context Country Context 1. Sri Lanka is a lower-middle-income country with a GDP per capita of USD 3,852 (2019) and a total population of 21.8 million. Following 30 years of civil war that ended in 2009, the economy grew at an average 5.3 percent during the period 2010-2019, reflecting a peace dividend and a determined policy thrust towards reconstruction and growth, although growth slowed down in the last few years. The country has been gradually transitioning from a predominantly rural-based production towards a more urbanized economy oriented around manufacturing and services. Sri Lanka has also made notable strides in reducing poverty and sharing prosperity among the less well-off. The $3.20 poverty headcount rate declined from 19.4 percent in 2009/10 to 11.0 percent in 2016. Extreme poverty is rare and concentrated in some geographical pockets. Social indicators including human capital outcomes, and high literacy rates compare favorably with those in middle-income countries. 2. Weak fiscal buffers and a high debt burden have constrained the government’s ability to support growth and facilitate economic transformation. Sri Lanka’s revenue collection (12.6 percent of GDP, 2019) is low relative to its peers. As a share of GDP, the Public and Publicly Guaranteed debt rose from 78.5 percent in 2015 to 94.3 percent in 2019. Gross financing requirements are at the highest levels among middle-income countries. With approximately 50 percent of debt is foreign exchange denominated, the government’s refinancing requirements are expected remain high in the short to medium-term. Low fiscal buffers combined with a high debt burden have constrained critical development spending on health, education, social protection and infrastructure. 3. The COVID-19 induced crisis is exerting a severe impact on the economy, while exacerbating an already challenging macroeconomic situation. Real GDP is expected to have contracted by 6.7 percent in 2020. Key transmission channels include a decline in export earnings (tourism, textiles, tea) and subdued domestic demand. The pandemic triggered sharp jobs and earnings losses in the informal sector and some formal sectors such as the apparel industry. As a result, poverty is expected to have increased to 12.5 percent in 2020, after falling further to 9.1 percent in 2019. 4. The rural sector forms a significant part of Sri Lanka’s economy, being home to over 80 percent1 of the total population and to the majority of the country’s poor. Poverty at the rural level is 12.2 percent, which is significantly higher than the urban poverty rate (5.2 percent). Rural sector contributes to 52.7 percent2 of the country’s labor force and is also home to a large majority (77 percent) of the country’s older population (aged 60 years and above) who need reliable road network and accessibility to health facilities. 1 Economic and Social Statistics of Sri Lanka 2020, Central Bank of Sri Lanka - https://www.cbsl.gov.lk/sites/default/files/cbslweb_documents/statistics/otherpub/ess_2020_e1.pdf 2 Economic and Social Statistics of Sri Lanka 2020, Central Bank of Sri Lanka - https://www.cbsl.gov.lk/sites/default/files/cbslweb_documents/statistics/otherpub/ess_2020_e1.pdf Jan 31, 2021 Page 3 of 9 The World Bank Inclusive Rural Connectivity and Development Project (P176164) Sectoral and Institutional Context 5. Road transport, being the only mode of transport in many rural areas plays a key role connecting the rural population with economic and social opportunities. With over half of Sri Lanka’s poor living in rural areas, improving economic and social wellbeing of the rural and remote areas of the country is critical for Sri Lanka’s overall economic development. Roads carry 95 percent of passengers and 98 percent of freight. Therefore, uninterrupted road connectivity and accessibility to health care, education, employment opportunities, and other critical basic services is critical for the rural communities. Road network connectivity also plays an important role in agriculture supply chains, the primary source of livelihoods of the rural communities in Sri Lanka. 6. The provincial and rural road network does not provide sufficient connectivity and accessibility to remote rural areas. While nearly 100 percent of national roads are paved, only 67 percent of the provincial roads and 13 percent of rural roads are paved and in good condition. Most rural roads have been poorly designed, with no consideration to road safety or climate impacts.3 Poor road conditions at the provincial and rural level are further exacerbated by lack of proper maintenance due to limited funding allocations. 7. Several studies have highlighted the lack of adequate infrastructure facilities such as collection centers, warehouses and cold storage facilities and poor transport connectivity between farms and markets as key constraints in handling and storage of agriculture products. Agriculture is the backbone of the rural economy. The agriculture production sector contributes approximate 10 percent of GDP and the share of workers engaged in the sector is around 25 percent. The country is now seeking to diversify the smallholder sector, including into higher value horticulture, spices and tropical fruits. This requires a more market integrated approach to ensure that produce is able to reach consumers (both in domestic and export markets) efficiently and without loss in quality. Transport and logistics infrastructure along the agriculture supply chains are critical in connecting rural farmers to markets, improving accessibility to other economic opportunities as well as reducing post-harvest losses. In addition, high logistics costs due to poor road connectivity and inadequate transport facilities has been indicated as a major constraint for farmers, collectors and wholesale distributors, particularly given the layered and fragmented supply chain. 8. Limited connectivity and accessibility to basic services makes the rural and remote areas more vulnerable during public health emergencies such as climactic events. Sri Lanka is highly vulnerable to slope failures and climate related extreme weather conditions such as floods and landslides which often cause transport disruptions and makes it challenging for the rural population to access social-economic opportunities. Improving the quality and connectivity of a core rural roads network is essential to increase the resilience of rural Sri Lanka to such climate related hazards. 9. Road safety remains a key concern for the national, provincial, and local road networks. Sri Lanka has developed a national Road Safety Action Plan (RSAP) which addresses the United Nations Global Plan for the Decade of Action for Road Safety 2011–2020. However, many of the actions were not fully implemented as planned. Furthermore, road safety is often overlooked in provincial and rural road improvement, creating additional vulnerabilities to rural road users. There is a need to better integrate road safety practices in road engineering, enforcement and emergency care to reduce accidents and improve overall safety scenario at the provincial and rural level. 10. Institutional fragmentation and insufficient funding for roads have reduced institutional efficiency and have led to additional challenges in provincial/rural road improvements. There are two separate central ministries, nine provincial road agencies, and hundreds of local agencies4 overseeing the road network in Sri Lanka. Such a high number of road 3 Rural Roads and Community Access in Sri Lanka: An Overview, Amal Kumarage, 2003 4 24 Municipal Councils, 41 Urban Councils, 276 Pradeshiya Sabhas Jan 31, 2021 Page 4 of 9 The World Bank Inclusive Rural Connectivity and Development Project (P176164) management agencies (approximately 1 for every 330 km of roads) is inefficient and presents barriers to streamlining institutional and technical capacity growth. In contrast, only two agencies in Bangladesh are responsible for over 240,000 km of roads and only 14 road agencies in Pakistan are responsible for nearly 260,000 km of roads. Also, due to inadequate and irregular funding, there remains little incentive for the provincial road agencies to plan and budget for either capital or maintenance works. 11. Institutional and technical capacities of road agencies are weak, especially at the provincial and local levels. There are no long-term development and asset management plans for provincial and local networks, and only rudimentary annual maintenance schedules exist for some agencies. There is no proper inventory of rural roads or a systematic prioritization framework in selecting roads for rehabilitation/maintenance giving due consideration to economic and social importance of the road corridors. 12. The GoSL has recently initiated a broader 100,000km rural roads development program proposed in the Government’s national development program “Vistas of Prosperity and Splendour�. This initiative is envisaged to be a fully integrated rural development program to improve road infrastructure, develop passenger transport infrastructure, agro-logistics, economic centres and community facilities in rural and remote areas. It is a continuation of earlier attempts in 2014 including the ADB funded “Integrated Road Investment Programs� (iRoad I and II), totalling US$1.7 billion and covering the rehabilitation of almost 7,000 km of roads. Relationship to CPF 13. The project is well aligned with the World Bank Group’s Sri Lanka Country Partnership Framework (CPF) for FY17–FY20 discussed by the Board on June 28, 2016 (Report No. 104606-LK), as updated by its Performance Learning Review (PLR) of the CPF FY17–FY21 (Report No. 135126-LK). It directly contributes to Pillar 2 of the PLR that seeks to promote inclusions and opportunities for all, by improving access to basic services and economic opportunities in the rural areas of the country and by reducing regional disparities in economic development. The development of green and climate resilient transport and agro-logistics infrastructure, promoting the use of sustainable resources and mainstreaming of climate resilience practices into planning and investments in the sector will contribute to achieving Pillar 3 of the PLR which aims to promote green growth and resilience. The program will also help improve economic contribution of the lagging regions in the country, thereby contributing the improvement of economic competitiveness of the country (Pillar 1 of the PLR). C. Proposed Development Objective(s) 14. To improve rural connectivity and economic opportunities for the people of Sri Lanka with a focus on transport network and agriculture logistics through inclusive, safe, and integrated rural infrastructure and service development as well as capacity building. Key Results (From PCN) 15. The proposed PDO Indicators are: Component 1  Institutional management of rural roads is supported by a formal policy  Annual budgeting for rural roads supported by a scientific tool Jan 31, 2021 Page 5 of 9 The World Bank Inclusive Rural Connectivity and Development Project (P176164) Component 2  Proportion of new rural inhabitants connected to improved roads increased  Cost of transporting agricultural produce reduced in the project areas  Proportion of road crashes in participating provinces reduced Component 3  User satisfaction survey on agro-logistic interventions has overall “satisfactory� feedback  Proportion of local entrepreneurs (including women) participating in road maintenance increased D. Concept Description 16. This project aims at improving rural connectivity and economic opportunities for the rural population with a focus on road network and agriculture logistics. Rural connectivity will be improved through a nationwide rural road improvement program in support of rural transportation efficiency, safety and accessibility to economic and social amenities including markets, education, health, and government services. The program will entail road rehabilitation including performance-based road maintenance, the implementation of which - particularly road maintenance - would be designed to promote rural entrepreneurship. As a direct contribution to rural economic opportunities and enhanced inclusivity, the rural roads program will be augmented by provision of agriculture logistics such as aggregation, community infrastructure intended to supply chain marketing, and storage facilities. Other amenities aimed at better gender equality and empowerment, and reduction of rural-urban gap such as health, education, women entrepreneurship, and youth development programs would be included. The success and sustainability of the program is to be underpinned by strong institutional capacity enhancements in the roads sector, that would include sectoral capacity reviews, sectoral operational performance support, and project implementation support. 17. The project will be implemented in two phases, an initial quick-wins phase in the first year focusing on improvement of priority rural road accessibility in selected provinces and the initial institutional support activities such as technical assistances on data inventory, evidence-based analysis, green infrastructure guidelines, etc. This will be followed by a more comprehensive program in the second phase, that would comprise the rural road improvement program, improvement of agro-logistics and community development infrastructure, implementation of community development initiatives, and other institutional enhancements. 18. Component 1: Institutional Strengthening and Capacity Enhancements (US$25 million): This component will support the development of a comprehensive digital tool to systematically prioritize and select provincial and rural road networks for rehabilitation and improvement in a way that will optimize economic and social benefits of the investments. The tool will link with existing road asset management systems and practices in the country. It will be GIS-based with layers of digital information on the road network (such as traffic volumes), rural population distribution, connectivity with the national road networks, accessibility to agriculture value chains, climate and disaster vulnerabilities, connectivity to employment and economic centers, schools, hospitals, public institutions and other facilities. This tool will be used to carry out a road network assessment and strategic prioritization of investments and services financed under Component 2 of the program. A critical area of focus in the development and the use of the tool will be the integration of climate vulnerabilities into the prioritization framework and investment decision making process to help prioritize investments in more vulnerable road corridors. The analysis will make use of flood/landslide and other climate hazard maps to assess the vulnerability of the road sections to climate disasters and the impact of such climatic events on accessibility. This component will also focus on institutional strengthening for better road management and building capacity for Jan 31, 2021 Page 6 of 9 The World Bank Inclusive Rural Connectivity and Development Project (P176164) stakeholders engaged in the local road construction industry in asset management, road safety, climate resilient and development and adoption of technical guidelines on bioengineered solutions for road construction. 19. Component 2: Sustainable and Climate Resilient Improvement of Rural Road Connectivity (US$ 450 million): This component will primarily finance planning, design, civil works, and contract management, leading to rehabilitation/ improvement of priority provincial and rural roads spread across the country. The roads will be upgraded in compliance with climate resilient standards and the use of green and cost-effective solutions such as recycled paving materials, full- depth reclamation, bio-engineering solutions, etc. will be emphasized in designs, resulting in resource efficient, climate� resilient and safe roads. The use of innovative and sustainable construction materials will be explored and incorporated into designs to reduce costs and to optimize the use of limited local materials. The road improvements will be closely integrated and linked with improvements of agro-logistic infrastructure along the supply chains connected through the road sections and other economic and community infrastructure that will help improve rural economy and liveability. 20. Component 3: Improvement of Rural Economic Opportunities through Agro-Logistics and Community Development initiatives (US$ 25 million): The component aims to augment the rural roads investments for better impact, and create a platform to introduce systematic enhancement of other social economic aspects for the rural population, such as education, health and etc. Through this project, it will lay out the foundation for cross-sectoral collaboration that ultimately support human capital development. It will comprise three main areas: improvement of agro-logistics infrastructure; improvement of other community development infrastructure; and implementation of community empowerment initiatives. The activities would include mapping and identification of the main agriculture farms, production centers, markets, consolidation and food processing centers, as well as community estates, to develop a strategy for rehabilitation and development of efficient rural road system. Legal Operational Policies Triggered? Projects on International Waterways OP 7.50 No Projects in Disputed Areas OP 7.60 No Summary of Screening of Environmental and Social Risks and Impacts . 21. The Environmental and Social risk classification of the Project is proposed to be ‘Substantial’ at the concept stage given that exact project subprojects and their locations are largely undetermined at this point. The project activities are predominantly related to the upgradation and rehabilitation of existing rural roads across the country, as well as the rehabilitation and construction of small-scale rural infrastructure that supports agriculture-related value chains and public infrastructure. The project is not expected to have adverse impacts to environmentally or socially sensitive areas as the roads selected will be located in areas that have already been anthropogenically altered and within human settlements and habituated areas. In addition, the project will also support the mainstreaming and capacity building of project selection criteria and sustainable design and implementation of rural connectivity. While the interventions are not likely to have significant adverse risk or impacts on the environment or human populations and will be small to medium in scale, they will be sporadically spread across various environments across the country. 22. Potential key environmental risks and impacts expected due to the nature of proposed physical interventions will relate to temporary disruption of current traffic circulation, traffic safety, damage to access roads, dust nuisance, and Jan 31, 2021 Page 7 of 9 The World Bank Inclusive Rural Connectivity and Development Project (P176164) gaseous emissions, potential pollution of soil and water resources, brief disturbance to biotope, and momentary interference to neighboring settlements through various operation activities, erosion and sedimentation of rivers and wetlands from earth works and run-off, felling of trees along the right of way (ROW), increased traffic, generation and disposal of waste/spoil, occupational and community health and safety, air pollution and noise emissions from machinery. Sourcing of construction materials will also have risks and impacts from extraction, transport and hauling and site restoration after extraction. Negative impacts are anticipated mainly during the rehabilitation/construction period largely within the existing footprints and can be managed through implementation of engineering measures and good construction site management. Off-site activities include quarry, burrow pit and asphalt plant operations, which if not managed properly, may cause localized adverse impacts. There might be site-specific E&S risks and impacts of some road improvement works, which will be screened, assessed and managed in site-specific ESMPs/ CESGPs, to be prepared during project implementation when the locations of these roads are known, and detailed designs are prepared. 23. In terms of social risks, construction works will mainly occur within the existing right-of-way with the nature of interventions limited mostly to rehabilitation, upgrade from dirt to asphalt rural roads, and in some instances, widening of local roads, may also be required. There might be a need for land acquisition either for road widening or construction of agriculture/community infrastructure such as cold storage facilities, community centers, etc. However, the land required are envisaged to be either very small scale or mostly linear and narrow strips of the land by the road, which to the extent possible, will be acquired through voluntary land donation. Improving the safety standards of the roads will be important and this project could be used as opportunity to improve the safety standards, especially for the roads within inhabited settlements. The works most probably will be carried out by domestic companies and thus the project could support generation of the road maintenance related jobs especially given that the labor will mostly be hired locally and not imported. The SEA/SH risk rating for the project is currently classified as ‘Low.’ 24. In line with the World Bank’s ESF requirement, the project will develop an Environmental and Social Commitment Plan (ESCP) along with an Environmental and Social Management Framework (ESMF), that will include sub-project eligibility criteria and exclusion lists; site selection procedures; procedures for screening all sub-projects for E&S risks and impacts; designing assessment and mitigation measures in accordance with relevant ESSs; a framework for monitoring and reporting on due diligence implementation; and institutional arrangement for staffing and capacity building as well as occupational health and safety plans in line with the ESF. During project preparation, the World Bank will further assess the relevance of ESSs for this project and verify that the RDA and all other implementation agencies collaboratively completes the preparation of Labor Management Procedure (LMP), Resettlement Policy Framework (RPF) and Stakeholder Engagement Plan (SEP). In addition, proportionate to the risk of each sub-project, all front runner subprojects will conduct subproject specific Environmental and Social Screening and undertake the preparation of Environmental and Social Screening Reports (ESSRs), Environment and Social Impact Assessments (ESIAs), Environmental and Social Management Plans (ESMPs) ,or other relevant instruments which will be determined via the screening, in line with the ESSs, as soon as they are identified. All front runner projects will have completed the E&S due diligence process and disclosed the relevant instruments prior to the close of project appraisal. The program ESMF, RPF, LMP, SEP and ESCP will also be prepared and disclosed prior to project appraisal. Jan 31, 2021 Page 8 of 9 The World Bank Inclusive Rural Connectivity and Development Project (P176164) . CONTACT POINT World Bank Wei Wang, Andrew D. Goodland, Justin Runji Senior Transport Specialist Borrower/Client/Recipient Democratic Socialist Republic of Sri Lanka Implementing Agencies Ministry of Highways Ranjith Pemasiri Secretary sec@mohsl.gov.lk 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 APPROVAL Task Team Leader(s): Wei Wang, Andrew D. Goodland, Justin Runji Approved By APPROVALTBL Practice Manager/Manager: Country Director: Chiyo Kanda 21-Feb-2021 Jan 31, 2021 Page 9 of 9