Document of The World Bank FOR OFFICIAL USE ONLY Report No: 58621-TD PROJECT APPRAISAL DOCUMENT ON A PROPOSED GRANT/CREDIT IN THE AMOUNT OF SDR 16.3 MILLION (US$ 25 MILLION EQUIVALENT) TO THE REPUBLIC OF CHAD FOR A LOCAL DEVELOPMENT PROGRAM SUPPORT PROJECT 2 March 1, 2011 Agriculture and Rural Development Unit Sustainable Development Department Country Department AFCW3 Africa Region This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. CURRENCY EQUIVALENTS Exchange Rate Effective December 30, 2010 Currency Unit = FCFA 490 FCFA = US$ 1 US$ 1 = SDR 1 FISCAL YEAR January 1 – December 31 ABBREVIATIONS AND ACRONYMS AFTFM Africa Region Financial Management Unit/Unité de Gestion Financière de la Région Afrique (UGFRA) AIP Annual Investment Plan/Plan annuel d’investissement (PAI) APL Adaptable Program Loan/Programme Adaptable de Prêt (PAP) ASPEN Africa Region Safeguards Policies Enhancement/Unité Chargée de l’Amélioration des Politiques de Sauvegarde de la Région Afrique (UCAPSRA) ASPOP Agricultural Services and Producer Organizations Project/Projet d’Appui aux Services Agricoles et aux Organisations de Producteurs (PSAOP) AWPB Annual Work Plan and Budget/Plan de Travail et Budget Annuel (PTBA) CBO Community-Based Organization/Organisation Communautaire de Base (OCB) CDA Community Development Assembly/Assemblée Communautaire de Développement (ACD) CDD Community Driven Development/Développement Communautaire (DC) CDP Communal Development Plan/Plan de Dévelopment Communal (PCD) COJO Tender Commission/Commission d’Ouverture et de Jugement des Offres CPAR Country Procurement Assessment Report/Rapport National d'Evaluation des Passations de Marchés (RNEPA) CF Consulting Firm/Bureau d’Études (BE) CZ Consolidation Zone/Zone de Consolidation (ZC) DAC Departmental Action Committee/Comité Départemental d’Action (CDA) ESMF Environmental and Social Management Framework/Cadre de Gestion Environnemental et Social (CGES) ESIA Environmental and Social Impact Assessment/Evaluation de l’Impact Environmental et Social (EIES) ESMP Environmental and Social Management Plan/Plan de Gestion Environnemental et Social (PGES) EU European Union/Union Européenne (UE) EZ Extension Zone/Zone d’Extension (ZE) FA Financing Agreement/Accord de Financement (AF) ii FDA French Development Agency/Agence Française de Développement (AFD) FM Financial Management/Gestion Financière (GF) GAC Governance and Anti-Corruption/Gouvernance et Anti-Corruption (GAC) GDP Gross Domestic Product/Produit Intérieur Brut (PIB) GEF Global Environment Facility/Fonds pour l’Environnement Mondial (FEM) GoC Government of Chad/Gouvernement du Chad (GoC) HCD High-level Committee on Decentralization/Haut Comité de Décentralisation HIV/AIDS Human Immunodeficiency Virus (HIV)/Acquired Immunodeficiency Syndrome (AIDS)/Virus de l'Immunodéficience Humaine (VIH)/Syndrome d'Immunodéficience Acquise (SIDA) IBRD International Bank for Reconstruction and Development/Banque Internationale pour la Reconstruction et le Développement (BIRD) IDA International Development Association/Association Internationale pour le Développement (AID) IFR Interim Financial Reports/Rapport de Suivi Financier Intérimaire (RSFI) IPM Integrated Pest Management/Lutte Antiparasitaire Intégrée (LAI) ISN Interim Strategy Note/Note de Stratégie Intermediaire (NSI) LAC Local Action Committee/Comité Local d’Action (CLA) LDP Local Development Plan/Plan de Développement Local (PDL) LDPSP Local Development Program Support Project/Projet d’Appui au Programme de Développement Local (PROADEL) LPMU Local Project Management Unit/Unité de Gestion Locale (UGL) M&E Monitoring and Evaluation/Suivi et Evaluation (S&E) MAFAP Manual for Administrative, Financial and Accounting Procedures/Manuel de Procédures Administratives, Financières et Comptables (MPAFC) MC Municipal Council/Conseil Municipal (CM) MC Management Committee/Comité de Gestion (CG) MCD Ministry Charged with Decentralization/Ministère Chargé de la Décentralisation (MCD) MDG Millenium Development Goal/Objectif de Développement du Millénaire (ODM) MG Matching Grant/Subvention à Frais Partagés (SFP) MIS Management Information System/Système d’Information et de Gestion (SIG) MoAI Ministry of Agriculture and Irrigation/Ministère de l’Agriculture et de l’Irrigation (MAI) MoEF Ministry of Environment and Fisheries/Ministère de l’Environnement et des Ressources Halieutiques (MERH) MoEP Ministry of Economy and Plan/Ministère de l’Economie et du Plan (MEP) MoH Ministry of Health/Ministère de la Santé (MS) MoL Ministry of Livestock/Ministère de l’Elevage (MdE) MoLMUH Ministry of Land Management, Urban, and Housing/Ministère de l’Amenagement du Territoire, de l’Urbanisme, et de l’Habitat (MATUH) MoT Ministry of Transport/Ministère du Transport (MT) MoW Ministry of Water/Ministère de l’Eau (ME) NEAP National Environmental Action Plan/Plan National d’Action Environnementale (PNAE) iii NGO Non-Governmental Organization/Organisation Non-Gouvernementale (ONG) NPRS National Poverty Reduction Strategy/Stratégie Nationale de Réduction de la Pauvreté (SNRP) OHADA Organisation pour l’Harmonisation en Afrique du Droit des Affaires/ Organization for the Harmonization of Business Law in Africa OP/BP Operational Policy/Bank Procedure/Politique Opérationnelle/Procédure de la Banque (PO/PB) ORAF Operational Risk Assessment Framework/Cadre Opérationnel d'Evaluation des Risques (COER) PO Producers Organization/Organisation de Producteurs (OP) PAD Project Appraisal Document/Document d'Evaluation du Projet (DEP) PAP Project-Affected People/Personnes Affectées par le Projet (PAP) PDO Project Development Objective/Objectif de Développement du Projet (ODP) PIM Project Implementation Manual/Manuel d’Execution (ME) PMP Pest Management Plan/Plan de Gestion des Pesticides (PGP) PMU Project Management Unit/Unité de Gestion du Projet (UGP) PRSP Poverty Reduction Strategy Paper/Stratégie Nationale de Réduction de la Pauvreté (SNRP) PSC Project Steering Committee/Comité d’Orientation et de Pilotage (COP) RAC Regional Action Committee/Comité Régional d’Action (CRA) RAP Resettlement Action Plan/Plan d’Action de Recasement (PAR) RC Rural Council/Conseil Rural (CR) RDSP Rural Development Support Program/Programme d’Intervention pour le Développement Rural (PIDR) RPF Resettlement Policy Framework/Cadre de Politique de Recasement des Populations (CPRP) SBD Standard Bidding Documents/Dossiers Standards d’Appel d’Offres (DSAO) SDC Swiss Development Corporation/Direction du Développement et de la Coopération (DDC) SLM Sustainable Land Management/Gestion Durable des Terres (GDT) SME Small and Medium Enterprises/Petites et Moyennes Entreprises (PME) SOE Statement of Expenditures/Relevé de dépenses (RDP) TORs Terms of Reference/Termes de référence (TdR) UDP Urban Development Project/Projet de Développement Urbain (PDU) Regional Vice President: Obiageli Katryn Ezekwesili Acting Country Director: Mary-Kathryn Hollifield Sector Director: Jamal Saghir Sector Manager: Karen Mcconnell Brooks Task Team Leader: Soulemane Fofana iv Table of Contents REPUBLIC OF CHAD: LOCAL DEVELOPMENT PROGRAM SUPPORT PROJECT 2 I. Strategic Context ...............................................................................................................1 A. Country Context ..........................................................................................................1 B. Sectoral and Institutional Context ................................................................................2 C. Higher Level Objectives to which the Project Contributes ............................................6 II. Project Development Objectives ........................................................................................7 1. Project Beneficiaries ................................................................................................7 2. PDO Level Results Indicators ..................................................................................7 III. Project Description ............................................................................................................7 A. Project components..................................................................................................7 B. Project Financing .....................................................................................................9 1. Lending Instrument ..................................................................................................9 2. Project Cost and Financing (in US$ million)............................................................9 IV. Implementation ............................................................................................................... 10 A. Institutional and Implementation Arrangements ...................................................... 10 B. Results Monitoring and Evaluation......................................................................... 10 C. Sustainability ......................................................................................................... 11 V. Key Risks and Mitigation Measures ................................................................................. 12 VI. Appraisal Summary ......................................................................................................... 12 A. Economic and Financial Analysis ........................................................................... 12 B. Technical............................................................................................................... 12 C. Financial Management ........................................................................................... 13 D. Disbursement......................................................................................................... 13 E. Procurement .......................................................................................................... 14 F. Social (including safeguards) ................................................................................. 14 G. Environment (including safeguards) ....................................................................... 15 Annex 1: Results Framework and Monitoring .......................................................................... 17 Annex 2: Detailed Project Description ..................................................................................... 22 Annex 3: Implementation Arrangements .................................................................................. 28 Annex 4: Operational Risk Assessment Framework (ORAF).................................................... 55 Annex 5: Implementation Support Plan ................................................................................... 60 Annex 6: Team Composition ................................................................................................... 63 MAP....................................................................................................................................... 64 v List of Figures Figure 1: Shares of the types of micro-projects selected during Phase 1 ......................................5 Figure 2: Overview/Summary of Institutional Arrangements for LDPSP 2/PROADEL 2 .......... 31 Figure 3: Structure of the Local Project Management Units (LPMUs) ...................................... 33 Figure 4: Structure of the National Project Management Unit (PMU) ....................................... 34 Figure 5: Financial setup and flows ......................................................................................... 37 vi Republic of Chad Local Development Program Support Project 2 PROJECT APPRAISAL DOCUMENT AFRICA AFTAR Date: February 28, 2011 Sector(s): General agriculture, fishing and forestry Acting Country Director: Mary-Kathryn sector (50%); Health (15%); Primary education Hollifield (15%); Water supply (15%); Public administration - Sector Director: Jamal Saghir Finance (5%) Sector Manager: Karen Mcconnell Theme(s): Rural services and infrastructure (50%); Brooks Rural policies and institutions (25%); Team Leader(s): Soulemane Fofana Decentralization (25%) Project ID: P113030 EA Category: B Partial Lending Instrument: Adaptable Program Lending Project Financing Data: Proposed terms: [ ] Loan [X] Credit [X] Grant [ ] Guarantee [ ] Other: Source Total Amount (US$ m) Total Project Cost: 77.25 Co-financing: Government of Chad: 50.00 Communities: 2.25 Total Bank Financing: 25.0 IBRD IDA 25.0 New Recommitted Borrower: The Republic of Chad Responsible Agency: The Ministry of Land Management, Urban Development, and Housing (MoLMUH) Contact Person: Mr. Dobingar Allassembaye Telephone No.: (235) 66-24-19-52. Fax No.: (235) 22 52 37 09 Email: adobingar@yahoo.fr vii Estimated disbursements (Bank FY/US$ m) FY 2012 2013 2014 2015 Annual 3.81 6.26 7.12 7.81 Cumulative 3.81 10.07 17.19 25.00 Project Implementation Period: March 22, 2011 to June 30, 2015 Expected effectiveness date: July 1, 2011 Expected closing date: June 30, 2015 Does the project depart from the CAS in content or other ○ Yes x No significant respects? If yes, please explain: Does the project require any exceptions from Bank policies? ○ Yes x No Have these been approved/endorsed (as appropriate) by Bank ○ Yes ○ No management? Is approval for any policy exception sought from the Board? ○ Yes x No If yes, please explain: Does the project meet the Regional criteria for readiness for x Yes ○ No implementation? If no, please explain: The revised APL Program Objectives are: improved access to infrastructures and basic social services in targeted districts and improved planning, management and monitoring by local communities and communes of decentralized investments. The Project Development Objectives for Phase 2 are: (i) improved access to basic infrastructure and social services in targeted districts; and (ii) improved planning, management and monitoring by local communities and communes of decentralized investments. Project description [one-sentence summary of each component] The proposed operation includes two major technical components: (i) capacity building of local communities and communes and support to decentralization; and (ii) decentralized financing of micro-projects. The operation also includes a project management component to support implementation. viii Safeguard policies triggered? Environmental Assessment (OP/BP 4.01) x Yes ○ No Natural Habitats (OP/BP 4.04) o Yes x No Forests (OP/BP 4.36) ○ Yes x No Pest Management (OP 4.09) x Yes ○ No Physical Cultural Resources (OP/BP 4.11) x Yes ○ No Indigenous Peoples (OP/BP 4.10) ○ Yes x No Involuntary Resettlement (OP/BP 4.12) x Yes ○ No Safety of Dams (OP/BP 4.37) ○ Yes x No Projects on International Waters (OP/BP 7.50) x Yes ○ No Projects in Disputed Areas (OP/BP 7.60) ○ Yes x No ix Effectiveness Conditions: Financing Agreement Description of Condition Date Due Reference Section I of Schedule 2 (a) the Recipient has employed the By effectiveness following staff (i) at the PMU: a Project Coordinator, a financial management specialist, a monitoring and evaluation specialist, a central accountant, a procurement specialist and an internal auditor; and (ii) at each of the seven LPMUs, a regional coordinator, a monitoring and evaluation specialist, an accountant, a civil engineer, and a social and environmental specialist, all in accordance with the provisions of Section I of Schedule 2 to Financing Agreement (FA); Article 5, 5.01 (b) (b) the Project Implementation By effectiveness Manual; the Project Administrative, Financial and Accounting Manual; and the Monitoring and Evaluation Manual have been updated to reflect the Project design features and implementation procedures, in form and substance satisfactory to the Association [Article 5, 5.01 (b)]; Section V.A.(b) of (c) the Recipient has made the initial By effectiveness Schedule 2 contribution into the Project Account required under Section V.A.(b) of Schedule 2 to the Financing Agreement. x Conditions and Legal Covenants: Financing Agreement Description of Condition/Covenant Date Due Reference Section V.A. of The Recipient shall, for the purposes Semi-annually Schedule 2 of the Project: (a) open and thereafter maintain, for the duration of the Project, an account in CFA Francs (the Project Account) in a commercial bank on terms and conditions satisfactory to the Association; (b) within six months of the Effective Date deposit into the Project Account an additional contribution of CFA Francs 2.5 billion; (c) thereafter deposit in the Project Account, at the end of each Project Semester, until the completion of the Project, such amounts as shall be required to timely replenish the Project Account back to the amount of CFA Francs 2.5 billion or whenever the balance of the Project Account shall be less than CFA Francs 1 billion; and (d) ensure that amounts deposited into the Project Account shall be used exclusively to make payments to meet expenditures made or to be made in respect of the reasonable cost of goods, works and services for the Project in addition of those financed from the proceeds of the Financing. Section V.B. of The Recipient shall not transfer Before first transfer of Schedule 2 Project funds to a LPMU unless such project funds to a LPMU LPMU has (i) been legally established; (ii) opened a segregated account in a commercial bank in form and subject to conditions satisfactory to the Association; and (iii) all as confirmed in writing by the Association on the basis of a satisfactory assessment carried out by the Association. xi Section V. C of By no later than 3 months after the No later than 3 months Schedule 2 Effective Date, the Recipient has after effectiveness employed the independent auditors which shall conduct the audits under Section II.B of Schedule 2 of the Financing Agreement, in accordance with the provisions of Section III of Schedule 2 to the Financing Agreement. Section II.B.4 of The annual audits performed, shall Annual Schedule 2 include spot checks of the physical existence of micro-project activities on a sample basis. Section II.A.3(a) of The Recipient shall, by no later than 2 Two months prior to Schedule 2 months prior to the date of the Midterm Review Midterm Review, carry out and furnish to the Association, a technical audit of the quality of the micro- project activities and expenditures on a sample basis. xii I. Strategic Context A. Country Context 1. The Republic of Chad is one of the most underdeveloped countries in the world. With a population of 11.3 million inhabitants, it is ranked 175 th out of 182 countries listed in the United Nations Human Development Report of 2009. Government spending has increased significantly since 2003, made possible by rising oil revenues, but the impact in terms of poverty reduction appears to have been negligible. Efforts will need to be intensified if significant progress is to be made on the development front. If the current trajectory continues, Chad is likely to achieve only one of the Millennium Development Goals (MDGs). Constraints include a lack of strategic planning in the social sectors, imbalances in sector spending, high unit costs, weak budget management, an unfavorable business environment, and weak transportation infrastructure. 2. Poverty in Chad is widespread. In 2003, when oil production started and poverty was last measured, approximately 55 percent of the population lived below the poverty line, and 36 percent lived in extreme poverty. More than 40 years ago, oil was discovered in Chad -- providing an opportunity to address some of the country‘s humanitarian and development challenges and to turn a predominantly agrarian economy into an oil producing exporter. But the development impact so far has been negligible. 3. Chad adopted its first Poverty Reduction Strategy Paper (PSRP) - ―Stratégie Nationale de Réduction de la Pauvreté (SNRP) - in June 2003, just when oil production was coming on- stream. The strategy set an ambitious target of reducing poverty 50 percent by 2015, with a focus on governance, economic growth, development of human capital, improvement to living conditions of the vulnerable, and preservation of ecosystems. In April 2008, the Government adopted a second generation PRSP (SNRP II). The SNRP II has five pillars: (i) good governance; (ii) robust, diversified growth; (iii) rural development; (iv) infrastructure; and (v) human resource development. The implementation of both strategies has been greatly undermined by persistent internal conflict and weak governance, coupled with a lack of government commitment and leadership in pursuing necessary reforms. 4. Governance remains a problem. Overall, the key governance challenge faced by Chad is the need to better manage government revenues and the overall reform agenda in a manner that can leverage the exceptional level of petroleum revenues for inclusive economic growth and poverty reduction. Recent progress achieved at the technical level has been reflected in improved respect for budget preparation and closure timelines, simplification of the budget execution chain, and stronger management of reforms. However, there is limited transparency with respect to the decision-making process and actual spending, and high levels of spending still take place outside normal budget processes. Transparency and accountability in the public sector continue to be rated low.1 1 Chad was ranked 171 out of 178 countries listed in Transparency International‘s Corruption Perceptions Index for 2010. 1 5. Public spending has increased, made possible by rising oil revenues, but it is not adequately aligned with the Government‘s PRSP. Actual expenditures in many key social sectors (including health, education, and rural development) have fallen short of budget targets. Allocations to and spending on infrastructure, however, have been in line with PRSP projections. A better alignment between the SNRP II and budget planning and execution will be critical for achieving progress towards identified SNRP II objectives. Furthermore, certain sectors, particularly infrastructure and defense, benefit from spending levels that are considerably higher than budgeted amounts. 6. Capital and recurrent expenditures have consistently been imbalanced. An analysis of spending within various sectors, including priority social sectors, shows that heavy emphasis is put on investment spending and transfers. Project costs are high, and budget allocations for recurrent costs, such as school equipment, health supplies, and skilled human resources, are inadequate. This imbalance between capital and recurrent expenditures undermines the productivity of public investments and reduces the impact on growth and the delivery of services to the population. B. Sectoral and Institutional Context 7. The Republic of Chad is taking steps toward decentralization. Decentralization was mentioned in the 1996 constitution, which called for the creation of decentralized, territorial ―collectivités‖ that can benefit from some degree of administrative and financial autonomy. In 2000, the Government undertook a comprehensive review of all legislation and regulations relating to decentralization, which furthermore made suggestions for implementation2 and provided guidance for further legislative work. The review and the subsequent legislative work were supported by the Local Development Program Support Project (LDPSP). 8. The Government‘s commitment to decentralization remains strong (as reflected by the introduction of the National Decentralization Plan), and LDPSP continues to play a key role in contributing to its progressive implementation. Approved in 2004 3 and structured as a three- phase APL, LDPSP was designed as part of the PRSP implementation strategy, with the purpose of reducing poverty and promoting sustainable development in rural areas by empowering communities and decentralized authorities and improving access to basic services and economic opportunities at the local level. Implementation of LDPSP 1, the first of the three planned phases, met with numerous challenges, but progress has been moderately satisfactory overall. The operation is one of several in the country portfolio that is supporting the Government‘s decentralization strategy. The efforts being supported in the rural space through LDPSP are paralleled in the urban space, most notably through the Bank-funded Urban Development Project (UDP), approved by the Bank in 2007 and funded with a US$ 15 million IDA grant. UDP, which finances the construction of urban infrastructure, is supporting the decentralization process by strengthening the capacity of local government in the five major cities of Chad. 2 Republic of Chad; Office of the Prime Minister: « Compilation of Laws and Regulations on Decentralization - The Law by Texts » N‘Djamena, 2000. 3 Phase I was co-financed by IDA (US$ 23 million), the French Agency for Development - AFD (US$ 5.45 million), and the Government of Chad (US$ 17 million). 2 9. Much has been achieved under LDPSP 1 in terms of the elaboration of the legislative and regulatory framework of decentralization. Numerous laws, decrees, regulations, and ordinances have been issued to support the decentralization process, which has seen the country re- structured into 22 regions, 61 departments, and 252 sub-prefectures. The Government bodies that are supporting the decentralization effort include:  The High-Level Committee on Decentralization (HCD), chaired by the Prime Minister;  The Technical Committee of the HCD;  The Ministry Charged with Decentralization (MCD);  The Ministry of Interior and Public Security; and  The Inter-ministerial Committee charged with the elaboration of legal texts related to Decentralization and Deconcentration. 10. To complement the legal framework for a more decentralized system of government, the MCD has prepared various texts related to the functioning of local government bodies. Six of these were adopted during Phase 1. It is important to recognize, however, that the institutional and legal provisions represent only a framework. In order for decentralization to become reality, people living in rural communities must be educated about their new rights and responsibilities, and implementation capacity must be instilled. LDPSP 1 has contributed to these latter activities, and the support will continue under LDPSP 2. 11. A distinctive feature of LDPSP is its use of a community-driven development (CDD) approach. Under this approach, communities are empowered to select the problems that will be addressed using project resources. The choice is not easy, because most rural communities in Chad face significant problems in a number of areas. The most common of these include: a. Health. Maternal mortality in Chad stands at 191 deaths per 1,000 live births, with 76 percent of women delivering without qualified assistance. Contraceptive use remains very low, not only because of cultural barriers, but also as the result of frequent shortages in family planning supplies at the health center level; b. Sanitation and water. A mere eight percent of the population of Chad is estimated to have access to improved sanitation, compared with a Sub-Saharan Africa-wide average of 36 percent. In the water sector, the picture is slightly brighter, as considerable progress has been made towards the achievement of the MDGs: an estimated 46 percent of the population now has access to an improved water source, compared with the MDG of 60 percent (by 2015); c. Education. Public primary education in Chad was declared free in 2006. Since then, the Government has engaged in an ambitious school construction program. The primary school gross enrolment rate currently stands at around 95 percent, although the primary school completion rate is only around 36 percent. However, there are large regional differences in terms of access to education, as well as important gender inequalities. 3 Additional spending in the sector has led to some progress, including the construction of about 300 classrooms and the training of around 2,000 new teachers per year; d. Agriculture and rural development. Chad has traditionally had an agrarian economy: more than 80 percent of the population is rural and relies on subsistence farming and livestock production activities for its livelihood. Yet despite the importance of agriculture, it is estimated that only six percent of the country‘s land area is currently cultivated. With the growth of the oil sector, the relative importance and contribution to the overall economy of agriculture has decreased dramatically: the sector currently accounts for only about 12 percent of GDP and is experiencing negative growth. In spite of declining cotton production, the cotton sector remains important, cotton being the main source of cash income for 350,000 rural families, representing several million Chadians. 12. Chad also faces serious risks from climate change, which add to already significant developmental challenges. Desertification, soil degradation, deforestation, and overexploitation of water resources have worsened over the last three decades. The seriousness of these threats and their socio-economic effects are becoming increasingly evident. According to the Climate Change Vulnerability Index, Chad faces ―extreme risk‖ from climate change. Virtually the entire country is exposed to natural disaster risks from multiple hazards, including drought, floods, and landslides. These disaster risks represent potential threats to economic development and poverty reduction efforts. 13. LDPSP 1 and its accomplishments. LDPSP 1 helped address some of the problems facing rural communities by funding community-driven micro-projects. Although the Project experienced management difficulties, significant results have been achieved. To date, 352 micro-projects have been completed, out of a total of 405 micro-projects identified and approved for implementation. The remaining 53 micro-projects that were identified and prepared are currently under implementation, and it is expected that these will be completed, because the Government continues to pay the outstanding co-financing. The 405 micro-projects provide support to 100 education facilities (mainly school buildings), 26 health centers and HIV/AIDS facilities, 214 water supply systems, 9 agricultural intensification schemes, 43 livestock production facilities, 10 training centers, and 3 community radio stations (see Figure 1). 14. Under LDPSP 1, micro-projects were undertaken both in the dry northern Sahelian zone, as well as in the more humid southern Sudanese zone. In both zones, the top need identified by the largest number of participating communities was clean drinking water, and in both zones, slightly more than one-half of all micro-projects addressed this need. In the northern zone, the main issue is the scarcity of water. In the southern zone, surface water is often available, but frequently it is not clean and safe to drink. The top priority of communities in both zones therefore was to access groundwater (up to 150 meters of depth). In the northern zone, livestock are the major livelihood source, which explains the second most important type of problem identified by participating communities: 34 percent of micro-projects funded in the north were for livestock infrastructure. In the southern zone, on the other hand, priorities identified by participating communities were different: 30 percent of all micro-projects funded in the south consisted of education projects, typically the construction of school buildings. 4 Figure 1: Shares of the types of micro-projects selected during Phase 1 Source: LDPSP 1. 15. LDPSP achieved many positive impacts. The most noteworthy included: (i) securing 35,000 child-years of additional schooling; (ii) providing 257,000 people with access to clean potable water; (iii) providing 65,000 people with access to basic health care services within their communities by building and equipping health centers; (iv) securing access to watering points for more than 100,000 cattle; (v) installing more than 5,000 decentralized Assemblies and supporting the preparation and adoption of 174 Local Development Plans (LDPs); (vi) setting up 210 Cantonal Committees, thus paving the way for the participation of communities and their representatives in the decision-making process and management of public socio-economic goods; and (vii) preparing and enabling the enactment of six laws on decentralization, along with 47 application decrees, thus setting the groundwork for the local elections. 16. Triggers for Phase 2. Of the eight triggers that were specified as conditions for proceeding to the second phase of the program, seven have been met: (i) LDPSP 1 has launched decentralization work in all 19 districts that were targeted; (ii) 87 percent of targeted communities have prepared and adopted an LDP, compared to the target of 50 percent; (iii) 68 percent of communities have implemented at least one micro-project from among those identified in the LDP, compared to the target of 50 percent; (iv) 93 percent of decentralization committees are in place, compared to the target of 75 percent; (v) six legal texts on the decentralization process have been prepared and are awaiting adoption by the National Assembly; (vi) 68 percent of the applicable texts are available to the public, compared to the target of 50 percent; and (vii) the date for local elections has been set, and these elections are foreseen in 2011. Trigger 8 relates to the percentage of oil revenues allocated by the Government to support poverty reducing micro-projects. In 2007, the most recent year for which data are available, this percentage stood at 0.2 percent, against an end-of-project target of 0.5 percent. Since 2007, the Government has financed additional activities in the sector, but no hard data are available to allow accurate assessment of the percentage. More importantly, as noted during the Project Concept Note Review, the Bank‘s dialogue with the Government has evolved considerably since the Results Framework was designed. Because of significant disagreements between the Bank and the authorities concerning the use of oil revenues (key conditions for Bank support to the Chad-Cameroon pipeline project), the government repaid all pipeline-related loans in September 2008, and IDA/IBRD exited from the energy sector in Chad. While the Bank 5 continues to support improved governance in Chad (the first pillar of support identified in the Interim Strategy Note), the Bank‘s support is no longer directly related to shares of expenditure in key sectors, expressed as a defined proportion of oil revenues. For this reason, Trigger 8 is no longer consistent with the overall Bank strategy in Chad, and it is no longer relevant as a trigger for Phase 2. 17. Relationship to Interim Strategy. The Interim Strategy Note (ISN) approved by the World Bank in July 2010 describes three main axes of engagement: (i) strengthening governance and public financial management; (ii) improving livelihoods and access to key social services; and (iii) improving regional integration and connectivity. The proposed Local Development Program Support Project 2 (with an estimated total cost of US$ 77.25 million, of which IDA finances US$ 25 million, and a project implementation period of four years) is strongly aligned with the second axis of the Interim Strategy. LDPSP 2 will focus on the delivery of services designed to respond to needs expressed by local communities, identified and delivered using a CDD approach. Likely areas of intervention include improving access to education and health services, improving access to drinking water, and financing of rural income-generating activities. C. Higher Level Objectives to which the Project Contributes 18. The original purpose of the Government‘s Local Development Program, as reflected in the Adaptive Program Lending (APL) program objective, was to reduce poverty and promote sustainable development in the rural areas by supporting governance and participation at t he local level. The revised APL objective is to provide improved access to infrastructure and basic social services in targeted districts, as well as improved planning, management and monitoring by local communities and communes of decentralized investments. Due to the complexity of needed institutional reforms and taking into account Chad's size, an APL approach was chosen, which allows a flexible, long-term (up to 12 years) intervention through three phases, with the second and third phases triggered by intermediate results. The program would evolve from pilot activities in a few areas into a full-fledged national program in a clearly established framework of decentralization by progressively adapting activities to experience and capacity. 19. The original project design envisioned that the geographical coverage would be progressively expanded during the three phases of the APL, with full national coverage achieved during Phase 3. Two factors have led to an acceleration of the expansion of coverage, which will allow complete national coverage to be achieved during Phase 2. First, in response to strong demand for micro-projects throughout the country, the Borrower has requested expansion of coverage during Phase 2, and it has backed up the request by committing additional co-financing, bringing the total amount of co-financing to US$ 50 million. Second, during implementation of Phase 1, there was a large and unexpectedly rapid increase in the number of local service providers available to work with the PMU to implement micro-projects, meaning that what was formerly a binding constraint to rapid expansion has been removed. Although national coverage will be achieved during Phase 2, Project resources will be modest compared to the enormous demand coming from communities for micro-projects. The objective during Phase 3 of the Project will therefore be to scale up the level of investment throughout the country, with the goal of increasing the total benefits. 6 20. In summary, LDPSP 2 is a key element in the World Bank‘s package of support to the implementation of the Government‘s PRSP 2 objectives. It will support the ISN‘s second axis, ―improving livelihoods and access to key social services.‖ It will also contribute to the Government‘s decentralization agenda, first by strengthening the capacity of local governments to plan, evaluate, finance, and manage local development activities, and second by reinforcing the institutional and legal framework for community development. Finally, it will help address cyclic food crises through the introduction of agricultural income-generating activities in the menu of micro-projects that can be financed under the Project. II. Project Development Objectives 21. The Project Development Objectives for Phase 2 are: (i) improved access to basic infrastructure and social services in targeted districts; and (ii) improved planning, management and monitoring by local communities and communes of decentralized investments. 1. Project Beneficiaries 22. The main project beneficiaries are the local communities that will benefit from micro- project investments. Beyond that, the Project is supporting the Government‘s decentralization program; this is expected to bring benefits to local communities by encouraging their more active participation in the local development process. 2. PDO Level Results Indicators 23. Key performance indicators for the Project are presented in Annex 1. III. Project Description A. Project components 24. The Project includes two major technical components: (i) capacity building of local communities and communes4 and support to decentralization; and (ii) decentralized financing of micro-projects. The Project also includes a project management component to support project implementation activities. The estimated cost of the Project is US$ 77.25 million, of which US$ 25.0 million will be IDA financing. Government will contribute US$ 50 million, and US$ 2.25 will come from beneficiaries. 4 In Chad the term ―communes‖ refers to urban communities, while for rural entities the term ―rural communities‖ tends to be used. 7 Component 1: Capacity building of local communities and communes and support to decentralization (US$ 12 million, of which IDA US$ 4 million) 25. The objective of Component 1 is to support the development of improved technical and fiduciary skills needed at the different decentralized levels and in the national institutions responsible for decentralization. The estimated cost of Component 1 is US$ 12 million. It will include two sub- components. Sub-component 1.1: Strengthening capacity of local communities and communes (US$ 4.64 million, of which IDA US$ 2.22 million) 26. Under this sub-component, the Project will finance capacity-building activities to benefit targeted communes and local communities. These will include: (a) participatory identification and prioritization of capacity-building needs to improve local governance; participatory diagnosis for the elaboration of LDPs and Communal Development Plans (CDPs); (b) identification, submission, implementation, and monitoring of local and communal micro - projects as defined in the LDPs and CDPs; and (c) strengthening of civil society organizations, the Departmental DACs and the Sub-Prefectoral Local Action Committees (LACs), in participatory local development management. Sub-component 1.2: Support to decentralization (US$ 3.36 million, of which IDA US$ 1.78 million) 27. Under this sub-component, the Project will provide technical assistance to strengthen the capacity of the national institutions responsible for decentralization, focusing especially on newly elected leaders,5 who will be equipped with the skills and knowledge needed to better perform their role in the local development process. These leaders will help with the consolidation of priority activities of the MCD. Component 2: Decentralized financing of micro-projects (US$ 56.25 million, of which IDA US$ 18 million, and beneficiaries US$ 2.25 million) 28. The objective of Component 2 is to increase the availability of basic infrastructures in targeted districts. Component 2 will support targeted financing of demand-driven micro-projects based on LDPs and Annual Investment Plans (AIPs). In addition to those approved during the first phase, all the micro-projects will be identified through participatory processes and included in the integrated LDPs and CDPs. The micro-projects, to be financed through a matching grant (MG) mechanism, will promote access to basic socio-economic services, income-generating activities, and sustainable natural resources management through the adoption of innovative technologies. The Project will channel funds to communes and local communities; these funds will be used for financing: (i) socio-economic infrastructure micro-projects (education, health, water facilities, etc); (ii) environmental and natural resources management micro-projects (acacia plantations, sustainable land management, Sahelian gardens, etc.); and (iii) rural income- 5 Elections in (urban) communes are currently scheduled for June 2011, while those in rural communities wil l be held later. 8 generating micro-projects (improved seeds, agricultural equipment, drying facilities, small transformation and storage facilities, etc.). The estimated cost of Component 2 is US$ 56.25 million. Component 3: Project coordination and management (US$ 9 million, of which IDA US$ 3 million) 29. The objective of Component 3 is to support the successful implementation of the Project. It will support project coordination and management activities, including: (i) administrative activities; (ii) fiduciary activities including financial management and procurement; (iii) technical execution; (iv) monitoring and evaluation of project performance and impact, including the establishment of a monitoring platform between the M oLMUH and the MEP; and (v) institutional support to the MoLMUH. The PMU will provide general coordination functions with all national institutions, especially those charged with decentralization, environmental stewardship, and natural resources management. It will further ensure compliance with the World Bank‘s procurement, disbursement, financial management, and safeguards policies and procedures. The estimated cost of Component 3 is US$ 9 million. B. Project Financing 1. Lending Instrument 30. The lending instrument is an APL (second phase). LDPSP 2 will be funded by IDA in the amount of US$ 25 million equivalent. The Government of Chad will provide co-financing in the amount of US$ 50 million, and beneficiaries will contribute US$ 2.25 million in cash, materials, and manpower. 31. LDPSP 2 will sustain efforts launched during the first phase of the APL by supporting the scaling up of project-supported interventions in the additional districts, and by helping the government to complete key institutional reforms on decentralization and local development. 2. Project Cost and Financing (in US$ million) Component and /or (US$ million) Contribution by (US$ Activity Financier million) (US$ million) Fo- Local Total Gv’t IDA Bene- reign Ficiaries A. Capacity Building of Local Communities and Communes and Support to Decentralization 1. Strengthening Capacity of Communal 4.58 2.14 6.72 4.64 2.22 and Local Communities 2. Support to 3.90 1.15 5.05 3.36 1.78 9 Decentralization Subtotal 8.49 3.29 11.77 8.00 4.00 B. Decentralized Financing of Micro-projects 1. Matching-grants 56.25 56.25 36.00 18.00 2.25 Subtotal 56.25 56.25 36.00 18.00 2.25 C. Project Coordination and Management 1. Coordination and 7.39 1.31 8.70 6.00 3 Management Activities Subtotal 7.39 1.31 8.70 6.00 3.00 2.25 Total Baseline Cost 72.13 4.60 76.73 Physical Contingencies 0.05 0.06 0.11 Price Contingencies 0.41 0.41 TOTAL PROJECT COST 72.59 4.66 77.25 50.00 25.00 77.25 IV. Implementation A. Institutional and Implementation Arrangements 32. The Project will put in place simple and efficient institutional arrangements, so that the sustainability of the efforts can be assured. The Ministry of Land Management, Urban Development, and Housing (MoLMUH) will hold overall responsibility of the Project and will ensure management and implementation functions. A representative from MoLMUH will serve as the chairman of the Project Steering Committee (PSC). The membership of the PSC will include all key Ministries directly related to the Project. At an operational level, the existing Project Management Unit (PMU) from Phase 1 of the LDPSP will continue to provide its services for Phase 2. To that effect, it is being reinforced with stronger staff and additional skills including a Project Coordinator, a Financial Management Specialist, a Monitoring and Evaluation Specialist, and a Central Accountant. The PMU will also be staffed with an Internal Auditor. B. Results Monitoring and Evaluation 33. Results monitoring and evaluation is a key part of LDPSP 2 implementation. Progress toward development objectives will be measured by means of key outcome indicators as well as intermediate outcome indicators. Annex 1 outlines the several indicators that will be monitored. The results framework has been developed to assess the impact of the project in terms of increasing access to basic infrastructures and social services for rural population, as well as the impact on decentralization by increasing the capacity of decentralized institutions. 34. The Monitoring and Evaluation (M&E) Specialist in the PMU at the central level will supervise all M&E activities under the Project, be responsible for ensuring quality control of data from decentralized levels, and take the lead in compiling the data for quarterly reporting. At the regional level, the regional PMUs will also be staffed with M&E Specialists that will work to collect data at the decentralized levels and report to the M&E Specialist at the central level. 10 Capacity building activities on M&E will be conducted for identified staff at the government decentralized institutions to ensure continuous monitoring of local development activities and enhance the sustainability of Project outcomes. LDPSP 2 will also use participatory tools to ensure community participation and measure their satisfaction with micro-projects‘ implementation. Some data will be regularly provided by monitoring systems external to the Project, such as the Poverty Monitoring System and the Rural Sector Monitoring System. The Financial Management Specialist at the central level will be responsible for analyzing data related to financial management activities of the Project. 35. An LDPSP 2 communication strategy will be developed, and a website will be built to share information about the Project. A new manual on M&E will be developed that will go in- depth in defining the results framework, the methodology and the tools for data collection, the institutional arrangement (actors and responsibility), the mechanism for information sharing, and the participatory approach. 36. The ―Guidelines on Preventing and Combating Fraud and Corruption in Projects Financed by IBRD Loans and IDA Credits and Grants", dated October 15, 2006 and updated January 2011, shall apply to the project. 37. Triggers for Phase 3 include: 1. 75 percent of targeted communities have prepared and adopted their LDPs (continued); 2. 50 percent of targeted communities have at least one micro-project whose last tranche has been disbursed (continued); 3. 75 percent of decision committees are in place and have met at least once (continued); 4. Elections in communes and rural communities have taken place (dropped); 5. 75 percent of national resources budgeted for decentralized authorities are actually transferred (dropped); 6. At least 47,000 students are enrolled in built/rehabilitated schools or classrooms (new); 7. At least 940,000 people in project areas have access to an improved water source (new); and 8. At least 250,000 people in project areas have access to health facilities (new). C. Sustainability 38. The long-term vision of the program foresees more decentralized management of public resources to reduce poverty in local communities by taking into account their priorities. For operational reasons, LDPSP 2 would have to establish some transitory structures and rely on donor financing, but particular attention would be paid to institutional and financial sustainability. This would be achieved through progressive integration of the financing mechanism into the existing public resources management framework, both at the national and decentralized levels. First, the sustainability of LDPSP 2 would require that financed micro- projects contribute effectively to PRSP 2 implementation and are coordinated with normal budget procedures. Second, sustainability would require a synchronization of the institutional arrangements with the decentralization process and in particular with a progressive transfer of responsibilities to elected local authorities. Third, the sustainability of LDPSP 2 investments 11 would be ensured by the participation of beneficiaries in the decision on investments and by their financial and in-kind contributions for implementation. V. Key Risks and Mitigation Measures 39. Potential risks are presented in the Operational Risk Assessment Framework (ORAF) (see Annex 4). The overall risk rating is Medium-Likelihood. VI. Appraisal Summary A. Economic and Financial Analysis 40. Under a CDD approach, micro-projects are demand-driven in nature. Support to urban communes and rural communities under LDPSP 2 will be provided within the framework of an ―open menu‖ of social and economic infrastructures. Therefore, it is not possible to predict with precision: (a) which investments will be proposed by the communities; and (b) which proposed investments will actually receive funding as decided by the various Action Committees. For this reason, economic analyses are usually not carried out for Bank-funded CDD-type operations. Nevertheless, some economic analyses were undertaken for three types of possible micro - projects: water wells, small-scale irrigation, and school construction/rehabilitation. Water wells generally have health and economic impacts at the same time; the analysis was based on the value of time saved, i.e. time that could be used for productive activities. Using reasonable, conservative assumptions, the internal rate of return of a typical water well is 32%, and the net present value is quite large, since a well can produce benefits for 20 years. A preliminary analysis was also undertaken for a small-scale irrigation scheme of 33.2 hectares. The resulting IRR is 14.9 percent. Finally, for school construction/rehabilitation, an incremental cost analysis was used as a criterion, which showed the effectiveness of this investment in terms of providing primary education. See the Project File for the detailed assumptions, analyses, and results. B. Technical 41. During preparation, the Government requested that support be continued during Phase 2 in the 19 districts covered during Phase 1 and that the geographical coverage of the Project be expanded to include all remaining districts in the country. Communities will have the opportunity to choose from a large number of possible micro-projects. There will be a negative list of a few types of projects that are excluded. The negative list is being developed by MoLMUH and will appear in the PIM, which is being updated. 42. Responsibility for the design, implementation, and monitoring of micro-projects will be entrusted to communes and local communities, who will design and implement their own development activities, including fiduciary management. Experience from similar projects demonstrates that with the appropriate mix of training and technical assistance, latent capacity existing within communes and local communities can be released, permitting the mobilization of adequate technical knowledge required for the successful implementation of basic socio- economic investments, income-generating activities, and natural resources management activities. 12 43. In addition to training, the Project will also provide technical assistance to project beneficiaries, to enable them to recruit local service providers who can assist them in preparing their LDPs, CDPs, AIPs), and the related micro-projects to be financed through Component 2. Furthermore, cooperation with key sectoral ministries will be strengthened through partnership agreements to ensure adequate technical input and conformity of micro-projects implemented at the local level with national directives and sector policies. C. Financial Management 44. In accordance with the new Financial Assessment Principles and AFTFM ORAF guidelines, the financial management arrangements of LDPSP 2 have been reviewed to determine their acceptability to the Bank. LDPSP 2 will use the same financial management and disbursement frameworks that are currently in place under the LDPSP 1, which will be managed by the existing PMU. Although the performance of the financial management function during the first phase of the project was rated moderately unsatisfactory, the PMU is already in place and familiar with most IDA financial management procedures. The PMU has no overdue audit reports. The proposed Project will use the existing financial management arrangements at the PMU, which during the second phase will be reinforced by the mitigation measures mentioned below. The existing ring-fenced arrangements will be maintained, and, when possible, use of country systems is planned (by joint internal audit missions with the Inspectorate of Finance, involvement of Chamber of Account in the recruitment process of the external auditor, and technical audit by de-concentrated national units). The conclusion of the Financial Management Assessment is that, subject to implementation of the mitigation actions below mentioned, the Project arrangements satisfy the Bank‘s requirements under OP/BP10.02 to provide, with reasonable assurance, accurate and timely information on the status of the execution of the project. 45. The overall Financial Management risk is considered Medium Impact. The assessment recommended among other measures: (i) the amendment of the PIM to include lessons learned during the first phase, as well as guidelines for management of the MG scheme; (ii) the finalization of the ongoing recruitment of FM staff (internal auditor, finance manager, and seven accountants); (iii) the appointment of an independent external auditor; and (iv) the implementation of a GAC Action Plan, which should include social accountability mechanisms. Details of the financial management arrangements are described in the FM annex. D. Disbursement 46. Disbursement mechanisms under LDPSP 2 will remain the same as under LDPSP 1. Flows of funds will be made into two segregated Designated Accounts opened by the PMU in commercial banks, acceptable to the Bank, in N‘Djamena, from which funds will be transferred to LPMU bank accounts in the regions, provided the LPMUs maintain satisfactory financial management arrangements. These arrangements will allow the PMU to prepare consolidated annual financial statements to be audited by an independent firm , acceptable to the Bank, to produce Interim Financial Reports (IFRs), and to safeguard the Project‘s assets and resources. The Project will continue to use a transaction-based disbursement mechanism. 13 E. Procurement 47. Procurement for the Project will be carried out in accordance with the World Bank‘s "Guidelines: Procurement under IBRD Loans and IDA Credits" dated May 2004 and revised in October 2006 and May 2010; and ―Guidelines: Selection and Employment of Consultants by World Bank Borrowers‖ dated May 2004 and revised in October 2006 and May 2010, and the provisions stipulated in the Legal Agreement. The various items under different expenditure categories are described in general below. For each contract to be financed by the project funds, the different procurement methods or consultant selection methods, the need for prequalification, estimated costs, prior review requirements, and time frame will be agreed between the Recipient and the Association in the Procurement Plan. The Procurement Plan will be updated at least annually or as required to reflect the actual project implementation needs and improvements in institutional capacity. 48. The procurement process and the Standard Bidding Documents (SBD s) that will be used by the implementing agencies will be defined in the PIM and in the Procurement and Financial Management Manual. Procurement activities carried out for small works, goods and services for community-based micro-projects financed by the MG would be carried out in accordance with paragraph 3.17 of the Guidelines (Community Participation in Procurement) and with the Bank's Guidelines for Simplified Procurement and Disbursement for Community-Based Investments (February 1998) and the PIM. These will be described in a specific chapter of the PIM. F. Social (including safeguards) 49. Four key social issues to monitor throughout project implementation include: (i) the participation of the poorest, isolated, and most vulnerable groups; (ii) the participation of women; (iii) the avoidance of elite capture; and (iv) social accountability. Drawing lessons from LDPSP 1, the project design provides for strengthening the participatory process and for consolidating project interventions through two linked planning instruments, the LDP at the local level and the CDP at the communal level. 50. The different stages of the planning process including needs assessment, micro -project identification, micro-project design, and micro-project implementation will strengthen participation of all local level stakeholders organized in thematic, social and gender-based focus groups. Moreover, specific measures are put in place so that the upstream process of approving and disbursing funds for micro-projects ensures that the above-mentioned key social issues are appropriately identified and addressed. In addition, the participatory process will be enhanced both within and between communes. For this purpose, a number of tools are proposed such as public consultations, participatory monitoring and evaluation, and a wide dissemination system of decision-making processes. 51. As with LDPSP 1, OP/BP 4.12 is triggered. Since the specific sites and potential impacts of project-supported physical investments are not known, the existing Resettlement Policy Framework (RPF) has been updated by the Borrower, and reviewed and cleared by the team. It was disclosed in-country on November 29, 2010 and at the Bank InfoShop on December 2, 2010. The RPF will be used as a guide to prepare specific Resettlement Action Plans (RAPs) as 14 needed; the RAPs will quantify losses of economic activities resulting from project-financed land acquisition and will specify compensation measures needed to minimize negative impacts on Project-Affected People (PAPs). G. Environment (including safeguards) 52. From an environmental and social safeguard point of view, the LDPSP 2 is a Category B project. This categorization is derived from the fact that the environmental and social impacts of the Project are expected to be minimal, site-specific, and manageable to an accepted level. Furthermore, positive environmental and social impacts are expected from the Project. There are five World Bank Safeguard policies applicable to the project: Environmental Assessment (OP 4.01), Pest Management (OP 4.09), Physical Cultural Resources (OP 4.11), Involuntary Resettlement (OP 4.12), and Project on International Waterways (OP 7.50). The Project‘s land and natural resource management related activities should lead to an improved environmental situation and thus provide a net benefit with respect to environmental impact. 53. For the second phase, the Government of Chad updated and disclosed, under a designated Inter-ministerial Project Preparation Committee, an Environmental and Social Management Framework (ESMF), a RPF, and a Pest Management Plan (PMP). These documents were disclosed in-country on November 29, 2010 and at the Bank InfoShop on December 2, 2010. 54. The ESMF formulates standards, methods and procedures specifying how unidentified future micro-projects, whose locations are unknown, will systematically address environmental and social issues during the screening and categorization, siting, design, and implementation of micro-projects. 55. The PMP assesses relevant pest issues in Chad and evaluates current farmer pest control practices. It calls for the use of Integrated Pest Management (IPM) practices and details those IPM practices which have been shown to be efficacious. The PMP also provides guidance for limited and appropriate use of pesticides when non-chemical means are insufficient and chemical means are technically and economically justified. It highlights the criteria to be used in processing micro-projects, from preparation to approval, implementation, and monitoring, as well as the official institutions that should be involved, depending on the nat ure and contents of micro-projects. Micro-projects with potentially negative environmental and social impacts are required to formulate environmental impact assessments and are subject to public consultations. The PMP also recommends some specific training and practice modules on IPM and provides a comprehensive Action Plan for the implementation of its key requirements. The updated PMP, following clearance by the Bank, was disclosed in-country on November 29, 2010 and at the Bank InfoShop on December 2, 2010, prior to appraisal. 56. The RPF deals with policy, legal, and regulatory mechanisms needed to address cases of land acquisition, loss of livelihoods, and restriction of access in protected areas, on the part of affected people, as a result of project activities, in case they happen. It also provides a coherent framework, eligibility criteria and asset valuation methods for compensation and/or resettlement of affected people, as well as grievance mechanisms of affected persons, in case of unsatisfactory arrangements between the parties involved. 15 57. Together, these safeguard instruments, are considered both as a planning tool and a means for a harmonious integration of the Project in its bio-physical and socio-economic environment and as a way to maximize positive effects on the same environment. The ESMF, RPF and PMP include institutional arrangements, outlining the roles and responsibilities for the various stakeholder groups involved, for screening, reviewing and approving micro-projects, as well as for implementing and monitoring their mitigation measures. They also include provisions for capacity strengthening, to ensure that safeguard measures are adequately implemented. 58. All instruments were cleared and disclosed in-country and at the World Bank Infoshop, prior to the project appraisal. Prior to disclosure in-country and at World Bank Infoshop, a stakeholders‘ workshop was organized by the Preparation Committee. This approach was used to share the results of the updated studies, mainstreaming ownership, and seeking input from these stakeholders in order to improve quality and soundness of these instruments. Recommendations from both ASPEN and the stakeholders‘ workshop have been reflected in the final safeguard reports, prior to disclosure. These recommendations and relevant provisions from the three sets of reports will be reflected in the PIM. 59. International Waterways: The safeguards studies concluded that the introduction of agricultural income-generating activities, such as small-scale irrigation schemes, among the micro-projects that could potentially be funded in the zones of the Chari River, the Logone River, and Lake Chad, which are international water bodies, may have a cumulative effect on the quantity and/or quality of water available to other riparians. Therefore, in conformity with OP 7.50, the Government sent a notification on November 30, 2010 to the Lake Chad Basin Commission to inform riparian countries about the proposed project activities. The Chad Basin Commission responded to the Government on December 3, 2010, authorizing the latter to implement the proposed LDPSP 2. They invited the Government to inform them before implementing small-scale irrigation micro-projects in order to agree on the best and suitable techniques to be used. World Bank Safeguard Policies Yes TBD 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] H. Other Safeguards Policies triggered (if required) 60. None. 16 Annex 1: Results Framework and Monitoring REPUBLIC OF CHAD: LOCAL DEVELOPMENT PROGRAM SUPPORT PROJECT 2 Original APL Program Objective: Reduce poverty and promote sustainable development in the rural areas by supporting governance and participation at the local level Revised APL Program Objective: Improved access to infrastructures and basic social services in targeted districts and improved planning, management and monitoring by local communities and communes of decentralized investments. Cumulative Target Values Core Revised APL Program Unit of Baseline 2010 2015 2020 Data Source/ Responsibility for Sector Frequency Outcome Indicators measure (2004) (end (end (end Methodology Data Collection Indicator APL1) APL2) APL3) Targeted communities have adopted Yearly Progress National and Percentage 0 50 75 75 M&E system their LDPs Reports Regional PMUs Decision committees of the covered Yearly Progress National and districts are in place Percentage 0 75 75 75 M&E system Reports Regional PMUs Students enrolled in built/rehabilitated Yearly Progress National and schools or classrooms Number - 12,000 29,500 50,000 M&E system Reports Regional PMUs People provided with access to improved Yearly Progress National and water sources under the project Number - 250,000 940,000 1,500,000 M&E system Reports Regional PMUs People in project areas with access to Yearly Progress National and health facilities Number - 50,000 250,000 400,000 M&E system Reports Regional PMUs 17 Original APL Program Indicators Proposed Change Comments Targeted communities have adopted Continued their LDPs Targeted communities have started Dropped implementing these plans Difficult to have accurate data on the Oil revenues disbursed based on LDPs Dropped part of oil revenues transferred to local communities Proper mechanism doesn‘t exist to track Resources actually transferred to local Dropped the resources transferred to local authorities based on LDPs authorities Natural resource are increasingly used Dropped Indicator difficult to monitor sustainable to the profit of local villages Covered districts where decision New committees are in place Students enrolled in built/rehabilitated New schools or classrooms People provided with access to improved New water sources under the project People in project areas with access to New health facilities 18 REPUBLIC OF CHAD: LOCAL DEVELOPMENT PROGRAM SUPPORT PROJECT 2 Results Framework Project Development Objective (PDO): (1) improved access to basic infrastructure and social services in targeted districts; and (2) improved planning, management and monitoring by local communities and communes of decentralized investments. Responsibility Description Core Unit of Cumulative Target Values** Data Source/ PDO Level Results Indicators* Baseline Frequency for Data (indicator Measure 2011 2012 2013 201 4 2015 Methodology Collection definition etc.) Indicator One: Students Yearly National and enrolled in built/rehabilitated Number 0 1,000 2,500 5,000 7,500 17,500 progress M&E System Regional - schools or classrooms report PMUs Indicator Two: People Yearly National and provided with access to Number 0 20,000 57,500 230,000 460,000 690,000 progress M&E System Regional - improved water sources6 report PMUs under the project Indicator Three: People in Yearly National and project areas with access to Number 0 20,000 50,000 100,000 150,000 200,000 progress M&E System Regional - health facilities report PMUs Indicator Four: Targeted communities have Strategic Quarterly Communities National and Development Plans (Local and Percentage - 10 50 60 70 75 progress and Strategic Regional - Communal) prepared and report Plans PMUs adopted Indicator Five: Community- Yearly National and based micro-projects properly Percentage - - 80 90 90 90 progress M&E System Regional - maintained one year after report PMUs completion Indicator Six: Direct project Total number of beneficiaries persons in the Yearly National and villages where the Number 0 100,000 500,000 1,000,000 1,500,000 2,000,000 progress M&E System Regional project has report PMUs implemented at least one micro-project 6 Targets are estimates based on LSDP1 community infrastructure choices; results will be adjusted when the selection by communities of micro-projects have been completed 19 Direct project beneficiaries, Percentage of female female in the total number Yearly National and of persons in the Percentage - 50 50 50 50 50 progress M&E System Regional villages where the report PMUs project has implemented at least one micro-project INTERMEDIATE RESULTS Intermediate Result (Component One): Capacity building of local communities and communes and support to decentralization Intermediate Result indicator One: Covered districts where Yearly National and Percentage 0 10 40 50 60 75 progress M&E System decision committees are in reports Regional PMUs place Intermediate Result indicator Two: Project beneficiaries at both local and communal Quarterly Reports of National and levels trained in community- Number 0 1,000 5,000 10,000 15,000 20,500 progress training Regional PMUs reports sessions based procurement and financial management Intermediate Result indicator Three: Legal texts on Yearly Number 6 6 7 8 10 12 progress M&E System MCD decentralization approved by reports council of ministers Intermediate Result (Component Two): Decentralized financing of micro-projects7 Intermediate Result indicator Quarterly Four: Community micro- Number 0 30 150 300 800 938 progress M&E System PMU projects completed report Intermediate Result indicator Number of persons Five: People in project areas working as self- working in Yearly National and employed in renovated/constructed Number 0 25 100 200 300 500 progress M&E System regional PMUs renovated/constructed report livestock production facilities livestock production 8 facilities under the project 7 Targets are estimates based on LSDP1 results and are for planning purposes only, given the demand-driven nature of the project. 8 Targets are estimates based on LSDP1 community infrastructure choices and results and will be adjusted when the selection by communities of micro- projects has been completed. 20 Intermediate Result indicator Six: Land area restored with Yearly Land area restored and National and tree plantings activities Hectares 0 100 500 900 1100 1300 progress M&E System regional PMUs to combat 9 reports protected desertification Intermediate Result indicator Seven: Additional classrooms Yearly built or rehabilitated at the National and Number 0 10 50 100 150 350 progress M&E System regional PMUs primary level resulting from reports 10 project intervention Intermediate Result indicator Eight: Improved Community Yearly water points constructed or National and Number 0 10 50 200 400 600 progress M&E System regional PMUs rehabilitated under the reports 11 project Intermediate Result indicator Nine: Health facilities Yearly National and constructed, renovated and/or Number 0 5 10 20 30 40 progress M&E System regional PMUs 12 reports equipped Intermediate Result indicator Ten: Satisfaction of Bi-annual Beneficiary PMU and beneficiaries with the results Percentage - - - 70 - 80 survey assessment independent of the Community micro- reports survey consultants projects in targeted local area 9 Targets are estimates based on LSDP1 community infrastructure choices and results and will be adjusted when the selection by communities of micro- projects has been completed. 10 Targets are estimates based on LSDP1 community infrastructure choices and results and will be adjusted when the selection by communities of micro- projects has been completed. 11 Targets are estimates based on LSDP1 community infrastructure choices and results and will be adjusted when the selection by communities of micro- projects has been completed 12 Targets are estimates based on LSDP1 community infrastructure choices and results and will be adjusted when the selection by communities of micro- projects has been completed. 21 Annex 2: Detailed Project Description REPUBLIC OF CHAD: LOCAL DEVELOPMENT PROGRAM SUPPORT PROJECT 2 1. The purpose of the proposed second phase of the Local Development Program Support Project (LDPSP) is to continue the capacity building efforts that are currently underway in the 1 9 original districts and extend the coverage of the project to the remaining districts (out of total 61 districts in the country). The implementation of the Project will take place within the framework of the decentralization policy that was formalized in 2006.13 As with LDPSP 1, LDPSP 2 will involve three institutional levels: local, ―Départemental‖ (district), and national. 2. The proposed operation includes two major technical components: (i) capacity building of rural communities and urban communes, and support to decentralization; and (ii) decentralized financing of micro-projects. The Project also includes a project management component to support project implementation activities. The estimated cost of the project is US$ 77.25 million, of which IDA will finance US$ 25 million. Component 1: Capacity building of local communities and communes and support to decentralization 3. The objective of this component is to build the capacity of local communities and communes for planning, managing, and monitoring of communal investments, including the sustainable management of ecosystems. The estimated cost of Component 1 is US$ 12 million, of which IDA will finance US$ 4 million. It will be implemented with two sub- components. Sub-component 1.1: Strengthening capacity of local communities and communes 4. Under this sub-component, the Project will finance capacity-building activities to benefit targeted local communities and communes. This will include: (a) participatory identification and prioritization of capacity-building needs to improve local governance; participatory diagnosis for the elaboration of LDPs and CDPs14; (b) identification, submission, implementation, and monitoring of local and communal micro-projects as defined in the LDPs and CDPs; and (c) strengthening of civil society organizations, the Departmental DACs and the Sub-Prefectoral CLAs, in participatory local development management. 5. Capacity-building activities for (rural) communities: The Project will promote the participation of grassroots communities, villages and ―cantons‖, and empower them to become efficient partners of their local governments. The Project will do this through the following activities: (i) training and supporting local communities, villages, and cantons in participatory planning and implementation, management and monitoring of micro-projects; (ii) training communities, villages, and cantons in community-based procurement and financial 13 Laws 002/PR/2000, 072002 and 03/PR/2004 are generally relevant and are particularly applicable for rural communities. 14 The LDPs and CDPs are translated into corresponding Annual Development Plan (AIPs) that contain the annual slice of investment activities. 22 management; (iii) training communities, villages, and cantons in participatory monitoring and evaluation; (iv) developing a communication strategy and tools adapted to local communities‘ training and information needs; (v) providing information, education, communication, and training to community stakeholders on their roles and responsibilities, and local governance control; and (vi) supporting the development and translation into national languages of adapted operational manuals for use by local communities in the implementation and monitoring of local development activities. Furthermore, as far as environment, natural resources management and sustainable land management (SLM) activities are concerned, the Project will finance sensitization workshops at the local level, and provide training and support to community stakeholders in mainstreaming environmental protection, natural resources management, and sustainable land management practices in the local development process. 6. Capacity-building activities for (urban) communes. By supporting in urban areas the same type of activities as those being supported in rural areas, the Project will provide training and technical support to communes to organize and conduct participatory planning, prepare CDPs, and design, implement, and monitor micro-projects. 7. Specifically, the Project will finance the following activities: (i) sensitizing elected officials and local stakeholders on the existing decentralization and related laws; (ii) providing training on participatory planning, management, and monitoring of local development activities; (iii) supporting the design and disseminating planning tools for local governments; (iv) developing, validating, and disseminating operational manuals and tools adapted for communes‘ use in local development management (simplified procurement and financial management manuals, delegated contract management tools, participatory monitoring and evaluation tools); (v) providing technical support for the drafting and implementation of CDPs, training and communication programs; (vi) providing technical support and training of communes in the implementation of information, education and communication activities on the implementation of LDPSP 2 and other local development programs/projects; (vii) training and supporting the establishment of local planning and management committees to ensure a better articulation of inter- and intra-communal interventions; and (viii) training private operators and partners at the local level. 8. To ensure that this sub-component is given the attention it deserves, the PMU will develop a capacity-building plan targeting all stakeholders at the local level, and taking into consideration their current capacity level. This plan, which will be submitted to IDA for approval, will be the basis for the implementation of capacity-building activities in favor of beneficiaries at the local level. This training program will describe the beneficiaries‘ status and individual circumstances, the implementation strategy, and the planning process throughout the duration of the Project. This will cover both LDPSP 2 beneficiaries in ‗extension‘ areas, as well as additional capacity building activities to be carried out for beneficiaries in ‗consolidation‘ areas (LDPSP 1 areas). Sub-component 1.2: Support to decentralization 9. Under this sub-component, the Project will provide technical assistance to strengthen the capacity of the national institutions responsible for decentralization, focusing especially on newly elected leaders, who will be equipped with the skills and knowledge needed to better 23 perform their role in the local development process. 15 These leaders will help with the consolidation of priority activities of the MCD. The Project will also continue the work started during Phase 1 to establish the regulatory and legal framework for decentralization and make available to the future elected local leaders the tools needed for a better management in a decentralized environment. Component 2: Decentralized financing of micro-projects 10. Component 2 will support targeted financing through a Matching Grant (MG) mechanism of demand-driven micro-projects based on LDPs and CDPs. The estimated cost of Component 2 is US$ 56.25 million, of which IDA will finance US$ 18 million. 11. The component will channel funds to local communities and communes to be used for financing: (i) socio-economic infrastructure micro-projects (education, health, water facilities, etc.); (ii) environmental and natural resources management micro-projects (acacia plantation, sustainable land management, Sahelian gardens, etc.); and (iii) rural income-generating micro- projects (small-scale irrigation,16 agricultural production activities involving the use improved seeds and small-scale agricultural machinery, drying facilities, village processing and storage facilities, etc.). All micro-projects will be identified through participatory processes and included in the LDPs. The micro-projects, to be financed through a matching grant mechanism, will promote access to basic socio-economic services, as well as income-generating activities and sustainable natural resources management through the adoption of innovative technologies. 12. Key features of the financing mechanism for micro-projects. There is no fundamental change in the design of the MG scheme during LDPSP 2, which has similar characteristics as compared with LDPSP 1, namely: (i) participation of all community stakeholders in the identification and selection of micro-projects; (ii) open investment options, subject to a small negative list; (iii) mandatory contributions of beneficiary communities both in cash and kind; (iv) transparent resource management, (v) commitment of beneficiaries as regards the maintenance and operation of their investments, and in monitoring and evaluation of the implementation process and results; and (vi) conformity with national and sector policies including environmental and social safeguards policies. 13. Micro-projects, to be financed through the MGs, will constitute an array of investments, including: (i) socio-economic investments in such sectors as education (village schools), health (local health centers, HIV/AIDS/STI centers), and water and sanitation (wells, boreholes); (ii) production and income-generating activities in the agriculture sector and related productive sectors, including small-scale irrigation, village-level processing facilities, and equipment, rural markets, local vegetable growing, seed production, animal husbandry, livestock fattening, cereal banks, fish farming and food processing; and (iii) environmental and natural resource 15 The first round of local elections is slated to take place in June 2011. These elections will concern only the 62 urban communes where the district head towns are located. The timetable for elections for the ‗rural‘ communes is yet to be fixed. A pre-condition for these elections is the geographic delimitation of these com munes that has not yet been prepared. 16 The Project will finance only small-scale irrigation systems with water retention structures that are less than 1 meter in height. 24 management activities, including sustainable land management structures and practices. The eligibility criteria are detailed in the PIM. 14. The MG beneficiaries are expected to provide their own contributions to investment costs, both in cash and in kind (provision of labor or materials). Depending on the type of micro- project, minimum mandatory contributions of beneficiary communities will vary between: (i) zero percent of eligible investments for environment and natural resource management activities (contributions in kind only); (ii) three percent for socio-economic micro-projects; and (iii) five percent for income-generating activities. Exceptions to the above mandatory contributions will be granted on a case-by-case basis for extremely poor and most vulnerable groups identified within the communities. These exceptions will have to be duly justified and documented beforehand. Using proceeds of the PPA, a rapid identification study will be carried out to determine these communities. 15. Since the MG process will be demand-driven, all micro-projects included as priorities in the local or CDPs will be eligible for funding under Component 2. There will be a small negative list of non-eligible investments. These are described in the PIM. 16. Micro-project cycle. As was the case under LDPSP 1, the LDPSP 2 micro-project cycle will include the following steps: (ii) project identification and preparation by local communities and communes; (ii) approval by departmental committees; (iii) transfer and management of micro-project funding; and (iv) micro-project implementation and quality control. Key features related to these steps are described below. Institutional aspects are presented in Annex 3. Details are in the PIM. 17. Identification and selection of micro-projects. Community and commune stakeholders, through their local development councils, will be fully empowered in the process of identification and selection of micro-projects. In this regard, Component 1 capacity-building activities will include support for recruiting facilitators (firms, NGOs) to assist beneficiary communities and communes in organizing, planning, and developing their LDPs and CDPs. The beneficiary communities and communes in turn will seek support from private service providers or from de-concentrated technical services of concerned ministries for micro-project preparation and execution micro-projects. 18. Eligible micro-projects will be included in the Local and CDPs, and earmarked as priorities by local communities. They will also conform to national and sectoral policies and guidelines. The approval committees set up at district level to approve micro-projects will ensure adherence to these policies and guidelines through appropriate representation of the local services of economic and sector ministries. In addition, appropriate environmental and social screening and mitigation measures will be incorporated in micro-project design. For this purpose, the technical staff of the Ministry of Environment and Fisheries (MoEF) will be called upon to participate in micro-project identification, preparation, and implementation. 19. Transfer and management of matching grant funding. Successful implementation of micro-projects is predicated on the capacity of communities to manage funds in an efficient and transparent fashion. To that effect, communities and communes will be offered capacity 25 building under Component 1, so that they can have the skills needed to manage financial resources effectively. The community will open a micro-project account with a commercial bank or micro-finance institution and give proof that it has deposited its cash contribution into this account. The funding agreement will then be signed with the Project, whereby project funds will be transferred to the micro-project account. Transfers will be made according to the micro- project execution plan. Micro-project funds will be managed in accordance with the principles agreed between IDA and the Government of Chad, as described in the PIM. 20. Implementation and maintenance of micro-projects. Responsibility for ensuring micro- project design, implementation, monitoring, and evaluation, rests with beneficiary communities and communes. To that effect, management committees will be established for each micro- project. Private sector service providers will assist the management committees in the design and implementation of their micro-projects. LDPSP 2 will provide support for the establishment and training of the management committees so that appropriate mechanisms are in place to ensure the sustainability of the micro-projects. 21. Monitoring and quality control. The Local Project Management Units (LPMUs) will ensure that micro-project implementation is carried out in strict compliance with the provisions of the PIM, as required under the micro-project agreement. In addition, a memorandum of understanding will be signed between LPMUs and de-concentrated technical services for specific activities. As part of their obligations under these agreements, the technical services will assist with quality control and ensure that sector policies, norms, and standards are adhered to. They will liaise closely with the LPMUs and report back to regional authorities and their own ministries. The foregoing is expected to improve coordination and information flow with technical services in support of micro-project activities. Component 3: Project coordination and management 22. This component will support project coordination and management activities, including: (i) administrative activities; (ii) fiduciary activities including financial management and procurement; (iii) technical execution; (iv) monitoring and evaluation of project performance and impact, including the establishment of a monitoring platform between the M oLMUH and the MEP; and (v) institutional support to the MoLMUH. The PMU will provide general coordination functions with all national institutions charged with decentralization, environment and natural resources management, or any other institutions as necessary. It will further ensure compliance with the World Bank‘s procurement, disbursement, financial management, and safeguards policies and procedures. The estimated cost of this component is US$ 9 million of which IDA will finance US$ 3 million. 23. The PMU will have the following responsibilities: (i) facilitating day-to-day coordination of project implementation; (ii) planning the project activities and preparation of the annual work program; (iii) monitoring and evaluating all activities and the implementation progress of LDPSP 2 with the concerned national institutions; (iv) ensuring responsible financial management of IDA and Government resources; (v) handling all procurement related to these funds; (vi) administering all financial agreements to be signed by the PMU with the beneficiary 26 communities and communes; and (vii) ensuring the implementation of proper environmental, social and land-use management frameworks. 24. The PMU will be led by a National Coordinator supported by a team comprising a Financial Manager, a Procurement Specialist, an M&E Specialist, a Central Accountant, and an Internal Auditor. 25. At the regional level, activities of the Project will be implemented by seven LPMUs consisting of three from the first phase and four new ones to be created under the second phase, each comprising a Regional Coordinator, a Monitoring and Evaluation Specialist, an Accountant, a Civil Engineer, and a Social and Environmental Safeguards Specialist. The LPMUs will facilitate project implementation and provide support to communities and communes at the local and communal levels. 26. Project monitoring and evaluation system. Particular attention will be directed to the monitoring and evaluation system of LDPSP 2, which will be strong and robust. There will be a Monitoring and Evaluation (M&E) Specialist in the PMU at the central level. He/she will supervise all M&E activities under the Project, be responsible for ensuring quality control of data from decentralized levels, and take the lead in compiling the data for quarterly reporting. The LPMUs will also be staffed with M&E Specialists, who will work to collect data at the decentralized levels and report to the M&E Specialist at the central level. Capacity building activities on M&E will be conducted for identified staff at the government decentralized institutions for ensuring continued monitoring of local development and sustainability of the Project's outcomes. LDPSP 2 will use participatory tools to ensure community participation and to measure their satisfaction with micro-project implementation. Some data will be provided regularly by other monitoring systems, such as the Poverty Monitoring System and the Rural Sector Monitoring System. On the financial side, the Financial Management Specialist at the central level will be responsible for analyzing data related to financial issues. 27. A communication strategy will be developed and a website built for diffusion of information about the project. A new manual on M&E will be developed that will provide details with regard to definition of the results framework, the methodology and the tools for data collection, the institutional arrangement (actors and responsibility), the mechanism for information diffusion, and the participatory approach. 27 Annex 3: Implementation Arrangements REPUBLIC OF CHAD: LOCAL DEVELOPMENT PROGRAM SUPPORT PROJECT 2 Introduction 1. Implementation arrangements during Phase 2 will remain largely the same as they were during Phase 1, both in the 19 districts where LDPSP 1 was active as well as in the new districts into which LDPSP 2 will expand. Based on the lessons during LDPSP 1, refinements will be made to increase effectiveness and efficiency. Institutional Arrangements Project Oversight and Orientation 2. Overall management, implementation, and supervision. The Project will be implemented with simple and efficient institutional arrangements, so that the sustainability of the efforts can be assured. The Ministry of Land Management, Urban Development, and Housing (MoLMUH) will hold overall responsibility for the Project and will ensure institutional and technical responsibility for sound management and implementation. 3. Orientation and Oversight of the Project. At the national level, the PSC established during the first phase will be maintained and will have overall responsibility of project oversight. The PSC, which will be chaired by the Secretary General of the Ministry of Land Management, Urban Development, and Housing (MoLMUH), will comprise all the key stakeholders involved with the Project, including members of the PSC during Phase 1 plus additional members as deemed necessary. It will have the following mandates: (i) vetting proposals, annual work plans, and budgets prepared by the PMU at the national level, ensuring their consistency with the project‘s objectives; (ii) reviewing progress made towards achieving the project's objectives; (iii) facilitating the coordination of project activities among the various entities represented ; and (iv) making recommendations for removal of any obstacles to Project implementation. Project Management and Coordination 4. Project management and coordination at the national level. At an operational level, the existing LDPSP 1 Project Management Unit (PMU) from will continue functioning during Phase 2. To that effect, it is being reinforced with a stronger staff, including a National Coordinator supported by a team comprising a Financial Manager, a Procurement Specialist, an M&E Specialist, a Central Accountant, and an Internal Auditor. 5. During the second phase, the PMU will continue overseeing the operation of LPMUs, including environmental and social safeguards aspects and internal auditing. Four additional LPMUs will be created, consistent with the expansion of the Project coverage. The PMU will also serve as facilitator for project implementation, monitoring and evaluation, financial management, and procurement. The PMU will have the following responsibilities: (i) consolidating annual work programs and budgets; (ii) facilitating the implementation of project 28 activities; (iii) ensuring that project implementation is carried out in conformity with financial, procurement, and disbursement procedures agreed between the Government and the World Bank; (iv) consolidating project implementation monitoring and evaluation information from the LPMUs and the various national institutions participating in project implementation; and (v) preparing and transmitting technical, financial, environmental, and M&E reports to the Steering Committee, the Government, the World Bank, and other key stakeholders. 6. Project management and coordination at the regional level. At the regional level, the LPMUs will serve as relays for the PMU and facilitate the implementation of project activities at the departmental and local levels. They will be entrusted with the following specific responsibilities: (i) providing technical support to communities and communes; (ii) collecting, consolidating, and transmitting project implementation activities at the departmental and local levels to the PMU; and (iii) ensuring that the project‘s fiduciary management at the local and departmental level is carried out in conformity with agreed procedures between the Government and the Bank. LPMU staff will include: (i) a Regional Project Coordinator; (ii) a Regional M&E Specialist; (iii) a Civil Engineer; (iv) an Accountant; and (v) and a Social and Environmental Specialist. Community Level 7. Community-level structures include both local (rural) communities and (urban) communes. The boundaries of urban communes will be delineated ahead of the June 2011 elections. Defining boundaries of rural communities is much more challenging, given the ethnic and social diversity. This work is on-going. Rural communities may be as small as a village or potentially as large as one or more ‗cantons,‘ the latter being already defined, sometimes along traditional leadership structures (‗sultanates‘). 8. During Phase 1, a key institution at the local level was the Community Development Assembly (CDA)/Assemblée Communautaires de Développement (ACD). These ad hoc committees will continue existing in rural areas until such time as elections in rural areas are held, as will be the case for urban areas in June 2011. 9. In urban areas, after the local elections are completed, ad hoc project structures will no longer be needed, since the Municipal Councils/Conseils Municipaux will have been elected. Each of these will in turn elect a Management Committee/Comité de Gestion, which will serve as an executive committee. Once this committee is in place, one of its tasks will be to help prepare the CDP and the corresponding AIPs. They may opt to confirm or update the existing LDPs. This must be done as a basis for prioritizing all projects, whether funded by Government, NGOs, or donors. The confirmation/updating of the LDPs will be timely for LDPSP 2, which is expected to begin implementation in July 2011. 10. The needs of local communities in terms of water and sanitation, health, education, agriculture, etc., are enormous. LDPSP 1 raised considerable expectations on the part of local communities, resulting in the submission of large numbers of micro-project proposals. In turn, during the micro-project approval stage, strong political pressures came into play at the departmental level. As a result, too many micro-projects were approved during Phase 1, creating in commitments that could not be met given the available project funding resources. For this 29 reason, some of the micro-projects approved during Phase 1 have not started, and others are yet to be completed. It would not be surprising if many of the newly elected local committees in urban areas and the CDAs in rural areas request Phase 2 funding to finance the backlog of micro- projects already approved but yet to be implemented. During Phase 2, a mechanism needs to be introduced so that micro-project approval decisions are aligned with the amount of available funding, so that approved micro-projects can count on receiving the full amount of funding. 11. Under Phase 1, community contributions in cash and kind ranged from 2 to 6 percent of total micro-project costs, compared to a target of 10 percent. The reason is that communities face droughts, floods, and other challenges that affect their livelihood activities in general and their food security specifically. Given the demonstrated inability of many rural communities to meet the contribution levels required during Phase 1, local contributions in cash, labor, or materials by the rural communities will be reduced to two percent of micro-project costs for environmental micro-projects (zero percent in cash), three percent for socio-economic micro- projects, and five percent for income-generating micro-projects. 12. As was the case during Phase 1, a local bank account will be opened by local communities that are implementing micro-projects. Since bank fees charged for maintaining these accounts were excessive during Phase 1, it is proposed that the PMU negotiate with micro- finance institutions in order to obtain reduced rates during Phase 2. Departmental and sub-departmental (sous-prefecture) levels 13. During Phase 1, decision-making committees were formed at departmental and sub- departmental levels to review and approve micro-projects. These committees will continue to operate during Phase 2, but with slightly adjusted names to reflect their main functions. Departmental Action Committees (DACs)/Comité de Département d’Actions (CDAs) will continue where the population at the sub-district level is less than 5,000 and/or if no deconcentrated services from technical ministries (Education, Health, Rural Development, Water, etc.) are present.17 At sub-prefectoral levels Local Action Committees (LACs)/Comitées Locales d’Action (CLAs) will continue to operate. As part of their approval responsibilities, the DACs/CDAs and the LACs / ClAs are responsible for: (a) checking the eligibility of the proposed micro-projects according to LDPSP guidelines; (b) determining their coherence with other on-going development work; (c) verifying their technical, environmental, social, and economic feasibility; and (d) monitoring micro-project implementation. The committees decide on the approval or rejection of the proposed micro-projects. They are assisted by the nearest technical ministries (economic development, agriculture, livestock, environment and water, health, public works, education, etc.), which can verify alignment with technical and sectoral strategies, norms, and standards. The Committees inform: (i) LDPSP; (ii) micro-project beneficiaries; and (iii) the head of the territorial administration structure (district or sub-district head). 17 A district (―department‖) typically has between 14 and 25 ―sous-préfectures‖. 30 Figure 2: Overview/Summary of Institutional Arrangements for LDPSP 2/PROADEL 2 LEAD MINISTRY / National MINISTERE DE TUTELLE (MATUH) PSC / COP PMU / UGP Regional LPMU / UGL RAC / CRA NGOs / ONGs D’APPUI District DAC / CDA LAC / CLA Municipal Local Council / Conseil Communal Management Committee / Comité de Gestion ACD ACD ACD ACD PROVISION OF SERVICES/PRESTATAIRES DE SERVICES 31 14. The DAC and LAC are composed of: (a) representatives from government services including rural development, education, health, and infrastructure; (b) one representative of an NGO designated by the local NGOs; and (c) one representative of the head structure of rural organizations existing in the area; and three representatives of CDAs by ‗canton‘, representing specific target groups (women‘s associations, youth, etc.). The total number of members of the DAC is capped at 25. The CDA representatives of the DACs must constitute a majority. Positioning of the LPMUs 15. During Phase 1 of LDPSP 1/PROADEL 1 there were three LPMUs/UGLs, which served as local implementation structures. The Koumra LPMU served project activities in the regions of Mandoul, Moyen Chari, and Logone Oriental. The Moundou LPMU served the areas in Lac Wey, Région du Longone Occidental, and the Tandjilé. The N‘Djamena LPMU served project activities in the regions of Chari Baguirmi, Hadjer Lamis (Dababa), and Kanem (Bahr el Gazal). All three LPMUs served 19 districts. 16. Since Phase 2 will expand the work to the remaining districts, four additional LPMUs will be created and the existing ones restructured. The organizational chart of the LPMUs is shown in Figure 2 below. The locations and coverage of the seven LPMUs for Phase 2 are as follows: Number Location Regions covered 1 Moundou Logone Occidental, Tandjilé, Mayo Kebbi Ouest 2 Koumra Mandoul, Logone Oriental, Moyen Chari 3 Bongor Mayo Kebbi Est, Chari Baguirmi 4 Massakory Kanem, Lac, Bahr El Gazal, Hadjer Lamis 5 Mongo Guéra, Batha, Salamat 6 Abéché Ouaddaï, Wadi Fira, Dar Sila 7 Faya Borkou, Ennedi, Tibesti 32 Figure 3: Structure of the Local Project Management Units (LPMUs) 17. The staff of each LPMU consists of a Regional Coordinator, an M&E Specialist, an Accountant, a Civil Engineer, a Social and Environmental Specialist, and support personnel. The main function of an LPMU is to insure that the funds provided through LDPSP are effectively invested in the communities as specified in the PIM (PIM). The PIM also describes in some detail the responsibilities of staff based in the PMU and staff based in the LPMUs. Some inefficiency occurred during Phase 1 because direct communications were not allowed between technical specialists based in the PMU and technical specialists based in LPMUs; instead, communications had to be channeled through the regional coordinators. During Phase 2, direct communications will be authorized. 33 Figure 4: Structure of the National Project Management Unit (PMU) 34 Financial Management 18. Phase 2 of the LDPSP will be carried out over a period of four years. Procurement, disbursement, and decentralized financial management practices will continue to be based on the Bank‘s standardized methods. Staffing and Training 19. The PMU will be staffed with a Finance Manager at the central level and one Accountant. The team will handle the project transactions with support of eight Accountants – one in the PMU and seven in the LPMUs. Internal audit activities will be carried out by an Internal Auditor. Recruitment of the Internal Auditor is expected to have been completed by effectiveness. The FM team will have the responsibility to collect and control invoices, maintain the books, enter data in the accounting software, manage the Project‘s bank accounts, keep the books of accounts, monitor the budget, and prepare the financial reports. The project Financial Management Specialist, the Central Accountant, and the seven Regional Accountants will be in charge of the financial management of the Project. The Project Coordinator and the Financial Management Specialist will sign all checks for payments made under the Designated Accounts A and B and the Project Account. The Regional Coordinators and the Regional Accountants of the Project in the LPMUs will sign all checks for the payments made under the Sub-Account for micro-projects, the Sub-Account for other activities, and the Sub-Accounts to the Project Account. A training program will be drawn up every year, since the FM Assessment revealed some weaknesses in the team capacity. Training is mainly conducted through the Bank‘s local or sub-regional training institutions (CESAG in Dakar). Bank CTR and FM Units will provide training on disbursement and FM procedures. The configuration of the PMU and the LPMUs, the profile of their staff, and their job descriptions are described in the PIM. Budgeting 20. PMU budgeting arrangements are described in its Manual for Administrative, Financial and Accounting Procedures (MAFAP). Reliance will be placed on the revised version of the manual. The existence of an Accountant in each LPMU will help to ease the budgeting process. Accounting Policies and Procedures 21. The PMU and the LPMUs will maintain the books and accounts of the project activities and ensure that the annual financial statements are produced in a timely manner and in line with OHADA (Organisation pour l’Harmonisation en Afrique du Droit des Affaires) accounting principles, which calls for double entries system. The PMU will be responsible for consolidating project accounts, including those of the LPMUs. The consolidation process will be performed by using an upgraded version of the existing accounting software by the PMU at the central level. The MAFAP will propose simplified tools to be used at the regional/local levels. 35 Internal Control and Internal Auditing 22. Internal control arrangements will be described in the revised version of the MAFAP. This will include provisions on key controls on the MG scheme (criteria of eligibility, frequency of selection, composition of panel in charge of selection, monitoring and evaluation of ac tivities of the beneficiaries). To provide reasonable assurance on the project transactions, an Internal Auditor will be recruited by effectiveness. The Internal Auditor will develop an annual audit plan using a risk-based approach. Joint missions with national control bodies (Inspectorate of Finance) will be encouraged. Internal audit reports will be submitted to the PSC, and the action plan will be closely monitored. During project implementation, the need will be assessed whether further reinforcement of the internal audit function will be needed. The Internal Auditor will be in charge of monitoring the implementation of the action plan aimed at addressing weaknesses revealed in the previous audit report. Financial Reporting and Monitoring 23. The current content and format of the IFRs, which have been improved with Bank support during supervision missions, are deemed acceptable to IDA. The same FM reporting arrangements used during Phase 1 will be maintained during Phase 2, whereby quarterly consolidated IFRs will be submitted by the PMU to IDA within 45 days after the end of each calendar quarter. The IFR will describe the sources and use of funds and will present detailed data on expenditures by component using the same format used under Phase 1, taking into account lessons learned and improvements proposed during supervision missions. A simplified format will be developed for LPMUs. At the end of each fiscal year, the Project will prepare an annual financial statement. The financial management indicators for the Project are the following: (i) portion of the budget disbursed every year at the level of each component of the project; (ii) nature of the opinion provided by the external auditor on the annual financial statements; (iii) number of major weaknesses in internal controls identified by the internal and the external auditors; and (iv) rating of FM overall control risk. Auditing 24. The consolidated annual financial statements and the quarterly IFRs prepared by the PMU as well as the internal control system will be subject to an annual audit by a reputable, competent, and independent auditing firm based on terms of reference that are satisfactory to the Bank. These TORs were prepared before negotiations. In line with the Use of Country Systems initiative, and depending on its capacity, the Supreme Audit Institution ―Chambre des Comptes‖ will consider the possibility to be jointly involved in the recruitment process and the audit fieldwork. The audit scope will be tailored to the specific risks associated with a particular unit or activity (e.g. LPMUs, communes, MG scheme, and micro-projects), in accordance with Bank requirements and agreed upon with the counterparts. The auditor will provide an opinion on the consolidated annual financial statements in compliance with IFAC Standards on Auditing, as well as a special opinion on the MG scheme and the micro-projects. In addition to the audit reports, the external auditor will be expected to prepare a Management Letter, giving observations, comments, and providing recommendations for improvements in accounting records, systems, controls, and compliance with financial covenants in the Financing Agreement. 36 The Project, through the ―Chambre des Comptes‖, will be required to produce, no later than June 30 of the following fiscal year, audited annual financial statements. In addition to the above audit arrangements, annual technical audits to be carried out separately will be required to complement the financial management arrangements. The technical audit will be used as a tool to reinforce the supervision tools and mechanisms of the project. In line with the new Access to Information policy, the Project will comply with the Bank disclosure policy of audit reports (i.e., it will make publicly available the audit reports, promptly after receipt of all final financial audit reports, including qualified audit reports) and place the information provided on its the official website within one month of the report being accepted as final by the team. Conclusion of the FM Assessment 25. Based on the Financial Management Assessment, the overall Financial Management risk is considered Medium Impact. The assessment recommended among other measures: (i) the amendment of the PIM to include lessons learned during the first phase, as well as guideline s for management of the MG scheme; (ii) the finalization of the ongoing recruitment of FM staff (internal auditor, finance manager, and seven accountants); (iii) the appointment of an independent external auditor; and (iv) the implementation of a GAC Action Plan, which should include social accountability mechanisms. Figure 5: Financial setup and flows IDA Grant Account IDA Credit Account Government Washington, D.C. Washington, D.C. Financing Designated Account Designated Accont Project Co-financing DA-A (Micro-projects) DA-B Account (Grant then Credit) (Credit) PMU PMU 7 Sub-Accounts DA-B 7 Sub-Accounts 7 Sub-Accounts B (1 for each LPMU) (Crédit) (1 for each LPMU) (1 for each LPMU) LPMU LPMU LPMU Communities’ Accounts Communities’ Accounts Communities Communities Suppliers/Service providers/Entrepreneurs/Consultants 37 Disbursements Arrangements 26. Supporting Documentation: Disbursements for all expenditures should be against records evidencing eligible expenditures (e.g., copies of receipts, supplier invoices), except for items of expenditures under contracts of less than: (a) US$ 300,000 for civil works; (b) US$ 200,000 for goods; (c) US$ 100,000 for consultant services contracts for firms; (d) US$ 50,000 for consultant services contracts for individuals; as well as (e) all training and operating costs, which will be claimed on the basis of Statement of Expenditures (SOEs). All supporting documentation for SOEs will be retained at the PMU and will be readily accessible for review by periodic Bank supervision missions and external auditors. 27. All disbursements against expenditures under the Decentralized Financing of Micro- projects component will be subject to ex post financial and technical audits, on a sample basis, to be carried out by auditors employed by the Project as stated in paragraph 24 above. 28. Disbursement Methods: The transaction-based disbursements method will be used. Following a review of IFRs submitted during the first year and completion of a risk assessment, the Project might shift to the report-based disbursement method, subject to maintaining satisfactory FM performance. In that case, the IFR templates would be modified to include specific disbursement reports. 29. Designated Accounts and Sub-Accounts. To facilitate project implementation and reduce the volume of withdrawal applications, the Government will open in a commercial bank two Designated Accounts (DAs) denominated in FCFA, on terms and conditions acceptable to IDA. The first Designated Account (DA-A) will be used exclusively to finance micro-projects in the form of grants. The ceiling of DA-A will be set at CFAF 1 billion as was the case during Phase 1. The second Designated Account (DA-B) will be used for other activities and expenditures under Components 1 and 3 of the project. The ceiling of DA-B will be set at CFAF 640 million, as was the case during Phase 1. The Designated Accounts will be used for all payments in an amount below 20 percent of ceiling of each Designated Account. Replenishment applications will be submitted monthly. 30. The government will provide co-financing in local currency equivalent to US$ 50 million to finance all project parts in parallel. The Government will open a Project Account in a commercial bank in which its contribution will be deposited in line with a disbursement schedule agreed at negotiations. In order to ease the financing of micro-projects and other activities, the Government will open seven (7) Micro-project accounts in the cities in which the LPMUs will be located, on terms and conditions satisfactory to the Association. Flow of funds 31. Upon project effectiveness, IDA will advance the amount of FCFA 1 billion into DA-A, and FCFA 640 million into DA-B. Subsequent advances will be made against submission of supporting documentation (records evidencing eligible expenditures or statements of expenditures) for expenditures paid from the DA. Resources needed for the financing of program activities will flow from: (i) the IDA Credit Account for Direct Payments to be made to 38 suppliers, Consultants and firms and to Designated Account B; (ii) the IDA Grant and Credit Accounts to Designated Account A ; (iii) from the Designated Accounts A and B to the seven Sub-Accounts linked to DA-A for micro-projects and the seven Sub-Accounts linked to DA-B dedicated to finance other activities and expenditures other than micro-projects; and (iv) the Project Account and its seven Sub-Accounts for the activities to be co-financed with the funds from the Government of Chad. Under the supervision of the project Financial Management Specialist, the project Accountants (the Central Accountant in N‘Djamena and seven Regional Accountants in the regions) will prepare the supporting documents needed for the replenishment of the Designated Accounts to be submitted to IDA through the Ministry of Economy and Plan (MoEP). The Project Account and its seven Sub-Accounts will receive Government co- financing in compliance with the terms of the Financing Agreement. Disbursements by components 32. The table below sets out the expenditure by component to be financed out of the proceeds of IDA financing. Percentage of Amount of the Amount of the Expenditures to be Component Grant Allocated Credit Allocated Financed (expressed in US$) (expressed in US$) (inclusive of Taxes) (1) Component 1: Capacity building of local communities and communes 4,000,000 100% and support to decentralization (2) Component 2: Matching 100% of amounts Grants for ―Decentralized 11,250,000 6,750,000 disbursed financing of micro-projects‖ (3) Component 3: Project coordination and 2,037,700 100% management Amount payable (4) Refund of Preparation pursuant to Section 2.07 962,300 Advance of the General Conditions (5) Unallocated - TOTAL AMOUNT 11,250,000 13,750,000 Procurement Arrangements General 33. A Country Procurement Assessment Report (CPAR) for Chad carried out in 1993 and 2000, and the audit of five large contracts carried out by the Audit Office of the Supreme Court 39 in 2002, together highlighted the dysfunction of the procurement system in Chad. The principal deficiencies identified in the CPAR included: (i) absence of a procurement regulatory body; (ii) the lack of a formal recourse available to tenders to allow them to dispute the decisions of contract awards; (iii) very low procurement thresholds and lack of harmonization of procurement thresholds; (iv) very cumbersome and time consuming approval process of contracts, compromising the rapid disbursements of national and external resources; and (v) excessive recourse to direct contracting. 34. Based on the recommendations made in these reports, the Government, with technical and financial support from the World Bank, undertook procurement reform s, and a new Procurement Code was published in December 2003. The Procurement Code and its implementation decrees took into account most of the recommendations of the CPAR. The Code, in Line 2 of Article 5, recognizes the primacy of international agreements in the event of a conflict with the provisions of the Code and the implementation decrees. The present key deficiencies of the national procurement system include: (a) the requirement that foreign bidders have to associate with national bidders or subcontract to national bidders; (b) the obligation for all bidders (national and foreign alike) to obtain a qualification certificate prior to the submission of a bid; and (c) a cumbersome procedure for the award and signature of contracts, involving the Minister of Finance and the President of Republic in contracts of relatively low value. 35. The deficiencies have been extensively discussed with the Government, including during appraisal, and their rectification in the Code and the regulations is part of the broader governance dialogue. For ICB, the procedures specified in the Procurement Guidelines and the use of the Bank‘s SBDs is mandatory. For NCB, the Government agreed during evaluation to the primacy of the provisions of the Bank‘s Guidelines over the national regulations. National Competitive Bidding (NCB) advertised locally will be carried out in accordance with Chad‘s procurement laws and regulations, acceptable to IDA, provided that they assure economy, efficiency, transparency, and broad consistency with key objectives of the Bank Guidelines. 36. In the absence of national SBDs, the Bank‘s SBDs (with appropriate modifications to provisions relating to ―advertising and notification,‖ ―currencies of bid and payment,‖ ―settlement of disputes,‖ and deletion of the domestic preference provision, etc.) will be used for NCB. This should ensure that: (i) methods used in evaluation of bids and the award of contracts are made known to all bidders and not be applied arbitrarily; (ii) any bidder is given adequate response time (four weeks) for preparation and submission of bids; (iii) bid evaluation and bidder qualification are clearly specified in bidding documents; (iv) no preference margin is granted to domestic manufacturers; (v) eligible firms are not precluded from participation; (vi) award will be made to the lowest evaluated bidder in accordance with pre-determined and transparent methods; (vii) bid evaluation reports will clearly state the reasons to reject any non-responsive bid; and (viii) prior to issuing the first call for bids, draft SBDs prepared as annexes to the PIM would be submitted to IDA for review. Guidelines 37. Procurement for the proposed project will be carried out in accordance with the World Bank‘s "Guidelines: Procurement under IBRD Loans and IDA Credits" dated May 2004 an d 40 revised in October 2006 and May 2010; and ―Guidelines: Selection and Employment of Consultants by World Bank Borrowers‖ dated May 2004 and revised in October 2006 and May 2010, and the provisions stipulated in the Legal Agreement. The various items unde r different expenditure categories are described in general below. For each contract to be financed by the Grant, the different procurement methods or consultant selection methods, the need for prequalification, estimated costs, prior review requirements, and time frame will be agreed between the Recipient and the Association in the Procurement Plan. The Procurement Plan will be updated at least annually or as required to reflect the actual project implementation needs and improvements in institutional capacity. 38. The procurement process and the SBDs that will be used by the implementing agencies will be defined in the PIM and in the Procurement and Financial Management Manual. Procurement activities carried out for small works, goods and services for community-based micro-projects financed by the MG would be carried out in accordance with paragraph 3.15 of the Guidelines (Community Participation in Procurement) and with the Bank's Guidelines for Simplified Procurement and Disbursement for Community-Based Investments (February 1998) and the PIM. These will be described in a specific chapter of the PIM. Advertising 39. A General Procurement Notice (GPN) will be prepared and published in the United Nations Development Business following Board Approval, to advertise for major consulting assignments and any ICB. Publication of a GPN in the national press or official gazette will be carried out for NCB. The GPN shall be prepared before negotiations and published after board approval. It shall include all contracts under ICB and all large consulting contracts (i.e., estimated to cost US$ 200,000 or more). The GPN will be updated on a yearly basis and will show all outstanding International Competitive Bidding (ICB) for works and goods contracts and all international consulting services. In addition, a Specific Procurement Notice (SPN) is required for all goods and works to be procured under ICB, and an Expression of Interest (EOI) for all consulting services costing US$ 200,000 equivalent or more will be published in the UNDB, Dg Market, as well as in the national press. Procurement Plan 40. At the time of appraisal, the Recipient had not prepared a procurement plan for project implementation that provides the basis for determining the procurement methods. This plan, covering the first 18 months of project implementation, was prepared after the appraisal mission and was reviewed by the Bank before the negotiations mission. It will be updated in agreement with the project team at least once each year to reflect the activities proposed for the following 18 months of project implementation, to reflect actual project implementation plans and improvements needed in institutional capacity. The updated Procurement Plan will be maintained in the Project database and made available through the Bank‘s external website, once the Grant is approved by the IDA Board of Directors. 41 Procurement Capacity Assessment 41. A procurement capacity assessment of the Ministry of Land Planning, Urban Development, and Housing (MATUH) and of the Project Preparation Team was carried out during the appraisal mission. A. Ministry of Land Planning, Urban Development, and Housing (MATUH ) 42. The assessment revealed that a body in charge of bids opening and award (Commission d’Ouverture et de Jugement des Offres – COJO) exists in MATUH, and is composed of the following members:  The General Secretary of MATUH – President  The Representative of the Ministry in Charge of Economy and Planning – Vice- President  The Administrative, Financial, and Equipment Director of MATUH – Member  The Procurement Specialist of MATUH – Member  The Urban Director of MATUH – Member  The Director of Financial Control in the Ministry of Economy, Finance and Planning – Member  The Public Procurement Body – Observer 43. In addition to COJO, there is a procurement unit (Service de Passation des Marchés) in the MATUH which prepares and monitors all procurement activities. The unit is staffed with a chief procurement specialist with five staffs but not familiar with bank procurement procedures. This unit also provides services to the secretariat of the COJO. 44. The assessment did not reveal any other anomaly in the functioning of COJO or in the MATUH procurement unit. The submission of evaluation reports by the sub-commission in charge of bids evaluation normally does not exceed 10 days, and COJO rules on the evaluation report within three days. However, certain deficiencies which may affect project implementation were reported during the assessment, including: (i) slow process for contract validation and approval; (ii) insufficient information technology equipment and programs for monitoring; and (iii) insufficient bank procurement training for the five staff working in the Unit. To address these deficiencies, the project will: (i) ensure that World Bank procurement training is provided at the specialized Regional Procurement Training Centers to these five staff; (ii) computerize procurement monitoring and management in MATUH through the purchase of computer notebooks with procurement monitoring and management programs; and (iii) ensure training on these programs. 45. The following is a schedule of actions to be carried out for the strengthening of procurement capacities in MoLMUH: 42 Responsible Action to be undertaken Dates Institution Purchase of computer notebooks with After Project Implementation procurement monitoring and effectiveness Unit and SG management programs /MATUH Training in the use of procurement After Project Implementation monitoring and management programs effectiveness Unit and MATUH Participation in procurement After Project Implementation workshops at the specialized regional effectiveness Unit and MATUH procurement training centers B. Project Preparation Team 46. The missions assessed the Project Preparation Team and concluded that there was not a person entirely in charge of procurement responsibilities. Recommendations made in the action plan to solve this problem and possible related risks include: (i) the hiring of a Procurement Specialist at the PMU; (ii) the preparation of a procurement plan and a regular updating of such plan to reduce the risk of the extension of project duration; (iii) the establishment of a procurement planning and contract management system integrated in the computerized Financial Management system to be installed at the PMU and the LPMUs in order to ensure the follow-up of contracts funds disbursement and aggregate amounts; (iv) providing procurement training workshops at the regional procurement center (located in Dakar, Senegal); (v) providing technical assistance through short-term consultants as necessary; (vi) carrying out annual technical and financial audits specific to procurement; and (vii) clearly developing procurement rules and methods in the PIM. 47. A schedule of actions to be carried out to strengthen procurement capacity in the Implementation Unit appears below. 43 Responsible Actions to be undertaken Dates Institution 1. Hiring of a Procurement Before effectiveness Project Preparation Specialist at the PMU Team and SG of MATUH 2. Preparation of a procurement Done Procurement plan and a regular updating of Specialist and SG of such plan to reduce the risk of MATUH the extension of project duration 3. Participation in procurement As needed during the life Implementation Unit training workshops at the of the Project Regional procurement center 4. Short-term technical assistance As needed during the life Implementation Unit in procurement by consultants as of the Project necessary 5. Annual technical and financial At least twice each year World Bank and audits specific to procurement during project External Auditors implementation 48. The overall project risk for procurement is rated high because of (i) the country conditions, (ii) the provisions of the national procurement code, (iii) the delays experienced in the past with approval of evaluation reports and signing of contracts, and (iv) the overall experience of poor management of contracts in the past despite the fairly strong arrangements in place at the level of the Implementation Unit. 49. To mitigate these procurement risks, in addition to the recruitment of a Procurement Specialist and their training, the Recipient and the Bank team have agreed to carry out at least three missions per year for the first two years of project implementation period to minimize the risk of failing to follow procurement procedures as well as for supervision of project activities. The Recipient and the Bank have also agreed to two field-targeted supervision visits per year to carry out post-review of procurement activities. Finally, the Bank will continue the dialogue with other partners (African Development Bank, European Union and AFD) to help the Government to review some provisions of the new Code and its implementation decrees. Procurement Implementation Arrangements 50. At the national level, the bulk of procurement for vehicles, equipment, construction or rehabilitation works for offices, consulting services, studies and training will be managed by the PMU through the Procurement Specialist. The Procurement Specialist will be in charge of preparing all bidding documents (ICB, NCB and local shopping) and all requests for proposals, as well as for submitting them to IDA for no objection before their publication. The Procurement Specialist in collaboration with the other senior members of the PMU will manage the evaluation of the bids and proposals and will seek the no objection of IDA before making any award for contracts not governed by the National Tender Board (Commission d’Ouverture et de Jugement des Offres). For contracts governed by the National Tender Board, the current legislation will apply, provided that it is not in contradiction with the FA. The Procurement 44 Specialist together with the team put in place and the National Coordinator will participate in the evaluation before seeking the no objection of IDA. At the local level, the Procurement Specialist will be in charge of the training of the communities for community-based procurement. The Project Implementation Manual (PIM) will develop a section entirely dedicated to community- based procurement with all the necessary elements. The PMU will use consultants as necessary to carry out specific tasks in procurement. The recruitment for all the positions in the PMU and the LPMUs should be acceptable to IDA, throughout the life of the project. 51. Documents related to procurement below the prior review thresholds will be maintained by the Borrower for ex-post review by auditors and by IDA supervision missions. The PMU will be required to prepare a computer-based system to monitor that the aggregate amounts agreed upon will not be exceeded during the life of project implementation. Procurement Methods 52. Civil Works. No major civil works will be contracted under the Project. Only small works will be contracted, for the rehabilitation or construction of the four new LPMU offices to be financed by IDA (these will cost an estimated US$ 400,000 in total). Each contract for rehabilitation or construction estimated to cost less than US$ 500,000 will be procured through NCB, in accordance with national procedures acceptable to IDA. 53. The remaining works will consist of small works to be carried out through community- based micro-projects. Given the size, amount and demand-driven nature of community-based works, these contracts will be governed (when applicable) by the Guidelines for Simplified Procurement and Disbursement for Community-Based Investments (February 1998) and the PIM. Funded through grants awarded for community-based micro-projects, small works will mostly be works relating to small community-level social infrastructure, such as classrooms, rural health clinics, youth facilities, community meeting facilities, etc. It is estimated that these small works will cost US$ 100,000 or less per contract. They can be procured under lump-sum, fixed-price contracts awarded on the basis of quotations obtained from three qualified domestic contractors invited in writing to bid. The invitation shall include a detailed description of the works, including basic specifications, the required completion date, a basic form of agreement acceptable to IDA, and relevant drawings where applicable. The awards will be made to the contractors who offer the lowest price quotation for the required work, provided they demonstrate they have the experience and resources to complete the contract successfully. 54. Goods. Procurement of computers and computing equipment, other office equipment, materials and furniture, locally available at economical price and costing less than US$ 500,000 per contract, will follow NCB procedures acceptable to IDA. Procurement of vehicles, motorcycles and equipment costing US$ 500,000 or more per contract will be carried out through ICB. Goods that cannot be grouped into bid packages of US$ 100,000 can be procured through national shopping, according to procedures acceptable to IDA, or through the UNDP Inter-Agency Procurement Services Office (IAPSO). The Borrower would award the contract, on the basis of written solicitation issued to at least three qualified suppliers, following evaluation of bids received in writing from such qualified suppliers. The award would be made 45 to the supplier with the lowest price quotation for the required goods, provided he still has the experience and resources to execute the contract successfully. 55. IDA Reviews. Contracts financed by IDA above the threshold value of US$ 500,000 equivalent for Goods and US$ 5 million equivalent for Works, as well as the first three contracts for Works and the first three contracts for Goods, awarded under National Competitive Bidding, will be subject to IDA's prior review procedures in accordance to Appendix 1 of the Guidelines. 56. Community-Based Procurement. The project will finance community-based micro- projects at an estimated total cost of US$ 56.25 million equivalent, of which IDA will finance US$ 18 million. The micro-projects will comprise things such as small and social infrastructure, classrooms, rural health clinics, IEC-related activities and materials, minor repairs or works, capacity building etc. It is expected that these micro-projects will cost US$ 80,000 or less per contract. Funding for these activities will be in the form of grants. Communities will be required to contribute an agreed percentage of the total budget in labor, kind, or in cash (see PIM for details). 57. Financing will depend on applications received from communities, which will be screened using a negative list of non-eligible activities. It is not possible to determine the exact mix of goods, small works, and services to be procured due to the demand-driven nature of the micro-project identification process. The types of activities to be financed and their procurement details therefore will depend on the needs identified by the communities. Procurement of items for the implementation of micro-projects will be carried out in accordance with simplified procurement procedures referred to the PIM. The manual will contain a special chapter describing the procedures and tools in accordance with those found in the Bank‘s Guidelines for Simplified Procurement and Disbursement for Community-Based Investments (February 1998). The PMU and the LPMUs will be responsible for ensuring compliance with these guidelines, and ex-post reviews of random micro-projects will be conducted periodically by the Bank and independent technical audits. 58. Consultants Services, Audits, Studies and Training. Consulting Services, studies, and training financed by IDA would be for: (i) specialized studies, supervision, project implementation and monitoring, Management Information System (MIS), financial management support, financial audits; and (ii) consultancies on technical matters and training --skills gap analysis and skills development (participatory approaches), capacity building for comm unity development, empowerment and organization, and IEC campaigns. Consultants financed by IDA, totaling up to US$ 2.14 million, will be hired in accordance with the Bank's Guidelines for the Selection and Employment of Consultants by World Bank Borrowers (May 2004 revised in October 2006, and May 2010). 59. Quality-and-Cost-based Selection (QCBS). All consulting service contracts costing US$ 200,000 equivalent or more for firms would be awarded through the Quality and Cost Based Selection (QCBS) method. To ensure that priority is given to the identification of suitable and qualified national consultants, short-lists for contracts estimated at or less than US$ 100,000 equivalent may made up entirely of national consultants (in accordance with the provisions of paragraph 2.7 of the Consultant Guidelines), provided that a sufficient number of qualified 46 individual or firms is available (at least three). However, if foreign firms have expressed interest, they would not be excluded from consideration. The Project Implementation Unit will ensure that expressions of interest are widely publicized, to attract multiple interested candidates. Based on agreed criteria, the Project Implementation Unit will maintain and update a list of consultants which will be used to establish short-lists. 60. Least-Cost Selection (LCS). For financial and technical audits estimated to cost less than US$ 100,000, selection of consultants will be made on the basis of Least-Cost Selection (LCS). 61. Selection Based on Consultants Qualifications (CQ). Consultants for small studies, engineering designs and supervision, monitoring and evaluation, and short term assignments, costing less than US$ 100,000 will be selected through the Selection Based on Consultants Qualifications (CQ). 62. Individual Consultants (IC). Consultants for project implementation, and assignments in sectors such as agriculture, economics, sociology, land tenure and other types of short term appointment which can be delivered by individuals, costing less than US$ 100,000, will be selected through comparison of qualifications among Individual Consultants (IC) expressing interest in the assignment or approached directly. 63. Single-Source Selection (SSS). In exceptional cases, Single-Source Selection (SSS) could be used, in accordance with the provisions of paragraphs 3.9 to 3.13 of the Guidelines, with IDA‘s prior agreement. 64. Training, Workshops, Seminars and Conferences. The cost of training, workshops, seminars and conferences is expected to total around US$ 9.70 million, of which IDA will finance US$ 3.14 million. Training, workshops, seminars and conferences (also study tours) will be carried out on the basis of approved annual programs that will identify the general framework of these activities for the year, including the nature of training/study tours/workshops, the number of participants, and the estimated cost. 65. IDA Reviews. Bank staff will review the selection process for the hiring of consultants proposed by the Borrower, in accordance with Appendix 1 of the Guidelines for Consultants. All consulting contracts costing US$ 200,000 equivalent or more for firms, all consulting contracts for audits regardless their estimated cost, and all individual consulting contracts costing the equivalent of US$ 100,000 or more, would be subject to IDA prior review. All other consulting contracts would be subject to post review, in accordance with paragraph 4 Appendix I of the Guidelines. Any amendments to existing contracts raising their values to levels equivalent or above the prior review thresholds are subject to IDA review. 66. All terms of reference of consultants would be subject to IDA prior review. Other procurement subject to IDA review would include annual training plans for local and overseas training and workshops, including terms of reference and estimated budgets. All out of country training will be subject to IDA approval. 47 67. Modification or waiver of the scope and conditions of contracts. Before agreeing to any material extension, or any modification or waiver of the conditions of contracts that would increase aggregate cost by more than 15 percent of the original price, the Borrower should specify the reasons thereof and seek IDA's prior no-objection for the proposed modification. 68. Project Implementation Manual (PIM). The PIM has been produced and is being revised to take into account comments received from reviewers. It defines the project‘s internal organization and its implementation procedures, and it includes: (i) the procedures for calling for bids, selecting consultants, and awarding contracts; (ii) the procedures for community-based procurement and sample contracts; (iii) the internal organization for supervision and control, including operational guidelines defining the role of the executing agency and reporting requirements; and (iv) disbursement procedures. The PIM was reviewed and discussed during negotiations. 69. During negotiations, the Government submitted to IDA for review: (a) a draft procurement plan for the first eighteen (18) months of the project; (b) the PIM; (c) the SBDs to be used for procurement using NCB for Goods and Works; and (d) a training program for the PMU and the LPMUs. The Government gave assurance that the PMU will: (a) use the PIM; (b) use the Bank's SBDs for ICB, the Standard Request for Proposals for the selection of consultants, and the Standard Bid Evaluation Reports; (c) apply the procurement procedures and arrangements outlined above; (d) update the procurement plan on a regular basis during annual reviews with IDA and other donors, to compare target times and actual completion, and transmit it to IDA, during implementation, with all procurement-related documents; and (e) carry out, during annual reviews, an assessment of the effectiveness of bidding procedures and performance, as they relate to the program's procurement experience, and propose for IDA and other donors' consideration any modification to the current procedures that would accelerate procurement, while still maintaining compliance with the Bank's Procurement Guidelines and adequate control over contract awards and payments. 48 Table 3.1: Thresholds for Procurement Methods and Prior Review Expenditure Threshold for Procurement Contracts Subject to Prior Review Category Method (US$) Method Works >5,000,000 ICB All < 500,000 NCB First 3 contracts per country <100,000 Shopping - Direct Contracting $10,000 and above; procedures for below $10,000 will be specified in the PIM Goods >500,000 ICB All <500,000 NCB First 3 contracts per country <100,000 Shopping/IAPSO - Direct Contracting $10,000 and above; procedures for below $10,000 will be specified in the PIM Consulting QCBS All contracts of $200,000 and above services from <100,000 CQS, LCS First contract per country firms & NGOs Single Source All Individual >100,000 IC All consultants <100,000 IC As specified in the procurement plan ICB – International Competitive Bidding QCBS -- Quality and Cost-Based Selection method NCB – National Competitive Bidding CQS – Consultants’ Qualification Selection method IC – Individual Selection method Details of the Procurement Arrangements Involving International Competition 1. Goods, Works, and Non-consulting Services (a) List of contract packages to be procured following ICB and direct contracting. 1 2 3 4 5 6 7 8 9 Domestic Review Expected Ref. Contract Estimated Procurement P- Prefer- by Bank Bid-Opening Comments No. (Description) Cost Method Q ence (Prior / Date (yes/no) Post) 1. Vehicles 455,300 NCB No No Yes July 20, 2011 NCB Equipment 2. and office 234,200 NCB No No Yes July 20,2011 NCB furniture (b) ICB contracts are estimated to cost above US$ 500,000 for goods and above US$ 3,000,000 for works per contract, and all direct contracting will be subject to prior review by the Bank. 49 2. Consulting services (a) List of consulting assignments with shortlist of international firms: 1 2 3 4 5 6 7 Review Expected Description of Estimated Ref. No. Selection by Bank Proposals Assignment Cost Comments Method (Prior / Submission (US$) Post) Date 1. Multiple Locally recruited Individual LDPSP individuals staff for PMU and 806,100 Yes March 2011 Consultant staff (42) LPMUs 2. Multiple Field Service Firms/NGOs 455,800 Firms Yes July 2011 contracts providers operating Training of Communes and 3. Multiple Communities 674,000 NGOs Yes July, 2011 Firms/NGOs contracts based Organizations Update or IFMS 4. software plus 16,000 SSS Yes June 2011 training (b) Consultancy services estimated to cost above US$ 200,000 equivalent per contract for firms and above US$ 100,000 for individuals, and all contracts awarded on a single source basis (SSS), will be subject to prior review by the Bank. (c) Shortlists composed entirely of national consultants: Shortlists of consultants for services estimated to cost less than US$ 100,000 equivalent per contract may be composed entirely of national consultants in accordance with the provisions of paragraph 2.7 of the Consultant Guidelines. Governance and Anti-Corruption (GAC) A. Background 70. Many years of conflict and a difficult transition to democratic rule have left Chad struggling to develop an appropriate institutional framework to manage its public resources. According to the Worldwide Governance Indicators 1996-2005 produced by the World Bank Institute, Chad had a governance percentile ranking of only 11th among 213 on the composite governance indicator.18 The country was also ranked 171 of the total of 178 countries listed in Transparency International‘s Corruption Perceptions Index for 2010. The lack of formal controls at the central and regional/local levels, especially with the country‘s geographical fragmentation, has often led to misuse of power and public funds. The influx of revenues from oil production beginning in 2003 has further increased the incentives for rent-seeking. 18 'Governance' percentile refers to the percentage of (213) countries worldwide that rank worse than the chosen country for th e illustrative Composite Governance Indicator, calculated as simple average of percentile rankings for the six governance components, namely Voice and Accountability, Political Stability/Absence of Violence, Government Effectiveness, Regulatory Quality, Rule of Law, and Control of Corruption. 50 71. In addition to constraining effective management of public resources, corruption and non- transparent practices also constrain private sector development. The governance environment has tended to foster a local private sector dependent on patronage, in which political connections are more important determinants of business success than managerial competence. The serious difficulties faced by the business are illustrated by the fact that Chad is in last place out of 183 countries surveyed in the 2010 Doing Business Report. B. Government efforts to fight corruption 72. In August 2002, the Government adopted a National Strategy for Good Governance, prepared by the National Secretariat for Capacity Strengthening. The strategy calls for transparent and participatory management of economic and social development processes by the central and decentralized public administration, together with the private sector and civil society. The Poverty Reduction Strategy (2003) incorporated some of these objectives, laying out several key pillars to improve governance and transparency while stepping up the fight against corruption: (i) decentralization and reform of the administration; (ii) overhaul of public finances; (iii) judicial reform; and (iv) strengthening of oversight institutions. Progress on the governance agenda is summarized below. C. Risk mitigation under LDPSP 2 73. Corruption risk assessment at national and local levels, and integrating procedures and tools to control corruption and maximize the project‘s development impact, have been a key part of the conceptualization and design of LDPSP 2. The Project has been designed with a focus on: (i) improving accountability to local communities / beneficiaries; (ii) enhancing project transparency; and (iii) strengthening financial and technical controls. Additionally, a set of indicators measuring the level of transparency in the procurement process has been developed and will be monitored regularly during Bank supervision missions and audits. 74. Project supervision will be strengthened by making use of team members in the Country Office, and a specific request to adequately fund supervision will be directed to Bank management. The Governance and Accountability Action Plan, which has been developed, will be reviewed annually as part of the supervision function, to assess progress made in the area of governance by national authorities and local communities in the context of the proposed project. Environmental and Social (including safeguards) 75. Environmental (including safeguards). With regard to environmental and social safeguards, LDPSP 2 is a Category B project. Environmental and social impacts, for the most part, are projected to be minimal, site-specific, and manageable to an accepted level. In light of envisioned Project activities, five World Bank safeguard policies are triggered: Environmental Assessment (OP 4.01), Pesticides Management (OP 4.09), Involuntary Resettlement (OP 4.12), Physical Cultural Resources (OP 4.11), and Projects on International Waterways (OP 7.50). The Indigenous People Policy (OP 4.10) is not triggered, nor is it triggered by any other project currently under implementation in the country. 51 76. Despite the benefits expected to accrue to local communities in terms of increased access to drinking water, increased use of health and education facilities, and better welfare as a result of other productive activities, all of which will lead to improvement in the overall quality of life of Project beneficiaries, investments in local development activities sometimes have adverse impacts on the biophysical, socio-economic, and cultural environments, if proper mitigation measures are not in place. These impacts can include: soil erosion and land degradation, loss of biodiversity through land clearing and lack of rehabilitation measures, land acquisition, loss of livelihood and economic activities on the part of project-affected people, and negative impacts on cultural and historical resources. In addition, there is potential for surface water contamination resulting from improper pesticide use, improper management and disposal of biomedical waste, or other factors, leading to public health risks, which could affect the entire food chain. 77. In line with the triggering of the five operational policies cited above, the Project has prepared three safeguards instruments, namely a PMP, an ESMF, and an RPF. These instruments set out standard methods and procedures, specifying how micro-projects, whose locations are unknown at this stage, will systematically address environmental and social issues at all stages. These include: micro-project screening, categorization, siting, design, implementation, operational, and maintenance. The core elements of this approach include: (i) systematic screening of all micro-projects; and (ii) systematic application to all identified micro- projects of procedures for using the environmental checklist, or for conducting ESIAs/ESMPs and RAPs (whatever combination is deemed applicable). The preparation of relevant ESIAs/ESMPs and/or RAPs is a condition of eligibility of expenditures for each micro-project requiring such instruments. 78. Regular monitoring and evaluation of activities undertaken by LDPSP 2 will be needed to ensure compliance with all applicable national and World Bank safeguard policies. Monitoring will also help ensure that implementation of project safeguard measures is systematically carried out throughout the project lifespan. The following indicators will therefore need to be measured as part of the Project‘s global monitoring plan:  Number or percentage of micro-projects screened in relation to the total number of micro-projects;  Number of ESMPs and/or RAPs implemented satisfactorily and according to schedule;  Number/frequency of annual safeguard supervision missions and Project safeguard reviews undertaken;  Number of training programs carried out for safeguard capacity strengthening; and  Number of institutions/organizations or stakeholder groups trained in accordance with specified measures identified in the safeguard instruments. 79. World Bank supervision teams will include environmental and social safeguard experts. To ensure effective Bank supervision, prior to these missions, the Environmental and Social Unit of LDPSP 2 will prepare and update, for review by IDA, detailed reports on the implementation of the safeguard instruments. The Bank safeguards specialists will be responsible for 52 corroborating these results and will contribute to updating the ISR. An appropriate budget for environmental supervision has been included in project costs. 80. Social (including safeguards). Four key social issues to monitor throughout project implementation include: (i) the level of participation of the poorest, isolated, and most vulnerable groups; (ii) the level of participation of women; (iii) the avoidance of elite capture; and (iv) social accountability. Drawing lessons from LDPSP 1, the project design seeks to strengthen participatory processes by consolidating project interventions into a single planning instrument, the LDP at the local level and the CDP at the communal level. 81. Participation of all local level stakeholders—organized into thematic, social, and gender- based focus groups—will be encouraged during the different stages of the planning process, including needs assessment, micro-project identification, design and implementation. Moreover, specific measures have been put in place so that the upstream process of approving and disbursing funds for micro-projects ensures that key social issues are appropriately identified and addressed. In addition, the participatory process will be enhanced both within and between communes. A number of tools are proposed for this purpose, such as public consultations, participatory monitoring and evaluation, and a wide dissemination system of decision-making processes. 82. As with Phase 1, OP/BP 4.12 is triggered under Phase 2. Since the specific sites and potential impacts of project-supported physical investments are not known, the existing RPF has been updated by the Borrower and reviewed and cleared by the team. It was disclosed in- country on November 29, 2010 and at the Bank InfoShop on December 2, 2010. The RPF will be used as a guide to prepare specific RAPs as needed; the RAPs will quantify economic losses resulting from Project-financed land acquisition and will specify compensation measures needed to minimize negative impacts on Project-Affected People (PAPs). Project Monitoring & Evaluation 83. Progress on implementation of the activities and policy measures that the Project will support will be monitored closely by Bank staff. Supervision missions will help evaluate and draw recommendations for better management of the Project. The PMU will produce a progress report each year and a final report at the end of the Project. Annual implementation reports were prepared by the implementation agency under Phase 1, and under Phase 2 supervision missions will insist that the same reporting requirements are strictly met and in a timely manner. Technical and financial data needed to assess Project performance will be captured in a MIS managed by the PMU. The existing system will be used during Phase 2. A mid-term review will be carried out at the latest 30 months from the date of project effectiveness. 84. Baseline data for the purpose of impact evaluation will be collected, in treatment and control villages, by a third party before project activities begin. Annual independent impact evaluation will be conducted and will serve as an input to the annual progress report that will be produced by the PMU. Satisfaction of the beneficiaries with the results of the community micro- projects in targeted areas will be measured every two years by an independent consultant. M&E staff in the LPMUs will coordinate data collection, referring to the intermediate outcomes at 53 village levels, and will provide periodic reports for the M&E Specialist at the central level for management and reporting purposes. These activities are covered under Component 3 (Project coordination and management) of the Project. 85. Following the completion of Project-financed activities, the PMU will commission an independent evaluation. This evaluation will provide an in-depth analysis of the progress achieved in relation to the objectives spelled out in the project agreement, and it will draw lessons and make recommendations for Phase 3. The state of the policy dialogue on decentralization reforms will provide a measure for assessing progress achieved on the decentralization agenda. Role of Partners 86. During the preparation and appraisal of the Project, the Bank team and Government communicated with various partners, including the European Union (EU), the French Development Agency (FDA), German Cooperation, and the Swiss Development Corporation (SDC). The FDA no longer supports generalized local development in Chad but will focus more narrowly on agricultural development. The EU, German Cooperation, and the SDC have decided to coordinate their interventions, through geographic targeting, harmonization of methodologies and local development techniques, and information sharing. This will help to increase aid effectiveness by: (i) avoiding duplication of effort in the same zone; and (ii) promoting the same model of local/CDPs. During the appraisal discussion, discussions were held with the SDC, which is planning to support local development. 54 Annex 4: Operational Risk Assessment Framework (ORAF) REPUBLIC OF CHAD: LOCAL DEVELOPMENT PROGRAM SUPPORT PROJECT 2 Project Development Objective(s) The Project Development Objectives for Phase 2 are: (i) improved access to basic infrastructure and social services in targeted districts; and (ii) improved planning, management and monitoring by local communities and communes of decentralized investments. PDO Level Results 1. Number of people in project areas with access to improved water sources under the project Indicators: 2. Number of direct project beneficiaries 3. Percentage of direct female project beneficiaries 4. Additional classrooms built or rehabilitated at the primary level resulting from project intervention 5. Improved Community water points constructed or rehabilitated under the project 6. Health facilities constructed, renovated and/or equipped Risk Proposed Mitigation Risk Category Risk Description Rating Measures 1. Project Stakeholder Risks Low Key local The Ministry and the PMU stakeholders are will conduct information waiting for the and sensitization second phase to campaigns and workshops The main stakeholders are start. The main risk to explain the evolution urban and rural communities, is that their and the choice for the the Borrower, donors, and the expectations related geographic coverage of the general public. to basic needs will not project. In addition, the be met. Since local following mitigation demand for micro- measures will be used: (i) projects is huge the Project will avoid (both in creating excessive 55 communities that expectations that cannot be have already had met; (ii) approval micro-projects committees will operate implemented and within the available pre- even more so in assigned budget those that have not) constraints so that all the main risk is that micro-projects that are communities’ approved have full funding expectations will for the project; and (iii) not be met due to increase the project limitations of funds, funding level, using the including when this Government’s matching is due to late contribution. Support will payment of the be enlisted from the CMU Government’s to induce the government contribution to the to honor its commitments Project. Borrower by paying its agreed relations, donor contribution fully and in relations, and timely fashion. general public perception represent small risks, since project objectives are aligned with ongoing donors’ projects as well as the Government’s strategy. M-L There are The PMU will be weaknesses in strengthened by the terms of financial, addition of an Internal technical, and Auditor. 2. Implementing Agency Risks fiduciary capacity LPMUs will be staffed with (including FM & PR Risks) to implement the competent staff in project. accounting and financial management. They will be in charge of the training of 56 communal staff and local communities. Regular training and supervision will be provided by the Ministry, the PMU, and Bank’s teams to strengthen the capacities of the beneficiaries and the stakeholders. The Ministry, the PMU and LPMUs will supervise implementation efforts at the local levels. The PIM will be updated and reinforced. 3. Project Risks L The project design The preliminary remains largely discussions with the unchanged but the government and early targeted geographic description of the second coverage may be Phase of the Project have too ambitious. shown that the project will be simple with three components and easy activities to implement. In both the existing and the expansion areas the risks 3.1 Design will be reduced by capacity building that will be undertaken/financed by the project. In existing areas the training and TA activities may be more targeted, while in expansions areas they will include assistance across the whole range from preparation of LDPs to implementation of micro- 57 projects. L Three safeguards instruments (ESMF, RPF and a Process Framework- PF) will be updated/prepared and mitigation measures Limited compliance 3.2 Social & Environmental implemented. Social with environmental safeguard issues will be regulations anticipated and addressed in the PIM. Particular attention will be paid to social and environmental aspects during supervision missions. L The project will be Dialogue and consultations implemented in the will be pursued with other broader framework donors during preparation of the Programme and implementation. The Integré de project will complement 3.3 Program & Donor Developpement the activities being Rural (PIDR), which financed under the GEF- encompasses all the financed Community-based donors’ Ecosystem Management interventions in the project and EU-financed rural and Local Development Project. agriculture sector. M-L The PMU or the The project will be staffed LPMUs may not with fully qualified properly monitor personnel whose implementation of performance will be the project’s evaluated regularly. It will 3.4 Delivery Quality activities. also put in place a strong M&E system to monitor the results and achievements. The Bank will conduct frequent supervisions and implementation support missions to make sure the 58 project is on track. Overall Risk Rating at Risk Rating During Preparation Implementation Comments L M-L 59 Annex 5: Implementation Support Plan REPUBLIC OF CHAD: LOCAL DEVELOPMENT PROGRAM SUPPORT PROJECT 2 I. Introduction 1. The Project Development Objectives for LDPSP 2 are: (1) improved access to basic infrastructure and social services in targeted districts; and (2) improved planning, management and monitoring by local communities and communes of decentralized investments. To achieve this objective, the project is designed with three simple components including: (i) capacity building of local communities and communes and support to decentralization; (ii) decentralized financing of micro-projects; and (iii) coordination and management of project activities. The objectives of these components are to: (i) provide improved technical and fiduciary skills needed at the different decentralized levels and the national institutions responsible for decentralization; (ii) increase availability of basic infrastructures in targeted districts; and (iii) support the successful implementation of the project. 2. Based on the practical experience of Phase 1, Phase 2 has been designed to be simple and easy to implement, despite the involvement of a wide variety of stakeholders having specific constraints and needs. To ease project implementation, the main PMU is based in N‘Djamena, the capital, while seven LPMUs of which three were created during Phase 1 will be located in the regions to better serve the communities and the communes that are on average located 1,000 kilometers away, often in remote areas. The Project will therefore require intensive supervision, backed up by on-the-spot training from Bank staff, consultants, NGOs and Government technical departments or agencies. II. Approaches and focus areas for project supervision Approaches 3. Supervision of LDPSP 2 will be carried out using a mixture of multi-disciplinary-team- based and topic-based supervision approaches. Multi-disciplinary-team-based supervisions: 4. As with all Bank-financed projects, LDPSP 2 will benefit from two formal supervision missions per year, carried out by the regular task team containing a wide range of required skills and bringing in additional expertise as needed. Resources permitting, supervision missions will last up to three weeks to allow both Bank and Government teams to carry out in-depth work on each topic and find appropriate solutions for emerging issues. Areas such as social and environmental safeguards, financial management, procurement, and monitoring and evaluation will be covered systematically and given the highest attention. 5. Resources permitting, interim field visits will be organized between regularly scheduled supervision missions to ensure that the PMU can receive implementation support from the TTL, other Bank staff based in the Country Office or elsewhere, and other specialists as needed. 60 Topic-based supervisions: 6. In addition to regular supervision missions designed to cover the full range of Project activities, topic-based supervision missions will be mounted from time to time focusing on specific areas of interest, such as environmental and social safeguards, financial management, disbursement, procurement, and monitoring and evaluation. Focus areas 7. Resources permitting, the following critical areas will be given particular attention: Environmental and Social Safeguards 8. With respect to environmental and social safeguards, the Bank supervision strategy will be regular and proactive. The Bank project team is staffed with a Senior Environmental Management Specialist and a Senior Social Development Specialist, complemented by very strong and equipped consultants. An Environmental and Social Specialist will be appointed in each of the seven LPMUs. Financial Management and Disbursement 9. Resources permitting, a team of financial specialists including the Bank Country Office- based Financial Management Specialist and the CTR Finance Officer will carry out periodic, thorough reviews of accounting and financial management practices. The team will examine audit reports and IFRs, review disbursement documents, and verify compliance with Bank guidelines and procedures. Procurement 10. Supervision of procurement activities under will be handled by Country Office-based Senior Procurement Specialist. Supervision of procurement activities will consist of frequent and regular monitoring of procurement practices, tracking of the procurement plan, confirming that procurement thresholds are respected, and checking the proper filing of documents. In addition to participating in the regular bi-annual supervision missions carried out by the full Bank team, the Procurement Specialist will carry out quarterly supervision missions during the first 18 months, which will provide opportunities to carry out post reviews. III. Objectives, Schedule of Supervision Missions, and Budget 1) First Supervision Mission (tentatively planned for June 2011) 11. The first supervision mission for LDPSP 2 will be combined with the project launch. The main objective of the mission will be to introduce the Project and present its various components, explain its modus operandi, and train key stakeholders at the national, regional, departmental and local levels before activities are initiated. The mission will benefit from a strong and well- organized communication campaign. 61 2) Second Full Supervision Mission (tentatively planned for December 2011) 12. The second supervision mission, the first ‖regular‖ supervision mission, will bring together the full range of expertise needed to establish that the Project has gotten off to a good start. The supervision team will assess the implementation status following the first six months of the Project‘s life. It will examine all of the activities planned to be implemented under the various components. 3) Objectives and Supervision Schedule during Years 2-4 13. The Project will be managed on the basis of the calendar budget year used by the Borrower (Jan-Dec). The supervision schedule for 2012 (the first full year of Project implementation) and for subsequent years will be finalized by the TTL, in consultation with the Borrower, supervising partners, and the Country Team, by the end of each preceding year. Resources permitting, the Bank will conduct two formal supervision missions each year. This will be complemented by interim support missions and specific supervision missions to be held by the fiduciary team, environmental and social safeguards team, and other sectors as needed. 14. As with the Year 1 supervision mission, the general objectives of supervision missions carried out in subsequent years will be to support and monitor the execution of the overall Project work plan, namely to: (a) continue to support the consolidation of the activities of the Project; (b) assess, discuss, and advise the PMU and LPMUs, the PSC, the Ministry of Land Management, Urban Development, and Housing (MoLMUH), the Ministry of Economics and Planning, and other involved Government institutions on project implementation issues; (c) assess the performance of the PMU and LPMUs in charge of implementing the Project; (d) monitor implementation against agreed targets in the Annual Work Program and Budget; (e) monitor and assess Project results against the PAD, with a particular monitoring vis-à-vis the ORAF. 62 Annex 6: Team Composition REPUBLIC OF CHAD: LOCAL DEVELOPMENT PROGRAM SUPPORT PROJECT 2 World Bank staff and consultants who worked on the project: Name Title Unit Soulemane Fofana Rural Development Specialist/TTL AFTAR Michael Morris Program Coordinator AFTAR Nicolas Ahouissoussi Sr. Agricultural Economist ECSSD Nathalie Munzberg Sr. Counsel LEGAF Aissatou Diallo Senior Finance Officer CTRFC Ernst Lutz Economist, Consultant AFTAR Ibrahim Nébié Sr. Agriculture Extension Specialist AFTAR Victoria Gyllerup Senior Operations Officer AFTDE Bolormaa Amgaazabar Country Officer AFTDE Julien Bandiaky M&E Specialist, Consultant AFTAR Amadou Konaré Sr. Environmental Specialist AFTEN Abdoul Wahab Seyni Sr. Social Development Specialist AFTCS Talib Esmail Operations Adviser LCSDE Daniel Sellen Sector Leader AFTAR Valerie Layrol Senior Operations Officer AFRVP Charles Annor Frempong Senior Rural Development Specialist AFTAR Maurice Adoni Procurement Specialist AFTPC Ousmane Kolie Financial Management Specialist AFCFM Charles Donang Sr. Procurement Specialist AFTPC Elizabeth Kleemeier Sr. Water and Sanitation Specialist TWIWA Jean-Claude Balcet CDD Specialist/Consultant AFTAR Bruno Losch Sr. Economist/Consultant AFTAR Olivier Béguy Economist AFTP3 Hawanty Page Sr. Program Assistant AFTAR Anta Tall Diallo Program Assistant AFCF1 Mohammed A. Bekhechi Legal Counsel and Decentralization LEGEN Specialist Marie-Claudine Fundi Program Assistant AFTAR Désiré Coquillat Consultant/Implementation Specialist AFTAR Boubou Cissé Health Sector Economist AFTHE Edmond Badge Communications Officer AFREX Dingamhoudou Patrick Philippe Sr. Operations Officer LCSHE Ramanantoanina Lanciné Dosso Financial Management Specialist AFTFM Helen Taddese Giorghis Program Assistant AFTAR Paulette Zoua Program Assistant AFMTD Berthe Tayelim Program Assistant AFMTD 63 16° 20° 24° C H A D 24° ALL-SEASON ROAD NETWORK 24° DRY-SEASON ROAD NETWORK RURAL ROADS AND ACCESS PATHS RIVERS SEASONAL WATERCOURSES L SELECTED CITIES AND TOWNS I E n n e ri PREFECTURE CAPITALS B Y NATIONAL CAPITAL En A ne Yébigué PREFECTURE BOUNDARIES ri Aozou INTERNATIONAL BOUNDARIES Bardaï Bardag u é Zouar 20° 20° Enn eri Ké N I G E R Ounianga-Kébir Tigui BORKOU - ENNEDI - TIBESTI Yen Kirdimi Aïn Galakka Faya-Largeau Fada 16° 16° Koro-Toro Koubba Nedeley Iriba Salal Arada KANEM B I LT I N E l Guerada Nokou za Biltine ha e lG hr Rig-Rig Mao Ba B AT H A Am Zoer Haraz-Djombo LAC Baga- Mondo Abéché Sola Moussoro Ngouri Djedaa To Birkat Saïra Bol Adré Oum Hadjer Ati Lake OUADDAI Chad S U D A N Tourba Massakor y Karal Ngoura Lac Fitri Am Dam Massaguet Bokoro Mongo Mangalmé Djermaya Goz Beida To Maiduguri N'Djaména Mongororo 12° Bitkine Ngama 12° Dourbali GUERA NIGERIA CHARI BAGUIRMI Abou Deia Massénya Erg ig Melfi Aouk Guelengdeng r Am Timan Bah Ch Log ar i SALAMAT one Bousso Bongor Lac Iro Harazé To Garoua t ma Fianga Mangueigné i la Léré K ebb Gounou Sa yo Gaya Ma Ba hr Kyabé MAYO KEBBI Laï Goundi Pala Kelo TANDJILE MOYEN CHARI Sarh Gondey Bénoy WEST l Koumra ta L O G O N E ciden Bebedjia Doba am Beinamar Oc Ouh Moundou al 24° nt Lo go ne Maro rie Moïssala O EAST LOGONE . ARAB REP L I B YA 8° Goré To Batangafo OF EGYPT Baibokoum 8° ALGERIA To Bossangoa To Mbitao NIGER CAMEROON CENTRAL AFRICAN REPUBLIC CHAD SUDAN 0 100 200 300 KILOMETERS N’Djamena NOVEMBER 2003 This map was produced by the Map Design Unit of The World Bank. NIGERIA IBRD 32817 The boundaries, colors, denominations and any other information shown on this map do not imply, on the part of The World Bank Group, any CENTRAL judgment on the legal status of any territory, or any endorsement or AFRICAN REPUBLIC acceptance of such boundaries. CAMEROON 16° 20° DEM. REP. OF CONGO