Page 1 PROJECT INFORMATION DOCUMENT (PID) APPRAISAL STAGE Report No.: AB6238 (The report # is automatically generated by IDU and should not be changed) Project Name Local Development Program Support Project 2 Region AFRICA Country CHAD Sector General agriculture, fishing and forestry sector (50%); Health (15%); Primary education (15%); Water supply (15%); Public administration - Finance (5%) Lending Instrument APL Project ID P113030 Parent Project ID N/A Borrower(s) Republic of Chad Implementing Agency The Ministry of Land Management, Urban Development, and Housing (MoLMUH) Environmental Screening Category { }A {x }B { }C { }FI Date PID Prepared December 19, 2010 Date of Appraisal Completion December 22, 2010 Estimated Date of Board Approval March 22, 2011 Decision At the conclusion of the Concept Note Review Meeting, the decision was taken to proceed with the preparation of the operation following Track 1 procedures. I. Country Context Chad is one of the most underdeveloped countries in the world. With a population of 11.3 million inhabitants, the Republic of Chad 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. 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. Page 2 2 Chad adopted its first Poverty Reduction Strategy Paper - “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. 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 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 (health, education, and rural development) have fallen short of budget targets. Allocations and spending in 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. 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 its impact on growth and the delivery of services to the population. II. Sectoral and Institutional Context The Republic of Chad is taking steps toward decentralization. Decentralization was mentioned in the 1996 constitution, which called for the creation of decentralized, territorial “collectives” 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 1 Chad was ranked 171 out of 178 countries listed in Transparency International’s Corruption Perceptions Index for 2010. Page 3 3 decentralization, which furthermore made suggestions for implementation 2 and provided guidance for further legislative work. The review and the subsequent legislative work were supported by the Local Development Program Support Project (LDPSP). 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. Structured as a three-phase APL, LDPSP, approved in 2004, 3 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 LDSP 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. 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. To complement the legal framework for a more decentralized system of government, the Ministry Charged with Decentralization (MCD) has prepared various texts related to the functioning of local government bodies, and 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 2 République du Tchad; Cabinet du Premier Ministre: “Recueil des Lois et Règlements sur la Décentralisation – Le Droit par les Textes”, N’Djaména, 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). Page 4 4 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. A distinctive feature of the 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 different areas. The most common of these include: a. Health. Maternal mortality in Chad stands at 191 deaths per 1000 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. 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 . Chad also faces serious risks from climate change, which add to already significant developmental challenges. Desertification, soil degradation, deforestation and decline in the quantity 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, Page 5 5 floods, and landslides. These disaster risks represent potential threats to economic development and poverty reduction efforts. 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 attained on the ground. To date, 329 micro-projects have been completed, out of a total of 405 micro-projects identified and approved for implementation. The remaining 76 micro-projects that were identified and prepared are currently under implementation, and it is expected that these will be completed, because the Government is effectively paying the outstanding counterpart funds. The 405 micro-projects include 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 (Figure 1). Figure 1: Shares of the types of micro-projects selected during Phase 1 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 often it 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. LDPSP 1 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 Page 6 6 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; (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 of their neighborhood; and (vii) preparing and enabling the enactment of six laws on decentralization, along with 47 application decrees, thus setting the ground for the local elections. 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: (1) LDPSP 1 has launched decentralization work in all 19 districts that were targeted; (2) 87 percent of targeted communities have prepared and adopted a Local Development Plan (LDP), compared to the target of 50 percent; (3) 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; (4) 93 percent of decentralization committees are in place, compared to the target of 75 percent; (5) six legal texts on the decentralization process have been prepared and are awaiting adoption by the National Assembly; (6) 68 percent of the applicable texts are available to the public, compared to the target of 50 percent; and (7) the date for local elections has been set, and these elections are foreseen before the end of June 2011. Trigger number 8 relates to the percentage of oil revenues that is 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. Relationship to Interim Strategy The Interim Strategy Note 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 cost of USD 25 million) 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. Higher Level Objectives to which the Project Contributes The purpose of the Government’s Local Development Program, as reflected in the (revised) APL program objective, is to provide i mproved access to infrastructures 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 Chad's size, an Adaptive Program Lending approach was chosen, which allows 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 to a full- Page 7 7 fledged national program in a clearly established framework of decentralization by progressively adapting activities to experience and capacity. III. Project Development Objectives The Project Development Objectives for Phase 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. (a) Project Beneficiaries The main project beneficiaries are local communities that benefit from micro-project investments. Beyond that, the Project is supporting the decentralization program, with expected benefits for communities in terms of participation in the local development process. (b) PDO Level Results Indicators Key performance indicators for the proposed operation include: (i) number of people in project areas with access to improved water sources under the Project; (ii) number of direct project beneficiaries, and (iii) percentage of direct female project beneficiaries. IV. Project Description Project components 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 Project also includes a project management component to support project implementation activities. The estimated cost of the project is USD 77.25 million, of which IDA financing is USD 25 million. Component 1: Capacity building of local communities and communes and support to decentralization (US$ 12 million, of which IDA US$ 4 million) The objective of Component 1 is to provide improved technical and fiduciary skills needed at the different decentralized levels and the national institutions responsible for decentralization. The estimated cost of Component 1 is around USD 12 million. It will include two sub-components. Sub-component 1.1: Strengthening capacity of communal and local communities 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 Local Development Plans (LDPs) and Communal Development Plans (CDPs); (b) identification, submission, implementation, and monitoring of local and communal micro-projects as defined in the Local Development Plans (LDP) and Communal Page 8 8 Development Plans (CDP); and (c) strengthening of civil society organizations in participatory local development management. Sub-component 1.2: Support to decentralization 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 empowered to assume their mission regarding local development. These will help with the consolidation of priority activities of the Ministry Charged with Decentralization (MCD). Component 2: Decentralized financing of micro-projects (US$ 56.25 million, of which IDA US$ 18 million) The objective of Component 2 is: increased availability of basic infrastructure in targeted districts. Component 2 will support targeted financing of demand-driven micro-projects based on Local Development Plans (LDPs) and Annual Investment Plans (AIPs). All micro-projects will be identified through participatory processes and included in the integrated Local Development Plans (LDPs). The micro-projects, to be financed through a matching grant mechanism, will promote access to basic socio-economic services, income-generating activities, and sustainable natural resources management through the adoption and application of innovative technologies. The Project will channel funds to communes and local communities 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 plantations, sustainable land management, Sahelian gardens, etc.), and (iii) rural income- generating micro-projects (improved seeds, agricultural equipment, drying facilities, small transformation and storage facilities, etc.). The estimated cost of Component 2 is USD 56.25 million. Component 3: Project coordination and management (US$ 9 million, of which IDA US$ 3 million) The objective of Component 3 is: strengthened Project Coordination and Management activities including administrative, technical, fiduciary, monitoring and Evaluation (M&E) activities. It will support project coordination and management activities, including: (i) administrative activities; (ii) financial management activities; and (iii) monitoring and evaluation of project performance and impact. 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 USD 9 million. Page 9 9 V. Financing Source Amount (US$ million) Borrower/Recipient 50.0 IBRD IDA 25.0 Others: Co-financing by communities 2.25 Total 77.25 VI. Implementation 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 also provide its services for Phase 2. To that effect, it is being reinforced with stronger staff and additional skills including a Coordinator, a Monitoring and Evaluation Specialist, an Environmental Safeguards Specialist, a Social Safeguards Specialist, and a Central Accountant. The PMU will also be staffed with an Internal Auditor. VII. Safeguard Policies (including public consultation) Safeguard Policies Triggered by the Project Yes No Environmental Assessment ( OP / BP 4.01) X Natural Habitats ( OP / BP 4.04) X Pest Management ( OP 4.09 ) X Physical Cultural Resources (OP/BP 4.11) X Involuntary Resettlement ( OP / BP 4.12) X Indigenous Peoples ( OP / BP 4.10) X Forests ( OP / BP 4.36) X Safety of Dams ( OP / BP 4.37) X Projects in Disputed Areas ( OP / BP 7.60) * X Projects on International Waterways ( OP / BP 7.50) X * By supporting the proposed project, the Bank does not intend to prejudice the final determination of the parties' claims on the disputed areas Page 10 10 VIII. Contact point at World Bank and Borrower World Bank Contact: Soulemane Fofana Title: Rural Development Specialist Tel: 5352+4127 / 221-33-859-4127 Email: sfofana@worldbank.org Borrower/Client/Recipient Contact: Mr. Dobingar Allassembaye Title: Secretary General of MoLUH Tel: (235) 66-24-19-52 Email: adobingar@yahoo.fr Implementing Agencies Contact: Mrs. Ildjima Badda Mallot Title: Project Administrator Tel: (235) 95-01-95-49 Email: proadel.cn@hotmail.fr IX. For more information contact: The InfoShop The World Bank 1818 H Street, NW Washington, D.C. 20433 Telephone: (202) 458-4500 Fax: (202) 522-1500 Web: http://www.worldbank.org/infoshop