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Implementation Completion Report (ICR) Review - Rural Municipalities

1. Project Data:   
ES Date Posted:
Project Name:
Rural Municipalities
Project Costs(US $M)
 40.4  34.63
Loan/Credit (US $M)
 30  28.3
Sector, Major Sect.:
General transportation sector, Central government administration,
Transportation; Law and justice and public administration
Cofinancing (US $M)
 0  0
L/C Number:
C2918; CP971      
Board Approval (FY)
Partners involved
Closing Date
03/01/2002 03/01/2002
Prepared by: Reviewed by: Group Manager: Group:  
Kavita Mathur
Christopher D. Gerrard Alain A. Barbu OEDST

2. Project Objectives and Components:

a. Objectives
The objectives of the project were to:

  • Establish a mechanism based on municipal governments and community organizations for reducing rural poverty through rural investment in economic infrastructure, improved natural resources management, and small-scale communal productive activities.
  • Ensure that central government institutions acquire the capacity to provide a coherent overall framework for natural resources policy making and enforcement, accounting for global, national, and regional environmental priorities.
  • Promote the long-term integrity of a biological corridor along the Atlantic slope of Nicaragua, conserving key global biodiversity values.

b. Components
The project had three components. Cost estimates at appraisal are in parentheses. (a) Rural Municipalities Development (US$35.3 million), which included: (i) institutional development of municipalities; (ii) institutional development of Nicaragua Institute of Municipal Development (INIFOM); (iii) information, participation and training for communities and the local private sector; and (iv) grants for community and municipality subprojects.
(b) Natural Resources Policy and Institutional Development (US$5.1 million) for the support of:
(i) Institutional development of the Ministry of Environment (US$3.0 million), including strengthening of several key ministry directorates, preparation and dissemination of environmental and land-use plans with local and municipal governments, developing and improving legislation, regulations, and studies to establish a framework for environmental sustainability, and maintaining an implementation unit for the component.
(ii) An inter-institutional assistance program (US$2.1 million) designed to provide Ministry of Environment and Natural Resources (MARENA) with resources and capacity to assist other government agencies in fulfilling their roles in the implementation and enforcement of environmental policies. These included the National Assembly, the Judiciary, the Office of the Attorney General, police environmental units, legal affairs offices of central government agencies, and the 32 municipalities included in the Rural Municipalities Development Component described above.
(c) Atlantic Biological Corridor. This included resources for sustaining the Nicaraguan portion of the Mesoamerican Biological Corridor through biodiversity protection projects; involvement of indigenous communities, NGOs, and local authorities; and biodiversity planning, information generation, monitoring, and evaluation. This component was financed to be financed by a separate Global Environmental Facility (GEF) grant of about US$10.0 million.

Revised Components: In response to the urgent needs created by the natural disasters El Nino in 1997 and Hurricane Mitch in 1998, the community investments sub-component was modified to cover such critical needs as roads reconstruction, latrine building, seed supply, and water purification.

c. Comments on Project Cost, Financing and Dates
The actual total costs were US$34.6 million compared to the SAR estimate of US$40.4 million. At project closing US$28.3 million of the credit was disbursed.

3. Achievement of Relevant Objectives:

The first objective of the project relating to rural municipalities development was partially achieved. The project assisted in the formation of community groups that worked with their respective municipal administrations to set priorities for allocating budget and creating infrastructure. To strengthen the influence of local communities with municipal governments, the project provided training in all aspects of project cycle and organization skills to community leaders, local civil society organizations and non-governmental organizations (NGOs). By the end of the project, most of the municipalities had municipal development and municipal investment plans that were built on community consultation processes. The project strengthened the capacity of INIFOM through (a) revision of the legal framework for local governments finances; and (b) improving the systems and manuals for local fiscal administration.
However, at project closing, 43% of the sub-projects were for emergency reconstruction; 32% for municipal and community infrastructure; 15% for "productive projects"; 7% for technical assistance for communities; and 2% for environmental management. The emergency reconstruction sub-projects did not meet the poverty reduction or improvement in environmental management objectives as envisaged at the appraisal.

The second objective relating to central government institutions was partially achieved. The legal capacity of MARENA was substantially strengthened. However, the functional capacity of MARENA and other agencies supported by the project was only partially improved. Important framework conditions for improved natural resource management were established. MARENA's work on regulations for land titling for indigenous people facilitated GEF projects. MARENA was not effective in helping communities internalize natural resource management into their project supported investment plans. It was unsuccessful in developing adequate methodology for communities to use in their investment planning decisions.

The ratings for this project are based on the achievement of the above two objectives only. The achievement of the third objective relating to the Atlantic biological corridor, and the associated components of which were funded by GEF, is not discussed in this ICR. The ICR notes that this objective will evaluated in a separate ICR, but without explaining why.

4. Significant Outcomes/Impacts:

(i) The project introduced participatory processes in municipal planning and priority setting. The involvement of communities in the decision-making process has added legitimacy to community choices and has facilitated the local governments and communities to plan ahead.
(ii) The project has considerably strengthened municipal management in the area of tax collection.
(iii) The project supported MARENA in strengthening its role in environmental regulation and environmental standards-setting.

5. Significant Shortcomings (include non-compliance with safeguard features):

(i) The project marginalized the issue of natural resource management. Only 2% of the sub-project financing for community and municipality subprojects was used for natural resource management.
(ii) The project provided resources and technical assistance to respond to the immediate needs of the newly created Ministry of Environment and Natural Resources (MARENA) . However, the project did not focus on providing systematic support to MARENA in the longer term.
(iii) The project did not adequately prepare for the financing of "productive" sub-projects that were to be made to individuals and groups in the form of recoverable loans that could be used to establish "revolving funds". The municipalities did not have a consistent policy for recovering the funds , and did not establish procedures for managing whatever repayments were made.

6. Ratings:ICROED ReviewReason for Disagreement/Comments
SatisfactoryModerately Satisfactory[the ICR's 4-point scale does not allow for a moderately sat. rating].The two major objectives of the project were only partially achieved, and with some shortcomings. (See sections 3 and 5.)
Institutional Dev.:
LikelyNon-evaluableSeveral aspects of sustainability, including the legal basis for fiscal transfers and the maintenance of subprojects, are questionable.
Bank Performance:
Borrower Perf.:
Quality of ICR:

7. Lessons of Broad Applicablity:

(i) In order to measure institutional development, it is essential to establish a clear baseline which can be used to assess accurately and efficiently the improvement in the operations of the institutions concerned. Also, to facilitate monitoring and evaluation, a separate monitoring and evaluation entity should have been established in this project.
(ii) Fostering institutional development is a longer term process that is best supported through a "programmatic" approach (such as a LIL or an APL), rather than through fixed, target-specific lending.
(iii) Change in project components and reallocation of project resources in response to natural disasters without a revision in development objectives leads to a disconnect between the expectations and accountabilities that were actually negotiated and the actual project outcome.

8. Audit Recommended?  No


9. Comments on Quality of ICR:

The overall quality of the ICR is satisfactory. However, the decision to evaluate the GEF financed component in a separate ICR is not stated. The achievement of project objectives and lessons learned would have benefited from a comprehensive analysis of both the Bank and GEF components together. The onus is on the region to explain why this normal practice of assessing all components in one ICR was not followed. Nor does the ICR mention the time frame of the evaluation of the GEF component. Also, the ICR does not explain the reasons for lower total project costs -- US$ 34.6 million compared to the SAR estimate of US$ 40.4 million.

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