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Implementation Completion Report (ICR) Review - Second Municipal Infrastructure Development Project

1. Project Data:   
ICR Review Date Posted:
Project Name:
Second Municipal Infrastructure Development Project
Project Costs(US $M)
 26  7
West Bank & Gaza
Loan/Credit (US $M)
 7.5  7.0
Sector, Major Sect.:
Central government administration, Sub-national government administration, Roads and highways, General water sanitation and flood protection sector,
Law and justice and public administration; Law and justice and public administration; Transportation; Water sanitation and flood protection
Cofinancing (US $M)
 14.1  0
L/C Number:
Board Approval (FY)
Partners involved
Saudi Fund, Government of Italy. 
Closing Date
12/31/2004 06/30/2005
Evaluator: Panel Reviewer: Division Manager: Division:  
Kavita Mathur
Laurie Effron Alain A. Barbu IEGSG

2. Project Objectives and Components:

a. Objectives
The original objectives of the project were to:
(a) improve municipal infrastructure service coverage and quality, increase accessibility, and improve environment for private investment; and

(b) build municipal and central government capacity and reform and strengthen municipal systems.

As a result of the impact of the Intifada that started in September 2000, just after the project was approved, a large restructuring program covering eight on-going projects in West Bank & Gaza (WB&G) was formally approved by the Board in August 2002 and the project was legally restructured in December 2002 (date of legal Amendment to the Credit Agreement). The first two objectives were scaled down and the focus shifted to damaging repairs to physical infrastructure and buildings.

b. Components (or Key Conditions in the case of Adjustment Loans):
Original Components:
I. Infrastructure Rehabilitation and Improvement
(a) Rehabilitation and improvement of regional road network, including drainage and essential services (appraisal cost US$18.1 million, actual cost US$1.58 million).
(b) Rehabilitation and improvement of village and municipal water supply and sewerage networks (appraisal cost US$3.1 million, actual cost US$0.5 million).
II. Capacity Building Support
(a) To the Ministry of Public Works (MPW) for initiating systematic road maintenance and to establish an environmental monitoring unit within the MPW (appraisal cost US$1.9 million, actual cost US$0.07 million).
(b) To the Ministry of Local Government and Selected Municipalities for investment and development programming, improving accounting systems, revenue mobilization, management and service delivery
(appraisal cost US$2.5 million, actual cost US$0.26 million).
III. Incremental Operational Expense Support (appraisal cost US$0.4 million, actual cost US$0.07 million).

Revised Components: After restructuring the scope of the original components was reduced and damage repair component was added. The actual cost for the damage repair component was US$4.52 million.

c. Comments on Project Cost, Financing, Borrower Contribution, and Dates
The Bank could not provide regular IBRD/IDA assistance as West Bank and Gaza is not a sovereign state, and therefore not eligible for normal sources of Bank financing. Therefore, the Bank provided a credit of US$7.5 million from a special Trust Fund (Trust Fund for Gaza and West Bank). Total credit disbursed was US$7.0 million.
At appraisal cofinancing was expected from the Saudi Fund (US$5-9 million) and the Government of Italy (US$5-7 million). The expected cofinancing did not materialize due to escalation of violence and increasingly difficult local situation.

3. Relevance of Objectives & Design:

The original project objectives were consistent with the 1999-2003 Palestinian Development Plan which identified rehabilitation and improvement of infrastructure as top priority. The project was built on the initiatives of the First Municipal Infrastructure Development Project (MIDP-1) and sought to tackle reforms in six municipalities and build infrastructure (roads) maintenance programming capacity in a the new ministry, the Ministry of Public Works (MPW). The original objectives were also consistent with the Bank Strategy for West Bank and Gaza (WB&G) dated April 28, 1998.
In August 2002, in response to the outbreak of the Intifada,the Bank country team identified eight operations, including the Second Municipal Infrastructure Development Project (MIDP-2) for restructuring to support emergency recovery activities. The revised objectives were consistent with Bank strategy as outlined in the "Status Report to the Board on the Trust Fund for Gaza and the West Bank and Strategic Outlook" (February 2003). The Bank strategy is to provide a balance between maintaining medium-term developmental activity where feasible and providing emergency assistance designed to sustain Palestinian institutions and mitigate poverty.The project objectives remained relevant throughout the life of the project.

4. Achievement of Objectives (Efficacy) :

In accordance with new Bank guidelines OED's assessment focuses upon both the original and revised objectives based on pre-restructuring weight of 17% and post-restructuring weight of 83%, derived from the share of actual loan disbursements before and after the restructuring.
Improve municipal infrastructure service coverage and quality, increase accessibility, and improve environment for private investment(Overall - Substantially Achieved).
Prior to restructuring the progress towards achievement of this objective was substantial. The Ministry of Public Works and Housing (MPWH) had completed all the required preparatory steps and completed two roads projects (13.2 km) in West Bank.

In the post-restructuring period, the achievement of this objective is also substantial. In the roads sector, 67 km of main/access/internal roads were rehabilitated. In the water sector, Palestinian Water Authority (PWA) implemented the Bidya water subproject in West Bank and 13.7 km (or 90%) of the network was rehabilitated. Infrastructure service quality has improved substantially. In Gaza Governorate, the rehabilitation of Cemetery Road has reduced travel distance from 20 to 9 km. Transport fees in project areas have dropped by 50-60%. In Ramallah Governorate (West Bank), travel distance in the project area was reduced from 35 to 20 km and transportation cost was reduced from US$3.4 to US$1.6. Water losses have decreased from 40-50% to 15 to 20%. The water network in Bidya was expanded and at project closing 90% of Bidya's population was receiving 24 hours piped water.

Build municipal and central government capacity and reform and strengthen municipal systems(Overall - Modestly Achieved).
Prior to restructuring the progress towards achievement of this objective was modest. In the Ministry of Public Works and Housing (MPWH), some progress was made towards Road Maintenance and Management System (RMMS). MPWH performed satisfactorily in preparing terms of reference, inviting and evaluating bids. However, the Ministry of Local Government (MOLG) lagged significantly in organizing its Capacity Building Unit, in finalizing terms of reference, and hiring local consultants for critical tasks.

In the post-restructuring period, the achievement of this objective is also modest. The project enhanced the capacity and skills of the staff of the MPWH staff in planning, programming, monitoring and procurement. Formal training was provided to MPWH in environmental review and monitoring, and reporting. The MOLG also benefited from the project through training, experience (on-the-job training) and support. However, the major revised capacity building objective, strengthening “municipal accounting systems” was not adequately implemented. Instead of implementing the strengthening activities in MIDP-2 municipalities, they were implemented in municipalities of MIDP-1 and Bethlehem 2000 project. The Road Maintenance and Management System (RMMS) was not implemented. The Revenue Management Information System (RMIS) was successfully implemented in 5 Local Government Units in West Bank. However, in Gaza it was a failure mainly due to poor task management, which could not be corrected by MOLG team in West Bank because of inability to travel to Gaza due to closures between West Bank and Gaza.

Emergency repairs and rehabilitation of priority infrastructure(Substantially Achieved).
The project assisted in repairing damage to schools (98), hospitals (5) and key Palestinian Authority institutions (58) throughout the West Bank and Gaza. This enabled key social service agencies to rapidly resume operations and to provide vital services in health and education sectors. Absolute numbers are reported as no specific targets were set.

5. Efficiency:

The estimated Economic Rate of Return (ERR) of the project at appraisal was 47%. This estimate was based on infrastructure components (roads and water), which accounted for 76% of the total project cost. The ex-post ERR was calculated mainly for roads component (which accounted for 44% of the total project cost) because of the difficulty in obtaining reliable data for other components. All road sections have an ex-post ERR higher than 12%. The ERR varied from 15% to 172% and the overall ERR is 55%.

The project improved the efficiency of collection of waste management fees through the installation and operation of computerized system. The revenue from waste management fees in 2000 was US$150,000. The actual revenue for same fees for 2004 was US$240,000.

As noted in Section 4, transport fees and water losses were both significantly reduced.
6. M&E Design, Implementation, & Utilization:

Although performance indicators were defined at appraisal, they lacked the baseline level to appropriately measure the project impact during implementation and after completion. During implementation data on water losses, water supply costs and transportation costs was collected and presented in the ICR.
7. Other (Safeguards, Fiduciary, Unintended Impacts--Positive & Negative):


8. Ratings:
ICR Review
Reason for Disagreement/Comments
Institutional Dev.: 
LikelyUnlikelyAlthough MPWH is much more conscious of the need to focus on maintenance, this is not being done in a systematic manner. Moreover, the maintenance is dependent on central government and donor funds. Given the devastation of the Palestinian economy, mobilization of government and donor funds for sustained maintenance is unlikely. Also, the capacity of MPWH is still weak.
Bank Perf.: 
Borrower Perf.: 
SatisfactorySatisfactoryOverall, Borrower Performance is rated Satisfactory. However, Ministry of Local Government (MOLG) performance during implementation was unsatisfactory. The Gaza project management team failed to comply with project requirements and thus failed to deliver the planned outputs.
Quality of ICR: 

- When insufficient information is provided by the Bank for IEG to arrive at a clear rating, IEG will downgrade the relevant ratings as warranted beginning July 1, 2006.
- ICR rating values flagged with ' * ' don't comply with OP/BP 13.55, but are listed for completeness.

9. Lessons:

Significant progress can be made even in a very difficult environment if adequate local leadership exists, and if the Bank team is sensitive and responsive to the problems and takes quick and decisive action. This can occur most effectively when there is close on-ground Bank supervision and communication with clients.
  • Capacity building can be achieved even during crisis if the participating institutions are accountable and have a strong incentive to perform. MPWH's capacity was built on-the-job, based on strong leadership and a determination to establish itself as an organization.
  • It is not enough to just develop performance indicators to monitor project outcomes and impacts. Building good monitoring and evaluation system also requires establishment of base-line data to appropriately measure the project impact during implementation and after completion.
  • The project experience demonstrates that it is important to obtain firm commitment from local partners prior to implementing components that (partly) depend on their inputs.

10. Assessment Recommended?  Yes

          Why?  As part of a cluster audit as there have been no IEG PPARs to date for West Bank and Gaza.

11. Comments on Quality of ICR:

The ICR complies with the Bank guidelines for evaluating projects with formally revised objectives. The overall quality of the ICR is satisfactory. However, there are a few shortcomings: (a) sometimes the arguments provided are difficult to follow (e.g. pp7 and pp11); (b) there is no discussion on lack of government counterpart funding (at appraisal it was estimated at US$4.4 million); and (c) the reasons for project extension are not discussed. Also, the ICR failed to mention that the project was restructured along with seven other projects in West Bank and Gaza in August 2002 and an emergency objective to fund priority repairs and rehabilitation of infrastructure was included in the draft "Master Amendment", which was being prepared. The ICR does not mention the Board approval date of the "Master Amendment".

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