|1. Project Data:
ICR Review Date Posted:
|Rural Investment And Local Governance Project
Project Costs(US $M)
Loan/Credit (US $M)
|Agriculture and Rural Development
Cofinancing (US $M)
|UNDP, DFID, SIDA
Board Approval Date
|Sub-national government administration (30%), Central government administration (20%), General agriculture fishing and forestry sector (20%), Roads and highways (15%), General water sanitation and flood protection sector (15%)|
|Other rural development (33% - P)
Other public sector governance (33% - P)
Other environment and natural resources management (17% - S)
Gender (17% - S)|
||ICR Review Coordinator:
|Keith Robert A. Oblitas
||George T. K. Pitman
|2. Project Objectives and Components:|
a. Objectives:The project development objectives stated in the Project Appraisal Document (page 2) were:
“to contribute to rural development and poverty reduction through supporting provision of priority public goods and services at the communal level, as well as to promote good local governance through support of decentralized and deconcentrated participatory local governance systems at the commune and provincial levels.”
The statement of objectives in the Development Credit Agreement (page 19) is almost identical:
“to assist the Borrower in its rural development and poverty reduction efforts through supporting provision of priority public goods and infrastructure at the commune level, as well as promoting good local governance through support of decentralized and deconcentrated participatory local governance systems at the commune and provincial levels.”
This Review uses the development objective described in the Project Appraisal Document.
b. Were the project objectives/key associated outcome targets revised during implementation?
Local Planning and Investment (Cost of $37.3 million estimated at appraisal. Actual costs at closure, including additional financing were $141.3 million.) This had two subcomponents:
(i) Establishment of decentralized planning processes at village communes including development of five-year Commune Development Plans, three-year rolling Commune Investment Programs and annual commune budgets for implementing the investments; and
Policy Support and Project Management (Cost of $24.8 million estimated at appraisal. Actual costs at closure, including additional financing, were $34.2 million.) This had two subcomponents:
(ii) provision of grants for small-scale commune level sub-projects for investment in infrastructure, identified and prioritized through local participatory planning processes in 15 provinces.
(i) Strengthening - through funding technical assistance, training, logistical and operational support, and incremental operating costs - the capacity of commune and government institutions to implement the first project component; and
(ii) provision of consultancies for strategic studies related to decentralization, and for monitoring of project implementation and performance.
d. Comments on Project Cost, Financing, Borrower Contribution, and DatesProject Costs:
Appraised at US$62.16 million, final project costs grew to US$175.57 million. This was because: project coverage was expanded from 15 to 23 provinces to achieve a nation-wide scale-up (excluding Phnom Penh) and a larger investment program; a major typhoon (Ketsana) damaged many commune sub-projects which required rehabilitation; and the price of fuel and materials doubled due to the financial crisis.
- The original credit was US$22.00 million and this increased due to appreciation of SDR against the US$ to US$24.34 million. At project closing US$23.98 million had been disbursed and US$0.10 million was cancelled. In mid-2007 Additional Financing as a grant of US$36.25 million equivalent was added to the project. By project closing the value of the grant had increased to US$37.83 million due to exchange rate appreciation. After cancellation of US$0.26 million, net disbursement of the grant was US$36.37 million.
- There were three cofinanciers: UNDP, DFID and CIDA. First they contributed grants of US$13.31 million (against US$15.57 million planned) under the Partnership for Local Governance; second they contributed grants of US$14.72 million (against US$17.22 planned) under the Project to Support Democratic Development through Decentralization and Deconcentration.
- Initially the Borrower contributed US$31.46 million (against US$24.39 million planned). After additional financing was approved, the Borrower contributed another US$55.73 million (against US$74.73 million planned). Overall, the Borrower contributed 88% of its planned contribution.
- At the time of additional financing in 2007 the project closing date was extended by three years to enable the expansion to the whole country.
|3. Relevance of Objectives & Design:|
a. Relevance of Objectives:High.
Project preparation in the early 2000's was in the aftermath of 30 years of conflict that had resulted in a hardly functional governance structure at all levels, the need for reconciliation between the war-divided peoples, dilapidated infrastructure, and very high poverty, especially in rural areas where 90 percent of the population were classified as poor. The "Seila" program introduced by Government in the late 1990's was the premier program to build decentralized institutions and finance locally managed infrastructure and public services. It was considered by Government as the foundation stone to build democracy and improve welfare from the bottom up. The second phase of Seila, 2001-2005 provided technical and financial resources for: (a) refining decentralized planning, financing, and management systems for service delivery and local development; (b) providing discretionary budget support to province and commune authorities for investment in services and infrastructure; and (c) providing practically tested lessons for national level policy and regulations for decentralization, deconcentration and poverty alleviation.The Government's 2001 "Governance Action Plan" viewed decentralization, deconcentration and local governance as a means to further democratize the country and improve service delivery in the regions. The Cambodia National Poverty Reduction Strategy highlighted the cross-cutting linkages between decentralized governance, rural development and poverty alleviation.
The project's objective to contribute to rural development and poverty reduction, and to promote local governance, are thus highly relevant to the "Seila" program and Government's National Strategic Development Plan for 2006-2011, now extended to 2013. The project's objectives were relevant also to Cambodia's Rectangular Development Strategy (2004-2008) that was based on good governance that included public administration, decentralization and partnerships with the private sector and civil society.
The project remains relevant to the Bank's Country Assistance Strategies and sector work for Cambodia both at entry and at completion. The 2000 Strategy covered the FY00-FY03 period and had four key thrusts: (a) supporting good governance, through measures articulated in the Governance Action Plan, including decentralization of political authority and deconcentration of administrative responsibilities; (b) building physical infrastructure; (c) rebuilding human capital; and (d) facilitating private sector development. The World Bank report to the December 2004 Cambodia Consultative Group meeting, Cambodia at the Crossroads, took governance as its central theme. The 2008 Strategy covered the period FY05-FY08 and is still current in 2012. The 2008 Strategy emphasizes improved and more decentralized governance, rural poverty alleviation, rural development through participatory grass-roots processes, and investment in rural infrastructure.
b. Relevance of Design:Substantial.
Project design presented a results chain that related project inputs and outputs to the expected outcomes of improved rural development and promotion of local governance. The causal links between the poverty alleviation objective and the project's design features was less clear. Benefits from new public facilities would affect all villagers and in that sense the project would contribute to poverty reduction. But there is little indication in the PAD of particular design features that would help enable the poor and women to be as well or better served by the sub-projects than the non-poor. Even so, construction of small-scale infrastructure chosen by the communes, whether transport, water supply, school classrooms or other investments, would be responsive to community needs and could be expected to improve rural welfare.
Governance improvements paralleled the rural development activities, and the commune councils were expected to provide a base for decentralization at the village level, complementing the governance reforms and decentralization of activities taking place at provincial levels. Processes designed to tighten accountability and financial controls were also appropriate given Cambodia’s acute fiduciary management problems.The community processes by which infrastructure was selected and monitored during construction was expected to bring citizens together and improve investment quality. The inclusion of studies to evaluate the Seila program and formulate future policy and strategies for community-led rural development recognized the need to adapt and adjust the program as experience was gained.
A shortcoming was that the project's exit strategy was not addressed at appraisal - specifically, how communities would maintain their infrastructure, and the measures and institutional arrangements needed to backstop this need.
|4. Achievement of Objectives (Efficacy) :|
“To contribute to rural development and poverty reduction through supporting provision of priority public goods and services at the communal level, as well as to promote good local governance through support of decentralized and deconcentrated participatory local governance systems at the commune and provincial levels.”
The project's efficacy is reviewed below in terms of the three objectives: (a) to contribute to rural development; (b) to contribute to poverty reduction; and (c) to promote good local governance at the commune and provincial levels.
(a) To contribute to rural development: Substantial
- Based on the Commune/Sangkat Administration Law passed in 2001, local Councils were established by direct election in 2002. Subsequently, the project provided capacity-building and technical backup to facilitate these councils to identify local needs and to invest annually in priority sub-projects, building skills and capacity through repetition. According to the ICR (page 7) the project only funded about about half of all the investments made by the local Councils, the balance coming from either government or other donor assistance.
- 100 to 125 full-time locally recruited UNDP consultants worked to build the capacity of local subnational administrations to manage the subprojects and ensure that eligible projects were funded. In addition over 30,000 staff, elected councils and citizens were trained in various aspects of project planning and implementation.
- All 1,545 communes participating in the project and subnational support staff were fully trained in the first year of implementation and received refresher training at the beginning of each new planning cycle.
- Technical support officers made 10-13 visits to each sub-project during each project cycle, with the number of visits depending on the complexity and remoteness of the sub-projects.
- 11 Executive Committee Building were constructed/renovated by 2008 and two were completed in late 2009.
- Physical achievements were well above expectations at appraisal. Originally, about 1,110 communes in 15 provinces representing some 1.5 million households, were targeted under the project. With additional financing the number of communes was expected to increase to 1,473 communes in 23 provinces with around 2 million households receiving benefits. At the end of the project there were actually 1,545 communes in 23 provinces which benefitted from the project. These communes implemented 8,327 subprojects.
- Subproject investments reflected the public goods demanded by the communes. The relative share of the number of subprojects by category was a follows:
- 77% was for feeder roads. Transportation structures included 10.8 km of concrete/bitumen roads, 9,770 km of laterite/gravel roads, 4,965 km of earth roads,17,830 culverts and 511 bridges.
- 15% was for irrigation, drainage and flood protection. Irrigation infrastructure included 1,343 km of canals, 234 dams/reservoirs, 233 drainage structures and 128 irrigation structures.
- 4.5% was for water supply. Water supply infrastructure comprised 13,383 wells (all kinds), 4,905 piped water systems, and 367 ponds.
- 2.5% was for education facilities. Some 500 school classrooms were constructed and 704 were refurbished. Health investments were nearly all for latrines (257 latrines).
- Lack of proper maintenance of the investments is a general problem of the Seila program and has also manifested itself under this project. The ICR considers that, while minor maintenance can be done by the communities, larger maintenance should be handled by a "systematic maintenance program" supported by government. Further details on this key issue are not provided in the ICR. The Task Team subsequently stated that in 2012, road maintenance committees at District and Commune level are being rolled out as policy, and they have a mandate to seek the most appropriate local solutions. This initiative builds on the Commune Sangkat Fund Technical Manual (2009) which includes appropriate design standards for rural roads and well-designed materials explaining how to apply these standards to practical road design.
- Communes increased their capacity to plan rural development, carry out procurement, manage and account for funds, report on progress of small, local development projects, and to begin to cooperate with local district and municipal government agencies. Even so, local preferences still provide a minority of local development projects. In 2008, for example, 60,000 commune priorities were submitted to District Integration Workshops and only 40% of those approved for further consideration represented commune-identified projects (ICR page 18).
- Improved transport assisted rural development. Agricultural-related travel makes up two-thirds or more of total travel on village roads (ICR, page 24). The ICR reports that a 2009 Asian Development Bank socio-economic survey of project roads found that the frequency of road travel in the wet season for agricultural purposes increased from the baseline by 82%. The study also found that the average changes in primary income from selling rice doubled and for non-rice products tripled (though it should be noted that the project would not have been the only influence on these increases – the improvement in the general economy would also have provided a stimulus as market demand and general governance improved).
- The Task Team stated the average number of motorbikes owned by rural households increased by 122% over the period 2004-2010. In the bottom quintile the increase was 400%, and the number of motorbikes per household in the second quintile was over 300%. This is an indicator that increased household incomes among the poorest quintiles increased use of local commune roads built by the project.
- 90% of villagers confirmed that travel time was less dues to improved roads. 37% utilized saved time for farming and 17% for other activities.
- Beyond the references above to frequency of travel and income from selling rice, there is little further data in the ICR on the outcomes of the other infrastructure investments. A study by Aruna in 2006 found, for example, that only 43% of irrigation projects financed by the project (7% of total project expenditures) were operational three years after their completion (ICR page 28).
(b) Contributing to Poverty Alleviation: Substantial
(c) Contributing to Good Local Governance: Substantial
- There is minimal information in the ICR regarding the project’s contribution to poverty. Information that is available is of a proxy nature and is based on assuming an impact expected from a project output or other indication. For instance, it would be reasonable to expect that greater access by road to markets and urbanized areas would benefit the poor as well as the better-off. And women, who do much of the small-scale market transactions, might be expected to benefit at least as much as men. Similarly, the boost in incomes noted above would likely have been at least partly shared by women and the poor, although if land ownership is primarily in the hands of men and the wealthier populace, an often found situation, first round benefits would go primarily to these better-off groups.
- There is no reference in the ICR to any specific project feature to facilitate better social inclusion for women and the poor.
- The Task Team subsequently reported, based on the Cambodia Poverty Assessment 2004-2010 (World Bank 2010), that:
- Assuming only the poorest two quintiles (800,000 households) received the benefits from improved access, the total household investment through the project was 5.1% of the $582 average increase in household income (as measured by consumption) for the poorest two quintiles.
- The volume of rice production over the period 2004-2010 doubled and value of production increased 2.5 times during the period 2004-2010. The poorest two quintiles increased production the most (70%) compared with the wealthiest quintile (35%).
- Based on household consumption data, rural poverty in Cambodia declined from 53.2% in 2004 to 22.1% in 2009. In addition, the Task Team, utilizing empirical evidence from the Micro Panel Survey Data 2003/2008 and 2008/2010 (publication pending), stated that Commune/Sangkat Fund investment results in approximately 20% increase in welfare for Cambodian households in villages that received the benefits of the Fund compared to households in villages that did not receive the benefits. Second, disaggregated data shows that Fund investments in rural roads produced a greater percentage increase in the welfare index than irrigation and water supply – although this was differentiated to some degree according to provincial conditions (e.g. existing access to roads and ability to benefit from irrigation). Third, the impact was pro-poor: the welfare of the poorest quartile welfare benefited 36% more than the highest quartile.
- The average number of motorbikes owned by rural households increased by 122%. In the bottom quintile the increase was 400%, and the number of motorbikes per household in the second quintile was over 300%. This is not only an indicator of increased household incomes among the poorest quintiles, but of the increased use of local commune roads built by the project.
- A total of 11,242 commune councilors and relevant government staff were trained in procurement.
- Internal audit capacity was strengthened through the training of 150 provincial officers. A Project Information Database was established to support eligibility screening of subprojects.
- All key information for the project's subprojects and implementation was posted on National Committee for Sub-National Democratic Development Secretariat's website with regular updates. This was supplemented by detail information of commune project information and progress accessible via a web-based database.
- All bidding information is posted on the Secretariat website and on the notice boards of the relevant province and commune; however, there is better compliance in urban areas than in remote communes.
- Accountability Working Groups to review complaints and provide remedies were established at national and subnational levels.
- The Code of Conduct for staff was established with sanctions for fraudulent and corrupt activity by Secretariat staff at district and commune level, as well as for contractors, suppliers and consultants. The names of black-listed contractors engaged in collusive practices are posted on the official website.
- Participatory management processes were introduced for all communes that were trained in the process.
- The actions taken under the project to build a legal framework for decentralized government and community investment and management could be expected to strengthen local governance. The ICR reports that a study in 2010 on local governance found that the benchmark "local governance index" had improved during the project period by 11 percent, and that the community development approach had contributed to this improvement. However, the ICR comments (page 11) on a need for greater community participation - only 50% of commune residents participated in commune meetings - and that broader participation and more active oversight by the community of the commune councils would be desirable. Even so, about 30% of the heads of communes or commune councils were women (measured in the last year of the project).
- Overall, however, the project has helped establish the base for local governance and community institutions that in most respects are contributing towards local development. Local governments are an active part of this and capacity improved through implementation of flow of funds, procurement and field supervision.The ICR also reports (page 11), based on a study in 2010, that local governance was strengthened through their handling of the commune fund. All communes carried out the new and participatory processes introduced by the preparation of a five-year Commune Development Plan; a three year rolling Commune Investment Program; and annual commune budgets. The Project Implementation Manual added more rigorous processes for procurement, and financing, and implementing the sub-projects enabled learning by doing.
- Perhaps the best indication that the communities are functioning is the percentage of sub-projects that after completion were found eligible for project funding - 87% under fairly rigorous technical standards.
At appraisal the economic rates of return (ERRs) by main types of investments were: 84% for roads, 98% for irrigation, and 14% for water supply. The project's overall ERR was estimated at between 64% and 74%. These latter ERRs depended on two different weighting assumptions: a weighting based on actual expenditures under the Seila program which yielded an ERR of of 74%, and a weighting based on expressions of consumer preferences based on a household survey which resulted in the 64% estimate.
The ICR's overall ex-post economic rate of return is estimated as 18%, with rates of return by the project's main sub-project types of 25% for roads, 20% for irrigation and 10% for water supply. However, the ICR’s economic analysis estimates that, without maintenance, the ERR for roads would fall to 6% (page 28). The ICR also comments on maintenance issues with irrigation systems. While the worst case maintenance scenarios for these two investments (all of the investments not maintained) is unlikely, the ERRs would be lower if the reality of weak maintenance is factored in. These estimates are far lower than the ex-ante rates of return because the PAD calculations did not include implementation costs when aggregating sub-project ERRs.
The Task Team updated the ex-post economic calculations and assumptions. noting in particular that the Abrams 2004 model only included a growth factor of a 2% annual increase in volume of all journeys to allow for population growth. However the Cambodian economy has grown overall at around 10% per year since 2003. The most important parameter is the value of time. Savings of wages account for 26% of benefits in the original model and savings in passenger time account for a further 19% of benefits. Value of wages and passenger time were derived from an approximate value of the agricultural unskilled daily wage which, in 2003, was $1 per day. The equivalent in 2012 prices is at least $4 per day, or allowing for overall price inflation of nearly 58% in the intervening years, and the present agricultural wage is about $2.50 per day at 2003 prices (increase by 150%). The updated economic rates or return are:
- Leaving all other parameters in the model unchanged, and increasing the value of wages and time by this amount, say 150%, results in an ERR of 51% for roads with routine maintenance, and an ERR of 31% for roads without routine maintenance. A substantially lower 40% increase in value of wages and time improves the calculated ERR on rural roads with no routine maintenance to 12%.
- Leaving all other parameters unchanged, increasing motorcycle traffic by 122% results in an ERR of 31% for roads with routine maintenance and an ERR of 11% for roads without routine maintenance. A 130% increase in volume of motorcycle traffic improves the calculated ERR rural roads with no routine maintenance to 12%.
- Utilizing the same model but with 2012 data for both wages and time (increase of 150%) and motorcycle traffic (increase of 122%) the results are an ERR of 60% for roads with routine maintenance, and an ERR of 39% for roads with periodic rehabilitation.
Procurement throughout most of the project period was difficult because stringent clearance processes and prior reviews (considered excessive by government officials and other stake-holders) created bottlenecks and delayed implementation. Despite this, about 95% of sub-project designs and 80% of sub-project construction were considered technically satisfactory (those that did not meet these standards were not financed, in effect excluding them from the project).
Overall, efficiency is rated Substantial.
a. If available, enter the Economic Rate of Return (ERR)/Financial Rate of Return at appraisal and the re-estimated value at evaluation:
* Refers to percent of total project cost for which ERR/FRR was calculated