|1. Project Data:
ICR Review Date Posted:
|Rural Investment Project (azrip)
Project Costs(US $M)
Loan/Credit (US $M)
Cofinancing (US $M)
|PHRD grant from Ministry of Finance, Japan
Board Approval Date
|Water supply (20%), Sub-national government administration (20%), Sanitation (20%), Roads and highways (20%), Power (20%)|
|Rural services and infrastructure (33% - P)
Participation and civic engagement (33% - P)
Infrastructure services for private sector development (17% - S)
Decentralization (17% - S)|
||ICR Review Coordinator:
|2. Project Objectives and Components:|
a. Objectives:The project objectives as stated in the Development Credit Agreement were to "reduce poverty, improve living standards and increase use of infrastructure services in rural communities of the Borrower" (Schedule 2, p. 15).
As stated in the Project Appraisal Document (p. 2, 23) the objective of the project was "for households in rural communities completing micro-project investments to improve living standards and increase the use of infrastructure services".
The Additional Financing Paper (p. 3) stated that objective of the additional financing would remain the same as for the original project (as described in the PAD) although it is proposed to revise the wording to strengthen the results framework. The re-worded objectives were: improved living standards and increased use of infrastructure services for households in rural communities completing micro-projects." This was approved by the Board on March 3, 2008.
For this review, the Development Credit Agreement objectives will be used as the original objectives and revised objectives will be taken from the Additional Financing Paper.
b. Were the project objectives/key associated outcome targets revised during implementation?
If yes, did the Board approve the revised objectives/key associated outcome targets?
Date of Board Approval: 03/03/2008
c. Components:A. Infrastructure (appraisal cost US$14.6 million; actual cost US$33.3 million). This component would fund grants for approximately 350-450 rural infrastructure micro-projects. Potential areas of investments are: economic (rehabilitation of secondary roads, water systems, electricity transformers) and social (schools and health clinics) infrastructure.
The average size of micro-projects was US$35,000. Micro-projects over US$50,000 would require prior review by IDA and the project Working Group.
Eligible recipients are municipalities, community based organizations (CBOs) including non-governmental organizations (NGOs) registered as legal entities, or any other associations and organizations that IDA and the Borrower agree upon (the recipient is defined as the organization in the community that executes the micro-project. Investments would be identified in consultation with communities, prioritized through local participatory planning processes, and appraised according to technical, financial, social, economic, institutional, and environmental criteria set out in the Operational Manual. Generally, recipients would be responsible for all phases of the micro-project, including preparation of the proposal, contracting, implementation, and operations and maintenance. As needed, local NGOs and CBOs or other service providers will provide support. Training needed at the community level will be built into the micro-project cycle and financed by the capacity enhancement component.
B. Capacity Enhancement (appraisal cost US$5.1 million; actual cost US$7.8 million). This component would fund training and technical assistance for project implementation. Training would be provided to local stakeholders, e.g. communities, recipients, and Regional Grant Approval Committees (RGACs) in the following areas: contracting, procurement, financial management, and participatory monitoring and evaluation. This component would also support capacity building of the staff in the Project Management Unit and the three Regional Operations Offices through management, planning, on-the-job and other training, consultations, lessons learned workshops.
C. Project Management. (appraisal cost US$1.4 million; actual cost US$6.1 million). This component would finance the administrative, project implementation and management costs, including hiring of the Project Management Unit professional and support staff, Regional Operational Offices support staff, travel cost and per diem, and support to the Regional Grant Approval Committee. The ICR does not provide an explanation on the fourfold increase in costs for this component.
The scope of the project and the financing ceiling of the micro-projects was revised under Additional Financing. Following changes were made in the components:
A. Infrastructure. In the face of stronger demand than expected an additional 250 micro-projects were included in 24 new districts. The micro-project ceiling was raised from US$ 50,000 US$ 85,000, to allow for cost increases (PAD mentioned a ceiling of 35,000 and special approval from the working group for projects 50,000 and above). This increased the maximum cost per beneficiary from US$18 to US$22 ( these increases are equivalent to the inflation index since implementation began), and the cash contribution was lowered from 5% to 2% to allow more of the cash strapped poor to participate.
B. Capacity Enhancement. No change.
C. Project Management. No change.
d. Comments on Project Cost, Financing, Borrower Contribution, and DatesProject Costs: The actual project costs was US$47.1 million compared to the original appraisal cost of US$21.1 million.
Financing: Both the original IDA Credit of US$15 million and the PHRD Grant were fully disbursed by the original closing date. Before Additional Financing, the project was completed five months prior to the original date of project completion (May 2009).
An Additional Financing of US$15 million was approved on March 3, 2008 for scaling-up project activities. The reasons for additional financing were: (i) the project was one of the few vehicles available to address rural needs as determined by the communities themselves; (ii) living conditions in rural areas remained poor due to lack of employment opportunities and infrastructure, and access to social services; and (iii) demand from rural communities had been consistently strong.
All IDA additional funds were fully disbursed (out of $15 million IDA funds $14,668,537 was disbursed and $331,463 was an exchange loss).
Borrower contribution: The Borrower actual contribution was US$10.3 million, substantially higher that the appraisal commitment of US$1.35 million. The reason for the much higher Borrower contribution is that initially the introduction of an unfamiliar model of community-driven development was perceived as risky by a number of government officials. However, as things picked up, and success stories were told through a number of media, and local and rayon government officials became active, stakeholders and the Government contribution increased substantially.
Dates: The project was completed five months prior to the original date of project completion (March 2009). The completion date for the Additional Financing was March 2012 when the project closed on time.
|3. Relevance of Objectives & Design:|
a. Relevance of Objectives:Relevance of original and revised objectives: substantial.
As pointed out in the most recent Country Partnership Strategy (CPS) for Azerbaijan for FY11-14, the CPS was prepared under the circumstances of a rapid increase in income and decrease in poverty, but also the global economic crisis from which the country emerged relatively well (CPS p. i). The drivers of growth and poverty reduction that served the country well in the recent past may not be available in the future, and the post-crisis world offers new challenges. The CPS therefore proposed a two pillar strategy of: (i) building a competitive non-oil economy; and (ii) strengthening social and municipal services, with a strong cross-cutting theme of governance and anti-corruption.
The project objectives remain consistent with "Results Area 4" of the CPS which aimed at providing "improved social and municipal services" through improved access to rural infrastructure The strategy emphasizes comprehensive efforts to support rural communities by identifying and supporting the highest priorities and supporting local infrastructure. It noted that rural infrastructure projects have a high impact in employment generation (CPS p. 25).
The life of the project was covered by three CPS documents. Despite differences in focus the key elements relevant to this project remained intact throughout: (i) the need to use oil revenues in pro-poor rural growth; and (ii) the need to address issues of rural infrastructure that raise transaction costs for rural people, while making rural areas unattractive for the private sector.
The project objectives of improving the living standards and increase use of infrastructure services in rural communities were consistent with the Azerbaijan's State Program on Socio-Economic Development (SPSED) 2004-2008 which called for comprehensive regional development measures that included improvement of infrastructure and utility service provision, especially in rural areas and small districts. The program emphasized the need to increase local responsibility in managing infrastructure and utility service delivery, as large, government funded and implemented infrastructure programs were no longer considered an option (ICR p.1).
b. Relevance of Design:Relevance of original and revised design: substantial.
The project’s design was directly relevant to achieving its objectives and there was a solid causal link between inputs and outputs. It included infrastructure component which aimed at providing grants for investments in economic (rehabilitation of secondary roads, water systems, electricity transformers) and social (schools and health clinics) infrastructure. This would benefit over 1.8 million people. in rural communities. It also included components to develop capacity of local stakeholders as well as Regional Operations Offices.
The ICR notes (p.4) that the piloting under the project helped work out the micro-project implementation process and provide hands-on training to the staff of the Project Management Unit and the Regional Operational Offices in Operational Manual procedures. With only two major components, the structure of the design was relatively simple, although CDD approaches, calling for community participation and local administration response and interaction, are rarely simple in practice.
However, the linkage between indicators and achievement of objectives was not always clear (see section 10 a below).
|4. Achievement of Objectives (Efficacy) :|
The original objectives of the project were to reduce poverty, improve living standards and increase use of infrastructure services in rural communities of the Borrower.
The reworded Additional Financing objectives were to improve living standards and increased use of infrastructure services for households in rural communities completing micro-projects.
Table: Number of Beneficiaries and micro-projects financed by the Project
350 to 450
The breakdown of micro-projects actual investments for the entire project, are as follows: road rehabilitation (52%, 333 micro-projects), potable water (17%,108 micro-projects) , electricity (10%, 63 micro-projects), irrigation (6%, 40 micro-projects), health clinics (5%, 34 micro-projects), drainage (5%, 29 micro-projects), schools (4%, 28 micro-projects ), community renovation (1%, 5 micro-projects) and pedestrian bridges (0.3%, 2 micro-projects).
Out of 717 communities mobilized, 642 communities actually received grants. 114 communities were declined at different stages of micro-project cycle for different reasons. 47 communities were declined during mobilization due to their lack of readiness; 54 were declined at time of training (because of low attendance or lack of interest to proposed topics), Other communities were declined after the Cooperation Agreement was signed as they failed to collect a sufficient community cash contribution. 13 of the declined communities later collaborated with the project.
Reduce Poverty: modest.
- The ICR reports that the original beneficiary contribution requirement of 10 percent of micro-project cost with at least five percent in cash often proven difficult for poor communities, resulting in needy communities dropping out of the program (p. 30). One of the reasons justifying Additional Financing was ongoing poverty in the project areas that the project itself intended to reduce. With Additional Financing, the cash contribution was lowered to two percent, while the minimum 10 percent beneficiary contribution remained in force. The ICR does not provides data on number of poor beneficiaries served by the project.
- The ICR reports that poverty is lower in project villages. At the time of the baseline 14% of households in the project area were below the internationally recognized poverty line. At evaluation that had improved to only 9%. In the control villages the percentages were 15 and 13 respectively (ICR p. 20).
- The ICR reports that the project created over 13,000 person - months of jobs in civil works. However, it does not report how many of these jobs were for the poor. The rural poor received more than $6.5 million equivalent in wages (ICR p. 11).
Improve living standards: substantial.
- The ICR reports that economic welfare has slightly improved across the region over the life of the project, but the rate of improvement is higher in the project villages than the control villages. It further reports that the rate of income increase in the project villages is higher than in the control villages. The financial situations of beneficiaries have slightly improved, with the rate higher in project villages than in control villages (ICR p. 14). However, it provides no evidence or underlying data to support this claim. The Project was named one of the 12 winners in the annual competition ‘Improving the Lives of People in Europe and Central Asia’ (June 2010) awarded by the World Bank.
- Thirty communities rehabilitated irrigation systems, benefitting over 700,000. The ICR reports that the average productivity increased by roughly 30% and added more than US$ 1 million to the value of production in project areas (ICR p. 69). Weighted average productivity has increased by 46% for potato, 40% for maize, 38% for cotton and 31% for wheat. The cost-benefit analysis of community micro-projects was carried out by an independent consultant in 2010.
- At project closure 80% of farm products were being brought to markets by farmers themselves (18% in non beneficiary areas). Prices of crops paid to farmers have increased on average by 20% in project areas. The crops and livestock prices showed significant price increases (in both inflation unadjusted and inflation adjusted scenarios) due to better roads. The inflation unadjusted price increase ranged from 14% to 49% and the inflation adjusted price increase (adjusted by the consumer price index) ranged from 12% to 41%. This increase is due to the fact that the farmers could move their produce to the nearest wholesale market or could sell their directly to the people in the nearby towns (ICR p. 59).
- ICR tables show that the household members with some sort of water-borne disease declined from the 2009 baseline 80% in the project areas to 7% at the 2011 evaluation compared to 81% and 53% respectively in non-project villages.
- Inadequate and infrequent water provision declined from a baseline of 49% in the project areas (assumed to be the most needy) to 25% at evaluation, compared to a slight increase from 70% and 74% respectively in non-project villages (assumed to be less needy).
Increased use of infrastructure: high.
- About 1.2 million people in 431 communities have benefited from a total of approximately 1,300 kilometers of new or reconstructed roads. The condition of rural roads has improved for over 640,000 people in 200 communities, with improved access to schools and clinics. People in project villages save between a quarter and a third of their time going to a primary school, a secondary school, or a clinic. Time taken going to a hospital, a transportation hub, or a marketing point was reduced by half.
- Nineteen communities rehabilitated primary schools, and school enrollment in beneficiary communities increased from 34 percent (baseline) to 98 percent (evaluation), benefitting more than 50,000 school boys and girls. Time taken to go to secondary school decreased from 15 minutes (baseline) to 10 minutes (evaluation),
- Seventy-one communities rehabilitated potable water supply systems, and 150,000 rural people in the previously worst served communities had access to safe drinking water by the end of the project.
- Home treatment declined from baseline 68% in the project areas to 34% at evaluation compared to 74% and 68% respectively in non-project villages.
Note: The baseline survey was done in 2009 and the evaluation surveys were done in 2011.
Ex-ante economic analysis was completed for a typical investment in a rural drinking water supply system for 700 households involving a project investment of US$79,200. The investment consist of an artesian well with a small piped system targeting households that used water from spring, rivers, lakes or canals. The economic rate of return (ERR) for a rural drinking water supply system was 15.7 percent (PAD p. 12).
The ex-post ERR ranged from 23.7 percent to 45.8 percent depending on the type of infrastructure. The ERR for health clinic construction was 23.7%, road rehabilitation was 27.1%, portable water 28.8%, and irrigation 45.8%.
The community based approach proved to be cost effective in building rural infrastructure, improving rural livelihoods and creating jobs. The project rehabilitated rural infrastructure by implementing 642 community micro-projects with the overall project budget of US$ 30 million, or at an average cost of about US$ 45,000 per micro-project. According to the ICR (p. 19), this is significantly less than the cost of comparable infrastructure projects implemented by other organizations.
The investment cost for a typical road rehabilitation micro-project was about manat (AZN) 40,845, for a typical potable water micro-project was about AZN 49,744, for a typical health clinic micro-project was about AZN 39,518, and for a typical irrigation micro-project was about AZN 44,900.
There was a four fold increase in the project management cost which increased from US$1.5 million at appraisal to US$6.1 million (actual).
The external technical audit and technical sustainability assessment of the selected micro-projects confirmed that the quality of works and of materials used was satisfactory and according to the designs, with no significant deficiencies (ICR p. 27).
Overall, the project 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