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Implementation Completion Report (ICR) Review - Municipal Services


  
1. Project Data:   
ICR Review Date Posted:
07/31/2013   
Country:
Bangladesh
PROJ ID:
P041887
Appraisal
Actual
Project Name:
Municipal Services
Project Costs(US $M)
 154.0  216.39
L/C Number:
C3177
Loan/Credit (US $M)
 138.6  203.1
Sector Board:
Environment
Cofinancing (US $M)
   
Cofinanciers:
Board Approval Date
  03/16/99
 
 
Closing Date
06/30/2005 06/30/2012
Sector(s):
Sub-national government administration (58%), General water sanitation and flood protection sector (20%), Other social services (17%), General transportation sector (5%)
Theme(s):
Municipal governance and institution building (23% - P) Pollution management and environmental health (22% - P) Municipal finance (22% - P) Urban services and housing for the poor (22% - P) Participation and civic engagement (11% - S)
         
Prepared by: Reviewed by: ICR Review Coordinator: Group:
Roy Gilbert
Robert Mark Lacey Soniya Carvalho IEGPS1

2. Project Objectives and Components:

a. Objectives:
Principal objective:

To improve environmental and infrastructure service delivery in urban areas.
Specific objectives:
(a) To strengthen the institutional capacity of selected municipal corporations and secondary towns to plan, finance, implement, and operate urban infrastructure services in an efficient and sustainable manner.

(b) To improve resource mobilization and allocation, and fiscal discipline through the creation of an improved financing mechanism for urban infrastructure investment.
(c) To support the Government of Bangladesh (GOB) and municipalities to reduce urban poverty and improve environmental conditions of urban communities through the financing of critical urban infrastructure and services.
[from Project Appraisal Document (PAD p.2), almost identical to the formulation in Schedule 2 of the Development Credit Agreement (DCA)]

b. Were the project objectives/key associated outcome targets revised during implementation?
No

c. Components:
At appraisal, the components were divided into two phases and remained unchanged after Additional Financing (AF):

First Phase:
Components 1. and 2. (consolidated here for lack of separate cost data for each in ICR) Infrastructure Development Civil Works and Equipment (appraisal cost US$39.7 million; AF cost US$0.0 million, actual cost US$27.8 million). Including: (a) Water Supply - rehabilitation of existing systems and equipment for O&M in 2 municipalities as well as urgent works (e.g., rehabilitation of hydrants, valve chambers, and overhead tanks). Rehabilitation of 12 km of Khulna's water supply distribution system; (b) Sanitation - construction of 47 public toilets and a pilot small-bore sewerage program in Khulna; (c) Roads and Drainage - upgrading and rehabilitation of existing road and drainage networks and systems, such as conversion of earthen, gravel, or brick roads to bitumen roads; road widening; bridge renewal (about 220 km); and construction of footpaths and culverts. Drain reconstruction and conversion of earthen drains to brick-walled drains (about 37 km); (d) Bus and Truck Terminals- construction and rehabilitation in all participating city corporations and municipalities; (e) Slum Improvement - pilots in Khulna and about five other municipalities with improved water supply, on-site sanitation, footpaths, and street lighting. and community involvement in planning, implementation, and O&M; (f) Solid Waste Management - equipment for primary collection. Existing disposal sites would be improved in Khulna and Rajshahi from open to controlled dumping. Technical assistance for identifying suitable disposal sites; (g) Markets - upgrading and/or rehabilitation of 16 existing municipal markets; (h) Land Acquisition – for bus/truck terminal and sanitation components; (i) Solid Waste Equipment to improve primary collection, including waste transport vehicles (tipping trucks and trailers) in Khulna and Rajshahi; (j) Motor Vehicles and Computers for field personnel, and computer equipment and consumables for support personnel in each municipality.
Component 3.Technical Assistance (appraisal cost US$ 7.9 million; AF cost US$4.4 million; actual cost US$19.4 million). (a) Institutionalizing a Municipal Support Unit (MSU) within the Government's Local Government Engineering Department (LGED) to strengthen the work of GOB's Local Government Engineering Department (LGED); (b) Creating a Municipal Performance Monitoring Unit and developing a municipality information data base within MSU; (c) Developing a Community Participation Program, including a workshop and a micro-credit study through NGOs and consultants working with MSU; (d) Establishing a Bangladesh Municipal Development Fund (BMDF), designing its policies, procedures and management structure, and incorporating it as a legal entity; (e) Studies including environmental management action plans in Khulna and Rajshahi for sanitation and solid waste management, and a hydro-geological investigation for Khulna; (f) TA for project management unit for design and construction supervision; (g) Training for MSU, LGED, and municipalities--mostly on-the-job; (g) Additional Project Staff for MSU and BMDF as well as incremental O&M costs
Component 4. - Chittagong Hill Tracts ("Special Consideration") (appraisal cost US$7.6 million; AF cost US$0.0 million; actual cost U$7.6 million). Physical investments in three municipalities (Rangamati, Bandarban, and Khagrachari) which had lagged behind other municipalities in service provision and urban development.
Component 5. - Flood Damage Rehabilitation (appraisal cost US$16.2 million; AF cost US$26 million; actual cost US$36.4 million). Rehabilitation of municipalities affected by the 1998 floods, to be determined upon completion of a needs assessment.

Second Phase:
Component 6. - Municipal Development Fund (MDF) (appraisal cost US$78.0 million, of which US$15.0 million was re-assigned to Flood Damage Rehabilitation component, leaving a net appraisal cost of US$68 million; AF cost US$36.8 million; actual cost US$57.3 million). BMDF Financing of municipal subprojects consisting of civil works, equipment, goods, and technical assistance.
Component 7.Technical Assistance (appraisal cost US$4.6 million; AF cost US$0.0 million; actual cost US$2.6 million). (a) MDF Specialists in Sub-project Appraisal, including technical review of proposals for compliance with environmental, social, economic, and financial feasibility; (b) TA to Municipalities for preparing sub-project proposals and Financial and Operational Action Plans (FOAP) to make them eligible for BMDF financing; (c) Incremental O&M Costs for BMDF and MSU for three years.

Additional Financing (AF):
Through three separate commitments during the 2004-2010 period, a total amount of US$77.5 million of AF was committed. AF brought no changes to the objectives of the project or to its components. Instead AF amounts were allocated to the project's existing Components 3, 5, and 6 in order to scale them up. The amounts of AF commitments to each component are noted in the list of components above.

d. Comments on Project Cost, Financing, Borrower Contribution, and Dates
The project was restructured three times:

  1. in 2005, in response to major flood of 2004, US$15.0 million, initially allocated to Component 6. - MDF was re-allocated to Component 5. - Flood Damage , Also, US$11.0 million was reallocated from the Bangladesh Private Sector Infrastructure Development Project (C2995 P044789), whose outcome was rated Moderately Unsatisfactory by the Jan 2008 ICR. Although this amount and its disbursements remain part of that 'donating' project's account, they can be treated from an operational point of view as expenditures of the Municipal Services Project reviewed here, as both this ICR Review and the ICR itself do.
  2. in 2008, after a major flood in 2007, when AF of US$24.5 million was approved
  3. in 2010, when AF of US$42.0 million was approved to scale up what were considered the successful components of the project.
Together, these three changes resulted in a total commitment of US$77.5 million extra funding for the project.
Total Borrower counterpart funding commitment to this project was for US$25.7 million, made up of three elements: (i) US$15.4 million original appraisal commitment; (ii) US$6.3 million more committed with the emergency re-assignment of other projects' funds to this operation after the 2007 flood (Project Paper Dec 21, 2007 p.iv); (iii) US$4.0 million more committed when AF was approved in 2010 after the 2007 flood emergency (Project Paper May 26, 2010). Actual Borrower counterpart commitment by completion was US$29.8 million. Apart from noting that Government provided counterpart funding 'as needed throughout most of implementation' (ICR p. 26), the ICR does not assess counterpart funding performance or explain why and for what US$4.1 million more was paid in than committed.
The original closing date of 06/30/2005 was first extended to 06/30/2008, following flood damage. It was extended again to 6/30/2011, following the approval of AF. In order to complete AF-financed components, there was one more extension of the closing date to 06/30/2012, seven years beyond the original closing date.


3. Relevance of Objectives & Design:

a. Relevance of Objectives:
The objectives are relevant to the priorities of the 2011-2014 Country Assistance Strategy for Bangladesh, and especially to its call for 'massive infrastructure investment' (p.i) especially in municipalities ( p.28), attention to poverty reduction (p.28) as well as the 'need to support the building of the financial and managerial capacities in all municipalities' (p.9).

The objectives are equally relevant to the country's priorities. Cities in Bangladesh continue to grow at a rapid rate, and municipalities throughout the country continue to need support for planning, financing, implementing and sustaining critically needed municipal infrastructure and improvements in urban services.

Relevance of objectives is rated High

b. Relevance of Design:
For achieving the project's principal objective of improving environmental and infrastructure in urban areas, most of the project's components, notably the larger Components 1/2 and 6 were highly relevant. Infrastructure delivery translated into outputs of urban services that would directly lead to the improvements sought by the objective. BMDF's output of finance for municipal infrastructure and environmental subprojects would, indirectly through the project's results framework, lead to the urban improvements intended by the project's objective, after the municipal investments has become operational. The large Component 5 being more concerned with disaster recovery than service improvement or environmental protection, was modestly relevant to the project's objectives.

Overall, the relevance of the project design is rated Substantial


4. Achievement of Objectives (Efficacy) :

Specific objective (a): to strengthen the institutional capacity of selected municipal corporations and secondary towns to plan, finance, implement, and operate urban infrastructure services in an efficient and sustainable manner. Substantial.
Outputs
  • The project provided technical support to strengthen the institutional and financial capacity of municipalities. The support included computerization and improved management of Holding Tax bills and records, municipal accounts, water supply bills and records, Trade License records, development of Infrastructure Inventory, preparation of base maps, and support to community mobilization. The project also provided the municipalities with equipment and logistical assistance.
  • A central urban data base was set up in the Local Government Engineering Department.
  • Technical assistance was provided for setting up the Bangladesh Municipal Development Fund.
  • An environmental action plan was developed and a hydrogeological investigation carried out for Khulna.
  • Training was provided to some 500 foreign and local project personnel in procurement, financial management, environmental management, human resource management, urban development, field testing of construction material, solid waste management, and project management.
Outcomes
  • 183 municipal plans were prepared with project support. 141 municipalities (paurashavas) carried out follow-up planning, with each producing a base map, an infrastructure development plan, an update of the Paurashava Master Plan, and preparation of community development plans.
  • Sub-project feasibility studies were completed in all 154 municipalities that received Bangladesh Municipal Development Fund (BMDF) financing (the original target for the number of municipalities that were to receive BMDF financing was 168). According to the project team, all of the feasibility studies were completed by the municipalities themselves, with assistance from BMDF, rather than by the Central Government as had been the case prior to the project.
  • The project team further reports that all 154 municipalities were “able to successfully implement sub-project investments, where, for the first time in the history of the country, they are solely responsible for planning, engineering design, procurement, and safeguards (under BMDF support). Before the project, all key infrastructure investments for such municipalities were carried out by central agencies.”
  • The volume of financing from BMDF to municipalities has risen from zero in 2004 to some US$103 million in 2011, supporting nearly 600 sub-projects in a variety of sectors. However, it is not possible to put this into a proper perspective since the project documents provide no information on the level of municipal investments (mostly financed by block grants) prior to the project.
  • Based on a 2012 survey of 102 mayors, “98 percent reported an increase in revenue income, development of staff capacity and skills, improved service delivery standards, and an increase in accountability and transparency. Among 57 water utility staff interviewed, moreover, 93 to 95 percent reported that they were able to deliver water bills on time, transparency increased due to collecting water bills through banks, and collection efficiency increased” (ICR, page 16). The survey involved a set of questionnaires sent to mayors, councilors, and paurashava staff (tax, water, trade license, accounting, and engineering sections) and citizens that were involved in project implementation (ICR, Annex 5, page 74).
  • With regard to efficiency, a BMDF analysis of revenue-generating sub-projects (bus and truck terminals, wholesale markets and kitchens, slaughter houses and public toilets), indicates an average financial rate of return of 14.8%, with discounted revenues 35% higher than discounted costs.
  • There are, however, some concerns about sustainability. The ICR (page 24) reports that “while some of the larger [Urban Local Bodies] have reported good cost recovery and income through the income generating infrastructure,… it is less certain that the non-income generating investments would have the same results (for example, maintenance of roads).” For urban road maintenance, for example, the municipalities would have to continue relying on block grants from the Central Government. The ICR also underlines the importance of assisting BMDF in mobilizing increasing amounts of own-source revenue to help secure its longer term sustainability. These issues are expected to be addressed through further support from the World Bank and Asian Development Bank (see Section 7 below).

Specific objective (b) to improve resource mobilization and allocation, and fiscal discipline through the creation of an improved financing mechanism for urban infrastructure investment. Substantial.
Outputs
  • The Bangladesh Municipal Development Fund (BMDF) was established under the project in July, 2000. After a delay in registration caused by government transition, severe floods in 2000 and start up difficulties, it became fully operational in 2004.
Outcomes
  • Once operational, and through its own line of credit, BMDF increased resource mobilization and allocation for municipalities, and provided them with an alternative to block grants from the Central Government. By 2011, the Fund had allocated US $103 million to a total of 595 municipal sub-projects consisting of civil works, equipment, goods, and technical assistance in 154 Urban Local Bodies, including seven City Corporations, 78 A class, 49 B class and 29 C class municipalities.
  • Municipalities have also increased their own resource mobilization. The project team reports that 93% of the BMDF-financed municipalities have augmented their own-source revenues by 89%. As noted above, 98% of 102 mayors interviewed reported higher revenues. 95% of the water utility staff interviewed reported greater collection efficiency, delivery of bills on time, and enhanced transparency due to collection through banks (which was not done prior to the project). However, increases in tax revenues were below target on average – 17.5% for a sample of 39 cities against an original target of 20% and a revised target of 25%. This average conceals considerable variability: 23 cities increased their tax revenues by between 48% and 95%, while seven others saw rises of between 40% and 47%.
  • Both the ICR and the project team state that the BMDF operation itself significantly improved the fiscal discipline of the 154 participating municipalities. Among the BMDF requirements for granting a loan are that the client municipality should achieve a tax collection rate of at least 65%, and surplus revenue to enable it to contribute its own share of 10% of sub-project costs. Prior to the project, practically all municipal infrastructure projects were financed by Central Government block grants. Although these grants are cheaper in financial terms, they are uncertain since they depend on the Central Government’s fiscal strength. According to the project team, this uncertainty undermined the municipalities’ planning process, whereas “the certainty introduced through BMDF improved [the municipalities’] fiscal discipline as they assume the repayment responsibilities.”
  • According to data provided by the project team, there has been progress during the last eight years in improving BMDF’s loan repayment rate from the municipalities. After increasing only slowly, from 40% in 2005-2006 to just under 50% in 2008-2009, this reached 80% in 2011-2012.
  • Neither the ICR nor the project team provided other indicators of enhanced fiscal discipline, such as municipal budget balances, debt ratios, etc.

Specific objective (c): to support the Government and municipalities to reduce urban poverty and improve environmental conditions of urban communities through the financing of critical urban infrastructure and services. Modest.
Outputs
  • Annex 2 of the ICR contains a detailed list by municipality of the sub-projects financed under the project, mostly with loans from the BMDF. According to the project team, the most important investments are 206 km of drains (no baseline or targets); 173 km of water supply pipelines (baseline 137 km, target 167 km) and two water treatment plants; 250 km of urban roads (no baseline or target); 24,960 street lights (baseline 8,500, target 11,550); 87 public toilets (baseline 75, target 87); and 211 kitchen markets (baseline 75, target 90).
Outcomes
  • According to the project team, more than 9.5 million people benefit from these investments. In the six municipalities covered by the Beneficiary Assessment, it was reported that “roads were good (no water logging or mud), there was increased employment, increased land values, improved movement of hospital patients, and increased volume of trade and business” (ICR, page 77). According to subsequent comments from the project team, “as a result of the project, permanent shops have been built, due to the lighting investment, trading could continue until late at night, [thereby leading to] an increase in employment opportunities.” In addition, beneficiaries in five municipalities noted that investment in drains reduced water logging and incidences of malaria and dengue (ICR, page 78). The quality of the water supply is now described as good or very good (ICR, page 79). The ICR also describes a considerable amount of rehabilitation works following floods in a number of municipalities (see Annex 2, pages 33-34), which were funded in part from the Additional Financing.
  • From the list of sub-projects and rehabilitation works provided, it could be inferred that the following investments would likely have a poverty impact: namely, public toilets, slum upgrading, and communal solid waste collection bins. Investments likely to improve the environment might include: small bore sewerage system, communal solid waste bins.
  • However, the ICR does not report specifically about the poverty reduction and environmental improvements outcomes of the project. The links to poverty and the environment are not made explicit for most of the investments, (for example, water treatment and distribution, urban roads, drainage improvements, and street lighting). Convincing evidence of positive outcomes, such as the number of urban households escaping poverty thanks to project improvements, and baseline and endline values of water pollution in project urban areas, especially when compared with unassisted cities, was not provided.
Progress was made towards the principal objective to improve environmental and infrastructure service delivery in urban areas.

5. Efficiency:

Efficiency is rated Modest.. Although the ICR estimates a high ERR at completion, it barely covers one half of one percent (0.5%) of all project costs and does not claim to be representative of the project as a whole. Project appraisal estimated an ERR for Phase 1 investments in roads, bus terminals, drainage and water supply rehabilitation was 26.4%--the share of costs covered by the PAD ERR could not be verified by IEG. The ICR informs that it was unable to assess the actual benefits of these Phase 1 investments because "adequate data were not available on the outputs and associated economic and technical parameters (ICR p.21)--itself not an indicator of local government efficiency in management of infrastructure service (as specific objective (a) intended). The ICR therefore estimated ERRs of four Phase 2 investments in roads, drainage and bus terminals for which data were available, the weighted average of which was 27.2%, but as already noted this covered only a very small fraction of the actual project investments without claiming to be representative. Since the PAD and ICR estimates refer to different investments, they cannot be compared. The final project cost of US$216.39 million was below the appraisal estimate plus AF estimate of US$223.4 million, and there were no ICR reports of cost overruns, although project closing was extended for seven years due principally to the Additional Financing. There is little evidence in the ICR on whether the Additional Financing provided benefits justifying the additional time and costs incurred.

a. If available, enter the Economic Rate of Return (ERR)/Financial Rate of Return at appraisal and the re-estimated value at evaluation:


Rate Available?
Point Value
Coverage/Scope*
Appraisal:
Yes
26.4%
0.57%
ICR estimate:
Yes
27.2%
0.57%

* Refers to percent of total project cost for which ERR/FRR was calculated

6. Outcome:

Relevance of objectives is rated high and that of design substantial. The efficacy of two of the specific objectives – strengthened institutional capacity of municipalities and secondary towns, and improved resource mobilization and allocation and fiscal discipline – is assessed as substantial, while that of the third – reducing urban poverty and improving the environmental conditions of urban communities – is rated modest due to lack of evidence. With efficiency rated modest, overall outcome is assessed as moderately satisfactory.

a. Outcome Rating: Moderately Satisfactory

7. Rationale for Risk to Development Outcome Rating:

Some factors point to moderate risks faced by this project's development outcome. The BMDF continues to be in operation, but the project has not analyzed its financial performance or assessed its potential sustainability. Later comments by the project team included the following: "With regard to BMDF’s operational sustainability, the following data are taken from BMDF’s audited annual financial statement report. BMDF is financially healthy with financial surplus in its operations. The deficit happened in FY2004- 2005 and FY 2008-2009. FY 2004-2005 was the first year that the BMDF loan was accounted. As BMDF gives one year grace period to its borrowers, it had no interest revenue in 2004-05. In FY 2008-2009, BMDF started to pay off the 1% loan interest back to MOF [the Ministry of Finance]. In 2008-2009, BMDF paid off all of the 1% interest of the loans from 2004 to 2010". The ICR notes that BMDF will have to mobilize increasing amounts of its own source revenue for longer term sustainability (ICR p. 19). , The project team informed IEG that the MOF has agreed to inject US$7.5 million of equity into BMDF, starting with US$1.25 million in 2013. The comments also report that BMDF is expected to play an important role in a forthcoming Bank-financed operation currently under preparation. However, the ICR notes (ICR p. 24) that there is uncertainty about the future operation and sustainability of project infrastructure and services that do not generate direct cost recovery such as roads, drainage and flood rehabilitation, subsectors in which the project made large investments. BMDF has agreements with the borrowing municipalities that they will maintain the O&M with their own source revenue and central government block grants. Local government staff will continue to need additional training to remain efficient and up to date. The ICR notes that continuing Bank engagement, as through the project mentioned above, could help to sustain this project's own capacity building.

a. Risk to Development Outcome Rating: Moderate

8. Assessment of Bank Performance:

a. Quality at entry:
As designed, the project was clearly focused upon key priority areas for both the Government and the Bank at the time of appraisal and still is today. The intended outcomes of the project were clearly conceived through an overall objective about to improve urban service delivery and specific objectives related to the intermediate steps--local and central institutional strengthening, better management of resources, reducing poverty and protecting the environment--for achieving this. Performance indicators, to measure progress in achieving these goals, did not cover all the intended outcomes, however. The lack of baseline data and poorly defined (or understood) performance indicators were shortcomings of the operation's quality at entry. The project design underestimated the time needed for BMDF to become operational (ICR p. 9), when it should have included mechanisms to better coordinate local capacity building with BMDF investments (ICR p. 10).

Quality-at-Entry Rating: Moderately Satisfactory

b. Quality of supervision:
Supervision was intensive, averaging two full missions per year with continual support by staff of the Bank's Dhaka office. According to the ICR, missions' focus on procurement issues prevented more cases of mis-procurement arising. On the other hand, supervision could have paid more attention to safeguard compliance by the project (ICR p. 25 and Section 11 below). Bank supervision of this project over a 12 year period could have done more to address weaknesses in the results framework. Although there were several changes of Bank task team leaders over the 12 year implementation period, there was continuity of the principal team members. When the establishment and start-up of BMDF was considerably delayed, supervision missions candidly rated project progress, which had been consistently rated positively up to that point, as unsatisfactory. One result of this was to kick start the operation of BMDF. There is lack of evidence on compliance with the Involuntary Resettlement safeguard. M&E weaknesses on outcome measurement remained largely unaddressed during implementation.

Quality of Supervision Rating: Moderately Satisfactory

Overall Bank Performance Rating: Moderately Satisfactory

9. Assessment of Borrower Performance:

a. Government Performance:
Despite changes of leadership, the government remained committed to the project and its objectives. Administrative discontinuity contributed, however, to the three year delay in operationalizing BMDF. Government commitment of project counterpart funding, originally US$15.4 million at appraisal, and building up to US$25.7 million, reached an actual pay-in of US$29.8 million by completion.

Government Performance Rating: Moderately Satisfactory

b. Implementing Agency Performance:
The Local Government Engineering Department (LGED) provided strong leadership for the project. Even though the establishment of BMDG was delayed, project start up was strong with the first year's disbursements matching appraisal expectations. LGED was, however, obliged to respond swiftly to the floods of 2004. After this, disbursements were at only half the amounts originally scheduled. There were 15 cases of mis-procurement out of 2,000 contracts, "a relatively small number" and "relatively good performance" in the context of Bangladesh's weak governance, according to the ICR (pp. 13 and 26). BMDF was proactive in establishing its business with local government clients during implementation, bringing many of them in as active partners in the process of local development. BMDF's website (http://www.bmdf-bd.org) has published annual financial reports (in English) from FY2010 that can be used to help verify the performance of an agency like this, but were not used as part of the self-evaluation of the project. BMDF also publishes its annual report on its website, but this is not available in English at the present time.

Implementing Agency Performance Rating: Moderately Satisfactory

Overall Borrower Performance Rating: Moderately Satisfactory

10. M&E Design, Implementation, & Utilization:

a. M&E Design:
Final outcome indicators were generally weaker than intermediate indicators. No baseline values were given at appraisal for the original indicators. The ICR correctly noted that some project indicators, such as "management reform completed', for example, were not clearly defined (ICR p.9). As a result, the ICR concludes that: "the PAD included a results framework with outcome indicators that could not be used for measuring how the project would achieve its PDO" (ICR p.12). No specific institutional arrangements were proposed for carrying out M&E beyond assigning the PMU responsibility for following up project implementation.

b. M&E Implementation:
LGED set up a national urban database that used information gathered through this project, although the data did not relate specifically to the achievement of this project's objectives. BMDF did, however, monitor on a monthly basis, the disbursement and use of its loan and how these related to physical progress of works, but again, this data was not related to the project's objectives intended outcomes. Had there been full implementation of the project’s technical assistance for monitoring performance and for municipal data base development, this would have provided the instruments for collecting and disseminating outcome-related information.

a. M&E Utilization:
Nevertheless, Bank supervision and the project management unit did use BMDF's data to identify particularly challenging area for project implementation. This enabled the acceleration of processing and completing large contracts, as well as mitigating the chances of problems identified early on becoming more serious problems of mis-procurement.

M&E Quality Rating: Modest

11. Other Issues:

a. Safeguards:
OP 4.01 - Environmental Assessment. This was an Environmental Category B project. The ICR notes that implementing agencies' performance with regard to OP 4.01 could have been better (ICR p. 13): "BMDF’s consultants were asked to send environmental specialists to carry out random sample of sub-projects to ensure that they had received the Department of Environment certification. However, the Bank’s environmental safeguard specialist noted that the consultants did not carry out a sufficient number of field trips, and the monitoring reports did not correspond to the planned number of field visits. Nonetheless, there were no significant negative impacts reported, and the environmental safeguard compliance has been rated satisfactory throughout the project (ICR pp. 13-14).

OP 4.12 - Involuntary Resettlement. The ICR does not report specifically about the occurrence of involuntary resettlement as a result of project actions and its compliance with this safeguard. Bank and local specialists periodically visited project sites to ensure that project actions were in compliance. The ICR assures that: "when issues were identified, they were resolved later by BMDF" (ICR p. 14). Later comments on this ICR Review by the project team confirmed that "there has been no case of any lack of compliance with OP 4.12. The Bank team reviewed the few cases which involved some temporary relocation or voluntary donation. The implementing agency provided the needed documentation to demonstrate compliance with the requirements."

b. Fiduciary Compliance:
Financial Management. Both the LGED and BMDF met their financial management obligations. The required audit reports were sent to the Bank. According to the ICR; where there were any objections or issues, these entities were fully responsive, although exactly what this entailed is not made explicit. The Bank team did not report any major problems since the start of project implementation.

Audits. From time to time, project activities were audited by the Government's Foreign Aided Project Audit Directorate under the Office of the Comptroller and Auditor General, at the Supreme Audit Institution of Bangladesh. The project was also subject to audit by private firms. During implementation of the project, the World Bank twice appointed external audit firms (independent of LGED) to carry out technical audits along with procurement and financial management audits on a sample basis. In all cases, the findings were satisfactory.

Procurement: According to the ICR, most procurement completed under the project has been satisfactory, and in compliance with the World Bank Procurement Guidelines. Local authorities were initially unfamiliar with these, however, and some deviations led to cancellation of bids and re-bids at the beginning of the project. The Bank team helped the Borrower overcome these problems through orientation workshops and training on World Bank Procurement Guidelines. The BMDF also provided training to municipalities in procurement to meet World Bank rules. Out of approximately 2,000 contracts, there were about 15 cases of mis-procurement. The project team subsequently reported problems of tender documents of different bidders submitted in the same handwriting.

c. Unintended Impacts (positive or negative):
None

d. Other:



12. Ratings:

ICR
IEG Review
Reason for Disagreement/Comments
Outcome:
Satisfactory
Moderately Satisfactory
The efficacy of one of the three development objectives, and efficiency, are rated modest. 
Risk to Development Outcome:
Moderate
Moderate
 
Bank Performance:
Moderately Satisfactory
Moderately Satisfactory
 
Borrower Performance:
Satisfactory
Moderately Satisfactory
There were moderate shortcomings in both Government and Implementing Agency performance (see Section 9 above). 
Quality of ICR:
 
Unsatisfactory
 
NOTES:
- 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.
- The "Reason for Disagreement/Comments" column could cross-reference other sections of the ICR Review, as appropriate.

13. Lessons:
The following are distilled by IEG from the Bank and Borrower ICRs:
  • The project demonstrated that a municipal development fund, BMDF, could be established and become operational in a large low-income country, with rapid, large scale urban growth. The BMDF applied a simple model designed to respond directly to municipal demands for financing. However, even a simple model requires the highest technical standards for its own work as well high quality technical assistance to help its municipal clients prepare priority projects for BMDF financing.
  • To be successful a municipal development fund must enjoy the full support of and close coordination with higher-tier authorities that oversee and work with it. This project showed that closer coordination between BMDF and LGED could have made BMDF operations more agile and readily accessible to municipalities. LGED/MSU was an effective vehicle for this in Bangladesh.
  • Adequate technical support at the outset needs to be built into projects working with a large number of municipalities. In the view of the Borrower, this project's 12 municipal engineers for 141 sub-projects in 65 municipalities over a 15 month period were insufficient. Designing sub-projects proved particularly challenging because municipalities lacked engineers.

14. Assessment Recommended?

Yes
Why?
To verify the ratings and document the lessons learned.

15. Comments on Quality of ICR:

The ICR describes the implementation of the project well and includes a good Borrower ICR. Its extensive report of project investments in the different beneficiary municipalities gives the reader a good idea of what made up the project activities. As far as presentation, format and coverage were concerned the report was consistent with Bank guidelines. As an assessment of project performance, however, the ICR has several shortcomings: (i) insufficient evidence of project outcomes, especially of better environment and infrastructure in urban areas, and of poverty reduction, intended results not well covered by the appraisal indicators; (ii) affirmations of project results not always backed up by evidence, e.g. "BMDF improved resource mobilization and allocation as well as fiscal discipline in participating municipalities" without supporting data (ICR p. 16) that could have been drawn from available financial reports; (iii) under the heading "Assessment of Outcomes," the ICR lists 27 sub-projects (such as "10 water supply wells replaced, 10 abandoned wells regenerated, 20 pump houses rehabilitated"). However, these are outputs, not outcomes, of the project. One of the most important of the intended outcomes, reduced poverty, lacks any specific reference in this section of the report; and (iv) while the ICR indicates that most procurement completed under the project has been satisfactory, and in compliance with the World Bank Procurement Guidelines, greater detail should have been provided on the 15 cases of misprocurement. Minor shortcomings include: (a) the list of acronyms does not include one of the most frequently used, ULB, presumably standing for urban local bodies; (b) inconsistent listing of components (seven in the ICR text pp. 3-6 versus ten in the Annex 1. cost table (ICR p. 30)); (c) the actual costs of components 1 and 2 (Civil Works and Equipment) are not reported separately, so that the two components had to be consolidated in this ICR Review.

a. Quality of ICR Rating: Unsatisfactory

(ICRR-Rev6INV-Jun-2011)
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