Report and Recommendation of the President to the Board of Directors

Transcription

1 Report and Recommendation of the President to the Board of Directors Sri Lanka Project Number: July 2006 Proposed Loan and Administration of Department for International Development of the United Kingdom Grant People s Republic of Bangladesh: Second Rural Infrastructure Improvement Project

2 CURRENCY EQUIVALENTS (as of 15 July 2006) Currency Unit taka (Tk) Tk1.00 = $ $1.00 = Tk69.77 ABBREVIATIONS ADB Asian Development Bank BBS Bangladesh Bureau of Statistics DPM deputy project manager EIA environmental impact assessment EIRR economic internal rate of return EOP end of project GAP gender action plan GCM growth center market GDP gross domestic product GOB Government of Bangladesh ICB international competitive bidding IEE initial environmental examination IRI international roughness index KfW Kreditanstalt für Wiederaufbau LCS labor contracting society LGD Local Government Division LGED Local Government Engineering Department LGI local government institution LIB limited international bidding M&E monitoring and evaluation MLGRDC Ministry of Local Government, Rural Development, and Cooperatives MMC market management committee MTR comprehensive midterm review NCB national competitive bidding NGO nongovernment organization NILG National Institute of Local Government NPRS national poverty reduction strategy PIR poverty impact ratio PMO project management office PPMS project performance management system PVAT property valuation advisory team RBM results-based management RF resettlement framework RIDP-1 Rural Infrastructure Development Project RIDP-2 Second Rural Infrastructure Development Project RIDP-3 Third Rural Infrastructure Development Project RIIP-1 (first) Rural Infrastructure Improvement Project SIEE summary initial environmental examination SOE statement of expenditure

3 UC union council (union parishad) UCC union council complex UDCC union development coordinating committee VOC vehicle operating cost GLOSSARY ghat Riverbank landing area or jetty. haor Wetland basin depression that gets flooded during the monsoon season to as much as 6 meters above the dry season water level. NOTES (i) (ii) The fiscal year (FY) of the Government ends on 30 June. FY before a calendar year denotes the year in which the fiscal year ends, e.g., FY2000 ends on 30 June In this report, $ refers to US dollars. Vice President L. Jin, Operations Group 1 Director General K. Senga, South Asia Department (SARD) Director F.C. Roche, Agriculture, Natural Resources, and Social Services Division, SARD Team leader Team members K.H. Ryu, Head, Project Administration Unit, SARD M.R. Islam, Project Implementation Officer, SARD P. Kamayana, Senior Country Programs Specialist, SARD L. Nazarbekova, Counsel, Office of the General Counsel B. Nguyen, Economist, Economics and Research Department S. Ranawana, Environment Specialist, SARD F. Sultana, Social Development and Gender Officer, SARD J. Zhang, Project Economist, SARD

4 CONTENTS Page LOAN AND PROJECT SUMMARY MAP iii vii I. THE PROPOSAL 1 II. RATIONALE: SECTOR PERFORMANCE, PROBLEMS, AND OPPORTUNITIES 1 A. Performance Indicators and Analysis 1 B. Analysis of Key Problems and Opportunities 2 III. THE PROPOSED PROJECT 4 A. Impact and Outcome 4 B. Outputs 4 C. Special Features 7 D. Project Investment Plan 8 E. Financing Plan 8 F. Implementation Arrangements 8 IV. PROJECT BENEFITS, IMPACTS, ASSUMPTIONS, AND RISKS 14 A. Economic Impacts 14 B. Poverty Reduction Impacts 15 C. Social Impacts 15 D. Resettlement 16 E. Gender and Development Issues 16 F. Environmental Impacts 16 G. Impact on Local Governance 17 H. Risks 17 V. ASSURANCES 18 A. Specific Assurances 18 B. Conditions for Loan Effectiveness 20 VI. RECOMMENDATION 20 APPENDIXES 1. Sector Analysis Externally Financed Rural Infrastructure Projects Design and Monitoring Framework Organization Chart for Project Implementation Implementation Schedule Procurement Plan for the Initial 18 Months Selection and Prioritization of Subprojects Lessons Learned from Previous ADB-Assisted Projects in the Rural Infrastructure Sector Outline Terms of Reference for Consulting Services Project Justification and Economic Analysis Summary Poverty Reduction and Social Strategy 46

5 12. Resettlement Framework Summary Gender Action Plan Action Plan for Improvement of Local Governance Detailed Cost Estimates Financing Plan of Cofinanciers 60 SUPPLEMENTARY APPENDIXES (available on request) A. Poverty Profile of the Project Area B. Organization Chart of LGED C. Description of Project Components and Unit Costs D. Participatory Development Approach during Project Preparation E. Detailed Gender Action Plan F. Detailed Terms of Reference for Consulting Services G. Environmental Assessment and Review Procedures H. Initial Environmental Examination I. Summary Initial Environmental Examination J. Improving Local Governance K. Detailed Economic Analysis L. Distribution Analysis M. Resettlement Plans for Three Core Subprojects N. Detailed Cost Estimates (COSTAB) O. LGED s Financial System P. List of Subprojects Q. Results-Based Management (RBM) Action Plan R. Summary Participatory Development Framework S. Monitoring and Evaluation Studies T. Capacity-Building for LGIs U. GTZ Cofinancing Package V. Socioeconomic Impact of Previous Projects W. Overseas Training for LGED X. Procurement Plan for the Initial 18 Months Y. Land Acquisition and Resettlement Matrix

6 LOAN AND PROJECT SUMMARY Borrower Classification Environment Assessment Project Description Rationale People s Republic of Bangladesh Targeting classification: Targeted intervention Sector: Agriculture and natural resources Subsector: Agriculture sector development Themes: Sustainable economic growth, gender and development, governance Subthemes: Fostering physical infrastructure development, developing rural areas, public governance Category B: An environmental assessment and review procedures, and an initial environmental examination for core subprojects, were prepared and included in the supplementary appendixes. The Second Rural Infrastructure Improvement Project (the Project) will reduce poverty in 23 districts of northeast and central Bangladesh. The 23 districts are (i) in Rajshahi Division: Dinajpur, Thakurgaon, Panchagar, Rangpur, Nilphamari, Gaibandha, Kurigram, and Lalmonirhat; (ii) in Dhaka Division: Mymensingh, Kishoreganj, Netrokona, Jamalpur, Sherpur, Tangail, Dhaka, Gazipur, Narsingdi, Manikganj, Munshiganj, and Narayanganj; and (iii) in Chittagong Division: Comilla, Brahmanbaria, and Chandpur. Poverty reduction will be realized by expanding the economic opportunities of the rural poor by improving rural infrastructure (roads and growth center markets [GCMs]), gender development, and improved local governance. Poverty reduction will be achieved by targeting poor areas, closely involving the poor and other stakeholders in implementing subprojects and maintaining rural infrastructure, and strengthening the capability of local institutions. Efficient rural transport and supporting infrastructure are indispensable to reducing poverty and achieving rapid economic development in Bangladesh. Investments in rural infrastructure have been made by the Government with substantial assistance from external funding agencies including the Asian Development Bank (ADB). The Project draws on experience and lessons identified from previous projects, particularly in mainstreaming the participatory approach and empowering local government. The Project area consists of 23 districts in Rajshahi, Dhaka, and Chittagong divisions that were selected for their poverty, poorly developed road infrastructure, and need for strengthened local governance. Improving rural roads and associated infrastructure will provide local inhabitants with efficient transport to markets and trading centers and access to social and welfare services. These improvements will lay the foundation for better economic opportunities and assist in reducing poverty. Strengthening local government units will enable them to plan, manage, and maintain the local infrastructure. Stakeholders from the private sector such as bus owners and operators, rickshaw drivers, farmers, and local traders will be consulted on their transport needs. Local participation will create a sense of ownership and focus greater attention to effective maintenance.

7 iv Impact and Outcome Project Investment Plan The Project will upgrade about 1,360 kilometers (km) of subdistrict roads, 780 km of union roads, 7,780 km of village roads, 370 rural markets, and 190 union council complexes. It will also provide for strengthening the capability of local government units. These complementary elements of rural infrastructure will provide local communities with effective transport to markets and access to social services. Investments in the Project will effectively reduce poverty by about 7%, as small farmers and the functionally landless will gain from additional employment, particularly of women. Additional employment will mean increased household income. The improved rural road network will bring increased motorized and other transport services, lower transport costs for goods and passengers, allow substantial savings in vehicle operating costs, and catalyze an overall increase in traffic volume by about 70%. The Project will improve the environment by planting and maintaining trees along the roads and building more effective drainage infrastructure. The investment cost of the Project is estimated at $260.5 million, including taxes and duties of $20.1 million. ($ million) Financing Plan Source Total Percent A. Asian Development Bank B. United Kingdom s Department for International Development C. German Development Cooperation 1. Kreditanstalt für Wideraufbau Deutsche Gesellschaft für Technische Zusammenarbeit D. Government of Bangladesh Total Source: Asian Development Bank estimates. The proposed ADB financing from ADB s Special Funds resources is equivalent in various currencies to sixty four million seven hundred sixty six thousand Special Drawing Rights (SDR64,766,000) ($96.1 million equivalent). The loan will have a maturity of 32 years, including a grace period of 8 years, with an interest charge of 1% during the grace period and 1.5% thereafter. Period of Utilization Until 31 December 2011 Estimated Project Completion Date 30 June 2011 Executing Agency Local Government Engineering Department (LGED) in the Local Government Division of the Ministry of Local Government, Rural Development, and Cooperatives.

8 v Implementation Arrangements Procurement Consulting Services Project Benefits and Beneficiaries The Project will be implemented by a suitably staffed project management office (PMO), to be established by LGED at its headquarters in Dhaka. A full-time project director will head the PMO and be responsible for overall project implementation and coordination, reporting to the chief engineer of LGED. The PMO will establish three regional offices one each in LGED s district offices in Dhaka, Rangpur, and Mymensingh each headed by a deputy project director. The deputy project directors will be responsible for the day-to-day implementation and supervision of project activities in their respective regions. The office of the deputy project director for Dhaka Division will be based at the PMO. A project steering committee, established under the first Rural Infrastructure Improvement Project and comprising the line agencies concerned, local government bodies, and nongovernment and private sector representatives, will provide overall policy guidance for project implementation. All procurement under the Project will follow ADB s Procurement Guidelines. All civil works will be procured from among qualified local contractors through national competitive bidding procedures prescribed by the Government s Public Procurement Regulation (2003) and acceptable to ADB. Civil works for improving infrastructure will comprise many small contracts scattered over a large area. The procurement of equipment, including vehicles, will be by international competitive bidding for contracts above $500,000, limited international bidding for contracts between $300,000 and $500,000, and national competitive bidding for contracts below $300,000. Consultants will assist LGED in project implementation. Three groups of consulting services are required to assist in (i) project design, supervision, and monitoring, (ii) institutional strengthening and training of local government institutions, and (iii) improving LGED capacity. Consultants under (i) and (ii) will be recruited in accordance with ADB s Guidelines on the Use of Consultants. Consultants under (iii) financed by GTZ will be recruited according to its own procedures. The directly quantifiable benefits of the Project consist of savings in vehicle operating costs on the improved subdistrict and union roads. The beneficiaries are various road users: bus and truck owners and operators, passengers, cargo movers, and the general population in the area of influence, estimated at about 6 million people, 50% of whom live below the poverty line. Improvements in growth center markets (GCMs) will enable more efficient trading. About 52,800 person-years of employment will be generated during the construction period. Permanent employment of women (about 7,000 new jobs) will be generated by retail areas in GCMs, the maintenance of completed roads, and the maintenance of trees planted along subdistrict and union roads.

9 vi The Project s overall economic rate of return is quite robust at 36% for subdistrict roads, with individual subprojects EIRR ranging from 12% to over 50%. The Project will reduce poverty by (i) enabling poor people to participate in economic activities and gain access to social services and (ii) creating additional employment opportunities by stimulating economic growth. Beneficiaries of the Project will be the general population in the 23 districts, who will experience shorter travel time at reduced cost, as well as transport operators, traders, and consumers who directly use the goods and services transported in and out of the area. Risks and Assumptions The Project has been carefully prepared to mitigate risks. To avoid delays in start-up, advance action for recruiting consultants has been taken. The preparation of the Government development project proposal was advanced for the same reason. Risks from the use of local contractors will be mitigated through actions taken in earlier projects, such as training them on construction quality control. Participatory processes involving stakeholders at all levels will foster a sense of ownership and minimize delays caused by lack of involvement in decision-making. Environmental and social processes, including a resettlement framework formulated for the Project, will address issues of local sensitivity and minimize adverse effects. Careful attention to monitoring mechanisms during implementation will ensure that gender considerations and measures to prevent child labor are properly implemented during construction.

10 vii

11 I. THE PROPOSAL 1. I submit for your approval the following report and recommendation on (i) a proposed loan and (ii) the proposed administration by the Asian Development Bank (ADB) of a grant to be provided by the Government of the United Kingdom through the Department for International Development (DFID) to the Government of Bangladesh (the Government) for the Second Rural Infrastructure Improvement Project (the Project). 1 II. RATIONALE: SECTOR PERFORMANCE, PROBLEMS, AND OPPORTUNITIES A. Performance Indicators and Analysis 2. The economic development strategy of Bangladesh is closely linked to the improvement of existing rural infrastructure. Efforts in this regard were initially taken in 1984 with the Government s formulation of its National Strategy for Rural Development. The strategy focused on channeling financial resources toward developing 1,400 growth centers where physical infrastructure such as roads, markets, and storage facilities would be developed as a major element of rural development. ADB and other development partners of the Government have supported the strategy since its formulation and have made substantial investments in rural infrastructure development through the years. Appendix 2 presents the externally funded projects in rural infrastructure. Improving rural infrastructure has also been a key element in the Government s efforts to reduce poverty. The national poverty reduction strategy 2 (NPRS) aims to reduce poverty within the shortest possible time so as to gradually lift the vast majority of the people above the poverty line and improve their quality of life. More specifically, the country s Millennium Development Goal is to reduce poverty incidence in Bangladesh by half (to 25%) by the year ADB s lending program to Bangladesh 3 recognizes this linkage as it identifies the major causes of poverty in Bangladesh as living in remote and unfavorable environments with limited transport and other infrastructure. The Project addresses the problem of isolationinduced poverty by expanding the economic opportunities available to the rural poor through improved rural infrastructure. 3. The road transport system of Bangladesh is an extensive network with a total length of 272,208 kilometers (km). The primary road network connecting the major cities to the 64 districts of the country is 8,555 km long, while the secondary road network i.e., district roads (formerly known as feeder road type A, or FRA) connecting the subdistricts 4 to the national and regional grid is 13,823 km long. The Roads and Highways Department, under the Ministry of Communications, administers the national and the regional grid together with district roads. The Local Government Engineering Department (LGED) of the Ministry of Local Government, Rural Development, and Cooperatives (MLGRDC) is responsible for tertiary roads (the rural road network), namely the 36,166 km of subdistrict roads (formerly known as feeder road type B or FRB), 42,329 km of union 5 roads (formerly called rural road, type 1 or RR1) and, together with the union councils (UCs), the 171,335 km of village roads (formerly rural road types 2 and 3 or RR2 and RR3). Of the 36,116 km of subdistrict roads, about 50% are paved, leaving 18,277 km in need of improvement. The need is even greater for union roads, of which only 20% (or 8,513 km) of the total are paved. The scope for investment in rural road development is quite substantial. 1 Project preparatory technical assistance was provided under ADB Technical Assistance to the People s Republic of Bangladesh for Preparing the Second Rural Infrastructure Improvement Project. Manila 2 Planning Commission, Government of Bangladesh Poverty Reduction Strategy Paper. Dhaka. 3 ADB Country Strategy and Program ( ): Bangladesh. Manila. 4 Subdistricts (upazila) are local government units at the third level of administration below divisions and districts. 5 Unions are the next level of government below the subdistricts. A union typically covers about 30 square kilometers and has a population of about 27,000.

12 2 4. The volume of traffic in the country has been growing at about 7.3% a year, faster than the growth in gross domestic product (GDP) of about 5.5%. Both freight and passenger traffic have shifted significantly from rail and water transport systems. From 1975 to 1997, the percentage of freight transported over roads increased from 35% to 63%, while that of passenger traffic increased from 54% to 73%. Improved roads provide more comfortable travel, lower transport costs, and significant savings in vehicle operating costs for all vehicles. With further upgrading of the country s road network, the demand for road transport will continue to rise. 5. Funds for maintaining rural roads have been provided by the Government to LGED on a sustained basis since LGED assumed this responsibility in The Government s allocation for this purpose has increased from Tk300 million in fiscal year (FY) 1993 to Tk4.0 billion in FY2006. Apart from these direct allocations, LGED also receive direct assistance from external funding agencies, including ADB. For instance, in recently concluded FY2005, the total amount allocated by the Government for maintenance amounted to Tk4.8 billion, of which Tk1.1 billion was contributed by external funding agencies. Taking account of funds from various sources, the allocation for maintenance invariably falls below the annual requirements. The gap (averaging about 10 15% in recent years) is likely to widen as more roads are improved. The Rural Roads Master Plan (July 2005) indicates that by 2015 no new improvements on subdistrict roads will be pursued and that, thereafter, as the need for maintenance rises rapidly, funds for development will be shifted to maintenance. The estimated funding requirement for rural road maintenance from FY2016 to FY2020, when no new road improvement is envisaged, is Tk104.7 billion, or about Tk21 billion a year. An analysis of the rural infrastructure sector is summarized in Appendix 1. B. Analysis of Key Problems and Opportunities 6. The NPRS has provided the needed direction to guide the Government and its development partners in developing rural infrastructure through the years. Investments in the sector have been shown to result in higher farm productivity and income, particularly among the rural poor and women. The strategy has proven to be particularly effective in reducing poverty nationwide. The percentage of the population below the poverty line fell from 58.8% in 1991 to 49.8% in 2000, or a decline of about 1% per year. A recent poverty monitoring report indicated a further decline of 5% over the 5-year period ending in The NPRS has been implemented through a series of rural infrastructure development projects (RIDP-1, RIDP-2, and RIDP-3) and a rural infrastructure improvement project (RIIP-I) assisted by the ADB. 6 The Project completion reports for the RIDPs showed that the projects contributed significantly to the strategy, particularly by generating employment for the rural poor through labor-intensive constructions. The lessons learned from previous projects favor (i) emphasizing the pro-poor bias in the selection of areas to be covered under the Project; (ii) putting greater emphasis on stakeholders participation in project design and implementation; (iii) strengthening local government capacity to manage and maintain rural infrastructure; (iv) continuing the hiring of local contracting societies for maintenance to provide employment for 6 ADB Report and Recommendation of the President to the Board of Directors on a Proposed Loan to the People s Republic of Bangladesh for the Rural Infrastructure Development Project. Manila; ADB Report and Recommendation of the President to the Board of Directors on a Proposed Loan to the People s Republic of Bangladesh for the Second Rural Infrastructure Development Project. Manila; ADB Report and Recommendation of the President to the Board of Directors on a Proposed Loan to the People s Republic of Bangladesh for the Third Rural Infrastructure Development Project. Manila; and ADB Report and Recommendation of the President to the Board of Directors on a Proposed Loan to the People s Republic of Bangladesh for the Rural Infrastructure Improvement Project. Manila.

13 destitute rural women; (v) continuing the use and training of local contractors who provide costeffective, labor-intensive skills; and (vi) the institutional strengthening of LGED, particularly in the areas of participatory development, contract management, and financial management. Lessons learned from previous projects in the sector are summarized in Appendix LGED s organizational structure has been undergoing changes to accommodate its expanding responsibilities for assisting the development of the country s rural infrastructure. Recent efforts to enhance its capability for planning, managing, and implementing projects were taken under an ADB-funded technical assistance study completed in The study concluded that LGED s responsibilities have expanded more quickly than the capabilities of its staff and that LGED should focus on consolidating and improving its internal efficiency. While a number of new staff have been recruited by LGED, including two additional chief engineers and six new executive engineers, the number of vacant posts remains at about 10% of total approved posts. Among the major recommendations of the technical assistance study are that (i) LGED develop a scientific organizational structure and install proper management systems at all levels and (ii) LGED upgrade its financial management system and fully implement the standard system of accounts. Implementation of these recommendations is being carried out through a number foreign-assisted projects 8 and will continue under the Project. In addition, LGED staff have been undergoing training in participatory approaches, project planning and management, and social analysis. 9. To reach a greater proportion of the population who would benefit from its development efforts, the Government has devolved to local government units responsibility for planning and executing various investment projects. In rural Bangladesh, the UC has been identified as the focal point for infrastructure development, in addition to its major responsibilities for maintaining peace and order and implementing the Government s health and family-planning programs. UCs receive allocations from the Government s annual development programs and are also empowered to raise revenues locally to meet part of their financial needs. Assistance given in the past has generally been meager; as a result, the UCs remain weak organizationally and financially. They also lack the technical capacity to plan and implement projects effectively. A continuing need is to strengthen the UCs and prepare them to assume greater responsibility for governance and to make them effective channels for delivering services from the central Government. Strengthening measures and project funds will be provided to the UCs under the Project to address this problem. 10. In its continuing efforts to pursue the NPRS, the Government added another 700 growth centers in 1994 to the 1,400 identified earlier, in which rural investments are to be concentrated. The growth centers were selected based on the size of population and area served and their revenue potential, trading volume, and distance from neighboring growth centers. They are therefore the locations for trade and commercial activities, so improving the facilities of growth center markets (GCMs) is seen as the key element of the country s rural development strategy. Pursuit of the strategy has proven effective in rationally distributing public investments. However, the need remains to introduce tighter regulations and encourage greater transparency in the management and operation of GCMs. 3 7 ADB Technical Assistance to the People s Republic of Bangladesh for the Management Capability Strengthening Project of the Local Government Engineering Department. Manila. 8 An institutional strengthening action plan that seeks to enhance LGED capabilities in planning, monitoring, and asset management is supported under IDA Project Appraisal Document on a Proposed Credit to the People s Republic of Bangladesh for the Rural Transport Improvement Project. Washington DC (Report No BD).

14 4 11. Improving rural infrastructure like roads, markets, jetties, and the physical facilities of the UCs can contribute to reducing poverty. Improved roads and markets lower vehicle operating costs and marketing costs while facilitating access to such public services as healthcare, education, and agricultural extension. A study carried out in showed that, in the catchment area of improved facilities, transport charges dropped by 19% for cargo and 23% for passengers, while the volume traded in the improved markets increased by 100%. Substantial growth was achieved in motorized and other traffic, which increased by 135% and 85%, respectively, after the roads were widened and paved. 12. In preparing the Project, stakeholder workshops were held at the union and the division levels. The workshops confirmed the high expectations among local communities about the benefits from improved rural infrastructure. The workshops also helped to identify issues that bear on the construction of specific works under the Project. The issues included the need for (i) mainstreaming the participatory approach and improving local government units, (ii) providing UCs with a sustainable source of revenue to finance their activities and services, (iii) improving transparency and strict enforcement of existing procedures in the operation of rural markets, (iv) specifying the roles of the local institutions in the sustained maintenance of completed facilities, and (v) improving the safety of rural roads. The lessons learned at these workshops have been incorporated in the design of the Project. III. THE PROPOSED PROJECT A. Impact and Outcome 13. The Project impact will be to help reduce poverty by about 7% in the rural communities of 23 districts in north and central Bangladesh. The impact will be realized through (i) enhanced access for the rural communities to basic services, (ii) increased on-farm income from the greater availability of agriculture inputs such as fertilizer and high-yielding seed varieties, (iii) enhanced women empowerment through improved access to social services and higher family income, and (iv) improved local governance. The project area, totaling 47,152 square kilometers (km 2 ), has a population of 55.9 million, accounting for 45% of the country s total population. The project area was chosen because of its extensive poverty and low level of development. In the three divisions of Rajshahi, Dhaka, and Chittagong where the 23 districts are located, about 55% of rural residents live below the poverty line, a percentage higher than the national average of nearly 50%. Of the existing subdistrict roads, only 30% are in good condition, and of the 806 GCMs, about 50% need to be improved. The Project s design and monitoring framework is in Appendix More than 6 million people will gain all-weather access to GCMs and social services at UC offices. The direct impact of providing these physical facilities and strengthening institutions will be (i) an estimated reduction in poverty in the project area by about 7%, (ii) an increase in the average farm family income by about 20%, (iii) an additional 52,800 person-years of unskilled employment during construction, and (iv) the employment of about 7,000 women in the new GCMs, tree planting and care, and infrastructure maintenance. B. Outputs 15. The Project will include the following components: 9 KfW Socioeconomic Impact of Tangail Infrastructure Development Project. Dhaka.

15 1. Improved Rural Roads a. Subdistrict and Union Roads 16. The Project will upgrade 1,360 km of subdistrict roads and 780 km of union roads to bitumen-surfaced standard and to provide year-round connectivity between agricultural production areas and GCMs. The Project will add about 7.6% to the current stock of improved subdistrict roads (17,889 km) and 6.4% to the existing improved union roads (8,513 km). Each road was selected through a participatory process with stakeholders. Structures such as bridges and culverts with a total length of 5,470 meters will be provided. Provisions for road safety such as road signs and loading and unloading zones will be incorporated into the design of subdistrict roads. Women belonging to labor contracting societies (LCSs) 10 will be engaged to improve road shoulders, plant trees on roadsides, and maintain roads. b. Village Roads 17. The Project will provide for resectioning 7,780 km of village roads with earthworks to link the villages more closely with markets and other vital services. The roads will be selected through participatory development. Each UC will be asked to prepare a proposal to the project management office (PMO) to improve village roads in its jurisdiction. The PMO will review the proposals and, if warranted, grant them approval. Each road will connect the selected villages with a higher-order road or GCM. Suitable structures such as bridges and culverts will be provided to close any existing gap on the road. The UC will be responsible for maintaining village roads. c. Submersible Roads 18. A total of 60 km of submersible roads will be improved in areas that are rendered inaccessible due to total submergence 6 months a year, i.e., in the haor 11 areas. While transport needs in these areas are met by boats during the wet monsoon, boat services are greatly reduced during the dry season, isolating large populated areas. The submersible roads will facilitate dry season transport and communications and open up the haor areas to the delivery of economic and social services. The submersible roads will have a rigid surface to better withstand prolonged submergence. The district office of LGED will be responsible for maintaining submersible roads. d. Road Safety Improvements 19. The Project will improve the safety provisions for roads constructed under the Project, as well as roads built under previous projects that do not have such features but require them now due to higher traffic volume. Adequate road signs, markings, safety barriers, and loading and unloading zones near schools and markets will be built to make the roads safe. Safety manuals and posters will be printed, and awareness campaigns mounted, to further enhance road safety. 2. Improved Rural Infrastructure a. Growth Center Markets 20. A total of 370 markets will be improved under the Project, including (i) 52 GCMs located at subdistrict headquarters, (ii) 130 GCMs located in other subdistrict areas, and (iii) 188 major village markets. Each GCM will be connected either to an existing paved road or to one of those 5 10 LCSs comprise poor women with limited income-earning capabilities who carry out routine maintenance on rural roads using basic hand tools and materials supplied by LGED. 11 Haors are wetland basin depressions that get flooded during the monsoon season to as much as 6 meters above the dry season water level. The haors perform an important ecological function, acting as natural water reservoirs.

16 6 to be improved under the Project. Each GCM will be provided with paved trading areas, sheds, a water supply system, adequate drainage facilities, sanitation facilities, and market offices. At each GCM, a market management committee will be responsible for ensuring proper physical and financial maintenance. Each village market will be provided with an access road, paved selling areas, sheds, and sanitary facilities. 21. While the project GCMs designs call for each to include an average 12 shops for women venders, the existing GCMs had been built exclusively for men. Accordingly, based on demand shown during participatory discussions, additional shops will be constructed to accommodate women traders. Each shop will measure about 6 square meters, have a roll-up door, and be constructed in line with LGED s gender-sensitive design standard for these facilities. The added facilities will provide more economic opportunities for women to contribute to the family income and to enhance their empowerment. b. Union Council Complexes 22. To enhance the effective delivery of public services, the offices and facilities of union council complexes (UCCs) in 190 locations will be improved. The improved facilities will serve as a one-stop center to provide the local population with ready access to social and technical services for healthcare, education, agricultural and livestock extension, and land administration at the union level. Needed office furniture and equipment will also be provided to the UCCs. Roads to the UCCs will be improved to permit year-round access. The UC will be responsible for maintaining UCCs using their own funds. c. Jetties 23. To complement the connectivity afforded by rural roads and integrate land transport services with water transport, 25 jetties will be improved in areas selected through participatory consultation based on agreed selection criteria such as their proximity to GCMs and the availability of land. Jetty improvement will involve installing mooring facilities at a cleared area of the riverbank near the main loading and unloading zone, where boats can be securely tied. Jetties will be linked to a paved road and located in the immediate vicinity of a GCM. Necessary sanitary facilities will be provided at each jetty site. A jetty management committee will be responsible for its day-to-day operation and maintenance. d. Flood Refuge Shelters 24. To provide emergency relief for victims of floods, six flood refuge shelters will be constructed. Each shelter will provide accommodation for people and have a separate section for livestock. A typical shelter will have an area of 150 square meters, including sanitary facilities. Each shelter will be designed as a multipurpose building and located close to the UCC to maximize its use year-round. 3. Improved Local Governance and LGED Capacity a. Local Governance 25. To enhance the capability of local government units to plan and implement rural infrastructure works, the Project will implement various training programs and awareness campaigns for members and officers of 1,832 UCs, local women leaders, and members of the management committees of GCMs and jetties. Training program topics will include the roles and responsibilities of the UC, financial management, poor people s participation in local decision making, and participatory planning. The training programs will be supplemented by on-the-job

17 training and awareness campaigns using posters, comic books, and short radio and television programs focusing on issues including governance (transparency, accountability, and efficient administration), health, and sanitation. Selected young people, both male and female, will also receive skills training on livelihood projects. Project consultants will assist in packaging the training programs and implementing the awareness campaigns. 26. Resource mobilization by the unions will be enhanced by full implementation of an existing Government regulation assigning the collection of specific taxes to UCs, including assessments on homes and residential lots, taxes on professionals and owners of businesses, fees for birth and death certificates, and many others. To help UCs properly maintain various records and accounts, as well as manage its resource mobilization efforts, the Government will appoint, by 31 December 2008, an accountant at each union. In line with the newly established regulations governing the management of GCMs, members of UCs (including women) will be appointed as members of market management committees (MMCs). Guidelines on MMCs are being revised to regulate the award and management of new leases and provide for a higher share of the income from market leases to UCs. b. LGED Capacity Building 27. The Project will provide training to LGED staff both locally and overseas. Local training 12 will be given in contract management, financial management, participatory methods, construction supervision and quality control, the application of information technology in project design, gender and development, and monitoring and evaluation. Overseas training will be given to LGED staff selected through transparent procedures acceptable to ADB. The areas of training will include safe road design, rural road technology, field and laboratory tests for road engineers, and project monitoring and evaluation. LGED will further strengthen its procurement unit by recruiting four additional engineers and five additional support staff. The Project will include an internship program whereby senior engineering students gain practical work experience in LGED to complement their formal education. In addition, the physical facilities of LGED in four regions will be improved by constructing new offices-cum-housing compounds for the regional superintending engineers and staff. Dilapidated furniture in subdistrict engineers offices will be replaced. Project consultants will provide on-the-job training to LGED staff in road safety, road maintenance planning, social assessments, gender development, and impact monitoring. 4. Support for Project Management 28. To ensure the efficient implementation and management of project activities, incremental staff will be provided to districts and subdistricts together with needed logistics. A combination of international and national consulting services will be engaged to support project design, supervision, management, and capacity building. A series of socioeconomic studies that focus on evaluating the Project s impact on poverty reduction and its strengthening of the capacity of UCs will be carried out to assist LGED in managing the Project. A benchmark study will be carried out at the start of the Project, followed by study on the third year and the final study at the end of project implementation. LGED will undertake an evaluation study 5 years after project completion. C. Special Features 29. The Project will strengthen local governance by providing additional staff to UCs and training to local officials, and by mounting wide-ranging awareness campaigns directed at the 7 12 This part of capacity building will be implemented and financed in parallel by the German Development Cooperation through Deutsche Gesellschaft für Technische Zusammenarbeit (GTZ).

18 8 rural population. The capacity of UCs to plan and execute local projects through the participatory approach will be sharpened as officers and members of the council initiate proposals for improving and maintaining village roads in their jurisdiction. Based on proposals developed by the UCs for village road improvement, they will be allocated project funds to manage directly at the local level with appropriate guidelines and safeguards. The capacity of UCs for resource management will be further enhanced by employing an accountant at each union. Tri-media campaigns explaining the roles and responsibilities of UC officials will be launched. Diverse issues related to local governance such as transparency, resource mobilization, cleanliness and hygiene, and law and order will be covered in TV and radio spots, and in posters and comic books to be distributed in villages. 30. To ensure that project outputs and outcomes are achieved, the Project has created a results-based monitoring and evaluation framework that will allow LGED to use data relating to project results to support more effective project management. This results-based management (RBM) approach will increase the effectiveness of the Project by using data collected by project monitoring and evaluation activities to allow the PMO and LGED to make management decisions in a timely way and increase the likelihood of meeting output and outcome targets. D. Project Investment Plan 31. The estimated project investment cost is $260.5 million equivalent, inclusive of physical and price contingencies, taxes and duties, and interest and service charges during construction. The project investment plan is summarized in Table 1. E. Financing Plan 32. The Government has requested a loan in various currencies equivalent to $96.1 million from ADB s Special Funds resources to help finance 36.9% of the project cost. ADB financing of the Project will be done in a variety of financing options. 13 The Project is expected to be cofinanced by the Department for International Development (DFID) of the United Kingdom in the amount of up to $60.9 million equivalent and by the Government of the Federal Republic of Germany through Deutsche Gesellschaft für Technische Zusammenarbeit (GTZ) and Kreditanstalt für Wiederaufbau (KfW) in the amounts $3.6 million equivalent (in kind), and $21.6 million equivalent, respectively, subject to the approval of their higher authorities. The Government will provide the equivalent of $78.3 million (30.0% of the project cost), including taxes and duties. A part of the DFID grant ($56.7 million equivalent) is on a joint basis to be administered by ADB. The GTZ and KfW grants and a remaining portion of DFID grant are on a parallel basis. The Government has agreed to scale down the scope of the Project if cofinancing does not materialize. The financing plan is summarized in Table The ADB loan of SDR million will have a maturity of 32 years, including a grace period of 8 years. The loan will carry an interest of 1.0% per annum during the grace period and 1.5% per annum thereafter. Interest during construction will be capitalized. F. Implementation Arrangements 1. Project Management 13 ADB Cost Sharing and Eligibility of Expenditures for Asian Development Bank Financing. Staff Instructions. Manila. (15 March).

19 9 Table 1: Project Investment Plan ($ million) Project Component Amounts A. Upgrading/Construction of Rural Roads 1. Subdistrict Roads Union Roads Road Structures on Subdistrict and Union Roads Village Roads Resectioning and Structures Submersible Roads 4.6 Subtotal (A) B. Improve Rural Infrastructure 29.2 C. Strengthen Capacity of LGED and LGIs 13.9 D. Project Management Total Base Costs a. Physical Contingencies a 19.4 b. Price Contingencies b Total Project Costs c Financial Charges During Implementation 2.4 Total LGED = Local Government Engineering Department, LGI = local government institution. a Physical contingencies are computed at 10% for civil works and 5% for all other cost items. b Price contingencies are set at 5% a year for local currency costs and 1.9% a year for foreign exchange costs. c The total project cost includes taxes and duties totaling about $20.1 million that will be part of the Government contribution. Source: Asian Development Bank estimates. Table 2: Financing Plan ($ million) Source Total Percent A. Asian Development Bank B. United Kingdom s Department for International Development C. German Development Cooperation 1. Kreditanstalt für Wideraufbau Deutsche Gesellschaft für Technische Zusammenarbeit D. Government of Bangladesh Total Source: Asian Development Bank estimates. 34. The Executing Agency will be LGED in the Local Government Division (LGD) of MLGRDC. The existing steering committee under the ongoing RIIP-1 will oversee the Project The secretary of LGD will chair the committee, with representatives from LGD; LGED; Roads and Highways Department; Planning Commission and Implementation, Monitoring, and Evaluation Division of the Ministry of Planning; Economic Relations Division and Finance Division of the Ministry of Finance; National Institute of Local Government; Ministry of Women and Children Affairs; local government bodies; nongovernment organizations; and the private sector. RIIP-1 was cofinanced by ADB and the German Development Cooperation through GTZ and KfW. Representatives from ADB, DFID, GTZ, and KfW will participate in meetings of the committee as observers.

20 10 The committee will meet once a year to review the progress of project implementation. The PMO, headed by a full-time project director with qualifications acceptable to ADB, will be established by LGED in Dhaka. The project director will report to the chief engineer of LGED, coordinate all project activities, and be directly responsible for overall implementation, monitoring, and supervision. In addition to the project director, LGED will appoint three qualified deputy project directors (DPDs), along with other qualified PMO administrative and support staff. Two of the deputy project directors will be posted in LGED s divisional offices in Rangpur and Mymensingh, while the DPD for Dhaka Division will be based in the PMO. The organization chart for project implementation is in Appendix The PMO will (i) prepare an overall project implementation plan and detailed designs; (ii) supervise various civil works; (iii) organize and maintain the project financial accounts; (iv) implement the gender action, resettlement, and environmental management plans; (v) organize monitoring and evaluation; and (vi) prepare progress reports and a project completion report. The PMO will be assisted by consultants with expertise in engineering design and supervision, economics and finance, social and gender development, participatory approaches, environmental assessment, monitoring and evaluation, and local governance. The PMO will work closely with the staff of LGED in district and subdistrict offices and coordinate with UCs and the management committees of the GCMs and the jetties in implementing relevant project activities. In coordination with the National Institute of Local Government, the PMO will implement capacity building for local government institutions (LGIs). 2. Implementation of Subprojects 36. The LGED district offices, headed by executive engineers, will be responsible for implementing subprojects under the guidance of the PMO. In the course of its feasibility study, LGED has carried out the appraisal of 434 subproject roads, 167 GCMs, and a sample of 25 union roads. Besides technical and economic viability, the subprojects included in the Project were prioritized based on such social indicators as poverty, gender disparity, environmental conditions, requirements for land acquisition and resettlement, and, in the case of subdistrict and union roads, connectivity to markets and higher-order roads. Prior to detailed design, the selection of the roads will be confirmed with the local community. As the socioeconomic conditions are generally homogeneous among subproject areas within a district, the social analyses will be carried out district-wide. The results will be submitted to ADB and the cofinanciers concerned. All subprojects will be implemented in accordance with ADB safeguard policies and requirements. Details on the selection and prioritization of subprojects are set out in Appendix Implementation Period 37. The Project will be implemented over 5 years from the second half of 2006 and to the first half of The activities during the first year include recruiting consultants, preparing detailed designs for the subprojects to be implemented in Year 1, and procuring office and construction equipment and vehicles. Civil works are expected to begin during the first quarter of 2007 to permit adequate time for preparing detailed field surveys and designs. The PMO will not award any construction contract until the land and rights of way are available, free of encumbrances, for executing them and necessary resettlement activities and appropriate compensation payments have been completed. A summary project implementation schedule is in Appendix Procurement 38. Goods, services, and civil works financed by ADB and KfW will be procured following ADB s Procurement Guidelines. Since the civil works will be small and widely dispersed, foreign