Document of

The World Bank

FOR OFFICIAL USE ONLY

Report No. 14589

IMPLEMENTATION COMPLETION REPORT

REPUBLIC OF COTE D'IVOIRE

THIRD URBAN PROJECT(LOAN 2789-IVC)

MAY 30, 1995

Infrastructure Operations DivisionWest Central Africa DepartmentAfrica Region

This document has a restricted distribution and may be used by recipients only in the performance oftheir official duties. Its contents may not otherwise be disclosed without World Bank authorization.

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

CURRENCY EQUIVALENT

(Period average)Currency unit: CFA Franc (CFAF)

1986: US $ 1.00 = CFAF 3461987: US $ 1.00 = CFAF 3011988: US $ 1.00 = CFAF 2981989: US $ 1.00 = CFAF 3191990: US $ 1.00 = CFAF 2721991: US $ 1.00 = CFAF 2821992: US $ 1.00 = CFAF 2651993 US $ 1.00 = CFAF 2831994: US $ 1.00 = CFAF 555

WEIGHTS AND MEASURES

Metric system

FISCAL YEAR

C6te d'Ivoire : Jan 1 - Dec 31CAA/CDMH : Oct I - Sep 30CAA/CTU : Oct I - Sep 30

ABBREVIATIONS AND ACRONYMS

BCEAO - Banque Centrale des Etats de l'Afrique de l'OuestBSIE - Budget Special d'Investissement et d'EquipementCAA - Caisse Autonome d'AmortissementCDMH - Compte de Mobilisation de l'HabitatCFD - Caisse Francaise de DeveloppementCTU - Compte des Terrains UrbaimsDCGTx - Direction et Contr6le des Grands TravauxFSH - Fonds de Soutien de l'HabitatMCU - Ministere de la Construction et de l'Urbanisme/Ministry of Construction and

UrbanismMB - Ministere du Budget - Ministry of BudgetMEF - Mim'stere de I'Economie et des Finances Ministry of Economy and FinanceMPWCPT - Precedent Ministere des Travaux Publics de la Construction, des Postes et des

Telecommunications/Former Ministry of Public Works, Construction, Posts, andTelecommunications

MPWT - Ministere des Travaux Publics et des Transports/Ministry of Public Works andTransportation

SETU - Societe d'Equipement des Terrains UrbainsSOTRA - Societe des Transports AbidjanaisTEP - Taux d'Escompte PreferentielUSAID - HG - United States Agency for International Development - Housing Guarantee

ProgramVAT - Taxe a la Valeur Ajoutde

FOR OFFICIAL USE ONLY

TABLE OF CONTENTS

PREFACE .........................................................................................................................EVALUATION SUMMARY ....................................................... I-IVPART I - PROJECT IMPLEMENTATION ASSESSMENT ........................................... 1

Introduction ........................................................ 1Project Description and Components ........................................................ 3Implementation Experience and Results . ....................................................... 6Summary of Findings, Future Operations and Key Lessons Learned 11.................... 1

PART II - STATISTICAL ANNEXES ....................................................... 13Table I Summary of Assessments ................................. ...................... 13Table 2 Related Bank Loans and IDA Credits ................................................. 15Table 3 Project Timetable ....................................................... 16Table 4 Loan Disbursements: Cumulative Estimated and Actual ..................... 16Table 5 : Key indicators for Project Implementation .......................................... 17Table 6 : Key indicators for Project Operation .................................................. 17Table 7 : Studies Included in Project ....................................................... 18Table 8A: Project Costs ....................................................... 19Table 8B: Project Financing ....................................................... 19Table 9 : Economic Costs and Benefits ....................................................... 19Table 10: Status of Legal Covenants in Loan Agreement ................................... 20Table 11: Compliance with Operational Manual Statements ............................... 22Table 12: Bank Resources: Staff Inputs ....................................................... 22Table 13 Bank Resources : Missions ....................................................... 23

APPENDIXES ....................................................... 24A. Mission's Aide-Memoire ....................................................... 24B. Borrower Contribution to the ICR ....................................................... 25

This document has a restricted distribution and may be used by recipients only in the performance of theirofficial duties. Its contents may not otherwise be disclosed without World Bank authorization.

IMPLEMENTATION COMPLETION REPORTREPUBLIC OF COTE D'IVOIRE

THIRD URBAN PROJECT(LOAN 2789-IVC)

PREFACE

This is the Implementation Completion Report (ICR) for the Third Urban Projectin C6te d'Ivoire, for which Loan 2789-IVC in the amount of US$126 million wasapproved on March 24, 1987 and made effective on August 4, 1988.

The loan was closed on June 30, 1994, eighteen months after the original closingdate of December 31, 1992. The final disbursement took place on January 18, 1995, atwhich time a balance of US$7.7 million was canceled.

Apart from the government counterpart contribution and the financial participationby beneficiaries (down payment and acquisition of plots), cofinancing for the project wassupposed to be provided by financial institutions and a USAID loan (Housing GuaranteeProgram).

The ICR was prepared by Mr. Jean Mazurelle (task manager for the project) of theInfrastructure Division, West Central Africa Department of the Africa Region. It wasreviewed by Mr. James 0. Wright, Chief of the Infrastructure Division, and Mr. FranzKaps, Operations Adviser of the West Central Africa Department.

Preparation of this ICR was begun during the Bank's final supervision/completionmission in October/November 1994. It is based on material in the project file. TheBorrower contributed to the preparation of the ICR, and provided its own evaluation ofthe project's execution (Appendix B), and commented on the draft ICR.

IMPLEMENTATION COMPLETION REPORTREPUBLIC OF COTE D'IVOIRE

THIRD URBAN PROJECT(LOAN 2789-IVC)

EVALUATION SUMMARY

Introduction.

1. Bank's Role in the Sector. Government's policy in the urban sector during thedecade prior to this project had been to reduce regional disparities in economicdevelopment by improving urban infrastructure and services and to promote the efficientuse of existing facilities. Bank Group lending supported these objectives not only throughthe First and Second Urban Projects but also through the First and Second Water SupplyProjects, the First and Second Sewerage and Drainage Projects, the First and SecondSmall Scale Enterprises Projects, an Industrial Finance and Development Project, and theFirst and Second Tourism Projects.

Project Objectives.

2. Neither the SAR nor the Loan Agreement clearly spelled out the objectives of theproject, and during the course of project implementation the Borrower and the Bank had asomewhat different understanding of what the objectives were supposed to be. For theBank, as spelled out in various supervision mission aides-memoire, the main objectives ofthe project were defined as: (a) implementing a new housing policy aimed at: (i) shiftingpart of social housing investment from the public to the private sector, and (ii) launching anew land development program for the housing sector without government subsidy; and(b) maximizing the efficient use of the Abidjan transport infrastructure in order to reducein-city transport costs. The government's objectives emphasized the reorientation ofpolicies and programs in the urban sector as well as in the transport sector. Regardinghousing, it referred to a shift to the private sector and the promotion of home ownership.In the context of C6te d'Ivoire, based on the Central Bank's (BCEAO) ceiling forrefinancing, and as reflected in the Loan Agreement and the SAR, social housing(logement &onomique) included relatively expensive houses (any house that cost CFAF15 million or less - or slightly less than US$50,000 at the exchange rate prevailing at thetime).

3. The objective for the urban transport component was clear and realistic.Regarding housing finance and land development, the only objective on which there was aclear understanding between the Borrower and the Bank was the reduction of publicexpenditure and subsidies and shifting the burden to the private sector. This objective wasimportant for C6te d'Ivoire, and for the Bank's country assistance strategy. It wasrealistic, but implementation was complex, and demanding for the government and theimplementing agencies. The objective of providing land and shelter for lower incomehouseholds was much more ambiguous. The only loan covenants or agreements that were

_jj-

expected to promote the achievement of that objective related to the selection criteria andmodalities for the commercialization of serviced plots.

4. Project Description and Components. In addition to studies, training and a pilotcredit program for micro-enterprises in the informal sector, the project consisted of threemajor components: housing finance (Compte de Mobilisation de l 'Habitat [CDMH], tobe implemented by Caisse Autonome d'Amortissement [CAA]); land development(Compte des Terrains Urbains [CTU], to be implemented by CAA and Direction etContr6le des Grands Travaux [DCGTx]) and urban transport (to be implemented byDCGTx). The CAA was responsible for the project's financial management, and DCGTxfor the project's implementation.

5. Loan Covenants. Agreements with the Borrower were reached on the mainissues, namely, that the Borrower would: (a) make proceeds of the loan available toCDM:H to refinance subloans by participating banks; (b) open and maintain in CAA aCompte des Terrains Urbains (CTU), (c) maintain and repair the road network in theGreater Abidjan area, and provide the funds, facilities, services and other resourcesrequired to cover, starting in 1992, the full maintenance costs of traffic signals, roadmarkings, and traffic signs; and (d) carry out land development program and ensure thatserviced land is sold in accordance with agreed criteria and terms.

Implementation Experience and Results.

6. Assessment of Project's Success and Sustainability. Project implementationwas unsatisfactory with respect to the setting-up of workable and self-sustainingmechanisms to encourage the participation of the private sector in the financing andmarketing of developed land and housing, "social" or otherwise. The "Studies, Trainingand Pilot Program" component was successfully implemented. Physical objectives havebeen exceeded for urban transport infrastructure but have not been achieved for homeownership and plot development. The reliance on the government budget was reduced, asgovernment contributed only a very small fraction of the estimated counterpart funds.Financial objectives have been achieved only partially, and the achievement of theinstitutional development objectives has been negligible. The urban transport componentcan be considered a success. On the other hand, the implementation of the housingfinance component and the land development component was unsatisfactory.

7. On balance, the sustainability of the project, has to be rated as uncertain. Despitethe apparent interest of the Borrower in sustaining some of the achievements of theproject, (mainly CTUs and CDMH), and the recent contribution of a donor (CaisseFran,aise de Developpement - CFD) to the housing finance component, there are anumber of uncertainties, particularly regarding the land development component where ashift to the private sector will take place only if there are changes in the policyenvironment. Government commitment to such changes has yet to be demonstrated.

8. Project implementation was affected positively by the professional competence andexperience of the CAA, in charge of the project's financial management and the DCGTx,responsible for the project's physical implementation, and by the flexibility shown by theBank to increase the disbursement percentage and to extend the closing date after

-i.i.

agreement was reached on an action plan. The major factors that negatively affectedimplementation were the very difficult economic and financial situation of C6te d'Ivoireresulting in the devaluation of the CFA franc in early 1994, the lack of liquidity ofcommercial banks and the lack of government counterpart funds, the hostility/competitionbetween the central administration and DCGTx, the lack of clarity in the division ofresponsibilities between CAA and DCGTx for the land development component, delays inprocurement and in the signing of deeds of plot sales, unsatisfactory accounts for the landdevelopment component, and the reluctance of government to implement the agreedprivatization of land marketing.

9. Summary of costs. At appraisal, the total project cost was estimated to be aboutUS$304.2 million, with government and the private sector contributing up to US$62.2million and 106.2 million, respectively. At the closing of the project, the Bank hadfinanced US$118.3 million, and the government US$30.4 million. Private funds whichwere expected to recover the cost of land and plot development did not materialize sinceonly 4000 out of 18,500 were developed. The total project cost therefore amounts toUS$148.7 million. The breakdown of the project's costs by project component is given inTable 8A.

10. Implementation Schedule. The Loan Agreement became effective on August 4,1988, about 17 months after the project was approved by the Board on March 27, 1987.The project was closed on June 30, 1994, after two extensions had been granted to theBorrower from the original closing date of December 31, 1992.

11. Assessment of Bank's and Borrower's Performance. Bank performance washighly satisfactory at the identification stage, less than satisfactory during preparation andappraisal, and rather deficient during supervision. Three different task managers wereassigned to the project supervision, one of whom lacked the appropriate expertise,especially for the Housing component of the project. Borrower performance wassatisfactory for project preparation, somewhat less than satisfactory for implementation,and deficient with respect to compliance with covenants. The professional competence ofDCGTx helped project implementation in many areas. However, on the government side,the Ministry of Construction and Urbanism (MCU), as "the Owner" (Maitre d'Ouvrage)should have been primarily responsible for the project. With the assistance of DCGTx as"the Engineer" (Maitre d'Oeuvre), MCU could have worked more closely with CAA andwith private banks and promoters, and it could also have delegated to DCGTx theimplementation of certain parts of the project for which DCGTx has a comparativeadvantage.

12. Assessment of Project's outcome. The outcome is highly satisfactory for the"Urban Transport" component and the "Experimental Pilot Program", satisfactory for the"Studies and Training" component, and unsatisfactory for the "Housing Finance" and the"Land Development" components. Overall, the project's outcome has to be rated as"unsatisfactory".

-iv-

Summary of Findings, Future Operations, and Key Lessons Learned.

13. The project was designed to address some of the most important issues in theurban sector. It was not expected to resolve all the problems but to test differentapproaches which could lead to improved policies and more permanent, self-sustaininginstitutions. Overall, the achievement of project objectives is partial, sustainability isuncertain, and the outcome of the project is unsatisfactory. The question of a futureoperation is closely related to actions already taken by government and to the follow-upactions planned by the Bank. Based in part on the lessons learned from this project'simplementation, there is an ongoing dialogue between the Borrower and the Bank on theobjectives and contents of a possible new urban project (Urban Rehabilitation andEmployment Project). This new project may include additional support for theCAA/CDMH and the introduction of new financing mechanisms, as well as financing forthe production of serviced plots, provided that there is a clear understanding on thedistribution of responsibilities between the state (land tenure and regulatory framework),public utilities companies, and the private sector (land development and marketing,building construction, and financing to facilitate home ownership and the supply of rentalunits).

14. The following lessons, which are relevant for future projects in the urban sector orin C6te d'Ivoire, can be drawn from the implementation of this Third Urban Project:

* In order to facilitate implementation and supervision, it is advisable to avoidcomplex projects with a mix of components of different kinds and to ensurethat the responsibilities of all parties involved are well defined and clearlyunderstood.

L It is essential that project and loan documentation include a clear definition ofthe project's objectives, performance indicators, and a plan for a mid-termreview.

* A project relying on private sector participation should not be designedwithout extensive prior consultations with the private sector itself or withoutconclusive evidence that the government is indeed committed to privatization.

* No matter how well designed the instruments might be, a private sector-oriented housing finance system, encompassing the production of plots and theconstruction of houses, cannot be fully successful if the policy environment(particularly the regulatory environment) is not conducive to private sectorparticipation.

* The Bank should pay more attention to the continuity of staff working on aproject, ensure that the staff assigned has appropriate expertise, and enforceessential covenants.

IMPLEMENTATION COMPLETION REPORTREPUBLIC OF COTE D'IVOIRE

THIRD URBAN PROJECT(LOAN 2789 - IVC)

PART I - PROJECT IMPLEMENTATION ASSESSMENT

I. INTRODUCTION

A. Macroeconomic Setting

1.1 The Republic of C6te d'Ivoire (RCI) is a lower middle income country, with a1992 GDP of about US$10 billion. The economy is predominantly agricultural, withabout two-thirds of the country's active population engaged in farming, forestry, andfishing. The agricultural sector, including forestry and agroindustries, account for about40 percent of GDP, while generating 70 percent of total export revenues in 1992. Exportscontinue to be dominated by cocoa, coffee, and timber.

1.2 Since the mid-1970s, the RCI population has been growing by 3.8 percentannually, reaching about 13 million by end 1992. High population growth coupled witheconomic decline has resulted in a steady fall of living standards. GNP per capita in 1992was estimated at less than US$700 compared to well over US$1000 in the early 1980s.Social indicators have also been deteriorating, reflecting, among others, the effects of theeconomic crisis, as well as neglect of basic social services.

1.3 The economic decline since the early 1980s contrasts sharply with the 1960s andmost of the 1970s when RCI grew on average by 7 percent annually. This growth tookplace mainly because of favorable resource endowments, inflows of cheap labor fromneighboring Sahelian countries, political stability, appropriate macroeconomic policies,and an agriculture-based and export-led growth strategy. In the May 1977 Report No.1147-IVC "Ivory Coast - A Basic Economic Report", the Bank analyzed in depth thecountry's str.i;ng economic performance during its first fifteen years of independence.

1.4 At the beginning of the 1980s, the country faced a number of serious economicproblems. First, the macroeconomic imbalances had grown to unsustainable levels. By1981, the budget deficit had reached 11 percent of GDP while the current account deficitwas equivalent to 17 percent of GDP. Second, RCI started to encounter serious debtservicing problems as a result of the rapid build-up of external debt during the second halfof the 1970s. Third, domestic markets had become increasingly distorted, contributing toan inefficient resource allocation. Finally, there was a serious deterioration in publicsector management, especially among public enterprises. These problems were in essencean outgrowth of the period of surge in spending which followed the cocoa and coffeeprice booms of 1975-77.

- 2 -

1.5 Prior to 1987, adjustment policies were partially successful in reducing the maininternal and external imbalances due in part to a depreciation of the French franc and,hence, the CFA franc, and to a short-lived recovery of commodity prices. The mainfeature of this adjustment process was the reliance on internal adjustment, particularly thepursuit of contractionary fiscal and monetary policies. This was manifested in a sharpreduction of public investment expenditure which fell from 9 percent of GDP in the early1980s to about 3 percent in 1989-90. In the mid 1980s, the fiscal situation improvedsignificantly as fiscal revenues surged due to a temporary recovery of commodity prices.However, with the renewed decline of those prices, the fiscal deficit again increased tounsustainable levels, reaching almost 15 percent of GDP in 1989. This also reflected amore fundamental problem, namely the downward rigidity of expenditure, especially ofsalaries and wages, and the high debt service obligations.

1.6 The country's renewed fiscal and balance of payment crisis at the end of the 1980sreflected not only inadequate macroeconomic policies but also more fundamentaldistortions in the economy. The latter include: (i) a trade regime that was stillcharacterized by relatively high tariffs and dispersion levels and a plethora of non-tariffbarriers; (ii) inadequate levels of resource mobilization reflecting the decline in domesticsavings and solvency and liquidity problems of the domestic banking system; (iii)continued public relatively high tariffs and dispersion levels and a plethora of non-tariffbarriers; (ii) inadequate levels of resource mobilization reflecting the decline in domesticsavings and solvency and liquidity problems of the domestic banking system; (iii)continued public intervention in the agricultural sector, especially with regard to pricepolicies; (iv) continued dependence on a few primary commodities; and (v) a generallyinefficient public sector, with limited capacity to provide adequate services as evidencedby the poor health indicators and low literacy levels. Faced with this situation, thegovernment launched a new adjustment program in mid- 1989.

1.7 The principal objective of this stabilization program was to reduce the fiscal deficitand to start clearing up domestic and external arrears while carrying out structural reformssupported by three sector adjustment operations of the World Bank. Substantial progresshas been achieved in implementing the structural reforms and reducing the fiscal deficit.However, the stabilization program did not achieve all its objectives, in particular thoserelated to the reduction of domestic and external arrears.

B. Bank's Role in the Sector

1.8 Before the preparation of the Third Urban Project, the Bank had been closelyassociated with the development of several aspects of Cote d'Ivoire's infrastructure,especially to support government objectives of strengthening institutional capability andfinancial management and, where feasible, promoting privatization. In transport, a SecondHighway Sector Loan was approved in FY85. It was aimed at upgrading the country'sroad network, restoring road maintenance capacity and fostering productivityimprovements in the private road transport industry. In the urban subsector, especiallyhousing, Bank assistance supported government efforts to reduce public spending onhousing finance by: (i) shifting this responsibility to the commercial banking system; and

- 3 -

(ii) creating a revolving fund for sites and services to be sold by private real estatecompanies. In addition, assistance was given to finance maintenance and upgrading of thetransport system in Abidjan. A Municipal Development Project (FY89) was prepared asa first stage in improving the capacity of local governments to maintain existing facilitiesand infrastructure and to mobilize fiscal resources. Following a reorganization study ofthe water supply and sanitation sector initiated in 1984, a water supply and sanitationsector adjustment loan (FY88) supported efficiency improvements and financial disciplineby expanding private management of part of the water system. A Rural Water SupplyProject (FY89) was aimed at rehabilitating rural water points and shifting responsibilityfor maintenance to the village level. An Abidjan Environmental Protection Project(FY90) completed a program to improve sanitary provisions in Abidjan and to restore thecity's lagoon waters through the construction of an ocean outfall.

Ul. PROJECT DESCRIPTION AND COMPONENTS

A. Project Description

2.1 In addition to studies, training and a pilot program for micro-enterprises in theinformal sector, the project consisted of three major components: housing finance(Compte de Mobilisation de I 'Habitat [CDMH], to be implemented by Caisse Autonomed'Amortissement [CAA]); land development (Compte des Terrains Urbains [CTU], to beimplemented by CAA and Direction et Contr6le des Grands Travaux [DCGTx]) andurban transport (to be implemented by DCGTx). The CAA was responsible for theproject's financial management and DCGTx for the project's implementation.

B. Original Project Objectives

2.2 Neither the Staff Appraisal Report (SAR) nor the President's Report andRecommendation included a specific statement of objectives. Schedule 2 of the LoanAgreement on the "Description of the Project" only states that "the objectives of theproject are to support the Borrower's urban development strategy" through theimplementation of the various components of the project. Although the SAR refers to the"urgency of a far-reaching reorientation of the housing sector and financing to promotehome ownership among the lower income population", it lists the objectives ofgovernment housing policy as reducing public expenditure and subsidies and increasingprivate savings and the role of the private sector in the formal housing market. Prioritiesfor urban transport were for rehabilitation and maintenance of the existing transportsystem, efficiency of existing public transport and traffic management schemes, andimprovements to road infrastructure. The main objective was clearly to maximize the useof existing infrastructure.

2.3 With the exception of the urban transport component, the project's objectiveswere not clear, and were subject to different interpretation, not only between theBorrower and the Bank, but (as it turned out later) also within the Bank. The objective ofthe urban transport component was clear and realistic, and that component was also fairlyclear for the Borrower, especially given the capability and experience of the DCGTx.Regarding housingfinance and land development, the one objective that was clear and

- 4 -

similarly understood by the Borrower and the Bank was to reduce public expenditure andsubsidies by shifting the burden to the private sector. Three comments can be madeabout that objective. First, it would have been realistic if the project had not been ascomplex. Second, it was important for Cote d'Ivoire to move away from the provision ofhousing for civil servants and middle-class households, which contributed to heavyrecurrent public sector deficits and had reached alarming proportions by the early '80s.Third, it was also an important element of the Bank's country assistance strategy with itsemphasis on restructuring parastatals and privatization of provision and selling ofdeveloped land. In a sense, the project could be considered transitional, a kind ofadjustment operation for the sector, beginning to answer the problems of public housingfinancing.

2.4 The objective of reaching lower income households was the most ambiguous.According to Schedule 6 of the Loan Agreement, on the conditions of eligibility for thesubloans, the cost of a house should be equal to or lower than the Central Bank's(BCEAO) ceiling for refinancing of social housing (logement economique) which was,CFA franc 15 million (less than US$50,000 at the exchange rate at the time). The term"social housing" was therefore in contrast with these relatively high loan ceilings.Regarding the land servicing component, the SAR does not emphasize the social aspect,but it mentions that the new plots would cost on average US$2,000 per unit in 1986 pricesand that, in establishing the price of individual plots, an element of cross-subsidizationmight be introduced to permit sales to low-income groups. In the Loan Agreement, theonly references to low-income beneficiaries are statements in Schedule 6 that the SteeringCommittee will ensure that "low-income households get a fair share of developmentprograms" and will set the remuneration of real estate agencies' services at such level as togive them incentives to commercialize "all types of land, particularly land for low-incomehouseholds".

C. Loan Covenants

2.5 Agreements with the Borrower were reached on the main issues, namely, that theBorrower will: (i) make proceeds of the loan available to CDMH to refinance subloans byparticipating banks; (ii) open and maintain in CAA a Compte des Terrains Urbains(CTU); (iii) maintain and repair the road network in the Greater Abidjan area, andprovide the funds, facilities, services and other resources required to cover, starting in1992, the full maintenance costs of traffic signals, road markings, and traffic signs; and (iv)carry out land development program and ensure that serviced land is sold in accordancewith agreed criteria and terms.

D. Achievement of Project Objectives

2.6 The ambiguity of the project's objectives and significant differences among thethree major components make the assessment of the project's success difficult. One has todistinguish between assessments on the project as a whole, reflected in Table I of Part II,and more qualified comments that can be made on individual components. For the wholeproject, achievements related to macro-economic policy were considerable, especially theshift from public to private provision of housing; they were only partial for financial and

-5-

physical objectives; and they were negligible for sector policy improvements, institutionaldevelopment and public sector management (other objectives listed in Table I of Part IIdo not apply).

* Macro policy objectives: the reliance on the government budget has beenreduced beyond expectations, mostly (and ironically) because governmentcontributed only a very small fraction of the estimated counterpart funds.

* Financial objectives have been only partially achieved. Regarding the housingfinance component, the CAA/CDMH has not been able to mobilize fundslocally by issuing long-term bonds to institutional investors. The loan from theUSAID - Housing Guarantee Program, which was included in the projectfinancing plan, did not materialize. On the other hand, the CAA/CDMH hasbeen able to secure additional external financing from the Caisse FranVaise deDeveloppement (CFD). The shortfall in the government contribution duringthe life of the project, as well as the delinking of the refinancing rate from theBCEAO preferential discount rate, prevented the CAA/CDMH fromgenerating the surplus necessary to become self-sustaining after the project, aswas expected at appraisal. On the other hand, for the land developmentcomponent, the CAA/CTU has been able to build a revolving fund, sufficientfor financing a third tranche of plot development. However, both the CDMHand CTU bear the foreign exchange risk on the proceeds of the Bank loan, andthe financial situation of those two accounts was adversely affected by thedevaluation of the CFA franc in January 1994.

- Physical objectives have been exceeded for urban transport infrastructure buthave not been achieved for home ownership and land development.

- The achievement of sector policies objectives has been negligible.

* Institutional development and public sector management objectives have notbeen achieved. The CAA/CDMH for the housing finance component hasfunctioned reasonably well, but its possible conversion into a housing financeinstitution with corporate status and direct borrowing authority has not beenexamined, as was envisaged in the SAR. The future of the CAA/CTU is evenless clear, as the implementation of the land development component hassuffered from lack of collaboration between the various institutions involvedand from serious deficiencies in management and accounting. The DCGTx hasremained a well qualified and experienced institution, but it was already sobefore the project.

HI. IMPLEMENTATION EXPERIENCE AND RESULTS

A. Project's Success and Sustainability

3.1 The Borrower's report in Appendix B provides a comprehensive picture of theimplementation record for the project, including a description of the problems that have

- 6 -

been encountered. In summary, implementation was fairly effective for the urbantransport component, but less so for the other two main components, particularly withrespect to setting up mechanisms to encourage the participation of the private sector inland and housing development and finance.

3.2 After a slow start, and despite difficulties created by the sharp increase in theBCEAO's preferential discount rate and the failure of government to pay its counterpartcontribution, the housingfinance component functioned reasonably well. By the end ofthe project, the construction programs approved by the CDMHICAA Steering Committeecorresponded to about 7,300 housing units, and the number of individual dossierssubmitted to the CDNII by participating commercial banks corresponded to about 4,100housing units. Nearly 3,300 subloans (compared to the SAR estimate of 7,000) had beenapproved by commercial banks with a total CDMH refinancing of CFA franc 17 billion.The average sale price of housing was CFA franc 7.8 million;' the average subloan CFAfranc 6.4 million (or 82 percent of the average sale price); the average refinancing CFAfranc 5.3 million (or about 80 percent of the subloan); the average contribution byowners/subborrowers 18 percent, and the average length of subloans 13 years. Theaverage monthly income of subborrowers/owners was CFA franc 290,000. Thepercentage of refinancing for subloans was modulated in accordance with the sale price ofthe housing and the term of the subloan; the lower the sale price and the higher the lengthof the subloan, the higher the refinancing percentage. Despite this incentive to commercialbanks to cater to the lower end of the market, the distribution of subloans was not as infavor of lower cost housing as envisaged in the SAR. The SAR estimated that 65 percentof the subloans would be in the CFA franc 2.4 - 3.2 million range; these were estimatesand not targets. They were not incorporated in the Loan Agreement as conditions, orincluded as performance indicators.

3.3 Despite those shortcomings, the housing finance component had some favorableresults. It allowed commercial banks to have access to long term resources to financehousing, so that the number of mortgage loans and homeowners increased. Thecomponent promoted savings mobilization. In fact, the personal contribution ofhomeowners was higher than estimated (18 percent vs. 10 percent) because of sales taxand settlement fees. It also stimulated labor intensive construction, contributed toeconomic recovery, and aided the creation of about 10 real estate development companies.All this was achieved with the government barely contributing any money, and so far therehave been no defaults on subloans made by commercial banks.

3.4 Implementation of the land development component was unsatisfactory. Since itsestablishment, the CAA/CTU has financed two large-scale operations covering a total of4,500 fully serviced plots (as compared to the SAR estimate of 18,500) offered to realestate development companies and to individuals. The first operation was located in thecommune of Cocody, at Riviera Palmeraie; the second was in the commune of YopougonT Ananeraie. All plots had been sold by the end 1994; the selling price was CFA franc4,100 per m2 for the first operation and CFA franc 5,500 per m2 for the second,

' Throughout project implementation, the average rate of exchange for one US dollar was 288 CFAfranc.

- 7 -

corresponding to a cost per plot of CFA franc 1.8 million and CFA franc 1.7 million,respectively. The component was not well managed. The CAA/CTU Steering Committeemet infrequently, and there was a lack of coordination and cooperation between the CAAand the DCGTx. From a technical point of view, the work was well done, although for amuch smaller number of plots than estimated at appraisal. Also, plots were relativelyexpensive. Apparently, no efforts were made to contract the marketing of plots to privatereal estate agencies, as envisaged at appraisal and as stipulated in the Loan Agreement.All plots were supposed to be paid in full by the time the work was completed, but thiswas not done. Because of delays in developing the plots, and especially because of theprotracted period between completion of the site improvements and construction, anumber of storm water drainage systems deteriorated for lack of maintenance, seweragepipes were stolen, and government money had to be spent on public lighting to prevent thetheft of electrical cables. Finally, accounting was extremely deficient. Because the CTUdid not separate transactions for these two operations from those for its other operations,the CAA has been, and still is, unable to produce satisfactory project accounts for thiscomponent. The only achievement of this component is that, at least before thedevaluation of the CFA franc, profits made from the two operations, were to be used tofinance a third one for lower-income families.

3.5 The urban transport component and the studies, training and pilot credit programwere successfully implemented. Regarding the transportation infrastructure, construction,improvements and maintenance are somewhat in excess of what was originally included inthe project. Studies are either completed, or being finalized. The informal sector pilotcredit program has financed 354 loans for a total of CFA franc 160 million to smallbusinesses in Abidjan, with a satisfactory average recovery rate (almost 90 percent,compared to the initial target of 80 percent). The latest cost estimate is about US$148.7million, compared to the SAR estimate of US$304.2 million. About 95 percent of theBank loan of US$126 million was disbursed and Government provided slightly less than50 percent of its estimated contribution of US$62.2 million.

3.6 A number of factors, positive and negative, affected project implementation.However, it is not easy to distinguish between the factors subject to government controland those subject to the implementing agencies' control. For most of the project period,one of the executing agencies-DCGTx-acting on behalf of both the Ministry ofFinance and the Technical Ministry, was not reporting to the government on essentialdecisions it should have taken. In effect, the whole project was implemented by theDCGTx, and the leverage and/or influence of the "owner", namely the Ministry ofConstruction and Urbanism (MCU), was limited. Differences between the MCU and theDCGTx was exacerbated by the fact that 90 percent of the DCGTx technical staffworking on the project was expatriate.

3.7 On the positive side, project implementation was affected by the professionalcompetence and experience of both the CAA and the DCGTx. Procurement, forexample, was fair and transparent. The flexibility shown by the Bank to increase thedisbursement percentage and to extend the closing date after agreement was reached on anaction plan was also an important factor.

3.8 The factors that negatively affected implementation are the following:

* Among those that were subject to government control: (i) the inability orunwillingness of government to pay the counterpart funds, which prevented thehousing finance component from becoming self-sustaining as planned; (ii) thecompetition between the central administration and the DCGTx, whichcontributed to delays in procurement and in the signing of deeds of plot sales;(iii) the lack of clarity in the division of responsibilities between the CAA andthe DCGTx for the management and implementation of the land developmentcomponent and the failure to cause the implementing agencies to keep properproject accounts; and (iv) the reluctance of government to implement theagreed sales of serviced plots.

* Among the factors that were subject to the control of the implementingagencies: (i) for the land development component, the reluctance of theDCGTx to adopt technical standards consistent with the needs of the middle-to low-income households and to phase land development in line with marketdemand, the unwillingness of the DCGTx to support the privatization of thecommercialization of plots, and the inability of the DCGTx to keep properproject accounts; and (ii) for the housing finance component, theunderestimation of the down payment required (including sales tax andsettlement fees) and of the difficulty for households with modest incomes tomake the required contribution.

3.9 Apart from the urban transport component, which is sustainable, provided thatmoderate financial allocations are made for operation and maintenance, the project wasconsidered transitional to support a change of emphasis from the public sector to theprivate sector. For the land development component, the change affected only theprivatization of the commercialization of serviced plots. At appraisal it was envisaged thatafter project completion, the CAA/CTU would continue to operate without subsidies witha program averaging 4,250 plots a year. On the other hand, the CAA/CDMH wasconsidered a new, simple instrument or mechanism that would evolve during the latter partof project implementation into a more sophisticated, permanent institution in the light ofexperience gained.

3.10 A number of factors militate in favor of project sustainability, but there are also anumber of uncertainties. As evidenced by the participation in recent urban sector work,the Borrower is eager to sustain some of the achievements of the project for a possiblefuture operation, the Urban Rehabilitation and Employment Project (UREP), which mayinvolve a reorientation of policies, including privatization of land development andmarketing in order to reach lower income people. With respect to the housing financecomponent, participants have incentives to sustain the project (real estate developers andbanks as well as potential subborrowers), and an external donor -CFD-is providingfunds to continue to finance the component. The CAA/CDMIH, or a successor agency,should be able to mobilize additional internal and external financing, as envisaged atappraisal. In the future, the lack of government contribution for housing finance will be a

- 9 -

handicap, as it has been for this project. However, provided there is no unreasonableexpectation as to the possible access of lower income households to housing financeprovided by commercial banks withlout government subsidies, there is no reason why theCAA/CDMH or its successor should not become in due course financially viable, given thedemand for housing and the number of potential creditworthy subborrowers. Thesituation is much less clear regarding the land development component, despite the factthat the CAA/CTU was able to generate some surpluses which are being used to finance athird operation. The CTU undertook the same kind of operation, formerly done by aparastatal agency, the SociWt des Terrains Urbainis (SETU); it completed them moreefficiently (although apparently with the same deficiencies in accounting and the same lackof financial control), but it is still a government monopoly. It seems that a real shift to theprivate sector will depend on changes in policy, toward land tenure, for example, plus theability of private real estate developers to work as land developers. Those issues havebeen the subject of one of the studies financed under the project, and the LandImprovement Concession bill is being finalized. However, the commitment of governmentto such changes has yet to be demonstrated. On balance, the sustainability of the wholeproject can be rated as uncertain.

B. Summary of Costs

3.11 At appraisal, the total project cost was estimated to be about US$304.2 million,with government and the private sector contributing up to US$62.2 million and 106.2million, respectively. At the closing of the project, the Bank had financed US$118.3million, the government US$30.4 million while private funds did not materialize, due tothe shortage of plots provision (4,000 instead of 18,500). The total project cost thereforeamounts to US$148.7 million. The breakdown of the project's costs in terms of projectcomponent is given in Table 8A.

C. Implementation Timetable

3.12 The project Loan Agreement became effective on August 4, 1988, about 17months after the project was approved by the Board, on March 27, 1987. The project wasclosed on June 30, 1994, instead of June 30, 1992, after two "one year" extensions weregranted to the Borrower.

D. Bank Performance

3.13 Bank performance on this project was satisfactory at the identification stage,somewhat less than satisfactory regarding preparation assistance and appraisal and ratherdeficient during supervision. As mentioned earlier, the project was very important forCote d'Ivoire and especially for its urban sector, and for the Bank's country assistancestrategy. All the relevant issues were identified. The central role played by the DCGTx atthe time must have made it difficult to have a real dialogue with all the ministries andentities concerned with the housing subsector; also, many unfavorable experiences withbankrupt institutions and companies (that were being liquidated) militated againstestablishing new permanent institutions, and for transitional solutions. Nevertheless,preparation assistance could have: (i) included more detailed studies of alternative

-10-

proposals for dealing with the issues that had been identified; (ii) provided for moreextensive consultations with private commercial banks and promoters (which are, after all,the main interested parties in a project relying on private sector participation); and (iii)tested government commitment to certain aspects of the project (such as the privatizationof land marketing), in order to improve the project design. The SAR should have spelledout the project's objectives and included a list of performance indicators as well as a planfor a mid term review. To the extent that certain SAR estimates were meant as targets orconditions to be complied with, they should have been incorporated into the LoanAgreement or a supplemental letter. As an example, for the housing finance component,the SAR indicated that the CAA/CDMIH would refinance four types of housing loans (alow-cost housing unit program, a social housing unit program, a middle-income housingunit program, and a "multiple builders" program) with different average loan amounts, butthe only condition reflected in the Loan Agreement (Schedule 6) was that the cost of ahouse acquired by a beneficiary should be equal to or lower than the BCEAO's ceiling forrefinancing of social housing (logement &onomique), namely CFA franc 15 million(slightly less than US$50,000 at the then prevailing exchange rate).

3.14 In its supervision of the project, the Bank adapted to new circumstances. When itbecame clear that the government would not be able to provide counterpart funds, theBank agreed to amend the Loan Agreement to increase the percentage of expenditures tobe financed to 100 percent; also, the Bank agreed to two postponements of the closingdate. Otherwise, during project implementation, the Bank performance was deficient inseveral ways. The failure of some staff to respond in a timely manner to requests for "noobjection" contributed to procurement delays. The Bank did not always assign staff withthe appropriate skills to supervise a project dealing primarily with housing finance and landdevelopment. This may explain why needed adjustments and changes envisaged atappraisal such as the possible conversion of the CAA/CDMIH into a housing financeinstitution, were not addressed, or why non compliance by the Borrower to undertakingssuch as the privatization of land marketing and the maintenance of CTU accounts, was notdealt with more aggressively. There seems to have been some misunderstanding betweenthe Borrower and the Bank and maybe within the Bank on the appropriateness of thetechnical standards adopted in the land development component and on the extent towhich the housing finance and the land development components should cater to the lowerincome groups. In retrospect, the Bank should not have criticized the Borrower on thesetwo points for the following reasons. First, from a purely legalistic point of view, theBorrower complied with the Loan Agreement, and all bidding documents (includingtechnical specifications) were approved by the Bank. Second, it is unrealistic to expectthat, without government subsidies, the lowest income groups could have access tohousing if the needs of other income groups are not being met. In any location, there isconsiderable mobility in the utilization of the housing stock, and any addition to thehousing stock, even for the higher income groups, benefit indirectly the pooresthouseholds. Moreover, private commercial banks, which are bearing the commercialrisks, cannot devote more than a rather small proportion of their lending to low incomehouseholds with less certain creditworthiness, but must diversify their portfolios.Similarly, for the land development component, it is not unreasonable to start with a highstandard development in an expensive neighborhood (Riviera Palmeraie in Cocody, for

-11-

example, as was clearly mentioned in the SAR) in order to generate resources to produceless expensive plots in less exclusive areas. The design of the project was based on thatstrategy but was touched upon in the SAR only implicitly. It would have been better if ithad been more clearly articulated in the SAR. These issues of whether to reach the urbanpoor, and if so, how, may have contributed to a less than harmonious relationshipbetween the Bank and the Borrower in the context of the project. However, they werethe subject of a very constructive and fruitful dialogue in the context of the urban sectorwork that was subsequently carried out jointly by C6te d'Ivoire and the Bank and thatshould help to clarify objectives for the next urban project, UREP.

E. Borrower Performance

3. 15 Borrower performance was satisfactory as regards project preparation, somewhatless than satisfactory for implementation, and deficient with respect to compliance withcovenants. The discussion in the section on "Implementation Experience" of the majorfactors that affected the project is relevant to a description of the Borrower performance:on the one hand, good professional competence and experience, particularly on thetechnical side, on the other hand, government failure to provide counterpart funds, lack ofcooperation between the central administration and the DCGTx and among theimplementing agencies, unwillingness to privatize land marketing, delays in procurementand in the signing of deeds of plot sales, and unsatisfactory accounts for the landdevelopment component (as a result of which the external auditor refused to certify thoseaccounts). The strengths of the DCGTx helped project implementation in many areas.However, on the government side, the Ministry of Construction and Urbanism (MCU), as'the Owner" (Maitre d'Ouvrage) should have been primarily responsible for this urbanproject. With the assistance of the DCGTx as "the Engineer" (Mailtre d'Oeuvre) MCUcould have worked closely with the CAA and with private banks and promoters, and itcould also have delegated to the DCGTx the implementation of certain parts of the projectfor which the DCGTx has a definite comparative advantage.

IV. SUMMARY OF FINDINGS, FUTURE OPERATIONS AND KEYLESSONS LEARNED

A. Assessment of Outcome

4.1 For the reasons discussed in the previous sections, the outcome is highlysatisfactory for the "Urban Transport" component and the "Pilot Program", satisfactoryfor the "Studies and Training" component, and unsatisfactory for the "Housing Finance"and the "Land Development" components. Despite differences in achievements for thevarious components, overall, the project's outcome deserves a rating of "unsatisfactory".

B. Future Operations

4.2 The project was designed to begin to address some of the most important issues inthe urban sector. It did not pretend to be the definitive solution to the problems, but,rather, to test a different approach which could lead to more sophisticated mechanismsand more self-sustaining institutions that could be supported by the Bank and other donorsas well as C6te d'Ivoire. Therefore, the question of future operations is closely related to

-12-

actions already taken by donors and to the follow-up actions planned by the Bank.Because the CAA/CTU generated some surpluses (before the devaluation of the CFAfranc), the land development component could continue under a third operation designedto benefit lower-income groups. Regarding the housing finance component which did notgenerate surplus, the Caisse Franfaise de Developpernenl (CFD) has provided CFA franc6 billion to the CAA/CDMH to enable it to continue its operations. Based in part on thelessons learned from this project's implementation, there is an ongoing dialogue betweenthe Borrower and the Bank on the objectives and contents of the next urban project inC6te d'Ivoire, UREP. This project could include additional support for the CAA/CDMHand the introduction of new financing mechanisms, as well as financing for the productionof serviced plots, provided that there is a clear understanding on the distribution ofresponsibilities between the state (land tenure and regulatory framework), public utilitiescompanies, and the private sector (land development and marketing, construction ofbuildings, and financing to facilitate home ownership and the supply of rental units).

C. Key Lessons Learned

4.3 The following lessons, some of which would also apply to many other projects,can be learned from the implementation of this Third Urban Project:

- To facilitate implementation and supervision, it is advisable to avoid complexprojects with a mix of components (such as urban transport on the one hand,and housing finance and land development on the other), and to ensure that theresponsibilities of all parties involved are well defined and clearly understood.

- To avoid any argument between the Borrower and the Bank on whether theproject is being properly implemented, and to facilitate monitoring andevaluation, it is essential that the project and loan documentation include aclear definition of the project's objectives, a list of performance indicators, anda plan for a mid-term review.

* A project relying on private sector participation should not be designedwithout extensive consultations with the main interested parties (in this case,the private commercial banks and promoters) and without conclusive evidencethat the government is committed to privatization.

* No matter how well designed the instruments might be, a private sector-oriented housing finance system, encompassing the production of plots and theconstruction of houses, cannot be fully successful if the policy environment(particularly the regulatory environment) is not conducive to private sectorparticipation.

* The Bank should pay more attention to the continuity of staff working on aproject, ensure that the staff assigned have the right kind of expertise (para.3.13), and enforce essential covenants (e.g., counterpart funds andprivatization of land marketing) more vigorously.

-13-

PART I - STATISTICAL ANNEXES

Table 1: Summary of Assessments

A. Achievements of Substantial Partial Negligible NotObjectives Applicable

Macro Policies x

Sector Policies x

Financial Objectives x

Institutional Development x

Physical Objectives x

Poverty Reduction x

Gender Issues x

Other Social Objectives x

Environmental Objectives x

Public Sector Management x

Private Sector xDevelopment

Other (specify) x

B. Project Sustainability Likely Unlikely j Uncertain

x

-14-

Table I: Summary of Assessments (continued)

C.. Bank Performance Highly Satisfactory DeficientSatisfactory

Identification x

Preparation Assistance x

Appraisal x

Supervision x

D. Borrower Highly Satisfactory DeficientPerformance Satisfactory

Preparation x

Implementation x

Covenant Compliance x

Operation (if applicable) n.a. n. a. n. a.

E. Assessment Highly Satisfactory Unsatisfactory Highlyof Outcome Satisfactory Unsatisfactory

I_I I x

-15-

Table 2: Related Bank Loans and IDA Credits

Credit or Purpose Year of StatusLoan Title Approval

PrecedingOperations1. First Urban planning and urban transport focusing on 1976 CompletedUrban Abidjan. 1983Project

2. Second To develop the public transport system and 1981 CompletedUrban improve the flow of traffic in Abidjan and, 1987Project through a pilot program in the secondary cities of

Korhogo and Daloa, to help implement a balancedregional development strategy.

FollowingOperationsMunicipal To render municipalities more effective centers of 1989 CompletedDevelopment economic and social development by developing 1994Project managerial capacities at central and local levels,

improving local resource mobilization,overcoming the lack of basic infrastructure andsocial services in selected secondary cities andinitiating local development actions. i

Municipal To improve welfare in urban areas, to improve 1995 Credit notSupport the ability of the national and local governments yetProgram to implement and sustain urban services by effective

establishing improved finance and managementsystems, and to contribute to sustaineddevelopment through environmental improvementand protection.

-16-

Table 3: Project Timetable

Steps in project cycle Date planned Date actual /latest estimate

Identification (Executive Project Summary) Oct - 84

Preparation Jan- 85 Mar- 85

Appraisal Mar- 85 Jun- 85

Negotiations Sept- 85 Jan- 87

Board Presentation Nov. - 85 24 - Mar - 87

Signing Apr. - 86 01 - Apr. - 87

Effectiveness Oct - 87 04 - Aug. - 88

Midterm Review n.a. n.a.

Project Completion 30 - Jun - 92 31 - Dec. - 94

Loan Closing 31 - Dec. - 92 30 - Jun - 94

Table 4: Loan Disbursements: Cumulative Estimated and Actual

(US$ million)

FY87 FY88 FY89 FY90 FY91 FY92 FY93 FY94 FY95

Appraisal 10.00 28.90 54.10 79.30 113.30 126.00 126.00 126.00 126.00Estimate

Actual 0.00 8.08 25.94 54.98 77.18 103.08 112.75 115.29 118.29

Actual as % ofEstimate 0.0% 28.0% 47.9% 69.3% 68.1% 81.8% 89.5% 91.5% 93.9%

Date of Final Disbursement: January 18, 1995.

-17-

Table 5: Key indicators for Project Implementation

Key Implementation Indicators in SAR/President's Report Estimated Actual

Housing Finance component:Number of sub-loans (disbursed) 7,000 3,300

(a)

Land Development component:Number of developed plots 18,500 4,480

(a) By the end of the project, the construction programs approved by the CDMH Steering Committee aspotentially eligible for financing corresponded to about 7,300 housing units (out of which some will bebuilt without any loan financing or with financing other than the CDMH mechanism), and the number ofindividual dossiers submitted to CDMN-H by participating commercial banks corresponded to about 4,080housing units.

Table 6 : Key indicators for Project Operation

Not Applicable

-18-

Table 7: Studies Included in Project

Study Purpose as defined at Status Impact of Studyappraisal

1. Preparation To determine the required Completed Programming of future investmentof a Transport investments and policies on the for urban transport has been usedPlan for Greater basis of a program of for investment allocations andAbidjan investment priorities, to preparation of the next project in

develop transportation the sector. The economic andplanning, and to promote financial constraints have notinstitutional development. allowed the implementation of the

recommendation on the financialsituation of SOTRA.

2. Feasibility To help prepare a planned Completed Helped in designing the project.study and final Abidjan Environmentaldesign for the protection Project.environmentalprotection of theAbidjan lagoon.3. Topographic To update mapping for Completed Used for preparation of theStudies infrastructure planning and forthcoming project.

design.4. A case study To develop new information Completed The study was integrated into theof rural/urban and insights that will help Long Term Perspective Studydevelopment facilitate the formulation and (LTPS) regarding such aspects asissues. implementation of better rural regional migrations, urban

strategies and policies, with productivity, etc.particular attention to issues ofresource mobilization, andinvestments choice betweenurban and rural areas.

-19-

Table 8A: Project Costs

(US$ million)

Project Components SAR Estimate Actual/Latest

Estimate

Housing Finance (CDMH)' 136.3 43.1Land Development (CTU) 40.8 16.0Urban Transport 71.8 83.1Training, Studies and Others 5.8 6.5

Sub-total Base Costs 254.7 148.7Physical Contingencies 7.7 0Price Contingencies 41.9 0

Total Project Costs, including Taxes 304.2 148.7of which Taxes 28.5 n/aTotal Project Costs, Net of Taxes 275.7 n/a

Table 8B: Project Financing

(US$ nmillion]

Source SAR Estimate Actual/LatestEstimate

IBRD _ 126.0 118.3Government Funds 62.2 30.4Private Funds 106.0 0Other (international) 10.0 0Total 304.2 148.7

Table 9: Economic Costs and Benefits

There are no data available to recalculate the economic rates of return that wereestimated in the SAR.

-20-

Table 10: Status of Legal Covenants in Loan Agreement

Section Covenant Present Fulfillment date Description of Covenant CommentsType Status

Original Revised2.02(b) I C continuous Open and maintain three Special Accounts in CAA on1 tenns and

conditions satisfactory to the Bank.3.01(a) 4, 5 NC continuous Borrower's commitment to project objectives; Borrower to carry out Borrower did not carry out the

project with due diligence and efficiency and in accordance with project with due diligence andappropriate practices, and to provide funds, facilities, services and efficiency, and did not provide theother resources required for project. agreed upon counterpart funds.

3.0 1 (b) 5, 10 C contiruous For purposes of Housing Finance component, Borrower to makeavailable proceeds of loan to CDMH to refinance sub-loans byparticipating banks in accordance with the Circular and the provisionsof Schedule 6 to this Agreement, and to cause participating banks toenter into sub-loans agreements with beneficiaries in accordance withcriteria, terms and conditions of Schedule 6 of this Agreement.

3.01(c) 4 NC continuous To carry out Housing Finance component, Borrower shall, as and when Borrower did not provide the agreedneeded, transfer funds to CDMIH in sufficient amounts to cover upon counterpart funds.CDMIHs estimated needs.

3.02 10 C continuous Procedures for procurement of goods, works and consultants' servicesfinanced out of the proceeds of the Loan.

3.03 1, 3, 5 C continuous In order to carry out Housing Finance component, Borrower (i) to openand maintain in CAA a CDMIH account (with an initial deposit ofCFAF 175 million); (ii) to establish and maintain a Steering Committeeand a Technical Secretariat; (iii) to appoint a Manager withqualifications and experience satisfactory to the Bank, to be assisted bycompetent staff with adequate numbers; and (iv) to communicate to theBank, prior to their publication, the draft schedule for the refinancingof sub-loans by CDMH, and all further amendments thereof

3.04 5, 10 C continuous Borrower shall cause CDMH to exclusively refinance sub-loanssubmitted by Participating Banks which comply with BCEAO'screditworthiness criteria.

3.05(a) I C condition of To carry out the Land Development component, Borrower to open andeffectiveness maintain in CAA a Compte des Terrains Urbains (CTU), on terms and

conditions satisfactory to the Bank.3.05(b) 5 C continuous To carry out the Land Development component, Borrower to establish

& (c) and maintain a Steering Committee and a Technical Secretariat, with.. _______ ____________ ________ ____________ ____ composition, functions and responsibilities satisfactory to the Bank.

-21-

3.05(d) 5 C condition of To carry out the Land Development component, Borrower to appoint aeffcctiveness Manager for CTU, with qualifications and experience satisfactory to

the Bank, to be assisted by competent staff in adequate numbers.3.05(e) 10 NC continuous To carry out the Land Development component, Borrower to ensure Borrower did not implement the

that all scrviced land is sold to clients in accordance with the criteria agreed privatization of theand the terms and conditions set forth in Schedule 6 to this Agreement. commercialization of serviced plots,

and did not comply with themodalities specified for suchcommercialization.

3.05(f) 10 C continuous To carry out the Land Development component, Borrower to obtain theBank's prior approval before carrying out a Development Program to beexecuted by DCGTx and to be financed by CTU.

4.01 1 CD by June 30 of Borrower to maintain adequate project records and accounts, and to Accounts of the Land Developmenteach year have the accounts audited by independent auditors acceptable to the component have not been kept

Bank. properly, and audit reports havebeen submitted with considerabledelays.

4.03 1 1 C by 1992 Borrower to maintain and repair its road network in the GreaterAbidjan area, and to provide the funds, facilities, services and otherresources required to cover, starting in 1992, the full maintenance costsof traffic signals, road markings, and traffic signs.

4.04 2 NC continuous Borrower to debit, from time to time, CDMH and CTU the equivalent Following the devaluation of thein CFA franc of the estimated amount to be paid by the Borrower to CFA franc in January 1994, theservice the portion of the Loan used to finance the Housing Finance CFA franc equivalent amountscomponent and the Land development component, respectively. necessary to scrvice the loan

portions exceed the funds availableI_______________ I_________________ _______________________________________________________ in the CDMH and CThJ accounts.

Covenant types:I = Accounts/audits. 8 = Indigenous people. Present status:2 = Financial performance/revenue generation 9 = Monitoring, review and reporting.

from beneficiaries. 10 = Project implementation not covered by C = Covenant complied with.3 = Flow and utilization of project funds. categories 1-9. CD = Complied with after delay.4 = Counterpart funding. 11 = Sectoral or cross-sectoral budgetary or CP = Complied with partially.5 = Management aspects of the project or other resource allocation.. NC = Not complied with.

executing agency. 12 = Sectoral or cross-sectoral policy/regulatory/6 = Environmental covenants. institutional action.7 = Involuntary resettlement. 13 = Other.

-22-

Table 11: Compliance with Operational Manual Statements

Statement Number and Title Describe and comment on lack of compliance

1. OD 10.60 The audit reports were not submitted on time.Accounting, financial Reporting and Auditing.

2. OD 12.20Special Accounts.

3. OP 12.30Statement of Expenditure.

Table 12: Bank Resources: Staff Inputs

Stage of Project Planned Revised ActualCycle

Weeks US$ Weeks US$ Weeks USSPreparation to 63.7Appraisal .Appraisal 59.2Negotiations throughBoard ApprovalSupervision 102.5 108.7 134.7CompletionTOTAL n/a n/a 257.6

-23-

Table 13: Bank Resources: Missions.

Stage of Monthl Number Days In Specialzed staff Performance Rating Types of ProblemsProject Cycle Year of Persons Field ddlls represented

Implemen- Develop-tatlon Status ment

ObjectivesThrough Mar-85 2 12appraisal IAppraisal May-85 8 EC, TRE, IE, FA,through Board TEC, CCApprovalSupervision I Nov.-87 1 _ EC I ISupervision 2 Jan-88 __31EC

Supervision 3 Jul.-88 3 3 EC, LEG, CONS 1 ISupervision 4 Nov.-89 1 3 EC 1 ISupervision 5 Feb.-90 I 9 EC I ISupervision 6 Jun-90 16 EC 2 1 PMP, AFSupervision 7 Feb.-91 3 4 EC,TEC,CONS 2 1 PMP,AFSupervision 8 May-91 4 7 EC, TEC, STE, 2 1 PMP, AF, FP

=__________ =_____ _ _____ CONSSupervision 9 Oct-91 4 7 STE, TEC, CONS 2 2 CLC, PMP, AF, SP,

_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ ~~~~~~~~FPSupervision 10 Apr.-92 2 10 TEC, UP 3 3 CLC, PMP, AF, PP,

.____ __ _ _SPFPSupervision 11 Oct-92 3 3 TEC, MFA, EC 3 3 CLC, PMP,

___ _________ ______ ______ ______________ __________ AF, PP, SP, FPSupervision 12 Jan-93 2 11 TEC, MFA 2 2 CLC, PMP, AF, PP,

SP, FPSupervision 13 Jun-93 7 9 TEC, TP, CONS 4 4 CLC, PMP, AF, PP,

SP, FPSupervision 14 Nov.-93 2 3 UFS, YP 3 3 CLC, PMP, AF, PP,

I___________ I_____ I___I __I__.___ __________ SP, FPSupervisionl5 15 _ T_IICompletion Mar-95 1 1

Key to specialized staff skills TRE = Traffic Engineer MFA = Municipal Financial AnalystEC = Economist TEC = Transport Economist UFS = Urban financial SpecialistIE = Infrastructure Engineer LEG = Legal YP = Young ProfessionalFA = Financial Analyst CONS = ConsultantCC = Computer Consultant STE = Senior Transport EngineerUP = Urban Planner

Key to performance ratingI = Problem Free 2 = Moderate Problems 3 = Major Problems 4 = Major Problems -

Corrective action to be taken.

Key to problemsAF = Availability of funds FP = Financial performance PP = Procurement progressCLC = Compliance with legal covenants PMP = Project management perfonmance SP = Studies progress.

-24-

APPENDIXES

A. Mission's Aide-Memoire

1. Une mission de la Banque Mondiale, composee de Messrs J. Mazurelle (Chef de Mission) et P.Geli (Consultant), a sejoumr en Cote d'lvoire du 11 au 23 mars 1995 pour finaliser le Rapportd'Achevement du Troisieme Projet Urbain, pour lequel le pret No.2789-IVC a e cloture le 31 decembre1994. La mission remercie tout particulierement S.E. Monsieur K. Tiapani, Ministre de la Construction etde l'Urbanisme, de lui avoir accorde une audience, au cours de laquelle elle a pu lui presenter lesconclusions et recommendations principales de ce rapport d'achevement. La mission remercie egalementles cadres de la CAA et de la DCGTx avec lesquels elle a eu des reunions de travail.

2. L'evaluation retrospective du Troisieme Projet Urbain faite independamment par la Banques'inspire largement du rapport prepare par le Gouvemement, qui comprend une description detaillee desactivites realisees et des problemes rencontres au cours de l'execution du projet. Le rapport d'achevementqui sera soumis au Conseil d'Administration de la Banque Mondiale doit presenter les deux points de vue,et il n'est donc pas necessaire de les harmoniser. La mission a toutefois pu constater qu'il y avait unecertaine convergence de vues entre I'analyse du Gouvemement et celle de la Banque sur 1'execution duprojet et ses resultats.

3. Les principaux objectifs du projet etaient (a) d'aider a la reorientation des politiques et programmesdes societes chargees de l'amenagement des terrains et du logement social; (b) de mettre en place desmecanismes permettant de mobiliser des ressources a long terme afin d'encourager la participation dusecteur prive au financement de l'habitat et d'inciter les menages a acceder a la proprilte; et (c) de financerles investissements complementaires necessaires a une utilisation optimale du reseau d'infrastructuresexistantes utilise par les transports en commun. Si le demier objectif a bien ete atteint, il n'en est pas dememe des deux premiers. La reorientation des politiques et programmes a ete tres limitee, et lesmecanismes mis en place n'ont pas permis de mobiliser des ressources a long terme, en dehors du pret de laBanque Mondiale. Les resultats de la composante "Compte de Mobilisation de i'Habitat" (qui a eu parailleurs des effets tres positifs) et de la composante "Compte des Terrains Urbains" (qui semble avoirproduit des terrains equipes reserves plus a des investisseurs/speculateurs qu'a des candidats a l'accession ala propriete) restent bien en dessous des previsions. Au total, les resultats du projet ne sont passatisfaisants, et sa viabilite peut etre jugee comme incertaine.

4. Les causes de cet echec sont multiples. Certaines sont dues a des defaillances tant de la BanqueMondiale que du Gouvernement aussi bien au stade de l'execution que de la conception, y compris certaineshesitations a s'engager pleinement dans une politique de privatisation de la production et de lacommercialisation de terrains equipes. D'autres sont liees a la conjecture particulierement difficile qu'aconnue la CUte d'lvoire pendant le projet, avec ses consequences defavorables en ce qui conceme l'absencede fonds de contrepartie, le manque de fiquidites des banques commerciales et la reduction du pouvoird'achat des particuliers.

5. Parmi les lecons que l'on peut tirer de 1'ex6cution de ce Troisieme Projet Urbain, il en est une quiest particulierement importante pour la preparation du prochain projet de developpement urbain en COted'lvoire. Aussi bien concus que puissent etre les instruments mis en place, un dispositif de financement dulogement axe sur le secteur prive, portant sur la production de parcelles et la construction de maisons, nepeut donner de resultats veritablement satisfaisants si le contexte legislatif et reglementaire n'est paspropice a la participation du secteur prive.

-25-

B. Borrower Contribution to the ICRIntroduction.

1. The Third Urban Development Project (UDP3) was financed by World Bank loan 2789-IVC in the amount of one hundred twenty-six million dollars (US$126,000,000), signed in April1988. The closing date of the loan was initially scheduled for December 31, 1992, but waspostponed for the first time to December 31, 1993, since some operations could not be completedby the original date. A completion plan was then proposed by the Ivorian government andadopted by the World Bank in March 1993. Following delays by the World Bank in respondingto requests for a "no objection" notice, and in view of the time required to perform all the work,the Ivorian government requested a further postponement of the loan's closing date, which wasdefinitively set for June 30, 1994. However, the Bank allowed some work to be completed bySeptember 30, 1994.

Description of the Project.

2. The main objectives of the project are as follows:

* to help the companies in charge of site development and low-cost housing to reorienttheir policies and programs;

* to set up arrangements for mobilizing long-term funding as an incentive to the privatesector to contribute to financing housing and as a way of encouraging families tobecome home-owners;

D to finance the additional investments required to make optimum use of the existinginfrastructure network used by the public transportation system.

3. The project has four basic components:

3 Component A: Housing Finance (Compte de Mobilization de l'Habitat--CDMH). Thisis a special account for refinancing the banks granting the loans to home-owners.

* Component B: Urban Site Development (Compte des Terrains Urbains--CTU). Thisspecial account is a revolving fund for financing improvements on the building sites. Inthe long run, the sale of lots should generate profits which can be used to start otherprojects.

* Component C: Transportation Infrastructure. This component includes a whole rangeof civil engineering works concentrated in the greater Abidjan area.

* Component D: Additional Activities and Studies

Component A is implemented by the Caisse Autonome d'Amortissement (CAA), under theresponsibility of a Management Committee, component B by the DCGTx [Direction et Contr6ledes Grands Travaux] under the responsibility of a Management Committee, component C by theDCGTx under the responsibility of the Ministry of Equipment, Transportation, andTelecommunications, and component D by the DCGTx, with the assistance of consultants andunder the responsibility of the Ministry of Equipment, Transportation, and Telecommunicationsand the Ministry of Construction and Urban Affairs.

-26-

Transportation Infrastructure Component.

4. Implementation of subprojects

* Construction and maintenance of the existing road system: 33 road segments measuringa total of 51 km were scheduled for rehabilitation in the following neighborhoods:Plateau, Cocody, Yopougon, Treichville, Marcory, Zone IV, Koumassi, Port Bouet,and Vridi; 40 road segments measuring a total of 49 km have been fully repaired.

* Development of bus lanes: 1.5 km of bus lanes, with two lanes alongside for othervehicles, were developed out of 2.55 km programmed for bus traffic.

* Improvement of access roads in the Blanco, Abobo, Williamsville, Marcory, andCocody neighborhoods: 30.33 km of access roads were built in these neighborhoods,as compared to the 23.5 km planned.

* Construction of the express road from Agban to Indenie: 2.73 km of express waylinking Latrille Boulevard to Mitterrand Boulevard, and a 4.55 km extension to LatrilleBoulevard were built (as compared to 3.0 km planned).

l Improvements and installation of equipment at 30 intersections: 47 intersections wereequipped with three-color traffic lights, and street lamps were installed along severalroad segments. Maintenance of traffic lights was also provided.

Main problems encountered.

5. The World Bank's share of financing under the loan agreement created implementationproblems for the initial subprojects, as outlined below. The economic crisis in CUte d'Ivoireprevented the country from making regular payments of its counterpart funds. This in turnslowed down the work in progress and increased the costs of subsequent projects, since firms'bids included provisions for nonpayment of the counterpart funds. The World Bank should becommended on its constructive response as, at the request of the Ivorian authorities, it agreed toincrease its financing rate for this project component from 75 percent to 100 percent, which hadthe immediate effect of lowering unit prices and stepping up the pace of the work in progress. TheWorld Bank has, however, made things difficult at times by refusing to accept the Ivorianauthorities' suggestions for improving project implementation.

6. As part of the subproject for developing a separate bus lane along Nangui AbrogouaBoulevard, the Bank rejected Cote d'Ivoire's proposal to give the work contract to the firm thatcame in second in the competitive bidding. The Ivorian position was based on the complexity ofthe work to be performed by a relatively shaky firm and on the fact that the difference betweenthe bids of the two firms in first and second place was minor. The winning firm was unable tocomplete the work, which was therefore turned over to the second-place firm to complete under anegotiated contract which the Bank accepted via a "no-objection notice". Delays occurred inissuing the "no-objection" notices for the bidding documents and the proposed contracts, causingdelays in performance of the work and thus in disbursements.

-27-

Impact of the project's transportation component on the urban environment.

7. The completion of this component had a highly positive impact on the urban environmentin various ways. It helped improve the standard of living of the residents of Abidjan. Proof ofthis can be seen in the smooth flow of traffic from the residential neighborhoods of II Plateaux, laRiviera, Abobo, Williamsville, and even Bingerville to "le Plateau" business center via Latrille andMitterrand Boulevards, and in the clear improvement in access to various neighborhoods,particularly the large settlement of 50,000 inhabitants at Koumassi, which used to be difficult toreach--and Yopougon, Marcory, Treichville, and Adjame.

8. A number of roadways have unquestionably been saved by the reconstruction and repairwork, although some roads which have not been rebuilt have now reached their reinforcementlimit. These roads could be saved if a similar project were to be put in place. If it is not,however, the investment required later will be very heavy. The extension of Latrille Boulevard inCocody Nord is benefitting all the neighborhoods, such as Aghien, Perles, Star, and Angre,developing there. The completion of the separate bus lane alongside the two-way road toAdjame, which drains off 33 percent of the SOTRA buses, and the rehabilitation of 38th street,another road with very heavy SOTRA traffic, have eased the considerable worries of themanagement of the main urban transportation company. Now passengers from Abobo andYopougon, the two most populous communes in Abidjan, can travel around easily, and thenightmare of the long lines of traffic jams is over.

9. Another urban development program with a major transportation component is urgentlyneeded. This component should include the rehabilitation of existing roads and a more limitedprogram to open new roadways to provide access to new neighborhoods as they are developed.It is important to note that the objectives of the transportation component were not only achieved,but largely surpassed.

Purpose, status, and organization of the CDMH.

10. The CDMIH was established by Decree No. 87/367 of April 1, 1987 to extend the initialmaturities of loans to home-owners. It is part of the CAA (Caisse Autonome d'Amortissement)and has no separate legal status. The CDMH's expenditures, or refinancing, are committed, paid,or authorized by the Managing Director (MD) of the CAA. Its daily management is handled byan administrator appointed by the CAA's MD. The MD of the CAA is chairman of the CDMHManagement Commnittee (CDG), and representatives from the Ministry of Economy and Finance,Construction and Urban Affairs, the CAA, the Central Bank of West African States (BCEAO),and the Direction et Contr6le des Grands Travaux [DCGTx] sit on it. The ManagementCommittee has a technical secretariat composed of the CDMH administrator, a representativefrom the Ministry of Construction and Urban Affairs, and a representative from the DCGTx, whoacts as coordinator.

11. Refinancing rate. Initially, the CDMH refinancing rate was aligned with the BCEAO'spreferential discount rate (TEP). But in view of the very steep increases in the TEP starting in1988, which went up by 5 points in two years, the Management Committee considered it essentialto unpeg the CDMH refinancing rate from the Central Bank's rate. The Current CDMHrefinancing rate is 8 percent, while the BCEAO's rate stands at 11 percent.

-28-

The rate applied to home buyers is currently 11.5 percent, and is broken down as follows:

Percentage- Refinancing rate: 8.0- Bank spread: 3.0Total, pre-tax 11.0Life and fire insurance: 0.5

TOTAL 11.5

Note: This rate is exempt from the TPS (Tax on Services), except for individual builders.

12. Processing of applications. The process of obtaining access to refinancing distinguishesbetween the construction of individual units and housing developments which involve largeamounts of refinancing. The main criterion applied by the Management Committee in approving acommercial bank is its creditworthiness as judged by the BCEAO. A primary objective of theCDMH is to encourage the production of housing for low-income families. This is why arefinancing scale was established. This scale provides for different refinancing percentages basedon the selling price and the term of the loan. Thus, the longer the loan's term--i.e., 18 to 20 years--and the lower the selling price of the housing--i.e., less than CFA franc 7 million--the higher isthe amount refinanced.

Results achieved.

13. Approved real estate developments. From the time it started up in September 1988, thedate the CDMIH became operational, until September 30, 1994, the Management Committee gaveits approval to real estate development projects involving 7,300 dwellings with loans eligible forits refinancing. This figure can be broken down as follows, according to purchase price bands

Selling Price Number of dwellings Percentage of total

less than 7 million 2,750 37.67 to 10 million 2,800 38.410 to 15 million 1,750 24.0

7,300 100 percent

14. Location of programs. Except for three programs located in Bouake, virtually all thedevelopment is concentrated in Abidjan, and mainly in the following communes:

Percentage

- Yopougon: 39- Cocody: 43- Other communes: 14

15. Organization of the property development sector

There are three (3) different groups of developers:

-29-

(i) Companies whose regular business is property development. There are twosubgroups here:

- the first subgroup is composed of the former construction companies;- the second subgroup comprises the new developers which do only that.

(ii) Part-time developers which come together to establish a non-stock real estatecorporation for a single operation and then disband;

(iii) Finally, the programs initiated by employers to help their employees buy a home.

16. Refinancing. By September 30, 1994, approximately 3,288 loans extended bycommercial banks had been refinanced by the CDMH, to a total of around CFA franc 17 billion.

- the average amount refinanced was 5.3 million;- the average amount of the loans was 6.4 million;- the average selling price of the dwellings was 7.8 million;- the average term of the loans was 13 years;- the average monthly income of the buyers was CFA franc 290,000;- the average individual down payment was 18 percent.

Major problems encountered.

17. It took much longer to put the CDMH into operation than planned at the outset of theproject. This is attributed to the fact that, because of the C6te d'Ivoire's economic problems, itwas impossible to maintain an equal balance between the Bank's financing (50 percent) and theTreasury's contributions (50 percent), and also to the sharp rise in interest rates. Other obstacleswere identified as well, including the following:

(a) The individual contribution or down payment, fixed at a minimum of 10 percent of theselling price of the housing, posed real problems for households with modest incomes.These households must in fact accumulate savings over a period of years, i.e., 3 to 5years.

(b) Financing the cost of the legal instruments, which account for 7 percent to 8 percentof the selling price of the housing. These costs cannot be covered by the loan underthe current refinancing conditions. If account is also taken of the cost of thepaperwork, the individual contribution required of the buyer is in the neighborhood of18 to 20 percent of the selling price.

(c) Access to bank credit. The CDMIH is currently providing financing only for wage-earners in the formal sector who can prove that they have a steady income, on thebasis of payroll slips. In view of the economic situation in C6te d'Ivoire and thedominant role played by the informal sector, it is clear that a broad segment of thepopulation is de facto excluded from CDM:H funds.

(d) Retirement age. The new laws established by the Cote d'Ivoire government pertainingto the retirement of government workers have profoundly changed the conditions

-30-

governing banks' intervention. Now only civil servants with a total of 30 years ofservice are entitled to retirement. This means that a large segment of this group ofworkers is excluded.

Success of the CDMH and future prospects.

18. The CDMH has made it possible for commercial banks to obtain new funds for financinghousing. This has therefore increased the number of housing loans. The CDMH is undeniablyresponsible for the recovery of private real estate development. In fact, around ten real estatedevelopment companies have been established, in addition to the ones that were alreadyoperating. The CDMH is also a factor in the mobilization of domestic savings, because of therequired individual contribution, for instance. The CDMH is an essential tool of economicrecovery, since it has revitalized the construction and public works sector, a labor-intensivesector, and has had a special impact on small and medium-scale construction businesses. Thecreation of the CDMH has also affected sectors such as insurance--life and fire insurance--andnotaries, who are needed to draw up the deeds of sale and credit instruments.

Recommendations.

19. Review of refinancing conditions. Loans to households with a monthly income ofaround CFA franc 300,000 are eligible for CDMH. The rate applied by banks is 11.5 percent.The CDMH has therefore made it possible to finance housing for middle-income families earningfrom CFA franc 250,000 to 300,000 a month. The CDMH could offer two or three refinancingplans at two or three different rates, as follows:

(a) The refinancing rate resulting from a mix of available resources (basic refinancingrate) would be applied to the current target (income over CFA franc 250,000 amonth);

(b) The refinancing rate could be increased for loans made for rental properties. Thisincrease is justified by the fact that the loan recipient would have not only his income,but additional funds in the form of rents, to repay his loan. Loans to these customerscould also have repayment periods shorter than the current minimum 11-year term.

(c) The refinancing rate could be reduced for loans granted to low-income households(less than CFA franc 250,000) for the purchase of very inexpensive housing.

These rate adjustments will essentially be based on two factors: purchase price and householdincome. The CDMH will naturally be run so as to ensure that it remains financially stable and thatits average refinancing rate is equivalent to that derived from the average cost of funds. Theoperation can therefore be summed up as an internal cross subsidy, and the inclusion of low-income households does not entail any subsidies from any other type of agency.

Purpose, status, and organization of the CTU.

20. The purpose of the CTU component is to finance improvements on building sitesaccessible to low-income families. The CTU was established by Decree No. 87-368 on April 1,1987. It is part of the CAA (Caisse Autonome d'Amortissement), and does not have separate

-31-

legal status. The Managing Director of the CAA is chairman of the Management Committee, theentity in charge of managing the CTU. Its members include representatives of the Ministries ofEconomy, Finance, and Planning, and Construction and Urban Affairs, the Direction et Controledes Grands Travaux, and the Caisse Autonome d'Amortissement. The Management Committeedraws up the physical and financial urban site development programs, and sets the selling pricesand terms of sale. The Management Committee is assisted by a technical secretariat, chaired bythe DCGTx and consisting of the Ministry of Construction and Urban Affairs and the CaisseAutonome d'Amortissement. It is in charge of preparing the dossiers required for thedevelopment work. An administrator appointed by the MD of the CAA is responsible for the day-to-day management of the CTU. In practice, the CAA manages the revolving fund, and theMinistry of Construction and Urban Affairs defines the urban development policy. The DCGTxmakes the land available, conducts the studies, performs the site development work, handlesmarketing and loan recovery, and is therefore the operating agent for CTU-financed programs. Itmust balance its accounts and show a profit so that new programs can be started up without anyresort to further borrowing.

21. CTU Funds. The initial working capital or revolving fund is being financed by aUS$12,650,000 loan, equivalent to CFA franc 3.795 billion at the exchange rate of US$1 = CFAfranc 300, made by the World Bank as part of the Third Urban Development Project (UDP3).Later growth of CTU operations will be financed first by the margin on the initial transactions,then by recourse to national savings, and possibly by additional borrowing.

22. CTU Activities. Since it was established, the CTU has financed two large-scaleoperations known as CTU1 and CTU2, covering a total of 4,500 fully-serviced lots offered to realestate development companies and to individuals. The first operation was located in thecommune of Cocody, at Riviera Palmeraie, while the second one was in the commune ofYopougon - Ananeraie. The selling price was CFA franc 4,100 per m2 for the first operation andCFA franc 5,500 per m2 for the second. All the lots involved in both operations had beencompletely sold by September 30, 1994.

Theoretical selling conditions- 30 percent as a deposit;- the remainder in 24 equal monthly installments.

Major problems encountered.

23. Defects in the arrangement. The defects discussed below do not stem from thearrangement itself, but rather were the subject of critical assessments by buyers, who feel that theselling prices of the lots are relatively high, which makes them inaccessible to modest-incomefamilies. In response to these comments, studies are being conducted with a view to diversifyingthe products offered and reducing the initial investment by deferring certain site improvementsand making holding companies [societes de patrimoine] responsible for certain utility systems,such as water supply and electricity. All these steps should make it possible to reduce the sellingprices of the lots so that families with modest incomes can have access to them. The objective isto produce plots ranging from CFA franc 800,000 to CFA franc 1,000,000. The CTU3 operationwill serve as a pilot project to try out these new proposals.

-32-

24. Coordination of CTU activities. As indicated in paragraph 3 above, three agencies areparticipating in the CTU, as follows:

- the Ministry of Economy and Finance, through the CAA;- the Ministry of Construction and Urban Affairs; and,- the Direction et Contr6le des Grands Travaux.

The first projects, CTU1 and CTU2, were designed almost single-handedly by the DCGTx,without much assistance from the other partners, whose role was confined to approving their mainlines. Therefore, it is now the DCGTx that is being criticized for taking control of the CTU andblamed for its defects and malfunctioning. Further, since the roles were never clearly defined anddistributed, the DCGTx started up the operation by focusing on technical results, or in otherwords site development work.

25. As a result, management issues such as customer accounts were neglected. At the outset,the Real Estate Sales Office was restricted to monitoring sales and collections, and sometimes nodistinction was drawn between CTU operations and SETU-Liquidation operations. The availabledata base and the financial statements sent to the CAA were not sufficient to enable it to establishan acceptable system of accounts. It should also be noted that when the CTU started up,conditions were not propitious for close cooperation among the various participants. We believethat this situation was not taken as seriously as it should have been. Subsequently, thoseresponsible in the various ministries and offices involved tried to find the common ground neededto create a basis for working together. The various aspects of operations in 1993 were discussedat length with the CAA, which indicated that it had the information needed to prepare the 1993accounts. The DCGTx is waiting to receive comments and suggestions on CTU3 from both theMinistry of Construction and Urban Affairs and the CAA.

26. Technical aspects. No major problems have been encountered. The DCGTx hasexperience in this area as a result of the land improvement work it has done in conjunction withthe liquidation of SETU.

27. Operations. CTU's management units have not performed satisfactorily. In contrast tothe CDMH, whose Management Committee meets once a month and whose Technical Secretariatmeets at least as often, the CTU's Management Committee has met relatively infrequently.

28. Development of the lots sold. The delays in developing the lots, and especially theprotracted period between completion of the site improvements and the first construction, are tobe deplored. The deterioration of a number of storm water drainage systems for want ofmaintenance, the theft of sewerage pipes, and especially an increase in government expenses foritems such as public lighting, are all attributed to these delays.

Recommendations.

29. The CTU is the only arrangement in place for producing building sites at the present time.In other words, the real estate development business is closely linked to its survival . Althoughthere is nothing wrong with the program from a purely technical standpoint, the same is not trueof other facets of the program, such as coordination of the activities of the various participants,and financial control. The DCGTx should continue to use its know-how to good advantage. The

-33-

current conditions for cooperation are far better than the situation which prevailed when the CTUbegan operations.

Additional Activities And Studies

30. Three urban housing studies have been initiated, i.e.:

* A study on the bank of property and housing indicators is being finalized. It willprovide a tool for keeping track of supply and demand on the land and real estatemarkets, and of buying trends on those markets, broken down by socio-economicgroups, in the form of a "performance chart" grouping together all the different data onthe subject;

* A study analyzing property and real estate businesses is nearly completed. This studywill make it possible to determine the status of the property and housing market and tosuggest housing policy strategies, especially in the area of rental housing for low-income groups (small business rentals),

* The Land Improvement Concession bill is being finalized. This should enable thegovernment to divest itself of direct responsibility for improving and marketing urbanlots by granting concessions covering these tasks to other public or private oneratorslegally separate from it. In this way the economic stakes of the operations will be quiteapparent, and they will be based on a clear distribution of responsibilities.

31. Two important studies were conducted in the area of urban transport:

* the Abidjan Transport Plan, which made it possible to define the tariff and regulatorymeasures required to modulate demand, plan the medium and long-term transportationinfrastructure for the Abidjan metropolitan area (particularly major groundtransportation routes, terminals for urban and interurban passenger and freight traffic,and parking areas for automobiles and trucks) and also to make projections andrecommendations regarding the financial equilibrium and institutional organization ofthe sector;

* the study on SOTRA, which proposed measures whose implementation should enablethe company's financial equilibrium to be restored, thus allowing it to carry out itsinvestment programs and perform its role of passenger transportation operator in thegreater Abidjan urban area effectively.

32. In line with the development of the urban economy, two pilot operations were executed:

* an informal sector support project, whose purpose is to facilitate access to credit forthe micro-enterprise sector via NGOs acting as financial intermediaries; the project hasfinanced a total of 354 loans (involving some CFA franc 160 million) to small tradesand micro-businesses in Abidjan, with a very satisfactory average loan recovery rate(almost 89 percent, compared to the initial target of 80 percent). As a result, it has beendecided to extend the project, within the MDP/IBRD framework, to towns in theinterior;

-34-

* a study of urban/rural exchanges in the Center-West Region, which on the basis of thepreparation of Social Accounting Matrices (Matrices de Compatibilite Sociale -MACS) describing the settlements and economic activities of the department of Daloafor the years of 1980, 1990 and 2000, resulted in a proposed strategy and actionprogram designed to expand these exchanges. The study led to the introduction of anew method for defining and implementing a regional development policy, based on themobilization and alternative forms of allocation of resources and investments betweenrural and urban areas.

IMAGING

Report No: 1458S9Type: ICR