Document ofThe World Bank

Report No: 20143-GH

PROJECT APPRAISAL DOCUMENT

ON A

PROPOSED CREDIT

IN THE AMOUNT OF SDR 8.1 MILLION(US$ 10.83 MILLION EQUIVALENT)

TO THE

REPUBLIC OF GHANA

FOR AN

URBAN 5 PROJECT

IN SUPPORT OF THE FIRST PHASE OF THE

URBAN DEVELOPMENT PROGRAM

March 9, 2000

Water and Urban 2Country Department 10Africa Regional Office

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CURRENCY EQUIVALENTS

(Exchange Rate Effective January 31, 2000)

Currency Unit = Cedi (GHC)GHC I= US$ 0 0002849

US$ I = GHC 3,510 00

FISCAL YEARJanuary 1 - December 31

ABBREVIATIONS AND ACRONYMSAFD French Aid AgencyAPL Adaptable Program LoanCAS Country Assistance StrategyCBA Cost Benefit AnalysisCBO Community Based OrganizationCDF Comprehensive Development FrameworkCEA Cost Effectiveness AnalysisCIDA Canadian International Development AgencyCWSP-2 Second Community Water and Sanitation ProjectDA District AssemblyDACF District Assembly Common FundDANIDA Danish International Development AgencyDCA Development Credit AgreementDCD District Coordinating DirectorDFO District Finance OfficerERR Economic Rate of ReturnEU European UnionGOG Government of GhanaGTZ/KFW German Agency for Technical Cooperation/Kreditanstalt fur WiederaufbauICB International Competitive BiddingILGS Institute of Local Government StudiesLACI Loan Administration Change InitiativeLGPSU Local Government Project Support UnitLVB Land Valuation BoardMLGRD Ministry of Local Government and Rural DevelopmentNCB National Competitive BiddingNDF Nordic Development FundNDPC National Development Planning CommissionNGO Non Governmental OrganizationPC Project CoordinatorPCC Project Coordinating CommitteePIM Project Implementation ManualPMR Project Management ReportRIAP Revenue Improvement Action PlanSFR Statement of Funds RequirementTSC Technical Services CentreUESP Urban Environment Sanutation ProjectUVPBA Urban V Project Bank Account

Vice President Jean-Louis Sarbib, AFRVPCountry Manager/Director Peter C Harrold, AFC 10

Sector Manager/Director Letitia A Obeng, AFTU2Task Team Leader/Task Manager Jagdish K Bahal, AFTU2

GHANAURBAN 5

CONTENTS

A. Program Purpose and Project Development Objective Page

1. Program purpose and program phasing 32. Project development objective 43. Key performance indicators 5

B. Strategic Context

1. Sector-related Country Assistance Strategy (CAS) goal supported by the project 62. Main sector issues and Government strategy 63. Sector issues to be addressed by the project and strategic choices 74. Program description and performance triggers for subsequent loans 7

C. Program and Project Description Summary

1. Project components 82. Key policy and institutional reforms supported by the project 103. Benefits and target population 114. Institutional and implementation arrangements 11

D. Project Rationale

1. Project alternatives considered and reasons for rejection 152. Major related projects financed by the Bank and other development agencies 163. Lessons learned and reflected in proposed project design 174. Indications of borrower commitment and ownership 185. Value added of Bank support in this project 18

E. Summary Project Analysis

1. Economic 182. Financial 193. Technical 204. Institutional 205. Social 206. Environmental assessment 217. Participatory approach 21

F. Sustainability and Risks

1. Sustainability 222. Critical risks 22

3. Possible controversial aspects 23

G. Main Credit Conditions

1. Effectiveness Condition 232. Other 23

H. Readiness for Implementation 23

I. Compliance with Bank Policies 23

Annexes

Annex 1: Project Design Summary 24Annex 2: Project Description 27Annex 3: Estimated Project Costs 38Annex 4: Cost-Effectiveness Analysis Summary 40Annex 5: Financial Summary 47Annex 6: Procurement and Disbursement Arrangements 51Annex 7: Project Processing Schedule 56Annex 8: Documents in the Project File 57Annex 9: Statement of Loans and Credits 58Annex 10: Country at a Glance 60Annex 11: Profile of Project Towns 62Annex 12: Programme Letter 69

MAP(S)IBRD 26553

GHANA

URBAN 5

Project Appraisal Document

Afnca Regional OfficeAFTU2

Date March 9, 2000 Team Leader: Jagdish K BahalCountry Manager/Director: Peter C Harrold Sector Manager/Director. Letitia A ObengProject ID: P050624 Sector(s) UU - Urban Development AdjustmentLending Instrument- Adaptable Program Loan (APL) Theme(s): Urban

Poverty Targeted Intervention: Y

IDA Others Total Commitment ClosingUSS m % USS m USS m Date Date

APL I 10 83 486 11 47 22 30 06/30/2003 Government of GhanaLoan/Credit _ _ _ _ _ _ _ _ _ _ _

APL 2 25 34 73 8 9 00 34 34 06/30/2007 Government of GhanaLoan/Credit _ _ _ _ _

APL 3 37 00 74 0 13 00 50 00 06/30/2011 Government of GhanaLoan/

C red it _ _ _ _ _ _ _ __ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _

Total 73 17 ____ 33 47 1 106 64 __ _ _ _ _ _ _ __ _ _ _ _ _ _ _ _

Project Financing Data[ I Loan [XI Credit [] Grant [ Guarantee []Other (Specify)

For Loans/Credits/Others:Amount (US$m) 10.83

Proposed Terms: Smgle CurrencyGrace period (years) 10 Years to matunty 40Commitment fee 0 5 Service charge 0 75%F16*1ing =a&j V Jm § I Govermment 0 34 0 00 0 34IBRDIDA 8 01 2 82 10 83AFD 433 1 67 600NORDIC DEVELOPMENT FUND 0 62 2 98 3 60DISTRICT ASSEMBLIES 1 53 0 00 1 53

Total 14 83 7 47 22 30

Borrower GOVERNMENT OF GHANA

Responsible agency MINISTRY OF LOCAL GOVERNMENT AND RURAL DEVELOPMENTMLGRDAddress P 0 Box M50, Accra, GhanaContact Person Mr S Y M ZanuTel (233-21) 663 668 Fax (233-21) 664870 Email

Other Agency(ies)Local Government Project Support Unit (LGPSU) of MLGRD

Address P 0 Box M50, Accra GhanaContact Person Mr Godfrey EwoolTel (233-21) 670 364 Fax (233-21) 670 363 Email gewool@ighmail com

Estimated disbursements ( Bank FYIUS$M).FYf .2001 2002 2003

Annual 2 0 6 0 2 8Cumulative 2 0 8 0 10 8

Project implementation period Program 11 years FY2000-20 11, APL 1 FY2000-FY2003Expected effectiveness date 06/30/2000 Expected closing date 06/30/2003

OCSA~LPflOF~ P. D- 9 -M

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A. Program Purpose and Project Development Objective

1 Program purpose and program phasingI I The purpose of this Adaptable Program Loan is to ensure the sustainable delivery of adequateurban infrastructure and services, particularly in under-served secondary towns This will be achievedthrough local level capacity building and improvement of urban infrastructure and services in support ofthe Govemment of Ghana's decentralization program

1 2 Program scope The World Bank has been involved in the provision of infrastructure services inGhana through three recent projects--Urban II and the Urban Environmental Sanitation Project (UESP),which cover basic urban services in the five main cities, and the Local Government Development Project(LGDP), which covers basic social and economic infrastructure in 12 secondary towns The proposedAdaptable Program Loan (APL) seeks to improve basic infrastructure and services in the remaining 25urban towns, in 23 District Assemblies (DAs) in Ghana, thereby reaching the urban population that hasreceived least attention in the past by government or donors, and focusing on areas which would benefit alarge percentage of the low income urban population Since the majority of these constitute the weakerDAs, the APL is designed to launch a phased program of capacity building for the DAs, combined withphysical investments in critical basic infrastructure and services

1 3 Program phasing The program has three phases The first phase will cover 3 years, and the twosubsequent phases will each cover 4 years The underlying principle of the program is to ensureultimately that infrastructure needs are demand-driven from the DAs and reflect communities' needs andpriorities, and that DAs compete for scarce resources In order to reach this ambitious goal, a program ofcapacity building is critical to strengthen DAs' financial, management and technical capacities Becausethe DAs are starting from such weak positions, the program is phased in such a way that the institutionalstrengthening activities, which would be initiated in the first phase and continue and deepen in thesubsequent phases, would be accompanied by a program of physical investments

• Phase I The objective of the first phase is to strengthen the technical, financial and managementcapacities of the 23 participating DAs and finance the provision and/or rehabilitation of some basicinfrastructure It will focus on institutional strengthening and capacity building activities throughtraining of DA staff and technical assistance in activities such as improving financial managementand revenue generation through mapping, land revaluation and improved financial and accountingsystems This phase will also finance at least one infrastructure sub-project in each of the 25 towns toenable DAs to go through the process of procuring and managing consultants and contractors for sub-project preparation and implementation using Bank guidelines (a learnig-by-doing approach) Aprofile of the 25 project towns is attached as Annex 11

* Phase 2 The objective of the second phase will be to strengthen and deepen the capacity buildinginitiatives from Phase I and provide basic infrastructure for the participating DAs on a demand-driven and competitive basis During this phase, the program will be expanded to include 11additional secondary towns (which are currently a part of the LGDP project) This phase will (i)continue to provide training and technical assistance, with additional specific training needs providedto DAs on a demand-driven basis to ensure relevance, and (ii) provide funds for physicalinfrastructure investments which DAs will access on a competitive, demand-driven basis, with clearselection criteria that each DA will have to meet before they become eligible for the funds Duringthis and the subsequent phase, there will be close monitoring of DA performance improvements(particularly regarding financial management and own source revenue generation) in order to assessand strengthen the sustainability of investments

* Phase 3 The objective of the final phase of the program will be to finance infrastructure needs in allurban cities and towns in Ghana The scope of the program will therefore be expanded to include thefive metropolitan and municipal assemblies (Accra, Kumasi, Sekondi-Takoradi, Tema and Tamale),

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as well as the LGDP towns which were brought in during Phase 2. Funds will be provided on ademand-driven competitive basis, and each proposal will have to meet the selection criteria. Trainingwill continue to be provided on a demand-driven basis.

1.4 Since the program will be implemented in three phases, each phase will constitute a "project"with a separate credit agreement. Any references to "the project" in the remainder of this document willthus refer to the first phase of the program.

2. Project development objective: (see Annex 1)

2.1 The objective of Phase 1 of the program (i.e. the project) is to strengthen the technical, financialand management capacities of the 23 participating DAs and to finance the provision and/or rehabilitationof some basic infrastructure.

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3. Key performance indicators: (see Annex 1)

PHASE 1 END-OF-PROGRAMPERFORMANCE INDICATORS PERFORMANCE INDICATORS

(to be achieved by FY2003) (to be achieved by FY2011)Institutional indicators Institutional indicators1. Local Government Service Act enacted* I. Operational Local Government Service Act2. A phased implementation plan prepared to implement 2. By program end, full authority to DAs for staff

key recommendations of study on fiscal recruitment and personnel managementdecentralization where they relate to local 3. Competent technical and financial staff in key posts ingovernments* all participating DAs, supported by effective human

3. Technical and financial staff in key posts (district resource development policy and proceduresengineer, planner, financial officer) are trained and/or 4. District Development Plans and realistic annualcompetent staff are in key posts in place for at least 6 budgets in all participating DAs developed withmonths in at least 60% of DAs* greater stakeholder participation; Structure Plans

4. District Development Plans are updated in all 23 DAs developed for all 25 townswith adequate community participation* 5. Management tools in place (accounting and budgeting

systems; quarterly management reports; financialTraining management procedures manual; technical proceduresI. At least 70% of targeted days of training and coaching manual) in all participating DAsdelivered 6. Timely planning and programming of investment and

maintenance worksFinancial management1. Major tax base updated in all 23 DAs Financial management2. RIAPs & associated changes in the system of billing & I. Timely budget preparation, implementation and

collection are implemented in all DAs on a phased basis monitoring; clear and well-targeted urban budget3. Improved financial and accounting systems established allocations and disbursements

in 8 DAs 2. Improved transparency and accountability of DA funds4. Mapping completed for all 25 towns; digital maps through effective reporting and public access

prepared for participating towns in one region; regional 3. Local revenues improve by 2.5% per year in real termsstaff (8) of Survey Dept trained with effect from the beginning of Phase II.

5. Annual tax billing rate increases to total potential of tax 4. Adequate O&M funds established at DA level andbase in at least 60% of DAs* applied towards O&M expenditures; extensive use of

6. Annual collection rate of billed taxes is over 50% in all private sector in provision of O&MDAs*

7. Annual routine maintenance budgets for infrastructure Infrastructure sub-projectsare prepared and are sufficient to cover needs estimated I. Expansion and rehabilitation of basic infrastructurein annual maintenance programs in at least 60% of (related to the sub-projects approved) with resultingDAs* increase in access to basic services, particularly by the

poor (water, sanitation, solid waste, access roads, etc.)Infrastructure sub-projects 2. Adequate routine and periodic maintenance of facilitiesI. At least one sub-project per town implemented by DAs 3. 90% of civil works and design contracts at the DA2. O&M funds are established for all approved sub- level are contracted out to the private sector (10%

projects, and an initial deposit of at least 3% of sub- minor works carried out in-house)project costs is deposited (50% by the DA and 50% byIDA).*

* Also triggers for moving from Phase I to Phase 2. Seesection B4.

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B. Strategic Context

1. Sector-related Country Assistance Strategy (CAS) goal supported by the project: (see Annex 1)

Document number: 17002-GH Date of latest CAS discussion: September 4, 1997

1.1 Two of the goals of the World Bank's CAS for Ghana are to promote higher private investmentsand alleviate poverty. This program will support these two goals by improving basic infrastructure andservices, particularly in secondary towns, and strengthening the management of local governments.

1.2 Since the Government's decentralization policy gives responsibility for management and deliveryof urban services to the DAs, this project will work towards ensuring adequate, efficient and sustainableservice delivery by the DAs. Combined with improving basic infrastructure such as roads, drainage,sanitation, water supply, transport terminals, and markets (through physical investments), the project alsoaims to set the basis for greater private sector activity in these urban centers and improve the quality oflife of the population. Since small and medium cities serve as agricultural marketing and service centersin support of the rural economy, strengthening the management and infrastructure of these small townswill provide benefits to both the urban and rural economy in these regions. In addition, a significantnumber of the urban poor in Ghana live in secondary towns. By intervening in the urban areas that havebeen given the least attention by donors in the past, the project will directly address poverty alleviation.

2. Main sector issues and Government strategy:

2.1 Provision of basic urban infrastructure and services: The most important government policyrelated to urban development is the Government's decentralization initiative. Under the LocalGovernment Act of 1993, Ghana's metropolitan, Municipal and District Assemblies were given the statusof autonomous local governments with legislative and executive powers within their areas, and the powerto prepare and approve annual budgets, raise revenues from taxes and fees, borrow funds, acquire landand provide basic services and local infrastructure. To assist DAs in carrying out these functions, theconstitution requires that a minimum of 5 percent of central government revenues be distributed as grantsto the districts annually for capital investments through the District Assemblies Common Fund (DACF).However, investment needs in DAs are far greater than the transfers from the DACF, and DAs' capacityto deliver on their newly granted responsibilities is weak.

2.2 Staffing of District Assemblies: Currently, DAs do not have full authority over their personnelmanagement issues. DA staff are appointed through the central civil service with government transferscovering most of their salaries. Thus, there is little incentive for DAs to use staff efficiently, and needsare mandated by central government. A Local Government Service Bill is being discussed byGovernment currently, which would place civil servants working for local governments on a separateroster and enable DAs to participate with the Central Government in decision making regardingrecruitment of their staff. However, the Bill has not yet been passed by the Cabinet. Once the Bill ispassed and operationalized, granting full autonomy to DAs to directly manage their own staff would bethe next necessary step in the process.

2.3 Management capacity at the DA level: In order to enable the DAs to provide basic infrastructureand services and to operate and maintain them effectively, their managerial, administrative and technicalcapacity and ability to raise revenues will have to be greatly enhanced. A few initiatives financed byGOG and other development partners (such as GTZ, KfW and DANIDA) are already under way; theseaim to assist DAs in a few pilot districts to better coordinate local government activities. The EuropeanUnion (EU) is providing capacity building support to all DAs primarily through training local government

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officials and councilors. Previous IDA projects have also provided institutional, technical and trainingsupport to participating DAs. These efforts need to be supported and coordinated in order to make asignificant impact.

3. Sector issues to be addressed by the project and strategic choices:

3.1 Strengthen capacity of the DAs: The project will strengthen DAs' capacity in the followingareas: (i) supervision of infrastructure works; (ii) operations and maintenance; (iii) resource mobilization;and (iv) urban planning and management. The project will primarily use the Institute of LocalGovernment Studies in implementing this component.

3.2 Improve municipal resource mobilization and utilization: The weak capacity at the DA levelresults in low billing and collection rates of local taxes, i.e., property and business taxes. The unrealistictargets, compared to actual revenues and expenditures, make it difficult for municipalities to have a clearpicture of the amount and allocation of their resources. This is a contributing factor to the shortage ofbasic urban infrastructure and services.

3.3 Provide infrastructure to improve living conditions: The project will finance construction andrehabilitation of basic infrastructure in towns in the participating districts that have had limited investmentin the past. A preliminary analysis of the 25 towns has identified the main investment priorities ininfrastructure. DAs will utilize this analysis, as well as their own project preparation skills, to preparesub-project proposals and compete for resources from the project on a demand-driven, performance basedbasis.

3.4 Improve financial sustainability of project interventions: The project will also attempt tostrengthen DAs capacity to mobilize and allocate funds for operations and maintenance (O&M) of theinfrastructure created. O&M responsibilities for all rehabilitated infrastructure will be clearly outlinedfrom the outset, with indications as to which aspects are the responsibility of central government, DAs,and communities, and where possible, cost recovery mechanisms will be worked out. To improveefficiency, DAs will be encouraged to contract out O&M to the private sector.

3.5 Review of fiscal relationship between central and local governments: CIDA is financing afiscal decentralization study which is reviewing the adequacy of central government transfers to DAs inlight of the Government's decentralization initiative, and examining institutional issues such as themanagement and reporting structure of fiscal transfers. Based on the results of this study, the project willfinance the implementation of relevant recommendations of the study and/or undertake additional workthat may be necessary.

4. Program description and performance triggers for subsequent loans:Please see Section I above for program description. The following indicators will have to be achievedbefore the project can move to Phase II, and subsequently to Phase III:

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TRIGGERS FOR MOVING TRIGGERS FOR MOVINGFROM PHASE I TO PHASE 11 FROM PHASE 11 TO PHASE III

(to be achieved by FY2003) (to be achieved by FY2007)Institutional Institutional1. Local Government Service Act enacted 1. Local Government Service Act operational2. A phased implementation plan prepared to implement key 2. Competent technical and financial staff (district

recommendations of study on fiscal decentralization where they engineer, planner, financial officer) are in key posts forrelate to local governments at least 6 months in at least 80% of DAs

3. Technical and financial staff in key posts (district engineer, 3. Capacity of Survey Department adequately developedplanner, financial officer) are trained and/or competent staff are for the sustainable delivery of maps to DAsin place for at least 6 months in at least 60% of DAs 4. MLGRD attaches one additional staff to LGPSU to

4. District Development Plans are updated in all 23 DAs with make a total of 4.adequate community participation

5. MLGRD attaches at least 3 professional staff to LGPSUTraining

Training 6. At least 80% of DAs will have trained professionals in6. At least 70% of targeted days of training and coaching delivered posts and will have adopted participatory measures of

planning and programming of investment by end ofFinancial management Phase 11.7. Annual tax billing rate increases to total potential of tax base in at

least 60% of DAs Financial management8. Annual collection rate of billed taxes is over 50% in all DAs 7. Local revenues increase by 2.5% per year in real terms9. Annual routine maintenance budgets for infrastructure are during Phase 11 in all DAs

prepared and are sufficient to cover needs estimated in annualmaintenance programs in at least 60% of DAs Infrastructure and services

8. Evidence of private sector involvement in O&M ofInfrastructure sub-projects infrastructure and services in all DAs10. O&M funds are established for all approved sub-projects, and

an initial deposit of at least 3% of sub-project costs is deposited(50% by DA and 50% by IDA).

C. Program and Project Description Summary

1. Project components (see Annex 2 for a detailed description and Annex 3 for a detailed costbreakdown):

1.1 The Program has three phases. Each of the phases will comprise two types of activities: (i)strengthening municipal management; and (ii) urban infrastructure rehabilitation and construction. Theobjective of the first activity is to improve the level and quality of local public services provided by theDAs through: (i) studies; (ii) training and capacity building for DAs; and (iii) strengthening of lineministries' capacities to support DAs. The objective of the second activity is to improve access to basicservices and infrastructure for urban residents of DAs, particularly those in low-income areas, and toimprove the urban environment. Investments in infrastructure and services will be carried out through arelatively small amount of funds during the first phase (since the emphasis in Phase I is on capacitybuilding) and upscaling the fund during the second and third phases to include additional districts.

1.2 Training: Training will be provided DAs' staff in the areas of planning and management,including (a) contract management; (b) maintenance management (development of maintenanceprograms); (c) overall financial management and revenue mobilization; and (d) updating and monitoringdevelopment plans. A particular emphasis of the courses will be to train DA staff in involving

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communities in the planning and development process, especially with regard to formulating developmentplans and prioritizing needs

1 3 Capacity building: Technical assistance will be provided in specific areas to enhance theplanning, management and resource mobilization capacities of DAs in the long run These include (a)strengthening financial management capacities of DAs through Revenue Improvement Action Plans andputting in place effective financial management systems, and (b) property revaluation following thecompletion of the mapping exercise

1 4 Mapping: Financing will be provided by the Nordic Development Fund (NDF) to produce newdigital and hard copy base maps for all 25 towns and build capacity in the Survey Department, 8 regionalsurvey offices and the 23 DAs This will improve the availability of information for planners, engineers,providers of utility services, land valuers, revenue collectors and title registrars The Survey Departmentwill benefit from technical assistance to be acquired through a twinning arrangement contract and alsofrom short-term technical and management training and attachments to appropriate organizations

1 5 Infrastructure and municipal services sub-projects The project will finance infrastructureinvestments that meet the following objective to provide/rehabilitate basic municipal infrastructure andservices necessary to improve health and environmental conditions and the economic efficiency ofbenefiting communities/locations Eligible sectors include (a) water supply, (b) liquid wastemanagement, (c) solid waste management, (d) access roads and footpaths, (e) storm drainage, (f) securitylighting, (g) markets, (h) lorry parks/transport terminals, (i) community infrastructure upgrading, and (1)slaughterhouses DAs will, with the participation of community groups, prioritize infrastructure needs ofeach town from Town Development Plans They will prepare sub-project proposals which include, interalia, justification for the sub-project, number of beneficiaries, evidence of community participation in itsselection, environmental impact statement, O&M requirements and arrangements, as well as relevantfinancial data, such as costs and cash flow forecast, DA contributions, O&M costs, and so on Theproposals will be evaluated according to guidelines agreed with the Bank These will include ensuringconsistency with other sector programs, particularly with regard to user fees and charges (depending onthe type of sub-project, the appraisal/evaluation team will include staff of the relevant sector ministry oragency) and evaluating the consequence/impact of the sub-project (for example, if water is provided,ensuring that adequate measures are taken to deal with an increased amount of wastewater in the area)Once sub-projects are evaluated and certified that they meet the set criteria, the DAs will take charge ofsub-project implementation and subsequent O&M requirements

1 6 Co-financing. The Nordic Development Fund will finance the mapping component for a totalestimated cost of US$3 6 million (including contingencies) The Agence Francaise de Developpement(AFD) will finance infrastructure sub-projects (specifically roads sub-projects) for a total cost of US$6 0million, including US$1 0 for design and supervision consultants

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lndicative Bank- % ofComponent Setor Co$sts % of financing Bank-

:___::______________________ ( US$M) Total finS$M) financing1. Training Urban 1.19 5.3 1.19 11.0

Management2. Strengthening Financial Management Urban 0.97 4.3 0.97 9.0

Management3. Mapping Other 3.60 16.1 0.00 0.0

Urban4. Infrastructure & Municipal Services Other Urban 14.52 65.1 7.00 64.6

Sub-projects Development5. Implementation Support Urban 2.02 9.1 1.67 15.4

Management

Total Project Costs 22.30 100.0 10.83 100.0Total Financing Required 22.30 { 100.0 10.83 100.0

Costs include price and physical contingencies

2. Key policy and institutional reforms supported by the project:

2.1 Local government staffing review: The responsibility for recruitment and personnelmanagement are important for the efficient functioning of DAs. At present, DAs do not have theauthority to hire and fire their own staff. The Government has drafted the Local Government Service Billwhich provides for an independent Local Government Service separate from the general civil service.When passed, the Act would place civil servants working in local governments on a separate roster, andenable DAs to participate with the Central Government in decision making regarding recruitment of theirstaff. By giving DAs a say in the hiring, promotion and transfer of their own staff, efficiency of staffmanagement and responsiveness in terms of staffing needs at the DA level are expected to improve. Thepassing and operationalization of this act, and any remaining legislature and administrative or fiscalbottlenecks, will be dealt with as part of the policy agenda under the project.

2.2 Fiscal/financial review: The financial capacities and performance of DAs depend to a greatextent on the nature of the fiscal relationship between central and local govemments. This relationshipdetermines the level of resources that DAs have to carry out their newly granted responsibilities under thegovernment's decentralization program and their incentives to improve their own source revenues. CIDAis financing a fiscal decentralization study which is reviewing the adequacy of central governmenttransfers to DAs in light of the Government's decentralization act, and examining institutional issues, suchas the management and reporting structure of fiscal transfers. Based on the results of this study, theproject will finance the implementation of relevant recommendations of the study and/or undertakeadditional work that may be necessary.

2.3 Monitoring local government performance: MLGRD is responsible for monitoring theperformance of DAs, identifying problem areas, providing policy guidance on growth and developmentissues, etc. To do this effectively, MLGRD needs to collect data from DAs, particularly financial data,and monitor this on at least a quarterly basis. To increase transparency and accountability in centralgovernment support of local governments and decentralization, the project will strengthen the localgovernment finance unit in MLGRD and improve coordination with the Controller and AccountantGeneral's office (which also collects local government finance data for the Ministry of Finance).

2.4 Land administration: Many investment decisions in districts would involve decisions on landuse (e.g., landfill site, liquid waste disposal site, market, lorry park, etc.). The availability of land for such

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sites and land titling has been a problem in past projects. Pilot studies to review and analyze the landdelivery and titling system have been carried out through previous projects, and a report on the UrbanLand Administration Study published in May 1998 which lays out specific recommendations to improvethe system. These include, commercializing activities of land agencies, establishment of a Land DataBank, establishment of a "one-stop-shop" for land registration, and the establishment of a modernizedsystem of urban planning and guiding development. The project will support the implementation of keyreforms recommended by these studies when these are adopted by the Government.

3. Benefits and target population:

3.1 Residents: The project will benefit the general population in participating urban centers (for 25towns, a total population of about 964,000). These urban centers contain some of the poorest people inthe country but have received the least attention from government or donor support in the past. Socialand economic benefits will occur through improved access to municipal services. Improved roads willreduce travel time and vehicle operating costs; improved drainage, sanitation, solid waste management,and water supply will contribute to better health; increased street lighting will improve safety andsecurity; and markets and lorry parks will enhance economic activity. The program will also improve thelinkage between the urban population and local governments by promoting more participatory planningfor infrastructure investments, which should lead to more efficient use of developmental resources asinvestments would be better aligned with people's expressed needs.

3.2 District Assemblies. The project will benefit the DAs directly through capacity building,especially with regard to the management of basic urban services and municipal finances. Improvedcapacity for resource mobilization, increased transparency of local finance, more coordination with lineministries, more locally devolved responsibilities, improved understanding of local priorities and closerlinkages with urban residents will enable municipal decision-makers to make better informed and targeteddecisions on use of resources. Contracting out to the private sector and participation of communities inthe prioritization of urban infrastructure and services provision will improve efficiency and enhanceownership of infrastructure. It will also alleviate the burden on municipal government and allow it tofocus on planning, programming and managing.

3.3 Ministry of Local Government and Rural Development. MLGRD will benefit from additionaltechnical and professional staff, equipment and other resources that would be required to provide supportto the DAs from the central government level. MLGRD's capacity to monitor local governmentperformance will be improved.

3.4 Institute of Local Government Studies and other training institutes. The program will utilizethe Institute of Local Government Studies to provide courses and other forms of training for DA staff.

3.5 Local contractors and consulting firms: The program will promote private sector participation inthe provision of local government services by encouraging the contracting out of service provision tolocal small and medium enterprises (a policy already endorsed by the decentralization policy).

4. Institutional and implementation arrangements:APL Implementation period: FY 2000-2011 (11 years)Proposed project--Phase I of APL FY 2000-2003 (3 years)

4.1 MLGRD: The key sector ministry responsible for this project is the Ministry of LocalGovernment and Rural Development (MLGRD). The Local Government Project Support Unit (LGPSU)in MLGRD will have primary responsibility for project implementation.

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4.2 Project Coordination Committee: A Project Coordination Committee (PCC) will beestablished to provide overall policy guidance and will be responsible for overarching directives and keydecisions to be undertaken in the course of the project. It will also be a forum to discuss implementationprogress and share experience. The PCC, which will meet twice a year, will be chaired by the ChiefDirector of MLGRD and will be comprised of the head of LGPSU, representatives of the Ministries ofFinance, Roads and Transport, Works and Housing, Land Valuation Board (LVB), EnvironmentalProtection Agency (EPA), Survey Department (SD), Town and Country Planning (TCP), Ghana WaterCompany Ltd. (GWCL), and the National Development Planning Commission (NDPC), as well asrepresentatives of the 23 participating DAs (the designated Project Coordinators). LGPSU will act as thesecretariat for the PCC.

4.3 LGPSU: LGPSU will have primary responsibility for guiding, promoting, facilitating,monitoring, evaluating and reporting on project activities. LGPSU will manage all project funds,including disbursements, accounting, auditing, and financial reporting (see Financial Management).LGPSU will be responsible for procurement and contract management for the capacity buildingcomponents (mapping, property revaluations, development of Revenue Improvement Action Plans,financial management strengthening, (see Annex 2), and will implement and manage the trainingcomponent (see ILGS and Annex 2). One of LGPSU's primary responsibilities will be to provide supportto the DAs. This will include:* Assisting DAs in evaluating DA capacities, identifying training needs, and setting targets* Assisting DAs in the preparation of realistic District Development Plans, using greater stakeholder

participation (including assisting the Town Councils of the 25 towns covered under the project in thepreparation of their specific Town Development Plans)

• Assisting DAs in analyzing and implementing improvements to their financial management systems* Providing procedural guidance to DAs in the preparation of sub-project proposals (which should

originate from Town Development Plans)- Appraising sub-project proposals according to selection criteria and methodology agreed upon with

IDA* Providing technical support to the DAs in procurement, engineering, and contract management

4.4 In order to effectively build capacity at the district level, LGPSU will establish a field office forthe Urban 5 project to bring its services closer to its clients. The field office will focus on training,institutional development, and related capacity building issues for the districts in its vicinity, as well ascarrying out the sub-project technical appraisal and providing technical support for sub-projectimplementation. The Accra office will provide the same services for the districts in its vicinity. TheAccra office will also be responsible for implementing the capacity building components, managing thetraining component, and overall project coordination and management, including financial reporting andauditing. The need for field office support, as well as the size and skills mix of the Urban 5 LGPSUteam, will be reviewed at the end of the first phase of the APL in light of the increasing capacity built atthe DA level.

4.5 DAs: DAs will have primary responsibility for identifying their training needs and taking actionto fulfill these needs, and for implementing sub-projects. DAs will, with the help of LGPSU, carry outcapacity and training needs assessments, and prepare and implement sub-projects using privatecontractors. They will thus be directly responsible for monitoring the technical and financialperformance of sub-projects, as well as the performance of all technical assistance and training programsprovided in that regard. Specifically, DAs will:* Develop District Development Plans with a focus on Town Development Plans for participating

towns* Prepare sub-project proposals for funding* Manage and implement sub-projects (participate in bid evaluations; become signatories for contracts,

review and approve modifications to sub-projects, etc.)

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* Develop and implement RIAPs* Develop realistic annual budgets to implement District and Town Development Plans* Develop and implement an effective financial management system• Establish O&M funds, prepare annual O&M plans and contract out work to the private sector* Identify training needs and request training for staff from LGPSU* Recruit technical staff to strengthen their capacities* Report quarterly to LGPSU on project implementation progress

4.6 No parallel structure for project implementation will be established at the district level for thepurposes of this project. To be sustainable, project management has to be mainstreamed within theexisting administrative structure of each DA, with training and other technical assistance provided todirectly strengthen project management and implementation functions. Each DA will nominate a seniorofficer from its existing staff as Project Coordinator who will liaise with the LGPSU and represent thedistrict in all areas related to this project. DAs will be free to contract out project management servicessuch as procurement and project monitoring to the private sector if they are unable to recruit requiredstaff. DAs will also make their Finance Officers (seconded from the Office of the Controller &Accountant General) responsible for maintaining project accounts and preparing quarterly financialreports. These reports will be incorporated in the quarterly project status reports prepared by the DAcoordinators and sent to LGPSU. Sub-project Accounts will be opened for each participating DA whichwill be replenished on the basis of replenishment requests submitted by the DA to LGPSU. Payments forthe equivalent of US$50,000 and above and all foreign exchange transactions will be sent to LGPSU fordirect payment.

4.7 ILGS: A bill was approved by Cabinet in June 1999 establishing the Institute of LocalGovernment Studies (ILGS) as a corporate body whose objective is to "organize the training of DistrictAssembly members ... as well as the staff and other personnel in the local government ... to enhance themanagerial, administrative and operational efficiency of the units of decentralized government." TheILGS will therefore be responsible for the preparation and delivery of training activities under contract toLGPSU. Training needs will be identified by DAs with the assistance of LGPSU and/or consultants.LGPSU will then contract ILGS for the provision of the requested training. Specifically, ILGS will:* Identify and hire "experts" in their field of specialization to teach courses under temporary contract;* Identify specific learning outcomes for each course in collaboration with contracted instructor and

requesting DA, and provide a modular curriculum and training guides keyed to these learningoutcomes;

* Identify needed learning aids and ensure that necessary arrangements and logistics are in place;* Monitor delivery of training and prepare and implement quality assurance/quality control

mechanisms.LGPSU will provide overall management of the training system under the project, including processingtraining requests from DAs, preparing budgets, contracting and making payments for instruction, andcarrying out training impact assessments (see Annex 2).

4.8 Special Implementation Arrangements for Phase I: This project was originally designed as atraditional, centrally implemented project to provide infrastructure to secondary cities. Preparationactivities were initiated by the existing LGPSU, including hiring consultants to work with DAs andcommunities in prioritizing infrastructure investment needs and carrying out preliminary engineering.These were almost completed when the project was redesigned to one where sub-projects are to bedemand-driven by DAs and implemented by DAs. This new concept will normally require DAs to selecttheir own sub-projects as well as contract consultants to carry out the preliminary engineering, andsubsequently the detailed engineering and hiring of contractors. However, since the preliminaryengineering studies already exist, each DA has been advised to select a sub-project for financing underPhase I of the APL, each sub-project to be within a US$200,000 budget (see Annex 2). For this first setof sub-projects only, LGPSU will centrally appoint consultants to carry out the detailed engineering in

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one batch in order to expedite the process and provide a concrete sub-project for each DA to "cut theirteeth on." DAs will then take over the hiring and supervision of consultants and contractors forimplementation of the sub-projects. For all other sub-projects and in the future, DAs will be in charge offeasibility, preliminary engineering, detailed engineering and every other step in sub-projectimplementation (LGPSU and/or consultants will provide assistance where needed).

4.9 APL and Project Financing: IDA and co-financiers will provide 90 percent of project financingduring Phase I of the APL and DAs and GOG will provide 10 percent combined. During Phases 11 andIII, IDA and co-financiers are expected to provide about 80 percent and DAs and GOG 20 percent ofproject costs. IDA and all other co-financing will be contingent upon provision of DA and GOGcontributions and execution of the annual maintenance program (according to indicated targets) by eachDA.

4.10 Financial Management: LGPSU will be in charge of project financial management. A SpecialAccount will be opened in the name of LGPSU for the IDA credit, and a Project Account opened fordeposit of Government counterpart funds. The LGPSU field office will operate on anlmprest Account tomeet its administrative expenses which will be reimbursed on a quarterly basis. Two sub-projectAccounts will be opened in each DA when a sub-project is certified by LGPSU. The financialmanagement and accounting system of LGPSU was analyzed during project appraisal for application ofthe Loan Administration Change Initiative (LACI). It was agreed that LGPSU will maintain financialrecords in compliance with accepted accounting principles, as is presently done for the on-going LGDPand UESP projects. Agreement was reached with Government on an action plan to implement LACIwithin the first year of project effectiveness. LGPSU will provide interim and annual financialstatements to reflect the financial performance and position of the project. The Borrower will causeLGPSU to engage independent, external auditors, acceptable to IDA, to canry out annual audits of theproject. Audit reports will be submitted to IDA within 6 months of the end of the fiscal year.

4.11 Release of funds for each sub-project contract will be made by LGPSU only after the DA hasfulfilled the following conditions: (i) opened two bank accounts in a commercial bank, one for IDA fundsand the other for DA counterpart funds; (ii) deposited 5 percent of sub-project cost for Phase I in theSub-Project Account; (iii) provided expenditure justification to LGPSU; and (iv) submitted theirStatement of Funds Requirement (SFR) for the first quarter of sub-project implementation. As analternative to (ii) above, DAs may authorize MLGRD to deduct, at source, their contribution from theirshare of the Common Fund and deposit into the Sub-Project Account. MLGRD will be expected todeposit the amount deducted into the Sub-Project Account within four weeks of the date of deduction.DAs will provide mandatory monthly returns of Bank statements, Bank reconciliation statement andstatement of monthly expenditure to reach LGPSU no at later than 15 days following the end of thereporting month. DAs will also provide quarterly progress reports and requests for replenishment of theirSub-project Accounts. These will be examined by LGPSU for: completeness, internal financialconsistency, procurement justification, consistency with sub-project proposal, relevant field supervisionreports, etc. Auditors will be hired to undertake audits of financial and procurement compliance andrandom physical verification of works in the field with a focus on output.

4.12 Monitoring and Evaluation: LGPSU will submit quarterly activity reports coveringimplementation progress, financial status, status of each convenant, DA management and componentperformance indicators. Independent evaluators will be appointed by LGPSU to assist in carrying outimpact assessments of the project and monitoring performance indicators and triggers at mid-term andend of the project. Progress will be reviewed at mid term (2002) and project end in workshops with fullparticipation of all stakeholders. Based on the mid-term indicators, preparation of the second phase willbegin and will be evaluated when trigger targets are reached.

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D. Project Rationale

1. Project alternatives considered and reasons for rejection:1.1 The infrastructure needs in the urban centers of Ghana are great. This program is preceded bythree urban projects in Ghana, which dealt with various infrastructure and DA capacity constraints in theprimary cities and the "second tier" cities. Under the previous urban projects five DAs have benefitedfrom the Urban 2 project and eleven DAs from the Local Government Development project (LGDP).There are 23 DAs with urban settlements (as defined in the Local Government Act) that have been thelowest priority in the country's urban development agenda and have benefited the least from donorintervention due to their small size and remote locations. In the interest of promoting growth moreequitably throughout the country, the Government is keen on supporting investments in all theseremaining urban centers.

1.2 Stand alone traditional infrastructure projectfor 25 towns: The possibility of financing all 25towns in one project was rejected on the basis of lessons learned from past projects which revealed thecomplexities of supervising a centrally managed project in so many towns simultaneously, and the need toconcentrate a critical mass of resources in each town in order to achieve some measurable impact.

1.3 Stand alone infrastructure project for 12 towns: Cutting the scope of the project down to 12towns only was also discussed with the Government. The Government was reluctant to select only 12,but agreed on condition that preliminary engineering studies would be carried out for all 25, of whichIDA would finance investments in 12, and the Government would then seek other donor financing for theremaining 13.

1.4 Program approach: The above stand alone infrastructure project for 12 towns was rejected whenthe possibility of taking a program approach through the new Adaptable Program Lending instrument wasaccepted as a more viable option. The APL allows the phasing of the capacity building elements in such away that investments in subsequent phases can be based upon improved performance of DAs and basedon demand, thus providing incentives for taking capacity building seriously and actually improvingperformnance.

1.5 Basic resource transfer mechanism: The possibility of setting up a separate grant system wasconsidered. However, the District Assemblies Common Fund (DACF) is in place through which thecentral government transfers 5 percent of the national revenue to the DAs based on a formula which takesinto account factors such as equity, population, and local revenue generation, amongst others. There istherefore no need to develop a separate grant system. However, a fiscal decentralization study is beingcarried out and the project will assist the Government in implementing the findings and recommendationsthat are relevant to DAs.

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2. Major related projects financed by the Bank and/or other development agencies(completed, ongoing and planned).

Latest SupervisionSetor Issue Prject (PSR) Ratings

(Bank-financed projects only)Implementation Development

Bank-financed Progress Objective(IP) (DO)

1. Rehabilitate and improve essential infrastructure Accra District Rehabilitation S Sin Accra district Project--completed

S S2. Rehabilitate and improve essential infrastructure Urban II Project--closed Juneand strengthen capacity of DAs. Housing Sector 1999Reform to develop housing finance system.

S S3. Support decentralization; improve infrastructure Local Government& services in II secondary towns, strengthen DAs' Development Project--ongoingfinancial, technical, & managerial capacities.

S S4. Improve environmental sanitation services in Urban EnviromnentalGhana's five main cities. Sanitation Project--ongoing

S S5. Develop basic village-level infrastructure and Village Infrastructure Project--build capacity of DAs to better plan and manage ongoinginvestments and empower rural beneficiary groupsand associations.

6. Extend coverage of sustainable water and Second Community Water andsanitation facilities in villages and small towns and Sanitation Project--approvedstrengthening DA and community capacities to August 1999manage and deliver services.

S S7. Promote efficient fiscal management through Public Financial Managementbetter monitoring & control of public expenditures Reform Program--ongoing& resource allocationOther development agencies1. EU: Capacity building for District Assemblies Capacity Building program--

ongoing2. CIDA: Adopting budgeting and expenditure Local Government Reformmanagement reforms undertaken at the central level Study--ongoingto the local level3. DFID: Supports civil service reform for the entire Performance Improvementpublic sector (ministries, departments and agencies) Program--ongoing4. CIDA: Fiscal Decentralization Project e Implementation of Fiscal

Decentralization -- ongoing5. KfW: Promotion of district capitals Capacity building6. GTZ: Program for Rural Action Capacity building, and priority

infrastructure7. Danida: Danish support to DAs Capacity building, economic

development and employmentgeneration ..

IP/DO Ratings: HS (Highly Satisfactory), S (Satisfactory), U (Unsatisfactory), HU (Highly Unsatisfactory)

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3. Lessons learned and reflected in the project design:

3.1 IDA has been financing urban projects in Ghana for over a decade. Significant progress has beenmade: urban roads have been improved considerably; waste management systems have been establishedand are functional in major cities; a number of upgrading schemes have been successful; and inroads havebeen made in municipal capacity building, although more needs to be done. This project has built on thekey lessons learned and will address them in the following manner:

3.2 Establishing effective institutional arrangements: There is need to ensure that the agency or unitgiven the responsibility for project implementation is also given adequate autonomy to enable it tofunction efficiently. The program will focus implementation authority in one ministry, MLGRD, andbuild the capacity of the existing Local Government Project Support Unit to provide the necessarysupport to DAs. A comprehensive project management system will be put in place to effectively monitorand coordinate implementation.

3.3 Strengthening capacity of DAs and central government agencies: The implementation of theGovernment's ambitious decentralization program has been slow due to weak capacity both at the sectorministry and the DA levels and in other Ministries. The focus of this program will be on training andinstitutional development for DAs as well as MLGRD. The specific actions will build on past support byIDA in this sector.

3.4 Increasing own source revenues: The fiscal health of DAs can be significantly improved bymaximizing local revenue generation through the preparation and implementation ofRIAPs and usingbudgets as a management tool. The program will provide support for the preparation, implementation andoperationalization of RIAPs.

3.5 Ensuring adequate operations and maintenance: There is a need to ensure that properinstitutional and fiscal arrangements are in place to carry out adequate operation and maintenance (O&M)of the infrastructure created/rehabilitated through the program. The program will ensure theestablishment of institutional arrangements for maintenance and setting up of O&M funds at the DA levelfor longer term sustainability of the project.

3.6 Reforming local government staffing policy: The centralized staffing policy which placesauthority in the civil service to hire staff for DAs needs to be changed in favor of a policy that encouragesDA participation in decisions relating to DA staffing. The project will support Government's initiative tobuild an effective separate Local Government Service.

3.7 Continuing donor coordination: The Resident Mission in Ghana and other donors based inAccra have formed an informal group which meets every quarter to coordinate donor support of theGovernment's decentralization program. Project activities will be coordinated with the donors throughthese informal meetings.

3.8 Private Sector Participation: Delegating contract management for and involving the privatesector in urban service provision is an effective approach which alleviates the burden on DAs and ensuresbetter utilization. The project will encourage greater private sector participation in O&M of municipalservices.

3.9 Balanced Growth: There is a need to balance growth (i.e. spread investments) across the countryto avoid overwhelming the primary cities and stimulate regional development. During the third phase ofthe APL, the program will be opened so that all 39 DAs with urban towns in the country will be eligibleto participate.

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4. Indications of borrower commitment and ownership:

4.1 Government is keen on getting this program on board as soon as possible. The Minister of LocalGovernment and Rural Development has announced the Government's commitment to go ahead with theprogram in Parliament. Using funds from the on-going Local Government Development Project,Government commissioned a study by local consultants to assess the development needs and investmentprospectus for the 25 secondary towns which was reviewed and discussed during a project preparationmission in April 1998. The Government commissioned consultants (February 1999) to undertakepreliminary engineering studies of priority investments, including environmental and economic analyses,which were reviewed and discussed during the pre-appraisal mission in May 1999. During thesemissions, meetings were held with senior officials of all 23 DAs to introduce the demand-driven conceptof the project and seek their inputs in project design. All participating DAs have since then appointed aProject Coordinator and a workshop has been held to identify training needs and learning outcomes. Asecond workshop was held before the appraisal mission where DAs selected their first priority sub-project.

5. Value added of Bank support in this project:

5.1 The Bank has a history of involvement in the urban sector, has been the major funder of urbandevelopment programs, and has established a strong relationship with the key government agency,MLGRD. It is in a position to draw on past experiences and lessons and to address urban issues on awide and comprehensive scale. The Bank therefore has a comparative advantage in encouraginginstitutional development and long term sustainability, and ensuring the appropriateness of investments.The European Union (EU) has initiated a capacity building program for all 110 DAs which becameeffective two years ago. The proposed program will complement the EU's activities by supporting someof the weaker DAs. The program will liaise closely with the EU program to ensure consistency andcompatibility of approaches.

E. Summary Project Analysis (Detailed assessments are in the project file, see Annex 8)

1. Economic (supported by Annex 4):

Cost effectiveness NPV=US$ million; ERR= %

This project comprises two different types of activities: (i) infrastructure and municipal services sub-projects; and (ii) training and capacity building to support better planning and management of physicalinfrastructure investments. Briefly, the project analysis refers to ensuring the sustainable delivery ofadequate urban infrastructure and services through local level capacity building in support of theGovernment of Ghana's decentralization policy.

The demand-driven nature of the projects implies that communities will determine the nature and scopeof each sub-project funded. Accordingly, neither benefits nor costs can be completely identifiedex ante.As such, it is not possible to estimate an ex ante overall economic rate of return (ERR) for the project norindividually for the variety of potential sub-projects. Eligible sectors for sub-project financing willprimarily include: (a) water supply, (b) liquid waste management, (c) solid waste management, (d) accessroads and footpaths, (e) storm drainage, (f) security lighting, (g) markets, (h) lorry parks/transportterminals, (i) community infrastructure upgrading, and (j) slaughterhouses. Sub-projects funded underthe APL will, in general, be similar to sub-projects funded under the Bank-financed Local GovernmentDevelopment Project. Detailed methodology for economic analysis and expected ERRs for the mosttypical sub-projects based on the experience of previous urban development projects in Ghana areincluded in Annex 4.

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In summary, the economic analysis of roads and drainage sub-projects will be measured in terms ofsavings in vehicle operating costs and travel time (under LGDP the actual ERRs ranged from 57 percentto 110 percent). For markets and lorry parks, ERRs will be calculated by taking into account theincremental higher fees users are willing to pay for improved facilities (under LGDP, the range forERRsis between 10 percent and 15 percent). For solid waste management, ERRs will be based on estimates ofwillingness-to-pay for services such as the actual (market) user fees charged by private providers (underLGDP, ERRs were between 24 percent and 32 percent). For liquid waste management, a similar methodresulted in ERRs of 20 percent to 28 percent. ERRs for storm drainage and security lighting will bebased on property damage savings from flood alleviation and willingness to pay for security,respectively.

A significant percentage of the project will finance institutional development and capacity building.Although the impact of these are not quantifiable, it is expected that DAs will benefit significantly fromthese components. Specifically, DAs will increase their own source revenues, improve their financialmanagement capacities as well as their capacity to operate and maintain infrastructure investments.

2. Financial (see Annex 5): NPV=US$ million; FRR = %

Financial policy for sub-projects: DAs are expected to contribute 10 percent of all sub-project costswhich will be paid into the DA Urban V Matching Fund Account as follows: (a) the first five (5) percentat the time of the contract award, and (b) the remaining five (5) percent three months thereafter. DAswill also be expected to make a contribution of 3 percent of the sub-project cost to an O&M fund on anannual basis starting one year after completion of the sub-project. IDA will share 50 percent of the costof O&M. Appropriate user fees and charges will be reviewed and levied for sub-projects whereapplicable and will conform to sector practices.

Financial Management System: Financial systems acceptable to the Bank are already in place underongoing urban projects. Under a revised project implementation arrangement, the project accountingstaff, who previously reported to the Ministry of Works and Housing, will now report to MLGRD alongwith the rest of the project staff. The financial management system will be modified to fit the new LACIrequirements, within one year of project effectiveness.

Fiscal Impact:

A main objective of Phase I is to strengthen the revenue generating and financial management capacitiesof DAs. A detailed O&M plan (including sources of financing) will be developed for each sub-projectindicating incremental O&M costs and expected revenues. Evidence of DA capacity to finance O&Mcosts will be required for the evaluation exercise before a sub-project can be approved by LGPSU. Sincethe project is demand-driven, the types of sub-projects ultimately financed will depend on the needsexpressed by DAs during project implementation. Some sub-projects, such as drainage and access roads,are public goods for which cost-recovery will not be possible through direct user charges. These will becovered through property rates. The Revenue Improvement Action Plans (RIAPs) will estimate anyrequired increases in property taxes as a result of increases/improvements in general services. Forrevenue-generating sub-projects, such as markets and lorry parks, user fees will be charged. For sub-projects in water supply and sanitation, the present government policies followed by on-going watersector projects (e.g., CWSP-2) regarding user fees and subsidy ceilings will be applied.

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3. Technical:

The main issues are: (i) the choice of technical standards and consistency of standards and cost recoverymechanisms with other projects in the sector; and (ii) establishment of adequate mechanisms foroperation and maintenance of the facilities built/rehabilitated. The following activities have beenincluded in the project selection criteria to address these issues and LGPSU will assist DAs to achievethem: (i) LGPSU and/or consultants will discuss different design options and costs for different sub-projects with DAs and communities before standards are selected; (ii) the project will liaise with otherprojects in the sector (e.g., water, sanitation, roads, etc.) to ensure consistency of technical standards andcost recovery mechanisms; and (iii) O&M plans for each investment will be worked out at the designstage, involving to the extent possible, the participation of local communities and the private sector(especially for sub-projects, such as markets, public latrines and road side drains), and DAs will berequired to provide at least 3 percent of sub-project costs per annum in an O&M fund for the facility.IDA will share 50 percent of O&M cost.

4. Institutional:

a. Executing agencies:The sub-projects will be executed using a decentralized approach with key roles being performed by DAswith community and private sector participation. The current capacities of DAs to implement andmanage urban infrastructure is generally weak but varies amongst the 23 DAs (DAs have someexperience in implementing capital projects using their share of the Common Fund). The project willprovide technical assistance and training for DAs, including a short term training program to beimplemented during project preparation, in the areas of planning, contract management, financialmanagement, and O&M. The demonstration of adequate capacity to implement and maintain a sub-project is a pre-requisite for approval of sub-projects by LGPSU. The project will seek to ensure that theGovernment's initiatives in creating a separate Local Government Service are realized. However, theseinterventions will partially address the capacity problem as the longer term issues, such as improvingsalary levels and conditions of service to attract the right calibre of recruits into the Local GovernmentService, will have to be addressed through the body given the authority to implement the Act.

b. Project management:Problems with project management for previous urban projects have been addressed by combining thestaff of the two existing implementation units, the Technical Services Center (TSC) of the Ministry ofWorks and Housing and LGPSU, into one consolidated unit under one ministry, MLGRD. Both unitshad developed project management capacity through the implementation of two completed and two on-going urban projects. Finance and accounting systems acceptable to IDA are in place. The financialmanagement system will be upgraded during the first year of implementation to meet the LACIrequirements.

5. Social:

No significant social risks are expected, since communities have been involved and willcontinue to be involved in prioritizing infrastructure needs and selection of sub-projectsin each town. The project is generally expected to have a positive impact as poverty willbe reduced through better access to urban services.

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6. Environmental assessment: Environment Category: B

Justification/Rationale for category rating: The project is not expected to have a major adverseenvironmental impact. There is no significant resettlement expected in the project. Rather, the projectwill improve environmental conditions in the towns.

Each sub-project proposal that comes to the LGPSU for approval and funding will require anenvironmental impact assessment or statement to ensure that environmental concerns have been takeninto account and appropriate mitigation measures taken. For example, the final disposal of solid wasteand liquid waste (human waste evacuated from latrines, septic tanks and cesspits) is of particular concernin the towns, as the most common mode of disposal is indiscriminate dumping at "convenient" locations,such as fringe areas of the town, lagoons, streams, or the sea. Any project proposals for disposal siteswould be required to be appropriately located and engineered to provide maximum protection to theenvironment, specifically with regard to groundwater, drainage, air pollution and odor. The project willalso ensure the establishment of appropriate operational practices for the sites. The project will take intoaccount the policies and strategies undertaken by the Government and other projects in urbanenvironmental sanitation to ensure the use of appropriate technical options and consistency in approaches.

7. Participatory Approach (key stakeholders, how involved, and what they have influenced or mayinfluence; if participatory approach not used, describe why not applicable):

a. Primary beneficiaries and other affected groups:The first prioritization of sub-projects and preliminary engineering was carried out by consultants with thefull participation of DAs and community organizations. For future sub-projects, District and TownDevelopment Plans will be prepared using a participatory approach. LGPSU will assist DAs in taking amore consultative approach to the development of District/Town Development Plans, and otherconsultants and/or local NGOs may also be used to facilitate community and stakeholder meetings andconsultations. Future sub-project proposals will be selected only from these plans, ensuring that theproposals financed respond to community needs and priorities. The project follows a demand-driven,participatory approach and communities will play essential roles during project implementation.Technical standards and design options will be discussed with communities (e.g., the width of roads).Communities and the local private sector will be involved in the O&M of some infrastructure (especiallymarkets, lorry parks, keeping drains clean, etc.). DAs will be involved in every aspect of projectpreparation, implementation and evaluation.

b. Other key stakeholders:Other key stakeholders include the LGPSU, ILGS, relevant ministries (Local Government and RuralDevelopment, Roads and Transport, Finance, Works and Housing, National Development PlanningCommittee, Controller and Accountant General) and the private sector. They will be part of theMonitoring and Evaluation process as well as implementation and coordination.

Stakeholders Preparation Implementation OperationDistrict Assemblies CON COL/IMP IMPCommunities/CBOs/NGOs CON CON CON/IMPBusiness community/private sector IS COL COLCentral Government COL COL COL/IMP

CON =consultation COL =collaboration IMP = implementation IS = information sharing

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F. Sustainability and Risks1. Sustainability:

Sustainability of investments depends on: (i) ownership of sub-projects by DAs and communities; (ii)availability of resources for operations and maintenance; and (iii) management capacity at the DA level,especially for O&M. The project aims to involve DAs and communities in the preparation, design andimplementation to ensure ownership and aims to enhance the management of municipal infrastructure andservices, including improving DA own-source revenues. Involvement of communities and DAs from thebeginning will sensitize them to the need to pay for services where appropriate, and ensure cost recovery.

2. Critical Risks (reflecting assumptions in the fourth column of Annex 1):

Rk Risk Ris Mn"imiztion easut bk

From Outputs to ObjectiveGovernment does not support capacity building at DA level M MLGRD will act on Cabinet's comments and resubmitand LGS Act is not passed. draft Bill to Cabinet for clearance before Parliament

approval.Fiscal decentralization study recommendations are not M Study funded by CIDA is being carried out by GoG in aaccepted by Government. participatory manner to ensure involvement of all

relevant GoG ministries.ILGS facilities do not remain operational. M Training specialists in LGPSU will manage training and

ILGS will ensure its relevance.DAs unable to hire adequate number of staff. Trained staff M DAs will have a greater say in hiring and firing staff oncedo not remain in DAs. the LGS Act is passed.DAs are not open to using participatory consultation process M Ensure GoG's commitment to satisfy criteria for Qualityand being more transparent and accountable. at Entry.O&M funds are not used for O&M purposes. M Annual O&M plans will be prepared and submitted to

Bank for review.Maps are not made available to DAs N GoG has made a commitment to give one copy of maps

to each town free of charge and additional copies will besold.

Inadequate capacity and availability of local contractors. N Under previous urban projects sufficient local contractingcapacity has been built.

Government does not contribute to DA Common Fund N GoG's contribution to the Common Fund is aand/or local revenues are not available. constitutional obligation. DAs will be assisted by the

project to prepare and implement RIAPs.Inadequate capacity at DA level to manage sub-projects. M Extensive training program already started to strengthen

DAsFrom Components to OutputsCounterpart funds are not available and timely. S Extensive discussions will be held at Country Director

level to address this country-wide issue.Implementing agency does not have sufficient autonomy to M Implementation arrangements have been clearly laid outoperate efficiently. at project preparation stage and incorporated in PIM.Inadequate capacity of LGPSU. N The project will fund the cost of eight professional staff

to be added to the LGPSU.Inadequate capacity of DAs to absorb and benefit from M A training needs workshop held before appraisal helpedtraining and technical assistance. participating DAs identify a list of potential courses.Overall Risk Rating M

Risk Rating - H (High Risk), S (Substantial Risk), M (Modest Risk), N(Negligible or Low Risk)

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3. Possible Controversial Aspects:

None

G. Main Credit Conditions

1. Effectiveness Condition

The Project Implementation Manual has been adopted by Borrower in form and substance satisfactory tothe AssociationA Project Account is opened by Borrower and initial amount depositedThe Project Coordinating Committee has been established with membership, functions andresponsibilities satisfactory to the AssociationAuditors have been appointed by BorrowerA financial accounting and management system satisfactory to the Association has been established.

2. Other [classify according to covenant types used in the Legal Agreements.]

Monitoring:Quarterly report submitted by LGPSU within 45 days of end of each quarterTechnical audit of annual works program submitted no later than three months after the end of theBorrower's fiscal year.

Financial:Financial audit of project accounts submitted no later than six months after the end of the Borrower'sfiscal year.Regular provision of DA and GoG counterpart funding to LGPSUSufficient budgetary allocation for routine maintenance programs by DAs.

H. Readiness for ImplementationL .a) The engineering design documents for the first year's activities are complete and ready for the

start of project implementation.[XI 1. b) Not applicable.

] 2. The procurement documents for the first year's activities are complete and ready for the start ofproject implementation.

I 3. The Project Implementation Plan has been appraised and found to be realistic and of satisfactoryquality.

I 4. The following items are lacking and are discussed under loan conditions (Section G):

1. Compliance with Bank Policies

[X] 1. This project complies with all applicable Bank policies.] 2. The following exceptions to Bank policies are recommended for approval. The project complies

with all other applicable Bank policies.

Jagdish K. Bahar Letitia A. Obeng Peter C. HarroldTeam Leader Sector Manager/Director Country Manager/Director

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Annex 1: Project Design Summary

GHANA: URBAN 5

Key PerformhanceHierarchy of Objectives Indicators Molnitoring & Evluation Critical Assumptions

Sector-related CAS Goal: Sector Indicators: Sector/ country reports: (from Goal to Bank Mission)I. Poverty alleviation Increased access to basic MLGRD monitoring of DA Poverty alleviation remains GoG

infrastructure services of the provision of services priorityurban poor

2. Promoting higher private Increased pnvate sector MoF monitoring of private sector Government remains committedinvestment and participation participation investment and participation. to private sector participation

3. Support GoG's decentralization Local Govemment Service Act Parliament passes Localpolicy. operational. Government Services Act.

Program Purpose: End-of-Program Indicators: Program reports: (from Purpose to Goal)Sustainable delivery of adequate urban 1. Operational LGSA. PMRJsupervisioninfrastructure and services, particularly 2. Full authority to DAs forin under-served secondary towns recruitment & personnel

management.3. Competent technical &financial staff in key positions atcentral & local levels.4. District Dev. Plans & annualbudgets prepared w/ adequatecommunity participation.5. Mgmt tools in place in allparticipating DAs6. Timely planning &programming of investment &maintenance works

7. Timely budget management &well-targeted urban budgetallocation & disbursements.8. Improved transparency &accountability of DA fundsthrough public info campaigns &reporting.9. Local revenues improve by2.5% in real terms from 2003.10. O&M funds established atDA level & increasedexpenditures for O&M.

11. Basic infrastructureimprovements (related toapproved sub-projects).12. Adequate maintenance offacilities.13. 90% of contracts at DA levelcontracted out.

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Key PerformanceHierarchy of Objectives Indicators Monitoring & Evaluation Critical Assumptions

Project Development Objective: Outcome / Impact Project reports: (from Objective to Purpose)Indicators:

PHASE 1: 1. Competent technical and PMR/supervision Government maintains pro-active1. Strengthen financial, technical and financial staff in key posts decentralization policymanagement capacities of DAs. (District Engineer, Planner,

Financial officer) in at least 60% Professionals will be attracted to2. Improve basic infrastructure. of DAs. secondary towns

2. RIAPs & associated changesin system of billing & collection Trained staff will remain within each DA successfully DAsimplemented.3. Tax billing increases to total C&AG staff will remainpotential of tax base in 60% of committed to implementation ofDAs. improved financial systems for4. Tax collection rate is over the DAs50% in all DAs.5. District Development Plans ineach DA prepared with adequatecommunity participation.6. Basic infrastructure improvedaccording to approved sub-projects.7. O&M funds established forapproved sub-projects.

Output from each component: Output Indicators: Project reports: (from Outputs to Objective)Policy issues1. LGSA enacted. 1. Act passed by FY 2003 PMR/supervision Government passes LGSA.2. Progress made on review of fiscal 2. Phased implementation plan Studies completed and accepteddecentralization prepared to implement key by Government

recommendations of fiscaldecentralization study

Trainin ILGS facilities remain1. DA staff trained 1. Key staff (at least 6 in each PMR/supervision operational

DA) trained in planning, contractmgmt, & financial mgmt; other DAs hire adequate number ofstaff trained on as needed basis. staff2. Plans updated with adequate

2. District Development Plans updated community participation in 23 District Development Plans and Trained staff remain in DAsDAs. Annual Budgets DAs open to using more

3. Planning and programming of 3. Realistic annual budgets consultative processinvestments & O&M improved prepared; reporting of budgets to

the public. DAs open to being moretransparent & accountable

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Key PerformanceHierarchy of Objectives Indicators MnitMoring & Evaluation j Critical Assumptions

Output from each component: Output Indicators: Project reports: (from Outputs to Objective)Technical Assistance1I RIAPs implemented 1. Major tax bases updated in all PMR/supervision/District

DAs Development Plans/Annual2. Tax base updated 2. Financial status of DAs Budgets

analyzed & RIAPs prepared &implemented in phased manner.

3. Improved financial management 3. Improved financial mgmt &systems established accounting systems established

in 3 pilot DAs.4. Adequate mechanism established 4. Annual maintenance programfor O&M of infrastructure & services w/ cost estimates prepared & O&M funds used for O&M

funding mechanism for routine purposesmaintenance established.

5. Maps completed 5. Hard copy maps prepared for25 towns; digital map prepared PMRlsupervision/Maps/ Surveyfor participating towns in one Department reports/ consultants' Maps are made available to DAsregion. reports

6. Regional Survey Dept staff trained 6. Survey Dept staff in 8 regionstrained.

Infrastructure Sub-projects1. Sub-projects prepared and 1. At least one sub-project per PMR/Supervision/Annual Adequate capacity andimplemented town approved & implemented Budgets availability of local contractors2. O&M funds established 2. O&M funds established for

approved sub-projects with Government continues todeposit of at least 3% of sub- contribute to DACF and/or localproject costs (50% each DAs and revenues are availableIDA).

Adequate capacity at DA level tomanage sub-projects.

Project Components I Sub- Inputs: (budget for each Project reports: (from Components tocomponents: component) Outputs)

Costs (US$ millions):I. Training USS 1.19 PMR/supervision Timely availability of govt

counterpart funds.2. Strengthening financial mgmt US$ 0.97

Implementing agency has3. Mapping sufficient autonomy to operate

US$ 3.6 efficiently.4. Infrastructure and municipalservices sub-projects US$ 14.52 Capacity of LGPSU

5. Implementation support Capacity of DAs to absorb andUSS 2.02 benefit from training & TA

TOTAL PHASE I US$ 22.3 million

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Annex 2: Project Description

GHANA: URBAN 5

1. The Program has three phases. Each phase will comprise two types of activities: (i) strengtheningDA management; and (ii) urban infrastructure rehabilitation and construction. The objective of the firstactivity is to improve the level and quality of local public services provided by the DAs through: (i)studies; (ii) training and capacity building for DAs; and (iii) strengthening of line ministries' capacities tosupport DAs. The objective of the second activity is to improve access to basic services andinfrastructure for urban residents of DAs, particularly those in low-income areas, and to improve theurban environment. Investments in infrastructure will be carried out through establishing a fund forinfrastructure sub-projects that all participating DAs can access by fulfilling certain conditions andsubmitting Sub-project Proposal Forms which have been agreed upon with the Bank. The fund will berelatively small during Phase I as the focus in Phase I is on training and capacity building, but will beincreased substantially during the second and third phases (second phase to include the 11 DAs underLGDP and third phase will include all urban Assemblies).

By Component:

Project Component I - US$1.13 million (base cost)

COMPONENT 1: TRAINING FOR DAs

2. A needs-based system has been designed to systematically and efficiently support capacitybuilding for participating DAs through training of DA staff in technical, financial, and management skills.Training will be provided in planning and management including: (a) infrastructure management(procurement and management of consultants and contractors); (b) maintenance management(development of maintenance programs); (c) management of privatized contract maintenance; (d)updating and monitoring development plans; (e) overall financial management; (f) revenue mobilizationand management; and (g) property tax expansion and improvement. A particular emphasis of the courseswill be to train DA staff in involving the communities in the planning and development process,especially with regard to formulating development plans and prioritizing needs. No set amount of fundswill be "reserved" for a particular DA. DAs will be provided training as requested. Funds for trainingwill be provided according to training activities actually delivered from within the US$1.13 millionallocated for Phase 1.

Introductory Training Courses

3. In order to implement the first set of infrastructure sub-projects, DAs will require some key skills.The project will therefore require each DA to attend short skills training courses which will be providedprior to project effectiveness (funds to support this activity will be accessed from the ongoing LocalGovemment Development Project). These will include (a) budgeting and accounting (Loan AccountingChange Initiative); (b) selection of consultants; (c) goods and works procurement; (d) developmentplanning; and (e) training leadership. A Training Needs Workshop was held in August 1999 to determinethe leaming outcomes for each of these courses.

Training Program

4. Training to be delivered by the project will be needs-driven, and early training will focusprimarily on supporting the identification, design, and implementation of sub-projects. LGPSU willrequest ILGS to develop at least five courses, identified as the highest priority, during the Training NeedsWorkshop. These will include the following two courses that are critical for sub-project implementation:

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(i) civil works contract management (knowledge of requirements and duties of the engineer, the ProjectManager, and authorized representative as set out in contract document five days for each DA engineerand technical support staff); and (ii) maintenance planning and programming (development andsupervision of DA maintenance program and annual plans development and supervising typical biddocument for maintenance "term or annual" contract: 10 days for each DA engineer and technical supportstaff). A list of other potential courses that may be delivered during the rest of Phase I was identifiedprimarily from inputs from the Training Needs Workshop and are available in the Project ImplementationManual. These include training for financial, technical and planning staff, and for District ChiefExecutives. Curriculum and training materials for the rest of the courses will be developed/adapted asDAs request them.

5. ILGS will generally deliver training through two modes. For professional staff in seniorfinancial, technical, and management roles, training will be offered primarily through short coursesprovided at ILGS, followed by on-the job coaching to help each participant utilize acquired skills inhis/her daily work. For non-professional staff, such as O&M technicians, training will be provided byILGS primarily within the participants' workplace. The budget for this component will allow for thedelivery of approximately 50 training courses at ILGS (for an average of 3 days for each course) over 3years, about 20 days of training at the DA level for each DA per year, plus about 10 days of on-the-jobcoaching per DA per year.

Implementation Arrangements

6. Training will be needs-based in that each DA is expected to determine its own training needs anddemand that training from LGPSU. There will be two Training Administrators within LGPSU (one inAccra, one in the field office) who will provide overall management of the training system. Each DA willassign the responsibility of coordinating training to an existing DA staff, who will collaborate with aTraining Administrator within LGPSU in requesting training courses and identifying specific skills to bestrengthened or acquired (learning outcomes). Once needs and outcomes have been identified, LGPSUwill contract ILGS to prepare and deliver the training by hiring "best practitioners" (experts in their fieldof specialization, normally from outside ILGS) under short term contracts. LGPSU will be in charge ofcarrying out impact assessments of the training provided.

7. Specific roles and responsibilities of each agency are the following. LGPSU: Each TrainingAdministrator in LGPSU will, for their respective towns: (a) provide overall management of the trainingsystem, including providing continuing assistance to DAs in identifying training needs; (b) processtraining requests; (c) prepare budgets and contracts and make payments within guidelines agreed by theWorld Bank; and (d) carry out training impact assessments. DAs: DAs will identify their own trainingneeds. Once needs have been identified, each DA delegate (or training coordinator) will be requested,through his/her Chief Executive, to consult with appropriate persons within the DA in order to identifyspecific learning outcomes appropriate to each course. This data will then be discussed and agreed uponat a Training Needs Workshops a,tended by representatives from the DA interested in the course and staffof LGPSU, ILGS and MLGRD. ILGS: ILGS will be responsible for (a) identifying "best practitioners"(experts in their field of specialization, normally from outside ILGS) to deliver training courses undershort-term contract; (b) identifying learning outcomes in collaboration with the instructor and requestingDA; (c) developing modular curricula (one module for one day) and training guides to meet learningoutcomes (it is envisaged that most curricula and training guides will be adaptations of existing materialswhich have been developed through previous related projects or initiatives); (d) ensuring that necessarylogistical arrangements (either within the Institute or on site) are made; (e) monitoring the delivery oftraining; and (f) providing quality control. Steps a-c will need to be undertaken only once for eachcourse, as the course will then become part of ILGS's standard course list (though updating may benecessary from time to time). In recognition of the important role to be played by ILGS, specific learningresources for ILGS will be provided by the project within an agreed budget.

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8. Each training activity will require a no-objection from the World Bank. No-objections for thefive pre-effectiveness workshops will be sought in two packages. Budgets for each training activity(developed by the LGPSU Training Administrators) will follow the following parameters: (a) fees toinstructors (or to any task-specific consultant engaged by ILGS with approval of LGPSU), expected to bebetween US$100-120 per day; (b) approved resources and consumables; (c) actual approved expenses ofinstructor; (d) actual approved costs of pre-training meeting with requesting DA; and (e) approved costsof ILGS monitoring of training in the workplace. Where instructors or consultants are hired to adapttraining materials (curricula and training guides), payment is expected to be about US$50 per eight-hourday and the number of days for adaptation of each product is not expected to exceed 15 days. A modelcontract between LGPSU and ILGS for the delivery of training as well as payment schedules have beendeveloped and are included in the Project Implementation Manual. In order to contribute to thedevelopment of ILGS as a long-term provider of high quality training, the Institute will receive anadministrative fee of 15 percent of the total approved actual cost of each training activity that it delivers,which will cover overhead expenses, such as equipment, facilities and operational support.

Performance Monitoring and Triggers for Subsequent Phases

9. It is expected that at least 70 percent of the targeted days for training and coaching will have beendelivered--this indicator will serve as one of the triggers for moving the project to Phase II. Otherperformance indicators related to training include an improved quality of sub-project proposals (withadequate provisions for operations and maintenance), and satisfactory management and implementationof approved sub-projects according to the implementation plan. The impact of training on institutionaldevelopment and financial management will be monitored under those respective components. Trainingwill continue in Phase II on a demand-driven basis, and it is expected that 80 percent of DAs will havetrained professionals in key posts and will have adopted participatory means of planning and prioritizinginvestment decisions by the end of Phase II (a trigger for moving to Phase III).

Project Component 2 - US$0.92 million (base cost)

COMPONENT 2: STRENGTHENING FINANCIAL MANAGEMENT

10. Technical assistance will be provided in specific areas to enhance the planning, management andresource mobilization capacities of DAs in the long run. These include: (i) strengthening financialmanagement capacities of DAs through Revenue Improvement Action Plans and putting in place efficientfinancial management systems; and (ii) property revaluation following the completion of the mappingexercise. These activities will be handled centrally by LGPSU who will manage the relevant studies andconsultants, and will cover each of the 25 towns.

System development and implementation (US$0.57 million)

11. The DAs' current system of accounting and financial reporting has many weaknesses, includingpoor basic accounting skills; cumbersome manual systems which result in a lack of timely production offinancial reports to both the DAs and the center; limited and subjective chart of accounts which does notidentify costs and revenues by activity; and lack of forward financial planning. Comparisons of actualfinancial performance against budgets indicate that the actual budgets are unrealistic in many cases. Inthe first phase of the APL, an assessment will be carried out of all 23 DAs of their capacity to accept andsupport a computerized budgeting and accounting system that will enable DAs to effectively control, planand report on all financial aspects of their activities. Not all DAs will be able to install these systemsduring the first phase of the project due to lack of electricity, secure facilities or other problems. Forthese DAs, support will be provided for improving their manual accounting systems through the twofinancial specialists who will be hired in LGPSU. Following the assessment, eight DAs, one from each

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region, will be chosen as pilots for the implementation of the computerized system. This will entailconsultancy support for the installation of a simple computerized budgeting and accounting system ineight DAs, including the development of: (a) an activity-based chart of accounts; (b) computerizedbudgeting and accounting module (with provision for monthly, quarterly and annual reports, accounts andbalance sheets); (c) a single and multi-year budgeting module for recurrent and development expenditure;and (d) a revenue management module. The approach will build on current initiatives developed underprevious urban projects and will be in two parts. Part I will deal with system design, procedures, manualsand related training programs (approx. 8 months). Part II will involve pilot testing in eight DAs, relatedmodifications, and preparation of replication plans and budgets for the remaining DAs (approx. 12months). The systems will be developed using a standard accounting software package that is supportedin Ghana.

12. The project will also support the rationalization of the fiscal relationship between central andlocal governments. The Canadian International Development Agency (CIDA) is financing a fiscaldecentralization study which is reviewing the adequacy of central government transfers to DAs in light ofthe Govemment's decentralization act, and examining institutional issues, such as the management andreporting structure of fiscal transfers. Based of the results of this study, the project will finance theimplementation of relevant recommendations of the study and/or undertake additional work that may benecessary.

Preparation of Revenue Improvement Action Plans (US$0.25 million)

13. Maximizing direct DA revenues is considered essential to the successful participation of theselected DAs in the project. Financial perfornance of DAs has generally been poor over the last 4 years,and major revenue sources, such as property rates have fluctuated significantly from year to year.Specific project interventions will focus on property rates with technical assistance for both mapping andpreparation of new valuation rolls, with improved systems for revenue management. In addition,consultant support will be provided to assist the DAs in preparing and implementing RevenueImprovement Action Plans (RIAPs) through the project. Each of the 23 DAs will be required to appoint aRIAP preparation team to work with the consultants. The framework for preparation of RIAPs, preparedunder the on-going Local Government Development Project (LGDP), is available with MLGRD and willbe used as a guide.

Property Revaluation (US$0.1 million)

14. As part of a comprehensive package of measures designed to improve revenue mobilization andfinancial management, this sub-component will provide a comprehensive register ofrateable properties ineach of the 25 project towns to enhance revenue from this source. The program will provide for therevaluation of all rateable properties in the 25 towns, largely by the private sector, under the supervisionand guidance of the Land Valuation Board (LVB). LVB has successfully completed revaluation exercisesin some DAs under previous urban projects and has developed some expertise for effectiveimplementation and supervision of revaluation work. Since the LVB will need to develop its capacity tomaintain the Valuation Lists produced in the future, this component will undertake to carry out therevaluation exercise as well as strengthen the LVB's capacity in the process. The actual revaluation ofproperties for rating purposes will be carried out in Phase II of the APL after the mapping component hasbeen completed in Phase I, and hard copy maps have been made available to the DAs. However, duringPhase 1, some activities will be initiated to set the stage for valuation of properties as soon as the mapshave been completed, including the identification and banding of properties.

15. Activities. It is estimated that a total of 186,000 parcels are to be assessed under the project(subject to confirmation following the initial survey). The revaluation of properties in the 25 towns willbe carried out by private valuation firms under the direction and supervision of LVB. The activities will

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include (a) street identification and property numbering (in conjunction with DAs), (b) preparation ofvaluation scales, (c) preparation of plans based on maps (see Mapping section), (d) survey of rateableproperties in each DA, (e) valuation of rateable properties in each DA, (f) computer production ofValuation Lists, (g) deposit of new Valuation Lists with DAs, and (h) maintenance of new ValuationLists Based on past experiences with other urban projects, only "high value" properties will be revaluedand the remaining properties "banded" together based on the type of construction, size, and so on, into anumber of groups This would mean that a fixed graduated rate of property tax could be applied to eachproperty in a particular "band" while the normal levy of a percentage of the value of the property wouldbe applied to the others It is projected that about 20 percent of the estimated 186,000 properties wouldneed to be revalued This would considerably simplify the billing and collection system for the DAsThe design of computer systems to maintain the valuation roll will have to be compatible with thecomputerized accounting package that will be installed under the financial management component Theprocess of identification and banding of properties will commence in Phase I For this purpose, anestimated amount of US$100,000 has been allocated under this phase

Performance Indicators and Triggers for Subsequent Phases

16 Improvements in financial management and performance of DAs during the first phase will bemeasured using the following indicators, which will serve as the triggers for moving to Phase II of theproject (a) annual tax billing rate of at least 60 percent of participating DAs increases to total potential oftax base, (b) the collection rate for annual local tax bills is over 50 percent, (c) annual routinemaintenance budgets for infrastructure of at least 60 percent of DAs are sufficient to cover the needsestimated in annual maintenance programs, and (d) the capacity of DAs to provide counterpart funds forproject investment is sufficient to increase from 10 percent to 20 percent of sub-project costs for Phase IICapacity building and technical assistance will continue in Phase II for towns not covered in Phase I, tocomplete the property revaluation exercise, and to deepen the initiatives started under Phase I To movefrom Phase II to Phase III, it is expected that the following targets will be achieved (a) annual tax billingrate of at least 80 percent of participating DAs increases to total potential of tax base, (b) the collectionrate for annual local tax bills is over 75 percent, (c) own source revenue increases by 2 5 percent perannum in real terms, (d) annual routine maintenance budgets for infrastructure of at least 80 percent ofDAs are sufficient to cover the needs estimated in annual maintenance programs, and (e) DAs maintaintheir capacity to provide 20 percent of sub-project costs as counterpart funding

Project Component 3 - US$ 3 43 million (base cost)

COMPONENT 3- MAPPING

17 This component is being co-financed by the Nordic Development Fund The objective of thecomponent is to produce new digital and hard copy base maps for all 25 towns and build the capacities inthe Survey Department Head Office, 8 regional survey offices and the 23 DAs so as to improve theavailability of informnation for planners, engineers, providers of utility services, land valuers, revenuecollectors and title registrars This will be carried out in phases over the 11 year APL program periodDuring the first phase of the APL (this project), hard copy and digital maps will be developed for all 25towns to be used by the eight professional surveyors located in the capitals of the regions covered by theproject (Ashanti, Brong Ahafo, Central, Eastern, Greater Accra, Northern, Volta and Western regions) Inaddition, computer-based digital mapping equipment will be installed in one pilot region (BrongAhafo)to improve its capability

Activities Under Phase I of the APL

18 The following activities will be undertaken under this component, managed by the SurveyDepartment and supervised by LGPSU (details of specific responsibilities are in PIM)

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(a) Premarking and ground control. Prior to commencement of the aerial photography, the SurveyDepartment (SD) will mark the urban areas concerned (approx. 750 sq. km) by painting referencepoints in order to reduce the survey work to be undertaken after photography. The SD (orsubcontracted Licensed Surveyors hired for this task) will establish the required ground control basethrough: plotting existing control points prior to photography and, as appropriate, by photo-pointidentification after photography. The pattern of plan and height control points (necessary for aerialtriangulation) will be agreed between the SD and the subcontractor.

(b) Aerial photography and scanning. Under the general supervision of the LGPSU, consultants will behired by the SD to plan and fly aerial photography of the towns (1000 sq. km), process films,produce prints and diapositives, scan the photos digitally, and produce index plots and flight reports.

(c) Digital mapping. Digital line maps are printed maps similar to conventional line maps, but they canbe displayed on computer screens and printed selectively at different scales for urban planningpurposes. Under the general control of the SD, the consultant will observe and adjust the aerialtriangulation of each town as a single block, using a recognized and proven package for block (orbundle) adjustment. The consultant will notify the SD of any error detected in the ground controlresults, and the SD will check and confirm the correct coordinates and photo-identifications. Theconsultant will produce samples and preliminary plots of the digital mapping at a 1/2500 scale (areacovered by mapping is approximately 750 sq. km). The SD will carry out quality control andchecking of digital maps and data submitted by the consultant.

(d) Field completion. The SD (or consultants) shall carry out field completion on the ground to collectnames and other information not visible on the aerial photographs.

19. Technical assistance will be provided to the Survey Department through training arrangementsmade by NDF with a member country of the NDF. Services of a contractor will be obtained throughNDF's standard bidding processes to provide 18 person-months of technical assistance in different fieldsof surveying, mapping and land titling (including photogrammetry, ground control, digital cartography,field completion, printing, lathography and others). Other consultants to be hired for mapping will alsobe contracted out as NDF-financed contracts, except for pre-marking, ground control and fieldcompletion, which will be carried out by the SD itself or subcontracted in coordination with the NDF-financed contractors through national consultants. The SD will also benefit from short term technical andmanagement training and secondments to appropriate organizations. The estimated base costs of thiscomponent is US$3.43 million.

20. The SD will be responsible for the distribution of the hard copy maps and digital products, andwill be responsible for supporting the mapping needs to all DAs through its eight regional survey officeswhich will be managed by qualified staff from the SD. In the first phase (APL I), only the regionalsurvey office in Brong Ahafo will be equipped with computer-based digital capabilities as a pilot. In thesecond phase (APL II), the other nine regional survey offices will also be equipped with computer-baseddigital capabilities. While the SD will supply the products of this component to MLGRD and theparticipating DAs free of charge, it is expected to publicize these new products to generate revenue for thedepartment, which should enhance self-sufficiency.

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Mapping Activities for the Second and Third Phases of the APL

21. During the second phase of the program (APL II), the capacity of the SD will be improvedthrough equipping it with digital mapping capabilities. A "soft copy" digital production system, whichincludes an image production instrument and a photo scanner, will be provided and the existing analoguephotogrammetric systems at the SD will be modified to become fully analytical. The SD will also beassisted in producing sectional maps for all 25 towns. In addition, based on lessons learned from theBrong Ahafo pilot, the capacities of the other nine regional survey offices will be improved, through theinstallation of simple computer-based digital systems (computer, digitizer, plotter and printer). Theestimated base cost for this phase (APL II) is US$3.0 million.

22. During the last phase (APL III), the mapping activities will move from just mapping to landregistration. The Land Commission, the Title Registration, the Town and Country Planning and the SDwill work in a coordinated way to develop the process of title registration, again using the two selectedtowns in Brong Ahafo as a pilot. The sectional maps produced in the second phase will be developed intoparcel maps to be used in title registration. During this phase, the regional survey offices will be assistedin updating and maintaining their maps in the computer through undertaking periodic revisions withsupport from headquarters. The estimated base cost for this phase (APL III) is US$4.4 million.

Performance Indicators

23. Performance indicators for the first phase include (i) hard copy maps prepared for all 25 towns;(ii) digital maps and digital capacity in the regional survey office inBrong Ahafo; and (iii) trained staff atSD and its eight regional survey offices in digital mapping. Indicators for the second phase (APL II)include: (i) functional urban digital mapping facilities at SD and its regional survey offices in 10 regions;(ii) digital maps produced for all 25 towns plus the 12 towns mapped during the LGDP project; and (iii)trained survey staff at SD and all 10 regions. Indicators for the third phase (APL III) include: (i) arearegistration completed for two towns in Brong Ahafo; (ii) on demand registration capability in all 25towns; and (iii) update mapping programs in all 25 towns.

Project Component 4 - US$12.90 million (base cost)

COMPONENT 4: INFRASTRUCTURE AND MUNICIPAL SERVICES SUB-PROJECTS

Eligible physical investments

24. The project will finance infrastructure investments that will improve basic municipalinfrastructure and services necessary to improve health and environmental conditions and the economicefficiency of benefiting communities/locations. Eligible sectors include: (a) water supply; (b) liquidwaste management; (c) solid waste management; (d) roads and footpaths; (e) storm drainage; (f) securitylighting; (g) markets; (h) lorry parks/transport terminals; (i) community infrastructure upgrading; and (j)slaughterhouses. It is a general requirement that all sub-projects be demand-driven and thus be of highestpriority to the communities at large. This would be demonstrated in the project identification andplanning process which, where relevant, would involve participation of beneficiary communities. Theroads sub-projects under this component would be co-financed by AFD. A sub-project should meet all ormost of the following criteria to be eligible for funding:* Support implementation of District/Town Development Plans to facilitate rational and orderly growth

of municipal infrastructure networks or systems.• Maximize the efficiency of existing investments in infrastructure and municipal services.• Relieve bottlenecks and/or fill strategic gaps in infrastructure and services.* Serve as large as possible number of town residents.* Target (wherever possible) lower income group beneficiaries.

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* Provide maximum employment opportunities (i e, sub-projects which lend themselves to use oflabor-intensive construction and mamtenance, within sound economic parameters)

* Utilize functional least cost planning, design and construction standards while taking cognizance ofthe need to minimize future operation and maintenance requirements

Sub-project Cycle

25 Through the capacity building and training components described above, DAs will prepare TownDevelopment Plans, which will include all main physical investment requirements for that town DAswill, with the participation of community groups, CBOs and NGOs, prioritize infrastructure needs of eachtown from the Town Development Plans They will complete Sub-project Proposals (along a formatacceptable to the Bank) which include, inter alia, justification for the sub-project, number of beneficiaries,evidence of community participation in its selection, environmental impact assessment, O&Mrequirements and arrangements, as well as relevant financial data, such as costs and cash flow forecast,DA contributions, O&M costs, etc DAs can seek procedural guidance from LGPSU as well as hireconsultants for the preparation of the proposals The LGPSU will evaluate the proposals according toguidelines agreed with the Bank (an Appraisal Checklist) These will include ensuring consistency withother sector programs, particularly with regard to user fees and charges (depending on the type of sub-project, the appraisal/evaluation team will include relevant sector ministry or agency staff) and evaluatingthe consequence/impact of the sub-project (for example, if water is provided, ensuring that adequatemeasures are taken to deal with an increased amount of wastewater in the area) Once a sub-project isevaluated by LGPSU and meets the set criteria, MLGRD will provide the funding and the DA will takecharge of sub-project implementation This will include hiring consultants and contractors, andmonitoring progress, with technical assistance from LGPSU if needed (the Sub-project Proposal Formand Appraisal Checklist are available in project files and the PIM) The DA will also take responsibilityfor subsequent O&M requirements

26 Any proposal may be accepted provided it fulfills the eligibility criteria and the DA is able to fillout the Sub-project Proposal form adequately, including (a) demonstrating financial, technical andmanagement capacity to implement the sub-project, (b) meeting the financial obligations of counterpartfunding (10 percent of sub-project costs in Phase I, and 20 percent in Phases II and III) and O&Mfunding, and (c) as long as funds remain (funds will be available on a first-come first-serve basis) Toprevent a particular DA from submitting a number of proposals at the same time and thereby blockingfunds, a DA would have to demonstrate that construction progress on the first sub-project is 50 percent ormore before it would receive formal approval for the second sub-project and is able to access fund for itsdetailed engineering Sub-projects will be categorized as small (between the Cedi equivalents ofUS$20,000 and US$100,000, base costs) or large (more than the Cedi equivalent of US$100,000, basecost) Sub-projects costing less than US$20,000 will not be eligible for funding under the project

27 AFD has agreed to finance roads sub-projects at a total cost of US$5 million The procedure willbe the same as for selection of IDA-funded sub-projects AFD roads sub-projects will be financed inparallel with IDA with no restrictions on the degree of implementation progress of IDA sub-project forapproval of subsequent sub-projects O&M for roads project would be covered under the Road Fund, andtherefore no contribution to the O&M fund will be required from the DA However, the DA will berequired to finance 10 percent of the sub-project cost as for IDA sub-projects

Financial Obligations of DAs

28 DAs will be required to provide a minimum of 10 percent of total sub-project costs This 10percent will be paid into the DA Urban V Matching Fund Account as follows (a) the first five (5) percentat the time of the contract award, and (b) the remaining five (5) percent three months thereafter DAs will

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also be required to set aside at least 3 percent of the capital investment into an O&M fund one year aftersub-project completion and every year thereafter on an annual basis (to be equally shared by IDA).

Special Arrangements for the First Set of Sub-projects

29. Because the original design of the project was a traditional infrastructure project designed andimplemented centrally, preliminary engineering has already been carried out for priority investment needsof all 25 towns. A fundamental principle of the re-designed project is that infrastructure will be demanddriven (by DAs and their constituents) and not be supply driven (by central government). Ultimately, thisshould apply to the whole sub-project preparation and implementation cycle (i.e., from engagement andfunding of consultants for feasibility and engineering, through implementation and operation andmaintenance). However, since the preliminary engineering has already been done for a number of sub-projects per town, and in order to kick-start implementation so that DAs will be able to see results on theground quickly, each DA will, as a first step, select one of these sub-projects worth US$200,000 or lessfor each project town (for a total of approximately US$5 million). DAs will fill out a Sub-projectProposal Form (with assistance from LGPSU if required) ensuring that all the criteria have been met andsubmit this to LGPSU for funding. MLGRD hosted a workshop with all participating DAs prior toproject appraisal to assist DAs in selecting their first sub-project and filling out the Sub-project ProposalForm. LGPSU will procure and manage the detailed engineering and bid document preparation for thisfirst set of sub-projects in one batch (the cost for detailed engineering will be funded from the on-goingLGDP). Once the detailed engineering has been carried out, DAs will take over the procurement andmanagement of contractors and supervision consultants (using Bank guidelines) for the entireimplementation cycle. The rationale for having a different approach for the first set of sub-projects is: (i)it will give each DA an opportunity to go through the process of procuring and managing consultants andcontractors using Bank guidelines (a learning-by-doing approach) for the actual implementation of a sub-project (rather than preparation) and enable them to see results on the ground quickly--and thereby givethem an incentive to take advantage of the training and capacity building being provided in Phase 1; and(ii) it will enable each DA to get a piece of the pie, even if the stronger DAs take a larger share of thefunds in future.

30. Although the detailed engineering and bid document preparation will be managed and fundedthrough LGPSU, in keeping with the project objectives, supervision consultants will be procured, andmanaged by the DAs. To this end, LGPSU will hold a procurement workshop on consultant selectionfollowing Bank guidelines. DAs, with the support of LGPSU, will prepare the RFPs for the consultantsthat they would require for construction supervision of the first set of sub-project contracts. DAs willthen invite consultant proposals, evaluate and select consultants to manage the contracts.

Preparation of Second Set of Sub-projects

31. In addition to supervising the first set of sub-projects, DAs will also have to plan and preparedetailed engineering and bid documents for subsequent sub-projects. Although the second sub-projectswill be prepared in Phase I, it is expected that their actual implementation will take place in Phase II, dueto the limited available time in Phase I. As mentioned above, formal approval of the second sub-projectdepends on 50 percent implementation progress of the first sub-project. However, in order to ensurecontinuity between Phase I and Phase II, DAs will be expected to prepare and issue RFPs, receive andevaluate proposals and be ready for award of consultant contract prior to achieving 50 percentimplementation progress on their first sub-projects. This will ensure that once the second sub-project hasbeen formally approved, the contract for detailed engineering can commence immediately, since all thepreparatory work will have already been done.

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Funding arrangements

32 In addition to the US$5 million that will be made available on an equitable basis to all 25 towns,an additional allocation of US$2 02 million will also be available to DAs for supervision of the first set ofprojects and preparation of the second sub-projects Approximately US$5 million will be available fromAFD for roads sub-projects and an additional US$1 million for design and supervision About US$35million will be allocated by IDA for sub-project investments in Phase II of the APL, and approximatelyUS$50 million in Phase III with the possibility of additional investment from AFD as well The need forany caps on the size of sub-projects for Phases II and III will be reviewed at a later stage It will be theresponsibility of DAs to carry out all the preparatory work for sub-projects including engineering designs(other than for the first batch of sub-projects) However, the estimated cost of detailed sub-projectpreparation may also be included for consideration for funding along with the capital cost of theinvestment

Operations and Maintenance

33 To ensure that project investments are sustained, DAs will be required to establish a fundingmechanism and operational procedures and practices at the district level for operation and maintenance ofthe infrastructure, service vehicles and equipment to be provided through the project DAs will berequired to submit a maintenance program and set up a Maintenance Fund as part of each sub-projectproposal The maintenance program will set out, inter alia, the following (a) how the DA proposes tomaintain and operate the facilities provided, (b) the estimated annual O&M costs, and (c) the expecteddate that operation and/or maintenance activities for the sub-project are to commence Approval of a sub-project will be contingent on submission of an acceptable maintenance program (or detailed proposals ofhow and when it is to be prepared) and DA agreement to set up the Maintenance Fund (I e, to open anaccount and to contribute agreed contributions to the account at the appropriate times) It is expected thatmaintenance of infrastructure will be carried out by the private sector under contract to the DA For civilworks, the adoption of term (annual) unit rate contracts for maintenance of various facilities will beintroduced For vehicles and equipment procured for waste collection and disposal, DAs will, whenfeasible, lease the vehicles and equipment to private contractors who will provide the services Thecontracts will include the necessary safeguards regarding service levels, cost recovery, and equipment andmaintenance standards

34 Actual annual sums required for maintenance, which will determine the level of funding to bedeposited by the DA into the Fund, will be determined in the detailed maintenance program Howeverthe minimum annual sum for sub-project maintenance, which may include building up a sum forreplacement of vehicles and equipment provided under the project, will not be less than 3 percent of thecapital cost of the sub-project per annum IDA will share the cost equally to the Fund each year once theDA has deposited its own contribution As maintenance of a sub-project would not normally be requireduntil I year after completion of the sub-project (other than simple routine maintenance such as streetsweeping and drain cleaning), DAs (and IDA) will start making their contributions commencing one yearafter the completion of the sub-project The fund will be expected to continue beyond the life of theproject, and DAs are expected to maintain their contributions to the fund to ensure sustainability

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Performance monitoring and triggers

35. Approval of subsequent sub-project proposals in Phase II will depend on the performance of theDA in managing consultants and contractors in the implementation of the sub-project according to theimplementation plan, and on whether adequate O&M funds have been provided by the DA for completedsub-projects. These will be monitored through quarterly Project Monitoring Reports, annual audits andsupervision on the ground by LGPSU as well as Bank missions. By developing the DAs' capacity incontract management, it is expected that DAs will improve the efficiency of service delivery andinfrastructure management by increasingly contracting out to the private sector. As a trigger for movingfrom Phase I to Phase II of the project, 70 percent of civil works and design contracts in participating DAsare expected to be contracted out (the expected amount will increase to 90 percent of civil works anddesign contracts as a condition of moving to Phase III).

Project Component 5 - US$2.02 million (base cost)

PROJECT IMPLEMENTATION SUPPORT

36. The key focus of the proposed project management and implementation arrangements is to enableDAs to effectively perform their responsibilities with regard to the development of local infrastructure.The overall responsibility for the implementation of the project will be with MLGRD. The LocalGovernment Project Support Unit (LGPSU) in MLGRD will provide project management andimplementation support to the DAs. LGPSU will operate with a core team of 8 specialists, 4 in Accra and4 in the field office, including 2 engineers, 2 finance specialists, 2 training administrators, and 2 plannerswho will provide technical, institutional development and capacity building support to DAs. The projectwill finance these 8 specialists for a three year period, as well as operational support to LGPSU forvehicles, equipment, and other operating costs. The position of Project Director (PD) is currently beingfunded under the on-going Local Government Development Project. A provision has also been made forthe hiring of a limited number of short-term consultants for specialized support not available within thecore staff of LGPSU and for other aspects of the program, such as the implementation of the LocalGovernment Services Act, when passed, and implementation of the recommendations of the fiscaldecentralization study. The project will strengthen the capacity of MLGRD to monitor the financialperformance of DAs by facilitating the processing of monthly financial returns and improvingcoordination between MLGRD and the Controller and Accountant General in this regard. Anyconsultancies that may be required for this purpose will also be financed from the provision for short termconsultants.

37. In addition, the project will provide a limited amount of operational support to each of the 23DAs to facilitate the implementation of their sub-projects. This will be in the form of one vehicle, onemotorcycle, and US$3,600 for operating costs for each DA for the duration of the project. This tokensupport is being provided to give DAs as an incentive to commit their funds for project related activities.It is expected that once DAs prepare and implement their first sub-project, they will recognize the needand value in providing the requisite funds for operational support that would enable them to access fundsfor additional sub-projects as well as to access the training and capacity building support being providedby the project on a demand-driven basis.

38. Currently, all but three LGPSU professional staff are on contract supported by various Bank-financed projects. In order to ensure that capacity building is sustainable and that in the future MLGRDwill continue to be able to provide support to DAs, the project will require the Ministry to attach at least 3professional counterpart staff to LGPSU. This will serve as a trigger for moving to Phase II of the APL.The trigger to move to the Phase III will be that MLGRD attaches at least one additional professionalcounterpart staff to LGPSU.

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Annex 3: Estimated Project Costs

GHANA: URBAN 5

Local Foreign TotalProject Cpst By Coomponent US $rmrllion US $million US $million

1 Training 1 13 0 00 1 132 Strengthening Financial Management 0 73 0 19 0 923 Mapping 0 60 2 83 3 434 Infrastructure& Municipal Services Sub-Projects 9 00 3 90 12 905 Implementation Support 1 05 0 87 1 92

Total Baseline Cost 12 51 7 79 20 30Physical Contingencies 0 69 0 29 0 98Pnce Contingencies 0 67 0 35 1 02

Total Project Costs 13 87 8 43 22 30Total Financing Required 13 87 8 43 22 30

Local Foreign TotalProject Cost By ate o PS $yi9llon US $mdhon US $mllion

Subprojects 11 13 3 39 14 52Goods 0 00 0 89 0 89Consultant Services and Technical Assistance 0 76 0 21 0 97Training 119 0 00 119Mapping 0 62 2 98 3 60Operating Costs 1 13 0 00 1 13

Total Project Costs 14 83 7 47 22 30Total Financing Required 14 83 7 47 22 30

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Ghana - Urban V ProjectDetailed Cost Table

(in US$)

Components Cost/unit No. of Subtotal Total Base Physical Price Total Cost Local/ Disb. Procure- Flnmnc-units Cost Cont Cont 5% foreign Category ment Ing

10% financing method agency

A Training Courses 806,280 40,314 846,594 local Training Other IDA(i) Courses at LGS& course material preparation 232,200 11,610 243,810 local Training Other IDA(ii) Courses in the DAs 353,280 17,664 370,944 local Training Other IDA(iii) Follow-on coaching in the Das 220,800 11,040 231,840 local Training Other IDAB. Production of Training Materials 28,000 28,000 1400 29,400 local Training Other IDAC. Meals and Accommodation for partiapants 117,450 117,450 5,873 123,323 local Training Other IDAD. Equipment for ILGS to Support Training 7,000 7,000 350 7,350 local Training Other IDAE. Management/Overhead Fee to ILGS 170,000 170,000 8,500 178,500 local Training Other IDA

A. System development and Implementation in 8 DAs 570,500 28,525 S99,025(i) Consuiting ServicesTeam leader 4,000 24 96,000 4,800 100,800 local CS & TA Other IDAFinancial Specialist 4,000 18 72,000 3,600 75,600 local CS & TA Other IDAComputer Software specialist 3,500 12 42,000 2,100 44,100 local CS & TA Other IDATraining Specialist 3,500 39 136,500 6,825 143,325 local CS & TA Other IDA(ii) Equipment and MaterialsComputers (desktop), printers, UPS 2,500 8 20,000 1,000 21,000 foreign CS &TA Other IDAComputers (laptops) 4,000 2 8,000 400 8,400 foreign CS & TA Other IDALicensed Software 2,000 1 2,000 100 2,100 foreign CS &TA Other IDAManuals etc. 2,400 10 24,000 1,200 25,200 foreign CS & TA Other IDAVehide 25,000 2 50,000 2,500 52,500 foreign CS & TA Other IDA(iii) Office and Support costs 5,000 24 120,000 6,000 126,000 local CS & TA Other IDAB. Preparation of RIAPs 250,000 12,500 262,500(i) Consulting Services (5 @4000) 20,000 8 160,000 8,000 168,000 local CS & TA Other IDA(ii) Equipment, Vehicles and Supplies 90.000 1 90,000 4,500 94,500 foreign CS & TA Other IDAC. Property Revaluation 100,000 5,000 105,000Preparatory Work 100,000 1 100,000 5,000 105,000 local CS&TA Other IDA

(i) Aerial Mapping and Scanning 1 200,000 200,000 10,000 210,000 foreign Mapping NBF NDF200,000

(ii) Ground Mapping and Verification 496,000 24,800 520,800a. Pre-marking 1 84,000 4,200 88,200 local Mapping NBF NDF

84,000b. Ground Control 1 250,000 12,500 262,500 local Mapping NBF NDF

250,000c. Field Completion 1 112,000 5.600 117,600 local Mapping NBF NDF

112,000d. Editing 1 50,000 2,500 52,500 local Mapping NBF NDF

50,000(iii) Digital Mapping 1 2,180,000 2,180,000 109,000 2,289,000 foreign Mapping NBF NDF

2,180,000(iv) Capacity Bldg for Survey Dept. 405,000 20,250 425,250a. Training 1 100,000 5,000 105,000 local Mapping NBF NDF

100,000b. Technical Assistance (twinning) 1 225,000 11,250 236,250 foreign Mapping NBF NDF

225,000C. Equipment 1 80,000 4,000 84,000 foreign Mapping NBF NDF

80,000(v) Vehicles 2 50,000 50,000 2,500 52,500 foreign Mapping NBF NDF

25,000(vi) Supplies 1 100,000 100,000 5,000 105,000 foreign Mapping NBF NDF

100,000

A. 1 st set of Suc-projects(i) IDA-financed sub-projects 4,835,000 1 4,835,000 483,500 241,750 5,560,250 lo/fo 70130 Subproq. NCB IDA/DA(ii) AFD-financed roads sub-projects 4,635,000 1 4,835,000 483,500 241,750 5,560,250 b/fo 70130 Subproj. NBF AFD/DAB. Spn & prep of IDA sub-projects (1st & 2nd set) 2,020,105 1 2,020,105 101,005 2,121,110 local Subproj. Other IDA/DAC. Design & supervision of AFD roads sub-projects 1,057,000 1 1,057,000 52,850 1,109,850 lo/fo 70/30 Subproj. NBF AFDIDAD. O&M 150,000 1 150,000 15,000 7,500 172,500 lo/fo 70/30 Subproj. NCB IDAiDA

A. Technical Assistance 818,000 40,800 856,800(i) Staffing of LGPSU (8 @ $2500/month) 20,000 36 720,000 36,000 756,000 local Op. Costs Other IDAVGO

G(ii) Additional staff of LGPSU Yr 3 (2 Q 52500/month) 5,000 12 60,000 3,000 63,000 local Op. Costs Other IDAVGO

G(iii) Other short term staff 2,000 18 36,000 1,800 37,800 local Op. Costs Other IDAVGO

GB. Equipment and Vehicles 232,000 11,600 243,600Computers, Printers 4,000 8 32,000 1,600 33,600 foreign Goods ICB IDAVehicles 25,000 8 200,000 10,000 210,000 foreign Goods ICB IDAC. Operating Costs 174,000 1 174,000 174,000 8,700 182,700 local Op. Costs Other IDAIGO

GD. Support to DAs 703,800 35,190 738,990(i) Vehicles 25,000 23 575,000 28,750 603,750 foreign Goods lCB IDA(ii) Motorcycles 2,000 23 46,000 2,300 48,300 foreign Goods ICB IDA(iii) Operating Costs ($100/month) 3,600 23 82,800 4,140 86,940 local Op. Costs Other IDA

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Annex 4: Cost Effectiveness Analysis Summary

GHANA: URBAN 5

Basic Conceptual Framework: Cost benefit analysis (CBA), and cost effectiveness analysis (CEA) aretwo methods of determining the project's economic efficiency. CBA is commonly used to calculate thenet present value (NPV) of a project, which is an indicator of its economic desirability; it essentiallyinvolves estimating the stream of economic benefits of a project from which the project's stream of costs(during the life time of the project) are subtracted. And to the difference a discounted rate is applied.Where benefits cannot be estimated, the CEA procedures may be used as an alternative. Costeffectiveness or cost minimization approach would be more appropriate and will be used whenundertaking an economic evaluation of institutional development and capacity building components. Onthe other hand, cost benefit analysis will be used for physical infrastructure investment sub-projects.

Project's Objective: The proposed Adaptable Program Loan seeks to improve basic infrastructure andservices in 25 urban towns, reaching the urban population that has received least attention in the past bygovernment or donors, and focusing on areas which would benefit a large percentage of the low incomeurban population. The purpose of this APL is to support the Government of Ghana's decentralizationpolicy by providing the framework for institutional development and capacity building for localgovernments to ensure adequate urban service delivery and improve basic infrastructure.

Summary of benefits and costs:

Project's Expected Impact:

The program has three phases. The first phase (APLI) will cover 3 years, and the two subsequent phases(APL2 and APL3) will each cover 4 years. The first phase will strengthen the capacity of localgovernments (District Assemblies--DAs) to prepare subproject proposals, mobilize resources, improveservice delivery and improve DAs management. The expected impact will be measured in terms of theminimum number of staff in each DA capable of carrying out planning, financial analysis and contractmanagement. Adequate management is expected to include: (i) community participation in developmentplans; (ii) adequate provision of O&M for each sub-project proposed and an O&M fund established; and(iii) implemented changes in the billing and collection systems.

Project's Design Alternatives: The possibility of financing all 25 centers in one project was rejected onthe basis of lessons learned from past projects, which revealed the complexities of supervising projects inso many towns simultaneously, and the need to concentrate a critical mass of resources in each tow inorder to achieve some measurable impact. Cutting the scope of the project down to 12 towns only wasalso discussed. The Government was reluctant to select only 12, but agreed on the condition thatpreliminary engineering studies would be carried out for all 25. IDA, it was proposed, would financeinvestments in 12, and the Government would seek donor financing for the remaining 13. The aboveoption was also rejected when the possibility of taking a program approach through the new AdaptableProgram Lending instrument became a viable alternative. The APL allows phasing of the capacitybuilding elements so that investments in subsequent phases can be based upon improved performance anddemand, thus providing incentives for effective capacity building.

Linkages of Project's Components: In order to achieve the project's objectives, two areas have beenidentified as fundamental components of the project. The first component comprises capacity buildingand training for planning, local revenue mobilization (the property tax), and involving communities inthe planning and development process. Specific Revenue Improvements Action Plans will be put inplace, and will be linked to property revaluation following the completion of mapping of the core

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developed areas. Training and capacity building will support better planning on investments on physicalinfrastructure. The second component comprises investments in priority infrastructure. DAs, with theparticipation of community groups, will prioritize infrastructure needs of each town from TownDevelopment Plans. They will be linked through the preparation of sub-projects proposals which include,inter alia, justification for the sub-project, number of beneficiaries, evidence of community participationin its selection, environmental impact assessments, as well as relevant financial data, such as costs, cashflow forecast, DA contributions, and O&M costs. The Local Government Project Support Unit willevaluate the proposals according to guidelines agreed with the Bank.

NPV Vs Cost-Effectiveness:

Even if a benefit estimate can be based on institutional strengthening programs, experience suggests thatcalculation of a single NPV is not necessarily helpful. The benefits associated with effective managementof urban service provision typically far outweigh the cost of institutional capacity building. However, it isclear that there are different ways of generating the benefits associated with building local institutionalcapacity. If an institutional capacity building project costing US$20 million can have a similar effect as aninstitutional project costing two or three times that amount, then there is no economic rationale forinvesting on the basis of the most costly alternative. The major consideration in institutional valuations,therefore, is the project cost. This holds true, provided that the different alternatives have similarexpected benefits (i.e., that they have the same chance of success and that, if successful, they will lead tosimilar improvements in local management of service provision). An appropriate methodology, and theapproach taken here, is therefore to provide an institutional structure that would be capable of achievingthe potential future benefits but at a minimum cost. This is why the emphasis will be on setting up a well-trained core team of staff in each district assembly.

Winners and Losers:

In principle, national taxpayers (current and future) will have to bear most of the cost of the projectthrough national taxes. However, one of the project's targets is to strengthen local government finances,so that they may be able to contribute to project financing with initially 10 percent and subsequently 20percent of sub-projects cost. As only a part of the taxes (national and local) will be shifted to theconsumer, the public as a whole would be sharing in the cost of the project. Equally, the nation in generaland the residents (local taxpayers) in the 25 towns in particular would be the beneficiaries of the projectas a whole. Therefore, the cost is being distributed among those who benefit directly and indirectly fromthe project and the cost, in principle, is distributed in relation to their fiscal capacities. In this sense thefiscal burden is directly related to national and local fiscal capacities. Hence, the burden of the cost seemsto be distributed in an equitable manner.

Beneficiaries and Cost Recovery: Whenever the direct beneficiaries of the sub-projects are identifiableon an individual basis (i.e., the corresponding households), cost recovery policies must in principle beadopted in order to be eligible for financing. This would be the case primarily of those sub-projects thatare revenue generating, such as water provision, and solid waste collection and disposal. Cost recovery isexpected to make more rational use of these services and contribute to make their provision more cost-efficient.

Project's Financial Sustainability: The financial sustainability of the project is particularly relevant forthe component comprised by investments in physical infrastructure. Among those investments, the mostcritical, regarding their sustainability, are those that are not revenue generating, such as access roads andfootpaths, storm drainage, public lighting (security), and other community infrastructure. As a responseto this need, the project's design includes as a requirement to be eligible to the project's benefits, thecreation of Operation and Maintenance Funds. Also, part of the target is to ensure that O&M Funds

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would contract out most of the services needed (See section F of this document on Sustainability andRisks for more details)

Project's Risks: The project's success, however will depend, among other factors, on (i) the ability ofDAs to retain their staff after training and technical assistance is provided, (ii) the involvement of thecommunities on the ownership of the sub-projects, and (ii) the effectiveness of local governments tomobilize local revenues and establish the O&M funds to insure the sustainability of services provided(See Section F of this document on Sustainability and Risks for more details)

Main AssumptionsIt is being assumed that current needs of urban physical infrastructure will be transformed into effectivedemand for eligible sub-projects Also, it is assumed that the training and institutional strengthening ofthe first phase of the project will be able to mobilize resources and community participation to identify,prioritize and support required counterpart financing Furthermore, it is assumed that the expected neteconomic benefits of the eligible sub-projects will offer ERRs similar to those generated by such sub-projects in other urban centers (See illustrative tables including cost/benefit and sensitivity analysisattached to this annex )

Cost-effectiveness indicators: 2

Two main indicators would be the size and per capita cost of the local administration Other quantitativemeasures would be focused on the cost effectiveness (i e, the unit cost) of service provision of eachlocally provided service For those physical investments taking place during the first phase of the APL,cost benefit analysis would be applied

Economic Rates of ReturnThe economic analysis of four specific subprojects are included in the following pages (tables 1 to 4). Insummary the ERR for these four subprojects are as follows

Subproject Economk Rate of Return (ERR)

Sunyani - Road Rehabilitation Littlewood-Chiraa Rd 3 Km 67 57%

Sunyani - Central Market Rehabilitation Approach 12 36%

Bolgatanga - Solid Waste Management Revenue Approach 28 16%

Koforidua - Liquid Waste Management Revenue Approach 24 16%

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Tabte ERR for SUNYANIRoad Rehabilitation: Littlewood-Chiraa Rd. 3.0 Km(Unit; usS'000 at 1993 prices)

..... ...... ,............. ..... I ... ....... .......................................... ....... .................. ................. ...... . . ....... .. . ....

Economic Annual Project Cost w/ Economic Net Sensitivity AnalysisNo. Year V/C Ratio Surface Cond. Traffic Speed User AADT Economic Contingencies Naint'ce Economic Net Econmic Benefit:

------------- ............. ............... Savings Rd. User -------------- Cost Benefit w/o W/ W/w/o W/ w/o W/ w/o w/ per Cost Finan. Econom. Saved Passenger Zero Traffic 20X

Proj. Proj. Proj. ProJ. Proj. Proj. Veh-Km Savings Time Growth & No Cost(kph) (kph) Savings Surf. Decay Increase

(Cedis) ($'000) (S'000) (S'000) (S'000) (S'000) (S'000) ($ 000) (S'OOO)

1992 0.48 7500 36 2100 -4.00 -4.00 -4.00 -4.00 -4.001. 1993 0.51 8625 35 2226 -4.00 -4.00 -4.00 -4.00 -4.002. 1994 0.54 9919 34 2360 345 320.85 -320.85 -320.85 -320.85 -385.023. 1995 0.57 11407 32 2502 345 320.85 -320.85 -320.85 -320.85 -385.024. 1996 0.60 0.41 12000 3000 30 50.00 98 2652 550.30 4.00 554.30 478.31 478.31 554.305. 1997 0.64 0.43 12000 3450 30 47.50 100 2785 592.53 3.00 595.53 511.26 477.31 595.536. 1998 0.68 0.46 12000 3968 30 45.00 98 2924 610.53 2.00 612.53 524.96 476.31 612.537. 1999 0.72 0.48 12000 4563 30 42.50 106 3070 683.32 1.20 684.52 595.09 475.51 684.528. 2000 0.76 0.49 12000 5247 30 40.00 93 3224 643.28 1.20 644.48 548.39 475.51 644.489. 2001 0.81 0.52 12000 3000 30 50.00 98 3353 695.75 4.00 699.75 603.68 478.31 699.7510. 2002 0.85 0.55 12000 3450 30 47.50 100 3521 749.12 3.00 752.12 645.58 477.31 752.1211. 2003 0.91 0.58 12000 3968 30 45.00 98 3662 764.62 2.00 766.62 656.95 476.31 766.6212. 2004 0.96 0.61 12000 4563 30 42.50 106 3808 847.57 1.20 848.77 737.86 475.51 848.7713. 2005 1.02 0.64 12000 5247 30 40.00 93 3961 790.33 1.20 791.53 673.48 475.51 791.5314. 2006 1.08 0.67 12000 3000 30 50.00 98 4119 854.70 4.00 858.70 740.68 478.31 858.70

_ _ _-- .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. ... .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. ..

690._._ _ _ , _ __.. . ..... ..........-......................... . .. .. ....... .... ................. .. ...... ... .... .... .. . . . . .. . . . . ....

ERR= 67.57X 60.29X 55.97X 59.04X

Table: ERR for SUWYANI Central Market RehabilitationApproach

(Unit: USS '000 In 1993 prices at 600 Cedis/USS)

........ . ...... ....... ........ ....... ........ ....... ........ ....... ........ ....... ........ ....... ........ ....... ........ .......

No. Year Capital Cost wl Incremental Incrementat Economic Net Sensitivity 1: Sensitivity 2: sensitivity 3:

Phy. Cont. (IOX) Economic Benefits Salvage Economic 10X Net 25X Net loX Net

------- -- Operation & - - ----- -------- Value Benefit Increase Economic Increase Economic Increase Economic

Finan. Econom. Maintenance Finan. Econom. (1OX) in Cost Benefit in Benefits Benefit in Benefits Benefit

Cost 1/ 2/tS'000) (S'000) (S'O00) (S'OOO) (S'000) (S6000) (S'OOO) (S'000) (S'000) (S000) ($'000) (S'OOO) (S'OOO)

.... ...... ...... ...... ... ... .... . ....... ...... ....... .......... ................... .. ... .... .. .............. .... ...... ................ --------.

1 1994 0.0 0.02 1995 171.2 159.3 0.0 0.0 0.0 -159.3 175.2 -175.2 0.0 -159.3 0.0 -159.3

3 1996 178.7 166.2 4.8 33.8 31.4 -139.5 188.1 -156.6 39.3 -131.7 34.6 -136.4

4 1997 201.0 187.0 9.8 68.4 63.6 -133.2 216.4 -152.8 79.5 -117.3 69.9 -126.8

5 1998 193.6 180.0 15.4 107.1 99.6 -95.8 214.9 -115.3 124.5 -70.9 i09.6 -85.8

6 1999 20.8 145.9 135.7 114.9 22.9 112.8 169.6 148.8 149.3 128.5

7 2000 49.4 145.9 135.7 86.3 54.3 81.4 169.6 120.2 149.3 99.9

8 2001 49.4 145.9 135.7 86.3 54.3 81.4 169.6 120.2 149.3 99.9

9 2002 49.4 145.9 135.7 86.3 54.3 81.4 169.6 120.2 149.3 99.9

10 2003 49.4 145.9 135.7 86.3 54.3 81.4 169.6 120.2 149.3 99.9

11 2004 49.4 145.9 135.7 86.3 54.3 81.4 169.6 120.2 149.3 99.9

12 2005 49.4 145.9 135.7 86.3 54.3 81.4 169.6 120.2 149.3 99.9

13 2006 49.4 145.9 135.7 86.3 54.3 81.4 169.6 120.2 149.3 99.9

14 2007 49.4 145.9 135.7 86.3 54.3 81.4 169.6 120.2 149.3 99.9

15 2008 49.4 145.9 135.7 86.3 54.3 81.4 169.6 120.2 149.3 99.9

16 2009 49.4 145.9 135.7 86.3 54.3 81.4 169.6 120.2 149.3 99.9

17 2010 49.4 145.9 135.7 86.3 54.3 81.4 169.6 120.2 149.3 99.9

18 2011 49.4 145.9 135.7 86.3 54.3 81.4 169.6 120.2 149.3 99.9

19 2012 49.4 145.9 135.7 86.3 54.3 81.4 169.6 120.2 149.3 99.9

20 2013 49.4 145.9 135.7 86.3 54.3 81.4 169.6 120.2 149.3 99.9

21 2014 49.4 145.9 135.7 86.3 54.3 81.4 169.6 120.2 149.3 99.9

22 2015 49.4 145.9 135.7 86.3 54.3 81.4 169.6 120.2 149.3 99.9

23 2016 49.4 145.9 135.7 86.3 54.3 81.4 169.6 120.2 149.3 99.9

24 2017 49.4 145.9 135.7 86.3 54.3 81.4 169.6 120.2 149.3 99.9~~.... .. .... .... .. . .... .. .. ........ ..... .. ....... ---- ..... ... -- -- - -- - - - -- -- -- -- - --- ------- -- --

Total 744.6 692.4

ERR- 12.36X ERR- 10.06X ERR- 18.22X ERR= 14.77X

1/ The incremental operation and maintenance cost is estimated at 3X of the capital cost.

2/ The standard conversion factor (SCF) for Ghana of 0.93.

Table: ERR for BOLGATANGA SoLid Waste NanaganentRevenue Approach(Unit: USS '000 in 1993 prices at 600 Cedis/USS)

-- - - - ---- --- ---- --- ---- --- ---- --- ----------- --- - I................. ......... .................. . .......... ................. ......

No. Year Capital Cost wl IncrementaL Incremental Economic Net Sensitivity 1: Sensitivity 2: Sensitivity 3:Phy. Cont. (10X) Economic Benefits Salvage Economic 10X Net 25X Net lOX Net................ Operation & ------- ------- Value Benefit Increase Economic Increase Economic Increase EconomicFinan. Econom. Maintenence Finan. Econom. (10X) in Cost Benefit In Benefits Benefit in Benefits Benefit------ ....... Cost 1/ 3/ 2/ Value(S'OOO) (S'OOO) ($000) (C000) (S'OOO) (S'OOO) (S'OOO) (S'000) ($S000) (S'OOO) ($S000) (S'000) (S'000)

...... ... . ..... ........ ...... ........... ...... ......... ....... ............ .. .. ........ ............ .. ................ ......... ............. ... -----

1 1994 90.0 83.7 0.0 78.5 N.A. -83.7 92.1 -92.1 0.0 -83.7 0.0 -83.72 1995 280.0 260.4 15.1 107.5 100.0 -175.5 303.0 -203.0 125.0 -150.5 110.0 -165.53 1996 310.0 288.3 61.9 144.4 134.3 -215.9 385.3 -251.0 167.9 -182.4 147.7 -202.54 1997 0.0 0.0 113.8 192.7 179.2 65.4 125.2 54.0 224.0 110.1 197.1 83.35 1998 110.0 102.3 113.8 273.9 254.7 38.6 237.7 17.0 318.4 102.3 280.2 64.16 1999 132.2 344.0 320.0 187.7 145.5 174.5 399.9 267.7 352.0 219.77 2000 132.2 357.3 332.3 200.1 145.4 186.9 415.4 283.2 365.5 233.38 2001 132.2 371.1 345.2 213.0 145.4 199.7 431.5 299.3 379.7 247.59 2002 132.2 385.5 358.5 226.3 145.4 213.1 448.1 315.9 394.4 262.2

cn 10 2003 132.2 400.4 372.4 240.2 145.4 227.0 465.5 333.3 409.6 277.411 2004 132.2 415.9 386.8 254.6 145.4 241.4 483.5 351.3 425.5 293.312 2005 132.2 432.0 401.8 269.6 145.4 256.4 502.2 370.0 442.0 309.813 2006 132.2 448.7 417.3 285.1 145.4 271.9 521.7 389.5 459.1 326.914 2007 132.2 466.1 433.5 301.3 145.4 288.1 541.8 409.6 476.8 344.615 2008 132.2 484.1 450.2 318.0 145.4 304.8 562.8 430.6 495.3 363.116 2009 132.2 502.9 467.7 335.5 145.4 322.3 584.6 452.4 514.4 382.217 2010 132.2 522.3 485.8 353.6 145.4 340.4 607.2 475.0 534.3 402.118 2011 132.2 542.6 504.6 372.4 145.4 359.2 630.7 498.5 555.0 422.819 2012 132.2 563.5 524.1 391.9 145.4 378.7 655.1 522.9 576.5 444.320 2013 132.2 585.4 544.4 412.2 145.4 399.0 680.5 548.3 598.8 466.621 2014 132.2 608.0 565.4 433.2 145.4 420.0 706.8 574.6 622.0 489.822 2015 132.2 631.5 587.3 455.1 145.4 441.9 734.2 602.0 646.1 513.923 2016 132.2 656.0 610.1 477.9 145.4 464.6 762.6 630.4 671.1 538.924 2017 132.2 681.4 633.7 501.5 145.4 488.3 792.1 659.9 697.0 564.8

.... ---- ------ ------ ................ ......... ...... ... .... --------. ............ .-- -- - -- - -- - - -- -- -...- - -- - ....... .

Total 790.0 734.7

ERR= 28.16X ERR' 24.48X ERR' 38.60X ERR= 32.26XN.A. - Not applicable.1/ The incremental operation and maintenance cost is estimated at 18X of the capital cost.2/ The standard conversion factor (SCF) for Ghana of 0.93.3/ Includes benefits due to population growth (3.87X) in the number of anmual beneficiaries.

Table: ERR for KOFORIDUA Liquid Waste ManagementRevenue Approach(Unit: USS 4000 In 1993 prices at 600 Cedis/USS)

.......... ......................................................................................................................................No Year Capital Cost wl Incrementat incrementaL Economic Net Sensitivity 1: Sensitivity 2. Sensitivity 3:

Phy. Cont. (10K) Economic Benefits Salvage Economic 10X Net 25X Net 10X Net*--- ---- Operation & ---- -------- Value Benefit Increase Economic Increase Economic Increase Economic

Finan. Econom. Maintenance Finan. Econom. (10x) in Cost Benefit in Benefits Benefit in Benefits Benefit

--- ------- Cost 1/ 3/ 2/(S'OOO) (S'OOO) (SOOO) (SWON) (S'000) (S'000) (S'000) (S000) (SOOO) (S'OO0) (S'000) (S'OOO) (SOOD)

1 1994 180.0 167.4 0.0 69.2 N.A. -167.4 184.1 -184.1 0.0 -167.4 0.0 -167.42 1995 110.0 102.3 16.7 114.0 106.0 -13.0 130.9 -24.9 132.5 13.5 116 6 -2.43 1996 160.0 148.8 27.0 115.4 107.3 -68.4 193.3 -86.0 134.2 -41.6 118.1 -57.74 1997 250.0 232.5 41.9 185.2 172.2 -102.1 301.8 -129.5 215.3 -59.1 189.5 -84.95 1998 180.0 167.4 65.1 214.6 199.6 -32.9 255.8 -56.2 249.5 17.0 219.5 -13.06 1999 81.8 245.2 228.0 146.2 90.0 138.0 285.0 203.2 250.8 169.07 2000 81.8 251.1 233.5 151.7 90.0 143.5 291.9 210.1 256.9 175.18 2001 81.8 257.1 239.1 157.3 90.0 149.1 298.9 217.1 263.0 181.29 2002 81.8 263 3 244.9 163.1 90.0 154.9 306.1 224.3 269.3 187.510 2003 81.8 269.6 250.7 168.9 90.0 160.7 313.4 231.6 275.8 194.011 2004 81.8 276.1 256.7 174.9 90.0 166.8 320.9 239.1 282.4 200.6

12 2005 81.8 282.7 262.9 181.1 90.0 172.9 328.6 246.8 289.2 207.4

13 2006 81.8 289.5 269.2 187.4 90.0 179.2 336.5 254.7 296.1 214.314 2007 81.8 296.4 275.7 193.9 90.0 185.7 344.6 262.8 303.2 221.415 2008 81.8 303.5 282.3 200.5 90.0 192.3 352.9 271.1 310.5 228.716 2009 81.8 310.8 289.1 207.3 90.0 199.1 361.3 279.5 318.0 236.217 2010 81.8 318.3 296.0 214.2 90.0 206.0 370.0 288.2 325.6 243.818 2011 81.8 325.9 303.1 221.3 90.0 213.1 378.9 297.1 333.4 251.619 2012 81.8 333.7 310.4 228.6 90.0 220.4 388.0 306.2 341.4 259.620 2013 81.8 341.8 317.8 236.0 90.0 227.9 397.3 315.5 349.6 267.8

21 2014 81.8 350.0 325.5 243.7 90.0 235.5 406.8 325.0 358.0 276.2

22 2015 81.8 358.4 333.3 251.5 90.0 243.3 416.6 334.8 366.6 284.823 2016 81.8 367 0 341.3 259.5 90.0 251.3 426.6 344.8 375.4 293.624 2017 81.8 375.8 349.5 267.7 90.0 259.5 436.8 355.0 384.4 302 6

Total 880.0 818.4

ERR= 24.16X ERRz 20.63X ERR: 34.34K ERR- 28.13X

W.A. z Not Applicable1/ The incremental operation and maintenance cost is estimated at 10X of the capital cost.2/ The standard conversion factor (SCF) for Ghana of 0.93.3/ includes benefits due to population growth (2.4K) in the annuaL number of beneficiaries.

Annex 5: Financial Summary

GHANA: URBAN 5

Local Government Project Support Unit (LGPSU) of the Ministry of Local Government and RuralDevelopment (MLGRD)

Overview of LGPSU

Under previous Bank-financed urban projects, two implementing agencies were created which havedeveloped considerable experience and expertise in project management and World Bank procedures andguidelines. These are the existing LGPSU in MLGRD and the Technical Services Center (TSC) of theMinistry of Works and Housing, both of which currently share project management responsibilities foron-going urban projects. There is adequate capacity in the existing two units to deal with the accounting,reporting, engineering and technical matters relating to project implementation including the concept ofdecentralized project implementation. Under LGDP, in addition to TSC, there were four zonal officeswith planning, engineering and financial officers who provided support to the eleven DAs. Under UESP,each of the five DAs are responsible for implementation of their components and maintain sub-projectimplementation units in their respective DAs in addition to LGPSU at the center. All DAs are responsiblefor maintaining their sub-project accounts and preparing and submitting quarterly reports to LGPSU orTSC which are consolidated into the quarterly project reports.

The present LGPSU has technical staff, such as engineers, planning officers and support staff. Theaccounting and financial functions for both on-going projects (i.e., UESP and LGDP) are carried out bythe accounts unit at TSC. To effectively implement Urban V and to prevent overlap of functions, relevantstaff from TSC and LGPSU have been merged to constitute a new LGPSU under MLGRD which isresponsible for all Bank supported urban projects.

Current Accounting Unit

The unit is headed by a professionally qualified accountant and assisted by four additional staff, twoproject accountants (partly qualified _ part II of ICA) and two accounts assistants (C&AG staff). Theyhave been responsible for the implementation of several Bank and other donor-funded projects and arevery familiar with Bank disbursement and other requirements.

The financial procedures designed to implement the previous and on-going projects have beenfunctioning well and meet the Bank's requirements of adequate systems for transactions recording andaccounting processing. These procedures, as contained in their manual, will be modified to incorporatethe decentralized implementation arrangements for Urban V and its reporting needs.

Revised Financial Arrangements

The Urban V implementation will be decentralized to the DA level; and therefore, the mode ofdisbursements and reporting from the DAs will be modified, as deemed necessary, to meet this situation.A funds flow arrangement and disbursement mechanism was agreed with GOG at Appraisal. Theseprocedures will be documented in the financial procedures and project implementation manuals.

The procedures to be covered under the financial management section of the financial proceduresmanual/project implementation manual will address the financial policies and procedures governing theproject, the preparation of project budgets, the necessary supporting documentation for release of funds,

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the necessary forms and formats and other steps required in the financial administration of the project. Inaddition, the financial procedures manual will include changes to the chart of accounts, authorizationprocedures on the decentralized basis, and additional reporting for all identified levels. The computerizedaccounting system will also be modified to ensure that it can address the Bank's new Project ManagementReporting (PMR) requirements (see PMRs below).

The weaknesses at the DA level in the areas of inadequate skills, insufficient and untimely financialreporting, lack of forward planning and inadequate supervisory and control oversight over financialresources will be addressed through the financial management strengthening component of the projectduring Phase I of the APL.

Funds Flow Mechanism

Funds under the project will be managed centrally by the finance unit at LGPSU. However, the sub-project investment component will be fully implemented by the DAs with help from the LGPSU. Toensure that the DAs are accountable for the implementation, funds will be transferred to them under thiscomponent. Funds for the other components will be managed by LGPSU finance unit.

DAs will follow the guidelines outlined in the Project Implementation Manual to get their sub-projectsevaluated and approved. Funds flow or disbursement mechanism from the HQ to the DAs are as follows:

Steps

I1. For each DA to be eligible to receive funds it must open a Ghana Cedi bank account, to be knownas the DA Urban V Matching Fund Account and a second account in US dollars called the DAUrban V Account solely for Urban V project funds. IDA funds meant for the sub-projects will belodged in this Urban V Account while the DA's counterpart funds will be lodged in the MatchingFund Account.

2. Authorized signatories and specimen signatures must be communicated to LGPSU. It is expectedthat there will be two groups of signatories; one group consisting of the District CoordinationDirector (DCD), or in his absence, the Project Coordinator (PC) and the other group, the DistrictFinance Officer (DFO), or in his absence, the Budget Officer (BO) for this project. Twosignatures, one from each group, will be considered sufficient mandate for the release of fundsinto, and disbursement of funds from the PBA.

3. After a sub-project has been approved and when the DA is ready to award contract (which will bein accordance with agreed guidelines as outlined in the PIM), the DA will prepare their Statementof Funds Requirements (SFR) for the first quarter of sub-project implementation.

4. The SFR will be based on contracts signed (or ready to be signed) and termns of paymentcontained therein. DAs will submit their funds requirement to the LGPSU for verification andsubsequent disbursement directly into the DA account. Works for which contracts are not readywill not form part of the SFR.

5. The SFR will show details of contract percentage amounts being claimed in the first instance, andfor subsequent amounts already claimed and percentage completion to date. A sample form isattached in Annex A.

6. The LGPSU finance unit will disburse the funds directly to the DA's accounts, with informationto the officer who submitted the request.

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7. DAs will, on receipt of funds from HQ, immediately effect payment to variouscontractors/suppliers and submit monthly returns on disbursement/expenditure back to the HQ,either directly to Accra, if they are located in close proximity of Accra, or through the field office.

8. The monthly returns should include the following statements:

i) Bank statementii) Bank reconciliation statement (Annex B)iii) Statement of monthly expenditure (Annex C)

These are mandatory and should be submitted even if no activity has taken place in the previous month.Sample formats are attached as annexes.

9. These reports are to reach HQ no later than 15 days following the end of the reporting month.

LGPSU Field Office

To ensure that the field office operates effectively and provides the needed support to the relevant DAs,funds will be allocated and will be operated as a revolving fund of Cedis equivalent of US$15,000.Monthly returns of expenditures will be submitted to HQ. Resources will be allocated and accounted forwith the supporting documentation in line with the following procedures:

10. The office will open Urban V project bank account for this purpose and provide to the HQ thedetails, including the signatories and specimen signatures.

11. At the beginning of each quarter, the office will prepare a quarterly budget for its operationalactivities. This will be in line with their agreed program approved by HQ.

12. Resources will be released to the office based on their approved budget for the quarter. They willsubmit monthly returns to HQ with all the supporting documents for replenishment of theaccount. The returns will include: statement of the monthly expenditure; bank reconciliationstatement; Bank Statement for the month and supporting documentation.

External Audit.

The audit of Urban V will be carried out by independent and qualified auditors acceptable to the Bank.The selection of auditors shall be on a competitive basis and will be in place by effectiveness of theproject. The audit will also cover project activities in the participating DAs.

Project Management Reports (PMRs)

The Bank has introduced a new initiative to change loan administration, the Loan Administration ChangeInitiative (LACI). This initiative has been formally launched in Ghana and it is expected that all projectsshould comply fully with this new requirement at start of implementation or put in place an action plan toensure compliance in 12 to 18 months of commencement of implementation. LACI requires projects toprepare quarterly project management reports in the areas of finance and procurement, including contractdetails and project progress.

The Quarterly Financial Reports will consist of Project sources and Uses of Funds, statement of Uses ofFunds by Project Activity, Project Cash Withdrawals, Special Account Reconciliation statement and a sixmonths Project Cash Forecast;

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Quarterly Project Progress Report will consist of Output Monitoring Report on contract Managementand on Unit of Output by project activity;

Quarterly Procurement Management Report will consist of procurement process monitoring for goods,works and consultants' services, and contract Expenditure reports for goods, works and consultants'services.

Due to the expected new disbursement arrangements involving the DAs and DA contracting andreporting, Urban V will be unable to fully comply with the LACI-PMR requirements at the start ofimplementation. Agreements were reached with GOG at appraisal on the initial reports to be produced(same as for on-going projects, UESP and LGDP) and an action plan to achieve full compliance in thefirst year of implementation.

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Annex 6: Procurement and Disbursement Arrangements

GHANA: URBAN 5

Procurement

Guidelines

Procurement will follow the World Bank guidelines for procurement of goods, works andservices; Guidelines: Procurement under IBRD Loans and IDA Credits (1995 edition, revised in January1999), and Guidelines: Selection and Employment of Consultants by World Bank Borrowers (1997edition, revised in September 1997 and January 1999). Preference for domestically manufactured goodswill be allowed in accordance with World Bank Guidelines. National Competitive Bidding (NCB)procedures will include: (a) explicit statement to bidders of the evaluation and award criteria; (b) localadvertising with public bid opening; (c) award to lowest evaluated bidder; and (d) foreign bidders wouldnot be precluded from participating in NCB. Shopping procedures will include inviting in writing forwritten quotations from at least three different suppliers, setting a deadline for submission of quotationsand opening them at the same time. For ICB procurement, the project will use Bank's Standard BiddingDocuments for procurement of goods and works. For NCB procurement, Bank's Standard BiddingDocuments for procurement of goods and works with appropriate modifications. For selection ofconsultants, the Standard Request for Proposals for selection of Consultants would be used. For smallconsultant contracts, other simpler versions of documents acceptable to the Bank would be used.

Procurement Notices

A General Procurement Notice (GPN) will be published in the UN DevelopmentBusiness and in a National newspaper of wide circulation as provided for in the Guidelines. The GPNwould be updated annually in case ICB procurement would not be completed in the first year of theproject. Specific procurement Notices (SPN) would be required for goods and works contracts to beprocured on ICB and NCB basis and for expressions of interest for consultant contracts exceeding US$100,000. SPNs would (as a minimum) be published in local newspapers of wide circulation.

Procurement Planning

Except for sub-projects, a global procurement plan covering the entire project period and aspecific procurement plan for the first year of the project showing contract packages, and for eachpackage its estimated cost, procurement method and processing times until completion (includingbidding documents for items to be procured under ICB in the first year of the project) would be preparedand sent to IDA for Bank's review and comments before credit effectiveness. By September 30 of eachyear, the LGPSU would prepare and submit to IDA, for review and comments, a specific procurementplan for the following year as part of its annual work program. For sub-projects to be implemented byDistrict Assemblies, a tentative procurement plan has been prepared for phase one of the project and isattached to this annex as Appendix 1. No annual procurement plans will be required for sub-projects asthe sub-projects will be generated by the District Assemblies from time to time during the projectimplementation period on a demand driven basis. However, the appraisal document of each approvedsub-project will include a procurement plan for completing contract packages under the sub-project.

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Procurement methods (Table A)

Scope of Procurement and implementation arrangements

Procurement under the project will involve the following

(i) The sub-projects component, estimated to cost US$ 14.52 million, will consist of watersupply, waste disposal, roads and footpaths, stormn drainage, public parking terrinals,security lighting and other community facilities, such as slaughter houses, public toiletsand markets The cost of the sub-projects is inclusive of works, goods and consultantservices Contracts under the sub-projects would be packaged by DAs and procuredfollowing the procurement procedures specified in the DCA DAs would prepare aprocurement plan for each contract package under a sub-project as it gets approvedThe DAs will be responsible for calling for bids, receiving and evaluating bids,awarding and signing contracts, supervising performance and making payments NoICB procurement of goods and works is envisaged under the sub-projects in phase one

As part of this component, Agence Fran9aise de Developpement (AFD) will provideUS$5 0 million for road sub-projects (civil works) and US$1 0 million for design andsupervision Individual contracts for road sub-projects would be packaged by DAs andprocured following the specified procurement procedures, including those agreed withthe development partner for this component

(1i) Goods (excluding those under sub-projects), estimated to cost US$ 0.90 million forsector strengthening and for supporting project management by MLGRD, will consistof a limited supply of vehicles, computers, office equipment and miscellaneous itemsof supplies and furimture Contracts for these goods will be packaged by LGPSU,incorporated into the project's procurement plan and procured following procurementprocedures specified in the DCA

(1ii) Consultant Services and Technical Assistance, estimated to cost US$ 0.97 million,would consist of systems development and implementation in eight DAs, preparation ofRevenue Improvement Action Plans (RIAPs) and property revaluation TechnicalAssistance would consist of consultants providing implementation support to LGPSUResource persons required for training programs would be included in the trainingpackages and not under this component Contracts for Consultant Services andTechnical Assistance will be packaged by LGPSU, incorporated into the project'sprocurement plan and procured following procurement procedures specified in theDCA

(IV) Training component, estimated to cost US$ 1 18 million, will consist of training to beprovided to DAs in planning and management LPGSU would prepare trainingpackages (as part of the project's Annual Work Plan) and send them to the Bank forreview and comments before they are implemented

(v) Mapping, estimated to cost US$ 3.60 million, will consist of aerial mapping andscanning, ground mapping and verification and digital mapping, including associatedcapacity building, technical assistance, vehicles and equipment Individual contractsunder this component would be packaged by LGPSU and procured following specifiedprocurement procedures, including procedures agreed with the Donor for thiscomponent, and acceptable to IDA

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Procurement capacity

Procurement capacity in the LGPSU is adequate while that in the District Assemblies is weak as indicatedin procurement capacity assessment under other Bank-financed projects, to be implemented by DAs. Thisfact is recognized in the project design as under the project implementation arrangements, capacity ofDAs would be enhanced by the training programs to be implemented by LGPSU, as well as by use ofprocurement and financial procedures to be specified in the Project Implementation Manual.

Table A: Project Costs by Procurement Arrangements(US$ million equivalent)

Expenditure Category . 2 Total Cost

ICB NOB Other N.B.F.1. Works 0.00 5.73 2.12 6.67 14.52

(0.00) (5.09) (1.91) (0.00) (7.00)2. Goods 0.90 0.00 0.00 0.00 0.90

(0.90) (0.00) (0.00) (0.00) (0.90)3. Services 0.00 0.00 0.97 0.00 0.97Consultant Services & (0.00) (0.00) (0.97) (0.00) (0.97)Technical Assistance4. Training 0.00 0.00 1.18 0.00 1.18

(0.00) (0.00) (1.18) (0.00) (1.18)5. Mapping 0.00 0.00 0.00 3.60 3.60

(0.00) (0.00) (0.00) (0.00) (0.00)6. Operating Costs 0.00 0.00 1.13 0.00 1.13

(0.00) (0.00) (0.78) (0.00) (0.78)Total 0.90 5.73 5.40 10.27 22.30

(0.90) (5.09) (4.84) (0.00) (10.83)

1/ Figures in parenthesis are the amounts to be financed by the . All costs include contingencies2/ Includes civil works and goods to be procured through national shopping, consulting services, services of

contracted staff of the project management office, training, technical assistance services, and incrementaloperating costs related to (i) managing the project, and (ii) re-lending project funds to local governmentunits.

Prior review thresholds (Table B)

Procurement methods and thresholds

(i) Contracts for civil works would be awarded on basis of NCB. Goods contracts estimatedto cost more than US$100,000 would be by ICB, contracts estimated to cost between US$100,000and US$30,000 would be by NCB and below US$30,000 by shopping procedures. Directcontracting would be allowed only with prior clearance with the Bank.

(ii) Procurement of consultant services will follow the guidelines. The Bank's StandardRequest for Proposals (SRFP) will be used for all contracts estimated to cost more thanUS$100,000 equivalent.

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Bank Review

(i) Goods contracts estimated to cost the equivalent of US$100,000 or more and all civilworks contracts under sub-projects will be subject to prior review in accordance with theprocedures set forth in paragraphs 2 and 3 of Appendix I of the Procurement Guidelines.

(ii) For Consultant services, all terms of reference, regardless of cost, will be subject to priorreview. Contracts estimated to cost US$25,000 for individuals and US$50,000 for firms or morewill be subject to prior review in accordance with the procedures set forth in paragraphs 2 and 3of Appendix I of the Consultants Guidelines. Contracts not subject to prior review will be subjectto review by IDA supervision missions and through ex-post procurement audits and will begoverned by the procedures set forth in paragraph of Appendix I of the Procurement Guidelinesand the last sub-paragraph of paragraph 2(a) and paragraph 4 of Appendix I of the ConsultantsGuidelines.

Table B: Thresholds for Procurement Methods and Prior Review 1

CottValue CnrcsSbettThreshold Procurement Pri Pnor Rviwd

Expenditure Category (US$) Method (US$)1. Works NIL NCB All

2. Goods Over US$100,000 ICB All contracts

3. Services(Consultants) Above US$100,000 QCBS (i) All Sole sourceBelow US$100,000 Other methods (ii) All TORs

(iii) All stages forcontracts belowUS$25,000 andUS$50,000 forIndividuals and

Firms respectively

Total value of contracts subject to prior review: US$8.0 million out ofUS$22.30 million

Overall Procurement Risk Assessment

Average

Frequency of procurement supervision missions proposed: One every 6 months (includesspecial procurement supervision for post-review/audits)

1 Thresholds generally differ by country and project. Consult OD 11.04 "Review of ProcurementDocumentation" and contact the Regional Procurement Adviser for guidance.

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DisbursementAllocation of proceeds (Table C)

Table C: Allocation of Proceeds

Expenditure Cateory Amount in US$riuion Financing Percentage1. Works (Sub-projects) 6.08 50% of O&M expenditures

90% of other expenditures2. Goods 0.85 100 % of foreign expenditures

85% of local expenditures3. Consultants' Services and Technical 0.92 100%Assistance4. Training 1.13 100%6. Operating costs 0.75 70%7. Unallocated 1.10

Total Project Costs 10.83

Total 10.83

Use of statements of expenditures (SOEs):

Contracts less than US$100,000 equivalent for goodsConsultant contracts of less than US$ 50,000 for firms and US$ 25,000 for individualsTrainingOperating Costs

Special account:

The special account will have an authorized allocation of US$1,200,000 to cover 4 months of eligibleexpenditure. An initial deposit of US$600,000 will be made to the project account opened in acommercial bank upon effectiveness of the credit.

Sub-project accounts at the DA level

Each DA will open two sub-project accounts, one for IDA funds and one for DA counterpart funds. TheIDA account will be replenished on the basis of estimated quarterly requirements for sub-projectimplementation. All payments for US$50,000 and above will be referred to LGPSU for direct paymentfrom the LGPSU special account. Payments under US$50,000 may be made directly from the DAaccount.

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Annex 7. Project Processing Schedule

GHANA: URBAN 5

Project Schedule Planned Actual

Time taken to prepare the project (months) 27 42First Bank mission (identification) 12/01/97 12/01/97Appraisal mission departure 10/15/99 09/25/99Negotiations 01/15/2000 01/24/2000Planned Date of Effectiveness 06/30/2000

Prepared by

Ministry of Local Government and Rural Development (MLGRD)

Preparation assistance

Local Government Project Support Unit (LGPSU) of the MLGRD

Bank staff who worked on the project included

Name SpecialityJagdish Bahal Team LeaderCharles Boakye Civil Engineer (Ghana Office)Rumana Huque Urban SpecialistFrederick Yankey Financial Management Specialist (Ghana Office)Chris Banes Municipal EngineerHassan M Hassan Principal Environment SpecialistIan Wetherell Municipal Finance SpecialistDavid Webber Sr Disbursement OfficerSaid Al Habsy Sr CounselMbuba Mbungu Procurement Specialist (Ghana Office)Kofi Awanyo Procurement Specialist (Ghana Office)Hernando Garzon EconomistJack Cresswell Training SpecialistGunter Heidenhof Sr Public Sector Management SpecialistErnestina Attafuah Program AssistantLizmara Kirchner Team Assistant

Quality TeamGerhard Tschannerl Principal Municipal EngineerAlan Carroll Principal Urban SpecialistGeorge Gattoni Principal Urban Planner

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Annex 8: Documents in the Project File*

GHANA: URBAN 5

A. Project Implementation Plan

Project Implementation Manual

B. Bank Staff Assessments

1. Financial Analysis and Revenue Projection of 25 Towns2. Financial Management Assessment

C. Other

1. Study of Investment Needs and Priorities of 25 Towns2. Study of Preliminary Engineering Design of 25 Towns3. Training Needs Assessment

*Including electronic files

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Annex 9 Statement of Loans and Credits

GHANA URBAN 5

Difference between expected

and actual

Onginal Amount in US$ Millions disbursementsa

Project ID FY Borrower Purpose IBRD IDA Cancel Undisb Orig Frm Revd

GH-PE40557 1999 GOVERNMENT ERSO11 000 18000 000 17758 000 000

GH-PE-40659 1999 GOVERNMENT COMMUNFIYDEV 000 500 000 495 000 ooo

GH PE 50615 1999 GOV OFGHANA PUSSECTORMNGTPROG 000 1430 000 1405 000 000

GH PE 970 1999 GOVT OF GHANA TRADE GATEWAY & INV 000 5050 000 4738 1 98 000

GH PE 974 1999 GOVT OF GHANA NAT FUNC LIT PROG 000 3200 000 31 72 000 000

GH PE-946 1998 GOVERNMENT NAT RES MANAGEMENT 0 00 9 30 0 00 9 23 4 04 0 00

GH PE-949 1998 GOVT OF GHANA HEALTH SCTR SUPPORT 000 3500 000 2710 390 000

GH PE-41150 1997 GOVERNMENT VILLAGE INFRASTRUCTU 000 3000 000 2308 203 000

GH PE-45588 1997 GOVT OF GHANA PUB FIN MGMT TAP 0 00 20 90 0 o0 16 34 11 88 0 c0

GH PE42516 1996 GOVERNMENT PUBLIC ENTERPRISE/PR 0 00 26 45 0 00 1848 5 90 0 00

GH-PE 943 1996 MINISTRY OF FINANCE NON BANK FIN INS AST 0 00 23 90 0 00 1719 14 70 0 00

GH PE 957 1996 GOVERNMENT HWY SECTINVPROG 000 10000 000 5672 528 000

GH-PE 973 1996 GOVT OF GHANA URBAN ENV SANITATION 0 00 7100 000 49 26 3592 0 00

GH PE 975 1996 GOVERNMENT BASIC EDUCATION 000 5000 000 4208 2312 000

GH PE 926 1995 GOVTOFGHANA THERMAL(P VII) 000 17560 000 4029 4202 1317

GH PE 948 1995 REP OF GHANA EDUCNOC TRNG 0 00 9 60 0 00 5 68 425 0 04

GH PE-960 1995 GOVERNMENT PRIV SECTOR DEV 000 1300 000 851 752 000

GH PE 962 1995 GOVERNMENT OF GHANA FISHERIES 0 00 900 0 o0 4 32 2 31 000

GH PE 966 1995 GOVERNMENT MINING SEC DEV & ENV 0 00 12 30 0 00 5 46 3 76 000

GH PE 924 1994 TBD COMMUNITY WATER & SA 000 21 96 000 824 714 000

GH PE 936 1994 GOVERNMENT LOCAL GOVT DEV 0 00 38 50 0 00 1482 716 0 00

GH-PE 961 1994 GOVT OF GHANA AGRIC SECTOR INVEST 000 2150 000 398 216 231

GH PE 930 1993 GOVERNMENT LIVESTOCK 000 2245 038 258 354 315

GH PE 953 1993 GOVERNMENT NArLELECTRIFICATIO 000 8000 000 1006 1368 784

GH PE 956 1993 GOVT OF GHANA URBAN TRANSPORT 0 00 76 20 000 919 616 2 41

GH PE 931 1992 AGRIC EXTENSION 0 00 3040 0 00 4 85 449 449

GH PE918 1991 AGRIC DIVERS (TREE C 000 1650 1 85 452 559 1 01

Total 000 1 17536 223 65466 21417 22 8

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GHANASTATEMENT OF IFC's

Held and Disbursed Portfolio3 1 -Jul- 1999

In Millions US Dollars

Committed DisbursedIFC IFC

FY Approval Company Loan Equity Quasi Partic Loan Equity Quasi Partic1988/89/91/93 Bogosu 6.00 5.35 1.72 12.45 6.00 5.35 1.72 12.451989/91/93 Cont Acceptances 0.00 0.00 0.88 0.00 0.00 0.00 0.88 0.001989/92 Wahome Steel 0.87 0.00 0.44 0.00 0.87 0.00 0.44 0.001990 AEF Alugan 0.05 0.00 0.00 0.00 0.05 0.00 0.00 0.001990/91/96 GAGL 4.50 8.11 2.55 0.00 4.50 8.11 2.55 0.001991 AEF Packrite 0.06 0.00 0.00 0.00 0.06 0.00 0.00 0.001991 GHANAL 0.00 0.00 0.44 0.00 0.00 0.00 0.44 0.001991/92 Hotel Inv. Ghana 1.40 0.00 0.00 0.00 1.40 0.00 0.00 0.001992 AEF BMK 0.57 0.00 0.00 0.00 0.57 0.00 0.00 0.001992 AEF CFL 0.28 0.00 0.00 0.00 0.28 0.00 0.00 0.001992/93 Ghana Leasing 1.01 0.00 1.48 0.00 1.01 0.00 1.48 0.001993 AEF Afariwaa 0.18 0.00 0.00 0.00 0.18 0.00 0.00 0.001993 AEF GHUMCO 0.02 0.00 0.00 0.00 0.02 0.00 0.00 0.001993/96 Ecobank - Ghana 4.70 0.00 0.00 0.00 0.60 0.00 0.00 0.001994 AEF Shangri-la 1.10 0.00 0.00 0.00 1.10 0.00 0.00 0.001994 GHACEM 0.75 0.00 0.00 0.00 0.75 0.00 0.00 0.001995 AEF Dupaul Wood 0.38 0.00 0.00 0.00 0.38 0.00 0.00 0.001996 AEF Pako Bay 0.00 0.00 0.05 0.00 0.00 0.00 0.00 0.001996 AEF Tacks Farns 0.37 0.00 0.00 0.00 0.37 0.00 0.00 0.001997 AEF PTS 0.00 0.31 0.00 0.00 0.00 0.31 0.00 0.001998 AEF NCS 0.00 0.67 0.00 0.00 0.00 0.67 0.00 0.00

Total Portfolio: 22.24 14.44 7.56 12.45 18.14 14.44 7.51 12.45

Approvals Pending CommitmentFY Approval Company Loan Equity Quasi Partic

Total Pending Commitment: 0.00 0.00 0.00 0.00

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Annex 10 Country at a GlanceGHANA URBAN 5

Sub- 9/7/99POVERTY and SOCtAL Saharan Low -

Ghana Africa income Development diamond1998Population mid-year (milions) 184 628 351S Life expectancyGNP per capita (Atlas method USS) 390 480 520GNP (Atlas method US$ bitlions) 7 2 304 1,844

Average annual growth, 1992-98

Population (%) 2 6 2 6 17Labor force (YO) 2 7 2 6 19 GNP ____ Gross

per ~~~~~~pnmaryMost recent estimate (latest year available, 1992-98) capeta enrollment

Poverty (% of population below national poverty line) 31Urban population (% oftotalpopulation) 37 33 31Life expectancy at birth (years) 59 51 63Infant mortaltty (per 1000 live births) 69 91 69Child malnutntion (% of children under 5) 27 Access to safe waterAccess to safe water (% of population) 56 47 74Illiteracy (% of population age 15+) 36 42 32Gross pnmary enrollment (% of school-age population) 76 77 108 "- Ghana --- Low-income group

Male 83 84 113Female 70 69 103

KEY ECONOMIC RATIOS and LONG-TERM TRENDS

1977 1987 1997 1998Economic ratios*

GDP (U/S$b lions) 3 2 51 6 9 7 5Gross domestic investrnent/GDP 11 1 104 24 1 229 TradeExports of goods and services/GDP 10 5 19 7 24 0 26 7Gross domestic savings/GDP 10 0 3 9 9 8 13 2Gross natonal savings/GDP 9 6 5 6 15 4 19 4

Cunrent account balance/GOP -4 5 -4 4 -11 1 -6 6Interest payments/GDP 0 5 1 1 1 8 2 0 Domestic _ i - InvestmentTotal debVGDP 334 646 922 92 0 SavingsTotal debt service/exports 3 7 45 8 32 6 28 0Present value of debt/GDP 54 2 50 8Present value of debt/exports 220 3 186 6

Indebtedness1977-87 1988-98 1997 1998 1999-03

(average annual growth)GDP 0 4 4 3 4 2 4 6 6 1 -GhanaGNPpercapita 27 14 17 1 g 35Exports of goods and services -4 7 9 7 -0 4 14 4 5 6

STRUCTURE of the ECONOMY1977 1987 1997 1998 VGrowth rates of output and investment(%)

(% of GDP) 30Agnculture 56 2 50 6 35 8 37 6 20Industry 15 8 16 3 25 7 24 8 20-

Manufacturing 108 99 82 82 aServices 280 33 1 38 5 376 0-- -

Private consumption 77 4 85 5 77 8 76 5 20

General government consumption 126 106 124 103 _ GDl - GDPImports of goods and services 11 6 26 2 38 4 36 4

1977-87 1988-98 1997 1998 rowth rates of exports and imports(%)(average annual growth)Agriculture 0 8 27 43 53 130 rIndustry -4 0 4 8 6 4 2 6 20 -

Manufactunng -4 0 31 7 3 3 0Services 19 58 34 45 104

Pnvateconsumption 0 3 37 12 1 1 6 o _

General govemment consumption 1 4 4 6 -11 7 11 3 93 94 95 97 98Gross domestic investment -4 6 3 8 3 4 2 8 10 -Imports of goods and services -7 0 7 3 14 7 7 9 - Exports - mportsGross national product 0 2 4 3 4 3 4 6

Note 1998 data are preliminary estimates

* The diamonds show four key indicators in the country (in bold) compared with its income group average If data are missing the diamond willbe incomplete

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Ghana

PRICES and GOVERNMENT FINANCE1977 1987 1997 1998 rviat %

Domestic pricesInltoI%(% change) soTConsumerprices 116.5 39.8 27.9 19.3 60. Implicit GDP deflator 67.3 39.2 19.5 17.6 40 T

Government finance 20

(% of GDP, includes current grants) oCurrent revenue .. 14.1 17.8 18.9 93 94 95 96 97 98

Current budget balance .. 2.9 1.6 1.6 -GDP deflator eCPiOverall surplus/deficit .. -5.1 -10.8 -9.7

TRADE1977 1987 1997 1998 Export and i rv _______

(US$ millions) p ard import levels (US$ millions)Total exports (fob) .. 824 1,491 1,830 3,000

Cocoa .. 495 470 629Timber .. 91 172 170 200

Manufactures .iTotal imports (cit) . 1,009 2,321 2,417

Food .. 73 10

Fuel and energy .. 145 240 212Capital goods16

92 93 94 95 96 97 98Export price index (1995=100) .. 97 93 98Import price index (1995=100) .. 69 97 81 a Exports a importsTerms of trade (1995=100) .. 141 96 121

BALANCE of PAYMENTS1977 1987 1997 1998 kurrent account ba lance to GDPratio (%)

(US$ millions) IExports of goods and services 1,018 903 1,656 2,004 0 .

Imports of goods and services 1,121 1,203 2,645 2,732Resource balance -103 -300 -989 -728 -4

Net income -35 -127 -134 -142Net current transfers -6 202 380 378 -

Current account balance -144 -225 -763 -492

Financing items (net) 254 363 787 591Changes in net reserves -109 -138 -25 -99 -16

Memo:Reserves including gold (US$ millions) 182 332 508 502Conversion rate (DEC, local/US$) 3.5 147.0 2,050.2 2,314.0

EXTERNAL DEBT and RESOURCE FLOWS1977 1987 1997 1998

(US$ millions) Composition of total debt, 1998 (US$ millions)Total debt outstanding and disbursed 1,067 3,280 6,345 6,900

IBRD 43 151 30 27 G:737 A 27IDA 79 700 2,617 2,962

Total debt service 38 415 552 572IBRD 22 1 84IDA 1 7 31 34 8 2.962

Composition of net resource flowsOfficial grants 65 122 160 230Official creditors 70 254 333 295Private creditors 22 3 88 -25 E: 1,432Foreign direct investment 19 5 110 152Portfolio equity 0 0 46 80 D 566 C 334

World Bank programCommitments 57 233 54 147 A -IBRD E - Bilateral

Disbursements 30 194 237 261 H - IDA D - Other multilateral F - PrivatePrincipal repayments 3 13 23 19 C - IMF G - Short-term

Netflows 27 181 214 241Interest payments 3 16 22 20Net transfers 24 165 192 221

Development Economics 917199

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Annex 11: Profile of 25 Project TownsGHANA: URBAN 5

Region District Assembly Project Town Population (1999)

ASHANTIAsante Akim North 1. Agogo 24,665Asante Akim North 2. Konongo Odumase 29,600Ejura Sekye-Dumase 3. Ejura 34,418Sekyere West 4. Mampong 34,648Adansi West 5. Obuasi 124,642

247,973

BRONG AHAFOBerekum 6. Berekum 35,788Nkoranza 7. Nkoranza 33,273Wenchi 8. Wenchi 25,490

94,551CENTRAL

Upper Denkyira 9. Dunkwa 20,225Awatu/Efutu/Senya 10. Winneba 33,888

54,113

EASTERNBirim South 11. Akim Oda 35,670Kwaebibirem 12. Akwatia 19,902West Akim 13. Asamankese 32,220Fanteakwa 14. Begoro 26,622Kwahu South 15. Nkawkaw 44,498Aquapem South 16. Nsawam 31,383Suhum/Kraboa/Koltar 17. Suhum 30,953

221,248

GREATER ACCRAGa 18. Madina 118,161

118,161

NORTHSavelugu/Nanton 19. Savelugu 30,426Yendi 20 . Yendi 46,516

76,942

VOLTAKetu 21. Aflao 40,051Hohoe 22 . Hohoe 31,768Kpando 23. Kpando 23,852

95,671

WESTERNWassa West 24. Prestea 20,761Wassa West 25 . Tarkwa 34,242

55,003

TOTAL POPULATION: 963,662

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ASHANTI REGION

Agogo, the largest single settlement in the Asante-Akim North District is located along theAccra-Kunasi trunk road The population of Agogo for 1960, 1970 and 1984 were 10,356, 14,710 and18,879 respectively This shows an intercensal annual growth rate of 1 78 percent between 1970 and1984 Agriculture, at the subsistence level, is the main occupation inAgogo as in the Asante Akim NorthDistrict, engaging about 50 percent of the labor force The location ofAgogo as a gateway to the AframPlains, and the road to Konongo and other urban markets enhance the town's role as an important tradeand commerce center in the district This sector employs about 14 percent of the working populationTrading and commercial activities are carried out within two markets and a few shops in the town Themarkets which are local in status deal mainly in agricultural produce and manufactured goods Theirsphere of influence go beyond Agogo to the Afram Plains and Konongo

Ejura, the capital of Ejura Sekyedumase District is about 360km North-West of Accra and 90kmfrom Kumasi The population census report of Ghana for 1961, 1970 and 1984 shows the respectivepopulation of Ejura to be 7,078, 10,644 and 18,775 This shows an intercensal growth rate of 1 8 percentbetween 1970 and 1984 Ejura is an administrative, agricultural and commercial center As a linersettlement along the Mampong-Atebubu-Yeji trunk road, Ejura is linked to Sekyedumase, the only majortown in the district apart from Ejura It is also linked to adjacent districts The major economic activitiesin the district are agriculture and trading especially in agricultural goods Cattle rearing is also a majoractivity, especially in and around Ejura Many sheep and goats are also reared in the district More than80 percent of the population in the district depend on agriculture for their well-being, and it accountsannually for more than 70 percent of total incomes of households The district is the leading producer ofmaize and yams in the Ashanti Region Trading employs the highest number of people (39 percent)public servants constitute 30 percent whilst 26 percent of the people are engaged in farming

Konongo/Odumase, the district capital of the Asante Akim North District is located about204km North West of Accra, along the Accra-Kumasi trunk road, and about 66km from Kumasi, theAshanti Regional Capital The soils are of the forest ochrosols of Ghana's forest belt and support cropssuch as cocoa, cassava, plantain, oil palm, cocoyam and vegetables such as tomatoes, garden eggs andpepper The forest constitutes a major natural resource and consists of different species of tropical woodswhich have high economic value The population of Konongo/Odumase for 1960, 1970 and 1984 were16,311, 17,375, 22,279 respectively A greater proportion (54 9 percent) of the active labor force areengaged in commercial activities notably trading whilst only 9 1 percent are employed in agricultureKonongo/Odumase is one of the main commercial centers in the Ashanti Region The presence of therailway line, which helps in the transportation of food crops cheaply from the hinterland to the marketcenter as well as timber to feed local sawmills, also enhances the town's role as a marketing center

Mampong-Ashanti, the capital of Sekyere West District is located 5 1km North-East of Kumasialong the Kumasi-Yeji Trunk Road and lies on the Mampong scarp which has an average elevation ofabout 1268 metres above sea level The vegetation of the area is part of a belt of mixed patches of dryforest and grassland which borders to the north of the rain forest belt to the country The population ofMampong-Ashanti for 1960, 1970, 1984 were 8,462, 14,990, 22,463 respectively This shows anintercensal annual growth rate of 5 7 percent between 1960 and 1970, and 2 9 percent between 1970 and1984 Conditions in the Sekyere West District favours agriculture and hence agriculture is the mostpredominant occupation It engages about 49 percent of the working population

Obuasi, the capital of Adansi West District is located about 61km from Kumasi the regionalcapital Obuasi has been experiencing increasing population According to the population census reportsof Ghana, the population of Obuasi for 1960, 1970 and 1984 were 22,827, 31,022, and 60,709respectively The 1984 population made Obuasi the second largest settlement after Kumasi in terms ofpopulation in the Ashanti Region This gives an annual intercensal growth rate of 4 8 percent between

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1970 and 1984. The town owes its growth and development to the gold mining industry. The majoreconomic activities in Obuasi are mining, other industries, services, trading and agriculture. According tothe Adansi West District Development Plan, agriculture accounts for 51 percent of the total labor force inthe district. Though agriculture constitutes a major source of income for a large number of people,industry, specifically mining and its related subsidiary and ancillary sectors provide employment to asizeable number of people. Farming has therefore been overshadowed by mining.

BRONG AHAFO REGION

Berekum, the capital of Berekum District, is located in the Western part of the Brong AhafoRegion, a distance of about 32km from Sunyani the Regional Capital and 437km from Accra. Thepopulation for Berekum for 1960, 1970 and 1984 were 11,143, 14,296 and 22,269 respectively. Thisgives an intercensal annual growth rate of 3.16 between 1970 and 1984. Berekum is an importantadministrative center in the District and is also an important commercial center in theBrong AhafoRegion. It is well linked to the towns in the district and to adjacent districts. The major economicactivities in Berekum are trading, services, agriculture and industry. According to the Five YearDevelopment Plan for Berekum District, about 67 percent of the working population are engaged in theagricultural sector. Agricultural production and productivity in the district are relatively high. In 1994,the district achieved the highest average yield of plantain per hectare (12.30 metric tones per hectare) inBrong Ahafo Region, higher than the national achievable yield of 10 metric tones per hectare. There arealso a number of small-scale industries which include palm oil extraction, cassava processing, akpeteshiedistilling, wood processing and soap making.

Nkoranza is the Capital of Nkoranza District in the Brong Ahafo Region. The population ofNkoranza for 1960, 1970 and 1984 were 6,250 7,191 and 15,065 respectively. This shows an intercensalannual growth rate of 5.3 percent between 1970 and 1984. The main economic activities undertaken inNkoranza are commerce, industry and agriculture. According to the District Development Plan forNkoranza District, the predominant occupation in the District is agriculture engaging over 90 percent ofthe population. This is basically due to the fact that even those engaged in other occupations still take upagriculture as a minor activity. Nkoranza being an urban town however, portrays a different trend.Commerce and services engage 47 percent of the working population, agriculture engages 24 percent,public services engage 18 percent and industry engages 11 percent of the working population.

Wenchi the Capital of Wenchi District is located in the Western part of the Brong Ahafo Region.The population census reports of Ghana gave the population of Wenchi for 1960, 1970 and 1984 as10,672, 13,837 and 18,583 respectively. This shows an intercensal annual growth rate of 2.11 percentbetween 1970 and 1984. The major economic activities are commerce, industrial activities andagriculture. According to the Wenchi Development plan, the agricultural sector employs the majority ofthe economically active population in the district (40 percent). Industrial activities inWenchi comprisesmall-scale manufacturing, construction, artisans, craftsmen and food processing.

CENTRAL REGION

Dunkwa the Capital of the Upper Denkyira is about 144km from Cape Coast and is located at thenorthern part of the Central Region. The area falls within the wet semi-equatorial climate and supports amoist semi-deciduous forest. Dunkwa had a population of 12,689, 15,437,andl6,905 for 1960, 1970 and1984 respectively. Between 1970 and 1984 the population increased at a meagre average annual rate of0.65 percent. The removal of the headquarters of the Cocoa Marketing Board of the Western Regionfrom Dunkwa to Sefwi Wiaso in the mid 1980s partly accounts for this low population growth rate. The1984 population of Dunkwa accounted for 25 percent of the population of the Upper Denkyira District.Trading, agriculture and mining are the major economic activities in Dunkwa. Mining activities arecarried out by private companies such as Continental Goldfields and NEVSUN Goldfields Ltd, who

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employ the local people but operate outside the settlement. Dunkwa is one of the major towns on theWestern Railway line, and this forms an important link with the rest of the country. Dunkwa is linked toKumasi, Awaso and Takoradi thus making trading, especially in agricultural produce, viable. As one ofthe major markets in the district, it serves as one of the assembling points for agricultural produce. Thereare a number of small-scale industrial activities in Dunkwa. These are cassava processing, palm oilextraction, baking, distilling, dress making and soap making. Mining is also an important activity inDunkwa. The people engage in small-scale mining of alluvial gold.

Winneba is the district capital of the Awutu-Effutu-Senya district, which is in the CentralRegion. The population of Winneba for 1960, 1970 and 1984 were 25,400, 30,800, and 27,105respectively. Between 1970 and 1984, the population declined at an intercensal decline rate of about 1.1percent per annum. Winneba developed as the administrative headquarters of the Central Province of theGold Coast and major trading port servicing Agona and West Akim Districts. However, the northwardmovement of the trading firms to Agona Swedru after 1940 affected the growth of the town. Winneba,being a District Capital at the coast was a port town. With the completion of theTema Harbor after the1960s, the port activities were shut down and all commercial activities moved toTema, thus the declineof activities in the town. The major economic activities in the district are fishing, farming, trading andeducation. The School of Education was established in Winneba in 199?. Pineapple is grown oncommercial basis.

EASTERN REGION

Nsawam, the district capital of the Akwapim South District is located within the Densu Valleyalong the main highway from Accra to Kumasi; a distance of about 35km from Accra. Nsawam as adistrict capital has experienced fluctuations in population growth. However, the population is nowincreasing due to the emergence of a number of manufacturing companies, the status of the town as theAkwapim South District capital, and the use of Nsawam as a dormitory town by people who work inAccra. The population of Nsawam for 1960, 1970 and 1984 were 20,240, 25,518 and 20,439respectively. This shows an annual growth rate of 1.9 percent between 1970 and 1984. The majoreconomic activities are commerce, agriculture, and industry. According to Ghana Export PromotionCouncil, the Akwapim South District is the source of about 60 percent of pineapples exported from thecountry. With the strong agricultural base, there are a number of agro-based industries at Nsawam; theseinclude Astek Fruit Processing Industry, AgriPlast Ltd, and Nsawam Cannery. Trading at presentaccounts for about 26 percent of the service sector labor force. Increasing interaction with Accra hasboosted the trade and transport sector. However, commerce has generally declined with the diversion ofthe Accra-Western Region traffic through Winneba Junction. Agriculture is the main source ofemployment in the District (40.1 percent), followed by trading, services and industry.

Suhum, the Capital of the Suhum-Kraboa District is located in the south-western sector of theEastern Region. The major soil type in the area promotes the cultivation of both cash and food crops andare well drained by rivers and streams like Densu, Suhum, Essisem and Kua. The population of Suhum in1960 was 10,193, while in 1970 and 1984 it was 12,421 and 18,298 respectively. The growth ratebetween 1960 and 1970 was 1.98 percent and 3.15 percent between 1970 and 1984. Commercialactivities provide a source of income to 32 percent of the population. About 27 percent of the workingpopulation are engaged in industrial activities.

Asamankese is the Capital of the West Akim District. The vegetation is principally moist semi-deciduous forest, which contains a lot of valuable tree species such as Odum, Wawa, Sapele, Obeche andEmire. The vegetation gives Asamankese the unique advantage of producing a wide range of crops. Thepopulation of Asamankese in 1960, 1970 and 1984 were 16,718, 16,905 and 23,077 respectively. Thisshows an annual intercensal growth rate of 2.2 percent for the 1970-1984 period. Asamankese isprincipally an agricultural and commerce-oriented town. The economic structure of the district since

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1970 has always had agriculture dominating with commerce in the second place. The main crops grownare cassava, maize, plantain and vegetables, while the main cash crops are cocoa and oil palm.

Akwatia is located in the Kwaebibrim District and lies about 9km south-east of Kade which isthe District Capital. The vegetation in the area is basically of the semi-deciduous forest type withpredominantly medium height hardwood tree species. Also prominent are large plantations of teak, whichhave been cultivated by individuals and institutions outside theAyaola and Atiwa Forest Reserves. Thesereserves cover very large areas of the District. Apart from agriculture, Akwatia is noted for its prominentmining activities. Ever since mining began in the town, most of the people have engaged in small-scalemining as a means of earning their livelihood. Mining operations have resulted in the deforestation ofmost of the land and this has resulted in soil denudation. Akwatia had a population of 12,177 in 1970,and 15,000 in 1984. The town owes its growth to the operations of Ghana Consolidated Diamonds Ltd,which owns and operates a mining concession in the area. This has attracted a number of immigrants intothe area, thus increasing the population. Akwatia is also an agricultural town. Information available inthe 5-year Development Plan for the District indicates that apart from the numerous small-holder farmers,there are large scale oil palm plantations located adjacent to the mining concessions.

Akim Oda, the district capital of Birim South District with a decidual forest type vegetation.However, human activities such as farming and lumbering has reduced the vegetation to secondaryforests. The population of Akim Oda for 1960, 1970 and 1984 were 19,666, 20,957 and 24,629respectively. This shows an intercensal annual growth rate of 1.15 percent between 1970 and 1984. Themajor economic activities are agriculture, trading, lumbering and small-scale mining. According to theoccupational structure of the district, majority of the labor force are engaged in agriculture (60 percent)followed by industry (20 percent), commerce/service (15 percent) and public service (5 percent). AkimOda is one of the main commercial centers in the Eastern Region, and this is enhanced by its role as thedistrict capital of the Birim-South District. Many of the outlying settlements depend onAkim Oda fortheir shopping needs.

Begoro, the Capital of Fanteakwa District is about 58km to the north-west of Koforidua theRegional capital. The district mostly has a semi deciduous forest vegetation, but human activities such asfarming and lumbering, have reduced the vegetation to secondary forest. In the northern part of thedistrict, the vegetation is mainlysavannah woodland. The population of Begoro for 1960, 1970 and 1984were 9,289, 11,043 and 23,077 respectively. This shows an intercensal annual growth rate of 1.73between 1970 and 1984. The central location of Begoro enhances commercial activities. These activitiesare focused more around the Begoro market.

Nkawkaw, the commercial capital of the Kwahu South District has a total land area of 1,876km2. The population of Nkawkaw for 1960, 1970 and 1984 were between 15,627, 23,219 and 31,785respectively. This shows an annual intercensal growth rate of 2.24 between 1970 and 1984. The majoreconomic activities in the district are subsistent agriculture, services and industrial activities.Occupational distribution of the labor force shows that majority of the labor force are employed inagriculture (50.4 percent) while the service sector, which also includes trading, employs 42.2 percent withthe industrial sector still at its teething stage, employing only 7.4 percent of the labor force at the districtlevel. Nkawkaw the project town, has commerce as the highest employer of the labor force. As ajunction town, it is one of the main commercial centers in the Eastern Region and this is enhanced by itslocation on the Accra-Kumasi trunk road.

GREATER ACCRA REGION

Madina is located to north-east of Accra, a distance of about 17.6km. It is in the Ga district anda fast developing satelite of Accra. Madina had a handful of people in 1960, but by 1970, the populationwas 7,480 and this increased to 28,364 in 1984. Between 1970 and 1984, the town grew at a rate of 9.5

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percent per annum, one of the highest growth rates in the country. The main economic activities inMadina are industrial, commercial and services. Using the 1984 census data, about 49 percent of thelabor force in Ga district were engaged in agriculture. This is followed by commerce and services (23.4percent), industry (15.9 percent) and public service (11.9 percent). The construction industry is a veryvibrant one within the area. A number of estate developers such as Redco Estates are operating in thearea. Also located in Madina are industries engaged in brick and sandcrete block manufacturing, foodprocessing and wood processing. Nkulenu Industries, engaged in fruit processing is also located inMadina.

NORTHERN REGION

Yendi, the capital of East Dagomba District, is about 96km from Tamale the Northern RegionalCapital. The population of Yendi in 1960, 1970 and 1984 was 16,090, 22,072 and 31,633 respectively.This gives an annual intercensal growth rate of 2.57 percent between 1970 and 1984. Yendi, is thetraditional capital of the Dagombas and occupies an important position as an administrative andcommercial center in the District. Yendi is well linked to adjacent districts as well as major settlements inthe districts. The major economic activities are services, trading, farming, public services and industry.In Yendi, agriculture employs only 20.6 percent of the working population. Crops produced in andaround Yendi include yam, millet and other grains, groundnut and beans. In addition, the area is noted forlivestock, cotton and shea nut. Industrial activities in the town are mainly agro-based and providesemployment for 8.8 percent of the working population. These include rice mills, shea butter extractionfactories and breweries that process local drinks. Cotton gining is also carried out on a small scale at thehousehold level.

Savelugu is the District Capital of the Savelugu-Nanton District in the Northern Region.According to the population census reports of Ghana, Savelugu had a population of 5,949, 9,835, 16,965for 1960, 1970 and 1984 respectively. This shows an intercensal annual growth rate of 3.85 between1970 and 1984. According to the five-year Development plan for the district, agriculture employs about53.4 percent of the economically active population with commerce employing 17 percent, manufacturing25 percent and other occupations 4.3 percent. In the township however, trading employs most peoplefollowed by farming, cottage industries and, public services. The major economic activities undertaken inSavelugu are trading, agriculture and small-scale industrial activities. SinceSavelugu is an urban town,agriculture is not very intensive. However, at the district level, agriculture (farming, fisheries and animalhusbandry) accounts for over 50 percent of the working population.

VOLTA REGION

Aflao is about 186km from Accra, the national capital. It is located in theKetu District of theVolta Region. Aflao had a population of 7,439 in 1960. This increased to 11,397 and 20,904 in 1970 and1984 respectively. This shows an intercensal growth rate of 4.33 percent between 1970 and 1984.Agricultural activities are limited in Aflao. The sandy coastal soil supports vegetables. Industrialactivities in Aflao are mostly on a small-scale. These include cassava processing into dough and gari, andakpeteshie distilling. There is also a nail manufacturing factory at Aflao.

Hohoe is the capital of Hohoe District and is the second largest town in the Volta Region afterHo. Hohoe had a population of 9,502 in 1960 which increased to 14,775 and 20,994 in 1970 and 1984respectively. This shows an intercensal annual growth rate of 2.5 percent between 1970 and 1984. Themajor economic activities in Hohoe are commerce, small-scale industrial activities and agriculture.About 44.4 percent of the population are in the commercial sector, 23.8 percent in public services, with20.6 percent and 11.1 percent being in the industrial and agricultural sectors respectively. Agriculturalactivities are limited in the township. Hohoe is also a major marketing center in the district in bothagricultural and industrial goods. Its position makes it a major nodal and cocoa storage center. The

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District forms part of the Volta Tourist Development Zone Hohoe's position on the primary route makesit a strategic tourist stopover and enhances its commercial activities

Kpando, the district capital of Kpando district is about 85m from Ho Kpando had a populationof 8,070, 12842, and 15,717 in 1960, 1970 and 1984 respectively This shows an intercensal growth rateof 4 7 percent and 1 44 percent respectively Trading and light industrial activities such as carpentry,pottery, ceramics, and automobile repairs are the main economic activities at Kpando Because Kpando isan urban and vibrant marketing center, agricultural activities in the town are limited Commerce employsmajority of the labor force (41 2 percent), followed by industry (27 4 percent), public service (21 6percent) and agriculture (9 8 percent) Agricultural activities are however not limited Crops such aswater yam, maize, and cassava etc are grown Mangoes also appear to be gaining commercial value inthe district Fishing is also an important economic activity atKpando Torkor, a suburb of Kpando Thereis yet to be a fishing harbor at Kpando Torkor, one of the major fishing markets in the district, to boost upfishing

Tarkwa is the District capital of Wassa West District The population of Tarkwa in 1960, 1970and 1984 were 13,545, 14,702 and 22,107 respectively This shows an annual intercensal growth rate of2 91 percent between 1970 and 1984 The major economic activities in the district are subsistenceagriculture, mining, and commerce Occupational distribution of the labor force shows that a sizeablenumber of the force (42 6 percent) are employed in agriculture After agriculture, is the industrial sector(dominated by mining activities) which employs 21 6 percent of the labor force, commerce employs 20 3percent and services 15 5 percent Tarkwa is one of the main commercial centers in the Western Regionand this is enhanced by its location on the Takoradi-Dunkwa trunk road as well as its advantage of beingthe District administrative capital Many of the towns in the District depend onTarkwa for most of theirshopping needs Availability of industrial enterprises and supporting services such as hotel facilities arefactors of population attraction Industrial establishment is dominated by mining activities withAshantiGoldfields Company, Taberebe Goldfields, Ghana Australia Goldfields, Ausdrill etc, operating in theproject town

Prestea is a mining town located in the Wassa West district in the Western Region Prestea is thesecond largest town in the District Prestea has been experiencing increasing population at a low rateAccording to the population census reports of Ghana, the population figures for Prestea for 1960, 1970and 1984 were 13,246, 15,242 and 17,030 respectively This shows an annual intercensal growth rate of0 75 between 1970 and 1984 The major economic activities in the District are mining, agriculture,commerce, lumbering/sawmilling, palm oil and kernel oil extraction Occupational distribution of thelabor force shows that sizeable number of the labor force is employed in agriculture (42 2 percent) Afteragriculture is the industrial sector (dominated by mining activities) which employs 21 6 percent of thelabor force, commerce employs 20 3 percent and services 15 5 percent Prestea is one of the maincommercial centers in the western region and is enhanced by its location on theTarkwa-Samrebol TrunkRoad Many of the outlying settlements depend on Prestea for their shopping needs Industrialenterprises is dominated by mining, with Barnex Gold mines formally State Gold Mining Company(SGMC), employing about 6,000 people

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Annex 12: Programme Letter

GHANA: URBAN 5In case of reply thSe Miistry of Loal Goverzunentnumber and date of this and Rural DevelopmentLetter should bc quoted. P. 0. Box M 50

Our Ret. No ...................... Accra

Your Ref ..........................Tel. M 6654 21

D 666030 o November, 1999.D 6647 63 REPUBLIC OF GHANA . .................................. ........

URBAN V PROJECT

Programme Letter

MR. PETER HARROLDCOUNTRY DIRECTORTHE WORLD BANKACCA

Dear Mr. Harrold:

The purpose of this letter is to describe the sector policy framework withinwhich the Government of Ghana (GOG) will work during the implementationof the Fifth Urban Project to address the development needs of 23 urbansettlements.

Background

Cities and urban towns, as centers of industry and services, contribute morethan half of Ghana's GDP. Urban settlements also play a vital role in ruraldevelopment as market and service centers. The severe inadequacy ofurban infrastructure and services such as roads, water supply, electricity,telecommunications, sanitation, and solid waste management, human excretamanagement is a major constraint on the productivity of urban householdsand eri(erprises and consequently on both local and national development.Improving the coverage of urban services requires not only investment inphysical infrastructure, but also major efforts to build institutional capacity inthe fields of planning, management, finance, and operations andmaintenance.

The Government of Ghana's initiatives in the urban sector over the last fewyears include a number of multilateral and bilateral-assisted urban projects,the provision of incentives for private developers to become involved inhousing, and the provision of some municipal services, such as solid andliquid waste management.

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GOG is implementing a comprehensive decentralisation programme which isrequired by the Constitution of the Fourth Republic and the LocalGovemment Act of 1993 (Act 462). The Act gives District Assemblies (DAs)the power to "exercise political and administrative authority in the District andprovide guidance, give direction to and supervise all other administrativeauthorities in the District". The Act also gives the DAs the responsibility for"*overall development", "development control", and "the development of basicinfrastructure", "the provision of municipal services", and the "managementof human settlements and the environment", among other activities.

Urban Sector Strategy

The Govemment's urban sector strategy is to: i) continue to improve basicurban infrastructure and services to increase the productivity of urbanhouseholds and enterprises by carefully selecting investments in aparticipatory way; iii) improve services to the urban poor through targetedupgrading programmes, and focusing on secondary urban towns where manyof the urban poor live; iii) make urban service delivery more efficient,sustainable and relevant to the people through needs based on demand andcompetition; iv) improve and make more efficient local government; v)increase private sector participation in the sector; vi) build human resourcescapacity for urban planning and management.

GOG is applying to the World Bank for an Adaptable Programme Loan (APL)to support the Government of Ghana's urban sector strategy. Theprogramme will provide the framework for institutional development andcapacity building for District Assemblies to enable them to meet theirresponsibilities of ensuring adequate urban service delivery and improvingbasic infrastructure.

Policy Issues and Actions

As part of the programme loan, GOG will address the following policy issues.

Local Government Service Act. (1) GOG will take steps to ensurethat, by the end of the Phase I programme period, at least theMetropoiitan and Municipal Assemblies have full jurisdiction over theirstaff under the Local Government Service Act. (2) The passing of theAct and a plan for its implementation will be a condition of theprogramme and will serve as a trigger to move from Phase 1 to Phase2. District Assemblies currently do not have direct control over theirstaff who presently form part of the Civil Service and therefore reportto central government ministries. The passing of the LocalGovernment Service Act would place local government staff on aseparate public service and enable DAs to participate, with a ServiceCouncil, in decision making regarding the recruitment andmanagement of their staff.

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Fiscal decentralization. Donor-supported fiscal decentralization* studies are on-going. GOG will present to IDA the keyrecommendations of these studies along with a phased plan forimplementation during the program period to minimise the mismatch

between the allocation of responsibilities/functions and funding of theDAs for their performance.

Key Principles of the ProgrammeThe program will be implemented in accordance with the following principles:

* Demand-driven approach. DAs will have the responsibility forchoosing and prioritizing sub-projects, in accordance with priorities intheir Town Development Plans.

* Community participationlconsultation. A key objective of theprogramme will be greater participation of stakeholders in preparingand/or updating the Town Development Plans from which priority sub-projects will be chosen. Training in participatory planning will becontinued through the programme

- Decentralization of planning, implementation and management ofservices. In accordance with the Local Government Act of 1993, theMinistry of Local Govemment and Rural Development (MLGRD) willcontinue to provide the necessary support to the DAs to enable themto adequately provide infrastructure and services. This includescontinued support and giving the MMDAs greater control over bothfinancial resources and personnel management functions.

= Capacity building. Since the success of the urban sector strategydepends critically on the capacities of local governments, MLGRD willensure continued support to the Institute of Local Government Studiesestablished as a centre of excellence to provide, co-ordinate andmanage training of the staff, Assembly Members, Councilors andCommunity leaders in collaboration with other relevant traininginstitutions that are involved in building capacity of DAs.

* Financial principles. DAs will contribute towards the capital as well asO&M costs of every sub-project financed through the programme.

* Private sector participation. Implementation of sub-projects as well asO&M will be contracted out to the private sector to the extent possible.

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Programme Scope and Phasing

The proposed APL seeks to improve basic infrastructure and services in the25 urban secondary towns (in 23 DAs)in Ghana which have not been coveredin any of the previous Bank-financed urban projects. The program has threephases:

Phase 1: The objective of the first phase is to strengthen the capacityof DAs to prepare development plans, prioritize investments, preparesub-project proposals, mobilize resources, improve service deliveryand improve the efficiency and management of the DA through trainingand technical assistance. This phase will also provide funds for atleast one infrastructure sub-project in every town. It is expected thatthe experience of implementing one sub-project will enable each DAto go through the process of procuring and managing consultants andcontractors for sub-project preparation and implementation using Bankguidelines (a learning-by-doing approach).

Phase 2: The second phase will (i) continue to provide training andtechnical assistance, and specific training needs for DAs will also beprovided on a demand-driven basis to ensure relevance to the currentneeds of the Towns; and (ii) provide funds for physical infrastructureinvestments which DAs will access on a competitive, demand-drivenbasis with clear selection criteria that each DA will have to meet beforethey become eligible for the funds. The second phase will also financeimprovement of the capacities, infrastructure and services of the 12other secondary towns, currently covered under the Local GovernmentDevelopment Project.

Phase 3: The final phase will finance additional investments on ademand-driven basis, where all 37 towns (the original 25 plus theadditional 12) will compete for funding for investments. There will beclose monitoring of DA performance improvements, particularlyregarding financial management, own source revenue generation andO&M of infrastructure during the last two phases. Training willcontinue to be provided on a demand-driven basis.

Programme Financing

The MMDAs funding and the provision of infrastructure and services ismainly through the District Assemblies Common Fund (DACF). This currentlyconstitutes the main source of funding for DA capital expenditure. However,this is grossly inadequate to meet the infrastructure and services demands.The programme will complement the DACF to fulfill the unmet demands in thesecondary and poorer Towns in the Districts.

DAs will provide at least 10% of sub-project costs and make provision for 3%of sub-project costs of O&M as their matching funds to funding through theprogramme. Because a strong focus of the programme is to help DAs toincrease their financial management capacities, DA counterpart contributions

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towards sub-projects will be increased during the second and third phases ofthe programme to approximately 15% of sub-project costs.

GOG will provide matching funds to support the program. Total programmefinancing is estimated as follows:

(in US dollars) GOGIDAs IDA Total

Phase 1 1.6 m 12.4 m 14.0 m

Phase 2 6.6 m 33.4 m 40.0 m

Phase 3 8.4 m 37.6 m 46.0 m

TOTAL 16.6 m 83.4 m 100.0 m

Program Management and Implementation

MLG&RD has overall responsibility for providing policy guidance and forproject management through its Local Govemment Project Support Unit(LGPSU). LGPSU has primary responsibility for promoting, facilitating,monitoring, evaluating and reporting on project activities. DAs will haveprimary responsibility for (i) identifying their training and capacity buildingneeds and taking actions to fulfil these needs, and (ii) implementing sub-projects. The Institute of Local Government Studies (ILGS) will beresponsible for the preparation and delivery of training activities while theLGPSU will manage all related contract issues.

Yours Sincerely

(KWAMENA AHWOI)HON. MINISTER OF LOCAL GOVERNMENTAND RURAL DEVELOPMENTACCRA.

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In cose of reply the Ministry of C overnentnumnbcr and date of this and oLoal GovernmertLetter s/ould be guokd. and Rural Development

Our Ref. No ........SCRIADM294 SF1.1 .............. O. Box M50

Your Ref...........................Tel. M 665421 §

D 66 60 30 March 10, 2000D 66 47 63 REPUBLIC OF GHANA h .. 2..................

MR PETER HARROLDCOUNTRY DIRECTORTHE WORLD BANKACCRA

Dear Mr Harrold

Re: Urban V ProjectProgram Letter

I refer to the Program Letter submitted by my Minister per letter

dated November 30, 1999 and the Agreed Minutes of Negotiations dated

January 28, 2000, and submit herewith performance indicators and

triggers to be included as an annex to the Minister's letter.

Sincerely,

(S.Y.M. ZANU)CHIEF DIRECTOR

FOR:MINISTER

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Key performance indicators:

PHASE I END-OF-PROGRAMIPERFORMANCE INDICATORS PERFORMANCE INDICATORS

(to be achieved by FY2003) (to be achieved by FY2011)lnstitutions l indicators Itstitutional indicatorsI. Local Govermment Service Act enacted' I. Operational Local Government Service Act2. A phased implementation plan prepared to imnplement 2. By program end, full authority to DAs for staff

key recommendations of study on fiscal rccruitment and personnel managementdecentralization where they relate to local ;. Competent teclhnical and financial staff in key posts insoveniainents' all participating DAs, supported by effective human

3. Technical and financial staff in key posts (district resource development policy and proceduresengineer, planner, financial officer) are trained and/or 4. District Development Plans and realistic annualcompetent staff are in key posts in place for. at least 6. budgets in all participating DAs developed withmonths in at least 60% of DAs* greater stakeholder participation; Structure Plans

4. District Development Plans are updated in all 23 DAs developed for all 25 townswith adequate community participation* 5. Managenent tools in place (accounting and budgeting

systems; quarterly management reports; financialTraining management procedures mrtanual; technical proceduresI At least 70% of targeted days of training and coaching manual) in all participating DAsdelivered 6. Timely planning and progranuning of investment and

maintenance worksFinancial management1. Major tax base updated in all 23 DAs Financial management2. RIAPs & associated changes in the system of billing & I. Timely budget preparation, implementation and

collection are implemented in all DAs on a phased basis monitoring: clear and well-targeted urban budget3. Improvcd financial and accounting systers established allocations and disbursements

in 8 DAs 2. Improved transparency and accountability of DA fuids4. Mapping completed for all 25 towns; digital maps through effective reporting and public access

prepared for participating towns in one region; regional 3. Local revenues improve by 2.5% per year in real termsstaff (8) of Survey Dept trained with effect from the beginning of Pbase [I.

S. Annual tax billing rate increases to total potential of ax 4. Adequate O&M funds established at DA level andbase in at least 60%Xo of DAs* applied towards O&M expenditures; extensive use of

6. Ainnal collection rate of billed taxes is over 50%Y in all private sector in provision of O&MDAs*

7 Annual routine maintenance budgets for latstructure Itifrastructure sub-projectsare prepared and are sufficient to cover rieeds estimated I. Expansion and rehabilitation of basic infrastructurein anmual rnaintenance programs in at least 60% of (related to the sub-projects approved) with resultingDAs* increase in access to basic services, panicularly by the

poor (waler, sanitation, solid waste, access roads, etc.)Infrastructure sub-projects 2. Adequate routine and periodic maintenance of facilities1. At least one sub-project per town implemented by DAs 3. 90% of civil workls and design contracts at the DA2. O&M itiaids are established for all approved sub- level are contracted out to the private sector (10%

projects. and an initial deposit of at least 3% of sub- minor works carried out in-house)projiect costs is deposited (50% by the DA and 50% byIDA).*

Alsu Irig.ers for nioving from Phase I to Phase 2. Seesectioni U4.

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TRICGERS FOR MOVING TRICGERS FOR MOVINGFROM PHASE I TO PHASE It FROM PHASE II TO PHASE IlIl

(to be achieved by FY2003) (to be achieved by FY2007)Institutional InstitutionalI. Local Govcrnmcnt Service Act enacted I . Local Governmnuie Service Act operational2. A phased inpicpmcntation plan prepared to implement key 2. Competent technical and financial staft (district

rccomnicndations of study on fiscal decentralization where they engtncer. planner, financial officer) are in key posts forrclatc to locA gtovemments at least 6 months in at Ieast 60% of DAs

3. Tcchnical and fin,ancial staff in key posts (distric engineer. 3. Capacity of Survey Department adequately developedplanner. financial officer) are trained and/or conpctent stalTare for the sustainabic delivery of maps to DAsin pltacc for at Icast 6 months in at Ieast 60% of DAs 4. MLGRD attaches one additional staff to LGPSU to

4. District Dcvelopmcnt Plans are updated in all 23 DAs wih nmake a total of 4.adequate community parnicipation

5. MLGRD aaachcs at least 3 professional staff to LGPSUTraining

Training 6. Al least S0% of DAs will have trained professionals in6. At least 7 X.of targeted days of training and coaching delivered posts and will have adopted participatory measures of

planning and programming of investment by end ofFinancial nianatziecen Phase I.7. Annual tax billing rate increases to total potential of tax base in at

Ieast t(l% of DAs Financial manaermentS. Annual coilcction rate of billed taxes is over 50%A in all DAs 7. Local revenues increase by 2.S% per year in real terms9. Annual routine maintenance budgets for infrastuucture are during Phase II in all DAs

prepared and are sufficient to cover needs estinmted irt annualmainienance programs in at least 60%/. of DAS lnfrastncture and services

S. Evidence of private sector involvement in O&M ofInfrascnucturc sub-projects infrastrucwttrc and services in all DAsI 0. O&M funds arc established for all approved sub-projects, and

an initial deposit of at least 3% of sub-projcct csts is deposited(51t% by DA and 50% by IDA).

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