Idea Transcript
Public Disclosure Authorized Public Disclosure Authorized
Document o f
The World Bank FOR OFFICIAL USE ONLY Report N o 3993 1-BR
PROJECT APPRAISAL DOCUMENT ON A PROPOSED LOAN
IN THE AMOUNT OF US$18.90 MILLION
Public Disclosure Authorized
Public Disclosure Authorized
TO THE MUNICIPALITY OF PELOTAS WITH A GUARANTEE EACH FROM THE FEDERATIVE REPUBLIC OF BRAZIL
IN SUPPORT OF THE FIRST PHASE OF THE US$66 MILLION
RIO GRANDE DO SUL INTEGRATED MUNICIPAL DEVELOPMENT PROGRAM (PDMI)
December 10,2007
Sustainable Development Department Brazil Country Management Unit Latin America and Caribbean Region
This document has a restricted distribution and may be used by recipients only in the performance o f their official duties. I t s contents may not otherwise be disclosed without World Bank authorization.
CURRENCY EQUIVALENTS (Exchange Rate Effective January 3 1,2007) CurrencyUnit = BRL BRL$2.14 = US$1 US$0.47 = BRL$1.00
FISCAL YEAR January 1
AAA APL BMLP BNDES BP CAS CEF COFIEX CORSAN EA EMATER FRL FMR IDH IF1 SIG/MIS M&E OP UGP PDMI PMAT
PPA SEAIN SEBRAE SENAC SIL
wss STN
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December31
ABBREVIATIONS AND ACRONYMS Analytical and Advisory Activities Adaptable Program Loan Brazil Municipal Lending Program Brazil's National Development Bank Bank Procedures Country Assistance Strategy Caixa EconGmica Federal (a public sector bank) Inter-ministerialBody Responsible for Approving External Credit Operations Inter-ministerialBody Responsible for Approving External Credit Operations Environmental Assessment Empresa de Assist2ncia Te'cnicae Extenstio Rural (Technical Assistance and Rural Extension Company) Fiscal Responsibility Law Financial Management Report Human Development Index InternationalFinance Institution Management Information System Monitoring and Evaluation Operational Policies Unidade de Gesttio do Projeto (Project Coordination Unit) Programa de Desenvolvimento Municipal Integrado (Integrated Municipal Development Program) Programa de Modernizaqtio da Administraqtio Tributdria e da Gesttio dos Setores Sociais Bbsicos (Program for Modernization of the Administration Tax and the Management of Basic Social Sectors) Plano Pluri-Annual (Multi-year plans) Secretariat o f International Affairs Serviqo Brasileiro de Apoio as Micro e Pequenas Empresas (Brazilian Service to Support Micro e Small Companies) Sewiqo Nacional de Aprendizagem Comercial (National Service for Commercial Learning) Sector Investment Loan Water Supply and Sanitation National Secretariat o f Treasury, Ministry o f Finance Vice President: Country ManagedDirector: Sector Director: Sector Manager: Task Team Leaders:
Pamela Cox John Briscoe Laura Tuck Anna Wellenstein (Acting) Jennifer Sara, Paul Procee, Juliana Garrido
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FOR OFFICIAL USE ONLY BRAZIL RIO GRANDE DO SUL INTEGRATED MUNICIPAL DEVELOPMENT PROGRAM HORIZONTAL APL CONTENTS Page
. B.
.................................................................. PROGRAM DESCRIPTION ............................................................................................... C. IMPLEMENTATION .........................................................................................................
A
1. 2.
3. 4.
5.
.
D
STRATEGIC CONTEXT AND RATIONALE
.................................................................................................. Institutional and implementation arrangements ................................................................ Monitoring and evaluation o f outcomeshesults ................................................................ Sustainability ..................................................................................................................... Loadcredit conditions and covenants ..............................................................................
Partnership arrangements
APPRAISAL SUMMARY
..................................................................................................
3 8
16 16
17 17 18 -19 20
1.
Economic. financial and fiscal analyses ............................................................................ 20
2.
Technical ........................................................................................................................... 21
3.
Fiduciary ............................................................................................................................
22
4.
Social .................................................................................................................................
22
5.
Environment and Safeguard Policies .................................................................................
24
6.
Policy Exceptions and Readiness ......................................................................................
25
..........................................................
Annex 1: Country and Sector o r Program Background
Annex 2: M a j o r Related Programs Financed by the Bank and/or other Agencies
26
...............30
......................................................................... Annex 4: Detailed Program Description ................................................................................... Annex 5: Program Costs ............................................................................................................. Annex 6: Implementation Arrangements .................................................................................. Annex 3: Results Framework and Monitoring
31 35
42 44
.....................................
51
.......................................................................................
55
Annex 7 : Financial Management and Disbursement Arrangements Annex 8: Procurement Arrangements
This document has a restricted distribution and may be used by recipients only in the performance o f their official duties. I t s contents may not be otherwise disclosed without W o r l d Bank authorization .
................................................................. Annex 10: Safeguard Policy Issues............................................................................................. Annex 11: Program Preparation and Supervision................................................................... Annex 12: Documents in the Program Files .............................................................................. Annex 13: Statement o f Loans and Credit ................................................................................ Annex 14: Country at a Glance .................................................................................................. Annex 15: Map BRA35554 ......................................................................................................... Annex 16: Appraisal Document for Municipality of Pelotas................................................... Annex 9: Economic. Financial and Fiscal Analysis.
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63 79
84 86
87 91 93 94
BRAZIL RIO GRANDE DO SUL INTEGRATED MUNICIPAL DEVELOPMENT PROGRAM HORIZONTAL APL Team Leaders: Jennifer Sara, Paul Procee, Juliana
Date: December 10,2007 Country Director: John Briscoe Sector Manager: Anna Wellenstein (Acting) Project ID: PO94199 Lending Instrument: Horizontal Adaptable Program Loan (APL)
Garrido Sectors: General water, sanitation and flood protection
sector, Sub-national government administration Themes: Access to urban services and housing, water
and sanitation, municipal governance
Program Financing Data
[XI Loan
[ ] Credit
[ ]Grant
[ ]Guarantee
[
3 Other:
For Loans/Credits/Others: Total Bank financing (USsm.): up to $66M for the Program Proposed terms: T o be determined by individual projects under the APL and reflected in projects’ PAD.
BORROWER Municipality o f Bag6 Municipality o f Pelotas Municipality o f R i o Grande (Phase 1) Municipality o f Rio Grande (Phase 2) Municipality o f Santa Maria Municipality o f Uruguaiana Unallocated Total Program
4.40 12.60 5.40 5.20 9.25 4.59 1.56 43.00
0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
4.40 12.60 5.40 5.20 9.25 4.59 1.56 43.00
INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT Municipality o f Bag6 Municipality o f Pelotas Municipality o f Rio Grande (Phase 1) Municipality o f R i o Grande (Phase 2) Municipality o f Santa Maria Municipality o f Uruguaiana Unallocated Total Program
6.60 18.90 8.10 7.80 13.95 6.83 3.82 66.00
0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
6.60 18.90 8.10 7.80 13.95 6.83 3.82 66.00
109.00
0.00
109.00
Total: Borrower and Responsible Agency Municipality o f Bag6 Municipality o f Pelotas Municipality o f R i o Grande Municipality o f Santa Maria Municipality o f Uruguaiana
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Does the program depart from the CAS in content or other significant [ ]Yes [XINO respects? Re$ PAD A.3 Does the program require any exceptions from Bank policies? [ ]Yes [XINO Re$ PAD D. 7 [ ]Yes [ X I N O Have these been approved by Bank management? [ ]Yes [XINO I s approval for any policy exception sought from the Board? Does the program include any critical risks rated “substantial” or “high”? [ ]Yes [XINO Re$ PAD C.5 Does the program meet the Regional criteria for readiness for implementation? [XIYes [ ] N o Re$ PAD D. 7 Program development objective Re$ PAD B.2, TechnicalAnnex 3 The program objective i s to strengthen the capacity o f the municipalities o f Bage, Pelotas, Rio Grande, Santa Maria and Uruguaiana to provide selected infrastructure services and employment opportunities for their population. Program description [one-sentence summary of each component] Re$ PAD B.3.a, Technical Annex 4 The Program has been organized into three components:
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Component 1 Municipal Strengthening. The purpose o f this component i s to finance activities related to improving municipal capacity to plan, appraise, finance, implement, monitor and evaluate infrastructure and local economic development investments. Introducing World Bank project implementation, fiduciary, social and environmental practices are meant to strengthen municipal capacity in these areas and standardize procedures across all relevant secretariats o f the municipal government. Component 2 - Income and Employment Generation. This component will support municipal initiatives to generate income and employment opportunities, in addition to improving the quality o f jobs in both in urban and rural areas. Component 3: Infrastructure Service Improvements. This component’s objective will be to assist the municipalities improve their ability to provide infrastructure services in an efficient, environmentally sound and sustainable manner. The specific investments were also prioritized for their effects on: improving access to services by the poor, contributing to the municipal growth agenda and/or for environmental benefits. The following infrastructure investments are included in this component: (i)Rehabilitation or pavement o f existing urban streets and rural treatment roads; (ii)Water supply, sanitation and drainage systems in urban and rural areas; (iii) and final disposal o f solid waste, waste recycling centers and support to waste packers; and (iv) Urban upgrading, housing and social improvements in poor neighborhoods, and areas o f environmental risk.
Which safeguard policies are triggered, if any? Re$ PAD D. 6, TechnicalAnnex 10 The Program has received a World Bank Environmental Category A rating and triggers the following safeguards: Natural Habitats (OP 4.04), Cultural Property (OP 4.1 l), Involuntary Resettlement (OP 4.12). and Safetv o f Dams (OP 4.37).
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A. STRATEGIC CONTEXT AND RATIONALE
1.
Country and sector issues
1, The State o f Rio Grande do Sul (RS), located in the south-western corner o f Brazil, has an area o f 280,000 km2(3.2% o f Brazil’s total area) and a population o f 10.5 million. The State produces about 8% o f Brazil’s GDP, making it economically the fourth most productive state. With a population density o f 36 inhabitants/km2, RS i s more concentrated than the national average o f 19.9 inhabitantsikm2. The State i s also characterized by a large number o f small municipalities - more than 60% o f its 496 municipalities have less than 10,000 people. On the other hand, the State has a large number o f medium-sized cities. 2. The economy o f RS has been performing relatively well, with growth rates o f more than 3% per annum during 1999-2003. The industrial sector contributes more than 36% o f value added; the agricultural sector i s responsible for about 13%, while the services sector accounts for the rest. However, the benefits o f economic growth are very unevenly distributed across the population and particularly between the various regions in the State. Furthermore, regional disparities in wealth are increasing and these are resulting in significant poverty in certain areas o f the State. In addition, the State government faces a very difficult fiscal situation and has the highest level o f indebtedness o f any state in Brazil. N e t consolidated debt was R$ 33.8 billion in December 2006, or 254% o f the state’s net current revenue (NCR), well above the ceiling o f 200% set in the Fiscal Responsibility Law (FRL).
Addressing the Needs o f the Southern Municipalities
3. The Rio Grande Do Sul Integrated Municipal Development Program (PDMI i s i t s acronym in Portuguese) w i l l be implemented in the five largest municipalities o f the Southern half o f RS, namely Bage, Pelotas, Rio Grande, Santa Maria and Umguaiana. This part o f RS (“a Metade Sul”) i s poorer than the northern part: it contains 25% o f the population but only 19% o f the GNP. The per capita income disparity between the south and north i s even more striking at 6,787 reais versus 10,257 reais (source FEE 2004). 4. The five project municipalities cover an area o f over 17,000 km2(6% o f the State’s total area), and have a total population o f about 1,000,000 (9.5% o f state total population). Additional information i s provided in the Table 1.
3
Area
Municipality
(2005) .I
1 1 "
I Bage
I
1
120,544
"
15,018
I
105,526
i1
1
4,095
Santa Maria
258,834
10,344
248,490
1,780
Pelotas
333,947
15,435
3 18,s 12
1,609
1 RioGrande
I
Uruguaiana
I
197,793
5,843
I
191,950
1
2,814
133,525
6,683
125,842
5,716
Total
1,044,643
53,323
991,320
16,014
State
10,867,102
1,637,579
9,229,523
281,748
1
1
5.
The municipalities o f Bage, Pelotas, R i o Grande, Santa Maria and Uruguaiana present somewhat homogeneous socio-economic characteristics. Together, the five municipalities contribute to about 11% o f the State GDP. As to the per capita GDP, with exception o f the municipality o f Rio Grande, the remaining municipalities are slightly above half o f that o f the State average and about 25% o f the population i s estimated to live below the poverty line. The high GDP o f R i o Grande i s due to the presence o f an important port and manufacturing activities, such as fertilizers, o i l refinery, petro-chemical and food-processing, Economic activities o f the other four municipalities - Pelotas, Santa Maria, Bag6 and Uruguaiana - are mostly based on services, farming and cattle raising, as shown in Table 2. Table 2: Total and Per Capita GDP and Gross Value Added o f the municipalities r
Total CDP
!
Gross Value Added (TO)
Per capitu "
Municipality
CDP -l--"-I US$ 1,000. i ((~Ji~1uuu) Agricult. Indust.
Senice
Oh
Bage
382,081
0.56
3,181
16.28
26.14
57.57
Pelotas
793,876
1.65
3,030
6.67
33.60
59.73
I Rio Grande I Santa Maria
1 I
1,078,567 1,736,668
I I
---J
I
I 2.98 I I 1.21 I
3,185 8,962
I I
2.51 7.09
I I
65.11 22.87
I 1
32.39 70.04
1 1
Source, FEE ($1 US = 2.2 R$) - Econom) and Statistics Foundationo f Rio Grande do Su112004.
6. In addition to the formal economic activities, a considerable part o f the GDP o f each municipality i s based o n micro-economic activities, which involve widespread 'informality' in the small business sector. Informality and unemployment have n o w become big issues in the region, since the predominant charque (sun-dried salted beef) industry started to face strong
4
competition from Uruguay, in the second half o f the 20th century. Lack o f appropriate technology, problems in adapting new more productive cattle breeds in the region, increasing labor costs and labor regulation contributed to successive crisis in the former dynamic regional charque industry. The southern part o f the state has also suffered more recently from the closing o f large manufacturing plants (e.g., food processing) which left behind numerous unemployed workers. A significant number o f laid o f f workers entered the informal sector by engaging in activities such as small-scale commerce and manufacturing, handcrafts, and service sectors. These different groups face strong barriers to develop their businesses and move up to the formal economy. Difficulties range from low skills, insufficient training, limited operating scale, weak organization, shortage o f capital, barriers to access new and larger markets, in addition to an unfriendly business environment.
7. State Development Plan - Rumos 2015: this recently-produced study, partially funded from a previous World Bank loan, sets forth a sustainable regional development plan, based on the territorial organization o f the state, and with the objective o f achieving a more balanced income distribution across regions. Nine regional planning units have been defined (COREDEs), as well as 6 strategic areas o f thematic focus, as follows: State Competitiveness, Strengthening o f Hub-Cities, Social Inclusion, Environmental Preservation, Participatory and Modern Governance and Regional Development Plans to Overcome Inequalities. As part o f the Hub-Cities theme, the strategy emphasizes the fundamental role o f medium-sized cities to promote regional development based on an increasingly urban and knowledge-driven economy. 8. As the most prominent Hub-Cities o f the Southern Half o f the State, the five municipalities included in P D M I need strategic interventions to overcome economic decline, enhance their competitiveness, and accelerate sustainable economic growth. This would require support to infrastructure, employment and income generation, in addition to institutional capacity building o f the municipal governments. The strengthening o f these hub-cities i s an important development strategy, given the economies o f scale for service provision and joint opportunities for business attraction.
9. Municipal Governance in Brazil: With i t s 1988 constitutional reform, Brazil has one o f the most decentralized public sectors in Latin America. States and municipalities account for almost half o f all public sector revenues and expenditures. Municipalities make up 19% o f total public revenues (5.4% o f GDP), 13% o f public spending and 24% o f gross investment. They are at the forefront o f economic development and poverty alleviation o f their population. Municipal governments are responsible for the provision o f most basic services, such as urban drainage, water and sanitation, solid waste management, rural roads, and public transport. Additionally, municipalities share the responsibility with their respective State Governments for the provision o f health, education and social infrastructure. However, there i s a mismatch between the municipal responsibilities and their access to financial resources to meet them.
10. Municipal management has improved significantly in recent years, largely as a result o f federal measures to control inflation implemented in the mid-1990s and the passing o f the Federal Fiscal Responsibility Law (LRF) in 2000. In 2001, 68.5% o f the municipalities achieved fiscal surpluses, against only 13% in 1995. Municipal debt i s well under control, but municipalities have very limited access to sources o f borrowing due to the restrictions placed by
5
the National Monetary Council to restrict municipal borrowing to levels much lower than allowed in the LRF. However, the LRF also allows for municipalities that receive approval from the Ministries o f Planning and Finance (through the COFIEX process) to borrow from IFIs, including the World Bank. 11. Project Origin and the Consolidated Program: The initial request for World Bank borrowing was submitted by each municipality to SEAIN for COFIEX approval in December 2003. At that time, the federal government requested the five municipalities to j o i n efforts to create a common development program. The municipal governments spent much o f 2004 negotiating with COFIEX the program content and counterpart obligations. This resulted in an agreement o f a joint preparation o f the five municipal projects under an umbrella program entitled R i o Grande do Sul Integrated Municipal Development Program (Programa de Desenvolvimento Municipal Integrado - PDMI). Project preparation started in 2005, supported by a PHRD Grant, and the original PCN meeting was held in M a y 2006. An integrated program across the five municipalities can bring important benefits, as they share a common regional and territorial development vision, and are striving to address very similar development challenges, including that o f improved municipal governance, addressing rural and urban poverty and improvement o f infrastructure service provision, in order to lead to a greater participation o f the municipalities in the State’s economic growth agenda.
2.
Rationale for Bank Involvement
12. There are several reasons for the Bank to support the proposed program: (a) to continue our long-standing engagement in the State to address the needs o f poorer constituents, (b) to work on a complex multi-sectoral development agenda in five municipalities that are critical to the development o f the southern half o f the state, and (c) to further advance the Bank’s municipal development strategy for Brazil and draw lessons from the process. In terms o f continuing to work with the State, this is important as we have a positive history o f engagement and a continued demand for our support. Two recently completed projects (Road Rehabilitation and Rural Development); both rated as satisfactory, contributed to the preparation o f the State Development Strategy, which sets directions for the economic development o f the five municipalities. The new State administration has requested renewed Bank assistance in the form o f a D P L to support a reform program that will help it come into compliance with the LRF.. The ability o f the Bank to work directly with five important municipalities in the southern half o f the State provides continuity in our engagement as well as a means to test news forms o f working at the sub-national level in important municipalities.
13. Brazil i s one o f the few countries where municipalities are allowed to borrow directly from IFIs, as long as they receive a federal guarantee. Over the past several years, the Bank has developed i t s capacity to lend directly to municipalities. Since municipalities have so little access to credit markets, at the beginning o f this CAS period, the Bank started to receive a large number o f borrowing requests from municipalities across Brazil o f differing sizes and for a range of themes. The Bank worked with the Federal Government to clarify the eligibility criteria that would be applied for municipal lending to ensure that it was selective and strategic. The following requirements were put forward: (a) projects would need to address difficult and cross-
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sectoral development challenges, (b) municipalities larger than 100,000 people would be eligible, (c) cross-municipal partnerships would be promoted and (d) flexible lending terms using either Reais or hard currency. The municipalities included in the P D M I are some o f the first ones to meet these criteria. 14. The Bank strategy for supporting municipal development in Brazil emerged from these eligibility criteria and i s based on our comparative advantages o f addressing complex development challenges from a multi-sectoral perspective. The strategy has four pillars: (a) improving municipal fiscal and administrative management, (b) increasing the competitiveness o f the municipality through local economic development, (c) supporting partnerships across municipalities and with others and (d) strengthening municipal capacity to deliver key services. P D M I provides an opportunity to put all four pillars into practice while also fostering the inclusion o f environmental and social safeguards in municipal projects. Finally, these projects are being supported by a new line o f analytical work, started in FY07k which studies Brazilian and global best practice on local economic development as a means to improve city competitiveness. 15. In addition to responding to the development challenges o f municipalities, the Bank’s municipal lending program in Brazil i s helping to lay a foundation for market-based approaches to financing municipal development, as the federal government works towards developing an effective and sustainable municipal credit system. The cornerstone o f this program i s the $240M Brazil Municipal Development Program A P L (BMDP) approved by the Board in M a y 2007. The PDMI continues to move in this direction o f a more consolidated program o f municipal support. The P D M I would be different from other municipal lending in two aspects: (a) it would be the first set of municipal loans to support the development o f the entire municipal territory, covering both the urban and rural population and not just the municipal capital and (b) the five loans are being prepared and appraised as one common program expected to be implemented simultaneously (subject to the authorization to negotiate each loan b y the federal government) under a common operational and learning framework.
3.
Higher level objectives to which the program contributes
16. Brazil’s 2004-2007 multi-year plan (Plano Plurianual), on which the Bank’s CAS i s based, sets forth a development strategy that emphasizes: (i)social inclusion and universal access to high-quality public services, (ii) macroeconomic stability and j o b and income growth, (iii)greater equity among the regions through regional and local development, (iv) greater integration between development and the environment, and (v) the promotion o f civil society participation in decision making. The Board approved a CAS Progress Report in M a y 2006 which confirmed the strategic directions o f the original 2004-2007 CAS in support o f four program pillars: equity, sustainability, competitiveness, and macro economic stability. The CAS Progress Report further states that sub-national lending would continue to be an important part o f the Bank’s program, but would be substantially more selective and oriented toward sustainable growth.
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17.
The P D M I would contribute to the objectives o f the CAS and directly support the competitiveness and sustainability pillars by helping the five municipalities improve their business environment and support priority economic development clusters, while at the same time building their capacity to deliver sustainable and environmentally sound infrastructure services. In addition, the P D M I will bring together five municipal governments to work in a synergistic manner in developing an adaptive and learning-based approach to local economic development issues that can be replicated in other municipal development projects throughout Brazil and provide lessons for the dialog at the federal level.
B. PROGRAM DESCRIPTION 1.
Lending instrument
18. The program i s designed as a horizontal APL, comprised o f individual loans to each o f the five participating municipalities o f Bage, Pelotas, Rio Grande, Santa Maria, and Uruguaiana with a common focus on strengthening municipal capacity to promote income generation and employment (thereby improving their competitiveness) and improving the quality o f selected infrastructure services in a fiscally and environmentally sustainable manner. The R i o Grande project has been approved by COFIEX in two-phases as part o f the overall PDMI program. 19.
The purpose o f using an A P L is to: (a) Promote a ripple effect of economic development: All five municipalities contain important hub-cities and are the economic drivers o f the southern h a l f o f the state. Assisting the five o f them improve their economic power and dynamism as a joint effort should cause a positive ripple effect on the whole southern region, including in the neighboring smaller municipalities. (b) Contribute to establishing common development priorities across the five municipalities: in response to the economic potentials identified in Rumos 2015, while strengthening the autonomy and capacity o f each municipal government to implement an externally funded program o f this magnitude. The five municipalities are preparing a letter o f development policy which sets forth their common agenda. (c) Promote an increased focus on results-orientation by having common project components and, where relevant, similar results indicators across the 5 municipalities. (d) Capture economies of scale across the municipalities through common program implementation procedures, technical assistance, learning and sharing o f best practices, (e) Provide a flexible timeline for project approvals in case S T N does not allow all five municipalities to proceed with negotiations at the same time. ( f ) Contribute to the municipal learning agenda that the Bank i s seeking to establish with federal authorities as a means to inform policy making based on practical experience. It i s expected that this experience will be replicable in other municipalities.
20. Municipal Selection and Eligibility Criteria: The five municipalities were selected to participate in the P D M I o n the basis o f the following characteristics: (i)they are the main economic centers o f the southern portion o f the State o f R i o Grande do Sul; (ii)the municipalities are in compliance with the Fiscal Responsibility L a w and have been authorized by
8
the Federal Government (COFIEX) and by the respective municipal legislature to prepare they are committed to working together, and sharing projects for World Bank financing, and (iii) experiences and knowledge thus providing opportunities for economies-of-scale. 21. Individual lending operations under the P D M I would have to meet the following eligibility criteria: the project design i s structured to respond to the program objective o f promoting municipal competitiveness and improving infrastructure services in a environmentally and fiscally sound manner; 0 the municipality agrees to be a member o f the program coordination structure (Conselho Superior and Conselho TCcnico) and contribute i t s share to the costs o f the functioning o f the Unidade de Articulaqiio do Programa (UAP); 0 each project meets all appraisal criteria and the municipality agree to abide by the common Program Operational Manual; and 0 prior to negotiations, the municipality must receive an additional authorization from the Secretaria do Tesouro Nacional (STN) to allow borrowing and receiving a federal guarantee. 22. The five projects comprising the P D M I have been prepared and appraised simultaneously. Invitations to negotiate will also be sent to all five municipalities at the same time, and ideally these negotiations would take place jointly. However, since each municipality will first need to receive a new authorization from S T N and SEAIN (Ministry o f Planning) to proceed with negotiations, the timing o f the individual loan negotiations may end up being sequenced over a 12-18 month period. The A P L design will allow for a more flexible response to the potentially differing municipal approval timetables. 23. This Umbrella P A D i s being presented to the Board together with the individual loan package for the Municipality o f Pelotas. Management i s seeking (i)support for the P D M I through the Horizontal APL, and (ii) approval o f the first loan o f the APL. Subsequent loans would be presented when eligibility criteria have been met and projects have been negotiated. In accordance with the Bank’s streamlined procedures for horizontal APLs, each subsequent loan package would be circulated to the Board for information after approval in principle by Management. In the absence o f requests from three or more Executive Directors for Board consideration o f the loan, Management approval would become effective ten working days after circulation o f the documents to the Board.
2.
Program Objective and Phases
24. The program objective i s to strengthen the capacity o f the municipalities o f Bag& Pelotas, Rio Grande, Santa Maria and Uruguaiana to provide selected infrastructure services and employment opportunities for their population. In addition, the five municipalities will have benefited from improved partnerships and enhanced capacity strengthening by working together on common development priorities. Finally, the cumulative impact o f program implementation i s expected to have a positive spill-over effect on economic development in other municipalities in the southern half o f the State.
9
The size o f each loan and corresponding project amount under the APL, as approved by 25. COFIEX, i s presented in Table 3 as follows: Table 3: Proiect Cost bv MuniciDalitv
I
APL: Borrosrer
I Municipality o f Bag6 I Municipality o f Pelotas
IBRD USSM
1 I
6.60 18.90
I I
Borrower
'futal
USSM
US;Y;M
4.40 12.60
I I
11.00
31.50
Municipality o f Rio Grande (Phase 1)
8.10
5.40
13.50
Municipality o f Rio Grande (Phase 2)
7.80
5.20
13.00
Municipality o f Santa Maria
13.95
9.25
23.20
Municipality o f Umguaiana
6.83
4.59
11.42
Unallocated
3.82
1.56
5.38
66.00
43.00
109.00
Total Program
i
I I
26. Phasing o f the Rio Grande Project. The R i o Grande Project would be implemented as a two-phase A P L within the broader PDMI. This i s in accordance with the December 2004 COFIEX recommendation that the World Bank finance 60% o f the project amount o f U S 2 6 . 5 million and that the project be implemented in two phases as shown in Table 3.
27. The trigger defined by COFIEX for moving to the second phase loan i s that at least 50% o f the 1'' phase loan has been disbursed. The municipality o f R i o Grande expects to move to the second phase o f the loan by year three. World Bank participation in the second phase will also require that the project have made significant progress in implementation, t o be measured by the completion o f 80% o f the physical results expected by end o f year 2. I t i s anticipated that both phases will be im lemented over the time span o f 5 years, subject to a prompt approval b y dp COFIEX o f the 2" Phase. 3.
Program components
28. Each o f the five projects making up P D M I will have the same three components: (a) municipal strengthening, (b) local economic development and (c) infrastructure service improvements. A common set o f result indicators will be implemented across the five municipalities, although the specific investment plans and activities are customized to meet the respective development plans o f each municipality. O n overview description o f each component i s provided below and Table 4 presents a summary overview o f the investment program in each municipality. Component 2, given i t s innovative features, i s further detailed in Annex 4. In addition, each project P A D provides the detailed project description and summary o f the investment plans that are to be financed in each municipality.
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Component 1 Municipal Strengthening
29. The purpose o f this component i s to finance activities related to improving municipal capacity to plan, appraise, finance, implement, monitor and evaluate infrastructure and local
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economic development investments. Introducing World Bank project implementation, fiduciary, social and environmental practices are meant to strengthen municipal capacity in these areas and standardize procedures across all relevant secretariats o f the municipal government. In addition, R i o Grande, Santa Maria and Bage have ongoing and more encompassing public sector management improvement programs (PMAT funded by BNDES) focused on improved fiscal management, cadastre and tax collection and these efforts will be further supported by PDMI. In Bage and Pelotas, the municipal governments will use P D M I resources to improve the overall management o f their municipal water and sanitation service providers.
30. Furthermore, to promote learning across the five municipalities and capitalize on the horizontal A P L approach o f the PDMI, each municipality will include in this component resources for i t s project management arrangements and to cover i t s contribution to the cost o f the Unidade de Articulaqgo do Programa (see partnership arrangements). 3 1. The types o f activities funded under this component include: information systems, consultants, human resource developmentkraining, studies, equipment, office space improvements and incremental operating costs. Component 2 - Income and Employment Generation
32. Although not the largest program component in terms o f cost, this i s the more innovative and strategic part o f P D M I as i t will support municipal initiatives to generate income and employment opportunities, in addition to improving the quality o f jobs in both in urban and rural areas. Some o f the interventions would directly target the poor (e.g. street vendors, informal businesses) with instruments such as incentives to move into the formal sector, measures to facilitate access to micro credit, provision o f appropriate commercial space, focused training and capacity enhancement activities. Another set o f interventions would be geared towards selected SME clusters with growth potential (pre-identified clusters include fruit and vegetables in Bag& Uruguaiana and Pelotas; tourism in R i o Grande; waste recycling in Santa Maria, R i o Grande and Uruguaiana, etc). Actions would be to support the social capital formation o f the cluster, prepare business plans, identify new markets, etc. A third area o f work includes initiatives in Santa Maria and Pelotas to stimulate local potential to produce high value-added products, via access to the knowledge economy based on existing and new R&D efforts, coordinated across universities and private sector firms. Finally, support will be provided to all five municipalities to improve the overall business climate to reduce administrative barriers, time, effort and cost o f dealing with excessive business regulations. 33. The types o f investments to be funded under this component include: studies for preparing local economic development strategies and cluster business plans; training, cluster organization, facilitation o f access to micro-credit programs and productive infrastructure for SMEs; and technology park and R&D center
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Component 3: Infrastructure Service Improvements
34. This component will comprise the bulk o f the investment o f the P D M I (between 65% and 75% o f each project cost). The objective will be to assist the municipalities improve their ability to provide infrastructure services in an efficient, environmentally sound and sustainable manner. Careful analysis was undertaken during project preparation to help the municipalities consolidate their infrastructure investments in a few priority areas to maximize impact. The specific investments were also prioritized for their effects on: improving access to services by the poor, contributing to the municipal growth agenda and/or for environmental benefits. The following infrastructure investments are included in this component: A, Rehabilitation o r pavement o f existing urban streets and rural roads, including rehabilitation o f small bridges, improvements to public transport services, bicycle paths, landscaping and long-term maintenance strategies. While this will be the priority investment area for Pelotas, the other four municipalities also include investments in urban transport. In addition, the selected urban roads either provide public transport access to low-income neighborhoods or are important transport access corridors for the city. R i o Grande, Pelotas and Santa Maria include road improvements in rural areas. The rural road investments are focused on the core network that provides access to rural areas. B. Water supply, sanitation and drainage systems in urban and rural areas. Expanding the WSS system and improving performance o f the municipal WSS department (DAEB in Bage and SANEP in Pelotas) will be the priority investments in these two municipalities. In Uruguaiana and Santa Maria, where CORSAN, the State WSS Company, has a concession, parallel investments will be made b y CORSAN to complement the urban upgrading efforts being made in specific neighborhoods. These types o f investments will target access to services by the poor and also have positive impacts on water resource protection and the environment. C. Treatment and final disposal o f solid waste, waste recycling centers and support to waste packers. The priority investment in Uruguaiana i s to close i t s unsanitary landfill, open a new one, improve the overall management o f i t s solid waste and address livelihoods o f the waste-pickers. Actions to support waste-pickers and recycling will also be supported by Component 2 in Rio Grande and Santa Maria. These investments are important in addressing key environmental and social problems in these cities. D. Urban upgrading, housing and social improvements in poor neighborhoods, and areas o f environmental risk. Rio Grande and Santa Maria will make large investments in critical environmental areas that have been invaded by informal settlers over the past few years. The municipalities have been working to adopt the more holistic and integrated approach o f the World Bank to slum upgrading that focuses on the socioeconomic reintegration o f affected families, a participatory and fair resettlement policy and immediate physical use o f the space in the environmentally protected areas where slums have been removed. The rehabilitation o f these areas i s very important in
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protecting key environmental resources in these cities and developing policies to better address problems with informal settlements.
Table 4: Project Components by Municipality (bold indicates priority area o f intervention) Municipality Project objective and key components Bag6
Municiual Strengthening 0 Water and sanitation master plan, geo-referencesystem and user cadastre 0 Project and program management Income and EmDlOVment Generation 0 Capacity building and micro-credit program for micro-enterprises Support to small-scale h i t and vegetable farmers in rural areas Infrastructure Service Imurovements 0 Rehabilitation o f road infrastructure and urban landscaping 0 Expansion o f urban water supply system and waste water network and treatment
Pelotas
Municipal Strengthening 0 Modernization o f Public Services, drainage master plan and WSS management Plan 0 Project and program management Income and Emplovment Generation 0 Capacity building and micro-credit program for micro-enterprises 0 Processing center for vegetables and fruits and formalization o f market space Technology Park 0 Infrastructure Service Improvements 0 Rehabilitation o f rural and urban road infrastructure and urban landscaping Expansion o f WSS and drainage systems
Rio Grande
Municiual Strengthening Modernization of Public Service and Citizen Education Program 0 Project and program management Income and Emulovment Generation 0 Capacity building and micro-credit program for micro-enterprises 0 Reorganizationand improvements in the tourism sector and waste recycling Infrastructure Service Improvements 0 Rehabilitation o f urban and rural road infrastructure and urban landscaping 0 Environmental recuperation and urban renewal of the Orla dos Patos 0 Implementation o f a housing program (Programa Alianqa)
Santa M a r i a Municipal Strengthening 0 Modernization o f Public Services 0 Project and program management Income and Emulovment Generation Capacity building, micro-credit and citizen education 0 Support recycling cooperatives, commercial and Social Inclusion Center 0 Business Incubator a Technology Park Infrastructure Service Imurovements 0 Rehabilitation o f urban and rural road infrastructure and urban landscaping 0 Environmental renewal o f Arroio Cadena Cancela and Vacacai Mirim River
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Uruguaiana
35.
Municipal Strengthening Modernization of Public Services Project and program management Income and Emplovment Generation 0 Capacity building and micro-credit program for micro-enterprises Community vegetable gardens and support to rural production Infrastructure Service Improvements Public Rehabilitation o f urban road infrastructure and urban landscaping Integrated municipal solid waste management and socio-environmentaleducation Sewerage and drainage systems in low income neighborhoods
The following lessons were considered:
0
Project Focus: each o f the original carta consultas submitted by the municipalities had over 30 discrete activities and five components to be supported. A key lesson from municipal development projects in Brazil and other countries show that more impact can be had b y providing much more targeted support to a fewer number o f areas. T o this effect, several components were consolidated during project preparation and a decision was made to focus the interventions o f Component 1 solely on building the municipal capacity to deliver the other two project components, rather than embarking o n a broad program o f municipal and fiscal reform. Under Component 3, a couple o f sectoral interventions were prioritized to promote a more meaningful impact in improving infrastructure services.
0
Support to informal business requires a combination o f instruments beyond access to finance, such as training, organization and infrastructure. In terms o f micro-credit, financial resources for micro credit programs are very abundant in Brazil given the federal law requiring that 2% o f all deposits in the commercial banking system be channeled to credit programs targeting the l o w income population. In addition, the Bank has been supporting through Banco Nordeste, one o f the global best practice micro credit programs known as CrediAmigo. Hence, during P D M I preparation, municipalities and the Bank team decided not to allocate program resources to fund micro credit operations- as was initially planned-and alternatively, encouraged Banco Nordeste to expand CrediAmigo to these five municipalities as an entry-point to operations in the Southern part o f the country. P D M I resources are therefore focused o n other instruments that could boost access to and impact o f credit provision. Cluster Development: in order to support micro and small firms, P D M I focuses on strengthening clusters, rather than on isolated firms. This strategy draws on global and Brazilian experience for allowing groups o f f i r m s to reach economies o f scale (e.g. purchase o f inputs, sales o f products etc), informationhowledge sharing, to foster innovation and cluster competitiveness. Cluster identification and strategy design i s supported in each municipality b y analytical work. Contributions from the RedeNos experience in Northeast Brazil as well as methodologies for preparing business plans from the U S Small Business Association (www.sba.gov/smallbusinessplanner) were very relevant.
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8
Sustainable infrastructure service delivery and not just works. Projects which focus solely o n implementation o f infrastructure works are often unsustainable. Bank experiences show the importance o f identifying institutional, social and financial barriers to sustainable service delivery and address these as an integral component o f works design and provision. In addition, municipal infrastructure needs to respond to sound sectoral investment plans, rather than investments made in an ad-hoc manner in response to emergency situations (usually arising from inadequate preventive maintenance) or when funds are available. The costs and management arrangements for operation and maintenance need to be considered upfront, respond to citizen willingness to pay and municipal fiscal and institutional capacity. The P D M I program was designed taking this lesson into consideration and especially in the transport and WSS sectors by working closely with each implementing agency to identify priority interventions in light o f a longer-term investment plan, service delivery and cost recovery options and ways to guarantee long-term sustainability.
8
Improving Environmental Quality and Mainstreaming in planning process: there i s a strong need to mainstream environment in the design and implementation o f infrastructure projects. The program will assist environmental agencies to become fully integrated with the Municipal Planning and Technical Secretariats in the decision making and planning process. Constructive collaboration not only increases the positive impact o f investments on the environment, but also makes these investments more cost effective and sustainable. P D M I has mainstreamed environmental issues into i t s design and will build the capacity o f municipal staff, as well as design clear procedures and tools to be used during project implementation and beyond.
36.
Four project alternatives were considered: Stand-Alone SILs: The option o f stand-alone Specific Investment Loans to each o f the municipalities was rejected because the relative small size o f each individual loan would make this operation very costly for the Bank to prepare and supervise, while the transaction costs would also be high for the borrowers. In addition a stand-alone S I L would not allow for the cross-municipal learning. Using an Intermediary Entity: The possibility o f using an intermediary financing entity as a sole borrower could have reduced Bank transaction costs At the federal level either the Caixa Econbmica Federal or Banco do Brasil could have been an option, while a State-level Bank, Banrisul, could also have been considered. However, all o f these banks face lending exposure restrictions (45% to public sector borrowers) and each individual transaction i s subject to time-consuming approval processes by the federal government. These potential delays make the payment o f Bank commitment fees unattractive to the intermediaries. In addition, none o f the financial intermediaries supporting the municipal sector i s Brazil has the experience o f supporting multi-sector loans to municipalities, as they just work under the modality o f project finance for specific investments. In the longer term, the Bank municipal strategy in Brazil i s to help develop an efficient credit market for municipalities. A regional development program for the Sothern half o f the State: an early version o f the program design called for a common regional development agenda to which each
15
municipality would contribute. This could involve, for example, identifying common infrastructure and productive investments that would serve the interests o f several municipalities at once. However, given the non-contiguous nature o f these municipalities, the very localized and differentiated productive potentials, and site specific infrastructure improvement needs, it was determined that each project needed to be customized to respond to the specific development plans o f each municipality. Also, the uncertainties associated with the timing o f the issuance o f borrowing and guarantee approvals from S T N posed an additional risk for municipalities to commit to activities that would have required costsharing and joint implementation. 0
A g r o w lending amroach through an APL was therefore determined to be the best option, given the interest o f the federal government and the municipalities to move ahead with a program o f Bank assistance in these five municipalities. The APL, especially through i t s proposed knowledge sharing activities, also allows the piloting and consolidation o f standard methodologies and approaches that would be valuable under a possible future wholesaling mechanism.
C. IMPLEMENTATION 1.
Partnership arrangements
Although each municipality w i l l be responsible for implementing i t s respective project, the integrity o f the programmatic approach w i l l be guaranteed through the establishment o f a high level coordination body and a technical council comprising representatives o f the five municipalities as well as through the joint hiring by the five municipalities o f a Unidade de Articulaqilo do Program (UAP). 0
The Superior Council (Conselho Superior) will be established through an inter-agency agreement signed by the five municipalities. I t will serve as PDMI’s top decision-making body and w i l l consist o f the Mayors o f the five municipalities. The Presidency o f the Superior Council will be exercised by one o f the Mayors on an annual rotating basis and quarterly meetings would be held.
0
The Technical Council (Conselho Tecnico) w i l l be the operational arm o f the Superior Council and consist o f 10 members: the Secretaries o f the Municipal Planning Secretariats and the Project Coordinators o f each municipality. The Technical Council will: (a) act as a liaison body, ensuring that the five municipalities develop joint and common actions between them and share experiences; (b) supervise the UAP; (c) evaluate P D M I performance and identify any problems arising in the course o f implementation; (d) review the physical-financial progress indicators and the joint Annual Progress Report and (e) define common requirements for technical assistance and support the U A P in contracting and supervising consultants.
0
The UAP w i l l be hired under a common contract paid by the municipalities involved in P D M I and w i l l primarily be responsible for the capacity building and technical assistance to the municipal teams and for liaising between the municipalities for exchanges o f
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experiences. The Unit will also act as an information collector and interface between the World Bank and the municipalities and will serve to coordinate Bank supervision and P D M I monitoring activities. In addition, the U A P will provide necessary guidance to the municipalities on specific technical issues, starting in year one with the application o f Bank fiduciary and safeguard procedures.
2.
Institutionaland implementationarrangements
37. The respective municipal governments will be the implementing agency for each project. Each municipality will work through i t s existing administrative structure and use the project to strengthen its capacity in the areas o f project management, procurement, application o f social and environmental safeguards and financial management. 38. Each municipality will put in place either a fully-integrated or partially-integrated project coordination unit (Unidade de GestZio do Projeto - UGP), located in an existing municipal structure (usually the Secretariat o f Planning) and duly accountable to it. The UGP will be staffed with qualified municipal civil servants seconded from other secretariats with support from consultants, as needed. The justification o f using an UGP i s to address the coordination challenges o f a multi-sectoral project that involves numerous municipal agencies for i t s implementation. The UGP will coordinate project implementation across the different municipal secretariats that are responsible for implementation, while ensuring compliance with WB fiduciary and safeguard norms (which are quite complex for small municipalities to implement). Care will be taken to make sure the institutional strengthening objectives o f the other municipal secretariats are achieved and they build capacity to implement the improved project management, fiduciary, environmental and social processes being introduced through the PDMI. To this effect, suitable progress indicators will be developed and tracked in the M&E system.
3 9. Appropriate and detailed implementation arrangements have been developed for each municipality and appraised by the Bank. These are described in more detail in the Annex 6, as well as in the respective municipal PADs.
3.
Monitoring and evaluation o f outcomeshesults
40. Although a common Results Framework has been prepared for PDMI, each project has a customized set o f end-of-project outcome and intermediate indicators to reflect the specific nature o f i t s investment plan. These are reflected in the respective municipal PADs. A core set o f common indicators has been established for the institutional strengthening and local economic development components and will be tracked across all municipalities. However, indicators for the improved infrastructure services respond to the specific investment plans o f each municipality, and in every case, at least one major infrastructure service delivery improvement will be measured in terms o f improved coverage, efficiency and sustainability. 41. The municipalities, as project implementing agencies have the main responsibility for data collection and reporting on project results. The U A P has as part o f i t s function the
17
establishment o f a simple computerized Management Information System to help each municipal manage data. Annex 3 contains more details on how the P D M I will implement M&E.
42.
The key indicators for measuring the success o f each project in the P D M I are: Improved Municipal Management Capacity 0 Number o f municipal projects institutionalizing improved evaluation, social and environmental management processes in the municipal government o f Pelotas 0 Percentage o f citizens satisfied with quicker and more user-friendly access to client services provided by the municipality 0 Number o f good practices or innovations replicated from other municipalities Increased local economic development opportunities 0 The net percentage increase in formal jobs i s higher (or i t s decrease i s lower) among the beneficiaries o f the project than in the municipal economy as a whole 0 The net percentage increase in formal f i r m s i s higher (or i t s decrease i s lower) among the beneficiaries o f the project than in the municipal economy as a whole Improved Infrastructure Services (the indicators are customized to each project objective and could include): Coverage, quality and sustainability o f water supply, sanitation and drainage services Reduction in travel times in urban and rural areas 0 Reduction in number o f people living in environmentally risky and protected areas 0 Satisfaction o f population with quality o f infrastructure services
4.
Sustainability
43.
Financial sustainability: The economic and financial analysis confirmed that the project i s expected to generate positive returns. Investments in water, sanitation and solid waste management are expected to be recovered and sustained as much as possible through user fees. The urban upgrading and transport investments will also be partially recovered by the municipality via increased property tax collections. Environmental sustainability The project i s expected to have an overall positive impact on the environment, especially with respect to the rehabilitation and protection o f environmentally risky areas, improved water quality and waste water treatment, proper solid waste disposal, and improved overall quality o f l i f e and environmental health. Under the institutional strengthening program, the project will develop the municipal capacity to manage and monitor environmental and social aspects o f the project, deliver sanitary education program, manage water resources and solid waste, and protect river basins and other environmentally sensitive areas.
44.
Risks
Risk Mitigation Measures
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Risk Rating with
Mitigation
Municipalities may have difficulty providing adequate counterpart funding to the projects.
The structuring of counterpart funds in the project cost tables responds to the availability of financing in each municipality based on its ongoing investment programs. Project preparation has included a detailed fiscal analysis which i s subject to S T N review as a condition for authorizing negotiations.
Exchange rate risk may cause municipal local currency debt burden to be higher than expected.
Borrowers will have the opportunity to choose a lending instrument that allows swapping repayments into local currency.
Inexperience of municipalities with the Bank’s financial management rules may cause difficulties in implementation and pose fiduciary risks.
The project includes specific activities to build the capacity of the municipalities in financial management. The APL approach and presence o f UAP will provide a cost-effectivemanner to build capacity.
Moderate
Lack of capacity and inexperience of municipalities with the Bank’s procurement r u l e s may cause difficulties in implementationand pose fiduciary risks.
The UGP i s required to assign at least one procurement point person who will verify application o f Bank procedures. An appropriate mix of ex-ante and ex-post reviews by the Bank would be used throughout the l i f e o f the projects. The APL approach and presence o f UAP will provide a cost-effective manner to build capacity and share lessons across municipalities.
Moderate to High*
Municipal elections may bring in new authorities who do not support the project.
Given that the project will represent the bulk of municipal investment for the next 5 years, the Bank team will have to maintain an open communication and be responsive to the priorities o f the elected mayors. Given that the project responds to the PPA which reflects citizen demands, no major changes in investment priorities are expected.
Moderate
Projects that include resettlement of families from environmentally risky areas could experience delays in land acquisition and processes of community participation.
Resettlement frameworks conforming to Bank policy are being prepared for all projects that need them. Land acquisition and community participationwill be carried out in parallel to project design and engineering and would be carefully phased to coincide with works implementation.
Moderate
Investments under Component 2 fail to lead to sustained increased employment and income
Given the local economic development component i s the more innovative one, the Bank will pay close attention to it during PDMI implementationand link results to complementarily Bank analytical work on citv comDetitiveness.
Moderate
Little private sector demand for technology parks in Santa Maria and Pelotas
A business plan and partnership agreements will be required to be signed, which specify the contributions of all parties, including the private sector
Moderate
Overall Program - Risk
Low
Moderate
as high and Rio Grande and Santa Maria as modertae
5.
Moderate
L o a d c r e d i t conditions and covenants
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45. Each operation has met the Bank’s criteria for readiness by resolving all substantive design issues (e.g., the content o f the operational manual i s well advanced). For negotiations the following will be required: (a) law passed by each municipal council to establish the UGP, (b) the finalization and posting on the P D M I website o f the Operational Manual containing the following framweworks: Results, Monitoring and Evaluation; Environmental and Social Management; and Resettlement; (c) program letter sent to the Bank with interganecy agreement signed by the five mayors; (d) TOR for the Superior Council, Technical Council and U A P endorsed by all 5 mayors; and (e) activities listed in procurement action plan (Annex 8) are implemented. 46.
Loan Covenants include: 0 0
0
0
Within two months o f each project effectiveness, the UGP must be fully staffed When at least three o f the municipal loans have been declared effective, the U A P contract must be established. Business Plans are required for all productive subprojects o f Component 2. These include partnership agreements, as needed, for Technology Park and Business Incubator. Relevant resettlement plans in compliance with social and environmental safeguard framework must be submitted for Aroio Cadena in Sta Maria and Orla da Lago dos Patos in Rio Grande.
D, APPRAISAL SUMMARY 1.
Economic, financial and fiscal analyses
Economic and financial 47. The proposed activities will provide substantial economic benefits in the long term due to lower transport costs and reduction in travel time in Uruguaiana, Pelotas, R i o Grande and Santa Maria, and to improvements in water supply and sanitation services in Bage and Pelotas. Furthermore, project investments will provide economic benefits due to avoided impacts and real estate valuation in areas o f urban upgrading. Component 2 i s also expected to provide an increase in employment and income which should have a positive spill-over effect on the local economy. 48. The economic appraisal o f the P D M I was divided into two phases targeting: (i) interventions to be implemented during the first 18 months o f each project, and (ii)interventions planned for the following 18 months o f these projects. The total economic costs and benefits o f each o f the components were estimated in terms o f N P V and IRR. An appraisal period o f 20 years was established for evaluating the costs and benefits, with a discount rate o f 12% a year.
The appraisal results relating to the first phase o f the P D M I i s covered in Annex 9. 49. Individual project results in the transport sector showed IRR ranging from 17% to 40% and from 13% - 17% for investments in sanitation and solid waste management. All productive projects under Component 2 will have to show positive cash flows to be eligible for financing.
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50. When project implementation gets underway in each municipality, appraisal studies related to the interventions planned for the second phase o f the project will commence. The appraisal methodology for the second phase i s detailed in P D M I Operational Manual and municipal staff has been trained in i t s application.
Fiscal Analysis 51. The State o f Rio Grande do Sul faces a very difficult fiscal situation and has the highest level o f indebtedness o f any state in Brazil. N e t consolidated debt was R$ 33.8 billion in December 2006, or 254% o f the state’s net current revenue (NCR), well above the ceiling o f 200% set in the Fiscal Responsibility L a w (FRL). O n the other hand, as municipalities in Brazil are independent entities from the federal and state governments, the fiscal situation o f RS does not affect the creditworthiness o f the municipalities located in the state. As independent entities, they are evaluated individually and therefore their access to credit operations i s only conditioned by their own accomplishment o f the FRL regulations. Also, as international credit operations require a federal guarantee, the concession o f sovereign guarantees for credit operations to municipalities depends only on the federal government.
52. The fiscal situation o f the five municipalities included in the P D M I was appraised during program preparation and is considered to be comfortable. The five municipalities have complied with all fiscal requirements established by the Fiscal Responsibility L a w (FRL), keeping the key fiscal indicators below the FRL maximum levels. Annex 9 provides a snapshot o f the fiscal situation o f each municipality. 2.
Technical
53. All works to be financed under P D M I will meet the relevant technical norms as mandated by Brazilian legislation. Project preparation included technical studies in each municipality on different types o f infrastructure investment: roads and urban transport (in all 5 municipalities); water supply and sanitation (Bage and Pelotas); solid waste management and sanitary landfill siting (Uruguaiana); and upgrading urban settlements located in environmentally protected areas (Santa Maria and Rio Grande). The background studies assessed technical options for designing the most adequate intervention taking into account costs, technical soundness, environmental and social concerns and long-term operations and maintenance. The Bank team reviewed these studies and the detailed municipal investment plans and in some cases worked with the municipalities to develop lower cost alternatives. In particular, modifications were made to the proposed investments, for example: to reduce unaccounted for water and achieve 100% o f metering in BagC’s WSS system, water treatment options and site location in Pelotas and optimizations to the Uruguaiana landfill design. Prior to making any investment, each municipality has procedures in place that requires the preparation o f a detailed projeto bdsico which lays out all technical specifications and project costs, and these are included in the P D M I Operational Manual.
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3.
Fiduciary
54. A financial management risk assessment was carried out in each municipality in accordance with OP/BP 10.02 and the Financial Management Arrangements in World Bank Financed Investment Operations’ Manual, dated November 3, 2005. The purpose o f the assessment was to determine whether the municipal Implementing Agency has or will have by effectiveness acceptable financial management and disbursements arrangements in place to adequately control, manage, account and report about the funds to be allocated to i t s respective Project. These arrangements include, but are not limited to i t s capacity to: (a) properly manage and account for all Project’s proceeds, expenditures and transactions, (b) produce timely, accurate and reliable financial statements and reports, including Interim Financial Report (IFRs) for Project Management and other Bank purposes, (c) safeguard the Project’s assets, and (d) disburse Bank funds in the most efficient way, in accordance to applicable Bank rules and procedures. 55. This assessment was carried out in each municipality visited - Pelotas, Santa Maria, Bage, Uruguaiana and Rio Grande and included work sessions with staff from the Secretariats of Planning and o f Finance. The conclusion o f the FM assessment i s that the financial management arrangements as set out for these projects satis@ the Bank’s minimum requirements and that financial management arrangements are in place that can provide with reasonable assurance, accurate and timely information on the progress o f project implementation. The financial management risk associated with the program has been assessed as high (and the mitigated risk moderate), which i s usual for first time borrowers from the Bank Annex 7 describes the generic financial management procedures to be adopted by each municipality and each municipal P A D provides more specificity.
56. A procurement assessment: The capacity o f each municipality to implement procurement actions for the P D M I was carried out during project preparation. The assessment reviewed the organizational structures for implementing the project in each o f the five municipalities and the interaction between the staff responsible procurement (bidding committees) and the relevant central unit for administration and finance. The bidding committees, the contract and the legal advice departments (Consultoria Juridica) are not familiar with the Bank’s Guidelines, nor the respective methods, procedures, and bidding documents. The overall risk assessment for three municipalities was rated as high and moderate for the two others. 4.
Social
Citizen Participation in Settinv Municipal Priorities
57. Project design in each municipality has been largely based on priorities defined in each Municipal Multi-year Plan (Plan0 Plurianual) and corresponding Planos Diretores for the urban areas, which were drawn up between 2003 and 2005. The drawing up o f these plans involves numerous consultation processes by the municipal authorities with the population in both urban and rural areas. To ensure consistency in the application o f these regular participatory planning processes o f each municipality, the Program Operational Manual requires that all Projects be included in the PPA. In addition, during program implementation, stakeholder participation 22
would be sought for the design and implementation o f the specific investments that directly effect the beneficiary population. Specific consultations implemented by each municipal government as part o f project preparation are as follows: 0
In Pelotas a “City Conference” (Congresso da Cidade) was held, in which approximately
400 leaders from governmental and non-governmental organizations participated. The event resulted in the creation o f the pillars for municipal planning in urban and rural areas, and the identification o f priority investments. A public opinion survey was also carried out to assess the community’s acceptance o f the prioritized projects. In drawing up the city’s new Master Plan (Plano Diretor), 17 public forums were held, with an average participation o f 200 community leaders and technical specialists in each event. During these forums proposed investments for the Municipal Project were defined. 0
In BagC, a number o f community participation activities were carried out to identify priorities, including 14 City Conferences with 660 participants. Contributions to the new Master Plan were generated through 5 public forums (with 280 participants), various community meetings in rural and urban areas, and a Municipal Conference on the environment. These events were fundamental in the identification o f problems, objectives, indicators and goals for the Project.
0
In the municipality o f Uruguaiana, investments for the local Project were identified during the elaboration o f the Multi-Year Plan (Plano Plurianual, PPA), which entailed 34 community meetings with 770 participants and 4 public forums with 325 participants. In order to adapt the outcome to the Master Plan, 2 City Conferences were held with 173 community leaders and representatives from governmental and non-governmental organizations.
0
In Santa M a r i a all proposed activities to be financed by the project were taken from the Master Plan for Environmental Urban Development (Plano Diretor de Desenvolvimento Urbano Ambiental (PDDUA). The participatory process included 3 17 meetings with about 30,000 participants in the 10 regions and 5 1 “microregions” o f the municipality. In addition, 40 public forums were held locally elected officials (CBmara de Vereadores), with an average participation o f 150 persons per event. Other participating groups in the identification o f Project priorities were monthly meetings o f 32 municipal boards, and district boards o f the 9 rural districts that comprise the rural area o f the municipality.
Every four years, the population o f Rio Grande i s invited, through mass media and neighborhood associations, to participate in meetings held at public schools o f each region o f the municipality (there are 19 total regions). Investment priorities are determined during these meetings, in which the administration and i t s team o f secretaries work with the community. The priority setting process in Rio Grande began with the creation o f the first Multi-Year Citizen Plan in 2001, during which 13 meetings were conducted. In 2006, 11 meetings were held. This process i s ratified each year, in the public forums under the Budget Directives Law (Lei de Diretrizes Orqamentdrias (LDO).
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Social Benefits and Impacts
58. The P D M I is expected to have positive impacts on living standards o f the population as it aims to improve transport access, quality o f basic infrastructure, and promote economic growth in selected municipalities. Basic sanitation, drainage and road paving and rehabilitation works are to be carried out within the existing right o f way o f well established streets and rural roads and for this reason impacts on the local population are expected to cause temporary reversible impacts consisting mainly o f disruption and nuisance during the construction phase. Partial land acquisition i s possible, and will follow the guidelines established in the Operational Manual. Potential long-term negative impacts are the result o f unplanned growth and increased traffic impacts due to increased speeds and volumes o f traffic on improved roads and streets. Technical assistance and training will be provided to municipalities to address these cumulative impacts. 59. The investments that are expected to have the most significant social impacts are the rehabilitation o f environmentally degraded areas in Rio Grande and Santa Maria and the closing o f the open dump in Uruguaiana. These projects will require the resettlement o f slum dwellers currently living in environmental protection and flood prone areas and affect the livelihood o f waste pickers currently working or living on the dump. These investments will improve the quality o f l i f e o f affected population, and careful planning and implementation o f a resettlement plan will aim at minimizing and mitigating potential impacts and assist in socio-economic integration o f the population. A resettlement framework was prepared and i s included in the Operational Manual and will be applied to all relevant projects being prepared during the first year o f program implementation. N o projects involving resettlement will be implemented during the first year o f the program. 5.
Environment and Safeguard Policies
60. The P D M I includes a series o f environmental and social considerations that were developed during preparation, with the objective to ensure socio-environmental sustainability, and compliance with state and municipal environmental regulations as well as World Bank Safeguard policies. A common framework for environmental assessment and management was developed for all municipal projects and forms part o f the Operational Manual. In addition, many o f the infrastructure projects have the direct objective o f improving the environmental quality o f each municipality. 61. Based on the screening and assessment o f the projects included in the PDMI, the program has been rated as a category B environmental rating pursuant to the policies o f the World Bank. All o f the infrastructure the projects would be expected to trigger the policy on Environmental Assessment (OP 4.01). The following safeguard policies may be triggered depending upon the specific investments in each infrastructure project: (i) Natural Habitats (OP 4-04), (ii) Cultural Property (OP 4.1 l), (iii) Involuntary Resettlement (OP 4.12), and (iv) Safety o f Dams (OP 4.37). Each project will be assessed by the responsible municipal secretariat with oversight from the project management unit (UGP) to determine the specific safeguards triggered, the level o f analysis required, and the means to fully address risks. The municipality will comply with the requirements o f the Operational Manual, the Environmental and Social Management Framework and the Resettlement Framework.
24
6.
Policy Exceptions and Readiness
62. All f i v e projects in the PDMI meet the Bank’s readiness standards and are not expected to require any p o l i c y exceptions.
25
Annex 1: Country and Sector o r Program Background BRAZIL: N O GRANDE DO SUL INTEGRATED MUNICIPAL DEVELOPMENT PROGRAM
The State o f Rio Grande do Sul, located in the most southern part o f Brazil, has a total population o f 10,867,102 inhabitants (6% o f the total for Brazil), and with i t s 281,748.5 km2, occupies 3.32% o f the Brazilian territory. The State GDP o f nearly US$69,415 million (7.8% o f that o f Brazil’s) places the State as the fourth national economic power. The GDP per capita has been on the rise in the last few years and i s higher than the Brazilian average, reaching US$ 6,400.00 in the year o f 2005, while the National average was US$ 4,422.00 in 2004 (Table 1). Table 1 - Gross Domestic Product, total and per capital. Participation o f the State in the National GDP and growth rates in Brazil and in Rio Grande do Sul - 1994/2005
1
2000
I
38,698.88
I
3,773.42
I
4.38
I
3.21 I
7.73
I
500,570.49
I
2,922.53
I
4.4
I
2.8
I
Source: Fundaqao de Economia e Estatistica (FEE)
While being Brazil’s fourth largest economy, the State o f Rio Grande do Sul replicates Brazil’s regional economic disparities, by which the country’s northern region lags behind the most developed south. In Rio Grande do Sul, the reverse occurs, as the northern region i s the one leading the State economy, while in the southern region, economic growth has been more modest, mainly due to a lower industrialization rate, The two regions (known as the Southern H a l f and the Northern Half) are divided by the Jacui and Ibicui Rivers. In the Southern Half, the economy i s mostly based on primary sectors, with rice and cattle raising prevailing in medium and large rural properties, while corn and dairy cattle are predominant activities in small properties. In the Northern region, small and medium rural properties prevail and concentrate on production o f soy beans, corn, and wheat, in addition to dairy cattle, poultry and swine. Manufacturing industry i s concentrated in the Northern region
26
and involves metal-mechanical industry (oriented towards the production o f agricultural machinery and appliances), transport, chemical, furniture, apparel, leather footwear and agrofood products. The North i s also home o f the Port0 Alegre-Caxias Pole which encompasses large urban agglomerations and concentrates a large portion o f the State manufacturing production. Currently the lagging region, the Southern Half has once been a prominent zone. During the middle o f the 19th Century, the economic activity in the Southern Region was largely based on the jerked beef industry, mainly consumed in Brazil’s emerging regions mostly by the lowincome population and slaves. The jerked beef production, concentrated in the municipality o f Pelotas, was supplied by cattle farms located in the neighboring Campanha (Bage) region and exported through the Rio Grande port, hence bringing economic dynamism to the Southern part o f the State. Main urban centers developed in the region, as population grew in response to booming businesses and increasing job opportunities, while rural property became more concentrated. During the mid-20th century, the former dynamic regional jerked beef industry faced successive severe crises, due to lack o f appropriate technology, problems in adapting more productive cattle breeds in the region, increasing labor costs and labor regulation, as well as strong competition from Uruguayan production. Informality and unemployment have since become big issues in the region. In contrast, the colonial society, located in the Northern region experienced rapid growth and diversification o f i t s agricultural production while also receiving massive European migration. Population growth during the last century reflects the shift o f dynamism from the Southern to the Northern part o f the state (Table 2). Table 2 - Total population and percentage share o f each Half in the total o f the State o f Rio Grande do Sul 1890 - 2000
1920 1950 1970 2000
1,142,268 2,755,862 4,730,042 7,O 12,367
851,100 1,408,959 2,025,416 3,169,382
57.30 66.17 70.02 68.87
42.70 33.83 29.98 31.13
The declining Southern Half has never overcome i t s past economic crisis. More recently, the informal sector has been growing strongly due to the closing down o f large manufacturing plants (e.g., food processing) which left behind masses o f unemployed workers. A significant number o f laid o f f workers entered the informal sector by engaging in activities such as commerce, handicrafts, and small shops operating in manufacturing and service sectors. These different groups face strong barriers to develop their businesses and move up to the formal economy. Difficulties range from low skills, insufficient training, limited operating scale, weak organization, shortage o f capital (operating and investment), and barriers to access new and larger markets, in addition to an unfriendly business environment. Table 3 shows the major difference in per capita income between the poorer northern half and the North.
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Table 3 - Area, Population (2002), Total GDP (2001) and GDP per capita o f the Northern H a l f and Southern H a l f o f the State o f Rio Grande do Sul
Source: FEE, 2004.
The municipalities o f Bage, Pelotas, Rio Grande, Santa Maria and Uruguaiana are characterized as Hub-Cities o f the Southern Half. To a certain extent, the five municipalities present somewhat homogeneous social-economic characteristics. As to the per capita GDP , with exception o f the municipality o f Rio Grande, the remaining municipalities feature slightly above half o f the State average. Among the five, Rio Grande has the highest GDP due to the presence o f an important port and manufacturing activities (65.11% o f Gross Value Added), such as fertilizers, oil refinery, petro-chemical and food-processing. Economic activities o f the other four municipalities - Pelotas, Santa Maria, Bag6 and Uruguaiana - are mostly based on services, fanning and cattle raising, as shown in Table 4. Table 4 - Population, Total GDP and Gross Value Added o f the municipalities
As for social indicators, the Human Development Indexes-HDI o f the five municipalities compared to the State and rank above the national index. Among the five municipalities, Santa Maria presents the highest indexes, while Uruguaiana ranks lowest for income and education, in addition to showing a longevity index below national average (Table 5).
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Table 5 - Municipal IDH, Education, Income and Longevity 2000.
As the Hub-Cities o f the Southern Half, the five municipalities need strategic interventions to overcome economic decline, enhance their competitiveness and accelerate sustainable economic growth. This would require support to infrastructure, employment and income generation, in addition to institutional capacity building o f the municipalities. Consistent with this, a development program (“Rumos 20 15”) formulated by the State Government suggests strengthening Hub-cities as a development strategy, given the economies o f scale for service provision and business attraction.
The P D M I i s consistent with the State’s development plan and the Bank’s municipal strategy. As it will support the five municipalities to improve management capacity and service provision to their citizen, formulate and implement initiatives to generate jobs and income and provide priority infrastructure services. While supporting these initiatives, P D M I will focus on the longer t e r m development strategy for the municipalities. All in all, P D M I responds to the four thematic areas making up the Bank’s municipal development strategy in Brazil: (a) improving municipal fiscal and administrative management, (b) increasing the competitiveness o f the municipality through local economic development, (c) supporting partnerships across municipalities and with others and (d) strengthening municipal capacity to deliver key services.
29
Annex 2: M a j o r Related Programs Financed by the Bank and/or other Agencies BRAZIL: RIO GRANDE DO SUL INTEGRATED MUNICIPAL DEVELOPMENT PROGRAM
I
Prajeets
Sector Issues
Bank Financed Projects
Latest Supervision (ISIUICR) Ratings
1mplenientatiori Progress
Developnient Objective
I
Brazil Municipal Development Program APL
BR-PE-089011Uberaba Municipal Lending Program APL
S
S
Urban and Municipal
BR-PE-049265 Recife Urban Upgrading Project (Prometropole)
MS
MS
S
S
MS
MS
S
HS
S
MS
S
S
BR-PE-081436 Bahia Integrated Urban Development (Viver Melhor 11) BR-PE-089440 - Brasilia Sustentavel BR-PE-082328 - Betim Integrated Municipal Project Infrastructure
BR-PE-034578- RS Highway Management Project
Rural
BR-PE-043868- RS Natural Resources & Rural Poverty Alleviation
Other Development Agencies
BR- Municipality o f Belo Horizonte DRENURBS (IDB) PROCIDADES (IDB) BR- Municipality o f Port0 Alegre Environmental Rehabilitation (IDB)
30
I
Annex 3: Results Framework and Monitoring BRAZIL: RIO G W N D E DO SUL INTEGRATED MUNICIPAL DEVELOPMENT PROGRAM
Program Development Objectives Improve the capacity of the municipalities o f Bag& Pelotas, Rio Grande, Santa Maria and Uruguaiana to provide infrastructure services and employment opportunities for their population. Enhance cross-municipal learning and knowledge sharing o f the municipalities participating in the program.
Outcome Indicators (Indicators will be used as relevant in each project) Improved Municipal Management Capacity Number o f municipal projects institutionalizingimproved evaluation, social and environmental management processes in the municipal government o f Pelotas Percentage o f citizens satisfied with quicker and more user-friendly access to client services provided by the municipality Number o f good practices or innovations replicated from other municipalities Increased local economic development opportunities The net percentage increase in formal jobs i s higher (or its decrease i s lower) among the beneficiaries of the project than in the municipal economy as a whole The net percentage increase in formal firms i s higher (or its decrease i s lower) among the beneficiaries of the project than in the municipal economy as a whole Improved Infrastructure Services Coverage, quality and sustainability of water supply, sanitation and drainage services Reduction in travel times in urban and rural areas Reduction in number of people living in environmentally risky and protected areas Satisfaction of population with quality of infrastructure services
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Use of Outcome Information Monitoring, evaluation and adjustment o f each municipality’s policies, management and programs
Intermediate Results
Municipal Capacity
Income and Employment Generation
Infrastructure Services
Intermediate Results Indicators (Indicators will be used as relevant in each project) Number o f municipal administrative facilities physically and functionally improved and o f information systems implemented or improved Number o f municipal staff trained Percentage of annual work program delivered on time Number o f beneficiaries of training and/or technical assistance Number o f micro-credit loans reaching target population Number o f productive infrastructure installed Physical progress o f infrastructure improvements in urban and rural transport, water supply, sanitation and drainage, urban upgrading and environmental recovery Effective community participation and timely implementation of resettlement or other projects that require community participation
Use o f Intermediate Results
Monitoring o f project implementation and timely intervention with corrective measure as needed
Arrangements for results monitoring
Institutional issues and reporting: A monitoring system will be established in each o f the municipalities and the results, experiences and lessons learned will be shared across the P D M I participants. In each municipality, the UGP will be responsible for: (a) monitoring the activities implemented by the Executing Entities (other municipal secretariats or departments); (b) preparing the Monitoring and Evaluation Plan in order to monitor and evaluate the progress and achievements o f the various subprojects on the basis o f the outcome and impact indicators o f the Results Framework; (c) building a database which will supply data, including monitoring indicators, for the different decision-making levels; and (d) preparing technical progress and evaluation reports on the various projects.
The U A P will provide necessary guidance, standardize information collection procedures and assist to compile reports, review pertinent documents and other material in support o f the shared actions o f the five municipalities. The UAP’s specific functions include the analysis o f technical reports prepared by the UGPs in order to identify and increase the adoption o f good practices; assume a leading role in the ongoing monitoring and evaluation processes o f the Program, beginning with the establishment o f the baseline; and the compilation and coordination o f technical reports for the Federal Government and the World Bank.
32
The following steps will be taken to operationalize the M&E process during project implementation: (a) Project Launch Seminar A seminar will be carried out at the beginning of project implementation in each municipality to inform the participating entities and project beneficiaries o f the project objectives, procedures, expected results and monitoring indicators.
(b) Definition of baseline numbers: The baseline for progradproject outcomes and intermediary indicators will be defined by the U A P in coordination with each UGP. As part of this process, to take place during the first 6 months o f P D M I initiation, agreement will be reached on procedures, sources o f information, database structure and methodology for tracking o f the subsequent progress indicators. (c) Day-to-day monitoring and information dissemination o f the projects: The monitoring process will commence from the baseline and at the beginning o f P D M I execution. Information will be collected on a periodic basis. The relevant information will be disclosed through bulletins, pamphlets, radio, television, program website and a variety o f different events for the benefit o f the community. Dissemination o f information about the project will also assist the generation o f knowledge and encourage commitment and social awareness by local people.
(d) Semi-annual reports: The UGP will be responsible for obtaining information from participating municipal secretariats to draw up technical progress reports every six months, with the content as defined in the Operative Manual. (e) Regular seminars: A number o f municipal and regional seminars will be organized to provide information on P D M I progress and to give an opportunity for technical teams, civil society and government to discuss and evaluate P D M I results. These seminars may also be thematic to discuss progress with specific components.
( f ) Official evaluations:
The mid-term evaluation will provide details o f the progress and results o f each project and the program, and evaluate compliance with the objectives. This evaluation will also point to the need for possible adjustments to the Program to ensure i t s continued efficacy. Furthermore, the evaluation will emphasize the need to comply with the implementation deadlines and identify any areas and components requiring adjustment. Moreover, it will draw attention to any lessons learned that might be useful for guiding actions during the final phase o f the program and for the possible incorporation o f such lessons into the design o f future projects.
The Final Evaluation at the conclusion o f the P D M I will contribute to the Completion Report. I t will focus on the same questions and evaluation indicators raised in the mid-term evaluation. The evaluation will seek to identify the impact and sustainability o f the results and assess the progress made towards the long-term objectives. The Final Evaluation will also aim to indicate future actions needed for ensuring continued local commitment and awareness in the context o f the longer-term development o f the municipalities.
33
Institutional capacity and data collection Component 1 o f the PDMI includes activities to improve the management capacities o f the five municipal administrations to, among others, establish mechanisms related to monitoring and evaluation o f the actions planned, as well as assess the level o f knowledge sharing across the five municipalities. This component will also assist in the definition o f the baseline indicators (through the UAP), and the data sources for obtaining the indicators. In most cases, the data i s available in different government sources and needs to be better compiled to facilitate the daily monitoring work. In addition, the component will support the dissemination o f project information and the preparation o f progress and evaluation reports.
34
Annex 4: Detailed Program Description BRAZIL: RIO GRANDE DO SUL INTEGRATED MUNICIPAL DEVELOPMENT PROGRAM
The detailed description o f each project i s provided in i t s respective PAD. Due to the innovative, and somewhat experimental, nature o f Component 2, the generic approach being proposed in all 5 municipalities i s given more detail below. Each o f the five projects making up P D M I will have the same three components: (a) municipal strengthening, (b) income and employment generation and (c) Infrastructure Service Improvements. A common set o f result indicators will be implemented across the five municipalities, although the specific investment plans and activities are customized to meet the respective development plans o f each municipality. Component 1 - Municipal Strengthening
The purpose o f this component i s to finance activities related to improving municipal capacity to plan, appraise, finance, implement, monitor and evaluate infrastructure and local economic development investments. Introducing World Bank project implementation, fiduciary, social and environmental practices are meant to strengthen municipal capacity in these areas and standardize procedures across all relevant secretariats o f the municipal government. In addition, Rio Grande, Santa Maria and Bage have ongoing and more encompassing public sector management improvement programs (PMAT funded by BNDES) focused on improved fiscal management, cadastre and tax collection, and these efforts will be further supported y PDMI. In Bag6 and Pelotas, the municipal governments will also use P D M I resources to improve the overall management o f their municipal water and sanitations service providers. Furthermore, to promote learning across the five municipalities and capitalize on the horizontal A P L approach o f the PDMI, each municipality will include in this component resources for i t s project management arrangements and to cover i t s contribution to the cost o f the UAP. The types o f activities funded under this component include: information systems, consultants, human resource developmenthraining, studies, equipment, office space improvements and incremental operating costs.
Component 2 - Income and Employment Generation
This component was designed based on a careful analysis o f the productive potential o f each municipality. Four sub-components are proposed: A. Planning for Local Economic Development 35
B. Improving the Municipal Business Environment C. Support to Informal Businesses D. Innovation and R&D for Higher Value Businesses A. LED Planning - This subcomponent will focus on enabling municipalities to more effectively promote sustainable growth by devising plans and strategies to build on local productive assets. Municipal LED Strategy: Local governments in Brazil have often not been instrumental in promoting growth but rather relied on state and federal policies to attract investments and create jobs at the local level. However, both national and international experiences have shown the importance o f municipalities devising strategic interventions to effectively promote investment and business development, in participatory and environmentally sustainable ways. The role o f the municipal government needs to be clearly identified vis-&vis the other state agencies that promote employment (such as SEBRAE, EMATER, etc), to avoid duplication o f effort and ensure complementarities and synergies.
Through this subcomponent, each municipality will prepare a LED strategy based on identification o f i t s productive potential, comparative advantages, competitive niches and possible clusters. The analytical work produced as part o f the State Development Plan (Rumos 2015) will contribute to this effort. Expected results would be improved municipal capacity to promote LED and jobs. The strategy will also be used to set targets and indicators to monitor project implementation. Cluster Development: Through this sub-component, P D M I will finance the preparation o f cluster organization and growth strategies; business plans; identification and delivery o f demand-driven training and technical assistance; establishment o f businesses alliances and private-public partnerships (social capital), provision o f selective productive infrastructure and access to finance. Fieldwork done during project preparation pointed out a l i s t o f potential clusters such as tourism (Rio Grande), fruits and vegetables (Bage, Pelotas, Uruguaiana, Santa Maria), fishing (Rio Grande), knowledge-based activities (Pelotas and Santa Maria), and recycling (Santa Maria, Uruguaiana, Rio Grande). Expected results would include greater cluster competitiveness and more sustainable jobs.
B. Improving Municipal Business Environment
This subcomponent will identify measures to facilitate business development in the municipalities (administrative streamlining) and promote local entrepreneurship. Administrative streamlining: Excessive regulation, multitude o f requirements, high cost o f compliance and complex procedures to open, register, operate and close a business has often been a barrier for investment expansion, capital attraction and business growth. P D M I projects have put high priority in streamlining administrative procedures to make it easy to do business in respective municipalities. A general intervention will focus on
36
improving the municipal business environment focusing on reducing time, effort and cost to deal with excessive business regulation and to encourage productive activities to grow and become formal. The starting point for this would be an assessment o f municipal laws and regulations that affect cost o f doing business (e.g. indicators o f entry and exit barriers, required time to register a business, number o f required licenses), land use and zoning regulation, municipal tax policy, local policies that affect productive factors (labor, capital, infrastructure, logistics, information, technology), and efficiency o f local institutions, including the judiciary. The assessment will also propose measures to Expected results include address administrative barriers for business development. simplification o f business registration procedures and requirements to obtain construction permits, both in terms o f costs and complexity. Citizen Entrepreneurship: The public education system in the P D M I municipalities lacks mechanisms to train citizens on how they can identify and build on local economic potential in a sustainable manner, hence creating new productive undertakings, jobs and income-generating activities. This intervention, to be spear-headed in Santa Maria, will support public education programs to incorporate content related to local development potential, entrepreneurial skills, and a context for students to make more informed decisions about opportunities to position themselves in the market economy. The strategy will encompass delivery o f training activities for school teachers and students, use o f IT for training delivery and for data gathering, preparation o f content on local productive assets, environmental resources and related issues, tourism resources, and urban development. Types o f activities to be financed include specialized consulting services, improvement o f facilities, IT and laboratory equipment in schools and production o f printed material for public dissemination. Expected results would be increased awareness o f entrepreneurship and creation o f new businesses and jobs.
C. Support to Informal Businesses This subcomponent will focus on assisting informal businesses to become formal, expand operations and enhance profitability. Access to Micro-credit: Informal businesses often face barriers to access cost-effective and appropriate finance (lack o f collateral, high mortality rate, small scale loans etc). Micro-credit initiatives have emerged as a sound solution to finance both working capital and capital investments especially for - often informal - micro-businesses. Given the significant availability o f micro-credit lines in Brazil, P D M I will support potential microcredit clients to have access to such finance. That is, rather than using WB loan money to fund a micro-credit program, the P D M I will enable potential clients to apply and reach micro-credit lines already operating in the market. Initiatives will include public dissemination o f micro-credit lines, consulting services to assist in the preparation o f simplified business plans, provision o f office space and equipment for credit agents to operate, in addition to delivery o f training and focused technical assistance to support business development and contribute to reduce operational risk involved in credit provision.
37
During project preparation, municipalities were assisted to identify potential micro-credit programs with which they could coordinate in order to increase access o f local informal activities to micro-credit, while also improving impact o f credit provision by providing complementary support (e.g., training, technical assistance). The preferred alternative identified i s that o f CrediAmigo, operated by the Federal Bank o f the Northeast (Banco do Nordeste) and partially funded by a Bank loan.
The five municipalities are currently signing an agreement with Banco do Nordeste to allow the former to expand CrediAmigo to the P D M I region. This will be an interesting arrangement as, on the one hand, provision o f micro credit will boost P D M I initiatives to support the informal sector, as access to appropriate funding i s often a significant constraint faced by informal firms. At the same time, P D M I municipalities will not need to allocate WB loan money to fund a micro credit program. O n the other hand, Banco do Nordeste will use this expansion as an entry-point to expand CrediAmigo in Brazil’s South. In order to have the CrediAmigo solution introduced into the municipalities, the municipal governments have agreed to share part o f the initial expansion cost which will include a market survey, adaptation o f the control system, support to publicize the program in local communities, office facilities in the five municipalities and initial (first two months) supervision costs. According to the agreement being designed, all funding to be used for CrediAmigo operations will be from Banco do Nordeste which will also assume all commercial risk associated with each micro credit contract. As such, Banco do Nordeste will assume full responsibility for operation analysis and decisions about credit approval. As previously explained, P D M I will complement credit provision with additional training and technical assistance to beneficiaries. Also, as Banco do Nordeste does not have agencies in the South, it will partner with the state-owned bank o f Rio Grande do Sul, Banrisul, or another local partner, in order to make micro credit disbursements and collect loan payback from CrediAmigo clients.
Solid Waste Picking and Recycling: Within the support to informal businesses, three municipalities have requested P D M I support to work with some o f the poorest members o f their cities - the waste pickers. The project will finance interventions aimed at improving the quality o f jobs, working conditions and productivity as well as means to increase recycling in the municipality. Investments will focus on construction o f recycling facilities, provision o f work equipment, training activities, organization, public information campaigns and consulting services. Expected results include improved working and health condition o f waste pickers, reduced informality, expanded productivity and income of beneficiaries, in addition to environmental gains due to increased recycling, improved solid waste processing, and reduction o f environmental costhmpacts o f uncontrolled waste disposal Provision of Productive Infrastructure: Informal businesses often lack appropriate productive space to operate and are limited to perform their activities in the streets or in other precarious locations. In two o f the municipalities (Santa Maria and Pelotas), the project will invest in the upgrading o f appropriate commercial facilities to enable street
38
vendors to improve business operation, reach a larger client base, achieve economies of scale and face greater incentives to become organized. In addition, such facilities would decrease urban congestion, especially as urban commercial areas are currently taken over by invasive informal businesses. Beneficiaries o f such facilities are expected to bear the rental cost, which should cover both investment pay-back and administrative expenses. The management o f these facilities would be overseen by the municipal government, though run by a private entity, with representation o f beneficiaries. A required business plan will indicate cost recovery strategy, financial feasibility, economic impacts, as well as management arrangements. Sub-component D. Technology Parks and R&D Under this sub-component the P D M I will support two municipalities to improve their access to the knowledge economy by strengthening local potential for R&D efforts, both from universities and private sector firms. Initiatives involve establishment o f technology parks, associated with business incubators and R&D facilities. Technology Park: In Pelotas and Santa Maria, there are significant resources to develop high value-added innovative products and services, considering the availability o f highly qualified human capital (due to the universities), sound research capabilities and technology development. Areas o f expertise range from biotechnology, metal-mechanics and I T in Santa Maria; and industrial design, IT, medical instruments and biotechnology in Pelotas. In the two municipalities, the P D M I will finance the implementation o f technology parks to host knowledge-based innovative firms, including incubated ones. The vision i s that agglomeration o f knowledge-based companies will tend to produce synergies and
collective initiatives, thus fostering information sharing, shared projects and further innovation. Parks would be a joint initiative o f private firms, municipalities, universities and R&D institutions operating at the local level. Facilities would be managed on a cost recovery-basis by a private entity to be created by beneficiaries, under municipal supervision. Financing o f the technology parks would be contingent on presenting a solid business plan approved by the Bank. Internet Access: As a complementary initiative, some o f the municipal governments plan to expand I T infrastructure to connect all municipal agencies to the internet, in order to reduce cost, improve municipal government efficiency and service provision. The network will also allow for establishment o f internet kiosks to encourage the local population, including the informal business community to access and use internet service.
Expected outcomes o f the investment are expansion o f knowledge-based businesses and jobs and increased value-addedhncome generated in the municipality.
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Component 3: Infrastructure Service Improvements
63. This component will comprise the bulk o f the investment o f the P D M I (between 65 and 75% o f each project cost). The objective will be to assist the municipalities improve their ability to provide infrastructure services in an efficient, environmentally sound and sustainable manner. Careful analysis was undertaken during project preparation to help the municipalities consolidate their infrastructure investments in a few priority areas to maximize impact. The specific investments were also prioritized for their impact on: improving access to services by the poor, contributing to the municipal growth agenda and/or for environmental benefits. The following infrastructure investments are included in this component: A. Rehabilitation o r pavement o f existing urban streets and rural roads, including rehabilitation o f small bridges, improvements to public transport services, bicycle paths, landscaping and long-term maintenance strategies. While this will be the priority investment area for Pelotas, the other four municipalities also include investments in urban transport. Rio Grande, Pelotas and Santa Maria also include road improvements in rural areas. The selected urban roads either provide public transport access to low-income neighborhoods or are important transport access corridors for the city. The rural road investments are focused on the core network that provides access to rural areas.
B. Water supply, sanitation and drainage systems in urban and rural areas. Expanding the WSS system and improving performance o f the municipal WSS department (DAEB in Bage and SANEP in Pelotas) will be the priority investments in these two municipalities. In Uruguaiana and Santa Maria, where CORSAN, the State WSS Company, has a concession, targeted investments will be made by CORSAN to complement the urban upgrading efforts being made in specific neighborhoods. These types o f investments will increase access to services by the poor and also have positive impacts on water resource protection and the environment. C. Treatment and final disposal o f solid waste; waste recycling centers and support to waste packers. The priority investment in Uruguaiana i s to close i t s unsanitary landfill, open a new one, improve the overall management o f its solid waste and address livelihoods o f the waste-pickers. Actions to support wastepickers and recycling will also be supported by Component 2 in Rio Grande and Santa Maria. These investments are important in addressing key environmental and social problems in these cities. D. Urban upgrading, housing and social improvements in poor neighborhoods, and areas o f environmental risk. Rio Grande and Santa Maria will make large investments in critical environmental areas that have been invaded by informal settlers over the past few years. The municipalities have been working to adopt the more holistic and integrated approach o f the World Bank to slum upgrading that focuses on the socio-economic reintegration o f affected families, a
40
participatory and fair resettlement policy and immediate physical use o f the space in the environmentally protected areas where s l u m s have been removed. The rehabilitation o f these areas i s very important in protecting key environmental resources in these cities and developing policies to better address problems with informal settlements.
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Annex 5: Program Costs BRAZIL: FUO GRANDE DO SUL INTEGRATED MUNICIPAL DEVELOPMENT PROGRAM Proiect Costs bv MuniciDalitv and ComDonent Y
Bag6
1. Municipal Strengthening
0.52
0.55
1.09
2. Income and Employment Generation
0.28
0.04
0.32
3. Infrastructure Service Improvements
5.73
3.79
9.52
4. Unallocated
0.07
0.00
0.07
6.60
4.40
11.00
1. Municipal Strengthening
1.74
2.57
4.3 1
2. Income and Employment Generation
1.64
0.54
2.18
3. Infrastructure Service Improvements
14.77
9.49
24.26
4. Unallocated
0.75
0.00
0.75
18.90
12.60
31.50
Total Bag6
Pelotas
Total Pelotas
Rio Grande
1. Municipal Strengthening
1.18
1.89
3.07
(Phase 1&2)
2. Income and Employment Generation
0.59
0.24
0.83
3. Infrastructure Service Improvements
13.52
8.26
21.78
4. Unallocated
0.6 1
0.00
0.61
15.90
I O . 60
26.50
1. Municipal Strengthening
1.62
0.80
2.42
2. Income and Employment Generation
3.69
0.86
4.55
3. Infrastructure Service Improvements
7.39
7.59
14.98
4. Unallocated
1.25
0.00
1.25
13.95
9.25
23.20
1. Municipal Strengthening
0.65
0.19
0.84
2. Income and Employment Generation
0.63
0.56
1.19
3. Infrastructure Service Improvements
5.47
3.84
9.3 1
4. Unallocated
Total Rio Grande
Santa Maria
Total Santa Maria
Uruguaiana
* .
I
_.
0.08
0.00
0.08
Total Uruguaiana
6.83
4.59
11.42
'Total Project
62.18
41.44
103.62
42
Pelotas
3 1.48
Rio Grande (Phase 1 & 2)
26.50
Santa Maria
23.20
Uruguaiana
11.42
o..oo o..oo o..oo o..oo o..oo
103.60
0.00
Bag6
11.00
Total Project
43
11.oo 3 1.48 26.50
103.60
23.20 11.42
Annex 6: Implementation Arrangements BRAZIL: RIO GRANDE DO SUL INTEGRATED MUNICIPAL DEVELOPMENT PROGRAM
Overall Responsibility for Project Implementation
The Municipal Governments o f Bag6, Pelotas, R i o Grande, Santa Maria and Uruguaiana will be the borrowers and responsible for authorizing expenditures and implementing their respective projects. In addition, a coordination structure will be put in place across the five municipalities to provide a mechanism to undertake activities linked to the programmatic aspects o f the PDMI. Each municipality will sign a loan agreement with the World Bank with a guarantee from the Federal Government o f Brazil. Each municipality will work through i t s existing administrative structure and use the project to strengthen i t s capacity in the areas o f project management, financial management, procurement, and application o f social and environmental safeguards. The generic organizational structure and responsibilities for project implementation in each municipality are described in this annex, with site specific details included in each municipal PAD. Program Coordination To respond to the programmatic and learning nature o f the PDMI, a program coordination structure i s being put in place across the five municipalities. The structure will include the Superior Council, the Technical Council, the Unidade de Articulaqtio do Programa (UAP) and the 5 Municipal Project Implementing Agencies. The Superior and Technical Councils will be established through an inter-agency agreement signed by the mayors o f the five municipalities. Figure 1 - PDMI Structure I I \
_ .-- _ - - - - - - _-. Superior Council
‘t1
,I
“----I----=
Uruguaiana
44
Rio Grande
Santa Maria
Project ImplementationAgencies
(a) The Superior Council The Superior Council (Conselho Superior), PDMI’s top decision-making body, will consist o f the Mayors o f the five municipalities. The Presidency o f the Superior Council will be exercised by one o f the Mayors on a rotating basis for a term o f one year. An Ordinary Meeting o f the Superior Council will take place on a quarterly basis and Extraordinary Meetings will be called whenever necessary. The responsibilities o f the Superior Council are to: (i)serve as a forum for ensuring integration o f the program across the five municipalities; (ii) approve the Annual Program Progress Reports and any modifications to the Operational Manual; (iii)oversee the Program as a whole and suggest ways in which it might be improved.
(b) Technical Council The Technical Council (Conselho TCcnico) will consist o f 10 members: the Secretaries o f the Municipal Planning Secretariats (or equivalent as nominated by the Mayor) and the Project Coordinators o f each municipality. The head o f this council will be exercised by the Technical Council representative from the same municipality as the President o f the Superior Council. Meetings o f the Technical Council will take place on a bimonthly basis and Extraordinary Meetings will be called whenever necessary. The Technical serve as Council will provide management support and undertake the following tasks: (i) a forum for discussing P D M I strategies and results; (ii)act as a liaison body, ensuring that the five municipalities develop common actions between them and share experience; (iii)select and supervise the UAP, (iv) evaluate P D M I performance and identify any problems arising in the course o f implementation; (v) review the physical-financial progress indicators and the joint Annual Progress Reports; (vi) advise the Superior Council on the adjustments and modifications needed in the Operational Manual (subject to Bank approval); and (vii) define common requirements for technical assistance and support the U A P in contracting and supervising consultants. (c) Program Articulation Unit The Project Articulation Unit (UAP) will be responsible primarily for capacity building and technical assistance to the municipal teams and for liaising between the five municipalities on a range o f issues related to exchange o f experiences, information management and program monitoring. The U A P will help municipalities standardize monitoring activities and provide necessary guidance, compile reports, review pertinent documents and other material in support o f the shared actions o f the five municipalities.
The UAP will be a small team, comprising a Coordinator and one or two additional members, and will be staffed by the employees o f a company or members o f an institution contracted by the five municipalities specifically for this purpose. The U A P will be responsible for the following functions: 0
Training o f the municipal teams, with particular emphasis on fiduciary procedures (financial management and procurement) and the application o f World Bank safeguards;
45
Provision o f support for planning activities and to oversee execution o f the series o f actions common to the five municipalities; Pro-actively encourage information exchanges across the municipalities by constructing and managing the P D M I database and website, encouraging virtually knowledge sharing and organizing periodic meetings. Coordination o f the monitoring and evaluation processes o f the PDMI, beginning ’ \, with the establishment o f the base line; Compilation and coordination o f technical and financial reports for the Federal Government and the World Bank and identification o f good practices; Provision o f liaison support to the various events organized to disseminate and promote the PDMI; Facilitation and liaison support for World Bank missions. The costs o f this UAP are anticipated to be $150,000 per year and w i l l be shared equally across the five municipalities. Each municipality has therefore included $30,000 in i t s project budget to cover i t s portion o f the cost o f the UAP. The UAP would start functioning as soon as three municipal projects have become effective. In the event less than two municipalities start project implementation prior to the establishment o f the UAP, they would be expected to use their $30,000 budget allocation to acquire technical assistance, as needed, and collect baseline date for project M&E. In the case that the UAP starts to function with only 3 municipalities, i t s geographic coverage would be scaled back to work only in the municipalities actively engaged in the PDMI so that the cost would not exceed the $30,000 cost ceiling contribution established per municipality. Organization of the Municipality for Project Implementation Each municipality involved in the P D M I has a distinctive organizational structure consisting o f Municipal Secretariats and divisions or departments. The municipal government has nominated one Secretariat as the lead agency for project implementation, and this i s where the Unidade Gestora do Projeto (UGP) w i l l be housed. In Pelotas, Uruguaiana and Rio Grande, the Secretary o f Planning w i l l have this function, in Bag6 it w i l l be the Secretariat o f Government and Santa Maria the Escritorio da Cidade. Figure 1 - Typical Project ImplementationArrangement Mayor’s Office
Finance Secretariat
Planning Secretariat fIJGP1
Works Secretariat
46
I
Agriculture Secretariat
Environment Secretariat
Development Secretariat
The following i s a l i s t o f the Municipal Secretariats that will be directly involved in the project (the Secretariats are known by different titles in each o f the municipalities and their specific role i s detailed in each PAD): (a) The Municipal Finance Secretariat will play an important role in the various bidding processes and financial arrangements in general and will be responsible for analyzing the reports submitted by the f i r m s contracted, for releasing resources in accordance with the relevant physical-financial schedules and for the inspectiodsupervision o f the proper application o f resources, etc.
(b) The Municipal Planning Secretariat will be in charge o f the general planning and coordination o f the implementation o f project actions and will be responsible for contributing to the preparation o f the Annual Operational Plan (AOP) and all progress reports and for approving the release o f counterpart funds, jointly with the Finance Secretariat. (c) T h e Municipal W o r k s Secretariat will be directly involved in the preparation, analysis and approval o f the executive projects o f the different infrastructure works, in the selection o f firms, in the supervision and inspection o f works and related services, and in the analysis and approval o f technical reports submitted by the f i r m s undertaking the works.
(d) The Secretariat for Agriculture will play a key role in all the activities connected with rural development and income generation in rural areas and will be responsible for coordinating and supervising the technical assistance activities. (e) The Environmental Secretariat will be responsible for coordinating the environmental and social screening processes, provision o f environmental licensing and implementing the activities connected with environmental improvement and environmental education activities in general.
(0 The Secretariat for Economic Development will be charged mainly with the activities concerned with employment, income generation and social assistance. (g) The Municipal W a t e r and Sanitation Department: in Pelotas this Secretariat i s known as SANEP and in Bag& DAEB. In these two municipalities the WSS utility will be responsible for investments in this sector and implementing related institutional strengthening programs.
The Municipal Secretariats will implement their respective activities in close liaison with the UGP and will forge a partnership with relevant state bodies, as required. The State Agencies that could have a role in project implementation are listed below: (a) CORSAN - the State Water and Sanitation Company i s responsible for WSS service provision in Rio Grande, Santa Maria and Uruguaiana. CORSAN will finance works
47
included in the project scope as counterpart funds in Santa Maria and Uruguaiana and the municipalities will enter into agreements (conv2nios) specifying responsibilities.
(b) CEEE
-
the State Electrical Energy Company will provide guidance and be responsible for ensuring compliance with the technical norms governing the installation o f public lighting systems. In Pelotas they will contribute 100% counterpart funding to measures to improve energy efficiency in SANEP. They will not manage project funds.
(c) EMATER - the State Development, Technical Assistance and Rural Extension Association has ongoing cooperation agreements with Municipal Secretariats for Agriculture and Environment. This same framework agreement will guide the coordination that will be used for implementing productive projects related to the production, processing and marketing o f agricultural products in all five municipalities. EMATER will not manage any project funds.
(d) F E P A M - the State Environmental Foundation, in addition to providing guidance to the municipalities on all the aspects related to environmental legislation, will be responsible for issuing the corresponding permits and licenses for the execution o f any activities liable to have negative environmental impacts, corresponding to state-level approval. F E P A M will also evaluate and approve any proposed mitigating measures and inspect the execution o f the works pending their authorization and release. F E P A M will not manage any project funds.
When the actions o f the project require the various bodies to undertake tasks which are likely to exceed their attributions and routine obligations, inter-agency agreements (conv2nios) will be signed between these entities and the Municipal Governments in order to guarantee execution o f the activities according to plan prior to beginning implementation. Project Coordination Unit (Unidades de Gestfio do Projeto)
Each municipality will put in place either a fully-integrated or partially-integrated project coordination unit (Unidade de Gestao do Projeto - UGP), based in an existing municipal structure (usually the Secretariat o f Planning) and duly accountable to it. The UGP will be staffed with qualified municipal civil servants seconded from other secretariats with limited support from consultants, as needed. The justification o f using an UGP i s to address the coordination challenges o f a multi-sectoral project that involves numerous municipal agencies for i t s implementation. The UGP will coordinate project implementation across the different municipal secretariats responsible for implementation, while ensuring compliance with WB fiduciary and safeguard norms (which are quite complex for small municipalities to implement). Care will be taken to make sure the institutional strengthening objectives o f the other municipal secretariats are achieved and they build capacity to implement the improved project management, fiduciary, environmental and social processes being introduced through the PDMI. To this effect, suitable progress indicators will be developed and tracked in the M&E system.
48
The specific functions o f the UGP vary slightly in each municipality but can be itemized as follows: 0
0
0
0
0
0 0
0
0
0
Prepare and coordinate the execution o f the municipal project implementation and procurements plans in conjunction with respective implementing municipal secretariats or departments. The procurements and implementation plans must be updated whenever necessary and at least once a year; Ensure the correct application by the Implementing Secretariats o f all o f the procedures included in the P D M I Operational Manual, with a special emphasis on the fiduciary, environmental and social aspects; Sequence and coordinate the execution o f the works, services and procurement o f goods set forth in the Project Implementation Plan; Prepare the Monitoring and Evaluation Plan in order to track progress and achievements o f the outcome and impact indicators included in the Results Matrix; Construct a database which will supply data for the different decision-making levels, starting with the baseline indicators; Prepare technical and financial progress reports on the various project activities; Be responsible for financial management, payment approval and generation o f the respective financial reports in order to ensure that all expenditure conforms to World Bank fiduciary and eligibility criteria. The financial management report system will be interlinked with the normal procedures employed by the municipality; Maximize the utilization o f existing funds and resources and seek new funding sources; Promote the dissemination o f information on the project and i t s results to the community in general; Provide information as required to the Conselho Tecnico and Conselho Superior.
Profile o f the team comprising the UGP
The UGP has a slightly different composition in each municipality and will be made up by staff seconded from other municipal departments and consultants, as needed. The staff would be expected to work on the project on a full-time basis. General Coordinator: with experience o f at least five years in project management and with recognized skills in bringing together and leading multidisciplinary teams. The General Coordinator will be a full-time member o f the UGP and respond to the Secretary o f Planning (or equivalent). He or she will be directly responsible for the handling o f information to guarantee the proper functioning o f the monitoring exercises and database in the interests o f the efficient management o f the project. Infrastructure Coordinator: an experienced professional engineer or architect with knowledge o f the planning and execution o f urban and general infrastructure projects. This coordinator will need to demonstrate an ability to supervise technical works in the
49
specific area(s), to evaluate works and projects from a technical perspective, to analyze technical reports and to issue technical opinions as necessary. The Infrastructure Coordinator will have to become complete conversant in WB procurement procedures. The Coordinator will work closely with the Works Departments, SANEP, DAEB and other relevant Municipal Secretariats. Economic Development Coordinator: a professional with proven experience o f economic development projects covering activities related to employment enhancement and income-producing opportunities. This coordinator will be required to be familiar with the on-the-ground situation in the municipalities, o f the various opportunities available and o f the production systems covered by the project. S/he will also be required to demonstrate an ability to supervise and evaluate projects, analyze and approve technical reports and issue opinions. The coordinator will work closely with the Secretariats for Economic Development and Rural Development. Environmental Coordinator: a professional with proven training and experience in the environmental area. This adviser will be familiar with the legislation and procedures involved in environmental licensing and assessment in the municipality. The coordinator will also be required to have experience in the preparation and analysis o f projects, technical reports and the issuing o f technical opinions. The Coordinator will work integrally with the relevant Municipal Secretariats dealing with environmental issues. Social Assistant: a professional in the social assistance area, fully familiar with family resettlement policies, with experience in the preparation and analysis o f projects, technical reports and be competent to issue opinions. The social assistant will also manage the communication and public outreach strategy o f the project. Administrative-Financial Adviser: this adviser will be a professional in the area o f administration, with experience and knowledge o f administrative and financial procedures, rules and regulations, national legislation and other relevant procedures. Acknowledge of physical-financial follow-up systems related to projects i s also a key requirement. This position will be one o f utmost trust and will need to work closely with the Municipal Secretariat o f Finance. An Information Specialist: a professional specialist in Information and Communication Management. Knowledge o f information technology and familiarity with the internet and computer programs such as Word and Excel are required for this position, as well as proven skills in administrative organization and procedures in general.
A Procurement Coordinator: Some UGPs will have a full-time staff member dedicated solely to procurement, whereas in other municipalities one o f the Technical Coordinators will assume this function.
50
Annex 7: Financial Management and Disbursement Arrangements BRAZIL: RIO GRANDE DO SUL INTEGRATED MUNICIPAL DEVELOPMENT PROGRAM Background: The Rio Grande do Sul Integrated Municipal Development Program consists o f parallel projects being implemented concurrently in five municipalities under an overall programmatic approach. P D M I supports the development o f each municipality in the area o f institutional strengthening, local economic development and improved infrastructure services. The program will be supported through loan agreements signed between the WB and each municipality, with a sovereign guarantee provided by the Federal Government o f Brazil. Project preparation i s currently being financed by a Japanese PHRD Grant. Financial Management Assessment: A financial management risk assessment o f the P D M I was carried out in each municipality in accordance with OP/BP 10.02 and the Financial Management Practices in World Bank Financed Investment Operations’ Manual, dated November 3, 2005. The purpose o f the assessment was to determine whether the I A (Implementing Agency) has acceptable financial management and disbursements arrangements in place to adequately control, manage, account and report about the funds to be allocated to this Project. These arrangements include, but are not limited to i t s capacity to: (a) properly manage and account for all Project’s proceeds, expenditures and transactions, (b) produce timely, accurate and reliable financial statements and reports, including Interim Financial Report (IFRs) for Project Management and other Bank purposes, (c) safeguard the Project’s assets, and (d) disburse Bank funds in the most efficient way, in accordance to applicable Bank rules and procedures. This assessment included work sessions locally with the UGP staff and with Secretary o f Planning and Budget at municipal level.
The conclusion o f the FM assessment i s that the financial management arrangements as set out for this Program satisfy the Bank’s minimum requirements and that financial management arrangements in place can provide with reasonable assurance, accurate and timely information on the progress o f project implementation. The financial management risk associated with the P D M I has been assessed as high, which i s usual for first time borrowers from the Bank. However, with the implementation o f the listed mediation actions in each municipality, the remedial risk i s rated as Moderate. There are no FMrelated conditions o f effectiveness. An action plan for each municipality has been agreed, and once implemented, will enable the respective municipalities to provide relevant, timely and reliable information o f each project and for the program. Given the program design, and seeking effective and efficient Program FM management, each borrower has i t s own specific FM arrangements, and it i s not possible to consolidate the FM information in a safely manner, so it was agreed that the format of the IFRs, internal control reviews, operational manual, external auditing TOR and supervision schedule will follow the same design with some adjustments specified at the respective loan agreements.
51
A central unit will be created in Port0 Alegre under the name o f “Unidade de ArticulaqBo de Programa” (Program Articulation’s Unit- UAP) and will have the main responsibilities for: (a) technical assistance to the Project Implementation Units (UGP); (b) coordination across the five municipalities to facilities World Bank supervision; and (c) information sharing and support to evaluation activities to ensure program quality and effectiveness. The Project Articulation Unit will have no role in Project implementation. Implementing entities: Each project forming part o f the program will be implemented by a municipality o f the state o f Rio Grande do Sul. The municipalities are Bage, Santa Maria, Uruguaiana, Pelotas and Rio Grande. Each municipality will put in place a Project Management Unit (Unidade de GestBo do Projeto - UGP) established b y Laws o f Executive Decrees from local Mayors, not later than 60 days after negotiations. The UGP will have jurisdiction for coordination o f the execution o f plans and decisions made in the program framework as well as capacity to carry out the Financial Management responsibilities o f the project. Civil servants will be relocated under this decree to the UGP and will be complemented with consultants as needed. The UGP will be responsible for all FM and disbursement aspects related to the implementation o f the municipal project. Each UGP will prepare IFRs (Interim Financial Report) for reporting purposes and annual financial statements for auditing.
The Operational Manual will be prepared b y negotiations and include details o f financial management implementation arrangements to be followed by all municipalities, including but not limited to: organizational charts, flow o f funds charts, staffing arrangements, functions and routines, sample o f disbursements forms and IFRs, internal control specificities, TOR for the external auditors. The Operational Manual should be kept updated during project implementation. Staffing: The UGP will be responsible for all FM and disbursement aspects related to the implementation o f the project, in coordination with the respective Secretariats which the UGP i s subordinated. The Financial Management staff will consist o f a financial coordinator (accountant, usually seconded from the Secretariat in charge o f overseeing financial management matters under the proiect, with financial management functions undertaken through UGP’s procedures) and an administrative assistant. As it i s foreseen that a large number o f commitments will be required, an extra person may be necessary. The Financial Management Assessment confirmed that each municipality had staff capable to respond to project implementation. Financial Management System: Financial management systems currently in place within each municipality include budgeting, accounting and payments. Each payment for the respective municipal project will be managed through municipal systems and specific cost centers will be opened for the project’s accounting in each system which facilitates project expenditure reporting. All systems were developed to comply with the National Regulation regarding budget execution’ and to provide financial information o f project execution by components and source o f funds.The system in place in all municipalities I
L a w 4320164 , acceptable for the Bank.
52
meets the minimum requirements for a sound monitoring o f project implementation in terms o f reporting framework. Reporting: The UGP will prepare quarterly IFRs for management and reporting purposes. The following IFRs will be issued:
1. IFR 1 A - Source and application o f funds by cost category as per Project Agreement, 2. IFR 1B - Statement o f Investments by Components and activities,
All IFRs will be in local currency (R$), and expenditures figures will be stated by quarter and accumulated for the project. IFRs will be submitted to the Bank up to 45 days after the closing o f each quarter. Project-end IFRs will be used as the project’s financial statements for external auditing purposes. In addition to IFRs each municipality will be responsible for producing physical implementation progress, procurement and contracting reporting. The contents and the formats o f the reports have been discussed within each municipality. Each UGP will also provide annual financial statements for auditing purposes that reflect the activities o f the operation supported by the Bank loan, prepared in accordance with accounting standards acceptable to the Bank. The U A P will not have the role to produce any consolidated IFR or technical report as required by the Loan Agreement. However, since it will have an information sharing profile, it will be responsible for providing data to all municipalities for the evaluation o f the implementation o f the program. Internal audit: Currently each municipality has an internal control department that has an operational internal audit function in place. I t will assist in project implementation, by preparing and forwarding to the Bank its’ yearly project audit review by the end o f each calendar year This will be used as a Financial Management Tool which jointly with the audit report and the IFRs will provide information to mitigate associtated risks.This i s described in more detail in each municipal PAD. External audit: External audit will follow Bank’s new audit policy and guidelines issued by the FMSB on June 30, 2003. Project’s accounts and Financial Statements will be audited by an independent audit firm, selected from a pre-approved short l i s t o f three to six candidates, and under Terms o f Reference previously reviewed and approved by the Bank. It i s recommended that the hiring process starts right after the signature o f the Loan. The auditors report will express a single opinion on Projects’ financial statements which would include the Designated Account, IFRs and SOEs, and a management letter identifying any internal control weaknesses and areas o f improvement, and a note on contractual clauses. Terms o f reference for the audit will also cover all retroactive financing and should be included in the Operational Manual. The scope o f the audit TOR should cover but not be limited to: (i)Fully reviewing o f the financail management arrangements included in this PAD, Operational Manual and loan agreements, as well as in any other official Bank documentation, (ii)Proper use o f FM systems, (iii) the IFRs issued at the end o f Project implementation period with cumulative figures, (iv) Internal
53
Control arrangements; and (v) timely availability o f counterpart funds. The auditors’ report must be submitted to the World Bank no later than six months after the end o f each calendar year. Each municipality will be responsible for hiring an external audit firm.
The external auditing costs are included in each o f the project costs as Bank funding, thus allowing for the use o f Bank’s guidelines - QCBS - Quality and Cost based. If the audit cost will be financed by the counterpart funds only it would be used local law to contract the f i r m s (lei 8/666/93). Flow o f funds and disbursement: A designated account in dollars will be opened at a commercial Bank in each municipality and an operational account in R $ will be opened in a commercial bank. Payments for works, goods and services will be made directly from this account. Disbursements will be transactions based. SOEs will be prepared on basis o f payments*.actually made through bank payment orders issued by Finance Secretariat under instructions from the UGP. Reports will be drawn from the municipalities FM systems. SOEs thresholds will be confirmed with Procurement thresholds for consulting services and for goods and works. Supervision: During the first year financial management supervision will take place every six months and include: (a) reviewing o f quarterly IFRs; (b) reviewing o f the auditor’s report and follow-up o f issues raised by auditors in the management letter, as appropriate; (c) participation in project supervision, following up on any financial reporting and disbursement issues, (d) following up on internal control audit report, (e) following up on respective action plans. B y the end o f the mission, a financial management supervion report should be prepared, discussed with the borrowers and forwarded to the project team leader together with the ISR.
for eligible payments to suppliers and contractors for subproject expenditures similar to other expenditures
54
Annex 8: Procurement Arrangements BRAZIL: RIO GRANDE DO SUL INTEGRATED MUNICIPAL DEVELOPMENT PROGRAM A)
General
Procurement for the P D M I will be carried out in accordance with the World Bank’s “Guidelines: Procurement under IBRD Loans and IDA Credits”, published in M a y 2004 and revised in October 2006; and “Guidelines: Selection and Employment o f Consultants by World Bank Borrowers’’ published in May 2004 and revised in October 2006); and the provisions stipulated in the Loan Agreement. The general description o f various items under different expenditure categories i s described below. For each contract to be financed by the respective municipal Loan, the different procurement methods or consultant selection methods, the need for prequalification, estimated costs, prior review requirements, and time frame are agreed between the Borrower and the Bank project team in the Procurement Plan. The Procurement Plan will be updated at least annually or as required to reflect the actual project implementation needs and improvements in institutional capacity.
ICB Procurement of Goods, Works, and Non-consulting Services I C B procurement would be done in accordance with Sections Iand I1 o f the Guidelines, using the Bank’s Standard Bidding Documents (SBD). All ICBs would be subject to the Bank’s prior review.
Procurement o f Works: Works to be procured under the P D M I include: urban upgrading, road improvements and paving, water supply, drainage, sewage, construction o f houses and small buildings. I C B for the procurement o f works i s mandatory for all contracts estimated to cost the equivalent of US$10,000,000 or more. The SEAIN’s SBD agreed with the Bank for all NCBs shall apply. For small value civil works, shopping would be used.
Procurement o f Goods: Goods procured under the P D M I would include IT equipment and software, vehicles, office equipment and furniture, materials for producing asphalt, water meters, and equipment for small productive projects. I C B for the procurement o f goods and non-consulting services is mandatory for all contracts estimated to cost the equivalent o f US$500,000 or more. The SEAIN’s SBD agreed with the Bank for all NCBs shall apply. For small value goods, and procurement o f construction materials to carry out small improvement civil works on roads, office buildings, etc. will follow shopping procedures but the actual construction services will be done by Prefeituras themselves.
Procurement o f goods may also be carried out in accordance with the method known as ‘preglio eletr6nico”, as provided in the Brazil’s Pregilo L a w No. 10,520, o f July 17,
55
2002, under “COMPRASNET”, the procurement portal o f the Federal Government, for contracts estimated to cost less than $500,000. Scattered printing services, small technical services, computer equipment and peripherals, office equipment and furniture, sundry items, air tickets and logistics for training events and workshops have been identified to be procured under this method. Procurement o f non-consulting services: Non-consulting services procured under these projects would include logistics and transportation for seminars and workshops, printing services, training material, video production, communication campaigns, and telecommunication costs. The procurement would be done using (a) Bank’s SBD for all I C B and (b) SEAIN’s SBD agreed with the Bank. For small value services, shopping procedures and/or prega“o eletrsnico may be used. Selection o f Consultants: In each municipality, the project would finance consultant services by f i r m s and individuals to conduct the following tasks: support to project implementation; studies on local economic development strategies, cluster business plans, masterplans for WSS, drainage, solid waste management and transport organization; engineering designs and construction supervision; design and implementation o f training and facilitation o f access to micro-credit programs and productive infrastructure for small and medium enterprises; infrastructure management studies; environmental management plans and social work with resettled families. The selection and employment o f consultants will be carried out under arrangements acceptable to the Bank using the Bank’s Standard Forms and Contracts. Short l i s t s o f consultants for services estimated to cost less than $500,000 equivalent per contract may be composed entirely o f national consultants in accordance with the provisions o f paragraph 2.7 of the Consultant Guidelines. Consulting services estimated to cost US$200,000 or more would follow QCBS procedures. Single source selection may be used, with the Bank’s prior approval, and in exceptional circumstances, as provided for in the Guidelines and as approved by the Bank.
During project preparation, the municipalities have identified their intention in engaging local universities, government research institutions and public training institutions in specific technical assistance and capacity building activities. The identified institutions and the activities for which they will be contracted are listed in each separate Mini PAD. The institutions may be contracted using the single-source selection method in accordance with the Bank’s Guidelines. Project Incremental Operating Costs: Identification o f suppliers o f sundry items and minor services will be made through market inquiries in the local market as in shopping. Once the suppliers are established (generally those offering the lowest cost o f lists o f items), a purchase order will be issued using regular administrative procedures o f each municipality. The market inquiries will be updated periodically. Internal travel may be procured through administrative procedures acceptable to the Bank.
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B)
Assessment o f the agency's capacity to implement procurement
The P D M I consists o f five projects, each one implemented by the municipal government o f Bag& Pelotas, Rio Grande, Santa Maria or Uruguaiana. Each municipality i s responsible for implementing i t s respective project, the coordination o f which will be done with support by a management unit (Unidade de GestZio do Projeto - UGP), located in an existing municipal structure (Secretariat o f Planning or Secretariat o f Administration). The UGP will plan, implement, supervise and monitor all procurement tasks carried out by the respective ComissZio de LicitaqZio under the project. In addition, the integrity o f the programmatic approach will be guaranteed through the establishment o f a high level coordination body and technical council comprising representatives o f the all five municipalities as well as through the joint hiring o f a Unidade de ArticulaqBo do Program (UAP). Procurement activities will be coordinated and overseen out by the UGPs within their Secretariats (Planning and/or Administration). The UGPs will second or employ staff to work on procurement, who will take on the function o f procurement coordinator and will be the point person in ensuring that procurement planning, implementation and monitoring i s done in accordance to approved Bank procedures stipulated in the Loan agreement and P D M I Operational Manual. If necessary, due to the complexity and volume o f procurement, an assistant would be added. In addition, a procurement specialist with experience in Bank-financed contracts will be hired for the UAP, and will be responsible for training, and quality enhancement o f the work carried out by the procurement coordinators in each participating municipality. The U A P procurement specialist can be hired as an ad hoc consultant to work mainly on specific complex contracts or on a full-time basis (Activity 2 o f the Action Plan).
The overall risk assessment for three municipalities (Bage, Pelotas and Uruguaiana) i s rated as high and two municipalities (Rio Grande and Santa Maria) i s rated average. Remedial actions have been identified in the attached Action Plan, and these were to be made effective in each municipality, to mitigate procurement risks The key issues and risks concerning the procurement component for implementation o f the projects have been identified and are summarized below: Procurement Cycle Management: The technical teams for each project will be located in their respective Municipal Secretariats and supervised by UGP. Once
the technical documents are ready, the relevant Municipal Secretariat supported by the UGP and/or bidding committee (Comiss8es de Licitaqaes), prepares the bidding documents. The Municipalities do not have standard bidding documents for each procurement method, with the exception o f R i o Grande. None o f the bidding committees in the municipalities report that they are currently involved in procurement planning, but rather work in response to demand. For P D M I implementation, the Comiss8es de LicitaqGes and the UGP staff will therefore have to be trained in preparing procurement plans.
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0
Support and Control Systems: Only Rio Grande, and perhaps Santa Maria, has adequate information systems that can easily be adapted to produce PMRs and procurement reports. In any case, the ‘adaptation’ and/or improvement o f all municipal systems w i l l be required. Record-keeping: The team noted that the availability, quality, security and completeness o f procurement records and files do not meet good standards, with the exception o f Rio Grande. All other bidding committees suffer from a lack o f space and cabinets to f i l e procurement documentation in an orderly manner. Activities 3 and 4 o f the Action Plan l i s t the required actions in this respect.
0
Procurement Information System: There i s a need to upgrade the existing client Information Systems Activity in order to include a module for reporting the procurement plan and other procurement actions reflected in Activity 5 o f the Action Plan. Staffing: Each bidding committee o f the five municipalities has full-time staff. The teams are knowledgeable on procurement but none have any experience with Bank-financed contracts. Also, the UGP does not have yet the necessary human and equipment resources to carry out procurement for the proposed project. (refer to Activity 2 o f the Action Plan) Furthermore, Activity 3 o f the Action Plan foresees the availability o f required equipment for the procurement staff. The UGP will need to assign a responsible person to monitor and supervise the procurement management system (Activity 5 o f the Action Plan).
To compensate for the increased ICB/NCB thresholds from the Bank’s regulations for high risk agency, the following measures would be taken to overcome the identified risks: Activity No.
Action Plan
Timeframe
1
Include in the PDMI Operations Manual the design o f the entire procurement cycle and arrangements including clearances and approvals and description of the roles o f a l l participant agencies. This document forms part of the Loan Agreement
Before appraisal
2
(i) UGP to second o r employ staff to work with procurement to work as procurement coordinator;
Before effectiveness
3
Make available equipment for the procurement staff o f UGP, and Comissdes de Licitacdes including: (a) computer
Before effectiveness
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equipment with internet access; (b) printer; (c) necessary software; (d) office furniture and file cabinets
4
C)
Provide an ample office space for the Comissdes de Licitaqdes and the procurement staff at the UGP, and a reserved area for the bidding opening ceremonies. The office spaces should consider the privacy that any bidding committee required.
Before effectiveness
Finalize the procurement plan for at least the first eighteen months of project implementation and put in place a computerized procurement management system that shall be able to produce reports, including the procurement plan.
Before negotiations
W B to train of UGP staff on Bank-procurement policies.
After effectiveness
Procurement Plan
The implementing municipalities are preparing their procurement plans for the activities to be carried out during the first 18 months o f P D M I implementation. Upon completion, these plans will be approved by the Bank and filed in the project files, and will also be available in the P D M I database and in the Bank’s external website. The procurement plans should consist of: (i) goods, works and non-consulting services, including contract packaging, applicable procedures and process scheduling; and (ii)a consultant and training provider’s selection process plan for the projects’ training and consultant services, including contract packaging, applicable procedures, and selection criteria. The procurement and consultant selection process plans will be updated periodically, and shall be submitted to the Bank in the first quarter o f December o f each year. Such updating shall include the (i)l i s t o f contracts completed, under execution, under procurement, to be procured in the upcoming calendar semester and, tentatively in the subsequent semester; (ii)costs o f completed and under execution contracts, estimated costs for upcoming contracts; (iii)schedule o f bidding; and (iv) particular methods o f procurement o f goods, works and non-consulting services or selection o f consultants in accordance to a format agreed with the Bank. The working instructions shall be detailed in the Operational Manual indicating the standard bidding documents and request for proposals to be used, the samples for reporting on procurement, forms o f contract, timetables, model of TOR and any other relevant information related to procurement for each particular operation. The Procurement Plan i s required to reflect the actual project implementation needs and improvements in institutional capacity. I t i s expected that the procurement plan will be approved and will be part o f the clearance o f the final package before each project negotiation (Activity 5). D) Procurement Implementation
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Procurement Reviews: The Bank's review o f selection o f consultants will be in accordance with Appendix 1 o f the Guidelines for Selection and Employment of Consultants and the provisions stipulated in the Loan Agreement. The size o f the sample for post-review will be 1 .in 5 in all cases. This ratio may be adjusted during project implementation depending on the performance o f the municipalities and the results o f the reviews. The procurement supervision plan should recommend that independent post reviews o f procurement be carried out, if appropriate, giving the number and scope o f such reviews, and propose whether the supervision plan should include special missions for procurement supervision at critical points o f project implementation. In order to mitigate the high risk o f this proposed project, besides the post reviews, a yearly procurement audit will be required. Prior Review. The Bank's regulations establish that a high risk agency should not have thresholds exceeding $250,000 for goods, $1 million for works, $ 250,000 for consulting services with f i r m s and $50k with individual consultants. This assessment proposes the the following thresholds for prior review by the Bank. In all cases o f single-source selection (contracts with f i r m s or with individual consultants) the Bank should give the "no objection" to the proposed assignment.
Table 8.1: Thresholds Summary
Expenditure category
I Works Goods
Non-consulting services (incl. training, communication)
Contract value threshold (US$ thousands)
Procurement method
> 10,000
ICB
All processes
>500 500 > 100 G O O
ICB
All processes
NCB
First one and all processes above $250,000
500
ICB
All processes
> 100 G O O
NCB
First one and all processes above $250,000
loo
Shopping
Consulting (filTlS)
Consulting (individual)