Document of The World Bank

FOR OFFICIAL USE ONLY Public Disclosure Authorized

Report No: 34938-HT

PROJECT APPRAISAL DOCUMENT

ON A

PROPOSED GRANT

Public Disclosure Authorized IN THE AMOUNT OF SDR 11.2 MILLION (US$16.0 MILLION EQUIVALENT)

TO THE

REPUBLIC OF HAITI

FOR A

TRANSPORT AND TERRITORIAL DEVELOPMENT PROJECT

Public Disclosure Authorized March 13,2006

Finance Private Sector and Infrastructure Unit Caribbean Country Management Unit Latin America and Caribbean Region

This document has a restricted distribution and may be used by recipients only in the

Public Disclosure Authorized performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. CURRENCY EQUIVALENTS (Exchange Rate Effective February 28,2006) Currency Unit = Gourdes (HTG) 42.15HTG = US$l lSDR = US$1.4356

FISCAL YEAR October 1 - September 30

ABBREVIATIONS AND ACRONYMS ACDI Agence Canadienne de D6veloppement MDOD Makes D’Ouvrage DtltguCslSpecialized InternationallCanadianInternational operator contracted to handle the Development Agency implementationof some project activities AECI Agencia Espaiiola de Cooperacih ME Ministry of Environment Internacionall Spanish International Cooperation Agency BRH Banque de la Rtpublique d’HaW Haiti MEF Ministry of Economy and Finance Central Bank CBO Community-BasedOrganization MIS Management Information System CDD Community-Driven Development MARNR Ministry of Agriculture, Natural Resources and Rural Development CECI Centre Canadien d’Etudes et de MPCE Ministry of Planning and External CoopBration InternationaleKanadianCenter Cooperation for Studies and International Cooperation EGRO Economic Governance Reform Operation MTPTC Ministry of Public Works, Transport and Communications ESW Economic and Sector Work NGO Non-GovernmentalOrganization EU European Union OED Operations Evaluation Department FA0 Food and Agriculture Organization PADF Pan American Development Foundation FER Fonds d’Entretien Rontier (Road PCF Post-Conflict Fund Maintenance Fund) GOH Government of Haiti PDO Project Development Objective GTZ German Technical Cooperation Agency PIU Project Implementation Unit ICF Interim Cooperation Framework PL 480 Bureau pour la Gestion de I’Alimentation Food Aid Management Unit ICR Implementation Completion Report PPIAF Private Participation in Infrastructure Advisory Facility IDA International Development Association RN Route Nationale (National Road) IDB Inter-americanDevelopment Bank TCP Table de Concertation Dipartementale (Departmental Concertation Table) IHSI Institut Haitien de Statistique et TS S Transitional Support Strategy d’Informatique/Haitian Institute for Statistics and Computer Science KfW German Cooperation Agency UCE Unit6 Centrale d’ExtcutionlCentra1 Execution Unit LAC Latin America and Caribbean UNDP United Nations Development Program LICUS Low-income Country under Stress

Vice President: - Pamela Cox Country Director: - Caroline Anstey Sector Director: - Makhtar Diop Task Team Leader: - Jayme Port0 Carreiro/Nicolas Peltier-Thiberge HAITI

TRANSPORT AND TERRITORIAL DEVELOPMENT PROJECT

TABLE OF CONTENTS

Page A . STRATEGIC CONTEXT AND RATIONALE ...... 1 1. Country and sector issues ...... 1 2 . Rationale for Bank involvement ...... 4 3 . Higher level objectives to which the project contributes ...... 4 B. PROJECT DESCRIPTION...... 5 1. Lending instrument ...... 5 2. Project development objective and key indicators ...... 5 3 . Project components ...... 5 4 . Lessons learned and reflected in the project design ...... 11 5 . Alternatives considered and reasons for rejection ...... 12 C. IMPLEMENTATION ...... 14 1. Institutional and implementation arrangements ...... 14 2. Monitoring and evaluation of outcomes ...... 16 3 . Sustainability ...... 17 4 . Critical risks and possible controversial aspects ...... 18 5 . Credit conditions and covenants ...... 22 D. APPRAISAL SUMMARY ...... 22 1. Economic benefits and beneficiaries ...... 22 2 . Economic and financial analyses ...... 24 3 . Technical ...... 25 4 . Fiduciary ...... 26 5 . Social...... 28 6 . Environment ...... 29 7 . Safeguard policies...... 30 8 . Policy Exceptions and Readiness ...... 31 Annex 1: Country and Sector Background ...... 32 FOR OFFICIAL USE ONLY This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not be otherwise disclosed without World Bank authorization. Annex 2: Overview ofthe road sector...... 40 Annex 3: Major Related Projects Financed by the Bank and/or other Agencies ...... 46 Annex 4: Results Framework ...... 50 Annex 5: Summarized presentation of the two micro-regions ...... 53 Annex 6: Detailed Project Description ...... 59 Annex 7: Project Costs ...... 75 Annex 8: Implementation Arrangements ...... 77 Annex 9: Financial Management and Disbursement Arrangements ...... 81 Annex 10: Procurement Arrangements ...... 88 Annex 11: Monitoring and Evaluation Arrangements ...... 94 Annex 12: Economic and Financial Analysis ...... 98 Annex 13: Technical Analysis ...... 110 Annex 14: Safeguard Policy Issues...... 124 Annex 15: Social Assessment ...... 130 Annex 16: Project Preparation and Supervision ...... 138 Annex 17: Documents in the Project File ...... 140 Annex 18: Statement of Loans and Credits ...... 141 Annex 19: Country at a Glance ...... 142 Maps IBRD 34437 and IBRD 34438

.. 11 HAITI

TRANSPORT AND TERRITORIAL DEVELOPMENT PROJECT

PROJECT APPRAISAL DOCUMENT

LATIN AMERICA AND CARIBBEAN

LCSFT

Date: March 13,2006 Team Leader: Jayme Port0 CarreiroDIicolas Peltier-Thiberge Country Director: Caroline Anstey Sectors: Roads and highways (80%); Sector Director: Makhtar Diop Agriculture marketing and trade (20%) Sector Manager: Jose-Luis Irigoyen Themes: Rural services and infrastructure (P);Trade facilitation and market access (S) Project ID: PO95523 Environmental screening category: B Financing Instrument: Grant Safeguard screening category: Limited impact

~~ ~ Project Financing Data [ILoan [ ] Credit [XI Grant [ ] Guarantee [ ] Other:

For LoandCredits/O thers: Total Bank financing (US$m.): 16.00

INTERNATIONAL DEVELOPMENT 12.00 4.00 16.00 ASSOCIATION Total: 12.00 4.00 16.00

Borrower: Republic of Haiti

Responsible Agency: Ministkre des Travaux Publics, des Transports et des Communications (MTPTC) Unite' Technique d'Exe'cution (UTE) Garry Jean, Coordonnateur des Unites Techniques Port-au-Prince, Haiti Tel. (509) 558-0502 [email protected]

Project implementation period: Start June 1, 2006 End: June 1, 2012 Expected effectiveness date: June 1,2006

... 111 Expected closing date: June 30, 2013 Does the project depart from the CAS in content or other significant respects? [ ]Yes [XI No Does the project require any exceptions from Bank policies? [ ]Yes [XI No Have these been approved by Bank management? ]Yes 1 No Is approval for any policy exception sought from the Board? [ ]Yes [XI No Does the project include any critical risks rated “substantial” or “high”? [XIYes [ ] No Does the project meet the Regional criteria for readiness for implementation? [XIYes [ ] No Project development objective Lower the marketing costs for small farmers in two selected micro-regions. (marketing costs are those costs incurred in the aggregate of functions involved in moving goods from producer to consumer) Project description 1 - Road rehabilitation and maintenance: the objective of this component is to improve the transport conditions in a sustainable manner in the two micro-regions, through selected interventions on roads and critical points that are essential to the rural economy. The project will finance the cost of the works, but also related technical and economic studies as well as supervision. The project will also finance the maintenance costs for the roads that have been rehabilitated and encourage the GoH to increase funding for road maintenance. Funding for maintenance will be channeled through the Road Maintenance Fund (FER in French). 2 - Territorial Development Window: a consultative process with local stakeholders will be used to identify priorities based on a multi-sector territorial development strategy for the micro- regions. Priority investments identified from this planning process would be selected from a menu of eligible investments. These investments would be of micro-regional interest and support economic growth. 3 - Project administration, monitoring and evaluation: This component would finance expenditures for project administration, including environmental management, monitoring and evaluation as well as the project’s impact evaluation.

Which safeguard policies are triggered, if any? Environmental Assessment Forests Cultural property Involuntary resettlement

Significant, non-standard conditions, if any, for: Board mesentation: None Grant effectiveness: 0 The GOH should have adopted the operational manual in terms and scope acceptable to the Bank. Covenants: 0 The MEF should: (1) no later than sixty days prior to the end of the Haitian fiscal year, have sent a projection of monthly proceeds from taxes earmarked for road maintenance for the ensuing fiscal year; and (2) no later than ninety days after the end of the Haitian fiscal year, have sent documentary evidence that all proceeds from taxes earmarked for road maintenance have been transferred to FER on a monthly basis.

iv 0 The MTPTC should: (1) no later than twelve months after the effective date of the grant, have sent to the Bank the published list of roads whose road maintenance is the responsibility of the FER in terms and scope acceptable to the Bank; (2) no later than one month after its publication, have sent to the Bank the list of completed civil works, including those carried out on any road segment financed under the project; (3) no later than the end of the fiscal year, have sent to the Bank for its review and comments the maintenance program of the next fiscal year and the corresponding procurement plan; and (4) no later than 6 months before the closing date of the grant, have sent to the Bank for its review and comments, a technical assessment of the conditions of the roads rehabilitated under this project as well as a forecast of maintenance needs for the next 5 years after the closing date. 0 Requirement for the MTPTCPIU, PL 480 and FER to maintain an adequate financial management system, produce quarterly interim financial statements no later than 45 days after the end of each quarter, submit annual audited financial statements as detailed in annex 9.

V

A. STRATEGIC CONTEXT AND RATIONALE 1. Country and sector issues

1. Haiti is the poorest country in the Western Hemisphere and one of the most disadvantaged countries in the world. Average per capita income is comparable to the poorest countries of Sub-Saharan Africa, and Haiti ranks 153rd (out of 177 countries) in terms of the Human Development Index. About 78 percent of its population of 8.6 million lives below the poverty line, with 54 percent in extreme poverty. Income inequality is among the highest in the world, with the poorest 20 percent accounting for 1.5 percent of income and the wealthiest 20 percent accounting for 68 percent.

2. Economic situation is worsening. Over the past twenty years, Haiti has struggled to emerge from a cycle of political instability and internal conflicts that has devastated its economy, further weakened state institutions, multiplied poor governance practices, and augmented levels of poverty. Throughout the 1990s and early 2000s, the socio-economic situation has continued to decline. Between 1980 and 2003, the economy declined by a real average annual rate of about 0.8 percent.

3. Haiti remains primarily a rural and agricultural country: almost 5 million of Haiti’s 8.6 million people live in rural areas. About 60 per cent of the rural population earns less than US$l a day.’ Smallholder agriculture dominates the rural economy. Many off-farm economic activities are also linked to agriculture. Smallholder agriculture is characterized by small household landholdings, and an orientation toward production of staple foods combined with some cash crop production. To survive, most smallholder households have diversified livelihoods that also include off-farm agricultural wage labor and non-agricultural activities such as petty commerce. Remittances from migrants in urban areas or overseas are also an important source of income.

4. The productivity in rural areas is low and the cost of doing business is high. The recent Bank Agriculture and Rural Sector Economic and Sector Work (the “Agriculture ESW’) Diagnostic and Proposals for Agriculture and Rural Development Policies and Strategies (June 2005), states that the competitiveness of smallholder agriculture has declined in recent decades resulting in a cycle of persistent poverty, out-migration and environmental degradation. Reasons include: (a) lack of transport, communications, post-harvest and market infrastructure; (b) lack of information on prices, markets and technologies; (c) insufficient applied research, training and extension for profitable and sustainable farming systems; (d) weak producer associations and public-private partnerships, (e) poor natural resource management and environmental degradation, and (f)limited capacity and resources at all levels of governmental institutions.

5. Extremely unreliable and expensive transport - particularly when roads are impassible during the rainy season - contribute to the isolation of poor rural communities, and reduce opportunities to access social services and trading centers. This has grave financial

’ The ‘‘Enquste sur les Conditions de Vie en Hayti” (ECVH) began in 2001 and published its findings in 2003 under the auspices of the Institut Haytien de Statistique et d’hformatique (IHSI). consequences, especially considering the direct cost, opportunity cost of time lost, and the loss of potential benefits.

6. Agriculture could be an engine of growth, reducing poverty in rural areas. Agriculture continues to play a dominant role in the Haitian economy, contributing almost 30 percent of GDP (2002 figure) and accounting for around 50 percent of overall employment, two thirds of employment in rural areas, and three fourths of employment for the poor. As the major engine of growth, it can generate, in the short-to-medium term, multiplier effects for the rest of the rural economy. The Agriculture ESW identified lead crops with high value added (in most cases using labor-intensive cultivation practices) that can respond to market demand. The agro- ecological zones that can be found in Haiti have potential for a variety of farming systems that can benefit from increased productivity and lead to agricultural development and broader rural economic growth.

Project design strategy includes the following elements:

7. Need for a multi-sectoral approach. The Agriculture ESW concludes that overall, investments in education, health, basic infrastructure, rural institutions, agriculture and social protection are key elements of a balanced national rural development strategy. Thus, to be effective, it is important to have a broader multi-sectoral perspective, with the proper mix of investments.

8. Need for specific territorial development strategies for each micro-region. Since rural Haiti is characterized by diverse agro-ecological conditions, generally poor infrastructure and differentiated watershed areas that affect environmental quality and agricultural potential, a spatially differentiated approach was adopted. The areas considered are ‘micro-regions’ that correspond to an economically integrated territory that encompasses several communes sharing similar agro-ecological conditions and production potential, and having common economic interests. They also share common roads, marketplaces, and other basic infrastructure.

9. Need for active stakeholders’ involvement in the project. The geographical boundaries of the project should be designed to unite stakeholders around their common interests. Project boundaries might not coincide with existing political units. Stakeholders should be involved in the project through a participatory planning approach to select the right investments and to promote project ownership. Common interests and project ownership strengthen stakeholders’ lobbying power. This is important because weak institutions threaten the sustainability of project investments, particularly in the case of the road component, which requires regular maintenance.

10. Need for an initial investment to jumpstart economic growth. The limited available resources should not be spread too thinly, lest existing development constraints do change significantly. Component 1 of the project - Improvement of Key Transport Corridors - was chosen as the jumpstart investment because the major constraint to rural growth is the abysmal state of roads, some impassible in the rainy season. Very high transport costs and unreliable transport services are primarily caused by the deteriorated conditions of the Haitian road network. According to the latest road inventory (2004), only 5 percent of the 3,400 km of Haitian roads are in good conditions, while 80 percent of the network is in bad or very bad

2 condition. Even roads that are passable are in bad condition. The collapse of the road maintenance system in 1992, the reduced level of investment and the adverse climatic conditions have resulted in a dramatic deterioration of road assets. The proportion of roads in acceptable (good or average) condition has fallen from 34 percent in 1991 to only 20 percent in 2004. About 1,100 km of roads were taken out from the national road inventory due to their extreme levels of degradation, making them totally impassable.

11. Need for leveraging project investments to enhance growth prospects. Donor coordination is vital to ensuring efficient and effective use of the limited resources available. Donors’ coordination already exists at the national level as a result of the institutional framework put in place for implementing the Interim Cooperation Framework, but coordination at the regional and project level is critical. This is particularly so in the case of the Bank’s Community Driven-Development (CDD) project and the Inter-american Development Bank (IDB), which are supporting agriculture and infrastructure in the micro-regions targeted by the project. Other externally funded infrastructure and rural development projects that have synergy with the proposed project are listed in Annex 3.

12. Key elements of the Government and donors’ development strategy. In March 2004, following the resignation of President Jean Bertrand Aristide, a Transition Government headed by President Boniface Alexandre and Prime Minister GCrard Latortue was put in place. In early 2004, the Transition Government together with the donors’ community prepared the Interim Cooperation Framework (ICF), which sets a strategy for increasing political and social stability and promoting economic growth. It was agreed that the Framework will guide investments of the international community until September 2007. The Framework presents the broad themes of the Government’s transition strategy and seeks a national reconciliation process involving all components of society. The Government’s immediate priorities are: (i)strengthening political governance and promoting national dialogue; (ii)strengthening economic governance and contributing to institutional development; (iii)promoting economic recovery; and (iv) improving access to basic services. Improved roads and market infrastructure directly contribute to priorities (iii)and (iv) and indirectly to (i)and (ii).

13. Implementation of Government’s strategy. As of October 20052, progress in the implementation of the ICF has been mixed and slower than expected. The area where progress had been the highest is economic recovery thanks to the good performance of the agriculture sector and the generation of new employment with the support of micro-finance activities. The second area where progress had been the greatest is political governance, and improved access to basic services. Nevertheless, growth was constrained due to the poor results achieved in the infrastructure sectors (roads and electricity), in environmental protection and in the promotion of private sector development. In particular, the transport sector, which had been identified as a key pillar of the country’s economic growth strategy, had a disappointing performance. Finally, the fourth pillar of the Government’s strategy (economic governance and institutional development) was ranked the lowest in terms of implementation performance. In particular, little progress, if any, had been achieved in the areas of local development and decentralization.

Based on the latest evaluation report of the ICF: “Rapport d’tvaluation de la mise en oeuvre du CCI - Mise B jour des rtsultats sectoriels au 30 septembre 2005 - Octobre 2005”.

3 2. Rationale for Bank involvement

14. Bank strategy. On January 6, 2005, the Bank’s Board of Directors endorsed a Transitional Support Strategy (TSS) for Haiti, which includes up to $150 million in credit and grant commitments over a two-year period. A key aspect of the Bank’s transitional strategy is poverty alleviation through improved access to basic services and infrastructure. The two-year strategy aims at restoring hope by supporting: (i)basic services provision; (ii)job creation; (iii) rehabilitation of areas devastated by floods in 2004; and (iv) community initiatives in local development. The strategy also seeks to restore credibility in Haiti’s public institutions by strengthening economic governance and institutions, bolstering efforts to fight corruption, improving transparency, and promoting inclusion and consensus-building on development priorities. Under the TSS, the Bank has already approved an Economic Governance Reform Project (EGRO, US$61 million), an Emergency Recovery and Disaster Management Project (US$12 million), a Community Driven Development Project (CDD, US$32 million) and several Low-Income Country Under Stress (LICUS) grants, which include post-natural disaster rehabilitation.

15. The proposed project fits the Bank strategy. Its focus on transport and territorial development supports: (i)the improvement of transport corridors that are needed to link rural producers to markets; (ii)the promotion of economic development and job creation in the two selected micro-regions; (iii)spot interventions to ensure all-weather accessibility on selected connecting roads; and (iv) community initiatives in local development through a consultative process of participatory planning that will be used to determine development priorities and select investments financed by the project’s second component (territorial development window).

16. Bank advantage. The Bank has a comparative advantage for a territorial development approach, because of (i)knowledge of the rural economy it has gained through the preparation of the “agriculture ESW’; (ii)knowledge gained from other ESW work in the region (the LAC Rural Flagship “Beyond the City,”3 and the regional Central America “Drivers of Growth Study”4; (iii)the Bank work program to promote the inclusion and empowerment of poor rural communities - through the CDD project; (iv) the learning experience it has developed in Haiti in terms of institutional development and public assets’ management; and (v) the experience gained in territorial development in other LAC countries (e.g. Chile, Guatemala, Honduras, Peru).

3. Higher level objectives to which the project contributes

17. The project will promote income-generating opportunities for small farmers, who represent the majority of the rural productive population. Linking smallholders to markets can lower transactions costs and increase competitiveness, thereby helping them reap the highest returns from their limited assets. There are also consumption-related benefits that translate into increases in household well-being, and improvements in access to social services.

De Ferranti, D. Perry, G. Lederman, D. Foster, and Valdes, A (2005) Beyond the City: The Rural Contribution to Development. Washington D.C.; the World Bank. World Bank (2004) “Drivers of Sustainable Rural Growth and Poverty Reduction: case studies for Guatemala, Honduras and Nicaragua”. Reports prepared for Environmentally and Socially Sustainable Department, Latin America and the Caribbean Regional Office. Reports No. 31 193-GT, 31191-HN and 31 191-NI, Washington DC.

4 B. PROJECT DESCRIPTION 1. Lending instrument

18. Total project cost is estimated at US$16.0 million. An IDA-funded grant of US$16.0 million equivalent is proposed.

2. Project development objective and key indicators

19. Project Development Objective: Lower the marketing costs for small producers in the two selected micro-regions. (Marketing costs are those costs incurred in the aggregate of functions involved in moving goods from producer to consumer).

20. Specific Objectives: a) Reduce transport costs in bringing locally-produced goods to markets and productive inputs from market. b) Reduce other marketing costs (e.g. transit losses). c) Ensure the sustainability of investments (transport and other basic infrastructure).

2 1. Key indicators: OUTPUT: - km of roads improved up to acceptable standards - number of spot interventions and emergency maintenance activities - km of roads receiving adequate levels of routine maintenance - amount of basic infrastructure investments financed by the project - amount of productive investments identified through the territorial development window OUTCOME: - decreased transport costs - decreased travel time - decreased transit losses - employment generated IMPACT: - increased traffic

3. Project components

22. The project would pilot a territorial development approach focused on two micro- regions that have been selected according to their rural growth potential and their needs in basic infrastructure (see below). In each micro-region, the project would finance key transport improvement investments that are expected to have a major impact on rural accessibility so that they become an anchor to promote rural growth (component 1). In addition, the project would finance, or help finance, several basic infrastructure and productive investments prioritized by local stakeholders that could complement the effect of improved transport conditions on rural

5 growth (component 2). If successful this model could be replicated in other micro-regions in Haiti.

23. Selection of the micro-regions. The project would focus on two micro-regions selected from a set of ten regions identified in the Agriculture ESW using the following selection criteria: (a) agricultural growth potential with preference for areas with greater productive potential; (b) market and transport linkages with preference for areas where road rehabilitation might have a greater impact in terms of reducing transport cost and unlocking productive potential; (c) existence of market towns with preference for those areas with larger numbers of such towns serving as centers for economic activities; (d) local institutional capacity, including planning capacity and agriculture research-extension capacity with preference for areas where such a capacity is greater, for example where communal plans have already been completed and where regional service centers of MARDR are still in existence and operational; and (e) presence of other projects with which the proposed project would be synergistic and complementary, including transport and infrastructure projects, CDD and local development projects, and agriculture development and supply chain promotion projects. The most prominent criteria in reaching the decision concerning these two micro-regions were their high agriculture potential and the lack of roads and market infrastructure. Thus, improved roads and market infrastructure could make a large impact in these high agricultural potential areas. Since these micro-regions are characterized by smallholder agriculture, it is expected that any increased growth should directly benefit many poor households.

24. The following two micro-regions were selected for project interventions based on a systematic assessment using the above criteria during the project preparation phase: (a) micro- region of Dondon-St. Raphael, which covers five communes in the Northern Department, connected to Cap Hditien the second biggest city in the country (production of coffee, vegetables, beans, corn and citrus peels); and (b) micro-region of Thiotte-Anse-8-Pitres covering four communes in the South-Eastern Department, and located along the border with the Dominican Republic (production of coffee, vegetable, beans, roots, cattle and charcoal). The Bank-funded CDD project (PRODEP) has a presence in this second micro-region. The two micro-regions are very different in terms of (1) linkage to the departmental capital; (2) potential for trade and regional integration with the Dominican Republic; (3) governmental and civil society institutions; and (4) characteristics of the transport systems. These differences have required customizing the territorial approach that will be piloted in the two micro-regions. This diversity is expected to facilitate the scaling up of the territorial approach since other Haitian territories will be more likely to share some characteristics of one or the other of the two micro- regions.

25. Over a six-year period, the project would finance the following items:

26. Component 1: Improvement of key transport corridors (US$11.25 million). The objective of this component is to improve the transport conditions in a sustainable manner in the two micro-regions, through selected interventions on roads and critical points that are essential to the rural economy. The project will finance the cost of the works, related technical and economic studies and supervision.

6 27. Sub-component 1.1: Road improvement and spot interventions (US$10.75 million). The project would finance the improvement of key transport infrastructure in each of the selected micro-regions. Two transport corridors, totaling about 100 km (about 50km in each micro- region) were identified through consultation with local stakeholders during project preparation. These corridors constitute the “backbone” of the transport system in each of the micro-regions and are therefore essential to the functioning of the rural economy. For each of these transport corridors, the project will first finance detailed feasibility and engineering studies that should help determine what is the most appropriate technology for improvement taking into consideration the following criteria: (1) cost; (2) existing traffic levels and future projections; (3) impact on travel time; (4) investment sustainability given Haiti’s specific climatic conditions and past difficulties experienced in the implementation of road maintenance mechanisms; (5) potential to develop micro-enterprises; and (6) possible economies of scale. The scope of these studies would also include selected spot interventions to restore or preserve access (e.g. bridges, low water crossings, consolidation of slopes), in coordination with the other donors. The technology used for these spot interventions will follow the same considerations as for road rehabilitation. These studies will be contracted by the UCE in MTPTC, and their execution (including the preparation of terms of reference) will be performed under close supervision by the Bank. Once the studies have helped determine the appropriate technical solutions for road improvement and spot interventions, the project would finance the cost of the related works and the related supervision. Some reallocation of resources will be possible between the two corridors or with other spot interventions on key feeder roads, if costs, as determined by the detailed engineering studies, call for it. It is expected that large improvement works will have to be performed by mid- to large-sized firms while spot interventions could be contracted out to SMEs or even to micro-enterprises such as the ones that will be used to perform routine maintenance (see Sub-component 1.2). Nevertheless, the potential for economies of scale will be considered when the decision about the exact scope of the contracts is taken.

28. During preparation, a preliminary technical assessment has been performed on these two corridors. This assessment has allowed the identification of the most urgent interventions (road improvement and spot interventions) on these corridors and prepared a preliminary estimation of the costs involved.

29. The two transport corridors are: (a) Corridor no. 1: Carrefour La Mort - St. Raphael: This corridor includes a segment of the national road no. 3 (RN3), which connects a number of important local markets (Grand- RiviBre, Dondon, Saint Raphael) to Cap-Haitien. A number of spot interventions have been identified on this corridor.

(b) Corridor No. 2: For2t des Pins - Anse-&Pitre: This corridor includes a segment of the departmental road no. 102 (RD 102), which connects the Thiotte-Anse-&-Pitre micro- region to Port-au-Prince and to an important market located on the Dominican border (Pedernales). On the segment from Thiotte to For& des Pins (20 km), the preliminary technical assessment performed during project preparation recommended that a periodic maintenance be performed.

30. This component could also finance specific studies that would strengthen knowledge of the transport systems in the two micro-regions and their linkages with key national and

7 international markets. In the Thiotte micro-region, such a study should help evaluate alternatives to better integrate the micro-region with Port-au-Prince (taking into account the major critical point of Fonds Verrettes) and with Jacmel. Six months before the project’s closing date, this component will also finance a technical diagnostic to determine the conditions of the roads that have been improved by the project and the requirements in terms of maintenance for the next 5 years.

3 1. Sub-component 1.2: Emergency and routine road maintenance (US$0.5 million). The total collapse of the road maintenance system in the early 1990s constituted one of the most critical issues faced by any road investment in Haiti. Recent reforms engaged by the Government as well as the support of the donors’ community have allowed some limited progress in this area, the most notable being the creation of a road maintenance fund financed by earmarked taxes (essentially a gasoline tax). A full sector reform of the Haitian road management system goes beyond the scope of the proposed project. Nevertheless, some road maintenance activities are justified by the critical need to ensure the sustainability of the road investments that would be financed by the proposed project. To ensure such sustainability, this sub-component would finance the following: (a) emergency road maintenance: these activities would be contracted out to local small and middle size firms by the MTPTC and financed by the Road Maintenance Fund (FER). The sub-component would finance the works and the related feasibility and engineering studies as well as supervision. Several such emergency maintenance activities were identified during preparation in the two selected micro-regions. (b) mechanized maintenance: these activities include the reprofiling and grading of gravel roads that usually have to be performed after the rainy season. It is expected that these activities will be contracted out to local SMEs. (c) routine maintenance: these activities would be contracted out to micro-enterprises to be set up within the communities living near the rehabilitated roads. These micro-enterprises would be contracted by the MTPTC and financed by the FER. The sub-component would finance the routine maintenance activities and the consultancies needed to set up or train the micro-enterprises, and to monitor and supervise the works performed. Being labor- intensive, these routine maintenance activities are expected to generate employment and income-generating opportunities for the rural poor.

32. Eligible expenditures will include maintenance activities performed on a priority basis on the key transport corridors identified in each micro-region, and on other road segments, on a case-by-case basis, subject to Bank prior approval.

33. Despite the progress achieved, the FER remains a newly established institution whose capacity is progressively building up. To continue strengthening the FER, targeted technical assistance has been included as part of component 3. Several covenants were also integrated in the legal agreement to ensure that funding for road maintenance (in particular proceeds from earmarked taxes) are made available to the FER on a timely basis and that the FER uses these resources according to the road maintenance strategy endorsed by its Board.

8 34. Component 2: Territorial development window (US$3.0 million). The improvement of the key transport corridor identified in each region is expected to become an anchor to spur other productive investments that could promote rural growth. In order to facilitate the emergence of such growth initiatives that become feasible as a result of the improvement of transport conditions, a specific instrument (“territorial development window”) has been designed at the micro-regional level. The design of this instrument is inspired by a similar program that was successfully implemented in Peru, but which has been customized to the Haitian context. The territorial development window aims at putting in place a process to prioritize and assess growth initiatives (Sub-component 2.1) that could be financed either by the project (Sub- component 2.2) or by other donors, or the Government.

35. Sub-component 2.1: Territorial planning process (US$0.5 million). This sub- component would support the territorial planning process leading to the identification of priority investments, which would complement the improvement of transport conditions to maximize rural growth. This process would include two stages: (1) a broad participatory consultation in which all local and regional stakeholders could present investment proposals that are consistent with the development objective of the proposed project; and (2) a prioritization exercise managed at the level of each micro-region and performed by an ad hoc territorial planning committee in which key stakeholders would decide and endorse the territorial development strategy proposed for the region and the list of related investments. The institutional basis for this committee will be the Departmental Consultative Round Table (Table de Concertation De?partementaZe - TCD) or a similar institution. The TCD is a forum involving the departmental directorates (appointed) representing the central government, the decentralized bodies (elected) representing local governments, civil society and the private sector. The regional offices of the Ministry of Planning and External Cooperation are expected to play a key role in the functioning of the committee. To be able to play that role, they would receive specific technical assistance and support for institutional strengthening as part of the proposed sub-component.

36. The prioritization mechanism would take into account the following criteria: . Micro-regional (or supra-communal) scope, interest or impact; . Alignment with the project development objective (decrease in marketing costs) or compliance with project safeguards; . Cost-effectiveness in terms of investment cost per beneficiary; and Sustainability in terms of maintenance, management and operations, kdcost recovery.

37. This process will be managed by a facilitator to be hired and financed under the proposed sub-component. The role of the facilitator is to organize the broad participatory consultation process, provide technical assistance to the territorial planning committee and ensure the implementation of the prioritized sub-project. This last responsibility includes: assessing the technical, economic and financial feasibility of subprojects, contracting the operators that would implement the related works, and supervising and monitoring implementation and sustainability of sub-projects financed under this component.

38. The project would work closely with the other donors, including IDB, European Union, UNDP (Capacity 21 and/or UNCDF), Canadian, German and Spanish Cooperation, that have acquired experience in territorial planning in Hayti and/or are active in the two micro-regions.

9 These donors would be invited to support the planning process and consider funding the investments arising from this process that are not financed by the project. The facilitator would organize “project fairs” to present sub-projects to these donors.

39. Sub-component 2.2: Complementary sub-projects ($2.5 million). The sub-projects that would emerge from the above territorial planning process would be classified into three investment categories: . Productive infrastructure investments that are aligned with the project’s development objective (enhancing the positive impact on marketing costs); Safeguards-related investments (reforestation, AIDS epidemic control, etc.) that could mitigate possible adverse effects of the project; and . Other productive investments, and other environmental and social investments.

40. Sub-component 2.2 would finance investments in the first and second categories up to a total of $2.5 million for the two micro-regions. Regarding the third category of investments, the project would finance, as needed, the technical and/or economic feasibility studies so that investment proposals can be submitted for funding either to the national budget or to other donors. Under the previous sub-component, the facilitator would provide the required assistance to complete the studies and assist the TCD in seeking funding.

41. The cost of eligible investments would need to be between $20,000 and $100,000, that is, larger than the cost of investments eligible for funding under local development projects such as the Bank-funded CDD operation (typically under $20,000). A few projects costing over $100,000 could be made eligible for project funding on an exceptional basis and subject to prior approval by the Bank.

42. Component 3: Project administration and monitoring and evaluation (US$1.75 million). This component would finance expenditures for project administration, including environmental management. Eligible expenditures would include: (1) staff costs; (2) studies and consultancies; (3) training activities; and (4) acquisition of goods and equipments needed for project implementation (eg. computers, vehicles). Administrative costs incurred by the main PlU (the UCE of MTPTC) and by FER and PLA80 would be eligible under this component. The project would also complement some activities financed by the IDB to strengthen the capacity of the regional offices of the MTPTC in the two micro-regions (Le., Directions Dkpartementales des Truvaux Publics of Jacmel and Cap-Haitien). Finally, this component would finance monitoring and evaluation (M&E) activities and the project’s impact evaluation. Accordingly, this component will include three sub-components: . Sub-component 3.1 will cover administration costs, including the acquisition of goods; . Sub-component 3.2 will finance monitoring and evaluation, including the environmental management and the impact evaluation; and . Sub-component 3.3 will finance the building of institutional capacity in the PIUS.

10 Component US$ million 1. Improvement of key transport corridors 11.25 . Road improvement and spot interventions (10.75) . Road maintenance (0.5) 2. Territorial Development Window 3.0 . Territorial Planning Process (0.5) . Complementary investments (2.5) 3. Project administrationand M&E 1.75 . Project administration (1.52) . M&E and impact evaluation (0.23) TOTAL 16.0

4. Lessons learned and reflected in the project design

43. Project design builds on lessons from the implementation of the World Bank program in Haiti, especially the experience gained under the last Bank project in the road sector5. 0) Design simple well-defined operations with modest objectives (OED Report) and achieving a balance among implementation, sector objectives and social impacts. “Future interventions in Haiti must, therefore, strike a better balance to ensure that project goals are appropriate to the implementation conditions in the country as well as achieve maximum sector and social impact” (ICR). The proposed project has modest objectives and has been designed to avoid overwhelming the country’s limited implementation capacity. (ii) Achieving implementation objectives while gradually building institutional capacity in the sector (“[ Avoid ] overwhelming the fragile absorptive capacity”, “Need [ for operations ] to be directed toward piloting activities that can contribute to institution building” (OED Report) “Implementation could not adequately be achieved while strengthening the administrative capacity of the executing agency at the same time” (ICR). For the road rehabilitation component, the proposed project will build on the institutional capacity in a specialized agency in MTPTC that is supported by the IDB. The agency PLA80, which is implementing the Bank’s CDD project will be contracted to implement the consultative process and related investments. In addition, special attention is being devoted to capacity building for the FER. To improve institutional capacity within the communities to perform routine road maintenance, consultants will be contracted: only a limited capacity exists today within the Government. (iii) Need to reformulate managerial and administrative practices for asset management to maximize existing capabilities, ensure greater transparency, and permit tighter monitoring and supervision “Future IDA projects in Haiti require extreme rigor in the

See World Bank (2002a) Haiti Country Assistance Evaluation. Operations and Evaluation Department (OED), and World Bank (2002b) Haiti Road Maintenance and RehabilitationProject: Implementation Completion Report (ICR). Report P007318.

11 selection and monitoring of procurement advisors to ensure that procurement procedures are correctly followed.”(ICR). Project design has included specific provisions in terms of procurement, monitoring, reporting and control mechanisms. A very close partnership with the IDB has been developed so that the two institutions join efforts during project implementation to monitor, supervise and control progress achieved and to provide targeted technical assistance to the implementing agencies. Importance of securing road maintenance to ensure sustainability of investments “It is essential to develop mechanisms to ensure that the government protect road infrastructure by providing adequate and continuous funding for road maintenance. A dedicated road fund financed by user fees could be established as means of institutionalizing this financing mechanism” (ICR). Project design builds on initiatives by the Bank and other donors (Haiti Economic Governance Reform Operation, PPIAF-funded Technical Assistance to the Haitian Road Maintenance Fund) to develop and strengthen the FER. The Bank will fund routine maintenance of rehabilitated roads through the FER and several covenants to the grant legal agreement should help ensure that proceeds from earmarked taxes will be made available to FER to finance road maintenance. Choice of appropriate road improvement technologies. A road rehabilitation trade-off is whether the road should be paved or unpaved, the second option being much cheaper but less sustainable unless adequate levels of maintenance are performed. Many past and on-going road improvement programs in Haiti have been using inadequate and/or expensive technologies with insufficient attention to cost- effectiveness and sustainability. Project design includes a process to determine the most appropriate road improvement technology. The diversity of transport infrastructure in the two selected micro-regions should allow the piloting of different technological options customized to the Haitian context. Need to improve aid coordination “to be effective, aid coordination must coordinate planning, design and financing activities to ensure that investments are cost-effective and meet the scale, absorptive capacity, and development objectives of the country” (ICR). Great effort has been made to coordinate the planning and design of the project through consultations and sharing of documents with other donors (e.g., IDB, EU, USAID, FAO, UNDP, GTZ). During project implementation: (a) for Component 1, the project will use the same project implementing unit as the IDB; and (b) other donors will be invited to participate in the consultative multi-sector territorial development strategy (Sub-component 2.1).

5. Alternatives considered and reasons for rejection

44. Project alternatives considered. A multi-sector strategy was originally conceived for a number of micro-regions with growth potential in selected crop and livestock enterprises. Based on a comprehensive needs assessment performed during identification, this strategy focused on transport and communication infrastructure, agricultural productivity, access to social services and a range of infrastructure and services needed to support growth. Recognition of budget constraints, tight coordination with the other donors (eg. IDB involvement in the agriculture sector), and complexity of this concept led to a reduction of the original scope of the project.

12 45. The selected alternative focuses on two micro-regions to be able to implement the critical mass of investments needed to have an impact. The scope of the project was reduced to focus on the major barriers to economic growth in these areas: roads and other basic infrastructure. In each micro-region, a key transport corridor was identified during preparation through assessing the transport system and consulting with key stakeholders. Improving transport conditions in these corridors is expected to improve accessibility and relieve bottlenecks to growth.

46. Another alternative considered during preparation was to reduce the project’s scope to improvement of key roads in the two micro-regions. The effectiveness of this sector-based approach on rural growth was found to be less than of a territorial approach anchored on the improvement of transport conditions. A territorial development process was then designed to identify and prioritize basic infrastructure investments that could complement the impact of the improvement of transport conditions. This process is expected to help identify basic infrastructure investments that would be financed under the proposed project, as well as some productive investments for which the project will finance feasibility studies that could reduce transaction costs for other donors willing to intervene in these territories.

47. Another alternative was whether implementation arrangements should be simplified, with the use of a single implementation unit. This option was discarded since no agency was found with sufficient institutional capacity to implement all the proposed components. Building such capacity in a single institution would have taken more time than using several existing institutions which have already developed the expertise needed to implement some components or sub-components. Although the FER is currently the weakest of the three implementing agencies, it was felt important to include it in project design since this institution is supposed to become the cornerstone of the road maintenance strategy and is therefore a key institution to ensuring the sustainability of the proposed project.

48. Bank’s involvement fit with activities of other donors. The proposed project will complement the investments financed by the Bank-funded CDD operation and other projects financed by other donors, such as IDB and EU in the transport sector, and IDB and USAlD for agricultural support services (Annex 3). Coordination will be ensured during implementation with these other projects, in particular the CDD operation for which cooperation will be facilitated by the fact that it is implemented by the same PIU (PLA80).

13 C. IMPLEMENTATION 1. Institutional and implementation arrangements

Implementation period: Six years

49. Executing entities. The main project implementation unit will be housed in the MTPTC. There will be two secondary implementing agencies: (i)the Road Maintenance Fund (FER), for road maintenance; and (ii)the PIA80 Management Office (Ministry of Planning and External Cooperation - MPCE) for the management of the territorial development window, as well as the impact evaluation. MTPTC’ s regional offices in the two selected micro-regions will also be involved in the supervision of some road improvement activities. The main project implementation unit in MTPTC will be responsible for consolidating reporting for the entire project. Oversight for overall project implementation will be provided by a high level steering committee comprised of representatives from the main ministries concerned (MTPTC, MPCE, Ministry of Finance and Ministry of the Environment). These institutions will need additional staff to manage the proposed project. These additional needs have been evaluated during preparation and are described in Annex 8. Of particular importance is the designation by MTPTC of a “FER correspondent”, hosted within UCE that would facilitate the coordination between FER and MTPTC and ensure the alignment of FER’S road maintenance strategy with MTPTC’s operational work plan.

50. MTPTC’s Project Implementation Unit (Unit6 Centrale d’Ex6cution - UCE): The project will use the implementation unit set up by MTPTC for the IDB-funded road rehabilitation and maintenance program as its main implementation unit. This unit has successfully implemented two infrastructure projects in 2003 and 2005, resulting in 183 km of roads being rehabilitated and US$14 million disbursed. This unit is fully integrated into MTPTC and is using the local bureaus of the MTPTC (Directions Df2purtementuZes des Truvuux Publics) to supervise project implementation. This unit has now reached a credible degree of institutional and technical capacity including adequate monitoring instruments, under the close supervision of the IDB project team. The choice of this unit to implement the road component will also be a potent means to enhance coordination between the Bank and the IDB, and combine efforts to build some credible institutional capacity within the MTPTC. In order to be able to manage the project, the UCE will need to be strengthened and two additional staff recruited: a deputy coordinator, who could also be designated as “FER correspondant” and a process manager who will handle procurement and financial management.

51. Road Maintenance Fund (Fond d’Entretien Routier - FER): FER is an autonomous institution created in 2003 and whose strengthening has been supported by the Bank-funded Economic Governance Reform Operation (EGRO, FY05), and by other donors (IDB, EU in particular). FER is financed from specific earmarked taxes (e.g. a gasoline tax of one Gourde per Gallon). FER finances and controls road maintenance contracts procured by MTPTC on priority road segments. The measures taken by the Government since 2004 to strengthen FER’s institutional capacity are: (i)Board members were appointed; (ii)FER’s staff were recruited (as of December 2005, FER had three professionals: a Managing Director, an Administrative and Financing Officer, and an Operations Officer and several support staff); and (iii)the first road maintenance contract was signed in January 2006.

14 52. PL480 Management Office (participatory planning, complementary investments and impact evaluation): PL-480 Management Office is an autonomous public institution under oversight of MPCE, created in 1985 to receive and monetize food aid from international donors, and manage government projects funded by the proceeds of food aid or under separate donor financing. PL 480 currently manages three projects, including the Bank-funded CDD project. PL-480 would use its Project Coordination Unit (PCU) to manage the proposed project’s activities. It would delegate responsibility for facilitating participatory planning and implementing related investments in each micro-region to a specialized operator (Maitre D’Ouvrage De‘lkgue‘ - MDOD), either an NGO or a private consultancy firm with the required expertise in planning and project execution. This MDOD would facilitate the work of the committee established within the Table de Concertation Dkpartementale in charge of planning in the two project micro-regions. In addition, PL 480 would be entrusted with the impact evaluation that it will outsource to a specialized consultancy firm or NGO.

53. All three agencies will work through the same monitoring and reporting system to input . project management and accounting, so as to maximize the inter-communicability and cooperation in project implementation.

Financial Management and Disbursement Arrangements

54. The project’s financial management will be ensured by the three executing entities identified above:

0 As the main project implementation unit, the PIU in MTPTC will have overall responsibility for the project’s financial management. In particular, it will be directly in charge for the financial management of Component 1 and of consolidating reporting including financial for the entire project.

0 Given the different nature of Component 2 activities, and in order to facilitate implementation, the day-to-day financial management for Component 2 will be ensured by PL480 Management Office.

0 Considering the project’s specific objective to ensure the sustainability of the road investments through implementing an efficient routine road maintenance mechanism by channeling funding for road maintenance through the FER, the FER will also have direct financial management responsibilities for this sub-component.

55. The PIU in MTPTC and PL 480 Management Office already have sound financial management systems in place and experience in project financial management. The FER is developing its own financial management system and procedures.

56. Two Designated Accounts will be opened at the Central Bank (Banque de la RCpublique d’Haiti or BRH) and managed by the UCE in MTPTC and the PL480 Management Office. FER will access project funds through an advance mechanism from the Designated Account of the UCE.

15 57. The road maintenance implemented by the FER will be undertaken by either micro- enterprises set up within local communities or by SMEs, who will be signatories to the maintenance contracts. The detailed financial management arrangements for these activities would be developed in the project’s operations manual.

2. Monitoring and evaluation of outcomes

58. The monitoring and evaluation framework includes two distinct elements. The first consists of monitoring project outputs and performance, along with annual audits and plans, to be undertaken by the project coordination unit on an ongoing basis. The second consists of periodic performance audits, and comprehensive outcome and impact evaluation studies that will be carried out by independent consultants specialized in this field, at mid-term (partial evaluation) and at the end of the project (full evaluation). A baseline study will also be prepared during the first months of implementation.

(a) Monitoring project’s performance and outputs.

59. A computerized monitoring system has been developed within the UCE to monitor the implementation of the IDB-financed road projects. Building on this experience, a monitoring system will be developed for the purpose of the proposed project, probably as an extension of the IDB system. Secondary monitoring systems will be developed within the PL-480 and the FER. The UCE will aggregate the information generated by these secondary monitoring systems so as to produce consolidated reports describing project implementation in a comprehensive manner. Whilst the primary responsibility of housing and maintaining the monitoring system will reside with the UCE, PL-480 and FER will be responsible for regularly updating the system, including key project information for the project components or subcomponents they are managing.

60. The UCE monitoring system will bring together both the physical and financial aspects of project implementation, to allow the implementing units and the Bank to ascertain the implementation progress towards the output targets of each sub-project and to gauge the project’s overall progress towards achieving the project development objectives. The monitoring system would specifically include: (a) subproject information, such as pertinent physical and financial data for each subproject; (b) financial management data, from which Statements of Expenditure (SOEs) would be generated and submitted to the Bank; and (c) project management information, from which all project reports (e.g., semi-annual technical audits) would be generated.

61. Progress reports detailing progress made under each of the project components will be prepared by the PCU every six months and submitted for review to the Bank. These reports should measure performance against the results indicators in the results framework (in Annex 4 of this document), and, in addition to financial management and procurement reporting requirements, include information on: (i)the status of project execution, with detailed information of allocated budget, scope of the activities and results achieved; (ii)a summary of progress in the implementation of environmental and social measures; and (iii)an annex describing actual and potential developments likely to impinge on project implementation. The PCU is expected to require some support for capacity strengthening in order to effectively carry

16 out its obligations under this arrangement, and funds under component three will be allocated to this end.

62. At intervals not exceeding one year (12 months) or more frequently if deemed necessary, auditors acceptable to the Bank, financed under Component 3, will conduct a performance audit of project implementation in each of the two target regions. These will focus particularly on the timeliness, cost, and quality of the execution of the physical components of the project, and on adherence to procurement procedures and compliance with the guidelines of the Operation Manual, and performance indicators in areas relating to social impacts, environmental practices, and participatory processes. The scope and exact frequency of these audits will be determined each year during a supervision mission (of which there will be at least two every year).

(b) Evaluating project’s outcome and impact

63. At the beginning of project implementation, a baseline study will be performed to assess the initial conditions in the selected areas of intervention and in control territories. A comprehensive mid-term review and a detailed impact evaluation study will be performed to assess project intermediary and final impact and to inform future lending operations. These studies will be carried out by an independent consultant(s) firm(s) specialized in this field.

64. Project monitoring indicators and a subset of the impact indicators are listed in the results framework of this document (Annex 4).

3. Sustainability

65. Sustainability encompasses physical, institutional and financial aspects. The physical investments financed by the project (roads in particular) should receive adequate maintenance in order to be sustainable. To ensure that this objective will be reached, the institutions in charge of maintenance should be strengthened and become fully operational within deadlines compatible with project execution. In addition, sufficient financing should be secured to pay for maintenance.

66. Sustainability of road infrastructure is a critical issue, given donors’ experience in the road sector in Haiti. To address that issue and mitigate the attendant risk, a great deal of attention was given during project preparation to devising systematic and effective road maintenance practices, as strongly suggested by the ICR of the last Haiti Bank-funded road project. These practices would be based on the operation of the road maintenance fund (FER), as the central institutional mechanism for performing road maintenance.

67. In recent years, the Bank has coordinated closely and combined efforts with other donors active in the road sector (mainly IDB and EU) to strengthen the institutional capacity and credibility of the FER: (i)the Bank-funded EGRO has included a conditionality concerning the appointment of FER Board members and the signature of the first road maintenance contract; (ii) a Bank-implemented PPIAF grant has provided targeted technical assistance to build FER’S institutional capacity; (iii)the new IDB-funded road rehabilitation project included the launch of the bidding process for the first road maintenance contract as a condition for effectiveness; (iv)

17 another IDB-funded road project is financing several consultancies to identify and strengthen community-based organizations that could perform routine maintenance; and (v) the EU has granted technical assistance financing so that the FER can experiment with community-based routine road maintenance on two road segments recently rehabilitated.

68. The proposed project will pursue these efforts by providing targeted technical assistance to FER and MTPTC’s regional offices so that adequate institutional capacity for road maintenance can be built and maintained. In addition, to set up micro-enterprises, FER will be able to build on the experience of several initiatives launched by NGOs specialized in capacity building to communities to design and implement labor-intensive infrastructure rehabilitation programs. The project will provide 100 percent of the financing for the routine maintenance of the rehabilitated roads and include a legal covenant so that the Government provides a sustained flow of financing for road maintenance, based on earmarked gasoline taxes as specified by the FER law.

69. Another issue has to do with the sustainability of the complementary public investments slated to be financed under the project’s second component. Indeed, evidence suggests that, like in the case of roads, once donor financing terminates, little attention if at all is given to maintaining these investments during their economic life span and to recouping funds for their renewal once their life span has expired. The complementary investments are only specified as a menu of options to be prioritized and selected based on the participatory planning process supported by the project. Hence they are not known precisely beforehand. However, the existence of sound management and maintenance procedures will be central to the prioritization process put in place in each micro-region. In addition, the inclusive and participatory nature of the planning process will ensure a high degree of ownership by micro-regional constituencies for these investments giving them strong incentives to ensure that they are adequately maintained. Technical assistance for the design of operating and maintenance procedures, and required cost recovery features through user fees and other measures, will be provided by the facilitator, as well as selected technical assistance to recipient institutions during the learning period and up to such time that they have acquired sufficient capacity.

4. Critical risks and possible controversial aspects

70. Insecurity and commercial disruptions. Civil insecurity, peaks in crime or politically motivated violence pose a significant exogenous threat to any major project in Haiti. It bears noting that these phenomena have tended not to disrupt activities in rural areas and most secondary towns. The events surrounding the upcoming presidential inauguration will likely represent the period of greatest uncertainty. Any events that might lead to the closure of air or maritime commerce, as occurred during the embargo of the1990s, would undermine the effectiveness of supply chain development for the export trade other than the significant cross- border trade to the Dominican Republic.

71. Natural disasters. Catastrophic events such as most recently observed following Hurricane Jeanne in September 2004 demonstrate the risk of the most devastating possible events. The current vulnerable state of many of Haiti’s 30 watersheds means that even lesser storms cause floods and mudslides. Roads, as well as other infrastructure are particularly

18 vulnerable to natural disaster. Some risk mitigation measures have been included in project design. These include: (1) appropriate technical designs for road rehabilitation works; (2) establishment of routine maintenance mechanisms which could also be mobilized in case of emergencies; (3) spot interventions on critical points that are particularly vulnerable in case of natural disasters; and (4) project’s environmental safeguards’ instruments. In addition, coordination will be ensured with other Bank-supported initiatives aiming at preventing or mitigating natural disaster risks (Haiti Emergency Recovery and Disaster Management Project), as well as with other initiatives directly addressing watershed management, a priority identified in the Bank’s Haiti program. Finally, while Haiti has not experienced significant seismic events in recent memory, the risk does exist and would prove catastrophic particularly in coastal areas. The only damage mitigation for that last risk would be civil defense efforts.

72. Fiscal constraint. The fragility of Haiti’s macro-economic framework and the scarcity of fiscal resources may ultimately affect the amount of resources dedicated to the road sector. While the financing structure of the proposed project does not depend directly on the availability of counterpart funds, the sustainability of road investments could be threatened if funding for road maintenance were to be affected by the fiscal constraint.

73. Sustainability of proposed road investments. The total collapse of the Haitian road maintenance system over the past decades is one of the biggest challenges for project implementation and for the sustainability of the road investments. Some limited progress has been achieved over the past years with the creation of the FER and with the convergence of several initiatives from the donors’ community. Nevertheless, the existing institutional and financing framework for road maintenance remains fragile and vulnerable. To mitigate those risks, the project is building on the existing initiatives of the donors’ community to further them and make sure sufficient institutional capacity is established within the FER and the MTPTC’s local offices. In addition, resources are being secured so that the FER can finance the maintenance of the roads that will be rehabilitated.

74. Cost over-run. Road investments in Haiti are characterized by their very high costs due in particular to (1) the limited capacity of the Haitian private sector, which limits domestic competition; (2) extremely high risk insurance premiums for international firms, which limits international competition; (3) very high degradation of the roads making access difficult; and (4) in certain cases, the high cost of materials. To mitigate these risks, the project has tried to make a cost estimation that does not reflect international standards but rather the history of recent road works in Haiti. In addition, procurement arrangements have been designed with the purpose of enlarging competition to the maximum extent possible and by securing payments to contractors so that risk premiums can be reduced. Finally, the road rehabilitation technologies intend to find the right balance between ensuring sustainability and cost.

75. Delays in execution. Past road investments in Haiti are also characterized by significant delays in execution. Reasons include: (1) over-optimistic initial planning; (2) institutional weaknesses; (3) limited capacity or over commitment of private operators; and (4) limited competition so that procurement processes may have to be re-initiated. To mitigate those risks, project design has included: (1) planning objectives that account for execution delays, which are common in Haiti; (2) a strong institutional building component in partnership with other donors

19 (IDB, EU); (3) the implementation of a system to monitor construction firms’ capacity to handle new tasks (in partnership with the IDB); and (4) procurement processes that are more likely to broaden competition.

76. Procurement. The many weaknesses in the Haitian public procurement system constitute an important risk for procurement implementation under the project, as few entities in the Haitian government are familiar with the open and transparent procurement procedures that Bank financing imposes. This risk is mitigated in part by various actions to improve procurement institutions and practices which are being taken in the context of the Interim Cooperation Framework (ICF). These include the adoption of a new Procurement Decree that created a Commission Nationale des March6s Publics (CNMP) with a mandate, inter alia, to improve procurement practices and develop standard bidding documents for use in all public procurement. The new Decree also formally establishes that competitive bidding practices are the norm and direct contracting the exception for government procurement. The risk of problems in procurement implementation will also be reduced by the decision to use existing PWs in PL- 480 and MTPTC, both of which have demonstrated experience implementing procurement financed by multilateral development banks, as well as by the requirement for full prior review of all contracts financed by the grant.

77. Inadequate technical designs. Lessons from past road projects in Haiti indicate that rehabilitation standards that are used are not appropriate (e.g. too costly with expensive paving technologies; poor design of slopes; insufficient consolidation, etc.). Insufficient guidance has been given to design consultants which, coupled with poor follow-up and management during the design process, has resulted in design documents that are not always appropriate for particular conditions. Supervision skills for rural road construction are limited and errors in design have been carried through uncorrected into implementation. Terms of reference for design consultants need careful drafting to ensure technology options and standards are chosen to actual needs. The design process needs to be carefully monitored with milestone approvals built-in to ensure consultants remain on track. To mitigate risks, technology choice methodology has been designed with the purpose of finding the right balance between cost and sustainability. To achieve this, close supervision and targeted technical assistance will be provided during project execution.

78. Adverse effects on deforestation and AIDS prevalence. Improving mobility of goods and people through the improvement of transport conditions in the targeted areas may trigger some limited negative effects on the environment and the spread of AIDS. Monitoring of adverse impacts as well as possible mitigation measures has been included in project design.

20 Risk Minimization Measure(s) Rating

OVERALL COUNTRY RISK: Insecurity and civil unrest continues Participatory process set by Transition Government under following the December 2005 Interim Cooperation Framework (ICF) is building partnerships elections, increasing implementation and mitigating social tensions, thereby reducing local-level H risks. implementation risks. New Government expected to pursue the same strategy. Natural Disasters Risk mitigation measures embedded in project design and H coordination with other initiatives Fiscal constraint affects sustainability Project duration has been extended to 6 years so that funding of road investments for the maintenance of the roads rehabilitated by the project can L be guaranteed for a longer period. To PDO: FER does not reach sufficient capacity Emphasis on institutional strengthening of FER, building on to ensure sustainability of proposed other existing capacity building initiatives; Secured financing H road investments for road maintenance and legal covenants to ensure GOH will dedicate receipts from earmarked taxes to road maintenance Inadequate technical designs A preliminary technical assessment of the selected transport corridors has been performed during project preparation so that technical alternatives could be identified. Final technical L solutions will be determined on the basis of detailed engineering and economic studies to be performed at the very beginning of project implementation. Adverse effects on deforestation and A monitoring system has been integrated in project design so that possible adverse effects on deforestation and the spreading AIDS prevalence L of AIDS can be evaluated. Funding for possible mitigation measures has also been integrated.

Cost over-runs Cost estimates from Haitian data and not international standards; customized technologies; procurement processes L aiming at increasing competition and decreasing risk premiums

Delays in execution Planning based on Haitian practices and not international standards; strong institutional strengthening component; implementation of monitoring system of firms’ capacity to H handle new tasks; procurement arrangements to broaden competition Procurement Close supervision by the Bank has been included in project design, including full prior review of all contracts financed by the grant. Existing PIUs in PL-480 and MTPTC, have M demonstrated experience implementing procurement financed by multilateral development banks.

H

21 5. Credit conditions and covenants

79. Effectiveness conditions:

8 The Government of Haiti should adopt the operational manual in terms and scope acceptable to the Bank.

80. Covenants:

8 The MEF should: (1) no later than sixty days prior to the end of the Haitian fiscal year, send a projection of monthly proceeds from taxes earmarked for road maintenance for the coming fiscal year; and (2) no later than ninety days after the end of the Haitian fiscal year, send documentary evidence that all proceeds from taxes earmarked for road maintenance have been transferred to FER on a monthly basis.

8 The MTPTC should: (1) no later than twelve months after the effective date of the grant, send to the Bank the published list of roads whose road maintenance is the responsibility of the FER in terms and scope acceptable to the Bank; (2) no later than one month after its publication send to the Bank the list of completed civil works, including those carried out on any road segment financed under the project; (3) no later than the end of the fiscal year, send to the Bank for its review and comments the maintenance program of the next fiscal year and the corresponding procurement plan; and (4) no later than six months before the closing date of the grant, send to the Bank for its review and comments, a technical assessment of the conditions of the roads rehabilitated under this project as well as a forecast of maintenance needs for the next five years after the closing date.

8 Requirement for the MTPTCPIU, PL 480 and FER to maintain an adequate financial management system, produce quarterly interim financial statements no later than 45 days after the end of each quarter, submit annual audited financial statements as detailed in Annex -9.

D. APPRAISAL SUMMARY 1. Economic benefits and beneficiaries

81. Major Expected Benefits of the Project. Despite the physical isolation and poor road and market infrastructure, there is significant agricultural production taking place, but also significant untapped potential for growth. Year-round access to roads and markets is the key for agricultural production and marketing that is nationally and internationally competitive. The lack of year-round access and high transport and transaction costs related to poor roads and markets leads to low productivity and high post-harvest losses. A major short term benefit of the project should be to “harvest the low-lying fruits” that exist and raise incomes of smallholders by increasing farmgate prices, lowering input costs and decreasing post-harvest losses related to poor and/or impassable roads. New markets should lead to higher returns and provide initiatives for production of higher-value crops and livestock. Increases in value-added along the chain would not be limited to rural households however, since actors all along that chain will benefit, including input suppliers, transporters, merchants, processors and exporters. Rural households should also benefit as consumers as it becomes easier for buyershellers to move in the micro-

22 regions, costs of transport fall and competition increases. In addition, there should be improvements in household well-being associated with improved access to social services (e.g., education and health) located in urban centers. Labor-intensive road maintenance activities are also expected to generate employment opportunities for the rural poor, including women. Finally, the project will also improve the efficiency of public and private investments achieved by the project’s interventions in strategic management and market linkage.

82. Rural economy. A description of the rural economy in the two micro-regions is presented in Annex 5. Key features include: (i)Rural Economy Characterized by Smallholders. Rural areas in both micro-regions are characterized by smallholder agricultural production. Smallholders with less than 1.O hectare produce for market and home consumption and sell their labor and engage in small-scale- trading activities. Many households in this group tend to be poor and are vulnerable to falling deeper into poverty, although most maintain a low-level equilibrium. Some of the poorest households are headed by elderly and infirm persons whose other household members have out-migrated. On the other hand, some of these households are more dynamic and can potentially benefit from improvements to agricultural production and marketing. Some able- bodied persons in households with small landholdings migrate to find better employment opportunities in urban areas or out of the country. Smallholders with 1.0 to 3.0 hectares tend to hire seasonal labor to help with agricultural activities (e.g., harvest, weeding/pruning) and other farm activities. These households represent an important group in the rural economy because they tend to have sufficient assets to benefit from improvements in agricultural production and marketing. In relative and absolute terms these households are not the “poorest” and many are not “poor” in terms of an income based poverty line. These households have the potential to both intensify and diversify production, in both crops and livestock enterprises. Smallholders with more than 3.0 hectares represent a more dynamic segment of the population because they also engage in non-agricultural activities (notably commerce by women household members and transport) and have been buying land from the less fortunate households and/or households out-migrating. In relative and absolute terms most of these households would be considered as “non-poor” and able to intensify and diversify production from both agricultural and non-agricultural activities. (ii)Subsistence-Oriented, But Integrated into Markets. Although the rural economy is characterized by smallholders located in areas generally lacking roads and market infrastructure, with a strong subsistence orientation, there is a surprising amount of commercial activity by most rural households. Most households sell and buy agricultural products, seek off-farm employment, and buy and sell different consumer goods and services. Expenditures on food (including the purchase and preparation of food) are the major consumption items of the majority of households. There seems to be an incredibly high amount of small-scale sellers - mostly women - in formal and informal marketplaces, along with the larger-scale commercial operators who come from urban areas to the rural areas to buy and sell. (iii)CofSee Production is a Major Economic Activity. Coffee is an important cash crop for smallholders in Haiti, with about 200,000 households producing coffee on about 100,000 hectares. Approximately 1 out of every 3 rural Haitian households is estimated to be involved, to some extent, with the coffee sector. Smallholders with 0.5-2.0 hectares of coffee

23 predominate in both micro-regions. Thiotte is considered an area with high production potential. (iv) Non-Agricultural Rural Economy. In terms of non-agricultural economic activity, there are not any “major” enterprises that employ more than a few persons in the micro-regions. That is, there are no major industries or assembly plants. However, there seems to be a rather significant proportion of the rural population that engages in some type of petty trading activities - of their own agricultural products (raw or processed) and/or various types of basic consumption goods. Some men engage in sewing activities with their own sewing machines. There are also various retail and service activities in the tqwn center and home based services. Also, there are activities linked to post-harvest coffee activities such as pulping, drying and sorting. Many children are engaged in activities related to collecting water and fuelwood, besides activities related to farm production, harvest and marketing.

83. Potential Beneficiaries by Household Group. It would seem that the major target group of the project is households with 1-3 ha, which account for about 45 percent of households in the micro-regions. Many of these smallholders have potentially economically viable household farming systems. Other major beneficiaries would come from households with 3-10 ha (15 percent of households) and households with 0.5-1 ha. Probably it would be households with smaller landholdings in the 3-10 ha group and those with larger landholdings in the 0.5-1 ha group. Thus, it can be roughly estimated that the major target group consists of more than 50 percent of all rural households.

2. Economic and financial analyses

84. In addition to many indirect benefits, the improvement of transport conditions will have a direct impact on reducing vehicle operating costs. An economic analysis has been performed for the two selected transport corridors, using the Roads Economic Decision model (RED) to estimate these benefits and compare them with the projected investments. This model is adapted for these two roads because of their low traffic.

85. The RED model was used to (1) ensure that proposed investments are economically justified; and (2) compare various road improvement options that came out of the technical assessment performed during preparation on the two corridors (see next section). More specifically, two options were proposed for the Northern corridor (depending on the decision from other donors or the Government to ensure the rehabilitation of a section, for which an on- going contract is stalled). To compare these two options based on results from RED, a dynamic strategic planning model was used.

86. Traffic growth assumptions. On the two roads, traffic generating during the first years following improvement works is expected to be significant. Indeed, the situation in the two micro-regions can be characterized by a heavily constrained demand for transport due to the extremely deteriorated conditions of road infrastructure. In particular, most of the traffic is generated by trucks, pick ups and buses that people use to access markets in order to sell or buy goods. A one-way trip takes between three and five hours, resulting in only one rotation per day. If travel time could be halved (which is a realistic objective if roads could be improved), traffic

24 could be at least doubled in the very short term (more considering the introduction of new transport service providers). 87. Exogenous benefits. In both micro-regions, exogenous benefits are expected to be significant, though difficult to estimate. In the case of the Southern micro-region, potential benefits on the “coffee farming system” could be assessed, and used in the RED simulations.

88. Sensitivity analysis. A sensitivity analysis was performed for key variables used in the model (eg. traffic estimations, traffic growth, investment costs, exogenous benefits, probability that first section of Northern corridor is rehabilitated by other donors or by GOH).

89. Results: (i)Northern corridor: In the case of the Northern corridor, the economic analysis has established that the proposed investment is largely economically justified in all cases. Population density and existing traffic justify high cost rehabilitation technologies (asphalt treatment). Nevertheless, the comparison between the two technical options remains unclear, since the preferred option changes with small variations of key variables. The detailed engineering and feasibility studies to be performed at the beginning of project implementation - as well as further discussions with other donors and the Government regarding the first section - should help refine the choice between the two options. (ii)Southern corridor: In the case of the Southern corridor, the economic analysis suggests that the proposed investment (low cost improvement technologies with spot interventions) is also economically justified (especially given the underestimation of exogenous benefits for which only the impact on the “coffee economy” was taken into account). Nevertheless, the sensitivity analysis shows that this conclusion is not valid if investment costs or traffic growth were to be significantly less favorable than expected. In this case, the detailed engineering and feasibility studies should help refine the cost estimates with a focus on limiting costs while keeping the goal of achieving sufficient impact on the improvement of transport conditions (travel time in particular).

3. Technical

90. An assessment of conditions along the road corridors was performed during preparation. This assessment resulted in the identification of improvement options considered affordable within the budget but appropriate for the particular conditions in each micro-region. The options for individual road segments were combined to form scenarios for the economic analysis.

91. In the north, sealing the unpaved sections of the Carrefour la Mort - St Raphael road was considered essential in order to provide an appropriate service level for road users and reduce maintenance demand. High rainfall, steep terrain, poor subgrade and difficult drainage conditions combine to make unpaved roads in this area particularly difficult to maintain. This is especially the case for the project road which also carries substantial traffic. Upgrading is now strongly justified. The suppressed demand for transport services in the area is expected to result in substantial generated traffic once the road is improved.

25 92. The project road in the north is part of the RN3 which is the most direct route between Port-au-Prince and Cap Hatien. Improvements have been considered in the context of a strategy for upgrading the entire corridor. National road standards, in terms of width, have been adopted, although only minor changes to the alignment are anticipated. A 6 m wide pavement with double bitumen surface treatment on crushed stone base and 1 m wide unpaved shoulders has been adopted for the project estimate, which also provides for paving the central parts of Dondon and St Raphael with block paving. The cost of asphalt concrete is prohibitive at current prices, but could be considered as an alternative if it becomes more affordable as more asphalt contracts are awarded in the country.

93. Rehabilitation of the Carrefour la Mort - Barriere Battant section might be completed under separate financing. The stalled contract on this section provided for pavement reconstruction in asphalt concrete. The other paved section from Barrikre Battant to Carrefour Menard near Grande Rivikre du Nord is included in the project. This section will be restored to its original standard using double bitumen surface treatment.

94. The road in the south is at a relatively early development stage and has yet to receive major investment. Traffic levels are very low outside Thiotte. The spot improvement approach adopted on recent CDD and EU financed projects has had a limited impact in removing some of the more difficult obstacles in the steep rocky terrain, but the work done so far has been insufficient to significantly reduce travel time. The use of concrete surfacing on the steeper slopes is an expensive but effective solution, given the limited technology available to the community groups who carried out the work.

95. The objective of the project is to extend the spot improvements to cover the whole road and reduce travel time to about two hours (from the present 3.5 hours). The use of rock breaking equipment (compressors and rock chisels) to prepare the road platform will allow economies in the use of materials and provide a more durable result. It is expected that about 5 km of the total length will require concrete treatment. Ride quality on other less steep sections will be improved through construction of cushioning layers on the rock with macadam surfacing, retained within masonry stub walls.

96. The road through Thiotte will also be improved using the spot improvement approach. An allowance has been made for block paving of the centre of the town near the administrative building and market and providing concrete drainage channels.

4. Fiduciary Financial Management

97. A financial management capacity assessment was conducted for the project. The objective of the assessment was to determine whether the project’s implementing entities have acceptable financial management arrangements including the accounting system, reporting, auditing, and internal controls. The entities’ arrangements are assessed in terms of their capacity to record correctly all transactions, and balances support the preparation of regular and reliable financial statements, safeguard the entity’s assets and address inherent fiduciary risks. They are also subject to auditing arrangements acceptable to the Bank. The specific activities and

26 circumstances of the project were also factored in to ensure that the entities' financial management system is not only acceptable in general terms but it is also commensurate with the needs and the unique nature of the project.

98. Although there are significant country risks because of major weaknesses in the public financial management system and corruption issues, the impact of these risks on the project is likely to be limited given the defined implementation arrangements. These arrangements do not rely on the government's system. Instead they build on experienced implementing entities with proven track record. The project itself does not present any significant risk and its overall risk is rated as moderate. The three implementing entities (MTPTCPIU, PL 480 and FER) have adequate financial management systems or, in the case of FER, are in the process of installing one. This includes adequate staffing, accounting system, and procedures. The operational manual (an advanced version was available at the time of negotiations), would have to be approved as a condition for the project to become effective.

Procurement

99. Procurement for the proposed project will be carried out in accordance with the World Bank's "Guidelines: Procurement under IBRD Loans and IDA Credits" dated May 2004; and "Guidelines: Selection and Employment of Consultants by World Bank Borrowers" dated May 2004, and the provisions stipulated in the Legal Agreement.

100. The Borrower, at appraisal, developed a procurement plan for project implementation which provides the basis for the procurement methods. This plan was agreed between the Borrower and the Project Team at negotiations. The Procurement Plan will be updated in agreement with the Project Team annually or as required to reflect the actual project implementation needs and improvements in institutional capacity.

101. The key issues and risks concerning procurement implementation for the project arise from the many weaknesses in the Haitian public procurement system. These weaknesses were identified by a CPAR prepared by Bank in 1999 and confirmed by the Government and multiple donors in the context of the Interim Cooperation Framework (ICF) adopted in 2004. The Bank's Economic Governance Reform Operation (EGRO) and recently approved Economic Governance Technical Assistance Grant (EGTAG), seek to address many of these problems through their procurement components and the Government has already taken several actions to improve procurement institutions and practices.

102. In addition to these broader reforms supported by other Bank initiatives, procurement risks will be mitigated in the case of the proposed project by close supervision, including full prior review of all contracts financed by the grant, and by the choice of PIUs that have demonstrated good performance in managing procurement.

103. During preparation, the Bank assessed the project implementing units' capacity. This assessment confirmed that these units have considerable experience in managing procurement financed by multilateral development banks: Procurement activities under Component 1 of the project will be carried out by the PIU in MTPTC (UCE) which has successfully managed

27 procurement for two large IDB infrastructure projects. Procurement activities under Component 2, will be carried out by the Project Coordination Unit (PCU) in the PL-480 Management Office, which demonstrated a satisfactory performance to date in implementing a LICUS grant; the community driven development component of the Bank’s Emergency Recovery and Disaster Management (ERDMP) project; and the Bank’s Community Driven Development (CDD) project .

5. Social

104. A participatory social assessment consisting of structured and unstructured meetings and interviews with stakeholders6 was conducted during project preparation to elicit information and seek guidance as input to project design and assess benefits and risks related to project implementation (see Annex 15) This social assessment should not be construed as a one time only endeavor. Key findings are summed up below: (i)Rural institutions. A general finding borne out by the social assessment is that in the two selected micro-regions, project implementation will take place in a context of strong social cohesiveness. Rural cohesion is demonstrated by the continued importance of traditional, reciprocal labor groups - cornbites and eskwads - that provide necessary labor for peak, seasonal needs to Haiti’s small farms. The consultations have identified a strong associational life both at local and regional level. NGOs, associations and government agencies network formally and informally through a variety of mechanisms. There is strong, informed awareness of local development needs across the various categories of stakeholders. This significant capacity of local communities is likely to facilitate the creation of micro-enterprises for routine road maintenance (sub-component 1.2) as well as the territorial planning process (sub-component 2.1). (ii)Gender. An analysis of gender relations and the role of women show that women play a pivotal role in Haiti’s rural society, notably as health care providers and spiritual leaders. They also play a key role in the marketing of agricultural products, and on that account are likely to be one of the population segments targeted by the project that should benefit most from project interventions. (iii)Stakeholders ’ consultation about project design. The consultations identified strong support, and demand, for the proposed road rehabilitation project in both regions. All consulted stakeholders - including local producers, local authorities and NGOs, and representatives of the Ministry of Public Works in Port-au-Prince - argued that the proposed road project may contribute significantly to supporting local livelihoods and inclusive economic growth. Rural Haitian livelihoods are market-oriented, both among poorer and more prosperous farmers. Landless are even more dependent on access to labor and product markets. The two selected regions make no exception; the road rehabilitation project is likely to enhance market access and increase income earning opportunities across a broad range of socio-economic strata.

Stakeholders is defined here as those who are affected by the project (positively or adversely) and therefore are relevant interlocutors for the successful implementation of the project.

28 105. Since the project entails the rehabilitation of existing roads, it is likely to have only minimal indirect adverse impacts on the target population’. The following are the major risks that may arise and therefore should be addressed during implementation: Involuntary resettlement: The road rehabilitation on the main two stretches under consideration may involve some involuntary resettlement as defined by the Bank’s social safeguards policies, even assuming only a minimal enlargement of roadways, to deal with this issue. The Ministry of Public Works has prepared, adopted and published a resettlement policy framework for the appropriate consultation and compensation mechanisms. It was confirmed that this ministry has the required institutional capacity to address resettlement issues that may arise as a result of project implementation Adverse health impacts: The rehabilitated roads may impact adversely on people’s health due to dust problems. Respiratory problems are already reported. The dust problem would increase with heavier and faster traffic if the road rehabilitated remains unpaved. Moreover, the pedestrian traffic on roads is dense and children who walk to and from school constitute a large group. Increased traffic would greatly increase the risk of serious accidents with these school children. Environmental risks: Some of the road stretches to be rehabilitated are traversing environmentally-sensitive areas. This poses risks for the sustainability of road works, caused for instance, by: (i)the erosion of river banks where the road is located near the river (e.g., the black spot after Grande Rivikre du Nord toward Bahon); and (ii)the deforestation which increases water flows over the roads in the rainy season (e.g., the Grand Gilles area between Cap Haitian and Dondon); this risk is all the more serious since the road rehabilitation itself may add an incentive for increased charcoal production, the leading cause of deforestation.

Haiti - Dominican border related difficulties: The gains expected from increased traffic towards the Dominican border in the Southeastern micro-region may be offset by a weak and likely corrupt border control system. Increased smuggling and occasional harassment of Haitians crossing the border, including through illegal taxing or confiscation of goods, have been reported and are among the difficulties that may offset the benefits of increased cross border traffic, although the exact extent of the phenomenon is impossible to quantify.

Environment

106. The Government is very aware of the catastrophic state of the environment in Haiti and of the constraints that it represents for long-term sustainable economic growth and human development. Of particular concerns in inland rural Haiti are land erosion (and land management more generally), natural disasters, water resources, biodiversity and forest management and waste management in towns and markets.

107. The project aims at improving transport infrastructure in Haiti, and to improve territorial development. This will lead to many environmental and social benefits at the local and regional levels. The risks of generating negative environmental and social impacts locally are minimal and the Government and the task team are confident that the provisions made for mitigating and

’It is to be noted that there are no indigenous people in the micro-regions covered by the project, therefore the related safeguards do not apply.

29 monitoring these potential impacts will prohibit the p.otentia1 pre-identified impacts from happening and will equally cover for unexpected <>impacts.

108. Because of the lack of precise and definite information on the location, magnitude and nature of the future works, the work on safeguard policies has resulted in the preparation of frameworks, which describe the mechanisms to put in place for environmental management.

109. The environmental safeguard policies triggered by the project are: - OP/BP 4.01 on Environmental Assessment - OP/BP 4.36 on Forests

110. These policies have been addressed through the preparation and adoption of an Environmental Management Framework. The public consultation and information disclosure aspects are discussed later in Annex 14.

111. The required preparation of an Environmental Assessment of the works to be funded is consistent with the requirements set forth in GOH's October 12'h, 2005 Decree on Environment. It is expected that this framework decree will be shortly ratified by the new Government.

7. Safeguard policies

112. Social safeguards, including the involuntary resettlement policy framework, and the environmental policies and procedures are described above. Safeguards will be taken into account with due compliance with Bank standards and requirements. The safeguard policy on cultural property has also been included as required by recent Bank policies. In the event that goods or sites that might appear culturally significant are encountered during project implementation, work will be stopped and the relevant authorities called upon to investigate the site. Ifthese goods and sites are found to be of cultural significance, the related work program will be redesigned to avoid any harmful effects or otherwise cancelled altogether. These requirements and those related to environmental policies will be incorporated in the Project Operational Manual.

* By supporting the proposed project, the Bank does not intend to prejudice thefinal determination of theparties' claims on the disputed areas

30 Environmental Category: B - Partial Assessment

8. Policy Exceptions and Readiness

113. There are no policy exceptions and the project is ready to be implemented.

31 Annex 1: Country and Sector Background HAITI: TRANSPORT AND TERRITORIAL DEVELOPMENT PROJECT

Overall Context

1. Haiti is the poorest country in the Western Hemisphere and one of the most disadvantaged in the world. The country recently celebrated the bicentennial of its independence against a backdrop of deep political and social turmoil. The causes of this situation are complex and long-standing. In recent decades, Haiti has struggled to emerge from a cycle of political instability and internal conflicts that has devastated its economy, further weakened state institutions, multiplied poor governance practices, augmented levels of poverty and, at times, prompted the withdrawal of external assistance to the government. Throughout the 1990’s and early 2000’s, the socio-economic situation continued to decline, with the economy declining by a real average annual rate of about 0.8 percent between 1980 and 2003.

2. As a result, poverty is endemic, inequality is severe, and Haiti’s social indicators are among the lowest worldwide, signaling a chronic humanitarian crisis. Some 78 percent of its population of 8.6 million live below the poverty line, with 54 percent in extreme poverty. On average, the per capita income in extremely poor households is only 44 percent of the extreme poverty line, which is comparable to the poorest countries in Sub-Saharan Africa’. Haiti ranks 153rd (out of 177 countries) in the Human Development Index. Income inequality is among the highest in the world, with the poorest 20 percent accounting for 1.5 percent of incomes and the wealthiest 20 percent accounting for 68 percent.

3. Transition government. A Transition Government headed by President Boniface Alexandre and Prime Minister GCrard Latortue was put in place in March 2004, following the resignation of President Jean Bertrand Aristide. The Transition Government initiated a program aimed at increasing political and social stability and jump-starting the economy. During the Spring of 2004, the Transition Government of Haiti led the donor community in putting together an Interim Cooperation Framework (ICF) to guide future efforts in 2004-2006. Because of its broad experience in the areas of rapid, short-term employment generation and local development, the World Bank was invited by the Government to help design and support the implementation of the sections of the ICF regarding employment creation and local development. The ICF focuses on the broad themes of the Government’s transition strategy and seeks a national reconciliation process involving the socio-economic situation of all components of society. The Government’s immediate priorities were identified as: 1) strengthening political governance and promoting national dialogue; 2) strengthening economic governance and contributing to institutional development; 3) promoting economic recovery; and 4) improving access to basic services. The elections that took place in February 2006 are an indication that political and social stability have increased (at least to some acceptable level), and there are some encouraging signs with respect to the economy, especially the agricultural sector.

Haiti Living Conditions Survey 2003 draft report; according to international poverty lines of US$2 PPP and US$1 PPP per capita per day.

32 The Haitian rural economy

4. This section and the next draw heavily on the recent Bank Agriculture and Rural Sector Economic and Sector Work (the “Agriculture ESW”) Haiti: Diagnostic and Proposals for Agriculture and Rural Development Policies and Strategies (World Bank, 2005).

5. Haiti remains primarily a rural and agricultural country with almost 5 million of 8.6 million people living in rural areas. About 60 percent of the rural population earns less than US$1 a day’. Smallholder agriculture dominates the rural economy. Many off-farm economic activities are also linked to agriculture. Smallholder agriculture is characterized by small household landholdings, an orientation toward production of staple foods combined with some cash crop production. About eight out of every ten rural households have access to land and the majority of them own (usually informally) and cultivate their own plots using simple hand tools and minimum purchased inputs and improved technologies. Land holdings are small and dispersed, with an average of 1.8 hectares per household. To survive, most smallholder households need to have diversified livelihoods that also include off-farm agricultural and non- agricultural activities, such as petty commerce. Remittances from migrants in urban areas or overseas are also an important source of income.

6. Agriculture continues to play a dominant role in the Haitian economy, contributing to almost 30 percent of GDP (2002 figure) and accounting for around 50 percent of overall , employment, two thirds of employment in rural areas, and three fourths of employment for the poor. But the overall importance of the agriculture sector in the national economy is declining. This is because of a decline in productivity due to depleted natural resources, poor know-how, and the disruptive effects of political turmoil, poor security, natural disasters, and rapid trade liberalization. During the embargo between 1991 and 1994, Haitian farmers suffered from decapitalization and were not prepared for the liberalization of their sector. Farmers have not yet recovered from this process of rapid liberalization, as production of agricultural goods such as rice and coffee has continuously decreased, replaced by imports. Furthermore, in general, international commodity prices have not been favorable for traditional agricultural export commodities and the terms of trade have declined. On the other hand, imports of petroleum are an increasing burden on the economy.

7. Productivity in rural areas is low and the cost of doing business is high. The competitiveness of smallholder agriculture has declined in recent decades resulting in persistent poverty, out-migration and environmental degradation. Reasons include: (a) lack of transport, communications, post-harvest and market infrastructure; (b) lack of information on prices, markets and technologies; (c) insufficient applied research, training and extension for profitable and sustainable farming systems; (d) weak producer associations and public-private partnerships, and (e) limited capacity and resources at all levels of governmental institutions. Macro and sectoral policies have also not provided appropriate incentives for smallholders to increase production of staples or cash crops.

The “Enquete sur les Conditions de Vie en Hayti” (ECVH) began in 2001 and published its findings in 2003 under the auspices of the Institut Haytien de Statistique et d’hformatique (IHSI).

33 8. Underlying factors for the decline of agriculture. There are a number of interlinked and reinforcing factors that have contributed to the decline of the rural sector in Haiti. Besides the factors mentioned above, demographic and environmental pressures on a limited natural resource base have been a major factor. Agricultural output has suffered from a growing population farming a finite area of land. There has been the division of cultivated land into smaller and smaller plots, so that by the 1990'~~78 percent of Haiti's farms had an average size of less than two hectares, with significant differences in land pressure by Department. On many of these small farms the soil has become progressively exhausted and less productive. This problem has been compounded by the country's mountainous terrain and the extensive deforestation which, in turn, has led to the severe erosion of fertile topsoil, with an annual loss of 3 centimeters of top soil per year. This decline in soil productivity was one of the causes of a gradual decrease of agriculture production estimated at between 0.5 percent and 1.2 percent per year over the last ten years."

9. Cycle of Poverty. Many Haitian smallholders have found themselves locked into a self- destructive cycle in which the cutting of trees for charcoal production, and the farming of land higher up the mountainsides, can possibly prevent short term financial disaster, but only create greater problems in the long term. Moreover, the agricultural sector is characterized by a lack of access to capital needed for physical goods such as tools, machines, fertilizers, transportation, and infrastructure. There is minimal public support for new investments, and private investment is hampered by weak rural institutions and the lack of credit. Because of the poor state of the rural transport infrastructure, it is often cheaper to bring imports to rural towns than to collect and transport local products. Hence new trading patterns have developed in competition with the traditional rural agricultural economy. These new trading patterns might be efficient given constraints of poor infrastructure, but this situation might change significantly with improved infrastructure and other type of support to local producers.

10. Diversity of agro-ecological zones and potential. The total land area of Haiti is 27,560 square kilometers, with mostly rough and mountainous terrain. The climate is mostly tropical with high rainfall, but semi-arid in some coastal areas that experience periodic droughts. The highly differentiated elevations and rainfall patterns are related to the varied - and limited - soil potential and land use patterns." Haiti's agro-ecological zones provide potential for a variety of crop and livestock enterprises that could trigger productivity and agricultural development through production for the international and domestic markets. In the Southern department around the plains of Les Cayes, research and diversification of vegetable and tuber crops,

loHaiti is especially exposed to erosion as almost two-thirds of the rural areas is at a slope of more than 20%, and 40% of the land is above 400 meters in elevation. The major consequence lies in soil erosion (36,6 million tones or 12.000 ha per year) and therefore an annual productivity loss between 0.5 and 1.2%." 75% of the cultivated areas, which are mainly located in the hillsides, have no tree/forested cover and 25 of the 30 watersheds are heavily, if not completely, deforested. l1Land use patterns reflect topology, rainfall and soil quality, with forests and perennial crops dominating high elevationhigh rainfall areas. Pastures and savannahs are spread throughout the coastal areas, but these are not necessarily high productivity farming systems. Areas where annual crops predominate are spread through the country. The limited agricultural potential of large parts of Haiti is exacerbated by problems related to soil erosion.

34 combined with inputs and fertilization techniques have permitted increased production to three annual cycles with yields of about 3 metric tonshdcycle.

11. Reversing the negative trends. From an agro-ecological and environmental standpoint, Haiti’s low and declining land productivity is not irreversible at least in some areas of the country. The increased use of techniques such as grafting for mango trees and the establishment of supply chains for export of products such as essential oils, mangos and coffee show that their is potential for synergies of different actors to increase production in the agricultural sector. In hillside areas there have been successful projects by USAID, FA0 and others to (re)introduce agro-forestry and coffee12.

12. Agriculture has the potential to be an engine of growth, reducing poverty in rural areas. Agriculture continues to play a dominant role in the Haitian economy, contributing almost 30 percent of GDP (2002 figure) and accounting for around 50 percent of overall employment, two thirds of employment in rural areas, and three fourths of employment for the poor. Haiti’s agro-ecological zones have potential for a variety of farming systems that can benefit from increased productivity and lead to agricultural development and broader rural economic growth. The Agriculture ESW identified several ‘lead’ crops with high value added (in most cases using labor-intensive cultivation practices) that can respond to market demand. In the short-to-medium term, it is important to support the agricultural sector as a key engine of growth as it can produce multiplier effects for the rest of the rural economy.

13. The IDB recently commissioned a set of background papers to assess the potential of various agricultural commodity supply chains (filieres). Damais (2005) summarizes the findings of these commodity-specific analyses and highlights how poor road and market infrastructure is a major constraint that holds back agricultural growth potential. This is especially true for agricultural commodity exports, which require high quality and timely delivery. Smucker, et. al. (2005) reports on the economic potential for production and exports of coffee, mango, and cocoa along with the associated environmental benefits of the farming systems (that usually include avocado, citrus, banana and other crops and livestock) associated with these tree crops. The importance of improved post-harvest handling and access to roads and markets is highlighted as key to realizing this potential.

Constraints to Rural Growth

14. Constraints to rural growth are multi-dimensional and include deficient or inadequate infrastructure, institutions, human capital (need for investments in education, health and nutrition), natural resource management, access to technology, and agro-ecological conditions and other location factors. There are a number of structural impediments to the development of the rural sector and to increasing the productivity of the agricultural sector. However, there is potential to remove many of these constraining factors by addressing them directly through various interventions.

l2While deforestation and soil erosion proceeds, and the condition of the Haitian environment is alarming, pilot projects in ago-forestry (such as CIDA project in Nippes), in supporting hillside agriculture (USAID-HAP) and in watershed management (FA0 in Marmelade, Artibonite) show that environmental conditions allow the increase of agricultural productivity.

35 15. High transport costs and lack of year- round accessibility. Recent studies that examine the cost structure of different crop and livestock enterprises have found that marketing and transport costs often range from 15 percent to 30 percent of gross revenues, and are often even higher. Another recent report on the potential of different agricultural commodities states that: “Transport plays a major role in the structure of the coffee industry. Farmers and traders consistently cited as their highest priority improved road infrastructure to ensure that the roads from the local processing centers to the central processing center . . . , are reliable and accessible by trucks and other transport. Poor roads exemplify the risks involved in transporting agricultural products ... Many people feel that poor roads have discouraged competition among transporters, thus leading to higher transportation costs. The bad road conditions lead transporters to experience higher vehicle repair costs and a much slower turnaround time, which end up increasing the marketing costs (DAI, 2001, p. 12-13).”

16. The poor state of Haiti’s roads, especially secondary and access roads, makes access to even local markets difficult, let alone regional or national markets. In 1999, Haiti had only 720 miles of paved roads out of a total of some 3,000 miles (Street, 2004, p.11; EIU, 2003). The situation is especially bad in rural areas. “There is virtually no infrastructure in the countryside, so that ceteris paribus, living in rural districts makes for a lower return to work efforts (Lundahl, 2004, p.2).” Clearly, the lack of road infrastructure is a major constraint to economic growth in rural areas. How is it possible for rural Haitians to be competitive nationally or internationally with this situation?

17. Roads and poverty in Haiti. In a recent poverty analysis for Haiti, it was found that “Roads play multiple roles associated with poverty alleviation and the improvement of the poor rural population’s quality of life. Roads are essential elements for the production and marketing of agricultural products, and for stimulating economic activity that results in greater job opportunities and better income levels. They also facilitate access to labor markets and allow greater labor participation by the rural population in non-agricultural activities outside rural areas. In addition, they contribute to improved quality of life by facilitating communication and access to services, enabling greater social participation by more distant sectors (Verner, 2005, p.46)” In Haiti, “There is evidence that the nonfarm sectors are more vibrant in more populated areas which are connected to markets and enjoy certain minimum standards of infrastructure . . , . Access to infrastructural services such as water, electricity, and roads are important for producer income generation. Farmers with access to roads (paved and gravel), water and electricity earn statistically significantly higher incomes than do farmers without access to these services (Verner, 2005, p.56 and 66).” Verner (2005) concludes that it is key that government make investments to improve the road infrastructure to generate new economic opportunities and to help rural households take advantage of the opportunities.

36 18. Large post harvest losses and inadequate infrastructure. In a recent report on sources of growth in the Haitian economy, Lundahl (2004) strongly advocates major investments in road and market infrastructure as a necessary condition for stimulating agricultural growth. Specifically, Lundahl (2004, p.43) claims: “Broad based growth requires improvements in the efficiency of transport and marketing and reductions in the costs of doing business. Severely deteriorated roads affect agricultural productivity and selection of crop and livestock enterprises. A high priority is placed on rehabilitating roads and associated market infrastructure and institutions. “The challenge to rural development is the acceleration of agricultural productivity growth through technology generation and diffusion, higher-value production and value-added enterprises, and the promotion of productive off-farm activities in rural areas (IDB, 2004, p.9).”

Guiding Principles and Priorities for Rural Development

19. Territorial approach to rural development. This approach applies a holistic framework considering together economic, growth, natural resource management, social development, and institutional building of local communities. Key elements of the territorial approach are: (i)the recognition that agriculture needs to be an engine for growth in rural areas; (ii)the use of area specific strategies; (iii)the use of a multi-sector approach; (iv) the importance of linking the rural economy to urban markets; (v) the inclusion of a wide range of stakeholders in economic development planning and implementation; and (vi) the coordination of national, regional and local development strategies. The territorial development approach is being applied in the European Union and Canada and is now being promoted by IDB and the World Bank in selected Latin American countries (e.g., Chile, Mexico, Peru).

20. Analysis of the Haitian rural sector led to the adoption of a territorial approach tailored to the unique conditions of the country. Several guiding principles and priorities have been identified for stimulating rural growth and reducing poverty in Haiti.

21. Need for region-specific strategies. With widespread rural poverty and the many dimensions of this poverty, it is impossible to simultaneously assist all areas of the country at one time. Also, there are not sufficient resources available to make a difference if they are spread thinly throughout the country. Since Haiti is characterized by diverse agro-ecological conditions with different agricultural potential and different access to roads and markets, region-specific rural development strategies should be articulated. There is a need to identify ‘micro-regions’ that correspond to an economically-integrated area that encompasses several communes sharing similar agro-ecological conditions and production potential, and having common economic interests and also sharing common roads, marketplaces, and other basic infrastructure.

22. Agriculture-led rural development. With Haiti’s high levels of rural poverty and prevalence of smallholder agriculture, any rural development strategy needs to be led by growth in agriculture. Moreover, smallholders must be at the forefront of the strategy. Smallholders with larger landholdings should be able to increase production and productivity using household labor and hired labor, while other smallholders with very small landholdings should benefit through increased demand for labor. All smallholders should benefit from increased variety and lower costs of production inputs and consumption items, and better access to social services. There is a

37 need for smallholders to transition into higher-value crops, which requires greater market integration. However, as noted throughout this annex, smallholders face multiple constraints.

23. Linking farmers to markets. Recognizing the complexities of rural Haiti, and many challenges facing smallholders who have minimal assets and poor access to roads and markets, it is apparent that the major constraint that needs to be dealt with is the poor road and market infrastructure. Rural development should concentrate on infrastructure improvement to provide better access to markets for peasant farmers. This should include funding for primary and secondary road building and development of access roads. Improvements in rural storage facilities are also vital, as is support to rural micro-enterprises. Year-round access is key to increasing agricultural production and productivity. There is a need to identify urgent investments to ensure that essential roads are usable all year round. This should lead to decreases in transport costs and reduce transport times, and increase transport flows. Road investments and maintenance should also create jobs in road rehabilitation and maintenance.

24. Harvest low-lying fruits As noted, because of poor road and market infrastructure, smallholders incur considerable losses of income. Improving road and market infrastructure should lower post-harvest losses and maximize value-added from existing production and literally allow smallholders to “harvest the low-lying fruits.” This strategy should provide rapid short-term increases in incomes for smallholders, increase confidence in markets and provide incentives to increase production and productivity.

25. Need for complementary investments. Dealing with the poor road and market infrastructure is a necessary, but not sufficient, condition to stimulate agriculture-led rural growth. To energize smallholder agriculture complementary investments are needed in technical assistance and other support services for agricultural production and marketing, financial services, along with investments in social sectors (education, health, nutrition), and other infrastructure (water and sanitation, energy), in governance, participatory methods and group formation, and more. For example, the Agriculture ESW concludes that even in areas where there is potential for increased productivity, improved well-being will largely depend on the confluence of complementary assets and support from non-agricultural sectors and that there is a need for multi-sector interventions.

26. Stakeholder involvement is key. Following from the experiences of the CDD project, it is important to strengthen rural institutions in Haiti and to be more inclusive. Stakeholders should be involved in a participatory planning approach not only to select the right investments, but also to promote project ownership. However, in the short-run it is important to show results in the field, so participatory processes ‘should be oriented towards providing practical, tangible results, Greater donor coordination is also critical and should support participatory planning processes and be responsive to local demands.

Overall Bank strategy for Haiti

27. In line with the strategy outlined in its 2003 Haiti Country Briej the Bank has supported, through a Post-Conflict Fund (PCF) grant, the design and implementation of a Community-Driven Development (CDD) pilot project (US$ 1 million). Through December 2004,

38 some 44 community subprojects were identified, selected, approved and implemented, using an open, transparent and democratic process with strong community ownership and support. These include productive, infrastructure and social subprojects.

28. In December 2004, the Bank approved a LICUS grant (US$l.O million through September 2005) to support a Labor Intensive Basic Infrastructure Rehabilitation Pilot Project. Implemented by the existing PL-480 Management Office of the GOH, the pilot project aims to strengthen government capacity to manage and implement labor-intensive, small-scale basic infrastructure rehabilitation programs and projects, using the CDD approach already field-tested and described above.

29. In January 2005, the Bank endorsed a Transitional Support Strategy for Haiti, which includes up to $150 million in credit and grant commitments over a two-year period. The two-year strategy aims to restore hope by supporting: (i)basic services provision; (ii)job creation; (iii)rehabilitation of areas devastated by floods in 2004; and (iv) community initiatives in local development. The strategy also seeks to restore credibility in Haiti’s public institutions by strengthening economic governance and institutions, bolstering efforts to fight corruption, improving transparency, and promoting inclusion and consensus-building on development priorities.

30. Under the TSS, the Bank has already approved an Economic Governance Reform Project (EGRO, US61 million), an Emergency Recovery and Disaster Management (US$12 million), a Community Driven Development Project (CDD, US$32 million) and several Low- Income Country Under Stress (LICUS) grants, including for post-natural disaster rehabilitation.

39 Annex 2: Overview of the road sector HAITI: TRANSPORT AND TERRITORIAL DEVELOPMENT PROJECT

Rural infrastructure and the productivity of the rural economy

1. One of the most important bottlenecks behind the productivity problems of Haiti’s rural economy comes from extremely limited access to infrastructure services. In the rural areas, basic infrastructure (e.g., water and irrigation, feeder roads, electricity, and sanitation) is virtually absent or severely depleted, reinforcing isolation and exclusion.

2. The extremely bad condition of transport infrastructure has a dramatic impact on productivity in rural areas and they accentuate the isolation of Haiti’s rural population. According to a 2000 survey of the rural female population, more than half of the rural population has no access to transport services and more than a third of it is accessible only through a very deteriorated rural road. In such conditions, opportunities to increase social capital through access to basic social services (health, education) but also to generate income through access to markets and trading centers is very limited: about 40 percent of the female rural population in Haiti lives more than one hour away from a secondary school, 54 percent more than one hour away from an hospital, 30 percent more than one hour away from a daily market and 33 percent more than one hour away from the nearest shop (see table 1).

Table 1: Access to social services and economic opportunities in rural areas

Primary school 92 4 4 Secondary school 31 17 38 Hospital 24 16 54 Health center 45 16 39 Pharmacy 39 17 44 Daily market 37 19 31 Shop ’ 42 14 33 Public transportation’s regular stop 39 17 30 Source: EMMUS-I11Haiti 2000.

3. The poor conditions of Haitian roads has a direct impact on transport costs. Several sources (CARE, UAP) from the mid-1990s report that transport costs for food aid double between a very deteriorated road and a road in acceptable condition^.'^ Overall, the very high logistics costs (land transport but also ports and airports) result in an additional cost of up to 30 percent for certain imported goods. l4Twelve years ago, transport problems were already ranked by rural producers as the greatest bottleneck to the development of productive activities. According to a 1993 study”, transport costs until the nearest market represented for local producers 25 percent of selling price and 45 percent of net margin. Today, the extreme level of l3Source: Haiti: The Challenges of Poverty Reduction, Banque Mondiale (1998). l4Source: U.S. Department of State - FY2000 Country Commercial Guide: Haiti. l5Source: SECID, 1993 citC par Haiti: The Challenges of Poverty Reduction, Banque Mondiale (1998).

40 deterioration of the Haitian road network suggests that the impact of transport costs on the productive sector is even greater. A 2004 study that analyzed the cost structure for a number of agricultural products traded in local markets has established that all transport costs (for goods but also those incurred by the trader) ranged between 20 percent and 80 percent of the net margin (see Figure). Transport is, by far, the largest expense incurred by traders - other than the cost of buying these products from producers.

Box 1: Impact of poor transport conditions on the trading chain in rural Haiti. Given the very poor conditions of transport infrastructure and the old age of vehicles, travel times for goods in Haiti remain very uncertain and are generally longer than expected. Many problems can occur: the most common is vehicle failure, which can delay by one or several days the arrival of the truck expected for market day, or delay amval to Port-au-Prince. One woman trader from the Jacmel region estimates that, on average, “her” truck has a problem every other trip. Long breakdowns (more than a day) can force traders to spend an entire night in the truck with their goods, with all the risks associated given the increasing insecurity on Haitian roads. Itineraries are therefore adapted taking into consideration breakdowns and time schedules: a truck arriving from the Southern region must absolutely arrive in Petit-G6ave before 8 p.m.; passed this hour, the driver will prefer spending the night in Petit-GGave instead of taking the risk of driving at night across the notoriously dangerous Morne Tapion (high risks of thieves’ attacks or accidents). Trucks can therefore arrive anytime in Port-au-Prince, and the market of La Croix-des-Bossales is active practically 24 hours a day. If the breakdown occurs near an urban area (for example in the area of Carrefour for a truck going to La Croix-des-Bossales), traders may decide to sell their goods on the spot, particularly for perishable goods (eg. fruits), to the benefit of other traders who will negotiate a lower price. In all cases, the uncertainty associated with transport services in Haiti has an impact on the income earned by intermediary traders such as the Madumes Sara. This uncertainty can increase fixed costs associated with travel (eg. an additional night on the road to Port-au-Prince) or it can generate the full loss corresponding to a trading cycle (if the woman trader arrives in La Croix-des-Bossales with a delay exceeding two or three days, she will not have sufficient time to sell her goods and return to the production market to refurnish her stock at the next market). Uncertainty and poor transport conditions may also result in lower-than-expected selling prices (damaged goods, sale on the spot before arriving in Port-au-Prince, etc.). Sozme: cccaractkrisation des circuits de commercialisation de quelques produits exportables non traditionnels>>,report by F. Pierre and G. Damais, June 2004.

41 Figure 1: Transport as a % of net margin for a few agricultural products traded in local markets.

W h ite Yellow Pum kin Chile lgnam e lgnam e (Giraum on)

PTransport costs for goods .Transport cost for traders I Source: F, Pierre and G. Damais (2004).

Overview of the road sector

4. About 80 percent of the country’s overall traffic is by land. With a road network of about 3,400 km for a population of 8.6 million people (including 62 percent living in rural areas) and a geographical area of 28,000 km2, road density in Haiti remains low compared to the national average in Latin America and Caribbean. Haiti has 0.4 km of roads per 1,000 people (compared to 7.1 for the LAC region as a whole) and 0.12 km per km2 (compared to 0.14 for the LAC region). The comparison is even less favorable when taking into account recently paved roads or roads in acceptable conditions. Nevertheless, the high population density and the proportion of the rural population suggest that the road network plays a critical role in ensuring the mobility of goods and people.

5. The Haitian road network includes three categories of roads: (a) The primary network (routes nationales) connects the most important cities and represents about 690 km (or 20.3 percent of the total network). Traffic volume is between 1,000 and 4,000 vpd (b) The secondary network (routes d&parternentaZes) connects urban centers and ensures connectivity with the primary network. Total length is 1,508 km (44.4 percent of the total network). Traffic volume is between 200 and 1,000 vpd.; (c) The tertiary network (routes comrnunales) ensures connection between rural communities and the secondary network. This network plays a critical role in ensuring access to public services and to economic activities. These roads are characterized by low traffic levels and, generally, are not usable year-round.

42 Table 2: Geographical Distribution of the Road Network

Source: MTPTC

6. According to the MTPTC’s estimations, in 2004, only 5 percent of the Haitian roads were in good condition, while 80 percent of the network was in bad or very bad condition.

Table 3: Condition of the Haitian Roads in 2004.

Paved roads 98 249 108 173 628 Unpaved roads 71 214 996 1,431 2,772 Total (km) 169 523 1,104 1,604 3,400 Total (%) 5% 15 % 33 % 47 % 100% Source: MTPTC.

7. The 2004 situation shows a significant deterioration compared to 1991 when 34 percent of the network was still considered in good or average condition. Degradation is significant for paved roads (the proportion of roads in acceptable condition has decreased from 72 percent to 55 percent) but it is extreme for unpaved roads (the size of the total network in acceptable condition has collapsed from 1,110 krn in 1991 to 345 km in 2004). The deterioration of the network has dramatic consequences, particularly for rural roads. Between 1991 and 2004, the size of the officially registered tertiary road network has decreased by more than half from 2,580 km in 1991 to 1,202 km in 2004. Some road assets were eliminated from the official road registry because of their extreme deterioration, which, was making them completely inaccessible.

43 Table 4: Situation of the Haitian road network in 1991 and 2004

Sources: MTPTC, IDB, World Bank.

8. The present situation of the network does not ensure the continuity of mobility. The primary network is fragmented in segments of very diverse condition (acceptable to bad or very bad), including segments with high traffic. On the other hand, the secondary and tertiary network is often discontinuous because of the existence of “critical points’’ (eg. absence of bridges or destroyed bridges). The lack of connectivity of the road network is a critical bottleneck for mobility of goods and people.

9. Despite many efforts, there is still no culture of road maintenance in Haiti. According to the evaluation of the last road project financed by a multilateral bank (IDB) in Haiti, less than 10 percent of the 2,000 km of roads that were initially scheduled for maintenance have been actually maintained. Unlike many countries, the budget of MTPTC does not distinguish between investment (construction, rehabilitation) and maintenance (routine, periodic, emergency). A 1997 IDB estimate for the period 1982-1997 has shown the volatility of budgetary expenditures for road maintenance, and their collapse starting in 1992 (see Figure below).

Figure 2: Budget for road maintenance 1992-1996 (1996 US$)

14000 12000 -f 10000 -0 3 8000 0 ‘O 6000 E .-2- 4000 E 2000 0 I R II I1,B I I

Source: IDB.

44 10. The failure to perform adequate routine and periodic road maintenance is a major threat to the condition of the road network and the mobility of goods and people in Haiti. In addition, it jeopardizes the sustainability of any large scale investment in road rehabilitation.

11. Routine road maintenance financing needs have been estimated at US$1.4 million per year if only roads in good or average condition (ie. 20 percent of the network) receive routine maintenance. If the entire network were to be rehabilitated - and therefore maintained - these needs would increase to US$4.7 million. These estimates do not take into account periodic maintenance but only routine maintenance.

Table 5: Estimate of road maintenance needs

Paved roads 3,000 347 1.o 628 1.9 Unpaved roads 1,000 345 0.4 2772 2.8 TOTAL 692 1.4 3400 4.7 Source: CCI,

12. To address the lack of road maintenance and the deterioration of the country’s transport infrastructure, the Haitian authorities decided to create an efficient and sustainable road maintenance mechanism. Based on the successful experience of other countries in the region, the strategy has been to create in Haiti a “road maintenance fund” (Funds d’Entretien Ruutier - FER), with financing from earmarked taxes and charges.

13. In July 2003, a law creating the FER was passed. In September 2004, the FER’S Managing Director was appointed. In December 2004, the FER’S Board of Directors was appointed and had its first meeting. In January 2006, the first road maintenance contract financed by FER was signed. The Haitian authorities are now committed to making the FER fully operational as soon a possible so that an efficient and sustainable mechanism for road maintenance can be progressively and rapidly implemented.

14. The various taxes earmarked to finance the FER could raise up to US$2 million annually. The gasoline tax only (1 Gourde per gallon) could raise up to US$1 million given 2002 imports (913 million barrels). The same tax applied to diesel could raise even larger resources, given 2002 imports (2.2 million barrels). With annual investment resources of US$2 million, the FER would be able to cover routine maintenance for the network currently in good or acceptable condition (ie to preserve the current situation in terms of road conditions). Resources would have to be raised if, in the future, the road rehabilitation programs increased the stock of roads to be maintained by the FER.

45 Annex 3: Major Related Projects Financed by the Bank and/or other Agencies HAITI: TRANSPORT AND TERRITORIAL DEVELOPMENT PROJECT

1. The proposed project would complement the Bank-funded CDD project as well as several externally-funded infrastructure and rural development projects. The CDD project supports social inclusion, participation, transparency and public-private partnerships at the local level, while improving basic social, economic and infrastructure services. One of the micro-regions selected under the proposed project, Thiotte-Anse B Pitres, has been a pilot area and is currently covered as part of the first phase of the CDD project. Two large IDB-funded projects supporting economic infrastructure and road rehabilitation and maintenance would complement the road rehabilitation interventions undertaken as part of the project. There would be high complementarity and synergy, as well, between the proposed project and the European Union national road rehabilitation program, since the road network of the Dondon-St. Raphael micro- region, being rehabilitated under the project feeds, into the all important road stretch linking Cap Haitian and Ouanaminthe (border town with the Dominican Republic) which is being rehabilitated under the EU project. The project would also be highly synergistic with the proposed IDB- Rural Supply Chain Development Project supporting the expansion of agricultural filibres production (including regional farm services centers) in the two micro- regions selected. Finally, the proposed project would build upon interventions on participatory planning undertaken as part of several other externally-funded projects: (i)the UNCDFRJNDP- funded Local Governance Project working with NE local governments and municipalities; (ii) the IDB-funded Local Development Project with the national social fund - FAES (Fund for Social and Economic Assistance); (iii)the FA0 participatory planning project (Marmelade); and (iv) the Spanish Cooperation program in the South-East.

A. MAJOR RELATED BANK PROJECTS

Project Latest Theme/ Sector Project Title Size Supervision US$MM (ISR) lating . Economic Economic Governance Reform Operation 61 S S Governance (FY05) Supporting economic governance reforms identified by the Transitional Government in the ICF, improving the policy environment for increased Bank and donor-supported investment lending in key sectors. (IDA H1420.4029) . Natural Resources Emergency Recovery and Disaster Management 11.5 S S Management (FY05) Project to support the rehabilitation of the areas affected by recent adverse natural disasters; strengthen capacity to manage natural disaster risks and better respond to emergencies resulting from adverse natural events; and to reduce the vulnerability of communities through risk identification and risk mitigation activities. Participatory LICUS Grant (basic infrastructure, rural water and 1.5 S S Develo ment (FY05) sanitation. solid waste management) ,46 I Community-Driven Haiti Community-Driven Development Project 38 S S (PRODEP) Building on the PCFlfunded CDD pilot, project will scale-up the direct transfer of public resources to local community organizations in poor rural and peri-urban communities, by: (i)improving access to basic social and economic infrastructure and support income-generating activities by financing small-scale investments proposed, implemented and I managed by community organizations; and (ii) improving governance and building social capital of communities by increasing citizen participation and transparency in open decision-making processes. Institution Building Economic Governance Technical Assistance Grant 2.03 Pipeline Pipeline I(EGTAG) Project to assist the GOH in strengthening its institutional capacity in the areas of budgetary planning and execution, investment and project planning, internal and external control, procurement, accountability, participatory monitoring, and reform constituency building. Haiti Rural Water and Sanitation Project 10 Pipeline Pipeline Sanitation Aims to increase the sustained and effective use of water and sanitation systems in rural communities in Haiti through providing water services in participating communities, laying the foundations for project sustainability; improving sanitation practices in participating communities; and strengthening the capacity of Service National d’Eau Potable, local government, local water committees, and professional operators. Haiti Electricity Project 6 Pipeline Pipeline This has two main objectives (1) To lay the foundation for improving the operational and technical performance of Electricit6 d’Haiti (EDH) through investments in Port-au-Prince; & (2) To reduce and stabilize the fiscal burden caused by the electricity sector on public finances through better governance of the sector and commercial re- orientation of EDH. The project has two components: (1) loss reduction in Port-au-Prince; and (2) development of a medium- term strategy for the electricity sector

47 B. MAJOR RELATED PROJECTS FINANCED BY OTHER DONORS

Donor/ Sector Project Title / Description

. IDB (through FAES) - Local Local Development Program (PDL): Micro projects in Development selected departments . IDB (UTENinistry of Finance) - Basic Economic Infrastructure Project Rehabilitation (HA- Economic infrastructure 0093) $77.8 millions (2003), nationwide . IDB (MTPTC) - Road rehabilitation Road Rehabilitation and Maintenance Project (99USF-HA) and maintenance (MTPTC), $50 million, and Transport Sector Infrastructure Rehabilitation Program (1638/SF-HA), $62.6 million, both project nationwide . IFAD (through FAES) - Rural Support to Productive Initiatives Project (PAP): Center development department . EU - Rehabilitation of national roads Rehabilitation of selected national road streches : Cap Haytien

~~ ~~ . IFAD - Foodcron develonment I Foodcron Intensification Proiect -Phase I1(PIrV-In I . KfW/ GTZ - Decentralization Local Development Project (North East and Center): Support to communal nlanninn . FAO/ Canadian Cooperation - Marmelade Watershed Project Natural resource management . UNDP/ Capacity 2 1 Decentrali- Departmental Action Plan for Environmentally Sustainable zation and local planning Development (North-East) (MDEMPCE) . UNCDF - Local Governance Project Community Projects (North-East Department) . CIDA: Local development Support communal planning (Nippes, NE and Lower Central

Dondon-St.Raphae1 Micro-Region . IDB - Agricultural productivity Filibre Support Project (proposed): Interventions focused on (MARNDR) fruits, coffee and tubers / Rehabilitation of Dondon Regional Farm Support Center . IDB (through FAES): Local Local Development Program (PDL): St Raphael market development . IDB ‘(UTENinistry of Finance) - Basic Economic Infrastructure Project Rehabilitation (HA- Economic infrastructure 0093) : Road stretches Grande Rivibre - Bahon - Ranquitte - Pignon - St Raphael . European Union Rehabilitation of Dondon Regional Farm Center . USAID - Hill agriculture Hill Agriculture Project (HAP): support to yam and cocoa . French Cooperation (through Support to coffee cooperatives and small farmers associations FCdCration des Chambres d’Agriculture du Nord - FECHAN) - support to farmers’ associations . IFAD (through Agro-Action St. Raphael irrigation project (2000 ha) Allemande - AAA)

48 . IDB - Agncultural productivity Filihre Support Project (proposed): Interventions on coffee, (MARNDR) vegetables, fruits and cattle / Rehabilitation of the Savane Zombi regional farm service center . IDB (through FAES) - Local Local Development Program (PDL) Micro-projects development . IDB (UTE/ Ministry of Finance): Socio-Economic Infrastructure Support Project (HA-0093): Economic infrastructure Road stretches Thiotte-Mapou-Belle Anse . AECI (Spanish Cooperation) : Local EUR 600000 / Miscellaneous local investments development . GTZ - Disaster management Disaster prevention and mitigation (about EUR 2 million) . UNDP - Environmental management Environmental project . USAID - Hill agriculture Hill Agriculture Project (HAP): Support to the coffee filikre FAES Communal development plans

49 Annex 4: Results Framework HAITI: TRANSPORT AND TERRITORIAL DEVELOPMENT PROJECT

Results Framework

Project deveIopment PDO Indicators Use of PDO monitoring objective (PDO) information Assess impact of improved transport conditions on the Lower marketing costs 0 Decrease transport cost cost structure for key goods for rural producers in 0 Decreased travel time produced two selected micro- 0 Roads accessible all year round. regions. 0 Lower transit losses. Assess cost-effectiveness of interventions and impact on transport users

Components Companent Indicators

Component 1 km of roads improved up to Verify implementationof Improvement of key acceptable standards (output) proposed project transport corridors 0 km of roads receiving adequate Verify sustainability of levels of maintenance (output) investments financed by proposed project

0 no. spot interventions/emergency Verify implementation of maintenance activities (output) proposed project

Number of workdays generated Measure effect of labor- by road maintenance activities intensive routine maintenance (outcome) activities on employment

0 Increased traffic on improved Measure ultimate effect of roads (impact) improved transport conditions on the use of transport services

Component 2 Cumulated amount of acceptable Monitor effectiveness of Territorial development productive investment proposals participatory process to window prioritized, assessed and identify acceptable productive presented to potential financers investments (output)

Cumulated amount of basic Monitor implementation of infrastructure proposals financed basic infrastructure by the project (output) complementary investments.

50 'c! z hl

0 0

0 C s

.3Y> m 9 cd c 8 Y 0 c m .m Y r3dm

C 0 .3Y cd 9 3 cd 2 Y 0 e, e'

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28 2 3 e,

0 Y m

Y8 (d 0 3 d 3

02 .wY 3 a 4 Annex 5: Summarized presentation of the two micro-regions HAITI: TRANSPORT AND TERRITORIAL DEVELOPMENT PROJECT

1. The two selected micro-regions represent a total population of about 247,000 of which 83 percent live in rural areas. The region of Dondon-St. Raphael is the most populated with 139,000 inhabitants (107,000 for the Thiotte-Anse B Pitre micro-region). The project area accounts for about 3.1 percent of the national population and about 4.3 percent of the rural population.

Table 1: Population of the two selected micro-regions

Urban Rural Total figure % Figure % figure % region Thiotte-Anse & Pitre micro-region 15,198 14.1 92,248 85.9 107,446 23.9 1. Belle Anse 3,372 6.5 48,335 93.5 5 1,707 11.5 2. Grand Gosier 1,124 10.4 9,728 89.6 10,852 2.4 2. Thiotte 3,684 16.0 19,357 84.0 23,041 5.1 4. Anse ?iPitre 7,018 32.1 14,828 67.9 21,846 4.9 South-Est region (Sud-Est) 54,8 74 12.2 394,711 87.8 449,585 100 Dondon-St.Raphae1 micro-region 26,775 19.2 112,65 1 80.8 139,426 18.0 3. St. Raphael 7,601 20.1 30,138 79.9 37,739 4.9 2. Dondon 4,737 18.3 21,109 81.7 25,846 3.3 4. Milot 5,558 22.1 19,591 77.9 25,149 3.3 5. Grande Rivikre du Nord 7,600 22.8 25,675 77.2 33,275 4.3 5. Bahon I 1,279 I 7.3 I 16,138 I 92.7 I 17,417 2.3 Northern region (Nord) I 295,624 I 38.2 I 477,922 I 61.8 I 773,546 100 Total project I 41,973 I 17.0 1 204,899 I 83.0 I 246,872 - I 3,204,965 I 40.4 I 4,724,083 I 59.6 I 7,929,048 Source :4'" recensement gCnCral de

Table 2: Population and areas of the various Haitian regions

Pop-2003: 2003-08-07 census, Pop-1982: 1982-08-30 census Source: http://www.statoids.com/uht.html

53 A . The Dondon - Saint Raphael micro-region

2. General description. The region comprises four principal agro-ecological zones, including a humid plain (Grande Riviere), an irrigated plain of 1800 hectares (Saint Raphael, with 2500 users), an arid plain (St Raphael), and steep hills, in particular in Dondon. The principal economic crops include coffee and fruits in the semi-humid plains and mountains, vegetables in the irrigated land, and maize and beans in the semi humid hills. Cocoa is also produced in some of the humid lowlands. Livestock is a supplementary activity in addition to the agricultural activities, in which about 90 percent of the population is engaged. Those engaged in commerce and other activities in the urban zones also undertake agriculture. Women are responsible for the majority of commercial activities.

3. Rural households. Four major livelihood systems were identified in the local area: a. The grands exploitants are large landholders, growing coffee, fruit and beans, mainly in Dondon, and accounting for five percent of farmers. b. The petits paysans who are either owners or lessees (fermage) of land and produce mainly coffee, vegetables, banana, maize and beans. Their landholdings are invariably small, but very productive. For example, 97 percent of the plots within the irrigated perimeters of Saint Raphael are less than half a hectare large. The vast majority, roughly 80 percent, of farmers are in this category.

C. The petits paysans who lease or sharecrop land and that cultivate only or almost only subsistence crops (beans, maize) for their own or local consumption. This group is estimated by our respondents to include about 10 percent of local farming households. d. Finally, ‘other activities” or households in the village engaged in various trade, commerce, crafts, and professional work. This is a small group of no more than five percent of households.

4. Transport infrastructure. The road, as planned, will stretch 50 km from the outskirts of Cap Haitian to St. Raphael, through the communes of Quartier Morin, Grande Riviere du Nord, Dondon, and St Raphael, with a combined population of 139,000 people, or about 30,000 households, The villages of Dondon and St Raphael are major local market nexuses, while the population is scattered both in and around these villages and all along the road.

5. Markets. The St Raphael market is the principal rural commercial center in this region. People arrive from wide tracts of the surrounding regions (Pignon, Saint Raphael, St Michel, Ranquite, Marmelade Grande rivikre, Hinche) to buy or sells goods in the market in St Raphael. The market in Dondon has a similar role, though on a smaller scale. Goods are transported from peasant producers to local markets manually, carried on the head by the women, or sometimes by donkeys or mules, and trucks distribute the goods further in the region. Transportation costs between St Raphael and Dondon to Cap Hditien are respectively 100 and 50 Gourdes per person or per “sac” of goods, depending on the type of product. The owners of the trucks generally reside in Cap Haitian or in cities of neighboring departments. The marketers often have difficulties in selling on their goods because the trucks cannot access St Raphael or Dondon markets during the rainy season. Under current conditions, and without particular obstacles, a

54 truck takes six hours to travel between Saint Raphael and Cap Haitian, and four hours between Dondon and Cap Haytien. A private 4WD car may make the trip in two to three and one to two hours respectively. Speculators (local buyers) are key actors in Dondon and St Raphael. Coffee, cacao, and citrus are purchased locally by the approximately half a dozen speculators working in the area. In general, the organizations of cooperatives, that are key market actors, have eroded the tendency of oligopoly that prevailed among speculators earlier. For instance, the agricultural cooperatives are very active in the marketing of coffee. This is part of a marketing network that exports coffee to Britain and Japan. The other products are consumed locally or sold to markets in Cap-Haitien, Hinche, Gonaive, or in Port -au-Prince.

Table 3: Example of trading chain for several products produced from the Dondon-St Raphael micro-region and sold on markets outside the region

international markets

(*) <( Sara >> or << Madan Sara >> is a creole name for women acting as local intermediates in the trading chain.

B. The Thiotte / Anse 21 Pitre micro-region

6. General description. The Thiotte - Anse 8 Pitres micro-region comprises the two communes of Thiotte and Anse-8-Pitres (South-Eastern Department) and the communal section of the For& des Pins, Fonds Verrette commune (Western Department.) It is located at a crossroads of communications and marketing channels centered on the city of Thiotte and directed respectively to the Dominican Republic toward the East, Port-au-Prince toward the North and Jacmel toward the West. The two communes of Thiotte and Anse a Pitre had a combined population of 44,887 persons in 2003 (IHSI 2003). The two Section Communales of Anse-h-Pitre (Bois d’Orme Boucan Guillaume) with a total of 14, 828 inhabitants) are currently isolated from the village center because of the disrepair of the roads.

7. The micro-region consists of five main agro-ecological zones oriented East-West presenting the following potential respectively from North to South:

55 . Extremely humid highland (> 1000 m of altitude) suited for temperate vegetable production (cabbage, potatoes, onions, carots), as well as dairy production; . Extremely humid upland (700-1000 m of altitude) where coffee associated with fruits, bananas and tubers has high potential; . Humid upland (400-700 m) suited for diversification crops (fruit varieties with high value added such passion fruit and avocado); . Semi-arid upland (e 400 m) suited for intensification of crops that are less demanding such as certain varieties of beans (‘pois d’angol’); and . Coastal lowlands, with emphasis on the tropical vegetable crops (tomatoes, eggplants, chillies) and maritime fishing.

8. Although Thiotte is the main pole for economic activities, it is Belle-Anse which is the head of the ‘arrondissement’. This is where the main public offices are located including the Vice-Delegate’ s office representing the central government in the arrondissement. But in practice the vice-delegate is posted in Thiotte. This city also houses the sub-departmental directorate of the Ministry of Agriculture whose mandate covers the entire arrondissement. No other services of the central government (e.g., public works, health and education), are present at the arrondissement level. They are present only at the departmental level (Jacmel).

9. Institutions. Civil society organizations are numerous in the micro-region due in part to the lack of presence of the central government at the arrondissement level. The prominent ones that have legitimacy in the eyes of the population are (i)the COPRODEPs, established in the communes of Anse h Pitres and Belle Anse with the help of PADF (an international NGO) as part of the Bank CDD project; (ii)the coordinating bodies of developmental organizations; (iii) the coordinating structure of the development organizations of the Belle Anse arrondissement (CODAB) which comprises all the organizations of the arrondissement that have some degree of representation at the communal level (including the COPRODEPs); and (iv) the regional coordinating body for local organizations in the South-Eastern department (KROS) that acts as a federation of supra-communal organizations.

10. Numerous national and international NGOs are present in the arrondissement, some of them for a long period of time. Most of them work as much on economic as on social developmental tasks. In contrast, private sector organizations are not numerous in the arrondissement. The Chamber of Commerce and Industry of the South-East is based in Jacmel. An association of independent coffee producers of Thiotte was created recently. It regroups the large producers of the Thiotte basin (> 10 ha of coffee) and represents an important potential in terms of private investments within and outside agriculture in the Thiotte region.

11. Rural households. Observations point to three main categories of households: . The grunds exploitants’, land owners, growing coffee (10 ha), and accounting for 5 percent of the farmers in both communes; . The petits paysans owning small land and growing coffee, vegetables and fruit and cereals in particular in the commune of Anse a Pitre, accounting for 85 percent of the population.

56 . Other activities (petty commerce, fishery, etc.) accounting for 10 percent of the population. 12. Expenditures on food (including the purchase and preparation of food) are the major consumption items of the majority of households. Key purchased consumption items include bread, cooking oil, matches, pasta, wheat flour, maize, rice, sugar, salt, pepper, and ginger. As mentioned, most rural residents produce a significant amount of the food they consume.

13. Given the typology of households, it would seem that the major target group of the project is households with 1 to 3 ha, which account for about 45 percent of households. Other major beneficiaries would come from households with 3 to 10 ha (15% of households) and households with 0.5-1 ha. Probably it would be households with smaller landholdings in the 3-10 ha group and those with larger landholdings in the 0.5-1 ha group. Thus, it can be roughly estimated that the major target group consists of about 50 percent of rural households from our typology above. Those not expected to be direct beneficiaries are the larger landholders (from the group of 3-10 ha and 10+ ha) and smaller landholders (from the group of 0.5-1 ha and < 0.5 ha). The project is more concerned about including the smaller landholders in the group of potential project beneficiaries than excluding the larger landholders. In fact, some of the larger coffee producers might be included in the coffee agri-business partnerships because of their business experience. From the group of smaller landholders, it is expected that the project can help them increase real incomes by increasing access to markets for consumption goods and for selling their farm outputs and also for the increase in labor demand by larger farmers.

Table 4: Estimated Shares of Different Types of Households.

Non-Farmers with Profession, Business (non-poor) 5% Total Rural Households 100 %

14. Economic potential. The dominant economic activity for at least 90 percent of the households is agriculture. Principal economic crops include coffee, bananas, vegetables, root crops, fruits (mainly in the commune of Thiotte); corn, sorghum and livestock in the commune of Anse-&Pitre. Fisheries is also one of the main activities in the village of Anse B Pitre and its surroundings. In terms of non-agricultural economic activity, there are no “major” enterprises that employ more than a few people. There seems to be a rather significant proportion of the rural population that engages in some type petty trading activities - of their own agricultural products (raw or processed) and/or various types of basic consumption goods (e.g., rice, beans, flour, cooking oil, garlic, pasta, bread). Some men engage in sewing activities with their own sewing machines. There are also various retail and service activities in the town center and home based services (e.g., hair cutting). Also, there are activities linked to post-harvest coffee activities such as pulping, drying, and sorting that take place. Many children are engaged in activities related to collecting water and fuelwood, besides activities related to farm production, harvest and marketing.

57 15. Transport infrastructure. The 48 km road passes through a Section Communale of Thiotte (lstsection of Thiotte) only on a portion of 3 km and crosses two Sections Communal of Anse B Pitre (2nd Bois d’Orme and lStBoucan Guillaume). It stretches through 12 localities (habitations) of the commune of Anse-B-Pitre with some 1500 habitants. The road crosses three principal agricultural zones: from Dupuy to Jericho, some 6 km from Thiotte, coffee is the main crop production; from Jericho towards << Banane >> (26 km from Thiotte), through Boucan Guillaume et Boni, cultivation is concentrated on corn and sorghum; from Boni to Anse-B-Pitre, runs an arid and sparsely populated zone, where cactus and bayahonde grow, and where goat raising and charcoal production are significant.

16. Markets. There are no marketplaces and not much commercial activity between Anse B Pitre and Thiotte. Port-au-Prince and Pedernales are the major destinations for produce from Anse a Pitre and Thiotte, the latter being only a transit point between Anse a Pitre and Port-au- Prince. For the axis Thiotte-Pedemales, the most common transportation means is mule from Thiotte to Bois d’Orme and then truck to Padernales. There is a fee of 70 gdes for transportation to the market. Most of the transactions take place in the market place of Padernales, even for the Haitian households living in Anse a Pitre, entailing higher prices. It is worth noting that some Dominican traders in the Padernales market come to Thiotte to buy primary products (coffee, vegetables, fruit, etc.). For the axis Anse B Pitre Port-au-Prince, the deteriorating road impacts negatively on the flows of goods, with only seven trucks transporting goods from Anse a Pitre to Port-au-Prince twice a week. Travel time between Anse a Pitre and Thiote takes seven hours and transportation cost is about 250 Gourdes. In many cases, traders in Anse B Pitre travel by boat, which entails a high transaction cost (2 500 gourdes for transportation cost), to Marigot, then by truck to Jacmel and Port-au-Prince.

Table 5: Examples of trading chain for several products produced from the Thiotte-Anse h Pitre micro-region and sold on markets outside the region.

Actor 1 Actor 2 Actor 3 Final Transport means Transport means I Products destination (1 to 2) (2 to 3) Coffee Producer Collector Speculator Port-au-Prince, Human head, Trucks, Producer Speculator Dominican animals Departmental, Republic paths, rural roads national and Producer Cooperative Cooperatives’ England, Japan, international roads network Port-au-Prince, Dominican r Republic Producer Collector Sara Port-au-Prince Human head, Trucks, beans, Producer Sara animals Departmental and roots paths, rural roads national roads Producer Sara Ptdernales Small trucks, Producer market (DR) International road to DR Breeder Collector Ptdernales By foot Small trucks, (sheeps) Breeder market (DR) paths, rural roads International road to DR Producer Sara Port-au-Prince Trucks, Departmental and national roads

58 Annex 6: Detailed Project Description HAITI: TRANSPORT AND TERRITORIAL DEVELOPMENT PROJECT

Component 1: Improvement of key transport corridors (US$11.25 million)

1. This component aims at improving the condition (quality, reliability, cost) of transport in the two selected micro-regions through interventions on road infrastructure that have been identified as key for the development of the rural economy. Such investments in improving transport conditions are expected to have a major impact on relieving key bottlenecks to growth and would become an anchor for productive activities to develop.

2. Two transport corridors, totaling about 100 km have been identified through consultation with local stakeholders during project preparation. These corridors constitute the “backbone” of the transport system in each of the two micro-regions and are therefore essential to the functioning of the rural economy. A more detailed technical assessment of these two corridors is presented in Annex 13.

(a) Northern micro-region: Corridor Carrefour La Mort - Carrefour Jean Bernard - St-Raphael (38.8 km). This road corresponds to the final segment of the RN3 (national road no. 3) that connects Hinche to Cap-Haitien. The segment ends in Carrefour La Mort, since the final kilometers to reach Cap-Haitien are scheduled to be rehabilitated as part of a contract financed by the European Union to upgrade the road between Cap-Haitien and Ouanaminthe. The road plays a critical role to connect three very important markets (Grand Rivikre du Nord, Dondon and St-Raphael) between themselves but also with Cap-Haitien. The micro-region produces many agricultural products (eg. coffee, orange peels) which are traded first in one of these key local markets before being either consumed locally or transported to Cap-Haitien (and eventually then to Port-de-Pince and/or exported). This road is in very bad condition, with the exception of a few paved segments between Carrefour La Mort and Grand-Rivikre du Nord. An ongoing rehabilitation contract financed by the GOH is active on the segment Carrefour La Mort - Carrefour Jean Bernard - Milot. The objective was to facilitate access to the Citadel and Palace of Roi Christophe, a major tourist attraction in the region (the Citadel has been registered by the UNESCO). Nevertheless, the contract seems stalled (the firm has stopped performing any rehabilitation work). The situation of that contract remains to be clarified to determine whether or not the corresponding segment should be included or not in the proposed project. A fourth important market (Bahon) could be connected in the future with financing from the IDB (a pre-feasibility study has already been performed for the segment Grand Rivikre - Bahon - Ranquitte - Savanette. Two other important segments have been identified and ranked as second-priority investments for the proposed project: the roads St. Raphael - Pignon and St-Raphael - St. Michel de 1’Attalaye. The first road is important because it continues the RN3 in the direction of Hinche. This second road is important because it could in the future facilitate the connection with Gonaive and create an alternative route to Cap-Haitien via Marmelade. (b) Southern micro-region: Corridor For&-des-Pins - Thiotte - Anse-&-Pitre(63 km). This road is a major trade corridor since it connects the whole South East region to the

59 Dominican Republic (DR) border. Many Haitian goods are traded in the market of Pedernales, a Dominican city on the border, just in front of Anse-&-Pitre. A large proportion of the coffee produced in Thiotte is traded informally across the border, in conditions where Haitian producers have no alternative to selling to a single major trader, a situation that could change if the road to Anse-&-Pitre was to be improved. Similarly, vegetable producers around Thiotte have very limited access to fertilizers, which they could buy in the DR, if transport conditions were to be improved. A significant proportion of the production of Anse-&-Pitre fishermen is also lost because it cannot be transported by land when sea conditions do not permit to carry them to Belle Anse through cabotage. Finally, improving the segment Thiotte-Anse-&-Pitre could improve access of the population to several social services (eg. Anse-&-Pitre has no secondary school but Thiotte does while some of Thiotte inhabitants may be interested in having a facilitated access to DR health services). The road is currently in a seriously deteriorated state: it takes about three and a half hours with a four-wheel drive vehicle to travel the 41.3 km (more with an overloaded local bus or truck, a significant proportion of which get stuck on the way). The road has been prioritized for spot interventions by another Bank project (CDD) and some small improvements (treatment of 14 critical points totaling 2-3 km with a technology consisting of applying a layer of concrete on the road). These interventions have demonstrated the critical importance that local communities give to this road, although the cost-effectiveness of the improvement works remains low since they have not been sufficient to improve transport conditions in a significant manner. A pre-feasibility study has been prepared for the rehabilitation of the road Thiotte-Anse-&-Pitre, but also for the segment Thiotte-Belle Anse which constitutes a second major economic corridor for the micro-region since it can contribute to connect Thiotte to Jacmel. In the near future, it is likely that the rehabilitation of the segment Thiotte-Belle Anse will be financed by the IDB. The third road that is essential to the development of the micro-region is the segment Thiotte - Savane Zombi - Foret des Pins which connects to Fonds Parisien and Port-au-Prince. The segment Thiotte - Savane Zombi - For& des Pins (20 km) is important because it connects Thiotte to the agriculture research center of Savane Zombi and with an important market located in For& des Pins. On that particular segment, the preliminary technical assessment performed during project preparation recommended that a periodic maintenance be performed.

3. The proposed component will finance road improvement works such as upgrading, rehabilitation or spot interventions as well as maintenance activities (periodic, emergency routine) to ensure sustainability. Eligible expenditures include: works, studies and supervision. Activities are sorted in two sub-components:

4. Sub-component 1.1: Road improvement and spot interventions (US$10.75 million). For each one of these two transport corridors, the project will first finance a detailed feasibility and engineering study that should help determine what is the most appropriate technology and what shall be the scope of works for improvement taking into consideration more particularly the following criteria: (1) cost, (2) existing traffic levels and future projections, (3) impact on travel time (an ideal objective would be to at least halve travel time on the selected corridors), (4) investment sustainability given Haiti’s specific climatic conditions and the difficulties experienced in the past to implement road maintenance mechanisms, (5) potential to develop micro-enterprises, and (6) possible economies of scale. The scope of these studies would also

60 include selected spot interventions to restore or preserve access (eg. bridges, low water crossings, consolidation of slopes), in coordination with the other donors. The choice for a particular technology used for these spot interventions will follow the same considerations as for road rehabilitation.

5. Once the studies have helped determine the appropriate technical solutions for road improvement and spot interventions, the project would finance the cost of the related works as well as the related supervision. Some trade-offs will have to be carefully assessed taking into consideration the costs involved, the technical options proposed and coordination with other sources of funding (donors, GOH). It is expected that large improvement works will have to be performed by mid- to large-sized firm while spot interventions could be contracted out to SMEs or even to micro-enterprises such as the ones that will be used to perform routine maintenance (see Sub-Component 1.2). Nevertheless, the potential for economies of scale will be considered when the decision about the exact scope of the contracts will be taken.

6. During preparation, a preliminary technical assessment has been performed on these two corridors (see Annex 13). This assessment has allowed to identify the most urgent interventions (road improvement and spot interventions) on these corridors and prepare a preliminary estimation of the costs involved and suggest one preferable scenario that would have to be confirmed by the detailed feasibility and engineering studies. The preferable scenario is described in Annex 13.

7. Regarding the spot interventions, this component will finance the treatment of selected critical points which are key to ensure mobility and connectivity with the rest of the network. Most of these critical points are located in the micro-region of Dondon - Grand Rivikre - St. Raphael. These critical points are generally caused by Haiti’s difficult climatic conditions (heavy rains), insufficient drainage and/or poor infrastructure design. In a number of cases, these critical points not only threaten the mobility on the corresponding roads but they also endanger human lives. In other places where the project will not be intervening (eg. Fond Verettes, Plaine Mapou), similar - though more extreme - conditions resulted in major human and environmental disasters. One objective of this sub-component is therefore to develop and customize low cost but sustainable technical solutions that could help solve these critical points and be replicable elsewhere in Haiti. The Bank would have an added value in this area, since other donors (IDB, EU) did not investigate that issue (with the exception of a “bridge component” in the projects financed by the IDB). The proposed sub-component will finance the development and customization of these technical options as well as the associated works (provided they do not exceed the project’s envelope) and the related supervision. In order to benefit from economies of scale, the study and treatment of the critical points that are key to ensuring mobility on the two selected corridors would be included in the larger contracts aiming at improving these corridors (except for emergency maintenance interventions). Additional spot interventions on other road segments located in the micro-regions could be financed by the proposed project (sub-component 2.2) provided they are prioritized by the territorial development process (sub-component 2.1).

8. The most critical spot interventions that have been identified during project preparation are located in the Northern region. Those include the following:

61 e Pont Limite: This metallic bridge was built in the 1950s and is now about to fall down (one side is already leaning). The bridge was still used in the early fall of 2005, causing major risks to the life of users. Alerted, the Direction D&partementale des Travaux Publics of Cap- Haitien has closed the bridge and established a temporary deviation which crosses the river (which is not practicable in case of heavy rain). A replacement technical study has been financed by one of the IDB’s projects. At pre-appraisal, the IDB confirmed that they would finance the treatment of that critical point. e Route St.RaphaeZ - Pignon, sortie de St.Raphae1: This critical point is located right after the town of St.Raphae1, on the road to Pignon. Erosion from the river has provoked a collapse of the road. An alternative itinerary has been developed that follows the river before crossing it. This alternative solution has restored transitability (at least when the river is not too high) but it is not sustainable since erosion continues. The road is currently the only access to Pignon from the North and it is therefore a critical infrastructure for the population of this city and its surroundings (in particular to access St.Raphael’s market). No donor is currently considering treating this critical point. e Route Grand Rivibre - Bahon, sortie de Grand RiviBre: This critical point is the most difficult one that has been identified during the field assessment. Difficulty comes from the extent of the problem, some resettlement issues (though minor) and from the potentially high costs involved. Nevertheless, the road - which is completely destroyed due to the erosion caused by the river - plays a major role to integrate Bahon and its market (one of the largest in the region) to the other communities. An alternative road has been developed by the DDTP of Cap-Haitien as part of an emergency operation but it is dangerous and not cost-effective nor sustainable. In addition the erosion is now threatening some houses that are located nearby and the life of their inhabitants. In spite of the complexity of this critical point, this investment could be a potential candidate for this component, provided that the costs involved do not exceed the project’s capacity. Coordination has been initiated with the IDB on the treatment of this critical point. It will be pursued during project implementation since the IDB-funded Basic Infrastructure Rehabilitation Project has financed a technical study for the road Grand-Rivikre - Bahon - Savanette (before the collapse of the road) and may finance the rehabilitation of the road and/or the treatment of this critical point. e Route Gde. Rivibre du Nord - Dondon: several critical points (eg. Grand GiZZes) have been identified on that road. They generally involve simple slope consolidation that could prevent further erosion subsequent collapse of the road. Some of these critical points have already received some treatment (with a local technique called gabions consisting of placing groups of stones tied with iron threads on the side of the road). This solution is low cost (materials are abundant) and could provide an adequate technical alternative to more expensive options. However, this solution needs to be improved since the sustainability of the existing works is already threatened, less than one year after execution. The treatment of these critical points would either be included in the main contract for road improvement or, for the most urgent ones, be addressed as emergency road maintenance to be financed under sub-component 1.2.

9. This component could also finance specific studies that would allow strengthening the knowledge of the- transport systems in the two micro-regions and their linkages with key national and international markets. In the Thiotte micro-region, such a study should help evaluate alternatives to better integrate the micro-region with Port-au-Prince (taking into account the

62 major critical point of Fonds Verrettes) and with Jacmel. Six months before the project’s closing date, this component will also finance a technical diagnostic which would determine the conditions of the roads that have been improved by the project as well as the requirements in terms of maintenance for the next 5 years.

10. Sub-Component 1.2: Emergency and routine road maintenance (US$0.5 million). The total collapse of the road maintenance system in the early 1990s constitutes one of the most critical issues faced by any road investment in Haiti. Recent reforms engaged by the GOH as well as the support of the donors’ community have allowed some limited progress in this area, the most notable being the creation of a road maintenance fund financed by earmarked taxes (essentially a gasoline tax). A full sector reform of the Haitian road management system goes beyond the scope of the proposed project. Nevertheless, some road maintenance activities are justified by the critical need to ensure the sustainability of the road investments that would be financed by the proposed project. To ensure sustainability, routine road maintenance needs to be addressed and done permanently, while emergency maintenance will also be needed to address localized road collapses. Well maintained roads will create durable assets that would generate second-round social and economic benefits for the region.

The proposed sub-component would finance the following: emergency road maintenance: these activities would be contracted out to local small and middle size firms by the MTPTC and financed by the FER. The sub-component would finance the works and the related feasibility and engineering studies as well as supervision. Several such emergency maintenance activities have been identified during preparation on the two selected transport corridors. mechanized maintenance: these activities include the reprofiling and grading of gravel roads that usually have to be performed after the rainy season. It is expected that these activities will be contracted out to local SMEs. routine maintenance: these activities would be contracted out to micro-enterprises to be set up within the communities living nearby the roads that would be rehabilitated. These micro-enterprises would be contracted by the MTPTC and financed by the FER. The sub- component would finance the routine maintenance activities as well as the consultancies needed to set up or train the micro-enterprises, and to monitor and supervise the works performed. Being labor-intensive, these routine maintenance activities are expected to generate employment and income-generating opportunities, thus becoming a social safety net for the rural poor. The road maintenance activity will target the poorest segments of the population and women through labor-intensive income generating activities aiming at helping them earn cash. Based on lessons learned from international experience, the design of the road maintenance work will follow specific patterns in order to allow it to perform its systemic risk mitigating roles: (i)road maintenance will take the form of high labor intensive work; (ii)the wage will be set so that it corresponds to unskilled labor force but be high enough to provide a sufficient incentive to maintain the road adequately; and (iii)female participation will be encouraged. 12. Eligible expenditures will include maintenance activities performed by priority on the key transport corridors identified in each micro-region, and, on a case-by-case and subject to Bank prior approval, on other road segments located in the micro-regions.

63 13. Regarding the consultancies that will be needed to support the routine maintenance activities, it is envisaged that local individual consultants would be recruited to ensure the monitoring and supervision of those activities. In addition, the DDTP is expected to be involved in a second level supervision of these activities. In order to be able to perform this task, the DDTP would receive targeted technical assistance under component 3.

14. It is worth noting that the FER will be able to build on a pilot program financed by the EU, aiming at financing routine road maintenance activities on two road segments (Port-8- Piment - Tiburon, and Mirebalais - Lascaobas) which is about to start. Models of contracts and terms-of-reference have been developed for this pilot program. In addition, the FER should be able to build on the important capacity of community organizations which are already involved in labor-intensive activities (including for road-improvement activities). Several potential facilitating partners - essentially NGOs - are present in the areas under the project. The general scope of their activities is somewhat different but they all have experience in community organizations and training, and in high-labor intensive workfare. Such activities include routine road maintenance, rehabilitation of tertiary roads, re-routing of river and reforestation. Some NGOs build community capacity and emphasize empowerment, consisting of organizing communities to take responsibility for the maintenance of basic infrastructure. In these cases, the communities provide voluntary workers. Some others provide assistance to help communities, especially the poor stabilize their revenue. The following table provides examples of the types of work performed by facilitating partners and shows that in some aspects, they differ in their modalities of collaboration with communities. The FER is expected to build on these community experiences in order to set up its micro-enterprises. Nevertheless, in most of the cases, implementing the micro-enterprises model will imply a shift from voluntary workers or individual workers contracted on a daily bases, to a more entrepreneurial model in which micro- enterprises are contracted - and paid - to ensure that transport conditions are maintained up to a certain standard (defined by measurable indicators). Although this approach is new in Haiti, FER management has well integrated the micro-enterprises model. If needed, the subcomponent could finance targeted technical assistance to assist in the implementation of the concept.

64 Table 1: Example of community-based initiatives for infrastructure management in Haiti

Facilitator Project type Area Labor int. (a) OrganizelTrain CasWfood Community- Women communities for work based part.(b) selection CARITAS Projet de correction Cap Rouge/ Yes (a) (b) Yes Voluntary Yes de ravines (Jacmel- workers (CRS) South East) CARITAS Re routing of a river Badon Yes (a) (b) Yes Voluntary Yes marchand / workers GonaYves CARITAS Rehab.of secondary La Quinte, Yes (a) (b) Yes Voluntary Yes roads and protection terre neuve workers of “berges” (Gonaives) CECl (EU) Rehab.of water and Hinche/ Yes (a) (b) Yes Yes Yes sanitation system North Les Anglais Yes (a) (b) Yes Yes Yes Rehab.of rural and secondary roads and Rendellsou reforestation th West Yes (a) (b) Yes Yes Yes Rehab. Of basic Country B’p L- infrastructure level 480-GOV) Agro Action Rehab/maintenance Yes (a) (b) Voluntary Allemande of small scheme St Raphael Yes workers Yes irrigation OXFAM Emergency Urban Yes (a) No Yes No Infrastructure Cap-Haitien rehabilitation

15. In spite of the progress achieved, the FER remains a new institution with limited capacity and which evolves in an unfavorable environment due to the lack of programming capacity of MTPTC for road maintenance and the uncertainty regarding its future resources. To continue strengthening the FER, targeted technical assistance has been included as part of component 3 and several covenants were also integrated in the legal agreement to ensure that funding for road maintenance (in particular proceeds from earmarked taxes) as well as accurate information about its maintenance program are made available to the FER on a timely basis and that the FER uses these resources according to the road maintenance program endorsed by its Board.

16. In addition, a strategy for bringing FER to full operational capacity has been designed and discussed with FER management during project preparation. This strategy includes in particular the following actions:

0 Continue building institutional capacity trough targeted technical and management assistance during at least one year of operation. This technical assistance will build on the support that FER has received in 2005 with the financing of PPIAF. It will focus particularly on the monitoring and evaluation of performance indicators for road maintenance.

0 Build capacity in MTPTC for the programming of road maintenance activities. This should focus in particular on setting up a prioritization process so that roads to be

65 maintained by FER reflect both the relevance of these infrastructures for the national economy and for territorial development, as well as the normal life cycle of these roads and the installation of sound road assets’ management practices.

0 Continue developing capacity regarding financial management, auditing and accounting procedures, as well as accountability, reporting and transparency. These actions are critical to ensure streamlined relationship with MEF and focus FER’S strategy on what should become its core business: financing road maintenance.

0 Disseminate information regarding FER road maintenance program to private enterprises (including SMEs and community-based micro-enterprises) so that private sector capacity can be progressively developed in the area of road maintenance works. In this regard, the FER will be able to build on the experience of a seminar to be held in the coming months with the financing of the EU, in order to inform the public about the FER.

Component 2: Territorial development window (US$3.0 million)

17. The improvement of the key transport corridor identified in each region is expected to become an anchor to spur other productive investments that could promote rural growth. In order to facilitate the emergence of such growth initiatives that are becoming feasible as a result of the improvement of transport conditions, a specific instrument (“territorial development window”) has been designed at the level of each micro-region. The design of this instrument is inspired by a similar program that has been successfully implemented in Peru (see Box) but which has been customized to the Haitian context. The territorial development window aims at putting in place a process to prioritize growth initiatives and to assess them (Sub-component 2.1) to see whether they could be either financed by the project (Sub-component 2.2) or by other donors or the GOH.

66 The component would be implemented over a period of four years.

18. Sub-component 2.1: Territorial development process (US$0.5 million). This sub- component would support the territorial planning process leading to the identification of priority investments that would complement the improvement of transport conditions so that impact on rural growth can be maximized. This process would include two stages: (1) a broad participatory consultation in which all local and regional stakeholders could present investment proposals that are consistent with the development objective of the proposed project; and (2) a prioritization exercise managed at the level of each micro-region and performed by an ad hoc territorial planning committee in which key stakeholders would decide and endorse the territorial development strategy proposed for the region and the list of related investments.

19. Institutional framework. The institutional basis for this committee will be the Departmental Consultative Round Table (Table de Concertation D&purtementuZe - TCD) or a similar institution. The TCD is a forum involving the departmental directorates (appointed) representing the central government, the decentralized bodies (elected) representing local governments, the civil society and the private sector. The regional offices of the Ministry of Planning and External Cooperation are expected to play a key role in the functioning of the committee. In order to be able to play that role, they would receive specific technical assistance as well as support for institutional strengthening as part of the proposed sub-component.

20. In the Northern Department where the micro-region of Dondon-St. Raphael is located, the TCD is not yet in existence. The project would therefore support the creation of the TCD in that department and its operation in the Dondon-St. Raphael micro-region on a pilot basis for the duration of the project. If it is successful, the TCD would subsequently serve the planning process for the entire department.

21. In the South-Eastern Department where the Thiotte-Anse h Pitres micro-region is located, the TCP already exists. It is meant to serve the entire department with no specific focus, but in fact is yet to be fully operational. Difficulties of communications with Jacmel, the head town of the department, result in a high degree of isolation and less attention given on the part of the departmental delegation and the TCD to the micro-region. To remedy this situation, the project would therefore support the creation within the TCD of an hoc committee covering specifically the micro-region and the piloting of its operation over a period of four years. The TCP would meet under the chairmanship of the Vice-Delegate residing in Belle-Anse, the head city of the Belle-Anse arrondissement.'6

22. Another difference between the two departments is in the degree of organization of civil society. In the Northern Department, NGOs and other civil society organizations are still loosely organized. They have created a platform called.PISADEN. This platform, however, is yet to play a lead role as an active government interlocutor. Hence, the necessity that the TCD would reach out individually to certain key organizations (such as FECHAN, RECOCARNO, AAA, etc.). In

l6The arrondissment is an administrative entity within the department, corresponding to 4-5 communes. In the department of the South East the limits of the Belle-Anse arrondissement correspond almost exactly to those of the micro-regionof Thiotte-Anse h Pitres which covers all four communes of the arrondissement (plus the ForCt des Pins communal section).

67 contrast, in the South-Eastern Department, civil society organizations are way ahead in getting together and already display a strong degree of organization. This is exemplified by the establishment of a platform called KROS (Coordination Rkgionale des Organisations du Sud- Est). KROS currently plays a lead role as interface with government authorities and external partners. It has been instrumental for the creation in the Belle Anse arrondissement of the CODAB (Coordination de Z’Arrondissement de Belle-Anse) which represents the quasi-totality of the civil society and local government organizations of the arrondissement. CODAB held a workshop during the period January 24-28, 2006 to define the strategy and a list of priority investments for the arrondissement. The presence in the micro-region of the COPRODEPs (Comitks du Projet de Dkveloppement Participatif) created recently under the Bank-funded CDD project in each of the four communes also testifies to the high degree of organization and dynamism of civil society organizations.. These COPRODEPs are to regroup themselves into a federation of COPRODEDs for the arrondissement de Belle-Anse.

23. Principles of territorial planning process. Based on lessons learned in and outside Haiti, the planning process at the micro-regional level would adhere to the following set of general principles: Participatory decision-making with all groups of stakeholders involved; search of consensus among multiple actors; and equal access to opportunities for participating groups. In this regard, the project would have to be satisfied that civil society organizations participating in the TCD planning committee have legitimacy in terms of representation of key groups or constituencies, transparency of operations, integrity and expertise; Institutional strengthening: reinforcement of existing local skills for consultation and sub- project planning, preparation and implementation; Production of concrete results rapidly through early identification of strategic priorities and supporting priority investments for quick implementation while the planning process is ongoing thereby avoiding “planning fatigue”; and Quick identification of sources of funding for at least some of the recommended investments emerging as part of the planning process.

24. Planning process facilitator. An operator would be recruited under the project to facilitate the planning process in each of the micro-regions. This operator would be an NGO, development agency or private sector consultancy firm with experience in participatory planning and coalition/ institutional building, as well as project implementation in the Haitian context. Based on competitive bidding it would be awarded by PL 480 a contract with ‘delegation of authority’ for the entire planning process in a given micro-region (Mattrise d’Ouvrage Dklkguke - MDOD). The Facilitator/ MDOD would assist the secretariat of the territorial planning committees in the definition of the strategy for the micro-regions, establishment of the list of priority investments and follow-up of the implementation of the sub-projects, by providing the required administrative and technical support. It would ensure that consensus is reached and that plans are developed within specified timeframes.

25. To discharge itself of its duties, a major task of the facilitator would be to gather all the relevant information existing on the micro-region and support the consultation process. In that respect it would: (i)collect and integrate all studies and development plans that would have been formulated for the micro-regions, verify facts and figures contained in the various documents

68 collected as well as their current relevance; (ii)take stock of the specific institutional context in the micro-region, identify and mobilize the representatives from all the key constituencies at communal and supra-communal level, hence helping formulate the exact composition of the committee so as to best represent stakeholders; the facilitator would have to vet the credentials of potential participants in the planning committee; it will have to see to it that they are representative of key stakeholders and have the required degree of integrity, expertise and transparency in their operations; and (iii)assist the TCD (or ad hoc committee thereof) in the definition of the selection process including the fine-tuning of criteria for the selection of sub- projects.

26. Coordination with other donors. The project would work closely with the other donors, including UNDP (Capacity 2 1 and/or UNCDF), Canadian Cooperation, German Cooperation, that have acquired experience in territorial planning in Haiti and/or are active in the two micro- regions. These donors would be invited to support the planning process and consider funding the investments arising from this process that would not have been selected by the project. It is expected that, in this fashion, the project’s complementary investments and other donors’ investments in the micro-regions would be integrated, hence leveraging ‘anchor’ investments undertaken as part of Component 1.

27. The following donors are particularly active or have keen interest in intervening in the two micro-regions: (i)IDB for roads and basic socio-economic infrastructure (ongoing projects); IDB is also processing a supply chain promotion project with focus inter alia on coffee, cacao, mangoes and avocadoes that have substantial production in the two micro-regions; IDB would finance as part this project the rehabilitation of the Regional Research and Extension Centers of Dondon and Savane Zombi; (ii)European Union for roads and micro-realizations (irrigation and markets); (iii)German Cooperation for market infrastructure in the north (Dondon marketplace through the FAES) and environmental management in the south-east; (iv) Spanish Cooperation, French Cooperation and FCdCration Lutherienne Mondiale for miscellaneous interventions in the South East; and (v) UNDP for local planning (north) and environmental management (south- east). Donors would be invited to participate as observers in the meetings of the TCD or ad hoc committee thereof.

28. Eligibilitv and prioritization criteria. The facilitator would ensure that the investment proposals are prepared along the required format and guidelines, and that they contain the required background information and technical, social and economic justification (see Operational Manual). Due attention will be given as relevant to institutional arrangements for operation and management, as well as to cost-recovery.

29. When presented for consideration of the TCD (or ad hoc committee thereof) the proposals would need to be evaluated taking more particularly into account the following criteria: (i) Micro-regional (or supra-communal) scope, interest or impact; (ii) Alignment with the project development objective (decrease in marketing costs) or related to the reduction of vulnerability of project investments and/ or compliance with project safeguards ; (iii) Cost-effectiveness in terms of investment cost per beneficiary.

69 I

(iv) Sustainability, as relevant in terms of maintenance, management and operations, cost recovery (for both operating costs and renewal of investments once they have finished their economic life), etc.

30. Sub-Proiect cycle. This sub-project cycle consists of two stages (a) preparation and approval of sub-project proposals; and (b) financing, contracting and execution. The first stage comprises two levels from the bottom up: (i)first level consisting in the consultation of local constituencies and prioritization of sub-projects through civil society upper level organizations (such as PISADEN, CODAB, Federation of COPRODEP, etc.); and (ii)second level consisting in the TCP level proper where strategic orientations and sub-projects are to be filtered through TCP’s planning committee for the micro-region under the chairmanship of the Departmental Director of Planning, with the participation of all other stakeholders representative of micro- regional constituencies.

3 1. The sub-project cycle would comprise the following stages and steps:

(a) Sub-proiect preparation and approval (see Diagram)

(i)first level: . Civil society organizations determine their local investment priorities and prepare subproject proposals for investment financing, following procedures detailed in the project Operational Manual. . Civil society organizations through their upper-level organizations prioritize proposals using their own vetting criteria based on the indicative resource envelopes likely to be made available in the micro-regions.

(ii)Second level . Facilitator technically evaluates the proposed subprojects on behalf of the secretariat of the TCD (or ad hoc committee thereof), and confirms compliance with subproject technical, social and environmental guidelines and criteria established in the project Operational Manual. Facilitator on behalf of the TCD (or ad hoc committee thereof) ranks proposals according to the criterion of amount of investment per beneficiary. . TCD (or ad hoc committee thereof) decides which sub-projects should be retained as part of the project financial envelope; normally all projects with highest priority that fall within the envelope are approved.

(b) Sub-proiect funding, contracting- and execution . Subproject agreements are signed between the beneficiary organization and the facilitator/ MDOD, and countersigned by the TCD (or ad hoc committee thereof). These agreements spell out the terms and conditions for the funding, execution, ownership, operation and maintenance of the approved subprojects. . Resources for subproject implementation are transferred directly from the MDOD to the bank account of the beneficiary organization.

70 . Beneficiary organizations bear responsibility for contracting operators to execute the sub- project, and subsequently for operating and maintaining subproject investments; . Facilitator/ MDOD, as requested, provides technical assistance in implementing, and managing/ operating sub-projects. . Facilitator/ MDOD monitors sub-project implementation (construction, establishment of management structures, etc.) and subsequently sub-project operation and maintenance during the entire duration of the project based on regular progress reports prepared by beneficiary organizations.

Sub-Project Preparation and Approval Cvcle

Subproject \ / Final Prioritized List *.. v Table de Concertation Wpartmentale (TCD) t t Eligible Sub-project Proposals

Sub-project TCD Secretariat 1Screening t T t Prioritized Sub-project Proposals

, I ", I I Consultation Civil Society Upper Level Organizations Process

Individual Sub-project Proposals

I 1 t \*\ .*, e* Sub-project Preparation Individual Beneficiary Organizations

32. Timetable. To meet quickly some of the most urgent requests from stakeholder constituencies, thereby responding to expectations and avoiding planning fatigue, early priorities would be identified as soon as possible following the establishment of the ad hoc planning committee for the micro-region and the recruitment of the facilitator. The proposed timetable calls for sub-projects to be identified and prepared as early as the second half of PY1 and to be executed as early as beginning of PY2 (see table below). The funding earmarked for sub-projects is 25% of the total envelope for the first 18 months following project start-up, and 25% each for the following three semesters. The target is for all eligible sub-projects to start before end-PY3 and be completed by end-PY04.

71 Table 2: Timetable for Planning Process, Preparation and Execution of Sub-projects

33. List of prioritized investments. The investments that would emerge from the territorial planning process can be classified into three categories of investments: . Productive infrastructure investment that are aligned with the project’s development objective (enhancing the positive impact on marketing costs); . Safeguards-related investments (reforestation, erosion control, AIDS epidemic control) that could mitigate possible adverse effects from the project; and . Other productive investments, as well as environmental and social investments such as promotion of rural commerce and enterprise, construction of collection and pre-processing centers to facilitate the assembling and sorting of agricultural products, technical support (research and extension) to agricultural production, natural resources management, support to education and health, etc.

34. The project would finance investments in the first and second categories through Sub- component 2.2. Regarding the third category of investments, the project would finance as needed the required technical and/or economic feasibility studies so that investment proposals could be submitted for funding either to the national budget or to other donors. the head town of the department. Under this sub-component, the facilitator would provide the required assistance for completion of the studies and assist the TCD in seeking funding for the implementation of the sub-projects (eg. through the organization of “project fairs”).

72 35. Sub-component 2.2: Complementary sub-projects ($2.5 million). The territorial (participatory) planning supported by the project as part of Sub-component 2.1 is meant to elicit stakeholders’ investment priorities aligned with the development strategies for the two micro- regions. The proposals eligible for funding under Sub-component 2.2 would concern investments complementary to the ‘anchor’ road investments funded under Component 1. These complementary investments would have to conform to a pre-determined menu of indicative investment options. Such a menu has been established based on (i)the options identified in the two micro-regions through investigations undertaken as part of project preparation; and (ii)the specific priorities that emerged from the participatory process followed as part of the social assessment.

36. Eligible categories of investments. The twin type of investments that would be eligible for funding under the project would be: (a) investments enhancing the expected positive impact of road rehabilitation on marketing costs; and (b) investments contributing to reduce the vulnerability of project investments and mitigate the project’s potential negative impacts (safeguard-type investments).

(a) Investments enhancing the positive impact of roads on marketing costs. The following categories of complementary investments came from the preparation studies and the social assessment. These investments would enhance the expected impact of road rehabilitation on the decrease of marketing costs, in turn positively impacting households’ incomes: Rehabilitation of tertiary (capillary) roads linking productive areas with markets. Most of the small localities surrounding the main regional cities are inaccessible by motorized vehicles. Such a situation has a serious adverse impact on the marketing of crops. This includes heavy losses and significantly increased economic transaction costs, particularly for women who have to walk for hours to reach the markets and as a result are in a weak bargaining power vis-&vis traders. * Improvement of market infrastructure, Le., rehabilitation of marketplaces, including paved and covered areas, as well as water supply, drainage and sanitary facilities, storage sheds for priority agriculture inputs (fertilizer, pesticides, fungicides, etc.) . Urban roads linking marketplaces to the road network. . Spot interventions on key transport infrastructure. (b) Investments reducing the vulnerability of the ‘anchor’ project investments and mitigating the project potential negative impacts (safeguard-type investments) Both micro-regions selected under the project are mountainous and characterized by difficult terrain (steep slopes, environmentally fragile areas, etc.) They continue to be heavily deforested which results in serious water run-off and erosion.

37. In order to mitigate the project’s possible adverse effects, this component would also finance selected interventions. Such protection works could include for instance establishing live anti-erosive hedges and/or outright reforestation of certain environmentally sensitive areas close to the roads being rehabilitated. Other types of investments eligible under Sub-Component 2.1 would be those more directly related to the implementation of the ‘safeguard’ measures to be complied with under the mitigation plan established as part of the project environmental assessment, as well as other adverse impacts such as AIDS mitigation programs.

73 Table 3: Example of safeguard-Type Investments: Descriptionand illustrative cost

Anti-erosive investments 80,000 Reforestation activities 20,000 Road safety (speed bumps, etc.) 10,000 Information/ sensitization campaign (about 10,000 AIDS, road safety, deforestation, etc.) TOTAL 120,000

38. Size of investments. Eligible investments would need fall between $20,000 and $100,000, i.e., larger than the cost of investments eligible for funding under other local development projects such as the Bank-funded CDD operation (typically under $20,000). A few projects costing over $100,000 could be made eligible for project funding on an exceptional basis and subject to Bank’s prior approval (for instance, the rehabilitation of marketplaces, if this kind of sub-project is selected, is likely to be above $100,000). It is estimated that sub-projects would number about 50 for the two micro-regions with an estimated 10% over $100,000.

Component 3: Project administration and M&E. (US$1.75 million)

39. This component would finance administrative expenditures incurred by the three project implementation units: technical unit within MTPTC (UCE), PLA80 and FER. Eligible expenditures would include: (1) staff costs; (2) studies and consultancies; (3) training activities; and (4) acquisition of goods and equipments needed for project implementation (eg. computers, vehicles). The project would also complement some activities financed by the IDB to strengthen the capacity of the regional offices of MTPTC but only in the two micro-regions where the project will intervene (ie. Directions D6purtementuZes des Truvuux Publics of Jacmel and Cap- Haitien). This component will also finance the monitoring and evaluation activities that will be put in place to monitor the project’s impacts (see annex 11). Accordingly, this component will include three sub-components: Sub-component 3.1 will cover administration costs, including the acquisition of goods; Sub-component 3.2 will finance monitoring and evaluation, including the environmental management and the impact evaluation; and Sub-component 3.3 will finance the building of institutional capacity in the PIUS.

74 Annex 7: Project Costs HAITI: TRANSPORT AND TERRITORIAL DEVELOPMENT PROJECT

COMPONENT US$ million Component 1: Improvement of key transport corridors 11.25 1.I. Road improvement and spot interventions 10.75 Improvement and spot interventions Northern corridor (6.8) Improvement and spot interventions Southern corridor (2.4) Periodic maintenance (0.6) Studies and supervision (0.95) 1.2. Emergency and routine road maintenance 0.5

Component 2: Territorial development window 3 .O 2.1. Territorial development process 0.5 2.2. Complementary sub-projects 2.5

Component 3: Project administration and monitoring and evaluation 1.75 Project administration (1.52) M&E (0.23)

TOTAL 16.0

75 Detailed (indicative) costs for the third component are:

Institution Category Expenditures (for 6 years) costs (US$) UCE 810,800 Salaries 468,800 I deputy-coordinator(48 months) 21 6,800 I process manager (72 months) 252,000 Goods and Services 102,000 Vehicle (SUV) 35,000 Monitoring software 5,000 Small office equipment (computers, phone, etc.) 15,000 Other overatina costs 47,000

I activity manager and part time support staff 193,600 Goods and Services 160,000 Vehicle (SUV) 35,000 Small office equipment (computers, phone, etc.) 30,000 Consultancies and training 70,000 Other operating costs (incl. mission fees) 25,000 PL480 585.600 I I Salaries I (48months) I 288.000 I

Final evaluation 75,000 Monitoring 20,000 Deforestation 10,000 AIDS 10,000 1 GRAND TOTAL 1,750,000

76 Annex 8: ImplementationArrangements HAITI: TRANSPORT AND TERRITORIAL DEVELOPMENT PROJECT

1. The project will be implemented by three different implementing agencies, depending on the type of activities involved: (i)the technical unit (UCE) within the Ministry of Public Works, Transport and Communications (MTPTC); (ii)the Road Maintenance Fund (FER); and (iii)the PU80, under the authority of the Minister of Planning and External Cooperation (MPCE.).

2. The main project implementing agencies is the UCE technical unit within the MTPTC. This unit will be responsible for consolidating reporting from the other agencies.

3. The decision of using three different implementing agencies instead of a single one has been one of the key trade-offs that has been addressed during project preparation. The option to use an implementing agency outside the Government has been discarded because it would have jeopardized the sustainability of the road investments and because that option would have contradicted the Bank overall strategy in Haiti (particularly the objective of restoring credibility through the strengthening of extremely weak governmental institutions). Instead, the proposed project builds on existing credible institutional capacity that has been identified within governmental agencies.

4. The UCE technical unit within the MTPTC: This unit is currently implementing two road projects financed by the IDB. The unit is embedded in the MTPTC organizational structure and is interacting - when needed - with other departments within the ministry, as well as with the regional offices of the MTPTC (Directions Dkpartementales des Travaux Publics). The unit has proved to be effective in implementing the road investments financed by the IDB (183 km of roads have been rehabilitated during the period 2003-2005, representing US$14 million of investment). In order to be able to handle the investments financed by the proposed project in addition to the IDB ones, the unit will need to recruit two additional staff (a deputy-coordinator and a process manager). In order to simplify implementation and improve coordination, the operational procedures and the monitoring and reporting instruments will be harmonized to the maximum extent possible between the World Bank and the IDB. The unit will be responsible for managing all the road rehabilitation and spot interventions to be financed under the proposed project. To facilitate implementation at the local level, the unit will use the regional offices of the Ministry: in the micro-region of Dondon - Grand Rivikre - St. Raphael, the unit will liaise with the Direction Dkpartementale des Travaux Publics based in Cap-Haitien. In the micro-region of Thiotte - Belle Anse, the unit will liaise with the Direction Dkpartementule des Travaux Publics based in Jacmel. A representative (from a road engineering background) of the DDTP of Jacmel is scheduled to be appointed by the MTPTC in Thiotte or Belle Anse in order to supervise implementation in the micro-region. Some resources for the institutional strengthening of the DDTPs of Jacmel and Cap-Haitien have been included under Component 3 of the proposed project.

5. The Road Maintenance Fund: The road maintenance fund (Fonds d’Entretien Routier or FER in French) is an autonomous institution created by a law published in Le Moniteur on July 24, 2003. In 2004, the Economic Governance Recovery Operation (EGRO) endorsed by the

77 GOH and funded by the World Bank has allowed strengthening of the institutional capacity of the FER: as part of the first tranche disbursed in Dec. 2004, the 5 members of the Board (representing the MTPTC, the Ministry of Finance, local governments, the importers and exporters of petroleum products and road users) have been designated and the first Board meeting was held. As of December 2005, the FER included three professionals (a Managing Director, an Administrative and Financing Officer and an Operations Officer) and several support staff. The first road maintenance contract (periodic maintenance of the road Carrefour Dufort - Jacmel) was signed in January 2006. The FER is financed from a specific earmarked tax on gasoline (one Gourde per Gallon) and, in theory (since the rate has not yet been established), by other fees and levies (e.g., fee on vehicle registration, driving license fees, taxes on cigarettes and alcoholic beverages). The FER finances and controls road maintenance expenditures procured by the MTPTC on priority road segments. These road maintenance activities cannot be performed under “force account” and have to be contracted out to private entities (firms or communities). According to the law, the list of such priority roads where the FER is active (REFER: Rkseau Eligible du Fonds d’Entretien Routier) is established by the ministry. The MTPTC is responsible for the financing of the roads that are not in the REFER. For the purpose of the proposed project, the funds for routine road maintenance activities under Sub-Component 1.2, will be channeled through the FER. The project will finance 100% of the routine maintenance costs for the expected duration of project implementation (6 years). According to the normal life cycle of a road under proper maintenance arrangements, a periodic maintenance is likely to be needed the year following the loan closing date. A diagnostic of road conditions and a maintenance plan for the following 5 years will be performed 6 months before the closing date.

6. To progressively build and strengthen a culture of road maintenance among the three key actors (MEF, MTPTC, FER), so that sustainable flows of financing will be granted to FER after the project’s closing date, a number of conditions of effectiveness and legal covenants have been included in project design. These are: (1) the preparation by MEF of a projection of monthly proceeds from the gasoline tax for road maintenance for the next 12 months following the effective date of the loan; (2) an annual updating of this projection every year during project implementation; and (3) an annual summary to be prepared by MEF of the proceeds that have been actually transferred to FER. A legal covenant has also been introduced so that the inclusion of the roads rehabilitated under the proposed project in the REFER is guaranteed no later than one month after the completion of the rehabilitation works. The FER will then finance - and control - the routine maintenance of these roads. The maintenance activities will be performed by micro-enterprises set up within communities and contracted by the MTPTC. A specialized NGO will be contracted by the FER to assist the communities in setting up these micro- enterprises, provide them with technical assistance and monitor their activities. The regional office of the MTPTC will be involved in the monitoring and supervision of the maintenance activities (see table).

78 Table 1: Responsibilities for routine road maintenance

cost is 1000-1500 USD per km per year) Ensures that financing is only used for maintenance Designs road maintenance strategy on REFER and monitor its implementation Micro-enterpriseskommunities Implement routine maintenance activities on rehabilitated roads. Micro-enterprises include 10 to 20 members, chosen among communities living nearby the roads. Individual consultants Helps the communities organize themselves to set up micro-enterprises. Provides training and technical assistance to the micro-enterprises so that they know what maintenance activities have to be performed. Monitor micro-entemrises' activities. MTPTC Contracts micro-enterprises Directions Dbpartementales des Travaux Publics Supervise maintenance activities and report to both MTPTC and FER.

PL480 Management Office (Ministry of Planning and External Cooperation)

7. The responsibility for implementing the complementary investments and participatory planning process under Component 2 of the project, as well as the impact evaluation activities under Component 3.2 would be vested with PL-480 Management Office. This is an autonomous public institution under oversight of the Ministry of Planning and External Cooperation, created in 1985 to (i)receive and monetize food aid from international donors, and (ii)identify government development projects to be funded by the proceeds of food aid through relevant institutions and/or agencies in distinct areas such as road construction, agriculture, education, health and commerce. In recent years, PL-480 has also been entrusted with project coordination activities under separate donor financing. As the executing agency for the above project activities on behalf of the GOH, PL-480 will be responsible for overall coordination and oversight of these activities. The duties of the PL-480 would include sending updated key progress indicators to the UCE so that consolidated progress reports can be sent to the Bank, as required by the legal agreement.

8. PL-480 would use its Project Coordination Unit (PCU) to manage the above project's activities. The PCU would be strengthened as required to that effect. It would delegate day-to- day participatory planning operations and oversight over implementation of related investments in each micro-region to a specialized operator (Muitre D'Ouvruge De'lkguk - MDOD.) This operator would be either an NGO or a private consultancy firm having the required expertise in planning and project execution. It would facilitate the work of the ad hoc planning committee in charge of planning at the micro-regional level within the Table de Concertation De'parternentule. This would involve serving as secretariat to the committee, mobilizing participating stakeholders and constituencies and providing the required technical support for the design and implementation of the complementary investment sub-projects arising from the planning process.

79 In line with its responsibility as MDOD, the operator would (i)select local contractors, (ii) oversee these contractors as they implement the complementary investments, and (iii)disburse the funds earmarked for these investments, all according to the procedures laid out in the Project Operations Manual.

9. PL-480 would recruit a specialized consultancy firm or NGO to undertake impact evaluation activities for the entire project activities.

Coordination between the various agencies

10. The fact that the project will be implemented by three separate agencies requires specific coordination mechanisms to ensure that implementation arrangements will be consistent. Overall oversight and coordination of project implementation would be vested with a Project Steering Committee co-chaired by the Minister of PCE and the Minister of TPTC comprising representatives of all ministries concerned inchding the Ministry of Agriculture (MARNDR), the Ministry of Environment, the Ministry of Finance and the Ministry of Interior and Decentralized Government. This committee would define the project’s strategic orientations, as well as to vet its annual work plans and budgets. Specific coordination between MTPTC and FER, will be through FER Board meetings since they are chaired by the Minister of TPTC. At the local level, the DDTPs - which will report to both MTPTC and FER will also ensure coordination between these two agencies. The UCE unit within MTPTC would have responsibility for overall operational coordination of project activities and consolidation of project accounts through a MIS.

80 Annex 9: Financial Management and Disbursement Arrangements HAITI: TRANSPORT AND TERRITORIAL DEVELOPMENT PROJECT

Country Issues

1. The Bank has not carried out a Country Financial Management Assessment in Haiti which would have provided information on the performance of the country's public financial management. Nevertheless, the information collected through a number of studies and as part of the Interim Cooperation Framework exercise and the Economic Governance Reform Operation supported by the Bank, point out significant weaknesses in the budget process, as well as internal and external control. Also, Haiti ranks very low in the Transparency International index indicating a high level of corruption per~eption'~.However, the Government has made some efforts in the past couple of years at clarifying the framework and improving processes and systems for fiscal management and financial control. In addition, the current project will not be directly affected by these weaknesses given its institutional arrangements, which rely mainly on a donor funded PIU and financially autonomous entities outside the regular government framework.

Financial management and disbursement arrangements

Key factors affecting financial management and disbursement arrangements

2. Given its activities and implementation arrangements, the project does not present any major financial management challenge. The only two aspects worth noting are: a) the use of multiple implementing entities with each having financial management responsibilities potentially making it more difficult to consolidate financial information and introducing additional disbursement and reporting layers; b) the fact that the FER is newly established with no proven track record in project management and implementation; c) the fact that PL 480 will be using NGOs to implement subprojects which means transferring resources to these NGOs. These factors have been duly considered in the design and assessment of the project financial management arrangements as detailed below. For example, the PIU of the MTPTC has been given responsibility to consolidate the project's financial reports and this will be documented in the operations manual. Disbursements under the activities implemented by the FER are relatively small in terms of amount (US$0.5 million over the life of the project) and negotiations will be subject to FER finalizing its procedures manual satisfactorily to the Bank. The NGOs contracted by PL 480 will have to meet minimum financial management requirements and this will be defined in the request for proposals and approved by the Bank.

Entities

3. As indicated above, the MTPTCPIU and PL 480 Management Office will have primary responsibility for the project's financial management, and the FER will manage the funds for the road maintenance. The project will essentially rely on these entities financial management

l7With a score of 4 out of a maximum of 10. Haiti ranked 155 out of 158 countries in 2005.

81 system already established (in the case of the PIU and the PL480) or being developed in the case of the FER.

4. MTPTCRIU: This unit is currently implementing an IDB-financed project and will also implement another IDB-funded project. It already has an operations manual, a computerized accounting system and an administration and finance unit staffed with a Finance Manager and an Accountant. Its financial statements are regularly audited by a reputable firm. The accounting system has the capability of handling the accounts of several “entities/projects” separately and generating customized financial reports. Given the expected increase in the volume of transactions with the second IDB-financed project, an additional staff will be recruited to deal with the TDT project’s financial management.

5. PL 480 Management Office: As a national agency with financial and administrative autonomy, PL 480 has a well established organizational structure, financial and administrative procedures, and computerized financial management system. It has a lot of experience working with the government and international partners, managing large amounts of money, and implementing development projects. More recently, it has managed a World-Bank financed LICUS trust fund pilot project with similar activities and following similar implementation arrangements that are very similar to those of the Haiti CDD project. For this purpose, it has already developed an operation manual for the needs of the World Bank-financed projects, in addition to its own operational procedures manual, which is very detailed. These procedures cover largely the needs and requirements of the activities that the PL 480 will implement under this project. There is therefore no need to develop additional procedures.

6. PL-480 has a computerized accounting software (ACCPAC Plus), which allows multi- users and operates in network. ACCPAC can be used for multi-sites, is multi-currency and allows managing a practically unlimited number of donors and projects separately. The World Bank is already recorded as a donor and an additional project code, chart of accounts can easily be set up for the current project in order to keep track and report on the project expenditures in accordance with the Bank’s financial management requirements. And PL-480 is capable of generating Financial Monitoring Reports.

7. In terms of staffing, the financial management function is under the responsibility of the Administrative and Finance Director to whom the Accounting Unit reports to. The Accounting Unit is composed of a Chief Accountant and two accountants with appropriate qualification and experience. In addition, a financial analyst reporting to the Administrative and Finance Director performs the function of an internal controller with the duty to review all documentation prior to any payment. In addition, PL-480 has hired an accountant who is working specifically in the PCU that implements the three operations financed by the World Bank. The CV of this accountant had already been reviewed and cleared by the Bank.

8. PL-480 prepares regular financial statements for its own operations and individually for each project it manages. These financial statements have been regularly audited. The audit opinion during the last three years was unqualified.

82 9. Based on the above, PL-480 financial management system is found to be adequate. However as P1 480 will be contracting two NGOs to implement the facilitation process and manage the contracts for the sub-projects (including procurement, signing the contracts, monitoring their implementation and payments), these NGOs will be expected to have sound financial management commensurate with the activities they will implement. These NGOs will be selected on a competitive basis following Bank’s procurement. It is not therefore possible at the moment to assess their financial management system. As a selection criterion, they will have to meet minimum financial management requirements that will be defined in the request for proposals to be approved by the Bank.

10. Fonds d’Entretien Routier (FER): As an autonomous government entity, FER is required to have its own accounting system, maintain regular accounts, and have its financial statements audited annually by an independent external auditorI8. Having been established just recently, the FER is still in the process of developing its financial management system. A draft manual of procedures has been developed and is awaiting approval of FER board of directors. The manual covers all relevant aspect of financial management and foresee funds-based accounting system given that the FER is financed from different sources of funding. This is particularly appropriate for the TDT project the accounts of which would be able to be maintained and reported on separately. In terms of finance and accounting personnel, the Administration and Finance Department consist of the Director and the Head of the Accounting Unit. Both have relevant qualifications and experience. For the time being, the accounting system is maintained in Excel spreadsheet as the operations are still limited. FER plans to purchase a computerized accounting software. Provided that the manual of procedures is approved by the board of directors and given the size of funding to be managed by the FER, its financial management system is deemed adequate.

Flow offunds arrangements

11. The Government would open at the central bank (Banque de la Republique d’HaYti) two separate designated accounts to be managed respectively by the MTPTCPIU and PL 480 Management Office. These accounts will be used to make payment for the activities implemented respectively by the PIU and PL 480 Management office. With regard to the activities implemented by the FER (a total of $0.5 million over the life of the project), an advance will be made from the designated account managed by the PIU into an account opened at the BRH and managed directly by the FER. Short term advances will be made to this account based on the schedule of payments to be made by FER for road maintenance contracts. The short term nature of these advances will help avoid that money sits too long in the account delaying accounting by the PIU of advances in the designated account.

Financial Reporting and auditing

12. Two main financial-oriented reports will be submitted to the Bank. The annual financial statements will be consolidated by the MTPTCPIU covering all project expenditures regardless of source of funding and implementing entity. These statements will be audited by an independent external auditor acceptable to the Bank. The audit report will be submitted to the

18 Loi portant Crkation du Fonds d’Entretien Routier, Le Moniteur , July 24,2003

83 Bank no later than 4 months after the end of each borrower’s fiscal year ending September 30, except for PL 480 audit report to be submitted no later than 6 months after the end of the fiscal based on previous agreements. The various audit opinions required are summarized below.

Audit opinions

Audit Report Due Date

Project Financial Statements 4 months after the end of each FY

- PL480 6 months after the end of each FY - FER 4 months after the end of each FY SOE for Special Accounts A and B 4 months after the end of each FY Special Account A 4 months after the end of each FY

Special Account B 4 months after the end of each Fy

13. In addition to the audit report, a quarterly Financial Monitoring Report (FMR) will be prepared. Each entity will prepare a separate FMR and all the FMRs will be consolidated by the MTPTCPIU and submitted as a single report to the Bank no later than 45 days after the end of each quarter. The format of the FMR will be defined in the operations manual.

Disbursement arrangements

14. The project will be implemented over a 6-year period, from 2006 to 2012. Procurement will be completed by 20 10 for component 2 and sub-component 1.1. The proposed allocation of the loan is shown in the table below.

Allocation of grant proceeds

Expenditure Category Amount in Financing US$ million Percentage

Goods works and services under 10.75 100% Part 1.1 of the project Goods works and services under 0.5 100% Part 1.2 of the project Goods works and services under 0.5 100% Part 2.1. of the project Goods works and services under 2.5 100% Part 2.2 of the project Goods works and services under 1.75 100% Part 3 of the project Total Project Cost 16.0 100% Unallocated 0

Total 16.0 100%

84 Statements of expenditures (SOE)

15. The project will be disbursing on the basis of SOE.

Designated accounts

16. There will be two designated accounts A and B, managed respectively by the MTPTCPIU and P1 480 Management Office. Their authorized allocation will respectively be US$600,000 and US$200,000. An advance not to exceed US$lOO,OOO will be made to FER by the MTPTCPIU from Special Account A.

Risk Analysis

17. The following matrix details the financial management risk assessment for the project.

H - High S - Substantial M - Moderate N - Negligible or Low

Country risks

18. Although a Country Financial Management Assessment has not been carried out in Haiti, information on the performance of the country’s public financial management points out significant weaknesses in the budget process, as well as internal and external control. Also, corruption is perceived as an issue as Haiti ranks very low in the Transparency International index indicating a high level of corruption perception”. However, the Government has made some efforts in the past couple of years at clarifying the framework and improving processes and l9 With a score of 4 out of a maximum of 10, Haiti ranked 155 out of 158 countries in 2005.

85 systems for fiscal management and financial control. In addition, the current project will not be directly affected by these weaknesses given its institutional arrangements, which rely mainly on a donor funded PIU and financial autonomous entities. Consequently, although the country fiduciary risk is high, its impact on the project is moderate.

Project risk

19. Given the nature of the project activities and institutional set up, no major inherent fiduciary risk is identified. The risk level is rated moderate.

Summary of Strengths and Weaknesses of FM Arrangements

20. Primary strengths and weaknesses of the financial management system, including actions required to address weaknesses:

Key strengths of the project’s FA4 arrangements: Established implementing entities with experience in donor funded projects in general and with World Bank procedures in the case of PL 480. Key area to be arranged or improved: FER which will implement part of the project has just been established and is still in the process of developing its financial management system, and as such does not have prior experience with World Bank funded projects.

Action Plan

21. The following financial management system has been agreed upon between the Bank and GOH:

Action Responsibility Completion Date Operations Manual - Finalize FER Procedures Manual and have it FER Effectiveness approved by its board of directors - Finalize the project’s operations manual satisfactorily MTPTCPIU Effectiveness to the Bank including format of the quarterly FMRs to be prepared by the three implementing entities, among other things giving MTPTCPIU responsibility to consolidate the project’s financial reports Audit MTPTCPIU No later than six - Appoint the auditors for the project acceptable to the months after Bank according to TORS also acceptable to the Bank project effectiveness NGOs contracted by PL 480 PL 480 As part of the Define minimum financial management requirements selection process to be met by the selected NGOs in the request for of the NGOs proposals and have them approved by the Bank

86 Supervision Plan

22. Supervision of the project’s financial management will be based on desk review of the quarterly FMRs and the annual audit reports. In addition, the implementing entities including the FER should be visited at least once annually to confirm the continuous adequacy of the financial management system and provide support for capacity building.

87 Annex 10: Procurement Arrangements HAITI: TRANSPORT AND TERRITORIAL DEVELOPMENT PROJECT

A. General

1. Procurement for the proposed project would be carried out in accordance with the World Bank's "Guidelines: Procurement under IBRD Loans and IDA Credits" dated May 2004; and "Guidelines: Selection and Employment of Consultants by World Bank Borrowers" dated May 2004, and the provisions stipulated in the Legal Agreement. The various items under different expenditure categories are described in general below. For each contract to be financed by the Grant, the different procurement methods or consultant selection methods, the need for pre- qualification, estimated costs, prior review requirements, and time frame are agreed between the Borrower and the Bank 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.

2. Procurement of Works: Works procured under this project, are expected to consist mainly of the rehabilitation and maintenance of two major road segments, totaling about 100 km., and spot interventions (eg. bridges, consolidation of slopes) on some critical sections of connecting roads. Small road maintenance works will also be carried out by community associations (Organisations Comunautaires de Base - OCBs) and small enterprises contracted by the regional offices of MTPTC (Directions Dkpartementales des Travaux Publics) in the two micro-regions where the project will intervene. Small works for productive infrastructure investments will be financed under Component 2 of the project. No works are expected to be procured under Component 3 of the project. However, in the event that additional works contracts are identified during project implementation, they would be procured according to the methods and thresholds identified in the table below. This procurement would be carried out using the Bank's standard bidding documents (SBD) for all ICB and national SBD agreed with the Bank for other procurement methods.

3. Procurement of Goods: Most of the goods procured under this project will be goods and equipment needed for project implementation (eg. computers, vehicles). Procurement of these goods will be carried out using the Bank's SBD for all ICB and national SBD agreed with the Bank for other procurement methods.

4. Procurement of non-consulting services: Non-consulting services required for project execution, such as those needed for training events and project information campaigns, will be acquired in accordance with the Bank's Procurement Guidelines, as appropriate. This procurement will also be carried out using Bank's SBD or National SBD agreed with the Bank.

88 5. Selection of Consultants: The project will finance contracts with consulting firms for studies, training, and other capacity building activities. Short lists of consultants for services estimated to cost less than $100,000 equivalent per contract may be composed entirely of national consultants in accordance with the provisions of paragraph 2.7 of the Consultant Guidelines.

6. Where teams of consultants are not required, individual consultants will be hired to provide specialized advisory services and services to support project implementation and monitoring, as well as technical assistance to the various implementing agencies.

7. Universities, Government Research Institutions, Training Institutions, NGOs and national and international technical assistance organizations may be contracted to provide technical assistance and carry out research in their areas of specialization. Under Component 2 of the project PL-480 is expected to contract NGOs for day-to-day participatory planning operations and implementation of related investments in each micro-region. An NGO may also be contracted to build institutional capacity in local communities to perform routine road maintenance, since no such capacity exists today within the Government. While the broad range of services to be provided by such NGOs cannot be exactly equated with consulting services, the NGOs will be selected, to the extent possible, through competitive processes based on the Bank’s Consultant Guidelines.

8. Operating Costs: Sundry items, utilities and other incremental recurring costs would be procured using the administrative procedures of PL-480 Management Office and the PIU in MTPTC, which were reviewed and found acceptable to the Bank. In addition, the Bank would finance incremental staff costs in PL-480, the PIU in MTPTC, and the FER required for project supervision and monitoring.

9. The procurement procedures and SBDs to be used for each procurement method, as well as model contracts for works and goods procured, will be included in the project Operational Manual.

10. Thresholds recommended for the use of the procurement methods specified in the project procurement plan are identified in the table below, which also establishes the notional thresholds for prior review. The agreed procurement plan will determine which contracts will be subject to Bank prior review.

89 Thresholds for Procurement Methods and Prior Review

Expenditure Contract Value Procurement Contracts Subject to Category (Threshold) Method Prior Review US $ thousands

1. Works > 1,000 ICB All 100- 1,000 NCB All loo ICB All 25-100 NCB All1 <25 Shopping All Regardless of value Direct Contracting All 3. Consulting Services -3.A Firms Regardless of value QCBS,QBS,FBS ,LCS All

Note: QCBS = Quality- and Cost-Based Selection QBS = Quality-Based Selection FBS = Fixed Budget Selection LCS = Least-Cost Selection CQS = Selection Based on Consultants’ Qualifications

B. Assessment of the agency’s capacity to implement procurement

11. Procurement activities under Component 1 of the project will be carried out by the IDB PlU in the MTPTC. The Bank’s preliminary assessment of the capacity of the MTPTCPIU to implement procurement actions for the project has been based on the unit’s good performance in managing procurement for two large IDB infrastructure projects, to include several bidding processes for road rehabilitation and maintenance contracts. In addition, the MTPTCPIU is currently recruiting a procurement specialist for their Administration and Finance team, who should be able to meet the needs of the Bank project as well as IDB’s. Nonetheless, this assessment will need to be updated once the final versions of the procurement plan and the project operational manual have been prepared and accepted by the Bank. If additional strengthening of the PlU is required at that time, an action plan will be prepared to address any remaining shortcomings.

12. Procurement activities under Component 2, will be carried out by the Project Coordination Unit (PCU) in the PL-480 Management Office, which was put in place last year to manage a LICUS grant, and then the community driven development component of the Bank’s Emergency Recovery and Disaster Management (ERDMP) project and the Bank’s Community Driven Development (CDD) project. The Bank’s assessment of the capacity of the PL-480 Management Office to implement procurement actions for the project has been based on PL-

90 480’s satisfactory performance to date in implementing the two ongoing Bank projects and the LICUS grant as well as in developing and adapting the project operational manuals for both projects.

13. The key issues and risks concerning procurement implementation for the project arise from the many weaknesses in the Haitian public procurement system. These weaknesses were identified by a CPAR prepared by Bank in 1999 and confirmed by the Government and multiple donors in the context of the Interim Cooperation Framework (ICF) adopted in 2004. The Bank’s Economic Governance Reform Operation (EGRO) and recently approved Economic Governance Technical Assistance grant (EGTAG), seek to address many of these problems through their procurement components and the Government has already taken several actions to improve procurement institutions and practices. These include the adoption of a new Procurement Decree which creates a Commission Nutionule des Murchks Publics (CNMP) with a mandate, inter alia, to improve procurement practices and develop standard bidding documents for use in all public procurement. The new Decree also formally establishes that competitive bidding practices are the norm and direct contracting the exception for government procurement and includes new provisions governing the procurement of intellectual (consulting) services.

14. An additional procurement risk, specifically related to contracts for road rehabilitation, such as those to be financed by this project, arises from the current lack of capacity among domestic contractors, which may limit the number of entrepreneurs who can compete for larger contracts. In addition, the security situation in Haiti has discouraged foreign firms from entering the market, apparently due to the high insurance costs they incur to operate in Haiti. This risk is considered manageable for two reasons. First, the IDB has been introducing innovative procedures through their own projects to increase competition (e.g.: multiple lot bids that allow smaller contractors to compete, qualification criteria specifically tailored to local capacity) and the Bank project will benefit from the expertise in these procedures already in place in the MTPTCPIU. Secondly, the newly created CNMP has already prepared an initial draft standard bidding document for works, which, along with the CNMP’s work to establish clear procedures for government contracting, should facilitate broader participation by private contractors in future government contracts.

15. In addition, as a result of the Government’s commitment to reform and the application of the Bank’s Guidelines in various recent Bank-financed operations, some government agencies such as PL-480, the Ministry of Finance and the Direction de la Protection Civile (DPC), are becoming increasingly familiar with the basic principles of open and fair procurement. This familiarity, combined with the expected broad dissemination of information on new procurement procedures to all purchasing agencies, is expected to mitigate some risks. However, the overall project risk for procurement remains HIGH

91 C. Procurement Plan

16. The Borrower, at appraisal, developed a procurement plan for project implementation which provides the basis for the procurement methods. This plan was agreed between the Borrower and the Project Team at negotiations and will be made available at the PL-480 office, through the Ministry of Planning and the MTPTCRIU office in Port-au-Prince. It will also be available in the project’s database and in the Bank’s external website. The Procurement Plan will be updated in agreement with the Project Team annually or as required to reflect the actual project implementation needs and improvements in institutional capacity.

D. Frequency of Procurement Supervision

17. Supervision will be carried out primarily through the prior review by the Bank of all procurement actions by the PL-480 Management Office and the MTPTCPIU. This exceptional level of Bank oversight may necessitate the engagement by the Bank of a local consultant to work with the various implementing agencies. In addition, day-to-day procurement supervision will be supplemented by supervision missions at least twice a year.

E. Details of the Procurement Arrangements Involving International Competition

1. Goods, Works, and Non Consulting Services

18. List of contract packages to be procured following ICB and direct contracting:

1 2 3 6 7 8 9

Ref. Contract Estimated Method Domestic Review Expected Comments No. (Description) cost Preference by Bank Bid- 7 (yedno) 1 (Prior / Post) I Opening 1 1 Improvement $7.1 million of corridor - Micro-region North 2 Improvement $2.6 million Yes Prior April 07 of corridor - Micro-region South 3 I Vehicles-3 I $105,000 No Prior August 06 suvs 4 I Vehicles - 4 I $110,000 No Prior August 06 I Pick-ups I ICBI No

92 2. Consulting Services

(a) List of consulting assignments with short-list of international firms.

5 6 7

Ref. No. Description of Estimated Selection Review Expected Comments Assignment cost Method by Bank Proposals (Prior I Submission Post) 1 Engineering $283,000 QCBS Prior study - Micro- region North 2 Engineering $102,000 QCBS Prior study - Micro- region South 3 Supervision - $425,000 QCBS Prior Corridor - North 4 Supervision- $153,000 QCB S Prior April 07 Corridor - South 7

(b) All selection processes for consultancy services, except those under subprojects, will be subject to prior review by the Bank.

(c) Short lists composed entirely of national consultants: Short lists of consultants for services estimated to cost less than $100,000 equivalent per contract, may be composed entirely of national consultants in accordance with the provisions of paragraph 2.7 of the Consultant Guidelines.

93 Annex 11: Monitoring and Evaluation Arrangements HAITI: TRANSPORT AND TERRITORIAL DEVELOPMENT PROJECT

1. The monitoring and evaluation framework includes two distinct elements. The first consists of monitoring project outputs and performance, along with annual audits and plans, to be undertaken by the project coordination unit on an ongoing basis. The second consists of periodic performance audits, and a comprehensive impact evaluation study that will be carried out by independent consultants specialized in this field.

2. A monitoring system will be created within, and operated and maintained by the MPTPC Bank/IADB technical unit (the PIU)20.This system will bring together both the physical and financial aspects of project implementation, and to allow both the implementing units and the Bank to ascertain the implementation progress towards the output targets of each sub-project and to gauge the project’s overall progress towards achieving the project development objectives (PDOs). The system would specifically include: (a) subproject information, such as pertinent physical and financial data for each subproject; (b) financial management data, from which Statements of Expenditure (SOEs) would be generated and submitted to the Bank; and (c) project management information, from which all project reports (e.g., semi-annual technical audits) would be generated. The system will also monitor the number of work days generated by the road maintenance activities (Le. within the CBOs), beneficiary satisfaction with the consultative planning process and associated investments, and the amount of outside (Le. not originating from this project) funding mobilized by the activities under Component 2. Whilst the primary responsibility of housing and maintaining the system will reside with the MPTPC PIU, all implementing units of the project (the MPTPC PIU, PL-480, and the FER) will be responsible for regularly updating the MIS, including key project information for the project components or subcomponents they are managing. Where sub-components are managed by local actors (such as NGOs) in the target regions, information gathering may be delegated to them, but with ultimate responsibility for ensuring accuracy and timeliness lying with the main agencies (MTPTC, PL- 480 and FER). The PIU will make available monthly summary MIS reports with which the Bank will monitor project performance indicators, review disbursements, as well as supervise implementation progress.

3. Progress reports detailing progress made under each of the project components will be prepared by the PCU every six months and submitted for review to the Bank. These reports should measure performance against the results indicators in the results framework (in annex 4 of this document), and, in addition to financial management and procurement reporting requirements, include information on (i)status of project execution, with detailed information of allocated budget, scope of the activities and results achieved, (ii)a summary of progress in the implementation of environmental and social measures, and (iii)an annex describing actual and potential developments likely to impinge on project implementation. The PCU is expected to require some support for capacity strengthening in order to effectively carry out its obligations under this arrangement, and funds under component three would be allocated to this end.

2o Probably as a modification of an existing MIS that the IADB has developed for its road rehabilitation projects in Haiti.

94 4. At intervals not exceeding one year (12 months), auditors acceptable to the Bank - financed under Component 3 - will conduct a performance audit of project implementation in each of the two target regions. These audits will focus particularly on the timeliness, cost and quality of the execution of the physical components of the project, as well as on adherence to procurement procedures and compliance with the guidelines of the Operational Manual, and performance indicators in areas relating to social impacts, environmental practices, and participatory processes.

5. In addition to monitoring progress along the project’s outcome indicators towards the project development objectives, an important element of the project design will also be to carry out a thorough impact evaluation. A key feature of the proposed project is its potential, as a pilot project, for establishing a model for scale-up of similar interventions in the Haitian context. Such an impact evaluation will provide an invaluable tool at the internal, national, and global level. This project is not only about restoring roads, it aims thereby to foster and promote rural trade, as a means to stimulate the rural economy, improving the livelihoods and wellbeing of the rural population. Evaluating the efficacy of this approach will require more then simply monitoring whether the roads were built, or even whether people used them. In order to judge this project a success on its contribution towards higher objectives, a more thorough impact evaluation will need to look at its effect on rural incomes, patterns of rural trade, and so on. Such an evaluation will also highlights the most successful, as well as the most problematic, elements of this project so that scale-up, and future activities in the sector can be tailored specifically to achieve maximum results in the Haitian context. Moreover, given the very large sums of money currently being spent on rural infrastructure rehabilitation in Haiti, a clear evaluation of the relative benefits, strengths, and weaknesses of this particular model, and of road rehabilitation projects in general would be a powerful tool both for the Bank, other donors, and indeed for the Haitian government itself

6. From a broader perspective, the focus on measuring the impact of transport projects on growth and income has largely come from the point of view of macro-level analyses of growth and infrastructural spending21.Undertaking road rehabilitation in such cut-off, isolated regions is likely to have a truly profound impact on the lives of people living in the targeted areas. This project therefore offers an unusual opportunity to look in detail at how these major changes will affect people’s everyday lives and wellbeing, and offer broader insights into the impacts of similar projects. In light of the high potential of such a study, a supplemental research support budget could be sought from within the Bank to support the hiring of expert external consultants to ensure the highest quality of the evaluation and survey design, as well as the ex-post impact evaluation report at the project’s termination.

7. The impact evaluation will consist of two extensive surveys, one before the evaluation (the baseline) and one at the end of the project (the ex-post).22A partial evaluation will also be performed at mid-term. The methodology employed will be a double difference analysis based

*’ For example, see Fay, Marianne, Ingram, G. (in press) - Physical Infrastructure. Forthcoming as Chapter 20 of the International Handbook of Development Economics. ** Given the project timescale (only 6 years), and that road construction is unlikely to be completed before the end of the third year, intermediate surveys would be highly unlikely to demonstrate any significant effects - changes to trade flows and lifestyles take time to occur, causing some latency in effects.

95 on a regression-discontinuity analysis. Given the evolving economic and political conditions in Haiti, a simple before and after evaluation of any given set of indicators in the target regions would be incapable of convincingly demonstrating the impact of the project, distinct from changes due to other factors. The before measurement would not, in other words, represent a realistic countefactual. The standard way to get around such a problem is to use an experimental or quasi-experimental design.

8. The ideal way to calculate a project’s impact is an experimental, randomised design in which interventions (or treatment in the technical language) are applied to random groups, and withheld from the rest (the controls). Any differences in the post-programme treatment and control groups is then attributable to the project intervention. Since the project target areas have already been selected a priori on the basis of their potential for growth, infrastructural needs and so on, an experimental design is not possible. A commonly used quasi-experimental technique is the double diflerence methodology. This is done by comparing regions with and without the intervention, both before and after the project. The diflerence between the diflerences (before and after) of the two regions is then the impact of the project.

Double Difference Methodology

Indicator 4 4 level

Before After

9. In the case of this project, the difficulty of establishing the counterfactual is worsened by the fact that it would be virtually impossible to identify control cases (Le. regions similar to the target regions in every respect other then the absence of the project). Haiti is a small country and, being an island, it has a very high degree of diversity in terrain, agricultural production, climate, and so on. Furthermore, extensive intervention by the donor community is occurring throughout the domain. Any ‘control’ regions would thus likely be a poor basis for establishing a with and without comparison. A regression-discontinuity (RD) design23 is a quasi-experimental design defined by the fact that the probability of receiving treatment changes discontinuously as a function of one of more underlying variables. In the case of road rehabilitation, this variable could be distance from a rehabilitated road. At an (arbitrary) distance from the rehabilitated road, a hypothetical border is drawn between ‘treatment’ and ‘control’ groups. The assumption is that the groups on either side of arbitrary line are likely to be similar in all respects, other then their proximity to the rehabilitated road. In this case the line is taken to be the end point of the

23 See, for example Hahn, Jinyong; Petra Todd; & Wilbert Van der Klaauw (2001) - Identification and Estimation of Treatment Effects with a Regression-Discontinuity Design. Econornetrica 69( 1); and Battistin, Erich & Enrico Rettore (2003) - Another look at the Regression Discontinuity Design. The Institute for Fiscal Studies, Department of Economic, UCL cemmap working paper CWPO1/03.

96 rehabilitated road. The two groups are then compared before and after the project interventions, using the double difference methodology described above to compute the effect of the project intervention.

10. As part of this exercise, an expert consultant with experience in impact evaluation in the transport and agricultural development field will be engaged to design an evaluation and survey design. The consultant will work with local firms to field test and refine then survey instruments and then gather the necessary data for the baseline survey. At the end of the project a consultant will again be engaged to carry out the follow-up ex post survey. On the basis of these results the consultant will then be tasked with preparing a final impact evaluation for dissemination. The results of this study will be disseminated within the Bank, to the wider donor community, and to the Government of Haiti. In addition to the above-mentioned learning opportunity benefits, the evaluation also has a high potential as a capacity building exercise in the Haitian context. A review of past and ongoing donor-sponsored evaluation exercises has revealed that whilst there have been many evaluations, most are on a simplistic level, and lack statistical integrity: whilst in many cases they do provide some estimate of the impact of the project itself, it is not done in such a way as to clearly distinguish direct impacts from external events effecting the local economy - these do not therefore provide the sort of detailed analysis which would allow them to be used as the basis for optimizing future interventions.

Unrehabilitated road

Control group Terminus of rehabilitation (discontinu'ity) Treatment group

11. Another issue in Haiti is the stark lack of existing data on which to draw to complement this project's impact evaluation. Whilst this is a drawback in terms of increasing the likelihood of obtaining data, it is also a benefit to conducting such a survey as data gathered as part of this project will have a high value in terms of informing follow-on studies and surveys in Haiti.

97 Annex 12: Economic and Financial Analysis HAITI: TRANSPORT AND TERRITORIAL DEVELOPMENT PROJECT

1. During project preparation, an economic evaluation has been performed at two levels: first, to evaluate qualitatively the possible benefits of the proposed interventions at the level of the two micro-regions (see Annex 5); and second, to perform quantitatively an economic evaluation of the main road rehabilitation investments envisaged under the project.

2. For the quantitative economic evaluation, the model used was the Roads Economic Decision Model (RED), which was found to be more appropriate than other models, due to the low traffic characteristics of the selected roads.

3. The RED24performs the economic evaluation of improvements and maintenance projects adopting the consumer surplus approach, which measures the benefits to road users and consumers of reduced transport costs. This approach was preferred to producer surplus approach, which measures the value added or generated benefits to productive users in the project zone of influence, e.g. agricultural producers, since the consumer surplus approach allows for a better judgment of the assumptions made and an improved assessment of the investment alternatives simulated. The RED simplifies the economic analysis and is less demanding in terms of input requirements. Additionally, the RED model addresses the following additional concerns.

(a) Reduces the input requirements for low-volume roads. (b) Takes into account the higher uncertainty related to the input requirements. (c) Clearly states the assumptions made, particularly on the road condition assessment and the economic development forecast (induced traffic). (d) Computes internally the generated traffic due to decrease in transport costs based on a defined price elasticity of demand. (e) Quantifies the economic costs associated with the days per year when the passage of vehicles is further disrupted by a highly deteriorated road condition. (0 Uses alternative parameters to road roughness to define the level of service of low volume roads (vehicle speeds and passability). (g) Allows for the consideration in the analysis of road safety improvements. (h) Includes in the analysis other benefits (or costs) such as those related to non- motorized traffic, social service delivery and environmental impacts. (i) Raises questions in non-traditional ways; for example, instead of asking what is the economic return of an investment, one could ask for the maximum economically justified investment for a proposed change in level of service, with additional investments being justified by other social impacts. (j) Presents the results with sensitivity, switching values and stochastic risk analyses.

24 RED, Software Users Guide. Rodrigo Archondo-Callao. July 2004

98 (k) Has the evaluation model on a spreadsheet, such as Excel, in order to capitalize on built-in features and tools such as goal seek, scenarios, solver, data analysis, and additional analytical add-ins.

4. The main simplification of RED with relation to other economic decision models is that it considers a constant level of service, during the analysis period, for the “with” and “without” project cases, while other models include road deterioration equations. Road deterioration equations vary over time the roughness of a given road as function of condition, traffic, environment, and maintenance characteristics; these equations are not implemented on RED. Rather, RED uses the concept of average levels of service, which is considered reasonable for low volume unpaved roads due to the following reasons.

(a) Difficulty in measuring or estimating the current roughness of unpaved roads. (b) Seasonal changes in road condition and passability. (c) Difficulty in determining the past andor future grading frequencies. (d) Cyclical nature of the road condition under a defined maintenance policy. (e) Convenience in defining levels of service for low-volume roads with parameters other than average annual roughness and gravel thickness.

Vehicle Operating Costs (VOC)

5. The HDM-4 Vehicle Operating Costs module has been used to get the Vehicle Operating Costs that are applied in the RED model.

6. The HDM-4 Vehicle Operating Costs Module computes, for a particular country, vehicle operating costs and speeds as a function of road roughness for nine terrain and road types (flat, rolling, mountainous, paved, graved, earth) and nine motorized or non-motorized vehicle types, which are selected among several possible vehicle types. Our road is a mountainous terrain type and currently is more like an earth road type. We entered 7 types of vehicles: car medium, four- wheel drive, truck light, bus light, bus medium, truck medium, truck heavy and motorcycle. We include their economic unit costs and utilization and loading data as well.

7. The HDM-4 VOC module also requires the main country specific input parameters regarding road characteristics, such as altitude, percent of time driven on snow (0% in our case), and percent of time driven on water (50% in our case). The model supplies values when we don’t have technical data available, such as for paved roads texture depth, number of rise and falls, super-elevation, speed limit enforcement and roadside and NMT factors.

8. The resulting coefficients relating VOC and speeds to roughness are used in the RED model for all seven vehicles and for all nine terrains and road types.

99 Methodology

9. The technical assessment performed on the two roads has identified various improvement alternatives on the different sections of the two roads, with their associated estimated costs (Annex 13).

10. Based on technical considerations as well as available budget, two options were identified for the Northern corridor and a single one for the Southern one:

Northern corridor:

(i)Option 1: leave Section 1 to other donors (eg. include in scope of on-going EU-funded Cap- Haitien - Ouanaminthe contract) or to GOH (ie. reactivate and complete stalled Carrefour La Mort - Milot contract) and rehabilitate Section 4 to paved standards.

(ii)Option 2: include Section 1 (Carrefour La Mort - Barrikre Battant) in project scope and rehabilitate Section 4 (Dondon - St. Raphael) up to unpaved standards.

Table 1: Description of investment alternatives for Northern corridor

ODtion 1 Option 2 DescriDtion US$/km Description US$/km Section 1: Carrefour no intervention 0 Complete project as planned with 153,000 La Mort - Barribre AC over 7 m on crushed stone Battant (left to other donors or GOH) base. Assume 2 km already built is OK. Project covers 6.5 km only.

~ Section 2 : Barribre Reconstruct 4.2 km with DBST on 154,000 Reconstruct 4.2 km with DBST on 154,000 Battant - Carrefour crushed stone and reseal 2 km. Assume crushed stone and reseal 2 km. Menard existing base reprocessed as sub-base Assume existing base reprocessed as sub-base Section 3 : Carrefour Improve to paved with DBST, 6 m wide 258,000 Improve to paved with DBST, 6 m 25 8,000 Menard - Dondon cway with 1.O m wide unpaved shoulders. wide cway with 1.0 m wide Include retaining structures and drainage unpaved shoulders. Include improvements. Block paving in Dondon retaining structures and drainage including lined drains. improvements. Block paving in Dindon including lineh dra& Section 4 : Dondon Improve to paved with DBST, 6 m wide 248,000 Improve to unpaved 5.5 m width. 140,000 - St. Raphael cway with 1.0 m wide unpaved shoulders. Drainage and block paving Include retaining structures and drainage improvements retained. improvements. Pave center of St Raphael with block paving. Include lined drains and access provision. TOTAL (US$ milli rtl * 6.8 6.8 * 10% should be added for studies and supervision.

11. The impact of option 1 on rural growth is directly linked to the decision of other donors or the GOH to intervene on the first section. Based on conversations with these potential co- financers during appraisal, it is estimated that the chances are about 80% that they would agree to finance these works in due time.

12. A dynamic strategic planning analysis was then used to compare the two options:

100 or GoH ,,p ,,p donors NPVA= NPVl improve SI P = 0.8 NPV (option I)= 0.8 x NPV, + 0.2 x NPV, P = 0.2 F donors or GoH Option 1 NPVg NPVl / do not improve SI

Option 2

\ NPV (option 2) Southern corridor:

13. Improve, through scaled up spot interventions approach, the section Thiotte - Anse-8- Pitre and perform periodic maintenance on section For& des Pins - Thiotte. Total cost is estimated at US$3 million, including US$470,000 for the periodic maintenance works (+lo% for studies and supervision).

Traffic growth assumptions

14. On the two roads, traffic generated during the first years following improvement works is expected to be very high. Indeed, the situation in the two micro-regions can be characterized by a heavily constrained demand for transport due to the extremely deteriorated conditions of road infrastructure. In particular, most of the traffic is generated by trucks, pick ups and buses that people use to access markets in order to sell or buy goods. Currently, it takes 3 to 5 hours for these vehicles to go one way, allowing only one rotation per day. If travel time could be halved (which is realistic if roads were improved), traffic could therefore be at least doubled in the very short term (more if considering the entrance of new transport service providers).

15. Using the input variables of the RED model, we made some assumptions for traffic growth during the 5 first years following road improvement. On year 6, we assume that traffic growth will be comparable to the current national average (+8% per year).

Northern corridor:

16. On the Northern corridor, traffic growth assumptions are: Option 1 with section one being improved by other donors or by the GOH. It is assumed that annual traffic growth for the first 5 years will reach 20% on section 2 and 40% on sections 3 and 4. Reasons for such assumptions are that we expect traffic to double in 5 years on section 2 and that traffic on sections 3 and 4 - which is currently much lower - should progressively catch up with section 2, as the 3 markets of Grand Rivikre - Dondon and St.Raphae1 become more integrated. After 5 years, traffic would thus reach 1,040 vpd on section 2, 770 vpd on section 3

101 and 580 vpd on section 4. These are realistic figures considering the existing constrained demand for mobility. Option 1 with section one not being improved by other donors or by the GOH If the first section is not improved - ie. the linkage is not established with Cap-Haitien - it is expected that traffic will grow at a lower pace (20%) on the three other sections. In that case, the 3 markets of Grand Rivikre - Dondon and St.Raphae1 would become more integrated but the reduced connection with Cap-Haitien would prevent full benefits from the project. Option 2: It is assumed that traffic will grow by an annual 20% on sections 1 and 2 (same as option 1 with section 1 improved). However, the unpaved solution on section 4 is likely to reduce demand for mobility on section 4, but also the generated traffic on section 3. The assumption is that traffic would grow by 30% on section 3 and 20% on section 4. Under these assumptions, traffic after 5 years would reach 1,040 vpd on sections 1 and 2, 570 vpd on section 3 and 310 vpd on section 4.

17. The effects of these growth assumptions on traffic are presented in the table below:

Table 2: Traffic growth assumptions on Northern corridor

20% 410 Dondon - St. Raphael 150 10% 40% 30% 20% 40% 580 20% 310

Southern corridor: On the Southern corridor, existing traffic is very limited (about 10 vpd) due to the extremely deteriorated conditions of the road (average speed has been estimated to 11 kph). Traffic growth assumption is an annual 50% for the first 5 years and 8% for the following years (ie. existing national average growth rate). Although this assumption seems over-optimistic, it should be noted that the actual effect on traffic is in fact limited (from 10 vpd on year 1, traffic would only reach 51 vpd on year 5). Potential trade flows with the Dominican Republic as well as the constrained demand for transport services to access social services (eg. secondary schools in Thiotte), inputs for productive activities or regional and national markets, makes this assumption rather conservative.

Exogenous benefits

18. As explained above, the improvement of the two corridors would generate benefits that go beyond the reduction of vehicle operating costs. The isolation of the Haitian rural population due to the poor condition of transport infrastructure translates into reduced access to social

102 services, limited access to key inputs to develop productive activities and high losses in transit. These benefits are very difficult to estimate given the unreliable data in Haiti.

19. For the purpose of the current economic analysis, we chose to focus on the potential effects on the coffee economy in the Southern micro-region (see first Box below). In the Northern micro-region, direct benefits from reduced VOCs are sufficient to justify the proposed investment (see next section). Nevertheless, it should be noted that these benefits are also expected to be significant.

25 It is estimated that about 90% of coffee production is by smallholders (DAI, 2001, p.2). 26 Constructing budgets for this inter-cropped coffee farming system are complicated. Attempts are being made by the mission team to generate some stylized budgets.

103 20. Based on data collected during project preparation, it is estimated that the size of the coffee economy in Haiti amounts to about US$31 million, of which half comes from export

104 revenues. The Thiotte micro-region produces about 16% of these revenues or about US$5 million. It is also estimated that net profits (shared between local producers and traders) amount to about 3% of total sales. For the Thiotte micro-region, these net profits are therefore in the order of US$150,000. In the broader sense (see previous Box), the “coffee farming system” includes associated crops (eg. bananas, avocados, grapefruits) which are cultivated together with coffee plants. The potential value of these associated crops has been estimated to about 40% of coffee sales, ie. about US$2 million in the case of Thiotte. Losses to bad transit conditions are very high. It is estimated that profits that smallholders can make out of these associated crops could be doubled if key transport infrastructure were improved.

21. The improvement of transport conditions is expected to have two main effects on the coffee farming system: (1) an increase of coffee sales as a result of increased productivity due to improved access to key inputs such as fertilizers; and (2) an increase of net profits earned by local producers and traders as a result of decreased transit losses for associated crops. A second- order effect is the increase of profits earned on coffee sales, due to the development of the gourmet and organic “filikres”. This effect would be reinforced if key paths and rural roads that are critical to link coffee-producing areas to processing centers were to be prioritized and improved as part of project’s component 2.

22. For the purpose of this economic analysis, the assumption is that the improvement of transport conditions would have an immediate (ie. since the first year) and strong effect on small holders’ income through a boost of productivity (+25%) and an increase (doubling) of profits earned from associated crops. After the first year of operation, the growth of coffee sales and associated crops would come back to more modest levels (12% the following year down to 6% on year 10 and then remaining stable, since productivity gains would have reached their maximum). A key assumption there is that no external shock - such as a collapse of coffee international prices - will happen. The progressing positioning of the Haitian coffee on high- value market niches (gourmet, organic) is expected to mitigate the risk of external shock. Finally, profits earned from coffee sales is assumed to slightly increase from 3% to 4% after 10 years, thanks to an improved access to high-value market opportunities arising from improved transport conditions.

23. Using these assumptions, exogenous benefits were estimated as follows: Table 3: Estimated exogenous benefits for the Southern corridor

Total net profits (US$ million) I 0.21 I 0.34 I 0.39 I 0.44 0.49 I 0.54 1 0.59 I 0.64 0.69 0.75 0.76 Exogenous benefits(US$ million) 1 0.00 1 0.13 1 0.18 1 0.23 0.28 I 0.33 I 0.38 I 0.43 0.48 0.54 0.55

24. Although these benefits were not included in the RED simulations, the following Box gives an indication of the extent of the exogenous benefits in the Northern micro-region:

105 Results

25. The selected investment alternatives were then analyzed using the RED model.

Northern corridor:

26. Under the assumptions described above, the NPV obtained under option 1 when section 1 is improved by other donors or by the GOH, amounts to US$ 10.58 million while it decreases to just US$4.7 million if section 1 is not improved. For option 2, NPV reaches US$9.41 million.

27. A first interpretation is that both options are economically justified (compared to the option of doing nothing), even with the use of expensive road improvement technologies (paving).

28. The dynamic strategic planning analysis was then used to compare the two options:

106 /” NPVA= P = 0.8 NPV (option I)= 9.46 A=02 Option 1 NPVg 4.7

29. Results show that the two options are in fact comparable: option 1 generates a NPV of US$9.46 million, only slightly higher than option 2, with a NPV of US$9.41 million.

Southern corridor:

30. Under the assumptions described above (in particular taking into account the exogenous benefits on the coffee economy), the resulting NPV has been estimated to US$0.58 million (IRR of 15%). While net benefits are less obvious than for the Northern corridor, it should be concluded that the proposed approach (spot interventions and use of low-cost unpaved technologies) isjustified to traffic levels.

Sensitivity analysis

3 1. Robustness of results was then tested using a sensitivity analysis:

Northern corridor:

32. A number of scenarios were explored varying the probability than the first section is not improved by other donors or by the GOH, as well as certain key variables (within the range +/- 25%).

33. NPV is found to remain largely positive under all assumptions, which reinforces the economic justification of the proposed investment. However, the choice between option 1 and option 2 is found to be highly dependent on the value of certain key variables (see table below). We conclude that the final choice should be postponed until the results of the detailed engineering studies to be performed under the proposed project are known, as well as the final decision of other donors and/or the GOH regarding the improvement of section 1.

107 Table 4: Results of the sensitivity analysis on the choice between the two options.

P = 0.7 P = 0.8 P = 0.9 Traffic estimates reduced by 25% Option 2 Option 1 Option 1 Traffic rrrowth rate reduced bv 25% Oution 2 ODtion 2 Oution 2

Southern corridor:

34. Scenarios explored included various traffic growth rates (30%, 50%, 70%) for the first 5 years, as well as a variation of certain key variables (within the range +/- 25%), including exogenous benefits.

35. Results are summed up in the table below. It appears that two variables have a critical impact on the economic justification of the proposed investment: one is the investment cost and the other the exogenous benefits. Indeed, investment costs exceeding 25% of the current estimate or exogenous benefits 25% lower than the estimate used would produce a slightly negative NPV.

36. Regarding the exogenous benefits, it should be noted that they should be significantly higher since only the effect on the coffee farming system have been estimated for the purpose of the current analysis, moreover using conservative assumptions. Other un-quantified benefits will include for example: effect on the vegetable economy and social benefits arising from improved access to education and health services.

37. Some examples of expected benefits that cannot be quantified but are likely to be significant include: (i)same reasoning as for the coffee economy applied for the economy of vegetables, a major (and growing) source of revenues for the micro-region; (ii)increased sales and reduced losses for fish from Anse-&Pitre which are currently transported by sea - through cabotage - to be sold in Belle Anse, a large proportion being lost when sea conditions do not permit transport. More generally, the social and economic benefits of moving traffic from sea to the road should be considerable; (iii)increased profits from reduced informal, low efficient trade with DR: goods are carried by animal or foot, using paths crossing the borders (in particular around the village of Banane). Informal trade is a risky and expensive business. Improving the road should result in diversion of this traffic and considerable savings for producers who currently see a large part of their margin disappear in losses and fees on the DR side; and (iv) improved access to education (eg. secondary schools in Thiotte) and health services.

108 38. Regarding the sensitivity of the results to the investment costs, this reinforces the choice of the proposed project to perform an initial detailed engineering study to refine the decision on low-cost technological options for road improvement as well as costs estimates.

Table 5: Results of the sensitivity analysis for the Southern corridor

Traflic growth rate for thefirst 5 years 30% 50 % 70% Traffic estimates reduced by 25% 0.27 0.44 0.71 Investment cost reduced by 25% 0.97 1.20 1.56 Maintenance costs reduced by 25% 0.38 0.61 0.97 Exogenous benefits reduced by 25% -0.3 1 -0.08 0.28 All variables kept equal 0.34 0.58 0.94 Traffic estimates increased by 25% 0.42 0.7 1 1.16 Investment cost increased bv 25% -0.28 -0.05 0.3 1 Maintenance costs increased by 25% 0.3 1 0.54 0.90 Exogenous benefits increased by 25% 1.oo 1.24 1.60

109 Annex 13: Technical Analysis HAITI: TRANSPORT AND TERRITORIAL DEVELOPMENT PROJECT

1. Introduction

The two micro-regions contrast quite dramatically in terms of climate, topography and socio- economic profile; elements that need to be accommodated in the design of improvements to the project roads. The northern micro-region is densely populated with a sub-tropical humid climate. Rainfall averages 1400 mm per year. The southeast is sparsely populated in the zone traversed by the project road and the climate is semi-humid becoming drier closer to the coast with rainfall less than 600 mm per year.

Both roads provide access from the coast to the hinterland, both provide important connections between markets but in all other respects they differ dramatically in terms of their current state of development and level of use.

The Carrefour la Mort to St Raphael road in the northern micro-region is a designated National Road (RN3) and is already paved as far as the town of Grande Riviere du Nord (14.7 km out of the total length of 38.8 km), the remainder of the road to St Raphael is unpaved and very rough with several problematic sections. The RN3 forms the most direct route between Port-au-Prince and Cap Hatien but due to difficult terrain and soil conditions has never been developed to paved standard over its full length. However, the southern section of the route (Crois des Bouquets - Mirebalais) is presently being rehabilitated under EU financing, and plans for the upgrading of the next section to Hinche are well advanced. The part of the road beyond Hinche to St Raphael through Pignon will follow in the longer term, but the completion of the route is now becoming more pressing as traffic on the RN1 coast road increases. It follows that improvements to the northern part of the RN3 need to be considered in the context of the national strategy for gradual development of the corridor.

In the south-eastern micro-region the picture is very different. Thiotte is served by two departmental roads; the RD41 from Jacmel via Marigot and Belle Anse (which continues beyond Thiotte to Anse B Pitres) and the RD81 from Fond Parisien via Fonds Verrettes and Foret des Pins. The RD81 is an engineered gravel road and is the principal link between Thiotte and Port- au-Prince. Part of the RD41 has been improved south of Thiotte towards Belle Anse and further improvements are in the pipeline under IDB funding to make the route a viable alternative in the event of the RD81 being cut at Fond Verrettes where the road follows a river bed subject to flash flooding and where there was extensive damage during the 2004 cyclone. However, the RD41 east of Thiotte to Anse B Pitres (the project road) has never received significant investment and is today little more than a very rough ‘access track’ used mainly for channeling produce towards the town of Pedernales (opposite Anse B Pitres) in the Dominican Republic.

Current road conditions, traffic levels and options for improvement of the road sections are described in the following sections.

2. Carrefour la Mort - St Raphael, 38.8 km

The road divides logically into 4 distinct sections:

110 i) Carrefour la Mort - Barrikre Battant, 8.5 km : paved in poor condition

ii) Barrikre Battant - Carrefour MCnard, 6.2 km : paved in poor condition

iii) Carrefour Menard - Dondon, 12.0 km : unpaved in very poor condition

iv) Dondon - St Raphael, 12.1 km: unpaved in very poor condition

Travel time to St Raphael is about 3 hrs in 4WD during the dry season which translates to an overall average speed of 13 kph.

The road profile, average travel speeds and alignment are shown below:

Canelcur Lamofl. Si Raphael

m 4Y) 400

I350 Em 0 250 i2w 150 1W 50 0 0 5003 lo300 15003 2oox) 25003 40303 45003 DI-BII- (m)

2.1 Carrefour la Mort - Barrikre Battant, 8.5 km

Carrefour la Mort is 7 km from the bridge in the centre of Cap Hatien on the road to Fort LibertC and the town of Ouanaminthe on the Dominican Republic border. The EU is financing a contract for the rehabilitation of this road (the RN4) which is due to begin in March 2006 and be completed by 2009. A contractor from the Dominican Republique (Ghella) has been awarded the 65 km long contract with a value equivalent to US$57 million (US$870,000 per km).

The first section of the project road (8.5 km but listed as 11.2 km in the charte routikre) from Carrefour la Mort to Barrikre Battant (the junction with the road to Milot) was the subject of a GOH financed rehabilitation contract awarded to a local contractor in 2003. This contract also included the road to Milot, the main access point for the Roi Christophe palace, a UNESCO

111 listed site of significant regional tourist importance. The contractor stopped work some time ago and it is understood that MTPTC intends to terminate the contract altogether. The old 7 m wide surface dressed pavement has been ripped over most of the length, some new crushed stone base laid together with 2 km of asphalt concrete surfacing. There are signs of localised failure in the new asphalt and structural failure in remnants of the old pavement which is badly potholed. The alignment is flat with long straights which will permit high speeds once the road is improved. The road is raised on low embankment over the low lying ground which becomes waterlogged in the rains and there are two small bridges which appear to be in good condition. Average travel speed in 4WD is presently 44 kph.

Traffic count data was not available but was judged to be in the range of 500 to 800 vpd with the majority of traffic travelling to/from Grande Rivikre du Nord. The section is only lightly populated and there is very little non-motorised traffic.

2.1.1 Improvement options

The scope of the GOH contract involved reconstruction of the pavement with crushed stone base layer and 50 mm asphalt concrete with unpaved shoulders. It is recommended that the same construction be retained for the project. Studies are required to assess the quality of the works done by the contractor and whether they can be incorporated in the new works (deflection and density tests). It has been assumed that the 2 km of pavement already constructed can be salvaged with only minor repairs.

112 9.8

9.7

19.7

196

196

19.5

19.5

19.4 72.3 72.2 72.2 72.2 72.2 72 2 72.2 72.2 72.2 72.2

The cost of completing the rehabilitation of this section is estimated at US$1.3 million.

2.2 BarriGre Battant - Carrefour Menard, 6.2 km

This section is paved with surface treatment, initially over about 6 m width but then narrowing to around 5 m after 2.5 km where the road passes through a village and then close to the bank of the river. The latter half of the section is in fair condition but the first part is badly potholed and there are long stretches where complete reconstruction of the pavement is needed. There are no signs that this road, built in the 1970’s, has ever received a reseal.

The stony river bed is a popular source of construction material and many trucks operate carrying materials to Cap Hatien. The river has been listed as a possible source of stone for the rehabilitation of the RN4. Side drains are lined with masonry through the village.

The alignment is initially flat and straight but then becomes more twisty close to the river. Average travel speed is 23 kph which would increase to about 40 kph once the road is improved.

113 Traffic was judged to be similar to that on the first section i.e between 500 and 800 vpd. The road cross-section is adequate and no earthworks or widening is required. There are two small and one large bridge (about 20 m span); all appear to be in good condition. Materials for base construction and crushing are readily available from the river bed.

2.2.1 Improvement options

The section requires partial reconstruction (assumed at 70%) and periodic maintenance (assumed at 30%) to restore it to maintainable condition. The pavement works can be accommodated within the existing width. A 6 m wide pavement with double surface dressing on new 15 cm crushed stone base has been assumed for estimating purposes, with unsealed shoulders. It is assumed that the existing pavement can be recycled as sub-base for the sections needing reconstruction. No structural work should be required. The estimated cost of this option is US$645,000 (US$154,000 per km).

2.3 Carrefour Menard - Dondon, 12.0 km

The road is unpaved from this point and follows the river on a platform that varies in width, narrowing at certain pinch-points where the road edge is exposed to erosion during floods, but elsewhere widening to about 8 m further away from the river. The first critical point is reached 1.2 km from the junction where a meander in the river is provoking rapid erosion of the bank right next to the road. Protection works in the form of gabions or a masonry retaining wall combined with retraining works in the river bed to straighten the channel are urgently required here to prevent the road being cut completely. Another exposed portion, a short distance after the first, has already been treated with gabions but the works have failed due to poor conception and lack of compaction of backfill during execution. Failure to adequately key the gabions into the bank on the upstream side has lead to penetration of the stream into the backfill which has been washed out and the baskets have now settled alarmingly and can no longer fulfil their intended purpose. A good example of a mass concrete retaining wall is found in the village about 2.5 km from the junction, said to have been constructed 20 or more years ago but still in good condition.

The long climb of 400 m up to the plateau begins 3.2 km from the junction. From this point the road narrows and becomes rougher (average speed 9 kph), with rock just below or at the surface. The 5 km long climb is at a more or less constant gradient of 8%. Width averages between 4 and 5 metres. There is very little erosion on the road surface and side drains, an indication of the good quality of the subgrade. The road is benched tight into the hillside at the sharper bends and slopes are not entirely stable, so material regularly falls onto the road, noted at two locations on the ascent. Drainage structures exist but are in dubious condition. One large culvert has been damaged and is at risk of being washed out completely during the next rains unless urgent action is taken. Half the road width has already been lost at this point.

The edge of the plateau is reached 6.5 km from the junction. From here the road slopes gradually downwards to Dondon on a shallow gradient following the river. The road sides are populated all the way along the section. Stones and pebbles from the river have been used to reinforce the soft subgrade and create a pavement, resulting in a very rough surface (average speed 8 kph) now punctuated with deep depressions which fill with water and become muddy during wet periods. Although there are some structures for cross drainage these cannot function properly due to lack

114 of shape and side drainage. The last intervention on the road was in 2002 when the stone surface was laid. No maintenance has been done since then.

A small bridge is crossed before the busy town of Dondon where the road has been widened and masonry lined drains built. The junction for St Raphael is reached opposite the market area. The road is presently unpaved through the town although some side streets have been impr0ve.d with block paving (adoquin).

Average speed over the whole section is currently 9 kph.

In the absence of count information, traffic was judged to be in the range of 100 to 200 vpd based on observed vehicles (pick-ups, medium sized trucks and buses) and wear on the road surface.

2.3.1 Improvement options

The unpaved road is difficult to maintain in the climate/terrain and warrants upgrading to paved standard, particularly given the large population served in the area of influence and the current traffic levels. Traffic should increase dramatically after improvement as there is clearly a substantial suppressed demand for transport services in the zone. It is expected that operators on the route will be able to double or triple rotations to/from Port-au-Prince.

The technically preferred improvement option would be widening of the road to 6 m width and paving with double seal, 1 m wide unpaved shoulders, protection works (masonry and gabions) over the first 2 km to safeguard the road at critical points, additional culverts (approx. 10 No.), lined drains in villages and block paving the entrance and central part of Dondon (9,000m2). The cost of this option is estimated at US$ 3.1 million (US$258,000 per km).

An alternative option was considered with a reduced width of 5 m but with all other works as for the first option. The reduction in cost is marginal; US$2.9 million.

The use of asphalt concrete instead of surface treatment for the paving would offer attractive benefits in terms of durability and reduced maintenance in the medium term, but at double the cost it could not be afforded in the project budget. However, the option should be considered during detailed design. The fact that a large contractor with asphalt equipment will soon be present in the region may well bring down rates.

2.4 Dondon - St Raphael, 12.1 km

This section is similar in character to the previous section from Carrefour Menard, although narrower and there is less evidence of previous investment. The road is benched into the side of the valley, cross drainage is insufficient and subgrade quality poor so there are many soft spots that present obstacles in wet conditions. Width of the platform is around 4 metres. Stone from the river has been used to reinforce the pavement, although this has deteriorated and is very rough. Average travel speed is 11 kph.

There is a concrete bridge at the exit of Dondon (appears to be in good condition). The steel truss bridge (Pont Limite) 6 km from Dondon has collapsed and is closed to all but pedestrian traffic

115 so vehicles are presently obliged to ford the river a short distance upstream. A permanent concrete replacement structure has been designed and is due to be built under funding from IADB.

The route is well populated but traffic levels appear lower than on section 3; probably in the range of 50 to 100 vpd (to be verified during engineering studies).

2.4.1 Improvement options

In view of the high population served by the road and the economic importance of St Raphael as a market centre on the edge of a highly productive irrigated area for grain production, there is a latent demand for transport that is constrained by the very poor road conditions. Maintenance demand for unpaved roads in such terrain and climatic conditions is high. Critically, road shape needs to be retained (particularly on the flatter sections) to prevent water ponding on the surface which, under the pumping action of passing vehicles quickly leads to loss of surfacing material, softening of the subgrade and development of larger and deeper depressions. Grading a compact stony pavement layer without ripping the entire structure is expensive and a spot repair approach may be more appropriate to maintain shape and ride quality.

Two options were considered: paved and unpaved.

The paved option (preferred) would widen the road to 6 m (national standard) with double seal on crushed stone base and 1 m wide unpaved shoulders. The works would also include: lined drains over 1 km in St Raphael and over 5 km along the rural part of the road; 9,000 m2of block paving in St Raphael; 15 new culverts, and allowances for protection works with gabion baskets and masonry. The estimated cost of this option is US$3.0 million.

The unpaved option would widen the road to 5.5m with a pavement in natural gravel from the river blended with crushed material to achieve a tighter matrix. Other drainage improvements and the block paving in Option 1 are retained. The estimated cost of this option is US$1.7 million.

2.5 Total improvement costs

Two scenarios have been considered.

Scenario 1 would result in the upgrading of the unpaved sections to 6 m wide paved standard and rehabilitation of section 2. It is assumed that funding for the first section from Carrefour la Mort to Barrikre Battant would be assumed by another funding agency. Total cost of this scenario is US$6.8 million, an average of US$225,000 per km for the 30.3 km.

Scenario 2 includes all four sections, but the last section to St Raphael is for the unpaved option. All other works remain unchanged. Total cost is US$6.8 million, an average of US$193,000 per km.

116 3. Thiotte - Anse 21 Pitres: 43 km

3.1 Description of the project road

The road today consists of an access track over very rough terrain linking Thiotte with villages close to the border with Dominican Republic and Anse B Pitres on the coast.

The road alignment, profile and average speeds are indicated in the charts that follow. Travel time is about 3.5 hrs in a comfortable 4WD, an average speed of 12 kph. Trucks are said to take about 5 hrs.

The start point is the administrative building in the centre of Thiotte which is a busy market town and an important transit point for the region. The end point is the market on the border with Dominican Republic in Anse B Pitres.

Thiotte - Anse a Pitres

Thiotte

-- \

11’:Guillaume I I -A\-

117 I Leg Speed

From the start point the road passes through Thiotte between houses on a narrow rocky, occasionally badly eroded alignment, over a distance of about 6 km. Most traffic in the town is concentrated on the first 2.5 km to a junction where there is a water point. The end of the town is quite distinct. At the boundary the luxuriant vegetation suddenly ends and the road opens out onto an open rocky ridge, with views over the hills to the south and east. This is the limit of the 'cuvette' within which Thiotte experiences a relatively humid climate suitable for coffee and fruit growing. From this point on the climate is much drier and vegetation more scrub-like on the limestone base rock.

The track then winds around the incised landscape, generally following the ridges where ride quality is often quite good, or just off the ridges where it is benched into the hillsides. These sections are the more difficult to negotiate since the limestone is often weathered and quite soft, so erodes easily as water runs down the slopes, trapped on the alignment. In some places catchwater drains have been cut into the rock. Where the limestone is harder, the jointing is more apparent so speed reduces to snails pace as it is necessary to negotiate blocks of rock projecting from the surface. At around 9 km there is a junction for an alternative route which avoids travelling through a stream bed further ahead. The alternative is only used when the stream is in flood and is said to be very rocky, but viable as a permanent way if improved. The stream section on the main track is about 3 km long. The village of Boukain Guyaume is passed on the way to Boni village from where the road returns to higher ground for the next section to Banane village, 20.8 km from Thiotte.

Banane is a large village sited adjacent to the border. From here there are footpaths leading directly to Anse h Pitres via Dominican Republic, so Banane is effectively a transfer point for

118 vehicles not travelling the full length of the road which is a much longer route to the market on the border.

The character of the road from Banane onwards is very similar to the previous sections up to about 32 km from Thiotte where it becomes increasingly rocky, even on the more level sections. The red soil here supports quite dense vegetation, but is has very little strength when wet.

The road descends to the coastal plain, the red soil becoming deeper covering the rock. Much of this last section into Anse B Pitres acts as a drainage channel during heavy rain. The channel carrying water to the irrigation scheme in Anse B Pitres is crossed 39 km from Thiotte. Two smaller feeder channels are crossed on the edge of Anse B Pitres. No attempt has been made to accommodate the road at these structures. A third is crossed in the town itself and is also quite difficult to negotiate.

3.2 Traffic

Traffic counts conducted on a previous study in 2002 are not valid since they were taken too close to the towns at each end of the road, not along the alignment. Truck drivers interviewed in Anse B Pitres gave a more realistic indication of road use. Five trucks operate on the route to Thiotte and beyond to Port-au-Prince, making two trips per week. Traffic was therefore judged to be in the band between 10 and 50 vpd, although the reality is likely to be at the lower end of this range. Only one vehicle was seen on the road between the two towns during appraisal mission in Jan 2006.

3.3 Recent improvements

Since 2004 the road has been the subject of a number of spot improvement projects financed through the World Bank CDD grant and by the EU. The CDD projects were carried out through COPRODEP who mobilized communities along the road to treat some critical sections. About 14 separate projects, each with a value of around US$20,000, were undertaken between 2004 and 2005. The chosen treatment comprises construction of a cushioning layer in broken rock over the rougher and steeper slopes where there are rock outcrops, and then sealing this with a layer of un-reinforced concrete. In sidelong ground the works have also included construction of low retaining walls in dry masonry on the low side. The width of the construction varies between about 3 and 5 metres depending on the location. It seems the works were done using very little equipment as there is no evidence that the outcrops were cut back to make a more even surface before the concrete was laid.

Due to limitations on the size of the projects the concreting sometimes falls short of the full length required and erosion is occurring on the transition to natural ground at the bottom of the slopes. Since only a small number of critical points have been treated, the overall impact on travel time has been limited but the works have clearly removed some obstacles that were extremely difficult for vehicles to negotiate.

From figures given during a visit to the road in January 2006, it seems the concrete treatment has cost around US$20 per m2 which is a little higher than rates quoted in recent contracts elsewhere in Haiti. The quality of the work is fair but as the concrete layer is rather thin, any cracks or spalling on the surface will allow water to penetrate the rock-fill underneath and the structure

119 will quickly fail. Prompt maintenance of the concrete is therefore vital. At the moment the communities have no funding for maintenance of the works they have built.

The work financed by the EU improved the road between Banane and Boni villages over a 7 km length for a value of around EUR200,OOO. This is now the best part of the route. It seems the road has been widened slightly and concrete laid over some rocky parts. Average travel speed is 18 kph here. This is probably the best possible result from a spot improvement approach.

The extremely difficult road conditions translate into high operating costs and high charges for passengers and produce. The cost of a one-way trip in an open truck is prohibitive at US$4 per person.

3.4 Improvement options

Given the very low traffic level and early development stage of the road, only modest investments can be justified to reduce travel time and encourage increased road use. A continuation of the spot improvements already started by the communities would appear to be the most logical approach, extending the works to cover all critical sections and reducing travel time to a target 2 hrs (an average speed of 20 kph) instead of the current 3.5 hrs.

Some sections can be improved without resorting to paving but by simply breaking the rock to make a smoother platform. This will require specialist equipment such as compressors and rock chisels.

When carefully selected, limestone aggregates can be used to construct a tightly bound wearing course layer resembling a water-bound macadam. It is necessary to select material that is not too hard, that will crush slightly under compaction to produce enough fines to fill the voids between the stones. When watered the layer ‘cements’ together and is quite resistant to erosion and abrasion from traffic. If the selected material is too soft the texture of the wearing layer will become smooth and very slippery in wet conditions, so it is important to select material with just the right crushing value for the purpose. Some good examples of this technique were seen on the road recently improved near Belle Anse.

On shallower gradients, where longitudinal erosion is less of a concern, the cushioning material over the rock can be laid between low stub walls built in cement masonry. The walls form dams preventing water washing out the fill material. With a well compacted macadam layer as a running surface this can be a quite durable solution.

Concrete strips for the wheelpaths can be used instead of surfacing over the full width, which offers savings in material. However, strips need to be founded on solid rock for stability and to resist the erosive force of water which is channeled or trapped between the strips. The additional thickness of concrete needed to achieve a common level for the running surface reduces the potential economy, and strips can only be used on short straight sections where there is good visibility. Although an option to the slab technique, concrete strips are only really a viable option in a limited number of situations.

120 Use of concrete (slabs or strips) on the steeper rocky sections, macadam on cushioning material’ between stub-walls on less steep areas, and macadam on low embankment on the flatter parts subject to flooding and in the villages and towns comprise an attractive range of solutions for this road. It is estimated that about 60% of the total length will require treatment of some type in order to achieve the target travel speed.

An option involving the following scope of works was identified: block paving over 8,000 m2 in Thiotte; masonry lined drains over 4 km (sections subject to erosion and in Thiotte); concrete pavement covering 19,700 m2 (a length of approx. 5 km); rock breaking over 10 km (assuming a quantity of up to 1.0 m3/m); 2,500 m3 of masonry works 5.8 km of macadam and 5.0 km of embankment. The cost of this option is estimated at US$2.5 million.

3.5 Options for executing the works

The spot improvements built by the communities demonstrate a strong desire to improve the road and the potential for carrying out works using this system. A technician was employed to advise the various groups, but the small scale of the project did not justify higher level expertise. The use of equipment to help break the rock would have given a better result; economies could have been made on the width of the concrete; the sections to be treated could have been prioritized more carefully.

Although the improvements intended under this project outlined above are of greater scale than those done so far, there could well be scope for carrying out at least some of the work using the community groups, working through similar structures (the NGOs PADF and COPRODEP) but with more skilled engineering input to improve the impact and overall quality. This would help build capacity for the future maintenance of the road (using micro-enterprises expected to emerge from the community groups) and enhance component 2 of the project.

The alternative would be to use a conventional contracting approach with a small contractor. Management arrangements would be more straightforward and the final result should be similar, but the opportunity for developing local capacity would be more limited. In view of the remoteness of the country, and the fact there are no contractors in the micro-region, it may be difficult to attract a company with the required skills for the project.

The alternatives for execution modalities require consideration during the detailed project design and will be included in the terms of reference for the design consultant.

4. Thiotte - Foret des Pins, 20 km

This road is an engineered gravel road and is currently in a fair condition but is likely to require rehabilitation during the timescale of the project. The road rises from around 900 m in Thiotte to 1,700 m near For& des Pins and there is erosion of the side drains on several sections. This is compounded by a lack of cross drainage or where culverts are simply blocked. The gravel wearing layer is also becoming thin in places.

An allowance has been included in the budget for improvements to this section, involving recharging the gravel layer (materials are available next to the road) and construction of

121 additional culverts, plus drain lining. The cost of this work is estimated at US$470,000 or an average of US$23,500 per km.

5 Further studies

The technical solutions identified at appraisal have been based on a subjective assessment of road use and interviews with road users. Traffic count data was either not available or, as in the south, judged unreliable. A more detailed appraisal of traffic (normal, generated and diverted) needs to be included in an economic study as part of the project design for both roads to ensure solutions adequately meet expected capacity and loading needs over the design life.

Both roads pass through urban areas where paving and drainage improvements are planned under the project. The design consultants need to engage with the local authorities during the design process to ensure the works are designed to match local needs, in terms of localizing the improvements (limits of block paving and land take), incorporating access provision in the works (over drainage channels) and in the selection and engineering of drainage outfalls. The design process will be set-up to ensure design consultants respect consultation requirements and municipalities are given the opportunity to comment during the approval process.

Checks need to be built-in to ensure designs remain on track and affordable, avoiding the situation where time is wasted preparing documents that are in the end unsuitable. Design consultants need to work to clearly defined budgets for the works costs. Client approval needs to be built in, especially at critical stages such as choice of technical solutions, alignment changes requiring land take and so on.

6 Cost Estimates

Costs have been derived using rates from typical construction and rehabilitation contracts supplied by the UCE technical unit in MTPTC. Rates for the most significant cost items (accounting for 80% of the total cost) have been used against preliminary estimates for likely quantities for each improvement option, with due allowance for fixed costs and overheads. Studies for preparing the contracts and supervision of the works have been assumed at 10% of the works costs.

Prices in recently awarded contracts (notably on the FW2, RN3 and RN6) are considerably higher than historic rates. This is attributable to the uncertain political situation in the country and perceived security risk that has lead to a reduction in competition from international firms. It is expected that rates will reduce to previous levels once the situation in the country stabilizes. However, construction prices in Haiti, even before the recent increases, were already high compared with other countries. .I

7 Construction industry capacity

There are a large number of small and medium sized contractors registered with MTPTC capable of carrying out roadworks, nearly all based in Port-au-Prince. About 10 firms are said to possess equipment for bitumen works, but there have been very few contracts recently and periodic maintenance in the form of resealing is rarely carried out. There are two local firms with asphalt plants and paving equipment.

122 In the consulting sector there are about 10 local firms with road sector experience, several of whom work in partnership with international companies. Experience on past rural road projects has shown that local firms are not always able to adapt technical solutions to particular conditions on the ground, particularly during contract supervision. It may be difficult for firms to allocate staff with sufficient experience to smaller projects.

123 Annex 14: Safeguard Policy Issues HAITI: TRANSPORT AND TERRITORIAL DEVELOPMENT PROJECT

1. The GoH is very aware of the catastrophic state of the environment in Haiti and of the constraints that it represents for long-term sustainable economic growth and human development. Of particular concerns in inland rural Haiti are land erosion (and land management more generally), natural disasters, water resources, biodiversity and forest management and waste management in towns and markets. Of social concerns are malnutrition, which starts to show its stigma on young children in particular, lack of access to basic education and health services, lack of access to potable water and, generally, extreme poverty, and its associated vulnerability and woes.

2. The project aims at improving transport infrastructure in Haiti, as well as to improve territorial development. This will lead to many environmental and social benefits at the local and regional levels. The risks of generating negative environmental and social impacts locally are minimal and GoH and the task team are confident that the provisions made for mitigating and monitoring these potential impacts will prohibit the potential pre-identified impacts from happening and will equally cover for unexpected << as-they-happen >> impacts.

3. Because of the lack of precise and definite information on the location, magnitude and nature of the future works, the work on safeguard policies has resulted in the preparation of frameworks, which describe the mechanisms to put in place for environmental management and resettlement.

4. The safeguard policies triggered by the project are : - OPBP 4.01 on Environmental Assessment - OPBP 4.36 on Forests - OPN 11.03 (draft OP/BP 4.11) on Physical Cultural Resources - OPBP 4.12 on Involuntary Resettlement

5. The first three policies have been addressed through the preparation [and adoption] of an Environmental Management Framework and the fourth and last one through the preparation [and adoption] of an Involuntary Resettlement Framework. The public consultation and information disclosure aspects are discussed later in this annex.

Environmental Management Framework

6. The required preparation of an Environmental Assessment of the works to be funded is consistent with the requirements set forth in GoH’s October 12th, 2005 Decree on Environment. It is expected that this framework decree will be shortly ratified by the new Government.

Project components with potential environmental impacts

7. The project would be implemented on a pilot basis in the two micro-regions covered by the project. If successful this model could be replicated in other micro-regions in Haiti. The

124 following two micro-regions were selected for project interventions based on a systematic assessment using the above criteria during the project preparation phase: (a) micro-region of Dondon-St. Raphael, which covers five communes in the Northern Department, which is connected to Cap Haytien, the second biggest city in the country, and (b) micro-region of Thiotte- Anse-8-Pitres covering four communes in the South-Eastern Department, and located along the Dominican Republic border.

8. Project components are:

1, Road rehabilitation and maintenance Road rehabilitation . Spot interventions . Routine maintenance 2. Complementary investments . Consultative process . Complementary investments 3. Project administration and Monitoring & Evaluation . Project administration (including environment management) . Monitoring & Evaluation 9. The activities with (limited) potential to create concerns about potential environmental impacts are Component 1 (road rehabilitation and maintenance) and the second sub-component of Component 2 (complementary investments).

10. Component 1 consists of the rehabilitation and maintenance of two road sections: Grande-Rivikre du Nord-Saint-Raphael(40.5 km) in the North and For& des Pins - Anse-&-Pitre (62 km) in the south-east. It focuses the bulk of project financing (US$ 11 m vs US$ 16 m). The technology used for rehabilitation will be customized to take into consideration (a) cost, (b) existing traffic levels and future projections, (c) investment sustainability given Haiti’s specific climatic conditions and the difficulties experienced in the past to implement road maintenance mechanisms, and (d) potential to develop micro-enterprises. The project will ensure maintenance of the rehabilitated sections with a strong emphasis on ensuring the sustainability of the rehabilitated sections, a task which will fully justify the resources invested into the road sector, and, surprisingly enough, a first in the road sector in Haiti, which is plagued by roads in terrible state. / 11. Priority investments identified under Sub-Component 2.1 would be selected from a menu of eligible investments that are complementary to the road investments financed as part of Component 1. These investments would be of micro-regional interest (serve multiple community needs) and support economic growth. Eligible investments would be typically between $20,000 - $100,000 and would include (a) roads feeding into the main road network rehabilitated; (b) additional road spot interventions; (c) marketplace infrastructure (e.g., covered stall areas, loading docks, storage facilities, improved drainage); (d) urban roads linking marketplaces to the road network; and (e) sheds to assemble and pre-process local production.

125 Baseline data

12. The climate is tropical with two rainy seasons (April-June and September-December). Average annual temperature is 30*C, going down 0.75" for every 100 m of additional altitude. In the North, volcanic soils dominate while lateritic soils are more frequent in the south. Both regions still have some tree covers, mainly fruit trees and small (unknown for lack of basic recent surveys) patches with a severe and continuing over-exploitation of the wood resources. Hydrography is characterized by the existence of many rivers, with most of their hydrological regimes unknown for lack of long-term records. Road drainage is at present very poor, which partly explains the very rapid degradations, a factor that this project focuses a lot of close attention on.

13. Populations in the two micro-regions are estimated at : - for the North : 139,000 inhabitants (81% rural) - for the South : 107,000 inhabitants (86% rural), showing a very high population density (average 124 inh./km2 with a high of nearly 200 around Thiotte), especially given the severely constrained arable land.

14. More specifically, around the two road sections to be rehabilitated, the environment displays the following features :

(i)Section Grande-Rividre du Nord-Saint-Raphael(40.5 km) - Grande Rivikre du Nord : Carrefour MCnard : flat section along a narrow valley - Carrefour Mknard-Dondon : hilly and something mountainous (slopes of over 10%) road in a very bad state. The road goes up from an altitude of 55 m to 400 m in 12 km. - Saint-Raphael / Pignon (16,2 km) : the road goes down to Saint-Raphael and does not present too many serious difficulties.

(ii)For& des Pins - Anse-&Pitre (63 km) : The Thiotte-Anse-&-Pitre road (43 km) today consists of an access track over very rough terrain linking villages close to the border with Dominican Republic with the coast. Travel time is about 3.5 hrs in a comfortable 4WD, at an average speed of 12 kph. Trucks are said to take about 5 hrs. The start point is the administrative building in the centre of Thiotte which is a busy market town and an important transit point for the region. The end point is the market on the border with Dominican Republic in Anse & Pitres.

15. The Thiotte-For& des Pins road (20 km) is an engineered gravel road and is currently in a fair condition but is likely to require rehabilitation during the timescale of the project. The road rises from around 900 m in Thiotte to 1,700 m near Fori% des Pins and there is erosion of the side drains on several sections. This is compounded by a lack of cross drainage or where culverts are simply blocked. The gravel wearing layer is also becoming thin in places.

16. At this stage, it is impossible to describe what the works will be under Component 2 and the framework will deal with this intrinsic uncertainty.

126 Potential environmental impacts

17. There will be several benefits from the project, including employment generation, easier access to social services and to markets, economic and financial fallouts and improvement of the physical environment (improved road drainage). However, some potential negative environmental impacts have been identified.

- land acquisition and limited physical resettlement (treated in the resettlement framework) - other impacts on private property, - hydrological alterations - risks of increased deforestation (direct and indirect) - negative changes in the landscapes (particularly attractive in both micro-regions) - traffic disturbance, notably during the works and in the towns and cities - workers’ safety risks (diseases and deaths) - noise and dust during construction - increased pedestrian and other NMT safety risks - additional risks of STD (and, in particular HIV/AIDS) transmission

18. Some of the above risks are specific to the construction phase, others to the exploitation phase.

Generic environmental mitigation measures

19. The above impacts should be avoided, mitigated or monitored. The precise mitigation measures are being designed. The generic activities include:

a strong focus on appropriate road drainage both for maintenance and environmental reasons environmental clauses in bidding documents for road rehabilitation contractors close supervision of the works by appropriate environmental inspectors awareness building and information on STD/HIV-AIDS transmission risks, especially among truckers, information campaigns to the public on pedestrian and NMT safety assistance to the development of tree crops (e.g. coffee) along the roads and farmers’ education to avoid deforestation for woodfuels purpose.

20. The mitigation measures promoted by the InterAmerican Development Bank in the projects that they finance in Haiti will be cross-referenced with this project.

Environmental Management Framework proposed

21. An EMF has been designed and adopted by GoH after public consultation. The framework describes the mechanism which will be put in place to conduct further environmental due diligence on the future works financed by the project.

127 22. The EMF includes the participation of GoH’s environmental constituency, including the Ministry of the Environment as well as environmental Non-Governmental Organizations (NGOs).

Involuntary Resettlement Framework

23. The GoH has designed and adopted a << Cadre d’Expropriations >> (CE) which makes this project compliant with OPBP 4.12 on Involuntary Resettlement.

24. The objective of the CE is to provide a mechanism by which the compensations paid to private parties are fair, in the context of the need for a transfer of private property to GoH in the context of the land requirements for the works under this project.

25. The CE applies principles of legality, integrity, equity and transparency. It is fully consistent with the articles 36 et 36.1 of the 1987 Constitution.

26. The CE has been designed to cover the following phases of the project.

Planning and implementation of the resettlement Planning and civil works activities

Pre-engineering studies 0 Draft plan

0 Topographical surveys 0 Property title review 0 Socioeconomic surveys 0 Identification and Evaluation of Impacts 0 Inventory and Analysis of Alternatives Engineering studies 0 Plan Formulation 0 Awareness Building Campaign 0 Plan approval 0 Plan Execution 0 Monitoring and Control

0 Plan Execution Call for Companies Bids 0 Monitoring and Control

0 Plan Execution Works / ConstructionMaintenance 0 Monitoring and Control

Implementation 0 ex-post Evaluation

128 Public consultation and disclosure

27. Although public consultation is prescribed for category B projects like this one in OPBP 4.01 on Environmental Assessment, the minimum requirements in terms of nature, depth and number of public consultation sessions is not specified. GoH has decided to consult broadly, however, and in spite of the less-than-favorable circumstances, on the recommendations of the EMF.

28. The EMF and the IRF have been disclosed at the InfoShop, on February 2,2006.

29. They have also been disclosed in-country on the PLA80 Website (http://www.mefhaiti.gouv.ht/) on February 2, 2006.

Resources earmarked for the implementation of the Environmental and Resettlement frameworks

30. GoH has set aside a lumpsum amount of US$ 200,000, included in the project cost, to cover the future environmental and social mitigation and monitoring costs.

129 Annex 15: Social Assessment HAITI: TRANSPORT AND TERRITORIAL DEVELOPMENT PROJECT

Introduction

1. This annex is a rapid social analysis of the proposed Transport and Territorial Development Project in Haiti27. The main objective of the social analysis is (a) to provide a quick assessment of the likely impact of the proposed road rehabilitation component on local livelihoods in the two affected regions; (b) to consult with the project’s stakeholders and elicit their views on the proposed road project in view of the communities’ broader needs; and (c) to formulate recommendations to enhance the quality of the project.

2. The proposed road project will take place in two “micro-regions’, including (a) the region of Dondon /St. Raphael, covering the four communes of Grande Rivikre du Nord, Dondon, St. Raphael and Bahon (Department du Nord); and (ii)micro-region of Thiotte/Anse-8-Pitres covering these two communes (Department du Sud Est). The project is growth oriented in nature, and thus does not target Haiti’s poorest regions where growth potential is low. The project targets two micro regions with high agricultural growth potential, i.e. humid highlands with good soil quality, limited deforestation and erosion problems, access to infrastructure (though regarding roads, of poor quality) including irrigation systems, and high value crop production. Thus, while the project’s rural investments benefit Haiti’s most disadvantaged areas overall, the two selected micro regions are inevitably among the least poor as far as rural areas are concerned. This analysis focuses on the local impact of the project and whether or not its benefits are likely to be inclusive and broadly beneficial to the people’s livelihoods in the two affected regions.

Rural livelihoods in Haiti28

3. Haiti’s rural economy is predominantly agricultural, described by small-holding, owner-operated, and capital poor production of mixed subsistence and market crops. Eighty percent of rural households have access to land, though with an average land holding of merely 1.8 hectares with a majority of land not being formally titled. The agricultural sector is essentially unimodul with no systemic, sectoral division between e.g. large export farmers on the one hand, and subsistence peasants on the other. Nevertheless, within this seemingly egalitarian structure, asset and income inequality is high.29 Access to mechanical or motorized tools and technology is at near zero levels, and only one in ten plots are irrigated.

4. Haiti’s rural economy is highly market-oriented. The recent World Bank study on “Rural and Agricultural Development in Haiti” proposed a typology of broad livelihood systems in rural Haiti that demonstrates the great socio-economic diversity within Haiti’s rural economy,

’’ The report was produced by a one week World Bank mission to Haiti, in collaboration with two local consultants, which conducted field visits to both regions . The mission comprised Luc Razafimandinby, Willy Egset (World Bank), Jean Chesnel, and Yolaine Lherisson (consultants). 28 This section draws on the Rural Development Economic and Sector Work, 2005. *’Both with Gini coefficients above 0.60. However, the correlation between land and income is weak because of the importance of non-farm income sources among higher income groups.

130 with very different levels of poverty. The document highlights the importance of various types of markets among different livelihood strategies, including local labor markets for the poorest landless, and regional, national, and even international markets for smaller, average and larger farmers.

5. Improved infrastructure is essential to supporting rural livelihood strategies. Access to basic infrastructure is extremely scarce: 7 percent of rural households report access to the electricity grid, (regardless of the quality of supply), four percent have access to a paved or partly paved road, 2 percent have piped water (to dwelling or compound), and 0.4 percent of rural households have telephones, including both cell phones and fixed line.30 Noticeably, statistical analysis finds strong positive effects of household infrastructure access on reducing poverty risk.

Table 1: Rural livelihoods and markets

Group Assets Livelihood strategy Markets “Landless rural No or very little land Men: day laborers working in Local unskilled labor markets workers” No education agriculture, fishing, or othkr Local goods markets Weak social networks production, migration to DR DR labor market (from border App. 10 % Poor health. areas) Very poor: high Women (elderly widows or single malnutrition risk, high parents with children): petty trade from school drop out mobile micro enterprises, migration to DR “Micro peasants “ Miniscule land Agriculture is main economic activity Local, regional and national holdings (< 0.75 ha)31 Production of local subsistence crops, crop markets App. 30 % No capital inputs esp. root crops and not including International markets for coffee Very poor: malnutrition Small livestock vegetables because of lack of producers risk, high school drop (chickens) appropriate inputs, mangoes and arbre Local unskilled labor markets out B pain for food security DR labor market (from border areas) Sale of day labor to local farms, National charcoal market Charcoal production Temporary migration to DR “Average peasants” Average land holdings Diversified production that includes use Local, regional, and national (1-4ha) of fertilizers in production of crop and livestock markets, App. 40 % Some use of capital vegetables Larger livestock (e.g. pigs), international markets for coffee Poor, but adequate inputs Hires day labor or work groups for and some fruit producers nutrition, local schools harvests Local labor market “Larger farmers” > 4 - 5 ha. land (but Cash crops for regional, national, and Local, Regional, National, and not more than lo), international markets. international crop markets App. 5-10 % Capital inputs Additional income sources may include Local labor markets Not poor, Port-au- (fertilizers, pesticides, permanent shops, mills, and other. Local input markets Prince schools mechanic tools) Hired labor “Other non-farming Education Employment in formal sector (doctors, Local skilled labor markets professions” Permanent stores teachers, administrators) Local-regional goods markets Production facilities Ownership of mills, mines, distilleries App. 5 % (mills, distilleries, etc) Larger traders and shop owners, Not poor, Port-au- Land - rented to employees, and others.

30 Figures from HLCS 2001, and reported in Rural ESW. 3’ However, the very strong differences in land productivity, the size of land is only an indirect predictor of farm productivity.

131 6. In strong contrast to urban areas, rural areas have remained peaceful and stable during Haiti’s recent political crisis. In view of the pervasive crime, violence, and conflict that have characterized the Metropolitan region in particular in recent years, rural areas remain peaceful and socially cohesive. In the 2001 living condition survey, 75 percent of rural residents reported feeling safe all or most of the time, as compared to only 41 percent of metropolitan residents. During the rapid rural livelihood assessments conducted for the World Bank (2005) rural ESW, respondents reported no significant conflicts or violence within their communities, except the odd theft of livestock. Earlier reports of widespread land conflicts were also not verified. However, the rebels’ seizure of local government installations and their control of roads between regional centers, did create fear and hampered regional economic exchange. Today, most of these rebel groups are subdued and rural residents in the North and South East regions consulted for this report said rebels no longer posed a tangible problem there. Yet, some rebel activities persist, as evidenced by the attack on UN troops in Plaisance, Department du Nord, during this mission. Rural cohesion is also demonstrated by the continued importance of traditional, reciprocal labor groups - coumbites and eskwads - that provide necessary labor for peak, seasonal needs to Haiti’s small farms. Rural communities demonstrate strong resilience to the unrelenting difficulties and periodic breakdowns of macro conditions in Haiti.

7. Women play an extraordinarily important role in Haiti’s rural society, based in their key roles in the marketing of agricultural produce, as traditional health care providers or spiritual leaders. Women traditionally bring agricultural produce to the markets, carrying - typically on their heads, less often with the help of donkeys or mules - large loads of goods from dispersed farms to local markets, where they spend the day marketing their goods to local buyers or to intermediaries for further distribution. Women are key actors also in this upstream part of the marketing process. The intermediaries for most crops32are the traditional Madam Sarah, women that buy crops in local markets or directly from farms, and resell in larger regional, or national markets.

Social services: health and education

8. Supply and demand problems affect the outcomes of education. In each commune and section commmunale, there are primary schools and supply problems relate mainly to the quality of education in many private schools which dominate the education system. Several schools do not have the required basic norms - some schools have a classroom in which several classes of different grades and ages take place - and the teachers are barely qualified. However, it is worth noting that in the Southeastern micro region, the commune of Anses a Pitres, there is no secondary school and students relocate to Thiotte where the national secondary school is located. There is also a significant demand-side constraint since in most of the communes in the two micro regions many children attend school for a few months only, in general after harvests -from October to December. The drop-out rate is estimated to amount 35 percent from January onwards.

9. Availability of.hospitals and health centers is a major issue in rural areas in both micro regions. Well-functioning hospitals could only be found in Cap-Haitien and Pignon in the

32 For some crops, notably coffee, the marketing organization is different because of the capital investments required to process coffee.

132 Northern micro region. For the Southeastern micro region, patients are referred to Padernales and Port-au-Prince. In case of complicated or emergency cases which need intensive care (cesarean; X-ray), people are referred to hospitals in these main cities. However, access to these hospitals is hampered by the deteriorating road infrastructure. In general, only the main communes have health centers at their disposal. For example, in the communes of Dondon and St Raphael, all the section communales have neither a health center nor a dispensaire. Health centers and dispensaire in the main communes are poorly equipped and staffed, and only provide basic minimum services - blood pressure checking, treatment of anemia or diarrhea. Population in section communales and remote areas do not have access to health treatment, especially pregnant women at the late stages of their pregnancy. Similarly, a significant demand-side constraint is hampering the access to health treatment. Due to the combination of both supply- and demand- side constraints, a significant percentage of the population resorts to traditional medicine, or simply does not get curative treatment, making health outcomes poor. For example, the rate of attended birth is very low and malnutrition rate is high. It is estimated to amount to about 22 percent among children between 0 and 3 years age.

Improved market access is essential for local livelihood improvements

10. The road project is likely to have significant positive impact on livelihoods in the affected areas. Different groups of farmers in these micro regions stand to gain differently because of (1) their varying potential to respond to market changes such as increased demand for agricultural products: (2) the high degree of market orientation of all livelihood systems in the areas’ and (3) the absence of systemic barriers to access among subgroups. However, the project is likely to have largely inclusive, positive social and economic impacts, and will, not least, benefit women in their capacity as agricultural marketers. Roads, rather than vehicles or transportation costs as such, are the main constraints to increased market access identified by local respondents, and their rehabilitation is essential to promoting social and economic development in the areas in question. Similarly, access to social services will be improved with improved roads: in the South East region, access to the secondary school in Thiotte, access to hospitals in Padernales, access to health centers in Thiotte.

Participation

11. The participation and consultation process is in two phases: (i)during the preparation to provide transparent information about the project, as inputs to project planning and designs, and to seek comments, advice on opportunities and assess risks related to the project; (ii)during the implementation phase under the routine road maintenance and participatory planning exercise (see project document).

Stakeholder Consultations

12. An important objective of the social analysis mission was to consult with local project stakeholders about the proposed project design - the perceived benefits and potential adverse impacts - and its overall appropriateness in view of local development needs. During project preparation, the consultation process consisted of structured and unstructured interviews with various informants representing different stakeholders groups. Especially during the social

133 analysis mission, meetings were held in the communes in Northern and Southeastern Haiti covered by the project. The mission focused on local stakeholders in the road rehabilitation regions, but also met with relevant government representatives in Port-au-Prince. During the mission, one two-day visit was made to each of the affected regions, to meet local stakeholders.

13. In the Cap Haitian - St Raphael project:

a. A meeting with local authorities (Delegue, DDA), NGOs (Oxfam, Agro Action Allemande, Caritas), and transporters’ associations. b. Focus group meetings in Dondon and St Raphael, comprising local associations (coffee associations, women’s groups) and authorities (Mayor of St Raphael) C. Individual interviews with producers, market women, and households along the road.

14. In the Thiotte-Anse a Pitre project: a. A meeting with the authorities (mayor and DDA), NGOs (Caritas, FLM) and producer associations (CROS) b. Focus group meeting in Anse a Pitre, comprising local associations (coffee associations, producer associations) and authorities (Mayor of Anse a Pitre) C. Individual interviews with producers, market women and households along the roads.

Consultation feedback

15. The consultations identified strong support, and demand, for the proposed road rehabilitation from Cap Haitian to St Raphael. All consulted stakeholders - including local producers, local authorities and NGOs, and representatives of the Ministry of Public Works in Port-au-Prince - argued that the road is essential because it links the three crucial agricultural markets of St Raphael, Dondon, Grand Riviere, with the Haiti’s second city, Cap Haitian, which in turn links directly to other national and international markets. Rehabilitation of the Thiotte - Anse a Pitre road is also in high demand, and will contribute to enhance access to important product and service markets in the Dominican Republic, including the “binational” zone of Pedernal, where local producers bring their produce for the weekly market day. There is an existing high volume of trade along the stretch of road to and from the Dominican border that will be facilitated by the road rehabilitation. However, in Thiotte, local government representatives expressed preference for rehabilitating the roads towards Foret de Pine and Belle Anse before the road to Anse a Pitre.

16. While benefits are likely to be broadly inclusive, poorer peasants especially face numerous additional constraints to respond to improved markets conditions (quality and size of land, inputs, etc.). The impact of improved roads on local prices of various agricultural products, and the effects on producers / consumers, is complex and beyond the scope of this assessment. It is not clear whether there could be winnersllosers and whether the project will increase inequities amongst different actors in the economy (that is producers vs. transportedmadame saras).

17. More specific benefits from the rehabilitation expected by local stakeholders are summarized below, and include improved access to services, increased employment opportunities for transporters, and increased scope of action for NGOs and local government agencies, among other.

134 Table 2: Impacts on stakeholder groups

zvl STAKEHOLDERS I: E= 82 "2 z,,aaS+$8- IMPACTS &bbZtS

18. Among the risks that should be addressed during implementation are (limited) involuntary resettlement, adverse health impacts, environmental context, smuggling and border control.

33 (a) means specific to the Southeastern Haiti. In Southeastern Haiti, in general, the Haitians complain about humiliating treatment by Dominicans and the road is perceived as a way to reduce the dependency to the Dominican Republic market through better access to services in Thiotte and an integration of the Haitian commercial network 34 B means specific to the North.

135 19. Involuntary resettlement: The two road rehabilitations may involve a limited number of involuntary resettlements as defined by World Bank social safeguards policies. In some parts of each road, houses and businesses are built very close to the road, and for some business enterprises, on the road itself. The exact number of units affected will depend on the exact design of the road. A number of small businesses, including one medium size repair shop on Dondon - St Raphael road, will have to move away from the road during rehabilitation. The Ministry of Public Works has prepared a policy framework for the appropriate consultation and compensation mechanisms, and institutional experience in addressing resettlement does exist. Based on prior experience, the government does not expect resistance from the affected population.

20. Adverse health impacts: The rehabilitated roads may impact adversely on people’s health in at least two ways: First, as stressed by all of our informants, heavy traffic on unpaved roads produces a significant dust problem that impacts directly on the health of people living near the road. Respiratory problems are already reported, and the dust problem would increase with a rehabilitated unpaved road with more, faster, and heavier traffic. The pedestrian traffic on the road is dense, and in particular children walk to and from school in large and playful groups. Increased traffic greatly increases the risk of serious accidents. On the other hand, access to emergency health services will be enhanced by the rehabilitation.

21. Environmental context: Parts of the roads are traversing environmentally delicate and challenging areas. This poses risks to the sustainability of the roads, caused by (a) the deforestation of some steep hills above the road (e.g. the Grand Gilles area between Cap Haitian and Dondon), which increases the amount of water that will flow over the road in the rainy season; and (b) the erosion of the road from below, where it follows river banks that are already expanding quickly. These risks should be taken even more seriously because the roads themselves may add incentives for increased charcoal production, which is the primary cause of deforestation.

22. Haiti - Dominican border: The gains expected from increased traffic towards the Dominican border may be offset by the weak and inefficient system of border controls that exist. Increased smuggling, tensions between the Haitian and Dominican populations living near the border, illegal taxing or confiscation of goods are among the problems that could limit the benefits of cross border traffic.

Related community development priorities

23. The participatory exercises will continue under the proposed project, further strengthened with the introduction of the participatory planning aiming at: (i)validating additional priority investment to complement the road rehabilitation; (ii)retooling the participatory mechanisms as necessary to reinforce local capacity; (iii)ensuring active involvement of all the stakeholders, including the most vulnerable groups.

24. During focus group interviews in St Raphael, Thiotte, and Anse a Pitre, representatives of the communities were asked about the most important community development needs. The groups confirmed that the proposed road rehabilitation was a primary priority. Three types of

136 investment could be explored: (i)investment that would ensure the durability of the rehabilitated road; (ii)investment that would reinforce access to services triggered by improved roads; (iii) investment that would complement the expected impact of the road on household income.

25. The following table summarizes the main priority list of investments as expressed by the stakeholders and using ratings of priority and interest: H (+++) very high; H (++), high; H (+) medium (Table 3):

Table 3: Community development priorities

North Thiotte Anses a Pitre Durability of roads Environment Protection including H (+++) H(+++) H(+++) Protection Berges Services Improved access to inputs H(++) Market rehabilitation H (++I School (secondary) Community-based health system 35 H (++> Water project Vocational training Income support and access to services Tertiary roads H (+++) Drainage (irrigation) H(++)

Monitoring and Evaluation System

26. This social assessment should become a continuous and evolving process where the monitoring of project social indicators not only provides timely feedback but the basis for identifying studies and assessments sharply focused on social issues. The system of monitoring and evaluation described in the results framework (Annex 4) includes several social indicators which have been designed based on the results of the social assessment.

35 From an analysis of the existing services.

137 Annex 16: Project Preparation and Supervision HAITI: TRANSPORT AND TERRITORIAL DEVELOPMENT PROJECT

Planned Actual PCN review September 8, 2005 September 2,2005 Initial PID to PIC September 8,2005 September 8,2005 Initial ISDS to PIC September 8,2005 September 8,2005 Appraisal January 23,2006 January 23,2006 Negotiations March 2,2006 March 1-3,2006 BoardRVP approval April 11,2006 Planned date of effectiveness July 1, 2006 Planned date of mid-term review July 1,2009 Planned closing date July 1,2012

1. Key institutions responsible for preparation of the project:

Ministry of Public Works, Transport and Communications (MTPTC) Ministry of Planning and External Cooperation (MPCE)/ PL-480 Office Road Maintenance Fund (FER)

2. Bank staff and consultants who worked on the project included:

Name Title Unit Jayme Port0 Carreiro Lead Energy Specialist, co-TTL LCSFE Nicolas Peltier-Thiberge Infrastructure Economist, co-TTL LCSTR Solange A. Alliali Senior Counsel LEGLA Philippa Amiri Operations Analyst LCSFP Carmel AndrC Consultant Ramon Anria Program Assistant LCSES Jean-Claude Balcet Senior Agricultural Economist LCSER Stephen Brushett Peer Reviewer (Lead Transport Specialist) LCSFT Hilarion Bruneau Consultant LOAGl Luz Caballero Road Specialist (Consultant) LCSFT Maryse Calixte ET Temporary LCCHT Luc Cosyn Road Specialist (Consultant) Gilles Damais Peer Reviewer (Consultant) Willy Egset Social development Specialist SDV Daniel Farchy Junior Professional Associate LCSFE Charles Feinstein Sector Leader LCSFP GCrard Felix Consultant Katharina Gamharter Legal Associate LEGLA Sophie Herrmann Consultant LCSER John Hine Peer Reviewer (Senior Rural Transport Specialist) TUDTR Jose-Luis Irigoyen Sector Manager LCSFT Nadim Khouri Senior Natural Resources Management Specialist LCSER Patrick Labaste Peer Reviewer (Lead Agriculture Economist) AFTS4

138 Yolaine LhCrisson Consultant Patricia E. Macgowan Senior Procurement Specialist LCOPR Maria Constancia Mallo ET Temporary LCSFT Jean-Roger Mercier Lead Environmental Specialist ESDQC Ahmadou Moustapha Ndiaye Lead Financial Management Specialist LCOAA Ulrich Cedric Myboto Operations Officer (Consultant) LCSFW Eric Palladini ET Consultant LCSFR Luc Razafimandimby Economist LCSHS Dana Rysankova Peer Reviewer (Senior Economist) LCSFE Manuel Schiffler Senior Economist LCSFW Jordan Schwartz Peer Reviewer (Senior Infrastructure Specialist) LCSFT Paul Siege1 Rural Development Economist (Consultant) LCSER David Webber Lead Finance Officer LOAGl Graham Williams Road Specialist (Consultant)

3. Bank funds expended to date on project preparation:

1. Bank resources: US$450,490 2. Trust funds: -0- 3. Total: US$450,490

4. Estimated Approval and Supervision costs:

1. Remaining costs to approval: US$lOO,OOO 2. Estimated annual supervision cost: US$75,000

139 Annex 17: Documents in the Project File HAITI: TRANSPORT AND TERRITORIAL DEVELOPMENT PROJECT

A. Project Implementation Plan

Draft Operation Manual

Draft Terms of Reference

Environmental Evaluation

Resettlement Framework

Procurement Plan

B. Bank Staff Assessments

Social Assessment

C. Background StudiesDocuments

HAITI - Diagnostic and Proposals for Agriculture and Rural development Policies and Strategies - World Bank, June 2005 (“The Agriculture ESW”).

In addition to the “Agriculture ESW’, the following background papers are on file: - Characterization of the “Nord” Department - Yolaine LhCrisson (Consultant) Table of population size in communes in selected micro-regions - From national census Presentation of the CARITAS (NGO) organization, and their experience in labor intensive public works - CARITAS.

Principle projects implemented within the last 10 years by the CECI NGO - CECI Presentation of the CECI organisation - CECI IADB Fili2re Study - IADB F. Pierre and G. Damais - Caracte‘risation des circuits de commercialisation de quelques produits exportables non traditionnels: ignames, taro (malanga), giraumon et piment. Hillside Agriculture Project; June 2004. G. Damais and J. Angrand - Diagnostic de la production cafe‘itre duns les zones d’intewention de RECOCARNO ; IRAM, July 2003.

140 Annex 18: Statement of Loans and Credits HAITI: TRANSPORT AND TERRITORIAL DEVELOPMENT PROJECT

Difference between expected and actual Original Amount in US$ Millions disbursements

Project ID FY Purpose IBRD IDA SF GEF Cancel. Undisb. Orig. Frm. Rev’d PO93640 2006 HT Community Driven Development 0.00 36.72 0.00 0.00 0.00 34.04 0.00 0.00 Project PO93936 2005 HT Governance Technical Assistance Grant 0.00 2.04 0.00 0.00 0.00 2.04 0.00 0.00 PO89873 2005 HT Economic Governance Adjustment Op 0.00 61.00 0.00 0.00 0.00 14.96 0.00 0.00 PO90159 2005 HT Emergency Recovery.& Disaster 0.00 11.54 0.00 0.00 0.00 10.65 0.00 0.00 Management Total: 0.00 111.3 0.00 0.00 0.00 61.69 0.00 0.00

ERROR! UNKNOWN DOCUMENT PROPERTY NAME. STATEMENT OF IFC’s Held and Disbursed Portfolio In Millions of US Dollars

Committed Disbursed IFC IFC

FY Approval Company Loan Equity Quasi Partic. Loan Equity Quasi Partic. 1998 Microcredit 0.00 0.40 0.00 0.00 0.00 0.40 0.00 0.00 Total portfolio: 0.00 0.40 0.00 0.00 0.00 0.40 0.00 0.00

Approvals Pending Commitment FY Approval Company Loan Equity Quasi Partic.

Total pending commitment: 0.00 0.00 0.00 0.00

141 Annex 19: Country at a Glance HAITI: TRANSPORT AND TERRITORIAL DEVELOPMENT PROJECT

Haiti at a glance 2/13/06

Latin POVERTY and SOCIAL America Low- Haiti &Carib. income 1 Development diamond. 2004 I Population, mid-year (millions) 8.6 534 2,310 GNI per capita (Atlas method, US$) 490 3,260 450 GNI (Atlas method, US$ billions) 4.2 1,741 1,038 Average annual growth, 1998-04 Population (%) 1.9 1.5 1.9 Labor force (%) 1.9 2.1 2.3 per Most recent estimate (latest year available, 1998-04) capita enrollment Poverty (n of population below nationalpoverty line) 76 Urban populatton (% of totalpo~ulation) 3% 77 30 Life expectancy at birth (years) 52 71 58 Infant mortality (per 1,000 live births) 79 28 82 Child malnutrition (% of children under 5) 17 44 Access to improved water source Access to an improved water source (% ofpopulation) 46 86 75 Illiteracy (7’. ofpopulation age 1%) 48 11 39 Gross pnmary enrollment f% of school-age population) 129 92 -Haiti Low-income group Male 131 99 Female 126 85

KEY ECONOMIC RATIOS and LONG-TERM TRENDS 1984 1994 2003 2004 Economic ratios. GDP (US$ billions) 1.8 2.5 3.0 35 Gross domestic investmenffGDP 159 91 30.7 27.3 Trade Gross domestic savings/GDP 6.8 2 9 29 8 26.5 Gross national savingdGDP .. 5.0 28.4 20.6 Dom e t ic Current account balance/GDP .. -3.8 -0.1 0.4 s Investment Interest paymentdGDP 0.4 0.0 0.3 0.8 savings I I Total debffGDP 38.4 28 9 44.0 37.2 Present value of debt/expoltS

1984-94 1994-04 2003 2004 2004-08 (average annual groowth) GDP -1.5 10.1 0.5 -3.8 GDP per capita -3.4 7.9 -0.5 -4 9

STRUCTURE of the ECONOMY 1984 1994 2003 2004 Growth of investment and GDP (Yo) (“A of GDP) 300, Agriculture .. 34.1 25.5 25.4 I Industry .. 22.1 15.5 16.0 2UO Manufacturing .. 13.5 7.6 8.0 100 Services .. 42.2 50.3 51.2 0

Private consumption 82.3 87.5 90.2 -100 General government consumption 10.9 9.6 8.3 Imports of goods and services 26.5 11.7 46.7

1984-94 lgg4-04 Growth of exports and imports (%) (average annual growth) Agriculture 0.4 10.5 -5.4 3o Industry -4.9 1.5 -1.5 M Manufacturing -2.6 1.5 -0.3 Services 0.7 13.3 -4.2 lo 0 Private consumption 2.8 General government consumption -8.8 .. -10 Gross domestic investment -9.0 27.4 -3.1 -Exports -Imports Imports of goods and services -2.9 30.9 0.2

’ The diamonds show four key indicators in the country (in bold) compared with its income-group average. If data are missing, the diamond will be incomplete.

142 1084 1394 21103 zou4 I

'I

f I MAP SECTIOIU U.S.A. 73°30' 73°00' 72°30' 72°00' T H E Tortue B A ATLANTIC Island H A Ile de la Tortue ATLANTIC OCEAN M 20°00' 20°00' A S OCEAN PORT-DE-PAIX St. Louis

Anse-á-Foleur CUBA For detail see IBRD 34438 DOMINICAN Chansolme REPUBLIC Jean-Rabel Le Borgne HAITI Môle St. Nicolas Bassin-Bleu CAP-HAÏTIEN L Port-Margot JAMAICA Puerto Rico e Bas Limbé s s (U.S.) e r Limbé Caribbean Sea A Quartier Morin n Plaine du Coracol t i Limonade l l Pilate Nord FORT LIBERTÉ e NORD-OUEST Terrier s Bombardopolis Baie de Henne Acul du Gros Morne Rouge Anse-Rouge Nord Ferrier Trou du Nord Terre-Neuve Plaisance Milot Ste 74°30' 74°00' Grde. Riv. Suzanne du Nord Dondon Perches Ouanaminthe Dondon- 19°30' 19°30' Marmelade Ennery St. Raphaël Bahon

HAITI GONAÏVES St. Raphaël Ranquitte Capotille Vallières Mont Monbin Organisé TRANSPORT AND TERRITORIAL St. Michel Canice Pignon Crochu L'EstereNORD de L'Attalaye La Victoire Desdunes DEVELOPMENT PROJECT Cerca Carvajel Grande Saline Dessalines MICRO-REGIONS PRIMARY ROADS Cerca-la-Source SECONDARY ROADS MaïssadeNORD- AGRO-CLIMATIC ZONES: SECTIONS COMMUNAL Petite Rivière HINCHE COMMUNE CAPITALS St. Marc de l'Artibonite EST DRY OR SEMI-HUMID (LOWLANDS, Thomassique PLATEAUS AND HIGHLANDS) DEPARTMENT CAPITALS Saint Marc Channel Verrettes NATIONAL CAPITAL Thomonde 19°00' HUMID (HIGHLANDS) 19°00' COMMUNE BOUNDARIES HUMID OR IRRIGATED (LOWLANDS) DEPARTMENT BOUNDARIES DOMINICAN REPUBLIC Boucan INTERNATIONAL BOUNDARY Carre La Chapelle GONÂVE Belladére Lascahobas Saut d'Eau ISLAND Anse à ARTIBONITEGalet Mirebalais

Pointe à Roquelle Arcahaie CENTRE Savanette

Cabare Gonâve Channel Cornillon Bonbon JÉRÉMIE Abricots Thomazeau Roseaux Crois des Bouquets Dame-Marie Corail PORT-AU-PRINCE Moron Pestel Petite Trou Carrefour Delmas L. Saumatre de Nippes Ganthier Petion- Chambellan Gressier Anse-à-Veau Ville 18°30' 18°30' Baraderes Léogâne Anse GRANDE - ANSE d'Hainault Petite Rivière Beaumont MARAGOÂNE de Nippes Kenscoff For detail see IBRD 34438 Les Irois Petite Grand Paillant Goâve Goâve Fonds L'Asile Verrettes Les Forêt des Anglais Maniche Pins Tiburon Camp-Perrin NIPPES Savane St. Louis du Nord Zombie Chardonnieres Cavaillon Aquin Belle-Anse Port-à-Piment La Valle JACMEL Marigot This map was produced by the Thiotte Chantal Cayes- Map Design Unit of The World Bank. Côteaux SUD Côtes-de-Fer Bainet Jacmel The boundaries, colors, denominations Grand Gosier JANUARY 2006 Roche-à Bateau CAYES OUEST and any other information shown on Torbeck IBRD 34437 this map do not imply, on the part of Arniquet Thiotte- The World Bank Group, any judgment Ile à Vache 0 1020304050 Anse à on the legal status of any territory, or Port-Salut St. Jean Pitres any endorsement or acceptance of du Sud CARIBBEAN SEA Vache Island Anse à Pitres such boundaries. KILOMETERS 72°00' 74°00' 73°30' 73°00' SUD - EST IBRD 34438 ° ° 20 16 00' 00' 20' 20' 10' 10' Rico ° ° ° ° ° ° (U.S.) Puerto 18 18 18 18 18 18 Oviedo ° ° Oviedo To Cabo Rojo, 40' 40' 40' 40' rainfall, in mm. 68 68 Average annual Average ° ° ° ° To Cabo Rojo,

2000

REPUBLIC 600 REPUBLIC 1000 OCEAN To Duverge DOMINICAN To Duverge DOMINICAN 2000 ATLANTIC Pedernales Pedernales

1400 REPUBLIC 7,018 7,018 14,828 21,846 14,828 21,846 DOMINICAN Pins Pins ° ° Forêt des Forêt des over 2500 m. 72 72 Pitres Anse à Thiotte- Savane Savane Zombie Zombie Dondon- St. Raphaël Anse à Pitres Anse à Pitres HAITI Thiotte Thiotte 2,544 2,544 37,680 40,224 37,680 40,224 50' 71 50' 71 THE BAHAMAS ° ° 71 71 Port-au-Prince 3,684 3,684 19,357 23,041 19,357 23,041 de Thiotte- de Thiotte- Fonds Fonds Anse à Pitres Anse à Pitres Verrettes Verrettes Micro-Région Micro-Région ° ° 2000-2500 m. 76 76 Caribbean Sea 1,124 9,728 1,124 9,728 15 15 10,852 10,852 JAMAICA Grand Grand Gosier Gosier CUBA ° ° 16 20 00' 00' 00' 71 00' 71 ° ° ° ° 72 72 72 72 1500-2000 m. 3,372 3,372 5 5 KILOMETERS KILOMETERS 48,335 51,707 48,335 51,707 Belle-Anse Belle-Anse OUEST OUEST Micro-Région de Micro-Région de Caribbean Sea Caribbean Sea 010 010 Thiotte–Anse à Pitres Thiotte–Anse à Pitres SUD - EST SUD - EST EST SECTIONS COMMUNAL COMMUNE CAPITALS CAPITALS DEPARTMENT (INSET) CAPITAL NATIONAL COMMUNE BOUNDARIES BOUNDARIES DEPARTMENT BOUNDARY INTERNATIONAL NORD- 00' 00' 10' 10' 20' 20' 1000-1500 m. ° ° ° ° ° ° 18 18 18 18 18 18 00' 00' ° ° 30' 30' 40' 35' 40' 35' ° ° ° ° ° ° 72 72 19 19 19 19 19 19 TOPOGRAPHY AND RAINFALL

2000 Coracol Coracol Ste. Suzanne Ste. Suzanne Ranquitte Ranquitte 500-1000 m. La Victoire La Victoire TOTAL URBAN EST + RURAL 6,826 6,826 22,501 29,327 22,501 29,327 1,279 1,279 PRIMARY ROADS PRIMARY ROADS SECONDARY ROADS TERTIARY Trou du Nord du Trou Trou du Nord Trou Pignon Pignon 16,138 17,417 16,138 17,417 NORD- HAITI 7,600 Limonade Limonade 25,675 33,275 COMMUNE POPULATION: Micro-Région de Micro-Région de 7,600 7,600 Quartier Morin Quartier Morin Dondon-St. Raphaël Dondon-St. Dondon-St. Raphaël Dondon-St. 25,675 33,275 25,675 33,275 Bahon Bahon Grande Rivière du Nord Grande Rivière du Nord 10' 10' ° ° 7,601 7,601 100-500 m. 72 72 30,138 37,739 30,138 37,739 St. Raphaël St. Raphaël CENTRE CENTRE ARTIBONITE 1400

NORD 1000 acceptance of such boundaries. judgment on the legal status of any territory, or any endorsement or on this map do not imply, on the part of The World Bank Group, any The boundaries, colors, denominations and any other information shown This map was produced by the Map Design Unit of The World Bank.

1400 1400 Dondon Dondon 5,558 5,558 19,591 25,149 19,591 25,149 Milot Milot Nord Nord 2000 Plaine du Plaine du Micro-Région de Micro-Région de 4,737 4,737 21,109 25,846 21,109 25,846 Dondon–St. Raphaël Dondon–St. Raphaël elevation 5 5 0-100 meters CAP-HAÏTIEN CAP-HAÏTIEN MARKETPLACES MICRO-REGIONS DRY OR SEMI-HUMID (LOWLANDS, DRY AND HIGHLANDS) PLATEAUS HUMID (HIGHLANDS) (LOWLANDS) HUMID OR IRRIGATED Nord Nord Acul du Acul du KILOMETERS KILOMETERS St. Michel St. Michel 20' 20' 20' 20' ° ° ° ° AGRO-CLIMATIC ZONES: AGRO-CLIMATIC de L'Attalaye de L'Attalaye 010 010 30' 30' 40' 40' 72 72 72 72 ° ° ° °

ARTIBONITE 2000 TRANSPORT AND TERRITORIAL DEVELOPMENT PROJECT DEVELOPMENT TERRITORIAL AND TRANSPORT Bas Bas 19 19 19 19 Marmelade Marmelade Limbé Limbé NORD JANUARY 2006