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World Bank Document The World Bank Maldives Urban Development and Resilience Project (P163957) Public Disclosure Authorized Public Disclosure Authorized Combined Project Information Documents / Integrated Safeguards Datasheet (PID/ISDS) Appraisal Stage | Date Prepared/Updated: 20-Dec-2019 | Report No: PIDISDSA24829 Public Disclosure Authorized Public Disclosure Authorized Page 1 of 19 The World Bank Maldives Urban Development and Resilience Project (P163957) BASIC INFORMATION OPS_TABLE_BASIC_DATA A. Basic Project Data Country Project ID Project Name Parent Project ID (if any) Maldives P163957 Maldives Urban Development and Resilience Project Region Estimated Appraisal Date Estimated Board Date Practice Area (Lead) SOUTH ASIA 11-Dec-2019 27-Feb-2020 Urban, Resilience and Land Financing Instrument Borrower(s) Implementing Agency Investment Project Financing Ministry of Finance Ministry of National Planning and Infrastructure Proposed Development Objective(s) To enhance resilient infrastructure and urban planning in selected cities in Maldives and strengthen the Government’s capacity to provide effective response to disasters. Components Component 1: Resilient Infrastructure and Emergency Preparedness Component 2: Sustainable Urban Planning, Development, and Management Component 3: Project Implementation Management and Reporting Component 4: Contingent Emergency Response Component PROJECT FINANCING DATA (US$, Millions) SUMMARY-NewFin1 Total Project Cost 16.50 Total Financing 16.50 of which IBRD/IDA 16.50 Financing Gap 0.00 DETAILS-NewFinEnh1 World Bank Group Financing Page 2 of 19 The World Bank Maldives Urban Development and Resilience Project (P163957) International Development Association (IDA) 16.50 IDA Credit 8.25 IDA Grant 8.25 Environmental Assessment Category B-Partial Assessment Decision The review did authorize the team to appraise and negotiate Other Decision (as needed) B. Introduction and Context Country Context 1. The Republic of Maldives is an archipelago comprised of 1,192 islands spread over 26 atolls, stretching over 800 km. north to south. With an estimated population of 436,330 in 2018 and a total land area of less than 300 sq. km., Maldives is the smallest and the most densely populated country in South Asia. Population is heavily concentrated around Greater Male’, the capital, accounting for about one third of the total population.1 The rest is distributed across approximately 200 islands,2 many of them inhabited by less than 500 people. In 2018, GDP and GNI (Atlas method) per capita were USD 10,242 and USD 9,310, far above the regional mean. 2. Despite its uniquely challenging geography and widely dispersed population, Maldives has become an upper-middle-income country by capitalizing on its extraordinary natural marine and coastal assets. Maldives growth success has been mainly driven by the development of a resort-based high-end tourism sector that has helped sustain impressive growth and mobilize resources to improve development outcomes and has lifted the majority of the population out of poverty. In 1980, Maldives was among the poorest countries in the world with a GDP per capita of 268 USD (or just 0.02 percent of the US income). In less than 40 years, sustained and fast growth has allowed the country to close the gap with rich countries (16.3 percent of US income in 2018), reaching upper middle-income status and on pace to become a high-income country within the next lustrum. Annual real GDP growth, averaging 5.6 percent over 2000-18, has been comparable to that of middle-income countries and ahead of other island small states. Few Maldivians are poor according to national and international poverty lines. About 8.2 percent of Maldivians live below the national poverty line and 6.6 percent live below the international poverty 1 Greater Malé is defined as Hulhumalé, Hulhulé, Malé, Funadhoo, Villingili, Gulhifalhu, and Thilafushi islands. In this PAD, Malé refers to Malé island. 2 Resort islands are not classified as inhabited by the Government of Maldives; Government of Maldives National Bureau of Statistics. Page 3 of 19 The World Bank Maldives Urban Development and Resilience Project (P163957) line for upper middle-income countries (US$5.5 per person per day).3 3. Central to Maldives’ development agenda is how to sustain these remarkable gains, while addressing the tensions and threats emerging from its development trajectory. The current development model and inherent characteristics of small island states present important economic, social, and environmental challenges that threaten long-term sustainability. Small size, geographical isolation and population dispersion limit agglomeration effects and economies of scale, resulting in a high cost of doing business. The dispersed islands lead to high cost of transport per unit due to the distance to markets. In addition, economic vulnerability is exacerbated by the dependence on several strategic imports, such as food and fuel, and concentration of economic activities around a few key sectors, notably fishing and tourism, with limited available opportunities for diversification. 4. In recent years, the government has embarked upon an ambitious infrastructure program. These investments—to address bottlenecks in the tourism sector, increase resilience to climate change, ease constraints in service delivery and support housing projects—have led to a rapid increase in public and publicly guaranteed external debt. Maldives’ total debt was estimated at about 75.3 percent of the GDP in June 2019. Debt-to-GDP ratio grew by 10.9 percentage points between end-2017 and June-2019, mainly on account of a large leap in guaranteed debt – which rose from 4.3 percent to 16.3 percent of GDP. Maldives’ risk of external debt distress remains high.4 5. With sea levels expected to rise and extreme weather events likely to increase in frequency and intensity,5 the low-lying Maldives is considered one of the world’s most vulnerable countries. The country’s average elevation is 1.7 meters above sea level.6 The consequences of high frequency events such as monsoonal flooding, coastal erosion, saltwater intrusion and sea level rise, combined with the potential of tsunamis, thunderstorms, flash floods, prolonged dry periods and coral reef destruction, pose threats to lives, livelihoods and the economy. Sea level and temperature rise and changes to the frequency and intensity of tropical storms threaten coral reef ecosystems, which provide a buffer against waves, floods and erosion. The reefs are also the foundation of Maldives’ two main economic activities, namely fisheries and tourism. As coastal erosion and pressure on inhabitable land increase, the physical vulnerabilities of the islands’ populations, infrastructure and livelihoods will increase. The effects of climate change, if poorly managed, could cause annual economic losses of over 12 percent of Maldives’ GDP by 2100.7 Sectoral and Institutional Context 6. Maldives’ urban development falls into two groups: Greater Malé and the outer atolls. In Greater Malé, access to tertiary education, employment, housing and modern urban services attract people from throughout the country. Large-scale migration to the Malé region8– while most atolls has experienced a shrinkage due to outmigration9– has led to severe overcrowding that is aggravating social 3 Household Income and Expenditure Survey (2016) and staff calculations. 4 IMF, 2019. 5 Fifth Assessment Report (AR5) of Intergovernmental Panel on Climate Change (IPCC) 2014. 6 UNDP, 2013. 7 Economics of Climate Change in South Asia, Asian Development Bank, 2015. 8 Approximately 53 percent of the resident population of Malé is made up of migrants from other atolls, and Malé has seen an increase in its total Maldivian population share between the 2006 and 2014 Census (from 34.7 percent to 38.8 percent) 9 Spellman, L.H, 2015. Empirical Analyses of Migration in Small Islands: The Role of Environment and Social Factors. Page 4 of 19 The World Bank Maldives Urban Development and Resilience Project (P163957) and environmental vulnerabilities of inhabitants. Malé is among the densest cities in the world, with 177,500 residents housed on a 1.95 km2 island10. In the outer atolls, small size of population and distance to markets are significant barriers to sustainable service delivery. Many people living in the outer atolls do not have piped water supply or sewer networks, while employment and educational opportunities are limited. 7. To address demographic pressures in Greater Malé, the Government of Maldives (GoM) has pursued a two-pronged approach: i. A focus on the sustainable development of the Greater Malé region considering existing migration trends. In parallel to strengthening urban services in Malé, the creation of a reclaimed island, Hulhumalé, was planned with the objective of reducing congestion in Malé and meeting development demands. Hulhumalé is the first planned city in the country. Its planning and design incorporate climate adaptation considerations and the 400-hectare landmass sits approximately two meters above mean sea level. Reclamation of Hulhumalé Phase 1 (160 hectares) was completed in 2002. Its primary physical and social infrastructure and residential development have been completed, and about 50,000 people are currently housed there, with a final target population of 80,000. Phase 2 reclamation (244 hectares) was completed in 2015, and construction is underway. Phase 2 has a target population of about 100,000 people. ii. A parallel regional development strategy is looking to
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