Document of The World Bank

FOR OFFICIAL USE ONLY

Public Disclosure Authorized Report No. P-6727-BD

MEMORANDUMAND RECOMMENDATION

OF THE

PRESIDENT OF THE

INTERNATIONAL DEVELOPMENTASSOCIATION

TO THE Public Disclosure Authorized EXECUTIVE DIRECTORS

ON A

PROPOSED CREDIT

OF SDR 78.4 MILLION

TO THE

PEOPLE'S REPUBLIC OF

Public Disclosure Authorized FOR A

RIVER BANK PROTECTION PROJECT

NOVEMBER 13, 1995 Public Disclosure Authorized

This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. CURRENCY AND EQUIVALENT UNITS (April 1995)

Bangladesh Taka 1 US$0.0248 US$1 Tk 40.25

WEIGHTS AND MEASURES

I meter (i) = 1.1 yards (yd) I kilometcr (kin) = 0.61 mile (mi) 1 hectare (ha) = 2.47 acres (ac)

ABBREVIATIONS AND ACRONYMS

BRE - Brahmaputra Right Embankment BWDB - Bangladesh Water Development Board CAS - Country Assistance Strategy Cr. - Credit CY - Calendar Year ERR - Economic Rate of Return FAP - Flood Action Plan GDP - Gross Domestic Product GOB - Government of Bangladesh ICB - International Competitive Bidding NCB - National Competitive Bidding NGO - Non-Government Organization NPV - Net Present Value NW`P - National Water Plan O&M - Operations and Maintenance PCR - Project Completion Report PPAR - Project Performance Audit Report R-AC - Regional Accounting Center RAP - Resettlement Action Plan SDR - Special Drawing Right WARPO - Water Resources Planning Organization

GOB FISCAL YEAR July I - June 30

GLOSSARY

Grovne - A rigid structure built out from the shore to stop erosion by deflecting the current.

Minor Irrigation - Irrigation using mechanical pumps typically in units of 50 ha or less.

Monsoon - Period of annual rains starting in June and ending in October.

Project Proforma - An internal Government document required to obtain authorization for the inclusion of a project in the investment budget.

Revetment - A facing of stone or concrete to protect an embankment from erosion. FOR OFFICIAL USE ONLY

BANGLADESH

RIVER BANK PROTECTION PROJECT

MEMORANDUM OF TRE PRESIDENT

Credit and Proiect Summars

Borrower: People's Republic of Bangladesh.

ImnlementingAgency: BangladeshWater DevelopmentBoard.

Beneficiarv: Not Applicable.

Poverty: Not specifically focused, but flooding and river bank erosion disproportionately affect the poor who have minimal assets to buffer flood losses or involuntary relocation. Many of the poorest are former erosion victims.

Amount: SDR 78.4 million (US$121.9 million equivalent).

Terms: Standard, with 40 years maturity.

CommitmentFee: 0.5% on undisbursedcredit balances, beginning 60 days after signing, less any waiver.

Financing Plan: See ScheduleA.

EconomicRate of Return: The beneficiaries of the project would be the estimated 2-3 million people living in the area of potential disaster caused by the Brahmaputra breaching its right bank at Mathurapara-Sariakandito flow down the Bangali river channel. About 125,500 urban people will be protected from severe property loss, impoverishment and physical displacementcaused by river bank erosion or chronic floodingat and Sariakandi. Flooding of the approaches to the Jamuna Bridge would disrupt local trade. The project would protect agricultural productionover an area of about 100,000 ha from annual flooding and control erosion at Sirajganj which is essential for the security of the Jamuna Bridge. Property losses prevented in the first five- year period would include 16,400 houses and shops, 75 factories, at least 9,000 traditional dwellings and considerable public infrastructure. The economic rate of return (ERR) for the project is 39%, and 45% and 35% respectively for the Sirajganj and Sariakandi-Mathuraparasubprojects. The ERR does not include the national water planningor BWDB institutionbuilding component.

Staff Appraisal Report: Report No. 15090-BD.

Maps: IBRD No. 27505: River Bank ProtectionProject. IBRD No. 27506. SimulatedArea Flooded by Merger of Brahmaputraand Bangali Rivers at Sariakandi.

Project IdentificationNumber: BD-PA-9545.

I This documenthas a restricteddistribution and maybe usedby recipientsonly in the performanceof their official duties. Its contentsmay not otherwisebe disclosedwiihout World Bank authorization.

MEMORANDUM AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT TOTHE PEOPLE'S REPUBLIC OF BANGLADESH FOR A RIVER BANK PROTECTION PROJECT

1. I submit for your approval the following mcmorandumand recommendationon a proposed development credit to the Pcople's Republic of Bangladesh for SDR 78.4 million, the equivalent of US$121.9 million, on standard IDA terms with a maturity of 40 years. This credit will help finance river bank protection to stop the Brahmaputra from disastrously breaching its right bank and flooding the hinterland, secure the Jamuna Bridge and two towns through erosion protection works, and assist water sector institutional development.

Sectorand Proicct Background

2. Land and Water Scctor. Bangladesh,one of the poorest countries of the world, occupies the floodplains and delta formed by the confluenceof the and BrahmaputraRivers at the head of the Bay of . Consequently,the country's agricultural and economicdevelopment is constrained by monsoon floods, salinity, tidal inundation, cyclones, river bank erosion and continuous meandering of the major rivers. The severity of some major floods and cyclones often attains disaster proportions as in the 1988 flood and 1991 cyclone. Agriculture is still the mainstay of the economy and accounts for about 36% of GDP and about 60% of employment. Processed and unprocessed agricultural products account for about 32% of exports. Despite vulnerability to flood damage, the country's foodgrain productionrose from 9.9 million tons in 1961/62to over 19 million tons in 1993/94. About two-thirds of this increase came from dry season cropping facilitated by the Government of Bangladesh's (GOB) successful policies of introducing and expanding the use of small pumps, tubewells, high-yieldingrice varieties and fertilizers and by policy reforms in the late 1980s liberalizing trade in minor irrigation equipment and fcrtilizer. About one-third of the net cultivable area is now irrigated and, for the first time in recent memory, Bangladeshis now self-sufficientin rice production in years of normal weather. Nevertheless,Bangladesh still has to import wheat and other food products. Continuedrapid population growth (reduced somewhatto 2.0% per annum)means that Bangladeshmust continue substantialefforts to accelerate agricultural growth.

3. Sector Issues. Given the success with minor irrigation, the principal land and water sector issues relate to the formulation of long-term policies and investmentswhich will: (a) ensure equitable access to water for all users; (b) foster further agricultural growth by encouragingmore minor irrigation by private farmers using abundantgroundwater resources; (c) enable viable and environmentallybenign public and private sector investment in flood control and drainage works; (d) not exceed the implementationand maintenancecapacity of the BangladeshWater DevelopmentBoard (BWDB); and (e) enable stakeholders,other agencies, non-governmentorganizations (NGOs) and the private sector to participate in water sector planning, implementation,and operation and maintenance. As a result of GOB and donor conccrns arising from the severe floods in 1988, the World Bank prepared the Flood Action Plan (FAP) Study program in 1989 and has since served as the program's coordinator. The FAP is a five-year program consisting of: (a) routine studies to formiulatea portfolio of structural and non- structural investment projects to mitigate major flood hazards; (b) studies to formulate a river bank erosion control program for the Brahmaputra and Meghna Rivers; (c) various pilot projects to test innovative concepts of flood and river bank erosion control; and (d) various supporting studies to investigate social, environmentaland disaster managementissues arising from project proposals. The final report of FAP, "Bangladesh Water and Flood Management Strategy" (August 1995), now recognizes that flood managementhas to be seen witlhinthe context of year round water management and development, and that many of thic earlier technical solutions for flood control have significant problems. In consequence, GOB is planning a more integrated approach to water and flood 2 management with particular attention being paid to environmental impacts, particularly fisheries, peoples' participation in project planning, implementation, operation and maintenance (O&M), and institutionalstrengthening. At the same time, the FAP report recognizesthat major institutionalreforms are needed to improve water sector planning, implementationcapacity, and maintenance of completed works. The FAP will be conmpletedin December 1995, and its functions will be integrated within the Water Resources Planning Organization (WARPO) which will require substantial strengthening to become a fully effectivenational water planning organization.

4. Brahmanutra Rivcr BankErosion Impacts. River bank erosion is a persistenthazard faced by land owners and cultivators of land adjacent to the meandering major rivers. Such erosion leads to the landward collapse of the river bank over stretches of several hundred meters at a time. On the , erosion rates vary greatly from year to year, averaging about 100 meters, but sometimesreaching up to 800 meters in a peak year. Such erosion results in loss of fertile land and destruction of buildings, major bridges, embankments,ferry terminals and other essential infrastructure at major riverbank towns. Along the Brahmaputra River's west bank, cumulative erosion results in discerniblewestward migration of the river channel in some reaches. This erosion periodically breaches the 220 km long Brahmaputra Right Embankment (BRE) which is home to some 100,000 sqatters - most of whom are former erosion victims - and widespread flooding affects areas that have enjoyed significant economicdevelopment since constructionof the embankmentover 25 years ago. To prevent such breaches and the consequentialflood damages,sections of the BRE have been realigned since the 1970s to the extent that only 70 km of the structure still follows its original alignment.

5. Erosion along the BrahmaputraRiver's banks has a significant social impact. The loss of land, crops and property has led to landlessnessand impoverishmentfor thousands of households. Over the period 1980-92, land capable of supporting 405,000 people was eroded. Allowing for continued increase in population density, it is estimated that about 578,000 people may be displaced by erosion over the next 20 years and about 400,000 may be forced to migrate from the area, many of whom may end up in the peri-urban slums around the major towns and cities.

6. The economicvalue of losses to the economyof the northwest region from bank erosion along the Brahmaputra river is considerable. At five locations, where erosion is currently very active (Fulchari, Sariakandi-Mathurapara,Kazipur, Sirajganj and Betil), the total cost of erosion losses over the next five years is estimated to be about US$75 million (in 1991 prices), but erosion protection can only be economicallyjustified where significant property and infrastructure are at risk (see para.11). Losses consist of productive agricultural and u.ban land, severe damage to property (houses, shops, public buildings) and infrastructure (roads and bridges, power and telephone lines, and railway embankments). If present erosion rates are sustained, there is a strong likelihood that a total of about 11,700 ha would be eroded in the coming 30 years in the vicinity of Sirajganj town and near the villages of Sariakandi and Mathurapara. The potential loss of 1,500 ha of the built-up area of Sirajganj is of particular concern. The town is an importantadministrative and tradingcenter with a populationof over 100,000. It has agro-industrialenterprises (textile, oil, sugar and jute mills) and a river ferry terminal for rail and boat traffic. The town is protected from flooding by a section of the BRE which has been incorporated into existing bank stabilization works which were constructed in the early 1970s when erosion first threatened the town. When erosion became more serious in the 1980s, the Ranigram Groyne was constructed north of the town. Both structures have performed well, but they were damaged by the severefloods of 1987 and 1988 and a larger than normal flood could cause widespread failure of the existing works which could result in the erosion of one-third of the area at Sirajganj (500 ha) - including its commercial district - within five years. As a direct consequence, the BRE would have to be realigned behind the town leaving the rest of the town exposed to major floods. The 3

stability of the Jamuna Bridge (Cr. 2569-BD) which is under constructionabout 5 km downstreamnis dependent, inter alia, on erosion being controlledat Sirajganj.

7. At Sariakandi, as a result of erosion, the Bangali and Brahmaputra rivers are presently separated by a strip of land about 1 km wide. Someprotection to Sariakandi is provided by the Kalitola Groyne which was designed for a small side-spill channel of the Brahmaputra River. However, it is now exposedto the main force of the river and is in an advanced state of structural deterioration due to adjacent bank erosion. Further realignmentof the BRE is not possible because of the proximity of the Bangali River. Without further protection, the narrow strip of land separating the Bangali River from the Brahmaputra River will be completely eroded within 5 years with the loss of Sariakandi town (population 15,000) and a merger of the Bangali and Brahmaputrarivers would then occur. A merger of these two rivers would result in perennial flow from the Brahmaputra into the Bangali River and would be a major environmental disaster. This would permanently augment the Bangali River's discharge, increase its flood potential, and result in greater depths of inundation and larger areas flooded. Not only would crop and property damage be caused in the incremental areas flooded, but the augmented flooding in the Bangali River floodplain would damage the road network leading to the Jamuna Bridge and disrupt local trade.

The Proiect

8. Progect Ohiectives. The project's principal objective is to prevent the erosion of land at two locations on the west bank of the Brahmaputra by the constructionand maintenanceof improvedriver bank protection works, which would: (a) protect Sirajganj town's built-up and semi-urban areas from major damage and cumulative destruction;and (b) prevent the merger of the Brahmaputra and Bangali Rivers in the vicinity of Sariakandi and consequentialincreased regional flooding. Further objectives are to assist GOB in: developing permanentinstitutions for improvedwater sector planning; preserving the institutionalcapacity developedunder FAP; making multi-disciplinaryplanning part of Bangladesh's normal water sector planning processes; and to assist BWDB's institutional reform program through improvementsin its accountingand managementinformation systems.

9. Project Description. The proposedproject consists of the following components:

a) Rehabilitation and construction of river bank protection works at two sites on the Brahmaputra River's west bank, includingrealignment of about 8 km of the BRE to link the bank protectionworks near Sariakandiand Mathurapara;

b) Land acquisitionand a programof resettlementfor peopledisplaced by project works;

c) Technical assistance for implementation and maintenance support of works constructedunder the project;

d) Establishment, staffing and initial funding support for an O&M Unit in BWDB to maintain the protection works constructed under the project, and procurement of vehiclesand equipmentfor the O&M Unit;

e) Institution building technical assistance to WARPO to integrate the FAP within the frameworkof national water planning,produce a national water managementplan and a portfolio of investment projects for the medium and long-terrn, and upgrade integrated water sector planningcapability; and

TheBrahmaputra River is alsoknown as theJamuna River, thus the JanunaBridge crosses the Brahmaputra River. 4

f) Institutionalcapacity buildingtechnical assistance to BWDB to improvethe operation of the new regional accounting centers (which includes training), and provision of equipment and transport to improve project supervision capability in the field and internal communications.

The proposedproject would be implementedover a five-year period starting in early CY 1996.

10. The project's cost is estimated at US$156 million equivalent, with a foreign exchange componentof about US$58.6 million (38%) and duties and taxes of US$18.5 million. A breakdown of project costs and the financingplan are presentedin ScheduleA. Amountsand methods of procurement and disbursement, and the estimated disbursement schedule are in Schedule B. A timetable of key project processing events and the status of Bank Group Operations in Bangladesh are shown in Schedules C and D, respectively. Two maps (IBRD No.27505, 27506) are also attached. The Staff Appraisal Report, No. 15090-BD, dated November 10, 1995, is being distributedseparately.

11. Site selection and design of the river bank erosion protection works are based on an extensive field and laboratory research and testing program. This includes examination of design, construction, operation and maintenanceof 11 existing river bank erosion protection schemes and 31 other hydraulic structures along the Brahmaputra River's right bank, the investigations and design of the Jamuna Bridge's river training works, physical and mathematical model studies, and review of engineering design practices in India and the USA. A master plan short-listed 10 potential sites for civil works, and the three having the highest economic return - Sirarjganj, Sariakandi and Mathurapara - were selected for detailed design. At Sirajganj, the only physical solution was protection of the river bank, whereas at Sariakandi-Maturapara,diversion of the Bangali River was considered as an alternative solution to prevent the merger of the Brahmaputra and Bangali. High cost, the large area of land to be acquired and thousands of people to be resettled eliminated this alternative. Of the two feasible erosion protectionmethods (groynes or revetments),or a combinationof the two, revetments were selected for all sites on the basis of type of erosion monitored for more than 15 years along the Brahmaputra, experience with the performanceof groynes since 1978, and cost-effectivenessgiven the construction materials available and required maintenance.

12. Proiect Implementation. All project componentsother than National Water Planningwould be implementedby BWDB. A Project Director at , assisted by a Project Coordinator at Dhaka, would coordinate implementation. In view of BWDB's limited experience with the proposed construction technology, construction contract management and engineering supervision would be undertaken by experiencedinternational consultants on behalf of BWDB. These consultants would be vested with the powers and duties of "The Engineer" as specified in IDA's Standard BiddingDocuments for major civil works. Selected BWDB staff would be seconded to the consultants' construction supervision team, to ensure technologytransfer to BWDB personnel. A specialized O&M Unit would be established under the project for monitoring erosion and maintaining bank protection works. Technical assistance would be provided to train the O&M Unit's staff in maintenance technology and management. BWDB has established a Project Management and Resettlement Unit (PMRU) to coordinate resettlement activities, with assistance from consultants and an NGO. PMRU staff and consultantswill work with the District Commissionersto ensure prompt provision of compensationfor acquired assets in accordance with the law, and will administer provision of additional compensation and rehabilitation assistance in accordance with an agreed Resettlement Action Plan. The small componentsfor assistance in improving BWDB's accounting and management information systems would be coordinated in Dhaka by BWDB's Member Accounting and Member Administration respectively. Project coordinating committees, at the national and district levels, would assist in coordinatingproject implementationand disseminationof informationconcerning project activities. S 13. The National Water Planning Component would be implemented by WARPO, which is responsible for strategic planning of water resources, reviewing and evaluating water sector plans and projects, and collecting and disseminatingwater sector data. A cabinet level National Water Council will provide policy guidance. Consultantsfinanced under the project will assist in policy guidance,plan formation and institutionbuilding. GOB has agreed to finance an internationalPanel of Experts which would provide an independent review of WARPO's work programs, strategic planning, and project proposals.

14. Experience under Prior Projects. IDA-financedprojects implementedby BWDB have been affected adversely by dclays in land acquisition and processing of civil works contracts, insufficient local funding allocations, poor quality construction and inadequate maintenance. However, in recent years adequate funding of IDA-financedBWDB projects has not been a problem. Based upon prior sector work, a BWDB institutionalreform program was agreed in September 1994 and performance to date in implementationof the program has been satisfactory. Key measures include approval of Guidelines for People's Participation in project design and operations, introduction of an improved accounting system, a phased program to separate staff and responsibilities between construction and O&M, and reforms in personnel policies. This project has been designed to take account of problems observed under prior operations. Use of contractor prequalification and International Competitive Bidding (ICB) for major civil works and supervisionby experienced consultants with the powers and duties of "The Engineer" are expected to improve performancein contracting and construction quality. Improved land acquisition procedures and improved compensation payments are modeled on the experience gained from the Jamuna Bridge project, and are also expected to reduce delays. For the small embankment realignment component to be awarded through National Competitive Bidding (NCB), agreement has been reached to use Class A contractors2 (or expatriate firms with equivalent qualifications). The establishmentof a specialized O&M Unit for riverbank protection works and the training to be provided by consultants to the Unit's staff are expected to improve maintenance performance.

15. Proiect Sustainability. The project implementation arrangements described above are designed to: (a) ensure safe and timely construction according to design specifications and fixed seasonal schedules; (b) create an organizational and recurrent budgeting focus for O&M of river training and bank protection works in general, and project works in particular; and (c) ensure the proper equipping of an O&M Unit and training of its staff. While in the short-run this project will add to the GOB's development expenditure for erosion and flood protection, the chronic loss of public infrastructureto erosion and property damagecaused by floodingthat would occur without the project - averaging about US$1.7 million per year - will more than offset the US$1.2 million cost of operation and maintenance. The annualized O&M costs is less then 0.5% of BWDB's annual budget, and represents about 4% of the FY94 O&M allocation for BWDB. GOB has been meeting its undertaking under the Systems Rehabilitation Project (Cr. 2099-BD) to increase allocations to BWDB's O&M budget by 10% annually (net of inflation). The overall GOB financial allocation for BWDB's maintenanceworks (excludingwork financed under the food-for-workprogram) has increased nine-fold since FY 1989. In consequence,this project should not crowd-out of essential rehabilitation and O&M activities. The sustainability of the National Water Planning component is strengthened by GOB approval on September 11, 1995 of the "Bangladesh Water and Flood Management Strategy" at the Cabinet level. GOB will place this document before an international conference of development partners, NGOs and the public in late November 1995 to reach a consensus on the strategy and how to implement it, and this gives further indication that GOB's commitmentto the program is strong. The desire within GOB for additional water sector projects arising from FAP studies and the strong position

2 This is the GOBclassification of localcontractors having the greatestcapability and capacityfor civil engineeringworks. 6 taken internally by the NGOs and externally by the donors for reformed multi-disciplinary planning procedures,increase the likelihoodfor the sustainabilityof this component.

16. Rationale for IDA Involvement. IDA's involvementin the proposed project stems from the Association's past support for river bank erosion control works and protection of towns and infrastructurefrom erosion damage. The need for river bank erosion control projects was endorsed by IDA's 1991 Environmental Strategy Report. IDA has played a leading role in supporting recent comprehensivedesign studies which have developedand recommendedimproved technologiessuited to bank erosion control for major rivers such as the Brahmaputra. The scale of economic damage and social disruption that would result from not undertaking adequate and early preventative measures at two key locations on the Brahmaputra River's west bank prompted GOB to seek IDA assistance. Our role in coordinationof the FAP studies (para. 3) puts us in the best position to take a leadership role in placing the improvementsin sectoralplanning and strategy initiated underFAP on a permanent basis.

17. Country Assistance Strategv. The project is fully consistent with the revised Country Assistance Strategy (CAS) which was discussedby the Executive Directors on November 9, 1995. The CAS emphasizes,inter alia, the importanceof agriculturalgrowtIh, development of rural infrastructure, institutional reform and capacity building and the need to reduce the negative impact of flooding on people's lives and livelihood.

18. Agreed Actions. During negotiations,agreement was reached with GOB that it would:

a) undertake all land acquisition and resettlement in accordance with an agreed Resettlement Action Plan (RAP);

b) ensure that only Class A contractors would be allowed to bid for minor civil works contracts under NCB procedures,and that contracts for earthworks would have a minimumsize;

c) appoint civil works contract managementand supervision consultantsnot later than the date of signature of the first river bank protection contract and appoint selected BWDB staff to the consultants'supervision team;

d) maintain project coordinating committees during construction of civil works, and undertake project implementationreviews accordingto agreed schedulesand arrangements;

e) prior to May 31, 1997, establish an O&M Unit for project works, appoint consultants for maintenancesupport, and procure all specialized survey equipmentfor the O&M Unit's use;

f) hold annual consultationswith the Association on the level of expenditure required for O&M of project works and provide adequate funds for this purpose during the project and after its completion;

g) have all disbursements applicationsfor civil works, resettlement, or O&M activities certified by the implementationsupport or maintenancesupport consultants;

h) appoint key WARPO multi-disciplinarystaff by June 30, 1996 and appoint by April 30, 1996 a consulting firm and members of the Panel of Experts to assist in strengthening national water planning, and prepare a National Water ManagementPlan by June 30, 1998; and

i) the Project Proforma for the national water planning component of the project would be approved by February 28, 1996; 7 19. Since negzotiations,GOB has: (a) approved the revised RAP; (b) appointed the Project Director, the Project Coordinator, and the professional staff of PMRU; (c) contracted for consulting scrvices for land acquisition and resettlement for land and other assets required for the first year's construction program and completed field work for the joint verification of the value of such assets using the services of an NGO acceptableto IDA; and (d) received the tenders for the two ICB contracts and consultancy proposals for construction supervision. Conditions of effectiveness are: (a) GOB approval of the Project Proforma for the componcntsof the project to be implementedby BWDB; and (b) approval by the Ministry of Water Resources of a draft Project Proforma for the National Water Planning Component.

20. Environmcntal Impact. The proposed project has been placed in environmental impact category B. The project's revetment works are waterfront structures that are confined to 0.4-2.0 kilometers of river bank at each site. They do not destroy river fisheries or interfere with fish movement. A fish pass structure to be incorporatedin the section of the BRE to be retired under the project will remove impedimentsto fish movementcaused by the current embankment. The proposed works would not affect sediment transport processes more than a few tens of meters beyond the river bank and thus would not have any impact on growth and decay of major sand bars and islands in the River. Project works would have minor and temporary adverse environmental and nuisance impacts arising out of dredging and land-based civil works operations during construction. These impacts are mitigable, and an enforceable EnvironmentalMitigation Plan has been included in the construction contracts. Thus any deviation from specified environmentaland behavioral standards by the contractor would result in immediaterepair or redress at his expense. Only bricks from coal-fired kilns would be permittedto be used to prevent illegal consumptionof timber as kiln fuel.

21. Project Objective Cate2ories. The project, as part of the GOB's Five-Year Development Program, would address natural resources management, environmental improvement and poverty reduction objectives.

22. Project Bencfits. The project has three principle sets of benefits derived from: (i) prevention of damages caused by river bank erosion; (ii) improved project sustainability as a result of the introduction of sound water sector planning; and (iii) enhanced institutional capability for project constructionsupervision, financial control, and for operationand maintenance.

23. Benefts from the Prevention of Erosion Damage. Benefits arise from the preventionof: (i) river bank erosion damages to land, housing and infrastructure; and (ii) local and regional flooding resultingfrom erosion-inducedbreaches of the BRE and merger of the Bangali and Brahmaputrarivers. The quantifiable benefits arise from avoiding the following damages: (a) destruction of land, property and infrastructurecaused by erosion; (b) resultant loss of wages to unemployment;(c) damageto crops, livestock, property and infrastructureon 400 ha near a BRE breach; (d) damage to crops, property and infrastructurein the region caused by increased floodingdue to the breakthroughof the Brahmaputrato the Bangali River at Safiakandi/Mathurapara; (e) reduction in the value of agricultural production due to farmers changing to a more flood tolerant and low yielding cropping pattern in response to more frequent and deeperflooding; and (f) costs to repair sections of the BRE breached by river bank erosion that would not be necessary with the project.

24. The project's river bank protection works would protect about 7,800 ha, including the urban and peri-urban areas of Sirajganj (population 104,000) and the semi-rural areas of Sariakandi and Mathurapara. The works at Sirajganj would also reclaim a 25 ha area for public use and squatter resettlement. Surveys indicate that the total property loss prevented within a five-year period would include about 16,400 masonry houses and shops, 75 manufacturingenterprises, at least 9,000 traditional dwellings and considerablepublic infrastructure. A severe impact on the regional economy caused by the loss of Sirajganj town and flooding of the road network serving the Jamuna Multi-PurposeBridge would be prevented. On an incrementalarea of about 100,000 ha, the risk of farmers changingto lower 8 yielding but more flood resistant crops would be avoided. Regression of the monsoon agricultural economyto a state comparablewith the physical environmentexisting in the 1950s, prior to the BRE's construction,would be prevented.

25. Strengthening National Water Planning. Tens of millionsof people are affected annually by flood damage, river erosion and periodic droughts. Most of these people are in the lowest national income groupings, many of whom are landless which includes many female-headed households, and thus sound water planning Icading to good water projects would have direct impacts on poverty alleviation. Ovcr the longer term, demand for water in Bangladesh will increase rapidly as the populationis projected to increase by about 70 million to total about 190 million by the year 2025, and at current rates of urbanization, the urban populationwill increase six-fold to 120 million in the same period. Sound water planning and managementis critical for the continued and accelerated growth of the urban areas, agricultural sector and environmental management. It is particularly important to design investmentsfor agricultural growth in ways to avoid damage to fisheries which provide the main source of animal protein in the Bangladeshi diet. In particular, the poorest rely almost entirely on subsistencefisheries for their protein. It will also become increasinglyimportant to provide safe water supplies and protection from erosion and flooding of essential infrastructure to urban and industrial areas which are required to secure a growing conimercial and industrial base. Efficient public investments in water, flood managementand sanitation services can be a significant factor in creating the necessary conditions for attracting both domestic and foreign investment. The proposed project will assist GOB to develop water strategies that focus clearly on facilitating and anticipating structural changes in the Bangladesh economy, institutionalize and operationalize lessons learned from FAP studies, and through its integrated and participatoryapproach, avoid the harmful externalities and public resistance associatedwith many earlier water sector projects.

26. Enhanced Institutional Capability. The capacity of the BWDB to supervise, operate and maintain erosion protectionprojects would be significantlyenhanced by on-the-job, local and overseas training of GOB personnel who will service a specialized river bank protection operations and maintenanceunit. Support for the establishmentof BWDB's Regional AccountingCenters and training of their staff will facilitate financial accountability,while technical assistance to upgrade BWDB's internal communications and management information systems will improve management and supervision. WARPO's capacity to undertake multi-disciplinary planning will increased by appointment of non-engineeringstaff, through training, and the experience of producing a national water plan assisted by international consultants under the peer review of an international Panel of Experts.

27. Bcneficiarics.The direct beneficiariesof the project would be the estimated 2-3 million people living in the potentially flood-affected area including about 125,500 people - of whom 32,000 are squatters - who would be protected from severe property loss, impoverishment and physical displacementas a result of bank erosion or chronic flooding. While this project is not specifically poverty focused, experience in Bangladeshshows that lower incomegroups are the least able to recover from losses caused by erosion or severe flooding and become permanentlymarginalized. In particular, small farmers who lose their holdings or are forced to sell land as a result of financial difficultiescaused by flooding,never recover but migrate elsewhere and often become paupers and squatters (cf. Para.5). Conversely, although high income groups lose considerable assets by erosion and sustain major financial damagesas a result of BRE breaching,their ability to recover is relatively high and rapid. By protectingthe built-up areas of Sirajganj and Sariakandifrom erosion damage, the project would protect formal and non-formal wage-earners and entrepreneurs against temporary loss of employment and income as a result of destruction of manufacturingestablishments and commercial enterprises. It is estimatedthat about 25,000 and 4,300 wage-earnersin Sirajganj and Sariakandi, respectively, would be affected and that it would take these wage-earners several months to find alternative sources of employmentand income. The prevention of an adverse change in croppingpattern induced by chronic floodingwould maintain the employmentof hired labor needed for the current labor-intensive cropping 9 pattern. In addition, about 43,000 person-yearsof employmentwould be generated by the project in the three year constructionperiod.

28. Economic nnalvses were carried out separately for the Sirajganj and Sariakandi-Mathurapara subprojects, based on the benefit categoriesdescribed in para. 22 for the most cost-effective solutions as determinedfrom the studies of alternatives described in para. 11. The economic rate of return (ERR) for the river bank protection component of the project is 39%, and those for the Sirajganj and Sariakandi/Mathuraparasubprojects are 45% and 35%, respectively. At a 12% discount rate, the net present value (NPV) of project incremental benefits is US$62.2 million and those of Sirajganj and Sariakandi-Mathuraparaare US$21.6 million and US$40.6 million, respectively. Moreover, the fiscal impact of the project is affordable as described in para. 15. No attempt was made to quantify the benefits from the national water planningor BWDB institutionbuilding components.

29. Proiect Risks. The operation is subject to severalrisks: a) Delayed Land Acquisition and Procurement could result in the loss of the 1996/1997 constructionseason. Failure to completethe bank protection works at Sariakandi-Mathurarparaby June 1998 would significantly increase the risk of erosion of the remaining land separating the Brahmaputraand Bangali rivers and greatly increaseproject costs. Delays beyond five years could nullify the efficacy of the project as the Bangali may by then have become an established of the Brahmaputra-Jamunariver. The project preparation schedule has addressed the implementationdelay risk by advanceprocurement and the risk of delayed land acquisitionthrough initiating work prior to Board presentation, an agreed timetable and the fair and generous provisionsof the ResettlementPlan. b) Major Flood or Erosion Damage could cause either major structural damage or failure. The morphologyof the river was extensivelymonitored and erosion trends have been determined from ground surveys, analysis of maps since 1830 and satellite imagery since 1973. To minimize risk, these empirical data were used to construct several physical and mathematical models which simulated 25 years of local hydrologyand river morphologyin order to determine flood and scour design events. In consequence, the civil works have been designed to cope with historic erosion patterns and floods 1 m above the 1 in 100 year flood level, and for scour depths 10 m greater than that likely to occur in 1 in 100 years. The materials to be used in the river revetment works conform to the best international design practice and quality assurance monitoringwill be a major componentof constructionmanagement. c) Construction Cost Overruns. Past experience has demonstratedthat most BWDB projects have suffered from severe cost ovcrruns due to (a) inappropriate design; (b) inexperiencedcontractors; (c) insufficientfunding to complete projects on time; and (d) poor constructionsupervision. The designs were undertaken by internationallyrecruited consultants and subject to international peer review. To ensure appropriate construction standards and timely completion, prequalified international contractors have bid for the construction contracts under ICB conditions, and an internationally recruited expatriate consultant firm will be appointed as "The Engineer." Insufficientlocal fundinghas not been a problemin recent years. d) Risks of Inadequate Operation and Maintenance. The physical design and materials used in the river bank protection works are new to Bangladesh and there is a risk that they would not be properly maintained. Inadequate financing of O&M would reduce the life of the investments requiring premature rehabilitation. O&M sustainabilityrisks are mitigated by the recent history of improved funding (para. 15), and establishment and training of a project dedicated O&M Unit. GOB has agreed to hold annual consultations with IDA concerning the level of expenditures required for O&M of the works constructed. 10 e) Water Sector Reform and Planning. There is a risk that GOB might not continue with the water sector reform efforts due to waning of political commitment,nor give WARPO the independence and support it will need to ensure objective planning. However, GOB approval of the Bangladesh Water and Flood Management Sirategy as noted in paragraph 15 above, the Governmentdesire for donor support for subsequentwater sector projects, and the strong views expressed internallyby the NGOs and externally by the donors, are expectedto reduce the risk substantially.

30. Sensitivity analyseswere undertaken to determine the effects on the ERR of: (a) delays in project benefits resulting from slow implementation;(b) increases in project costs resulting from inefficient management,higher than predicted rates of river bank erosion, delays over land acquisition and procurement, or shortage of counterpart funds; and (c) additional protection works in the future required by accelerated erosion upstream of the project. The aggregate project return is not made unacceptablylow by a one or two-year delay in obtaining benefits, but the ERR of the Sirajganj sub- component falls to 10% with a two-year delay. At a three-year delay, the aggregate return is 13%. These results underscore the necessity for a speedy project completion. The aggregate return falls to 23% with a 25% cost increase and to 16% with a 50% increase. The effect of cost overruns at Sirajganj is particularly strong, as a 50% increase would reduce the ERR to 10%. Increases in project cost are most likcly to occur bccause the risk of a severe flood increases the longer the project is delayed. Such floods could cause acceleratedriver bank erosion and scour which may require a deeper revetment, or partial loss of incomplete civil works. Such delays could be caused by procurement problems, difficulties over land acquisition,or poor project management,hence the emphasis given to these subjects in project design. The cost for additional upstream erosion protection works, although they are not included in the financingplan of the project, would reduce the estimated ERR for the entire project to 32% and at Sirajganj to 40%. Additionalworks at Sariakandi-Mathuraparawould reduce the estimatedERR to 28%.

31. Rccommendations. I am satisfied that the proposed developmentcredit would comply with the Articles of the Association and recommendthat the ExecutiveDirectors approveit.

James D. Wolfensohn President

Attachments:Schedule A-D

Washington, D.C. November 13, 1995 11

ScheduleA BANGLADESH

RIVER BANK PROTECTION PROJECT

1. Estimated Project Costs (US$ Million)"

Local Foreign Total 1. River Bank Protection and BWDB Institutional Development Civil Engineering Major CivilWorks 67.3 36.0 103.3 Minor CivilWorks 1.2 0.2 1.4 Land Acquisition 0.8 0.8 Resettlement 0.7 0.7 BWDBProject Management 3.5 3.5 Works Maintenance Surveyand O&M Equipment 3.1 2.2 5.3 O&M RecurrentCosts 1.0 1.1 2.1 BWDB Management 1.1 0.1 1.2 Technical Assistance Project Support- ConstructionSupervision 1.3 3.4 4.7 Project Support- O&M 0.4 1.1 1.5 BWDB InstitutionalSupport & Training 0.3 0.4 0.7 Vehicles 0.3 0.2 0.5 Equipment 0.6 0.4 1.0 2. National Water Planning WARPO Management and Support Personnel& operatingcosts 0.6 0.1 0.7 Vehicles 0.6 0.4 1.0 Equipment 0.3 0.2 0.5 TechnicalAssistance Institutionaldevelopment 1.0 4.5 5.5 Training 00 0.2 0.2 Total BaselineCosts 84.1 50.5 134.6 PhysicalContingencies 10.2 6.0 16.2 Price Contingencies 3.1 2.1 5.2 Total Project Costil 97.4 58.6 156.0 a/ Includingduties and taxes of US$18.5million equivalent

2. Financing Plan: Local Foreign Total - .---(USS mnillion) Government 34.1 - 34.1 IDA 63.3 586 121.9 Total 97.4 58.6 156.0 12 Schedule B Page 1 of 2 BANGLADESH

RIVER BANK PROTECTION PROJECT

Method of Procurement (US$ Million)!'

ICB NCB Othersw Total Civil Works: Major Civil Works 120.2 120.2 (99.8) (99.8) Minor Civil Works 1.7 1.7 (1.4) (1.4) Land Acquisition 1.1 1.1

Resettlement 0.9 0.9

Operation and Maintenance 2.0 1.8 3.8 (0.8) (0.8) (1.6) Vehicles & Enuipment: Vehicles 1.6 1.6 (0.7) (0.7) Equipment 1.1 0.4 0.1 1.6 (0.6) (0.1) (0.7) Survey and O&M Equipment 6.2 6.2 (2.6) (2.6) Technical Assistance & Training: Consultants 13.6 13.6 (13.6) (13.6) Overseas Training 0.2 0.2 (0.2) (0.2) GOB Proiect Manaeement: 5.1 5.1 (1.3) (1.3) Total 129.1 4.1 22.8 156.0 (103.7) (2.3) (15.9) (121.9) Figures in parenthesisare amountsto be financedby IDA. ' Others includesnational shoppingand procurementof consultants'services under IDA procedures,and GOBprocedures for land acquisitionand line agency support(including force accountmaintenance activities). 13 Schedule B Page 2 of 2 BANGLADESH

RIVER BANK PROTECTION PROJECT

Disbursement

Amount Percentageof Expenditures Category (USSmillion) to be Financed

CivilWorks (excludingresettlement) 91.10 83%

Resettlement 0.45 50%

Vehiclesand Equipment 3.55 100% of foreignexpenditures, 100% of local expenditures(ex-factory cost) and 70% of localexpenditures for other itemsprocured locally. Operation and Maintenance of Civil 1.70 85% through FY98 Works (excludingBRE Realignment) 65% in FY99 and 45% thereafter.

Consultantsfor CivilWorks; Operation 6.75 100% and Maintenance;Resettlement; BWDB InstitutionalStrengthening; and Training for BWDB InstitutionalStrengthening.

ConsultantsServices and Trainingfor 6.00 100% NationalWater Planning

Unallocated 12.35

TOTAL 121.90

Estimated Disbursementof IDA Credit

IDA FY: 1996 1997 1998 1999 2000 2001 Annual 25.2 41.9 33.2 18.6 2.6 0.4 Cumulative 25.2 67.1 100.3 118.9 121.5 121.9 14 Schedule C Page1 of 1 BANGLADESH

RIVER BANK PROTECTION PROJECT

Timetable of Key Processin! Events

(a) Timetaken to prepare: 53 months(February 1990 - June 1995). v

(b) Preparedby: GOB assistedby a team of internationallyrecruited consultants,with assistancefrom IDA.

(c) First IDA mission: October 1990.

(d) Appraisalmission departure: July 1992.

(e) Negotiations: August 14-19, 1995.

(f) PlannedDate of Effectiveness: January 15, 1996.

(g) List of relevantPCRs and PPARs: (i) ChandpurIrrigation Project, Cr. 340-BD, PPARReport No. 3436, dated April 30, 1981; (ii) KarnafuliIrrigation Project, Cr. 605-BD, and Barisal IrrigationProject, Cr. 542-BD, PPARReport No. 6521, dated November21, 1986; (iii) MuhuriIrrigation Project, Cr. 725-BD, PPARReport No. 8654, dated May 16, 1990; and (iv) Drainageand FloodControl Project, Cr.864-BD, PPAR ReportNo. 8805, dated June 29, 1990.

a/. Project processingwas delayedby about a year pendingagreement on BWDB institutional reformprogram and preparationof an acceptableresettlement action plan. 15

Schedule D Page 1 of2

THE STATUS OF BANK GROUP OPERATIONS IN BANGLADESH A. STATEMENT OF BANK LOANS AND IDA CREDITS (As of September 30. 1995)

Amount iUS$ miilhonj 'iscal F ess cancelHationsl Credit No. Year Borrower Purpose Bank iDA Undisburseu

2 Loans and 147credits nave been fully disbursed 56.56 4239 32 of which SECALs, SALs and Program Credits !a 1446.53

Cr. 1 827-BD 1987 Bangladesh Road Rehab. & Maintenance 102.00 18.117 Cr 1870-BD 1988 Bangladesh SM Sc. ;CD & Irrigation II 81.50 8.41 Cr. 1930-BD 1988 Bangladesh Urban Development ' 38.81 26.98 Cr. 1940-BD 1988 Bangladesh Rural Roads and Market 62.30 19 99 Cr. 2016-BC 1989 Bangladesh Power Distribution 116 Townsl 87.00 34.22 Cr. 2099-BD 1990 Bangladesh BWDB System Rehab. 40.82 33 92 Cr. 2118-BD 1990 Bangladesh General Education 146.09 60 43 Cr. 2129-BD 1990 Bangladesh Rural Electrification IlIl 105.C0 66 5. Cr. 2146-BD 1990 Bangiadesn Rishenes l 44.60 40.50 Cr. 2232-BD 1991 Bangladesh Inland 'i'/ater T(arnsoort 45.00 43 85 Cr. 2233-BD 1991 Bangladesh Agric. Suoport Se-vices 35 Co 26 85 Cr. 2246-BD 1991 Bangladesh National Minor Irrigation 32 74 34 02 Cr. 2259-BC 1991 Bangladesh Populat:on & Health IV! 180.00 88.75 Cr. 2263-BC 1991 Bangladesh LPG Distribution 67.20 73.39 Cr. 2340-BD 1992 Bangladesh Private Sec. lndus:.nal Credit 25.50 24 12 Cr. 2393-BC 1992 Bangladesh Technical Assistance 25 00 17 76 Cr. 2397-BC 1992 Bangladesh Forest Resources Management 49.60 37 74 Cr. 2469-BD 1993 Bangladesh Female Secondary School 68.00 63.09 * Cr. 2567-BD 1994 Bangladesh Jute Sector Adj. Crecit 247.00 209.14 Cr. 2569-BD 1994 Bangladesh Jamuna Bridge 200.00 147 94 Cr. 2638-BD 1994 Bangladesh Second Road Rehab & Maint. 146.80 126 61 Cr. 25672-BC 1995 Bangladesh Jute Sector Adj. Credit 3.20 3.44 Cr. 2720-BD 1995 Bangladesh Gas Infrastructure 120.80 1 24.33 Cr. 2735-BD 1995 Bangladesh Nutrition 59.80 59.31

Total 56.86 6253.58 .;b 1389.53 /b of which has been repaid 24 00 163 82

Total now held by Bank and IDA 32.86 6069.76

Amount sold 0.37 of which repaid 0.37

Total Undisbursed 1389.53

/a Approved during or after FY80

/b The principal amounts of IDA credits are shown in US Dollar equivalent at date of negotiations, as shown in the President's Report. Undisbursed amounts shown in US Collar equivalent are valued at the exchange rate applicable on the date of this statement. In some cases, therefore, the undisbursed balance indicates a dollar amount greater than the original principal credit amount expressed in dollars.

* SAL. SECAL or Program Loan 16

Schedule D Page2 of 2

THE STATUS OF BANK GROUP OPERATIONS IN BANGLADESH. B. STATEMENT OF IFC INVESTMENTS (As of September 30, 1995)

Amount ($millions) Date Borrower Purpose Loan Equity Total

1969 Paper Mills Timber, Pulp and Paper 3.12 0.37 3.49 1 979 Highspeed Shipbuilding Industrial Equipment 1 .20 0.36 1.56 1982 Industrial Promotion Development Financing 1.05 1 .05 1985 Industrial Development Capital Markets 3.02 0.15 3.17 1985i86 Bata Shoe Company General Manufacturing 3.04 0.51 3.55

1992 Dynamic Textile Textiles 2. 500 _ _ 2.50

Total Gross Commitments 1 2.98 2.44 15.32

Less Cancellations, Termination Exchanges Adjustments, Prepayments and Sales Writeoffs and Sales 10.33 0.99 11.32

Total Commitments now held by IFC 2.55 1.45 4.00

Total Undisbursed (including participants' portion) 0.00

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