Document of The World Bank Public Disclosure Authorized Report No: ICR2482 IMPLEMENTATION COMPLETION AND RESULTS REPORT (IDA-31770 IDA-31771 IDA-47610) ON A Public Disclosure Authorized CREDIT IN THE AMOUNT OF SDR 143.6 MILLION (US$ 205.6 MILLION EQUIVALENT) TO THE PEOPLES REPUBLIC OF BANGLADESH FOR THE Public Disclosure Authorized MUNICIPAL SERVICES PROJECT December 27, 2012 Urban Sector Unit Bangladesh Country Unit South Asia Region Public Disclosure Authorized CURRENCY EQUIVALENTS (Exchange Rate Effective November 30, 2012) Currency Unit = Bangladeshi Taka 1.00 = US$ 0.01 US$ 1.00 = Tk. 81.3 FISCAL YEAR July 1 – June 30 ABBREVIATIONS AND ACRONYMS ADB Asian Development Bank BMDF Bangladesh Municipal Development Fund CAS Country Assistance Strategy ERR Economic Rate of Return FOAP Financial and Operational Action Plan GOB Government of Bangladesh IDA International Development Association LGED Local Government Engineering Department MDF Municipal Development Fund MPRC Municipal Performance Review Committee MSU Municipal Support Unit NPV Net Present Value PMU Project Monitoring Unit PPA Participatory and Partnership Approach Vice President: Isabel M. Guerrero Country Director: Ellen A. Goldstein Sector Manager: Ming Zhang Project Team Leader: Zahed H. Khan ICR Team Leader: Janis D. Bernstein PEOPLES REPUBLIC OF BANGLADESH Municipal Services Project CONTENTS Page Data Sheet A. Basic Information B. Key Dates C. Ratings Summary D. Sector and Theme Codes E. Bank Staff F. Results Framework Analysis G. Ratings of Project Performance in ISRs H. Restructuring I. Disbursement Graph Main Document 1. Project Context, Development Objectives and Design ............................................... 1 2. Key Factors Affecting Implementation and Outcomes .............................................. 7 3. Assessment of Outcomes .......................................................................................... 15 4. Assessment of Risk to Development Outcome ......................................................... 24 5. Assessment of Bank and Borrower Performance ..................................................... 24 6. Lessons Learned ....................................................................................................... 27 7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners .......... 29 Annex 1. Project Costs and Financing .......................................................................... 30 Annex 2. Outputs by Component ................................................................................. 31 Annex 3. Economic and Financial Analysis ................................................................. 64 Annex 4. Bank Lending and Implementation Support/Supervision Processes ............ 72 Annex 5. Beneficiary Survey Results ........................................................................... 74 Annex 6. Summary of Borrower's ICR and/or Comments on Draft ICR ..................... 80 Annex 7. List of Supporting Documents ...................................................................... 99 Map IBRD 33368 A. Basic Information Country: Bangladesh Project Name: Municipal Services IDA-31770,IDA- Project ID: P041887 L/C/TF Number(s): 31771,IDA-47610 ICR Date: 07/19/2012 ICR Type: Core ICR Lending Instrument: SIL Borrower: GOB Original Total XDR 100.00 M Disbursed Amount: XDR 141.86 M Commitment: Revised Amount: XDR 143.60 M Environmental Category: B Implementing Agencies: Local Government Engineering Department, Bangladesh Municipal Development Fund Cofinanciers and Other External Partners: B. Key Dates Revised / Actual Process Date Process Original Date Date(s) Concept Review: 08/31/1997 Effectiveness: 10/25/1999 10/25/1999 2/10/2005 Appraisal: 06/13/1998 Restructuring(s): 12/21/2007 08/23/2010 Approval: 03/16/1999 Mid-term Review: 03/02/2002 Closing: 06/30/2005 06/30/2012 C. Ratings Summary C.1 Performance Rating by ICR Outcomes: Satisfactory Risk to Development Outcome: Moderate Bank Performance: Moderately Satisfactory Borrower Performance: Satisfactory C.2 Detailed Ratings of Bank and Borrower Performance (by ICR) Bank Ratings Borrower Ratings Quality at Entry: Satisfactory Government: Moderately Satisfactory Implementing Quality of Supervision: Moderately Satisfactory Satisfactory Agency/Agencies: Overall Bank Overall Borrower Moderately Satisfactory Satisfactory Performance: Performance: i C.3 Quality at Entry and Implementation Performance Indicators Implementation QAG Assessments (if Indicators Rating Performance any) Potential Problem Project at Yes Quality at Entry (QEA): Highly Satisfactory any time (Yes/No): Problem Project at any time Quality of Supervision Yes Moderately Unsatisfactory (Yes/No): (QSA): DO rating before Moderately Satisfactory Closing/Inactive status: D. Sector and Theme Codes Original Actual Sector Code (as % of total Bank financing) General water, sanitation and flood protection sector 20 20 Other social services 17 17 Sub-national government administration 58 58 Urban Transport 5 5 Theme Code (as % of total Bank financing) Municipal finance 22 22 Municipal governance and institution building 23 23 Participation and civic engagement 11 11 Pollution management and environmental health 22 22 Urban services and housing for the poor 22 22 E. Bank Staff Positions At ICR At Approval Vice President: Isabel M. Guerrero Mieko Nishimizu Country Director: Ellen A. Goldstein Frederick Thomas Temple Sector Manager: Ming Zhang Frannie F. Humplick Project Team Leader: Zahed H. Khan Jonathan S. Kamkwalala ICR Team Leader: Janis D. Bernstein ICR Primary Author: Janis D. Bernstein F. Results Framework Analysis Project Development Objectives (from Project Appraisal Document) The Project Development Objective (PDO) is to improve environmental and infrastructure service delivery in urban areas. See section 1.2 for the entire PDO. ii Revised Project Development Objectives (as approved by original approving authority) The Project Development Objective did not change during the implementation of the original project or the Additional Financing. (a) PDO Indicator(s) Original Target Actual Value Formally Values (from Achieved at Indicator Baseline Value Revised Target approval Completion or Target Values documents) Years Indicator 1.1 Municipalities able to plan, prioritize, and implement service improvement by end of project. Value Phase 1: 16 AF 2010 (Quantitative or 0 183 Qualitative) Phase 2: 40 183 Date achieved 03/16/1999 06/30/2001 06/30/2012 06/30/2012 By 2010, 92 cities had received MSU capacity building and support for community Comments mobilization. During the AF 2010, the MSU extended the capacity building to another 91 cities. Indicator 1.2 Management reform in municipalities completed. Value Phase 1: 16 AF 2010 (Quantitative or 0 183 Qualitative) Phase 2: 40 183 Date achieved 03/16/1999 06/30/2001 06/30/2012 06/30/2012 By 2010, 133 cities achieved management reform. By June 30, 2012, another 50 completed Comments reforms in project planning, tax and water tariff collection, and managing municipal accounts. Indicator 1.3 Demand driven and cost recovery measures introduced for revenue generating sub-projects. Value Phase 1: 16 AF 2010 (Quantitative or 0 168 Qualitative) Phase 2: 40 168 Date achieved 03/16/1999 06/30/2001 06/30/2012 06/30/2012 By 2010, 112 cities had introduced these measures; under the AF2010, another 56 cities were Comments required to involve participation in project selection and to initiate measures to improve cost recovery. Indicator 2.1 MDF created and operational for on-lending to municipalities. BMDF operations BMDF operations streamlined and Value streamlined and its BMDF created and coordination (Quantitative or MDF not established coordination with operational with LGED and Qualitative) LGED and other other relevant agencies strengthened agencies strengthened Date achieved 03/16/1999 09/1/2004 06/30/2012 06/30/2012 iii Under the AF2010, a new indicator was introduced - to streamline its operations and to Comments strengthen coordination with LGED (for details on all of the measures taken, see Sec. 3.2 (b) of the ICR main text. Indicator 2.2 Municipal Performance Review Committee (MPRC) established and operational by end of Phase 1 Established on July 5, Value 1999 MPRC established and (Quantitative or MPRC does not exist operational Qualitative) Operational on March 16, 2002 Date achieved 03/16/1999 03/16/2002 The MPRB was established on July 5, 1999 and fully operational by March 16, 2002, when the Comments first meeting was held. Indicator 3.1 Physical investments targeting poverty and environmental improvements through community participation. No target established in PAD because of 595 works Value 0 the demand driven 595 works packages packages (Quantitative or nature; by the AF of completed with BMDF completed with Qualitative) 2010, 454 works funding in 154 towns BMDF funding packages had been financed. Date achieved 03/16/1999 06/30/2005 06/30/2012 06/30/2012 Phase II investments involved participation in planning and implementing sub-projects aimed Comments at poverty and environmental improvement. Specific targets for Phase 1 are described below. (b) Intermediate Outcome Indicator(s) Original Target Actual Value Formally Values (from Achieved at Indicator Baseline Value Revised Target approval Completion or Target Values documents) Years Indicator 1.1 Municipal Development Fund established by July 1, 2000. BMDF established by BMDF established 0 July 1, 2000 Date achieved 03/16/1999 03/9/2002 03/9/2002 The delay