Document of The World Bank FOR OFFICIAL USE ONLY Public Disclosure Authorized Report No: 43081-BJ PROJECT PAPER ON A PROPOSED ADDITIONAL CREDIT Public Disclosure Authorized IN THE AMOUNT OF SDR 24.3 MILLION (US$40.0 MILLION EQUIVALENT) TO THE REPUBLIC OF BENIN FOR THE SECOND DECENTRALIZED CITY MANAGEMENT PROJECT Public Disclosure Authorized May 2 1,2008 Water and Urban I1 Country Department AFCF2 Africa Region 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 mav not otherwise be disclosed without World Bank authorization. CURRENCY EQUIVALENTS (Exchange Rate Effective March 3 1,2008) Currency Unit = CFA franc (CFAF) US$1.O = CFAF 440 SDR 1.0 = US$1.64664 FISCAL YEAR January 1 - December 31 ABBREVIATIONS AND ACRONYMS AADT Average Annual Daily Traffic ABE Benin Environmental Protection Agency (Agence be'ninoisepour 1'environnement) AFD French Development Agency (Agencefranqaise de diveloppement) AGETUR Public Works Executing Agency (Agence d 'exicution des travaux urbains) APL Adaptable Program Loan CAS Country Assistance Strategy CFAF CFAFranc CISU Community Initiative Support Unit COSUCO Steering Committee (Comite' de suivi, de coordination et d 'orientation) ECOWAS Economic Community ofWest African States EL4 Environmental Impact Assessment ERR Economic Rate ofReturn ESMF Environmental and Social Management Framework EU European Union GOB Government ofBenin HDM Highway Development and Management Model ICR Implementation Completion Report IDA International Development Association IEG Independent Evaluation Group IFR Interim Financial Report KfW German Bank for Cooperation (Kreditanstaltfir Wiederaufbau) LSC Local Steering Committees MDG Millennium Development Goal NDC Neighborhood Development Committee NPV Net Present Value OED Operations Evaluation Department PAACO Cotonou Agglomeration Support Program (Programme d 'appui a 1 'agglorniration de Cotonou) PDO Project Development Objective PRS Poverty Reduction Strategy RAP Resettlement Action Plan RED Roads Economic Decision Model RPF Resettlement Policy Framework SDR Special Drawing Rights sss Single Source Selection Vice President: Obiageli Katryn Ezekwesili Acting Country Director: Antonella Bassani Sector Manager: Eustache Ouayoro Task Team Leader: Franck Bousquet FOR OFFICIAL USE ONLY BENIN SECOND DECENTRALIZED CITY MANAGEMENT PROJECT ADDITIONAL FINANCING CONTENTS Page A . INTRODUCTION ...................................................................................................................... 1 B. BACKGROUND AND RATIONALE FOR ADDITIONAL FINANCING ............................. 1 C . PROPOSED CHANGES ............................................................................................................ 5 D. CONSISTENCY WITH CAS AND PRS ................................................................................... 6 E. APPRAISAL OF RESTRUCTURED OR SCALED-UP PROJECT ACTIVITIES ..................7 F. EXPECTED OUTCOMES ......................................................................................................... 9 G. BENEFITS AND RISKS ............................................................................................................ 9 H. FINANCIAL TERMS AND CONDITIONS ............................................................................ 10 TECHNICAL ANNEX .................................................................................................................. 12 Detailed description of the Additional Financing ............................................................. 12 Implementation arrangements........................................................................................... 14 Fiduciary arrangements..................................................................................................... 15 Social aspects .................................................................................................................... 18 Complementarity with other donor-financed interventions .............................................. 19 APPENDIX A: PROJECT PREPARATION AND TIMETABLE OF KEY EVENTS ...............21 APPENDIX B: MONITORING INDICATORS ........................................................................... 22 APPENDIX C: DETAILED PROJECT COSTS ........................................................................... 27 APPENDIX D: ECONOMIC AND FINANCIAL ANALYSIS ................................................... 30 IBRD MAP 33777R ....................................................................................................................... 38 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. BENIN SECOND DECENTRALIZED CITY MANAGEMENT PROJECT ADDITIONAL FINANCING PROJECT PAPER DATA SHEET Date: May 2 1,2008 Team Leader: Franck Bousquet Country: Benin Sector Manager: Eustache Ouayoro Project Name: Second Decentralized City Acting Country Director: Antonella Bassani Management Project Environmental Category: B Project ID: P109209 Borrower: Republic ofBenin Responsible agency: Agence d’exkcution des travaux urbains (AGETUR) Revised estimated disbursements (Bank FY/US$m) FY 2009 2010 201 1 Annual 10.0 26.0 4.0 Cumulative 10.0 36.0 40.0 Current closing date: June 30,2010 Revised closing date: December 3 1,20 10 Does the restructured or scaled-up project require any exceptions from Bank policies? I No Have these been approved by Bank management? I N/A Is approval for any policy exception sought from the Board? No Revised project development objectives/outcomes: The project development objectives remain unchanged: To increase access to infrastructure and basic services for residents of Benin’s primary cities (Cotonou, Porto-Novo, and Parakou) and selected secondary cities (Abomey-Calavi, Lokossa, and Kandi). The Additional Financing will scale up the project impact in the primary cities in terms ofthe number ofpeople gaining access to roads and being protected from periodic flooding. Does the scaled-up or restructured project trigger any new safeguard policies? No For Additional Financing [ ] Loan [XI Credit [ ] Grant For Loans/Credits/Grants: Total Bank financing (USsm.): 40.0 Proposed terms: Standard IDA terms. 40 years maturity including a grace period of 10 years. Financing Plan (US$m.) Source I Local I Foreign I Total Borrower 7.09 0.00 7.09 IDA 37.50 2.50 40.00 Others 0.00 0.00 0.00 Total 44.59 2.50 47.09 A. INTRODUCTION 1. This Project Paper seeks the approval of the Executive Directors to provide an Additional Credit in an amount ofUS$40 million to the Republic ofBenin for the Second Decentralized City Management Project (Cr. 4117 BEN). The proposed Additional Credit will finance costs associated with scaling up the development effectiveness and impact of the original project, as described in the Project Appraisal Document presented to the Board on September 12, 2005. The scaling up comprises construction and rehabilitation of 9.6 kilometers of roads and 10.8 kilometers of drainage works to hrther improve access to some of the poorest neighborhoods of the major cities of Benin and reduce periodic flooding in these neighborhoods. The proposed Additional Financing will also finance cost overruns (US$1 million), mainly related to the depreciation ofthe U.S. dollar.' 2. The Second Decentralized City Management Project is the second and final phase of a two-phased Adaptable Program Loan (APL). The first phase of the APL, the First Decentralized City Management Project (Cr. 3234 BEN), was implemented from 1999 to 2004 for an amount of SDR 18.9 million (US$25.5 million equivalent).2 Implementation of the second and final phase of the APL is rated satisfactory and no changes to the objectives or general design and implementation modalities of the original project are being proposed. 3. As was the case under the original Second Decentralized City Management Project, there is strong coordination between the proposed Additional Financing and a new operation under preparation for the urban agglomeration of Cotonou, financed by the French Development Agency (EUR 10-15 million, see Technical Annex for details). B. BACKGROUND AND RATIONALE FOR ADDITIONAL FINANCING 4. Country context. Benin is a small, poor country with a population of 8.7 million and a per capita income of US$540 in 2006. Poverty remains widespread and per capita income is below the average for Sub-Saharan Africa. Since 1989, democracy has been greatly strengthened and the new Government, elected in 2006, has reaffirmed the importance of decentralization as a critical issue for development. There has been no significant change to the country and sector background since appraisal of the original project in June 2005. The urbanization rate stands at 41 percent but is rapidly increasing, with an annual urban population growth rate of 5 percent. Limited infrastructure and poor access to basic services affect living conditions in many neighborhoods and constrain the ability of Benin's cities to reap the benefits of economies of scale normally linked with increased urbanization. 5. The original Credit. The original Development Credit Agreement for an amount of SDR 24.0 million (US$35.0 million equivalent) was signed on November 3, 2005. The 1 This addresses the first and third situations described in the OPBP 13.20 on Additional Financing and the Guidance to Staff