Document of The World Bank FOR OFFICIAL USE ONLY Public Disclosure Authorized Report No: 3 8 147 - LK PROJECT APPRAISAL DOCUMENT ON A Public Disclosure Authorized PROPOSED CREDIT IN THE AMOUNT OF SDR 21.7 MILLION (US$32 MILLION EQUIVALENT) TO THE DEMOCRATIC SOCIALIST REPUBLIC OF SRI LANKA FOR A PUTTALAM HOUSING PROJECT Public Disclosure Authorized JANUARY 24,2007 Sustainable Development South Asia 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 may not otherwise be disclosed without World Bank authorization. CURRENCY EQUIVALENTS (Exchange Rate Effective December 13,2006) Currency Unit = Sri Lankan Rupee 108 Rupees (Rs.) = US$1 US$1.50609 = SDR 1 FISCAL YEAR January 1 - December 31 ABBREVIATIONS AND ACRONYMS ADB Asian Development Bank LTF Land Task Force AG Auditor General LTTE Liberation Tigers ofTamil Eelam CAS Country Assistance Strategy NCB National Competitive Bidding CEB Ceylon Electricity Board NGO Non Governmental Organization CFAA Country Financial Accountability Assessment NEIAP North East Irrigated Agriculture Project CQS Selection Cased on Consultants Qualifications NEHRP North East Housing Reconstruction Program CSIA Continuous Social Impact Assessment NPA National Procurement Agency CSP Camp Social Profile NPV Not Present Value CWSSP Community Water Supply and Sanitation NWPEA North Western Provincial Environmental Act Project DMC District Monitoring Committees NWPRD NorthWest Provincial Roads Department DO Development Objectives NWSDB National Water Supply and Drainage Board EA Environmental Assessment OM Operational Manual EIA Environmental Impact Assessment PG Procurement Guideline EMP Environmental Management Plan PHP Puttalam Housing Project EQ Environmental Questionnaire PPU Puttalam Project Unit ERTA Economic Reforms Technical Assistance PSC Puttalam Steering Committee ESMF Environment and Social Assessment and QBS Quality Based Selection Management Framework FA Financing Agreement QCBS Quality and Cost Bases Selection GDP Gross Domestic Product RAP Resettlement Action P1an GN Grama Niladhari RWSSP Rural Water Supply and Sanitation Policy GOSL Government of Sri Lanka SA Social Assessment GSMB Geological Surveys and Mines Bureau SDA Special Dollar Account IAD Internal Audit Department SIA Social Impact Assessment ICB International Competitive Bidding SIL Sector Investment Loan IDA International Development Association SOE Statement ofExpenses IDP Internally Displaced Person sss Single Source Selection IEE Initial Environmental Examination TERC Tsunami Emergency Recovery Credit IFR Interim Financial Reports TOR Terms of Reference INGO International non-governmental organization UNDB United Nations Development Business IP Implementation Performance UNHCR United Nations High Commissioner for Refugees LCS Least Cost Selection UNICEF United Nations Children’s Education Fund Vice President: Praful C. Pate1 Country Director: Naoko Ishii Sector Manager: Sonia Hammam Task Team Leader: Naresha Duraiswamy FOR OFFICIAL USE ONLY SRI LANKA PUTTALAM HOUSING PROJECT CONTENTS Page A. STRATEGIC CONTEXT AND RATIONALE 1 1 Country and Sector Issues 1 2 Rationale for Bank Involvement 1 3 Higher Level Objectives to Which the Project Contributes 2 B. PROJECT DESCRIPTION 2 1 Lending Instrument 2 Project Development and Objectives and Phases 3 Key Performance Indicators 4 Project Components 5 Lessons Learned and Reflected in Project Design 6 Alternatives Considered and Reasons for Rejection C. IMPLEMENTATION 8 1 Partnership Arrangements 8 2 Institutional and Implementation Arrangements 9 3 Monitoring and Evaluation of Outcomes/Results 10 4 Sustainability 10 5 Critical Risks and Possible Controversial Aspects 11 6 Credit Conditions and Covenants 12 D. APPRAISAL SUMMARY 13 1 Economic and Financial Analysis 13 2 Technical 14 3 Fiduciary 14 4 Social 14 5 Environment 15 6 Safeguard Policies 15 7 Policy Exceptions and Readiness 15 Annex 1: Background and Project Design Framework 16 Annex 2: Major Related Projects Financed by IDA 20 Annex 3: Results Framework and Monitoring 22 Annex 4: Detailed Project Description 27 Annex 5: Project Costs by Components 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. Annex 6: Implementation Arrangements 40 Annex 7: Financial Management Assessment Report 44 Annex 8: Procurement Arrangements 50 Annex 9: Economic and Financial Analysis 55 Annex 10: Safeguard Policy Issues 61 Annex 11: Project Preparation and Supervision 68 Annex 12: Documents in the Project File 69 Annex 13: Statement of Loans and Credits 70 Annex 14: Country at a Glance 72 MAW) Country Map - IBRD 33485 74 UNHCR Maps 75 SRI LANKA PUTTALAM HOUSING PROJECT PROJECT APPRAISAL DOCUMENT SOUTH ASIA - SUSTAINABLE DEVELOPMENT UNIT Date: January 24,2007 Team Leader: Naresha Duraiswamy Country Director: Naoko Ishii Sectors: Housing construction (47%); Water Sector MangedDirector: Sonia Hammam supply (47%), General public administration (6%) Themes: Access to urban services, Conflict prevention, Pollution management Project ID: P100390 Environmental screening category B Lending Instrument: Sector Investment Loan Safeguard screening category: S2 1 Total: I 34.20 I 0.00 I 34.20 1 Borrower: Democratic Socialist Republic of Sri Lanka Responsible Agency: Ministry ofResettlement FY 07 08 09 10 11 Annual 1.o 6.5 9.5 9.5 1 5.5 Cumulative 1.o 7.5 17.0 26.5 1 32.0 Does the project depart from the CAS in content or other significant respects? [ ]Yes [XINO Does the project require any exceptions from Bank policies? [ ]Yes [XINO Have these been approved by Bank management? [ ]Yes [ IN0 Is approval for any policy exception sought from the Board? [ ]Yes [XINO Does the project include any critical risks rated “substantial” or “high”? [XIYes [ ]No 1 Does the project meet the Regional criteria for readiness for implementation? [XIY~S [ ]NO I Project development objective. The Puttalam Housing Project (PHP) would help integrate the Puttalam Internally Displaced Persons (IDPs) in their preferred location ofchoice through housing, water, sanitation and environment mitigation. It would support the construction of5,653 new houses to replace the temporary thatched huts and the completion of2,232 partly-completed houses in Puttalam. It would provide drinking water to 13,584 IDP families and 3,291 non IDP families. These interventions would help upgrade habitat and contribute to the socio-economic integration ofIDPs and non-IDPs. Project description. A. Housing Assistance: The component will finance the reconstruction of7,885 houses through the transfer of cash grants to selected eligible beneficiaries. B. Water, Sanitation and Environment Mitigation: The component would provide water to 136 refugee camps, construct 9,885 latines and mitigate the threat offlooding through improved drainage. C. Capacity Building and Monitoring: The component will support a comprehensive technical assistance program to ensure smooth implementation. D. Project Management: The component will provide project management and implementation support for the project. Which safeguard policies are triggered, if any? Environmental Assessment (OP/BP/GP 4.0 1) Involuntary Resettlement (OPBP 4.12) Significant, non standard conditions, if any, for: Board presentation (see section C.6). (i)Detailed Engineering Reports for two water supply schemes covering 2 1 refugee camps in Phase 1. (ii)Regularization ofLand Title for Phase 1 refugee camps. Covenants applicable to proiect implementation (see section C.6). Effectiveness: None A. STRATEGIC CONTEXT AND RATIONALE 1 Country and Sector Issues 1. The twenty-five year civil conflict in Sri Lanka led to a loss of life, the displacement of persons belonging to all ethnic groups and destruction of infrastructure. Approximately 2.5 million persons lived in areas of direct military activity. Up to 700,000 left the country while 613,220 individuals (160,754 families) remained internally displaced as at June, 2002.’ 172,000 Internally Displaced Persons (IDPs) lived in refugee camps2 that year. A cease-fire agreement was signed in February, 2002 but has not held in reality due to numerous violations. 2. While many IDPs had returned to their places of origin since 2002, 68,000 individuals (18,000 families) remained in refugee camps in Sri Lanka in December, 2005. The sharp escalation of violence since January, 2006 led to renewed displacement with 235,000 new IDPs in Sri Lanka. The majority of the earlier IDPs were housed in the district of Puttalam in the north west of Sri Lanka where 63,145 persons (or 15,480 families) lived in 141 refugee camps in 2006. Of these, 41% were children under the age of 18 who have known no other home than Puttalam. Due to security considerations, 96% of the IDPs (14,928 families) in Puttalam indicated that they intended to settle down there and not return to the North.3 74.2% had in fact bought land in Puttalam demonstrating a resolve to remain there. 3. Of the IDPs in Puttalam displaced in 1990, 5,653 families live in temporary thatched houses, 2,232 families live in partly-completed houses and 1,093 families live in permanent house^.^ Another 6,501 families, who are largely the married children of the original IDPs have no house oftheir own and live with their extended families. Therefore, a total of 12,154 new houses and 2,232 completions of partially constructed