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Document ofThe World Bank

FOR OFFICIAL USE ONLY

Report No: PAD1018

INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

PROJECT APPRAISAL DOCUMENT

ON A

PROPOSED GRANT

IN THE AMOUNT OF US$10.00 MILLION

TO THE

REPUBLIC OF LEBANON

FOR A

MUNICIPAL SERVICES EMERGENCY PROJECT

June 20, 2014

Sustainable Development DepartmentMiddle East and North Africa

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 March 31, 2014)

Currency Unit = Lebanese Pounds (LBP)LBP 1504.51 = US$1

FISCAL YEARJanuary 1 – December 31

ABBREVIATIONS AND ACRONYMS

AFD French Development Agency (Agence Française de Développement)BPCBLCDRCHUDCPSCSO

Bank ProceduresCentral Bank of LebanonCouncil for Development and ReconstructionCultural Heritage and Urban Development ProjectCountry Partnership StrategyCivil Society Organization

DAEMPESIAESMFESMP

Designated AccountEnvironmental Management PlanEnvironmental and Social Impact AssessmentEnvironmental and Social Management FrameworkEnvironmental and Social Management Plan

EUFMGDP

European UnionFinancial ManagementGross Domestic Product

GOLIBRD

Government of LebanonInternational Bank For Reconstruction And Development

ICBIFRIMFIPSASISDSLBPLSCTFM&EMENA

International Competitive BiddingInterim Un-audited Financial ReportInternational Monetary FundInternational Public Sector Accounting StandardsIntegrated Safeguards Data SheetLebanese PoundsLebanon Syrian Crisis Trust FundMonitoring and EvaluationMiddle East and North Africa

MOF Ministry of FinanceMOIM Ministry of Interior and MunicipalitiesMSEP Municipal Services Emergency ProjectNCBNGO

National Competitive BiddingNon-Governmental Organization

OMO&MOPPAPPDO

Operational ManualOperation and maintenanceOperational PolicyProject Affected PersonsProject Development Objective

PFSPMURAPRPFSOE

Project Financial StatementsProject Management UnitResettlement Action PlanResettlement Policy FrameworkState-Owned Enterprise

SPF State and Peace Building FundUNDP United Nations Development ProgrammeUNHCR United Nations High Commissioner for RefugeesUNICEFVAT

United Nations Children’s FundValue Added Tax

WDR World Development Report

Regional Vice President: Inger AndersenCountry Director: Ferid Belhaj

Sector Director: Junaid Kamal AhmadSector Manager: Franck Bousquet

Task Team Leader: Chantal Reliquet

LEBANESE REPUBLIC Municipal Services Emergency Project

TABLE OF CONTENTSPage

I. STRATEGIC CONTEXT....................................................................................................... 1

A. Country Context.................................................................................................................. 1

B. Situations of Urgent Need of Assistance............................................................................2

C. Sectoral and Institutional Context.......................................................................................3

D. Higher Level Objectives to which the Project Contributes.................................................4

II. PROJECT DEVELOPMENT OBJECTIVES......................................................................5

A. PDO.................................................................................................................................... 5

Project Beneficiaries................................................................................................................. 5

PDO Level Results Indicators................................................................................................... 5

III. PROJECT DESCRIPTION................................................................................................... 6

A. Project Components............................................................................................................ 7

B. Project Financing................................................................................................................ 9

Financing Instrument................................................................................................................ 9

Project Cost and Financing....................................................................................................... 9

C. Lessons Learned and Reflected in the Project Design........................................................9

IV. IMPLEMENTATION........................................................................................................... 11

A. Institutional and Implementation Arrangements...............................................................11

B. Results Monitoring and Verification.................................................................................13

C. Sustainability.................................................................................................................... 14

V. KEY RISKS AND MITIGATION MEASURES................................................................15

A. Risk Ratings Summary Table...........................................................................................15

B. Overall Risk Rating Explanation......................................................................................15

VI. APPRAISAL SUMMARY.................................................................................................... 16

A. Economic and Technical Analysis....................................................................................16

B. Financial Management...................................................................................................... 17

C. Procurement...................................................................................................................... 17

D. Environment and Social (including Safeguards)...............................................................18

Annex 1: Results Framework and Monitoring...............................................................................21

Annex 2: Detailed Project Description.............................................................................................25

Annex 3: Implementation Arrangements........................................................................................31

Annex 4: Operational Risk Assessment Framework (ORAF).......................................................46

Annex 5: Implementation Support Plan..........................................................................................50

.

PAD DATA SHEET

Lebanon

Lebanon Municipal Services Emergency Project (P149724)

PROJECT APPRAISAL DOCUMENT.

MIDDLE EAST AND NORTH AFRICA

MNSSU

Report No.: PAD1018.

Basic Information

Project ID EA Category Team Leader

P149724 B - Partial Assessment Chantal Reliquet

Lending Instrument Fragile and/or Capacity Constraints [ X ]

Investment Project Financing - Fragile within a non fragile country

Financial Intermediaries [ ]

Series of Projects [ ]

Project Implementation Start Date Project Implementation End Date

20-June-2014 30-June-2017

Expected Effectiveness Date Expected Closing Date

1-July-2014 30-Dec-2017

Joint IFC

No

Sector Manager Sector Director Country Director Regional Vice President

Franck Bousquet Junaid Kamal Ahmad Ferid Belhaj Inger Andersen.

Borrower: Lebanese Republic

Responsible Agency: Council for Reconstruction and Development (CDR)

Contact: Wafa Charafeddine Title: Funding Division Director

Telephone No.: +961 198 00 96 Email: [email protected].

Approval Authority

i

Approval Authority

RVP Decision

.

Safeguards Deferral (from Decision Review Decision Note)

Will the review of Safeguards be deferred? [ ] Yes [ X ] No

Project Financing Data(in USD Million)

[ ] Loan [X] Grant [ ] Guarantee

[ ] Credit [ ] IDA Grant [ ] Other

Total Project Cost: 10.00 Total Bank Financing: 10.00

Financing Gap: 0.00.

Financing Source Amount

Borrower 0.00

Lebanon Syrian Crisis Trust Fund 10.00

Total 10.00.

Expected Disbursements (in USD Million)

Fiscal Year 2014 2015 2016 2017 2018

Annual 0.00 2.00 3.00 5.00 0.00

Cumulative 0.00 2.00 5.00 10.00 10.00.

Proposed Development Objective(s)

The project development objective is to address urgent community priorities in selected municipal services, targeting areas most affected by the influx of Syrian refugees..

Components

Component Name Cost (USD Millions)

Emergency Response 3.50

Rehabilitation of Critical Infrastructure 5.50

Project Implementation Support 1.00.

Institutional Data

Sector Board

Urban Development.

ii

Sectors / Climate Change

Sector (Maximum 5 and total % must equal 100)

Major Sector Sector % Adaptation Co-benefits %

Mitigation Co-benefits %

Water, sanitation and flood protection Solid waste management 40

Water, sanitation and flood protection Sanitation 20

Water, sanitation and flood protection Water supply 10

Transportation Rural and Inter-Urban Roads and Highways

20

Health and other social services Other social services 10

Total 100

I certify that there is no Adaptation and Mitigation Climate Change Co-benefits information applicable to this project..

Themes

Theme (Maximum 5 and total % must equal 100)

Major theme Theme %

Urban development City-wide Infrastructure and Service Delivery

85

Social dev/gender/inclusion Other social development 10

Social dev/gender/inclusion Conflict prevention and post-conflict reconstruction

5

Total 100.

Compliance

Policy

Does the project depart from the CAS in content or in other significant respects?

Yes [ ] No [ X ]

.

Does the project require any waivers of Bank policies? Yes [ ] No [ X ]

Have these been approved by Bank management? Yes [ ] No [ ]

Is approval for any policy waiver sought from the Board? Yes [ ] No [ X ]

Explanation:

Does the project meet the Regional criteria for readiness for implementation? Yes [ X ] No [ ]

iii

.

Safeguard Policies Triggered by the Project Yes No

Environmental Assessment OP/BP 4.01 X

Natural Habitats OP/BP 4.04 X

Forests OP/BP 4.36 X

Pest Management OP 4.09 X

Physical Cultural Resources OP/BP 4.11 X

Indigenous Peoples OP/BP 4.10 X

Involuntary Resettlement OP/BP 4.12 X

Safety of Dams OP/BP 4.37 X

Projects on International Waterways OP/BP 7.50 X

Projects in Disputed Areas OP/BP 7.60 X.

Legal Covenants

Name Recurrent Due Date Frequency

Schedule, Section I.A.1 of Project Agreement

X CONTINUOUS

Description of Covenant

[…] The Project Implementing Entity shall maintain a Project Management Unit (PMU) throughout the life of the Project, with functions, staffing, resources, and terms of reference satisfactory to the World Bank.


Schedule, Section I.B.1 of Project Agreement

1-AUG-2014


The Project Implementing Entity shall, not later than one (1) month after the Effective Date of this Agreement, prepare, adopt, and thereafter implement an Operational Manual, in a manner and substance satisfactory to the World Bank, which manual shall include, inter alia: (i) implementation arrangements; (ii) procurement procedures and standard procurement documentation; (iii) reporting requirements, financial management and audit procedures; (iv) monitoring and evaluation, reporting and communication, including performance indicators; and (v) environmental and social safeguards including the operation of grievance redress mechanism.


Schedule 2, Section II.A.1 of Grant Agreement

X Semi-annual

iv


The Recipient shall cause CDR to monitor and evaluate the progress of the Project and prepare Project Reports in accordance with the provisions of Section 2.06 of the Standard Conditions and on the basis of the indicators set forth in the Operational Manual acceptable to the World Bank. Each Project Report shall cover the period of one calendar semester, and shall be furnished to the World Bank not later than forty five (45) days after the end of the period covered by such report.


Schedule 2, Section II.B.1 of Grant Agreement

X CONTINUOUS


The Recipient shall ensure that a financial management system is maintained in accordance with the provisions of Section 2.07 of the Standard Conditions.


Schedule, Section I. D. 1 of Project Agreement

X CONTINUOUS


The Project Implementing Entity shall carry out the Project in accordance with ESMF and RPF and any other Safeguard Document prepared or to be prepared in accordance with sub-paragraph 2 below, in a manner satisfactory to the World Bank..

Conditions

Source Of Fund Name Type

LSCTF Article 5.01 (b) of the Grant Agreement Effectiveness

Description of Condition

This Agreement shall not become effective until evidence satisfactory to the World Bank has been furnished to the World Bank that the conditions specified below have been satisfied:(a) The execution and delivery of this Agreement on behalf of the Recipient have been duly authorized or ratified by all necessary government action.(b) The Subsidiary Agreement referred to in Section I.A.1 of Schedule 2 of this Agreement has been executed on behalf of the Recipient and CDR.

Team Composition

Bank Staff

Name Title Specialization Unit

Chantal Reliquet Senior Urban Specialist Team Leadership MNSSU

Haneen Ismail Sayed Lead Operations Officer Human Development MNSSP

Hassine Hedda Senior Financial Officer Financing and CTRLA

v

Disbursement

Sima W. Kanaan Lead Social Development Specialist

Conflict and Institutional Development

MNSSU

Mazhar Farid Legal Analyst Legal LEGAM

Balakrishna Menon Parameswaran

Lead Social Development Specialist

Local Governance and Finance

MNSSU

Chaogang Wang Senior Social Development Specialist

Social Safeguards MNSSU

Caroline Bahnson E T Consultant Conflict, Resilience and Social Cohesion

MNSSU

Mei Wang Senior Counsel Legal LEGAM

Lina Fares Senior Procurement Specialist

Procurement MNAPC

Anna Victoria Gyllerup Senior Operations Officer

Results Framework and Quality Control

MNADE

Husam Mohamed Beides Lead Energy Specialist Sector Coordination MNSEE

Andrianirina Michel Eric Ranjeva

Finance Officer Finance and Disbursement

CTRLA

Zeyad Abu-Hassanein Sr Water & Sanitation Specialist

Environmental Safeguards

MNSWA

Guido Licciardi Urban Specialist Urban Management UDRUR

Rima Abdul-Amir Koteiche

Sr Financial Management Specialist

Financial Management MNAFM

Charlene D'Almeida Program Assistant Operational Support MNSSU

Fadi Riachi Consultant Civil Engineering MNSSU

Non Bank Staff

Name Title Office Phone City

.

Locations

Country First Administrative Division

Location Planned Actual Comments

Lebanon Liban-Nord Mohafazat Liban-Nord

X

vi

Lebanon Liban-Sud Mohafazat Liban-Sud

X

Lebanon Beqaa Mohafazat Beqaa X

vii

I. STRATEGIC CONTEXT

A. Country Context

1. Since the beginning of the violent conflict in Syria in March 2011, the country has faced widespread destruction of lives, livelihoods, and basic living conditions. This has resulted in a massive movement of people within Syria, as well as into neighboring countries. Three years after the conflict started, more than 2.5 million people had registered, or were awaiting registration with the United Nations High Commissioner for Refugees (UNHCR) in Lebanon, Jordan, Turkey, Iraq and Egypt. Lebanon has kept its borders open to Syrian refugees and is now the country that is hosting the largest number of Syrians in both absolute and relative terms. It is estimated that around one and a half million Syrian refugees have entered into Lebanon, causing the country’s population to increase by almost 25 percent.1 Lebanon has chosen not to establish refugee camps, and the majority of the Syrians have settled amidst Lebanese communities, many of them already poor and underserved.

2. More so than any of Syria’s other neighbors, the conflict has had direct political and security ramifications for Lebanon. A porous border and close links between political and militarized groups in the two countries have resulted in an exacerbation of existing political divides along sectarian lines and led to violent incidents across the country. This is threatening Lebanon’s already fragile institutional and political stability. The conflict spillovers, including the steady stream of Syrian refugees, are seen as an existential peril to the country. A long-standing political stalemate has further hindered the Government in developing and agreeing on a concerted plan to actively mitigate the impact of the crisis.

3. The crisis and the consequential inflow of refugees have also had significant social and economic impacts on Lebanon. A World Bank assessment from 20132 shows that the economic impact of the Syrian conflict has resulted in a reduction of Lebanon’s real GDP growth rate by 2.9 percentage points for each conflict year over the years 2012-2014. Increased levels of insecurity and uncertainty have hit investor and consumer confidence and trade routes for exports and imports of goods, tourism, and financial services have been disrupted. This has placed downward pressure on government revenues which, combined with rising demand for public services, is expected to widen Lebanon’s already large fiscal deficit in 2012 by an additional US$2.6 billion in 2014.

4. The same assessment found other alarming trends with potential long-term developmental impacts. It is expected that by the end of 2014, some additional 170,000 Lebanese will be pushed into poverty, while 220,000-320,000 Lebanese citizens are expected to become unemployed, most of them unskilled youth, thereby doubling the rate of unemployment to 20 percent. In education, 90,000 Syrian children are expected to enroll in public schools during this academic year, placing a heavy burden on an already stretched public education system. In terms of health, the refugee influx has resulted in a sharp rise in communicable diseases, increasing the

1 As of April 10, 2014, 1,015,000 Syrians had registered or were awaiting registration with UNHCR. The UN and the Government recognize that many more are in the country without registering the UNHCR due to a variety of reasons, including fear of reprisals or lack of need of support provided by the humanitarian community. 2 Economic and Social Impact Assessment of the Syrian Conflict, World Bank, September 2013.

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risks of epidemics such as water borne diseases and tuberculosis. Lebanon’s urban infrastructure was ill-prepared to cope with increased use from the refugees. The already cash-strapped and under-capacitated local and municipal governments are severely impacted by the crisis as they have to extend basic services and tend to the immediate needs of both refugees and host communities.

5. In spite of the social and economic burden placed on the Lebanese authorities and communities, international support has largely focused on addressing the humanitarian needs of the Syrian refugees. This has resulted in a widely held perception that Syrians are benefitting disproportionally from the national and international response, irrespective of levels of poverty or vulnerability. To address the needs of the host communities, a Roadmap for Priority Interventions for Stabilization from the Syrian Conflict (Roadmap) was prepared by the Government with support from the World Bank, the UN, the EU, and the IMF. The Roadmap’s articulated goal is to stabilize and consolidate from the adverse impact of the Syrian conflict on Lebanon and its population through the following key strategic objectives: i) restoring and expanding economic and livelihood opportunities, particularly to vulnerable groups; ii) restoring and building resilience in equitable access to and quality of public services; and iii) strengthening social cohesion.

6. It is at the local level where Lebanese and Syrians interact, share living space, and compete for jobs and access to services and where local groups and authorities often end up managing the rising social tensions. The sudden increased demand for services provided at the local level, whether run by central or municipal authorities, has put mayors and municipal councils under mounting pressure. The municipalities have been addressing the daily problems of keeping up with the provision of municipal services (for example, solid waste generation has doubled in several areas with high concentration of refugees, contributing to ground water contamination, pollution of water resources and spread of water-borne diseases), while they have also been asked to find solutions to basic social demands such as education and health, among many. This is not a new role for municipalities, which have traditionally been at the forefront of addressing the recurrent cycle of emergencies that have plagued Lebanon. In so doing, they have been working across confessional barriers and political differences in a way close to impossible for the central government, providing practical solutions in the face of an ever growing crisis.

B. Situations of Urgent Need of Assistance

7. This Project is being prepared and implemented according to Paragraph 11 of the World Bank Operational Policy 10.00, which allows for certain exceptions to the investment project financing policy requirements if the Bank deems the recipient to be in urgent need of assistance as a consequence of events such as man-made disasters or conflicts. The evolving situation in Lebanon reflects both the impact of conflict (in neighboring Syria) and of a man-made disaster (resulting from the influx of refugees fleeing the conflict) – two specific situations that the provisions were developed to address.

8. Despite ongoing efforts to find a political resolution to the conflict in Syria, it seems unlikely that refugees will be able to return to Syria in significant numbers anytime soon. As the inflow of Syrians continues, there is an increasing need for donors to intervene promptly to help

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alleviate the tensions on the already fragile situation in the country. In this context, the Bank’s urgent support will contribute to lessen the strains in host communities and lowering social tensions.

C. Sectoral and Institutional Context

9. Lebanon is a unitary state with four tiers of administration: Central, Mohafaza, Qaza, and municipality. There are six administrative regions (Mohafazat), which in turn are divided into a total of 26 Qazas. These two levels are in effect deconcentrated subdivisions under the Ministry of Interior and Municipalities (MOIM) and they do not hold independent authority or budget. Municipalities on the other hand are legal entities with jurisdiction to formulate and adopt their annual budget; determine tax rates and fees to be collected as allowed by law; manage municipal funds; and plan, improve, and expand urban roads and communal spaces and facilities.

10. Municipal elections were reintroduced in 1998, and the number of municipalities has continued to grow to the current total of 1006. Many of these municipalities have populations of a few hundred people, a feature that has hindered a sustained and progressive building of capacity, including in the adequate management of municipal finances to undertake the tasks currently entrusted to them. This fragmentation has led to the establishment of unions of municipalities, which are legal entities with financial autonomy. Unions facilitate the delivery of common services, and often transcend confessional boundaries. They are created by a decree from the Council of Ministers, upon the suggestion of the MOIM or the request of the municipalities. They consist of two bodies: a decision making authority represented by the mayors of member municipalities and an executive authority headed by the President of the Council of the Union. Through the Council, municipalities may decide to deliver services or implement projects of mutual interest. The Council also ensures coordination and resolution of conflict between municipalities.

11. The municipalities have been addressing the daily problems of solid waste collection, water supply, water contamination, sewer, drainage, traffic management, safety issues, and social aspects such as education and health. Lebanon’s local governments are suffering from a weak local revenue base and are relying on central government transfers to finance the tasks described above. Furthermore, both municipal revenues and expenditures have witnessed a major shortfall in 2013 due to lower revenues to the Independent Municipal Fund, an entity responsible for coordinating inter-governmental transfers. Even before the crisis, municipalities were facing a backlog of investment needs far exceeding their available resources.

12. The Bank has been engaged for quite some time in the municipal sector in Lebanon. In 2000, following the civil war, the Bank approved a US$80 million loan for the First Municipal Infrastructure Project, aiming at restoring selected basic municipal infrastructure and enabling municipalities to address local infrastructure maintenance and rehabilitation needs. In the aftermath of the 2006 conflict with Israel, the Bank supplemented the loan with a grant focusing on the restoration of basic services and on the development of the local economy. It was a highly successful project which contributed to restoring and rebuilding public infrastructure in affected municipalities and supported economic recovery and development in the areas that had suffered the heaviest damage. The Bank has also been supporting urban development through the on-

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going Cultural Heritage and Urban Development Project (CHUD), with the objectives of creating the conditions for increased local economic development and enhanced quality of life in the historic centers of five main secondary cities; and to improve the conservation and management of the country's built heritage. This Project is implemented by the Council for Development and Reconstruction (CDR), an autonomous Government entity directly accountable to the Council of Ministers and responsible for numerous infrastructure projects financed by domestic and/or external sources.

D. Higher Level Objectives to which the Project Contributes

13. Since the Lebanon FY11-14 Country Partnership Strategy (CPS) was prepared, the situation in the country has changed significantly. The Government priorities have consequently evolved, and are now focused on stabilization and short-term mitigation of the impact of the Syrian conflict. These changes are reflected in the CPS Progress Report, dated April 18, 2013, which highlights the exacerbating effect of the Syrian conflict on Lebanon’s fragile socio-economic and political environment, as well as on the Bank’s portfolio. The report addresses the need for seeking flexible adjustments to the Bank program where warranted, as well as retrofitting projects in the existing portfolio to address increased service delivery needs, and livelihoods support and safety nets in affected hosting communities, particularly in the disadvantaged regions. With its expected benefits in the area of municipal services and social cohesion, the Project is thus in line with the CPS Progress Report. In addition, the Project remains consistent with the CPS’ original and strategic goals of improved economic infrastructure through promoting balanced and sustainable territorial development, improved municipal solid waste management, and increased water supply reliability.

14. The Project is fully aligned with the Government’s priorities as they have emerged in the wake of the continuing crisis in Syria. It is designed to support the Roadmap’s key strategic priorities related to restoring and building resilience in equitable access to and quality of public services and strengthening social cohesion. The proposed Municipal Services Emergency Project is also specifically identified in the Roadmap, as it seeks to deliver emergency needs while institutionalizing a mechanism for sustaining support to municipalities to help them deal with the added pressures on their services. The Project will help the Lebanese address the increased demand on municipal services (water and sanitation, solid waste management etc.) while seeking to help the Government address the continued degradation of infrastructure at the local level.

15. Recognizing the detrimental impact of fragility and conflict on the long-term development trajectories of its clients, providing targeted support to address these situations is becoming a key priority for the World Bank’s poverty-fighting mission. The operation is guided by the analysis and recommendations stemming from the World Development Report (WDR) 2011 on Conflict, Security and Development, which highlights how citizens’ confidence in their authorities and institutions is critical for stabilization and the reduction of fragility. While the crisis is externally induced and causing limited direct damage to institutions and infrastructure, its protracted nature and the inadequate response to address it is further undermining an already weak social contract.

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16. While addressing an immediate and urgent crisis, the design of the Project ensures that it is also contributes to the wider strategies of the Bank’s Middle East and North Africa Region (MENA), as well as the Bank’s goals of ending extreme poverty and promoting shared prosperity. The Project will target areas that are dually hit by poverty and refugee inflows, thereby providing support to lagging regions for improved access to services in underserved areas. Meanwhile, the demand-driven aspects of the Project will contribute to the empowerment of local government and the strengthening of voice and citizen engagement. Finally, MENA’s companion piece to the WDR 2012 on Gender Equality and Development Opening Doors: Gender Equality in the Middle East and North Africa 2012 points out that broad-based, gender neutral investments in service delivery such as water and sanitation can have significant impact on health and mortality for women and girls. In addition, the study points out how women’s roles in decision making can be enhanced at the local and community levels, leading to female participation in civic life.

II. PROJECT DEVELOPMENT OBJECTIVES

A. PDO

17. The project development objective is to address urgent community priorities in selected municipal services, targeting areas most affected by the influx of Syrian refugees. Municipal services include solid waste management, water, wastewater and sanitation, roads (and related services), recreational facilities and community activities.

Project Beneficiaries

18. The proposed Project will initially support eleven unions, comprising their constituent municipalities and covering an estimated population of about 1.1 million Lebanese and 250,000 Syrians. With a continuously evolving refugee situation, the Project will use a flexible and programmatic approach that will allow further unions of municipalities to be included during implementation should additional financing become available. The main Project beneficiaries will be the residents in the targeted unions of municipalities affected by Syrian refugee inflows, of which an estimated 300,000 will benefit from improved provision of municipal services and communal activities as well as improved infrastructure reflecting the large increase in population. The participatory mechanisms of the Project, targeting both hosts and refugees, will promote inclusion and enhance the voice of the affected communities, especially women and youth.

PDO Level Results Indicators

19. Progress towards the PDO will be monitored through the following key indicators:

Direct Project beneficiaries (#), of which women (%); Conflict affected people to whom benefits have been delivered within the first year of

Project effectiveness (#), of which: (i) women; (ii) host population; (iii) refugees. Share of implemented subprojects that correspond to the priorities identified by unions of

municipalities (%).

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Beneficiaries reporting improved level of sanitary and/or mobility conditions (%), of which women (%);

Beneficiaries of mid-size rehabilitated/constructed infrastructure (#), of which women (%).

III. PROJECT DESCRIPTION

20. In response to the mounting needs of host communities, the proposed Project is designed to provide rapid and visible improvements to the urban environment at the local level. The Project will be part of a wider Bank program which includes support for social assistance and livelihoods aimed at alleviating the burden put on poor households. The Project seeks to reduce tensions in hosting communities through targeted interventions at the municipal level with a focus on: (i) providing immediate stress relief through emergency services; (ii) ensuring the preparation for a protracted displacement scenario by investing in critical infrastructure; and (iii) supporting social initiatives that promote interaction and collaboration. The Project will focus on improvements, upgrades and activities which are non-exclusionary in nature, and by emphasizing the vulnerability - rather than nationality - of its beneficiaries, it will redirect the focus on equity. By investing in municipal services, infrastructure and social activities, the Project aims to address some of the urgent needs identified by the World Bank assessment and will contribute to the strategic objectives of the Roadmap, namely restoring and building resilience in equitable access to public services and strengthening social cohesion.

21. The Project will promote a decentralized and consultative approach to emergency response, whereby municipalities through their unions and in collaboration with their constituencies will identify and prioritize the most urgent needs and appropriate interventions. Rather than relying on a centralized plan of pre-identified solutions, the Project will use the beneficiary municipalities’ and communities’ own understanding of their challenges and enable them to find locally engendered opportunities and solutions. The unions will facilitate the consultations, especially in the case of smaller municipalities, and play a critical role in ensuring a meaningful participatory and inclusive process so that not only are local demands effectively expressed and addressed in the best possible way but local governments are also empowered as key drivers of local development and problem solving.

22. In light of the limited financing envelope, the Project will initially target eleven unions of municipalities that have been identified in collaboration with CDR. The targeting is based on a list established by the UN agencies for refugees and children (UNHCR and UNICEF) and the Government that identifies municipalities which are particularly impacted by the crisis due to the ratio of Syrians to Lebanese and the level of poverty among the Lebanese population. The eleven unions were chosen after screening this list against the following criteria and filters: (i) the relative share and absolute number of refugees to the host population; (ii) security conditions sufficiently stable for project implementation; (iii) absence of similar donor interventions to avoid duplication; and (iv) readiness of counterpart agencies and subprojects.

23. Based on the above selection criteria, the Project will target the following unions:

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Union Number of Municipalities in the union

Region RegisteredLebanese population

Number of Syrians registered with UNHCR*

Union of Al Buhaira Municipalities

19 West Bekaa 99,100 15,801

Union of Municipalities of Al Sahel

12 West Bekaa 68,760 38,144

Union of Kalaat el Estiklal 10 Rachaya 24,671 5,856Union of Jabal El Sheikh 14 Rachaya 41,460 3,917Union of Municipalities of Central Bekaa

7 Central Bekaa 116,070 67,517

Union of Municipalities of Zahle Caza

7 Zahle 84,800 28,171

Union of Municipalities of Baalbeck and Surrounding Communities

8 Baalbek 134,200 24, 977

Union of Municipalities of Tyre 60 South Lebanon 282,768 28,062Union of Municipalities of Aarqoub

7 Cheba’a area – South Lebanon

70,000 3,803

Union of Municipalities of Central and Coastal Qayta’a

11 Bebnine/Abdeh area – Akkar, North Lebanon

89,100 20,315

Union of Municipalities of Al Shafat

11 Halba area – Akkar, North Lebanon

84,800 13,810

Total 166** 1,095,729 250,373*Number of Syrians registered with UNHCR in a given union as of March 31, 2014. Source: UNHCR/CDR** Given the limitations of the current available funding envelope, a number of municipalities in the targeted unions may not initially benefit from Project interventions.

A. Project Components

24. The Project consists of three components: (i) Emergency Response; (ii) Rehabilitation of Critical Infrastructure; and (iii) Project Implementation Support.

25. Component 1: Emergency Response (US$ 3.5 million). This component will finance the provision of high priority municipal services (Subcomponent 1A) and initiatives that promote social interaction and collaboration (Subcomponent 1B) in the eleven participating unions of municipalities. Allocation of resources among the participating unions of municipalities will be related to the number of Syrians hosted, considering the number of Syrian refugees as a proxy of the additional stress on local communities. Initiatives will be selected in consultation with municipalities and communities, with a decentralized approach to decision-making. These initiatives will provide non-exclusionary benefits addressing some of the most immediate service needs in the unions most affected by the crisis and will be aimed at: (i) improving safety and mobility; (ii) mitigating the increasing health and environmental risks associated with the deterioration of water, waste, and sanitation services; and (iii) increasing collaboration and interaction amongst the communities.

26. Subcomponent 1A Service Delivery will focus on improving municipal service delivery in areas such as water supply and wastewater, solid waste management, roads improvement, and

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recreational facilities and community centers. Subprojects will be small in scale, and will, depending on the expressed needs of communities and municipalities, include small works (such as road maintenance), equipment (e.g. well generators, water filters for schools, etc.) and services (e.g. surge capacity for garbage collection). For the first six months of project implementation and in order to gain credibility, Subcomponent 1A will address immediate service delivery requiring simple preparation, and will prioritize interventions identified by elected officials at the union and municipal levels, which can deliver quick impacts in the areas of water supply and wastewater, solid waste management, and local roads including street lighting. Beyond this period, activities may also include interventions that require longer preparation or implementation.

27. Subcomponent 1B Community Activities will finance activities that the communities and municipalities find conducive to reduce some of the social tensions stemming from cohabitation. In light of the increasing youth unemployment, communities may demand activities that can inform or engage the youth. Activities could also be targeting children through after school activities or learning programs, as well as women by facilitating for example skills exchanges, child care opportunities. They could also target the communities more widely through for example informational campaigns related to water usage or town events and celebrations. It is thus expected that the activities will be inclusive and socially cohesive, but with a particular focus on women, children and the youth.

28. Component 2: Rehabilitation of Critical Infrastructure (US$5.5 million). This component will finance larger works to rehabilitate and/or develop critical infrastructure in the areas of solid waste management, roads improvement, water and sanitation, and community infrastructure. Anticipated types of infrastructure include waste sorting and composting plants, small scale waste water treatment plants and rehabilitation of roads exceeding the union allocations under Component 1. Due to their larger scale and costs, and given the existing financing envelope, the initial number of unions benefitting from this component may be limited and priority will be given to those demand-driven projects that can generate benefits to the highest number of beneficiaries across several unions. These investments will be identified through consultations between elected officials and community representatives, consolidated at union level, and coordinated with relevant line ministries to ensure coherence with sector policies.

29. Component 3: Project Implementation Support (US$1 million). This component will finance the management of the Project and any support needed for the implementation of the decentralized, consultative approach. The component will cover the costs of the Project Management Unit (PMU) housed in CDR, which will be responsible for implementing the Project. The unit, which is already managing the CHUD project, will hire/supplement the required staff to carry out the responsibilities of the PMU, including coordination, reporting, financial management, procurement, social and environmental safeguards (see Implementation Arrangements, Section IV). The PMU will also plan and implement a public outreach campaign with the purpose of aligning communities and unions around the Project, as well as showcase the Project results to other stakeholders, including central level agencies and potential donors. Municipalities and/or unions (depending on size and capacity) will be in charge of undertaking the consultations with their constituencies, using already established participatory mechanisms

8

and platforms where they exist. The first round of consultations will take place while the initial activities under Subcomponent 1A are underway to gain credibility and deliver quick wins. For the current funding envelope, it is anticipated that all subprojects under Component 2 will be identified as well as approximately half of activities under Subcomponent 1B during this round. It is expected that further rounds will be initiated to allocate the remainder of the funds under component 1B, as well as for any additional contributions to the Project. The process will be facilitated by teams of social and technical experts, who will help communities translate the identified challenges into concrete proposals for infrastructure and social activities. Finally, the component may also fund other activities deemed conducive to the promotion of decentralized decision-making, such as knowledge-sharing events.

B. Project Financing

Financing Instrument

30. The Project will initially be financed through a grant from the Lebanon Syrian Crisis Trust Fund (LSCTF) in the amount of US$10 million. The LSCTF is a Bank-administered multi-donor trust fund that was established at the request of the Government so as to garner donor support for the priorities identified in the Roadmap. The LSCTF has, in addition to a transfer of US$10 million from the State and Peacebuilding Fund, received pledges in the amount of approximately US$18 million from a number of bilateral donors. The trust fund is overseen by a Steering Board which provides overall strategic direction and priorities for the program financed by the LSCTF. For this Project, the funds from the LSCTF will be disbursed to the Government on the basis of a Grant Agreement between the Government and the Bank. It is clear that this initial amount falls short of addressing the evolving municipal needs, and efforts will be made to leverage additional funds. Should such financing be made available by donors, this would be processed as Additional Financing and the Grant Agreement between the Government and the World Bank would be amended accordingly.

Project Cost and Financing

31. The Project costs and financing are detailed in the table below.

Project Components Costs(US$ M)

LSCTF(US$ M)

Component 1: Emergency Response 3.5 3.5Component 2: Rehabilitation of Critical Infrastructure

5.50 5.50

Component 3: Project Implementation Support 1.00 1.00Total 10.00 10.00

C. Lessons Learned and Reflected in the Project Design

32. Large scale refugee inflows have substantial development consequences for not only the displaced but also the communities into which they settle. Approximately half of the world’s

9

displaced are currently settled in urban areas, contributing to the expansion and overcrowding of informal settlements, increased demands for urban services, additional pressure on infrastructure and the urban environment, new conflicts over land, and increased competition for employment, housing, and social services. These stresses stretch the limited capacity of urban local governments and service providers, especially when population movements are large and happen quickly (Global Program on Forced Displacement 2014, Cities Alliance 2011). There is an increasing global consensus that in order to safeguard the protection space for refugees, responses to displacement crises have to concurrently address the stresses put on the hosts and the humanitarian needs of the displaced. The Project will use the communities in the targeted areas as point of departure, allowing unions of municipalities to offer services on a non-exclusionary basis to all residents.

33. Letting affected communities decide on the local needs and priorities is a strong model for ensuring relevance in dynamic and demographically diverse situations characterized by fragility. Using a decentralized and consultative approach to allocative decisions can offer a number of advantages in fast evolving situations where stresses and needs may be felt differently from location to location. In cases of deciding on public goods investments, it provides an opportunity to ensure that the benefits target vulnerable groups, including women and the poor. In Lebanon, where host communities and incoming refugees have disparate needs and existing coping mechanisms, giving the end users a choice can increase the relevance of interventions to match the context of the given location. The Project will give the opportunity to communities, municipalities and unions to decide on the priority interventions that can deliver visible benefits which can have an immediate and direct impact their own lives.

34. Taking advantage of existing implementation capacity and established structures facilitates a rapid and effective response to an emergency situation. Evaluation of the World Bank’s experience in responding to the global financial crisis indicates that, in the interest of providing timely assistance, 74 percent of responses were channeled through existing programs. This operation will benefit from the institutional arrangements and capacities already established in CDR under the ongoing CHUD project in a broad range of areas such as working with municipalities, delivery of infrastructure and services throughout Lebanon, as well as complying with World Bank rules and regulations related to procurement, financial management (FM), and safeguards.

35. Opting for a flexible design facilitates the leveraging of donor funding for successful projects in difficult and fluid country contexts. As development partners look for opportunities to effectively deliver results in fragile and politicized environments, starting with a small and scalable project design provides the opportunity for additional donors to contribute to the deepening or widening of the project scope once the underlying approach has been tested. This was recently done in Jordan, where a similar grant from the SPF leveraged an additional US$40 million in contributions from the Government and bilateral donors to widen the coverage of support to refugee-affected municipalities in northern Jordan. Should additional financing materialize, the Project can be scaled-up and expanded in a number of different ways depending on donor preferences and the given needs of the hosting communities. While still conforming to the approach and objective of the existing Project design, such expansion could be done either by: (i) increasing overall financing according to the existing distribution between components;

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(ii) adding more financing to one of the components; or (iii) targeting more refugee-hosting unions.

IV. IMPLEMENTATION

A. Institutional and Implementation Arrangements

Beneficiary communities, municipalities, and unions of municipalities

36. The targeted communities will be consulted to establish Project priorities and interventions through a process coordinated by the unions of municipalities, through their member mayors and local councils. Based on this process, the unions will be in charge of identifying the key local stresses and the related solutions that will be financed through the Project. Unions of municipalities will assemble community representatives (such as community leaders, and representatives of Civil Society Organizations (CSO) and the private sector, including representatives of vulnerable groups such as women and the youth), who together will prioritize the use of the available financing envelope. The involved stakeholders will decide on their priority interventions to be financed related to emergency services, social activities and medium-sized infrastructure projects. Sub-committees comprising representatives from civil society and the targeted unions and municipalities will be formed to undertake community monitoring of project implementation and impact.

37. The unions and municipalities will take on the following key roles: Identify priority service delivery interventions for component 1A; Organize and facilitate the consultations with stakeholders, including prior and post

outreach and communication; Work with and generate proposals from NGOs interested in implementing the community

activities under component 1B; Provide their concurrence with the final design developed by CDR; Monitor progress of implementation with the community monitoring subcommittees and

CDR and act as the main point of contact with the PMU to address bottlenecks and challenges;

Participate in the monitoring and evaluation of Project inputs, outputs, and results; and Be the first point of contact and responding authority for citizens seeking grievance

redress related to Project impacts.

Council for Development and Reconstruction (CDR)

38. The management of all the Project components will be located within one single entity in order to promote immediate implementation, facilitate economies of scale and scope in certain activities, while also ensuring quality and efficiency. CDR’s mandate and experience has revolved around development and post-conflict reconstruction in Lebanon, which along with its long track record of successfully implementing Bank-financed projects, makes it the most suited implementing agency for the Project.

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39. To ensure prompt and efficient implementation, the Project’s institutional set-up and institutional arrangements will follow the systems and procedures that have already been established under the CHUD project, which have proven to be time-tested and effective in working with municipal stakeholders. The CDR, through its dedicated central unit as well as its municipal-based technical cells, has developed a solid experience and knowledge in providing sustained assistance to the municipalities on both technical and participatory aspects of project implementation, as well as on Bank-related fiduciary and safeguard aspects. To facilitate the process, the already existing safeguard documents prepared for the CHUD - the Environmental and Social Management Framework (ESMF) and the Resettlement Policy Framework (RPF) – have been revised and adapted to suit the specificities of the Project. Both have been disclosed in Lebanon and on the Infoshop on April 18, 2014. The Project will thus use CHUD’s PMU and its existing staff for project implementation and coordination. A financial officer from CDR’s Finance Department will process all the Project’s financial transactions and prepare all financial reports required by the Bank and other potential co-financiers of the Project. CDR will be able to recruit additional technical, financial, and support staff if needed.

40. CDR will support the unions and communities translate the identified priorities into technical and financially sound interventions through a team of engineers and social scientists who will participate in the community consultation meetings in order to: (i) provide technical evidence of the current state of infrastructure, costs involved, etc.; and (ii) support the consultation process with the communities, particularly regarding the selection and content of the social programs. The technical experts will consult with relevant line ministries for coherence with sector policies and then assess and prioritize the proposed subprojects based on their potential number of beneficiaries, readiness, geographical coverage, and existing and programmed investments in the sector and location. To safeguard the decisions stemming from the unions and communities, CDR will send the final list and costing for each union as well as the minutes of the consultations to the Heads of unions for their concurrence. Prior to launching all major project interventions, CDR will need to provide the line ministries with all necessary information for them to comment and suggest appropriate revisions within a timeframe of ten business days.

41. CDR will also be responsible for organizing the Project’s mid-term review with the participation of key stakeholders. Given the volatility of the displacement and security situation in Lebanon, the mid-term review would provide the stakeholders an opportunity to review results to date, including inputs received from the community monitoring subcommittees, but also to assess updated information related to changes in the displacement pattern with a view to adjust targeting or allocations where necessary.

Lebanon Syrian Crisis Trust Fund (LSCTF)

42. LSCTF is a Bank-administered multi-donor trust fund that was established in December 2013 in order to facilitate donor financing for the priorities set out in the Roadmap. It operates under the auspices of the Prime Minister’s Office through a Steering Board comprising representatives from the Government, the World Bank, the United Nations and contributing donors. The Board is supported by a Technical Group responsible for selecting priority projects

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outlined in the Roadmap. This Project was selected as the first project to be financed by the LSCTF.

43. CDR will report to the LSCTF according to the trust fund’s requirements. Should additional financial contributions to the Project be made through the LSCTF, the Fund’s Technical Group, supported by information and recommendations from the implementing agency, CDR, would decide on the possibility of allocating additional funds in accordance with the existing design of the Project. This would entail either an expansion of the envelope available to the already identified unions of municipalities, or the identification of additional union(s) that could participate in the Project using its established modalities and component allocations.

Other donor-financed projects targeting municipalities and host communities

44. Although much of the donor support to Lebanon has been humanitarian in nature and primarily targeting Syrian refugees, there has been increasing attention to addressing the needs of host communities. A few donors have been directing their support to local governments and communities, including UNHCR, UNDP and the EU. The Project will work closely with the planned and existing initiatives targeting host communities. Where donor-funded initiatives are closely aligned with the planned activities under the Project, such as the UNDP Host Communities Support Programme or the EU support to municipalities through the Economic and Social Development Fund, concrete collaboration is expected on issues such as targeting, participatory mechanisms and monitoring and evaluation. Where there are common elements of sectoral and/or geographical targeting with other development or humanitarian projects, the use of common data and sharing of data and analysis will be sought through existing platforms. In addition to the responsible Government entities, the Project will closely coordinate and collaborate with a number of other bilateral and multilateral actors operating in Lebanon.

45. Detailed description of implementation arrangements, including the functioning of the citizen engagement in subproject identification and monitoring, will be given in the Project Operational Manual (OM), which will be prepared and updated as required by CDR, and approved by the Bank. The OM will be completed within thirty days of Project effectiveness.

B. Results Monitoring and Verification

46. Monitoring and evaluation (M&E) arrangements will be supported under Component 3: Project Implementation Support (see detailed Results Framework in Annex 1). The Project will track inputs, outputs and results through the following modalities:

On a routine basis, the Project will track expenditures and other fiduciary data relevant to project implementation. This will be carried out by the PMU via semi-annual progress reports and financial statements and annual financial audits by independent auditors contracted under the Project. CDR will report on this data semi-annually to the World Bank, the LSCTF and any potential donor partners.

On a half yearly basis, the Project will track key activities and outputs implemented at the

union/municipal level — for example, the number of community infrastructure

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subprojects undertaken, the amount of solid waste collected or the number of household wastewater connections provided, the number of community activities supported, and so forth. This will be tracked by CDR with the help of the feedback from the community monitoring subcommittees and a monitoring specialist hired under the Project who will support the PMU and the unions on project monitoring aspects. Half yearly progress reports prepared by CDR, and submitted to the Bank will report on key activities, outputs and results.

47. The CDR and the Bank team will undertake ex-post evaluations of the Project. This will involve surveys of beneficiary households and other key stakeholders at key points during the life of the Project. The evaluation design will employ appropriate evaluation techniques to estimate Project-specific benefits and impacts. In addition, the Project will also benefit from the knowledge being generated by other projects targeting refugee-hosting municipalities to gain a better understanding of the efficacy of various intervention modalities. Several other donors, including UNDP and the EU, are currently planning or implementing initiatives at the municipal level using other institutional arrangements, targeting methodologies or priority investments. The Project will collaborate closely with these and other projects as they may evolve in order to create cumulative and comparative indicators suitable to inform the global efforts currently underway to assist host communities cope with the massive population inflows.

A. Sustainability

48. Component 1. Most activities proposed under the Project are within municipal competence and routinely delivered by municipalities and unions of municipalities. The interventions under this component will be small in scale and of an emergency nature, and they are expected to be continued by the municipalities after Project closure. To facilitate sustainability, the component will scale up service delivery in areas for which there is basic capacity at the local level. However, with limited annual budget transfers from the Government to municipalities, they may face challenges to sustain the level of services provided beyond the Project’s duration. To facilitate sustainability, the beneficiary unions or municipalities will enter into an agreement with CDR recognizing their ability to undertake the necessary operations and maintenance (O&M) of the received interventions.

49. Component 2. Regarding investments in medium-sized infrastructure under Component 2, the Project will cover the cost of rehabilitation or construction, and will require unions of municipalities or relevant line ministries to cover the longer term O&M costs. To ensure sustainability, CDR will liaise with the line ministries, to guarantee that for each investment: (i) the entities to which the assets will be handed over are aware of the O&M implications; and (ii) O&M budgetary implications are determined and agreed upon prior to construction.

50. Capacity building to enhance O&M. Training will be organized for the benefit of participating unions of municipalities and municipalities, enhancing their capacity to operate and maintain their assets. The OM will include guidelines specifying the content of O&M training, presenting regional best practices and incentive-based mechanisms and principles of cost-recovery. In addition, it is proposed that a comprehensive O&M program be introduced at the Project mid-term review, possibly in collaboration with other donor-supported programs

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targeting the municipalities, to introduce more innovative approaches based on cost-recovery and tariff compliance to the actual cost of services.

V. KEY RISKS AND MITIGATION MEASURES

A. Risk Ratings Summary Table

Risk Category Rating

Stakeholder Risk Substantial

Implementing Agency Risk

- Capacity Moderate

- Governance Moderate

Project Risk

- Design Moderate

- Social and Environmental Moderate

- Program and Donor Moderate

- Delivery Monitoring and Sustainability Substantial

Overall Implementation Risk Substantial

B. Overall Risk Rating Explanation

51. The overall risk for this operation is “Substantial.” The unpredictable security and political environment constitutes the main risk of the Project. Lebanon was governed by a care-taker Government for eleven months during the height of the Syrian crisis, and the new Government which won the Parliament’s vote of confidence on March 20, 2014 has yet to express how they are planning on mitigating the impact of the refugee inflows. While grant-financed projects do not have to be ratified by the Parliament, they do have to be approved by the Council of Ministers or by decree-law. Continued political inertia and institutional fluidity could jeopardize the Government’s ability to make key decisions related to the Project, thereby delaying implementation of the critical interventions planned for the immediate start-up phase of the Project and at subsequent stages if the Project expands. The new Government is keen to attract financing for the Roadmap, and has indicated that the operationalization of the LSCTF and the implementation its activities will be key priorities. The Bank will continue its engagement and dialogue with the Government to facilitate progress at key junctures.

52. While CDR has proved to be a reliable and capacitated implementing agency for development and reconstruction projects, there is a risk that its internal decision-making procedures will be cumbersome for the small and rapid interventions anticipated under Component 1 of the Project. This risk is mitigated by the fact that CDR will use its fast-track

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procedures for contracting, whereby CDR’s Board can approve a program of activities rather than the specific proposals, and subsequently conduct a post-review of the awarded contracts. While the Project is designed to be scaled up, the current financing envelope and proposed scope may lead to benefits being spread too thinly to have an impact should the Project fail to leverage additional funding. This risk is mitigated by the Project's emphasis on delivering early and visible results through low-cost interventions designed to improve the public environment for a large number of residents in targeted unions. The Project's ability to provide immediate benefits may also have the added value of attracting additional funding from other donors.

53. In addition, the negotiations between municipalities within a union over the prioritization of limited Project funds may pose significant risks. The inclusion of a wide range of stakeholders, including vulnerable groups, will help guide the Project allocations to those areas that are most under stress; however, competition over scarce Project resources may increase tensions between unions or communities. The CDR will use its experience of mediating between municipalities to guide attention to the areas which has experienced that highest increase in population and deemed to be the most vulnerable, and preliminary social and conflict assessments will be undertaken before the first round of community consultations. Furthermore, procedures aiming at monitoring any negative social impacts will be specified in the OM and carried out by the social specialists at the PMU. Finally, an important risk includes the ability of unions and relevant line ministries to maintain the financed infrastructure. This will be mitigated by the consultative processes where those ultimately responsible for any O&M costs are part of the decision-making process.

VI. APPRAISAL SUMMARY

A. Economic and Technical Analysis

54. Methods for Economic and Technical Analysis. Analytical tools will be tailored to each component, given their diverse scope. Component 1 aims at financing small-scale activities, identified during implementation through consultations. During preparation, a positive list of eligible activities has been identified. The priorities outlined by the unions will be screened by CDR for technical feasibility. Subsequently, the technical analysis will translate into the development of bill of quantities and technical specifications. Additionally, a comprehensive analysis of a sample of 20 percent of these small investments will be carried out at the mid-term and at Project closure. Such analysis will include a technical audit to verify the compliance of works, goods, and services delivered with the technical requirements emerging from bidding documents and a standard cost effectiveness analysis to estimate their economic impact. Component 2 will finance medium-sized infrastructure investments, also in this case identified during implementation through consultations. These investments will require more complex preparation and will be subject to prior feasibility and cost benefit analyses, including calculation of Net Present Value, Financial Internal Rate of Return and Economic Internal Rate of Return.

55. Expected Economic Benefits. The Project has several expected economic benefits justifying the investments in service delivery and social activities. Tangible benefits include

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better services, improved enabling environment for business development, and positive externalities for local economic development. Intangible benefits include enhanced social capital through the social activities and the consultative processes underlying service delivery at the local level.

56. Rationale for Public Sector Intervention. Public sector provision and financing of emergency local services are appropriate in this context as activities financed under the Project will: (i) enhance the social capital and strengthen social accountability mechanisms; (ii) improve access to and quality of services in the participating municipalities, targeting poor communities; and (iii) alleviate pressures on the stretched public finances of local governments, since much of the financing will support activities that local governments are mandated to deliver.

B. Financial Management

57. Project financial management arrangements, including accounting, reporting, and auditing functions will be centralized at CDR. The flow of funds process will be undertaken through a Designated Account (DA) to be opened for the Project and managed by CDR. The consolidation of the Project financial reports will be done by the PMU and submitted to the Bank along with the project progress reports.

58. CDR has significant experience of implementing Bank-supported projects and providing sustained assistance to municipalities on both technical and participatory aspects of project implementation. CDR financial management (FM) performance on past and current projects is considered satisfactory. It has a functional unit undertaking FM responsibilities, including funds flow management, accounting, reporting, and facilitating an acceptable external audit. CDR’s external auditor conducts the audit of the World Bank-financed projects.

59. CDR’s main challenge related to FM is their lack of proper maintenance of asset lists. CDR will operationalize the assets module of its accounting software to ensure proper management of assets purchased under the Project in order to mitigate FM-related risks which will be set forth in the Project OM.

C. Procurement

60. CDR has extensive experience in implementing donor-funded projects (among others the EU, IBRD, and AFD). The Project will be implemented through the PMU currently managing the CHUD project. The unit is well managed and staffed with procurement and technical specialists as needed by the Project design. Diligence is observed in record keeping and quality of evaluation. The procurement processing and contract management has been rated satisfactory for the past two years. The unit is familiar with the Bank’s bidding documents and previous bidding has been reviewed and was found acceptable by the Bank. The Project capacity assessment identified risks related to: (i) delay in procurement processing and implementation;

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(ii) readiness of the projects of intervention by Grant Agreement signing; (iii) coordination with other concerned stakeholders, ministries, etc.; and (iv) contract management. The following measures are proposed to mitigate these risks: (i) assigning project coordinators with the appropriate decision making authority to interact with external partners, in particular municipalities; (ii) deciding on a first tranche of subprojects to be immediately implemented and within two months on a second tranche; and (iii) assigning field consultants to monitor contracts.

61. The following Project procurement arrangements are envisaged:

a. Project guidelines: World Bank procurement guidelines apply to the Project.3

b. Procurement methods for goods and non-consulting service: The Project is expected to use: (i) International competitive bidding (ICB); (ii) National competitive bidding (NCB) for which shall be used either ICB -or a translated version- or develop Standard Bidding Documents acceptable to the Bank as mentioned in clauses 3.3 and 3.4 of the procurement guidelines; (iii) Shopping; (iv) Framework agreements; (v) Force account; and (vi) Direct contract.

c. Selection of consultants: The Project is expected to conduct: (i) Quality-and-Cost-Based-Selection; (ii) Selection under a Fixed Budget; (iii) Least-Cost-Selection; (iv) Selection based on Consultants’ Qualifications; (v) Use of Non-Governmental-Organizations; (vi) Single Source Selection; and (vii) Selection of Individual Consultants.

d. Procurement plans: An initial procurement plan for the life of the Project has been developed by the Government. It defines the thresholds for prior review procurement methods and will be updated and reviewed by the Bank at least twice a year or as deemed necessary. The initial procurement plan for the Project was agreed at negotiations of the grant and is attached to the minutes of negotiations.

e. Prior Review threshold: Based on the satisfactory assessment, the Project shall be subject to low risk prior review threshold, making the Project mostly subject to post review.

f. Frequency of supervision mission and post procurement review: Foreseen twice and once a year respectively. The post procurement review will cover a sample of ten percent of eligible contracts.

62. Further details on Procurement arrangements are found in Annex 3.

D. Environment (including Safeguards)

63. The Project is classified as environmental category “B”, in accordance with Operational Policy OP 4.01. Since exact subprojects are not determined at the onset of the Project 4 and will be decided during project implementation based on demand and consultations with the concerned municipalities and communities, the appropriate instrument of OP 4.01 is an ESMF. It identifies the policy triggers for the Project, the screening criteria of subprojects, the environmental and social impacts for the likely subprojects and the mitigation measures to mitigate the identified 3 Refer to Annex 3 for a complete list of guidelines. 4 No subprojects of category “A” will be eligible for funding.

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risks, assessment of the institutional capacity of the implementing agency and measures for capacity-filling gaps, and an estimate of the budget needed for the implementation of the ESMF and related instruments. The ESMF has been reviewed and cleared by the Bank, and disclosed both in-country (CDR web site and at premises of concerned municipalities) and on the Bank Infoshop on April 18, 2014.

64. The Project is expected to produce substantial positive environmental impacts through improved community service delivery. In terms of solid waste management, improved capacity of the targeted municipalities is expected for collection, recycling, composting, and thus reduction in landfill disposal. The interventions are expected to improve water supply to schools, improved quality and continuity of wastewater networks collection and treatment. The interventions for road rehabilitation and street lighting are expected to improve access and road safety and reduce dust. The community centers, playgrounds, and gardens will improve the overall environmental and social conditions in targeted communities. The negative impacts anticipated for the Project activities are minor and of temporary nature during the construction phase, including dust, noise, waste generation, disruption to traffic and movement, damages to existing utilities, and easily mitigated by the environmental and social management plans (ESMPs) that will be included in the bidding documents.

65. CDR is familiar with the provisions of the Bank’s safeguards policies relevant to this operation, herein the implementation and monitoring of the ESMF and related instruments due to their experience with the CHUD project. Safeguards management of this operation will benefit from the safeguards modalities established under the CHUD project, and will utilize and build on the existing safeguards documentation and expertise. A summary of the ESMF provisions including the screening mechanism of sub-projects, generic Environmental Management Plans (EMP), and the requirements for specific EMPs and consultations are summarized in Annex 3 and detailed in the ESMF.

E. Social (including safeguards)

66. The proposed Project is expected to yield significant social benefits, including increased provision of municipal services and enhanced local economic development and livelihood opportunities. The participatory mechanisms of the Project, targeting both hosts and refugees, will promote inclusion and enhance the voice of the affected communities, especially women and youth. The focus on social cohesion through strengthening of community coping mechanisms and provision of social infrastructure will help reduce social tensions and ensure reliable access to resources for the most vulnerable groups.

67. The potential adverse social impacts are mainly related to the possible acquisition of land. All activities financed by the Project are relatively small in terms of the total cost of each single subproject. Land requirements are expected to be minor and subproject investments will be carried out primarily on municipally owned lands, or other Government-owned lands. However, project implementation may impact squatters or encroachers on Government-owned lands or

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result in the involuntary taking of land. Since the location of subprojects cannot be determined prior to project appraisal, an RPF is prepared to mitigate the potential resettlement impacts. The RPF establishes the principles for resettlement impact mitigation and the organizational arrangements for preparation and implementation of resettlement action plans which may be needed during project implementation. The RPF summary is included in Annex 3.

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Annex 1: Results Framework and Monitoring

REPUBLIC OF LEBANONMunicipal Services Emergency Project (P149724)

Results FrameworkProject Development Objectives

The project development objective is to address urgent community priorities in selected municipal services5, targeting areas most affected by the influx of Syrian refugees.

Project Development Objective Indicators

Cumulative Target Values Frequency Data Source/ Methodology

Responsibility for Data Collection

Indicator Name Core Unit of Measure

Baseline

20142015 2016 2017 End

Target

Direct project beneficiaries, of which women6

Number,%, 0 60,000

(50%)150,000(50%)

300,000(50%)

300,000(50%) Annual

Surveys and service delivery records of CDR.

CDR

Conflict affected people to whom benefits have been delivered within the first year of project effectiveness, of which: (i) women; (ii) host population; (iii) refugees7

Number 0

60,000(30,000)(40,000)(20,000)

NA NA60,000

(30,000)(40,000)(20,000)

AnnualSurveys and service delivery records of CDR

CDR

5 Municipal services include solid waste management, water, wastewater and sanitation, roads (and related services), recreational facilities and community activities. 6 Direct beneficiaries include the Lebanese host population who will benefit irrespective of the number of Syrian refugees living in the participating municipalities.7 Conflicted affected people include both the Lebanese host population and the Syrian refugees living in participating unions of municipalities.

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Share of implemented subprojects that correspond to the priorities identified by unions of municipalities

% 0 80 80 80 80 Annual

Records of consultations and union lists, and service delivery records of CDR.

Unions and CDR

Beneficiaries reporting improved level of sanitary and/or mobility conditions, of which women8

% 0 N/A N/A 50(50)

50(50) One time Surveys World Bank,

CDR

Beneficiaries of mid-size rehabilitated/constructed infrastructure, of which women9

Number 0 N/A N/A TBD TBD One time Service delivery records of CDR. CDR

Intermediate Results Indicators

Cumulative Target Values Frequency Data Source/Methodology

Responsibility for Data

Collection

Indicator Name Core Unit of Measure

Baseline

2014

2015(Year 1)

2016(Year 2)

2017(Year 3)

Consultations held on prioritization of subprojects10

Number 0 9 18 18 Annual Annual project progress reports CDR

Beneficiaries that feel project investments reflected their needs, of which women

% 0 N/A N/A 50(50)

One time Surveys World Bank, CDR

Emergency service delivery subprojects completed or under implementation in the first

Number 0 20 N/A N/A One time Annual project review mission aide memoires, annual project progress

World Bank, CDR

8 The target values will be further refined upon subproject implementation (Component 1).9 The target values will be established once the nature of the subprojects have been identified by unions and municipalities during the first year of implementation (component 2).10 The project will also track the number and type of participants in the consultations, including the number of women.

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six months after project effectiveness reports

Service delivery/ community subprojects implemented in participating unions11

Number 0 20 30 40 Annual

Annual project review mission aide memoires, annual project progress reports

World Bank, CDR

Unions implementing at least one social activity under Subcomponent 1B

% 0 20 50 80 Annual Annual project progress reports CDR

Average completion rate of infrastructure projects under Component 2.12

% 0 0 20 100 Annual Annual project progress reports CDR

Project Development Objective Indicators

Indicator Name : Description (indicator definition etc.)Direct project beneficiaries (#), of which women (%). This indicator will track the total number of project beneficiaries and the

share of women beneficiaries in the total.

Conflict affected people to whom benefits have been delivered within the first year of project effectiveness (#), of which: (i) women; (ii) host population; (iii) refugees.

This indicator measures the number of men and women reached through investments within the first year of the projects implementation cycle in different communities. This reflects the conflict-responsiveness and participatory nature of the project.

Share of implemented subprojects that correspond to the priorities identified by unions of municipalities (%).

This indicator will measure the extent to which decisions about the project reflected community preferences in a consistent manner.

Beneficiaries reporting improved level of sanitary and or mobility conditions (%), of which women.

This indicator will examine the impact of the small scale interventions undertaken under Component 1.

Beneficiaries of mid-size rehabilitated/constructed This indicator will measure the number of beneficiaries of the

11 Solid waste management, water, wastewater and sanitation, roads (and related services), recreational facilities and community social activities.12 This indicator will be tracked every 3 months during the final year of implementation.

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infrastructure (#), of which women (%). rehabilitation/construction of infrastructure projects implemented under Component 2.

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Annex 2: Detailed Project Description


Background

1. The Syrian conflict has had significant spillovers into Lebanon, causing profound negative impacts on the country’s political, economic and social spheres. The crisis has exacerbated the political divide along sectarian lines in Lebanon, leading to violent incidents across the country. The arrival of a large number of refugees – an estimated 1.5 million, or over 25 percent of the country’s population13 - has furthermore challenged the already delicate societal and inter-communal balance. Overcrowding, saturation of basic public services and competition for jobs and livelihoods are among the daily challenges faced by Lebanese and Syrians alike, leading to deteriorating social relations between the two groups. Struggling Lebanese families witness visible and direct support to their Syrian neighbors, which has resulted in a widely held perception that Syrians are benefitting disproportionally from the national and international response with little support for the Lebanese poor, the host families, and the returnees from Syria. With lingering crisis and limited support targeting hosting communities, discontent within the Lebanese populations is on the rise, risking increased insecurity within the Lebanese communities and threatening the safe asylum space for the Syrian refugees.

2. Among Syria’s neighbors, Lebanon has been most severely impacted by the conflict. The country is in itself institutionally fragile and was managed by a caretaker Government for eleven months during the height of the crisis. The situation has resulted in a drastic deterioration of the security environment with a number of violent incidents that has been linked to the Syrian conflict. The country has a long history of volatility and displacement, with many Lebanese having been refugees themselves during previous conflicts. In addition, it experienced firsthand the potentially explosive consequences of mass displacement, when violent conflict between the Lebanese Army and the Fatah al-Islam group at the Nahr al-Bared refugee camp near Tripoli displaced some 20-30,000 Palestinian refugees to neighboring communities. This experience now makes camps a loathed solution in Lebanon and the country has therefore continued to resist the establishment of dedicated camps for the Syrian displaced.

3. Lebanon has seen some economic gains from the Syrian conflict and the subsequent exodus, in particular at the outset of the crisis when trade and investments were redirected towards Lebanon, and the more well-off Syrians with resources would move to the country. Three years into the conflict, the costs far outweigh the benefits as the more destitute Syrians settle throughout the country, putting unsustainable pressure on prices, land and housing, public services, and the job market. Nowhere are these pressures felt more acutely than in the communities that in some cases have seen a doubling of residents in a very short period and where the competition for jobs, housing and access to services contribute to rising tensions between the two groups.

13 As of April 10, 2014, 1,015,000 Syrians were officially registered or awaiting registration with UNHCR. The total number is estimated at 1.5 million.

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4. Lebanon’s service delivery mechanisms and infrastructure was grossly ill-prepared to cope with the steep increase in population. Even before the crisis, municipalities were facing a decline in their revenue base and a backlog of investment needs that was far exceeding available resources. The sudden increased demand and utilization of services provided at the local level, whether run by central or municipal authorities, has put mayors and municipal councils under mounting pressure by their communities as they are affected by the visible decline in the level and quality of services. It has been local actors, particularly the mayors, as well as charities and civil society organizations, that have been on the frontline dealing with the many challenges faced by ever-expanding communities. The Municipal Services Emergency Project (MSEP) will aim to support the communities most impacted by the Syrian crisis address some of the main sources of tensions, whether related to manifest service delivery, infrastructure, and/or social impacts of the inflow of refugees. Through the direct engagement with communities, allowing them to express their most urgent needs, local authorities will carry out urgent investments in areas ranging from traditional municipal services and infrastructure to activities and initiatives that could ease cohabitation, and enhance local conflict resolution.

5. The Project will be part of a wider World Bank effort to support Lebanon mitigate the impacts of the Syrian crisis. The Bank has been taking an incremental approach in its response to the demands of clients and partners and has progressively expanded its support as the spillover increasingly threatens regional peace and stability. This has involved: (i) working very closely with the humanitarian community to build a continuum between humanitarian assistance and development engagement; and (ii) supporting a continued safe asylum space for refugees, through helping the host communities cope with the stress generated by the impact on services, jobs, and prices. The Bank stepped in to assist host communities, first in June 2012, when the State and Peacebuilding Fund (SPF) funded a US$900,000 project for education and livelihoods activities implemented by Save the Children and Danish Refugee Council. The Bank also redirected about US$8.2 million in unused funds from an earlier Lebanon Trust Fund financed from the IBRD surplus to help support an existing priority national poverty program that is included in the Roadmap of Priority Interventions. Similar considerations were taking into account in Jordan, where the Bank - through an SPF contribution - is financing an Emergency Services and Social Resilience Project, also addressing critical needs at the community level.

6. Prior to the current refugee crisis, the Bank provided support to local communities affected by external shock following the civil war as well as the 2006 conflict with Israel. In 2000 following the civil war, the Bank approved a US$80 million loan for the First Municipal Infrastructure Project, aiming at restoring selected basic municipal infrastructure and enabling municipalities to address local infrastructure maintenance and rehabilitation needs. In the aftermath of the 2006 conflict with Israel, the Bank supplemented the loan with a grant focusing on the restoration of basic services and on the development of the local economy. This highly successful project directly benefited an estimated 375,000 people through restoring and rebuilding priority public infrastructure in affected municipalities back to or superior to pre-conflict conditions. It also supported economic recovery and development in the areas that had suffered the heaviest damage, benefitting a population of about two million, and strengthened the municipalities’ capacity to mitigate the impact of the hostilities on municipal services within the context of developing the municipal sector.

7. Taking into account the identified pressures mounting on host communities, the Government’s priorities as expressed in the Roadmap, and the lessons learned from other Bank projects, the proposed Project has been designed to reflect the following principles:

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Reduce tensions in hosting communities through interventions targeting whole communities rather than nationalities. The Project is expected to contribute to the reduction of tensions at the local level through several elements: providing immediate stress relief through emergency services to targeted unions focusing on quick impact interventions; ensuring the preparation for a protracted displacement scenario by investing in critical infrastructure; strengthening community cohesion through social initiatives and programs that allow interaction and collaboration; and maximizing relevance and social resilience through community engagement and participation in the identification of priorities.

Promote a decentralized approach to emergency response to increase relevance. The Project will embed a decentralized approach to decision making, whereby municipalities through their unions and in collaboration with their constituencies, will identify and prioritize the most urgent needs and corresponding actions. As needs far outweigh the available funding, the benefits of the Project will be distributed in a manner that reflects the unique understanding and existing capacities within the affected areas, hence increasing relevance. As the local authorities will be leading the process, the Project will empower mayors and municipal and union councils as key drivers of local development and well-being.

Leverage existing implementation capacity for the delivery of rapid results . While decision-making will have a decentralized approach, harmonized procurement by a single implementing entity will allow for economy of scale and the delivery of timely results on the ground. Heeding consistent lessons from previous Bank emergency projects, the Project will use tested implementation mechanisms and entities to safeguard the emergency character of the Project and ensure visible and high-quality benefits in participating municipalities and unions from the early stages of the Project.

8. Given its limited financial envelope, Project implementation will begin in a restricted number of unions of municipalities for meaningful impact and with the expectation that it could be extended to a larger territory upon availability of additional funding. In an effort to identify the most affected areas in Lebanon, UNHCR, UNICEF and the Government have prepared a list of the most vulnerable municipalities based on municipal level data collected by UNHCR during their refugee registration process, in combination with the estimated number of Lebanese and the level of poverty. To further target unions within this list, additional criteria and filters were added including: (i) the relative share and absolute number of refugees to the host population; (ii) security conditions sufficiently stable for Project implementation; (iii) absence of similar donor interventions to avoid duplication; and (iv) readiness of counterpart agencies and subprojects at the local level. This resulted in the identification of the following eleven unions that will be initially targeted for Project support:

Union Number of Municipalities in the union

Region RegisteredLebanese population

Number of Syrians registered with UNHCR*

Union of Al Buhaira Municipalities

19 West Bekaa 99,100 15,801

Union of Municipalities of Sahel

12 West Bekaa 68,760 38,144

Union of Kalaat el Estiklal 10 Rachaya 24,671 5,856Union of Jabal El Sheikh 14 Rachaya 41,460 3,917Union of Municipalities of Central Bekaa

7 Central Bekaa 116,070 67,517

Union of Municipalities of Zahle Caza

7 Zahle 84,800 28,171

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Union of Municipalities of Baalbeck and Surrounding Communities

8 Baalbek 134,200 24, 977

Union of Municipalities of Tyre

60 South Lebanon 282,768 28,062

Union of Municipalities of Aarqoub

7 Cheba’a area – South Lebanon

70,000 3,803

Union of Municipalities of Central and Coastal Qayta’a

11 Bebnine/Abdeh area – Akkar, North Lebanon

89,100 20,315

Union of Municipalities of Al Shafat

11 Halba area – Akkar, North Lebanon

84,800 13,810

Total 166* 1,095,729 250,373*Given the limitations of the current available funding envelope, a number of municipalities in the targeted unions may not initially benefit from Project interventions.

9. The Project’s support to the eleven unions of municipalities will follow the above-mentioned approach and principles and will be implemented through three components, as outlined below.

Component 1: Emergency Response (US$3.5 million)

10. This component will provide non-exclusionary benefits at municipal level that extend uniformly across hosts and refugees, blending interventions in service delivery with social-oriented activities to ensure complementarity and maximize impacts. The component will finance small activities having high potential gains that unions of municipalities and communities deem priorities, and will focus largely on public goods that will benefit the community as a whole, herein improving service delivery and enhancing social cohesion. The two types of activities will be kept separate in dedicated subcomponents to encourage unions of municipalities and communities to take advantage of both kinds of interventions.

11. Activities under Component 1 will be identified by the communities and unions of municipalities themselves through an inclusive consultative approach led by local governments, involving elected officials and community representatives. Allocation of resources among the participating unions of municipalities will be related to the Syrians hosted, considering the number of Syrian refugees as a proxy of the additional stress on local communities. Prioritization will be based on a demand-driven, decentralized process, which will empower the unions of municipalities and involve a broad range of stakeholders, including mayors, and representatives from civil society, the community at large and the private sector (see description of the consultation process under Annex 3).

12. Subcomponent 1A. Service Delivery. This subcomponent will finance small-scale interventions aimed to improve service delivery at the local level in areas such as:

a. Water supply and wastewater;b. Solid waste management; c. Roads improvement; andd. Recreational facilities and community centers.

The interventions identified and prioritized by unions of municipalities and the communities will be communicated to the implementing entity, which will use its fast-track procedures for contracting out implementation. Contract bundling across unions will allow for economy of scale and delivery in multiple locations in a reduced timeframe, thus addressing urgent needs.

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13. To gain credibility with communities and municipalities through the provision of quick results, the Project will commence with a six-month inception phase where eligible activities will be limited to the delivery of visible and rapid improvements that do not require complex design or lengthy delivery. During this period, unions of municipalities will decide from a limited menu of high priority services, chosen for their ability to be implemented without lengthy preparation or delivery time. Through consultations with local authorities, the following services have been identified as commonly needed:

a. Water supply and wastewater, including inter alia: pumps and generators for existing wells14; water filters; maintenance of existing water supply networks; maintenance of existing waste water networks; declogging of sewers; roof water-tanks; and rainwater basins;

b. Solid waste, including inter alia: collection of garbage; cleanup campaigns; cleaning equipment; and garbage bins15;

c. Roads improvement, including inter alia: paving repair; drainage; sidewalk maintenance; asphalting; solar street lighting and street lighting maintenance; and

d. Rehabilitation of small-scale community facilities, including inter alia: playgrounds; public schools; main water tanks; and gardens.

14. The subcomponent will also be able to finance activities for which procurement or contracting could still start quickly, yet results would need more time for technical reasons. Under the same technical groupings as above, these activities could include small works needing more detailed design, as well as the purchase of mechanical equipment such as solid waste compactors, declogging trucks, excavation equipment and public health equipment. The component may also include other types of activities based on local demand, and within the allocation specific to each union. The activities will cover publicly owned assets and any equipment purchased under the project will be handed over to public entities.

15. Subcomponent 1B. Community Activities. This subcomponent will finance initiatives that can enhance social cohesion by facilitating interaction and collaboration among residents in the targeted areas. The specific activities will be identified by the communities and unions of municipalities themselves, but could inter alia include initiatives such as the establishment of sport teams/leagues, study groups or courses, play groups, skills exchange, organization of awareness campaigns and collective action, etc. that would be open to all members of the community. Following the identification of activities, the unions of municipalities will engage directly with NGOs, CSOs and other relevant entities to generate proposals for implementation.

Component 2: Rehabilitation of Critical Infrastructure (US$5.5 million)

16. This component will focus on the rehabilitation and provision of medium-sized infrastructure with the highest number of potential beneficiaries, with the objective of increasing the self-reliance of communities facing fluctuating population pressures. Investments will be decided upon by unions and their communities to ensure broad value and utility. The component could finance critical infrastructure in areas such as: 14 Excavation of new wells of any nature is excluded from the project as studies on the rechargeability of the water table are beyond the scope of the project. Additionally, pumps can be provided only for publicly owned wells that are already operational and active.15 The procuring of garbage bins will only be eligible in areas that have existing collection systems to avoid potential incompatibility with future equipment.

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a. Water supply and waste water; b. Solid waste management; c. Roads improvement; andd. Recreational facilities and community centers.

17. Activities financed under Component 2 will be identified through a three-phased approach: (i) unions and technical specialists from CDR will make initial assessments of the cost, coverage and beneficiaries of potential subprojects; (ii) consultations between communities, municipalities, and union of municipalities will identify the priorities related to larger infrastructure investments; and (iii) assessments of the proposed projects from a technical perspective with a view to prioritize them based on their potential number of beneficiaries, readiness, geographical coverage, and existing investments and plans in the sector and location. The consultative process will also allow for the easy identification of additional infrastructure projects to be financed should additional donor financing become available.

Component 3: Project Implementation Support (US$1 million)

18. This component will finance the management of the Project, including coordination, reporting, financial management, procurement, and social and environmental safeguards. The component will also support the decentralized decision making and consultative processes through which identification and prioritization of activities will be determined by local communities, bringing together a range of local stakeholders including elected officials, community leaders, civil society, and the private sector. Public outreach and dissemination of Project information will be prioritized at critical junctures of project implementation, such as before and after consultations, and in connection with the scheduled monitoring and evaluation activities.

19. Municipalities and their unions - in particular the mayors as elected representatives of their constituencies - will lead the organization, implementation and reporting on the consultations with support from the implementing agency as needed. The unions and municipalities will be encouraged to use already established participatory mechanisms and platforms (including those used by the Social Development Centers under the Ministry of Social Affairs) where they exist. The community monitoring subcommittees will be formed based on these platforms, with the unions participating in and acting as secretariat for the committees. It is envisioned that the first round of consultations will take place during the first months of project implementation while the initial activities under Subcomponent 1A are underway. For the existing financing envelope, these consultations will allocate Component 2, and approximately half of Subcomponent 1B. Further rounds would be initiated to allocate the remainder of the funds under Subcomponent 1B, as well as for any additional contributions to the Project. The process will be facilitated by teams of social and technical experts, who would help communities translate the identified challenges into concrete proposals for infrastructure and social activities.

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Annex 3: Implementation Arrangements


A. Project Institutional and Implementation Arrangements

1. The institutional and implementation arrangements for the Project will emphasize simplicity, keeping in mind the emergency nature of the prosed interventions. To ensure prompt and efficient implementation, the Project’s institutional set-up and institutional arrangements will follow the systems and procedures that have already been established under the ongoing Cultural Heritage and Urban Development Project (CHUD), which have proven to be time-tested and effective in working with municipal stakeholders. A detailed description of implementation arrangements and activities will be provided in the Project Operational Manual (OM), which will be prepared and updated by CDR, and approved by the Bank.

2. CDR will be the Project implementing agency. CDR is a public authority established as the Government’s arm for planning and implementing projects for economic development and for the rehabilitation and reconstruction of public infrastructure. To ensure effective and timely implementation, CDR has been granted exceptional authority and is exempted from laws and regulations otherwise applicable to the public administration. It is subject to special control regulations specified in its own Law. CDR is in charge of planning and implementing major and medium-sized infrastructure projects in urban services, such as water supply, sanitation, waste water treatment and solid waste management. It also has developed a solid experience and knowledge in providing sustained assistance to the municipalities on both technical and participatory aspects of project implementation. Finally, CDR has a long and on-going experience with the Bank and other donor agencies and is fully familiar with Bank-related fiduciary and safeguard requirements.

3. Within CDR, the Project will be coordinated by the Project Management Unit (PMU) already managing the CHUD project. The PMU has a simple management structure and consists of a limited number of qualified professionals. Some additional specialized expertise will be hired to support the implementation of some of the particular features of the Project. Overall, the unit will include: a Project Manager in charge of contract management; a Project Coordinator in charge of operations; a team of engineers and social scientists, two procurement specialists, and one officer in charge of monitoring and evaluation (M&E) as well as dissemination and public outreach. The team will be expected to work on both this Project and CHUD. A financial officer from CDR’s Finance Department will process all the Project’s financial transactions and prepare all financial reports required by the Bank and other potential co-financiers of the Project. CDR will be able to recruit additional technical, financial, and support staff if needed. All posts have clear Terms of Reference and measurable performance indicators that are reviewed annually.

4. Due to the emergency nature of the Project and the considerable number of smaller contracts that it will generate, CDR has agreed to use its fast-track procedures to implement Component 1. Practically, this means that the CDR Board can approve a program of activities (e.g. the social activities anticipated under Subcomponent 1B) rather than the specific proposals. This can advance the preparations of individual proposals for immediate contracting of the chosen implementing entities (NGOs, contractors etc.). The CDR Board will conduct a post-review of the awarded contracts. It is expected that for component 1, CDR will be able to sign contracts with contractors within two months of subproject identification.

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5. The PMU will be responsible for the Project’s overall coordination, management and monitoring. The key tasks will include:

Coordination and management of project implementation, which will involve, inter alia: (i) overall monitoring of all Project-related components and activities; (ii) technical assistance to the municipalities and heads of unions of municipalities in their management of the participatory process; (iii) procurement and contract management of all Project activities; (iv) fiduciary and safeguards compliance; (v) preparation, updating, obtaining approvals, distribution and dissemination of the Project OM; (vi) organization of training and orientation sessions for key Project stakeholders, including on the operation and maintenance of financed subprojects; (viii) carrying out various project related surveys and studies, as needed; and (ix) planning and implementing the Project mid-term review.

Implementing all Project-related reporting and communication activities, including: (i) reporting to the Government, the Steering Board of the LSCTF, donors and other stakeholders, as relevant; (ii) preparing bi-annual Project reports; and (iii) organizing and implementing outreach and communications activities related to the Project.

6. The mayors, through their unions of municipalities, will be leading the identification and prioritization process of subprojects with the involvement of host communities in the targeted unions. Each union of municipalities with their member mayors will convene a meeting with community representatives (such as community leaders, and representatives of CSOs and the private sector, including representatives of vulnerable groups such as women, youth and the poor) who together will prioritize the use of the union’s available financing envelope. During this meeting, the involved stakeholders will decide on the priority interventions to be financed. They will also select subcommittees consisting of 2-3 representatives of the beneficiary community plus a representative from the union or municipality, who will undertake regular monitoring of the implementation of subprojects in their area. To support the technical aspects of the consultations, a team of engineers and social scientists from the PMU will stand ready to advise the consultation parties. It is expected that the first consultation process will take place within the first two months after Project effectiveness and repeated according to Project need and available financing.

7. While the identification for all types of Project activities will be undertaken during one meeting, the consultations will be placed somewhat differently across the various components: (a) For the immediate activities under Subcomponent 1A, mayors through their unions will

decide on the interventions to be financed for the first six months based on a limited positive list in advance of Project effectiveness and without community consultations.

(b) For Subcomponent 1B, consultations will establish the overall content of the social activities to be funded. A smaller and more targeted round of consultations will then be called between the unions and the relevant NGOs operating in the area, to generate specific proposals from entities interested and capable of implementing the identified activities.

(c) For Component 2, the unions together with engineers from CDR will conduct initial technical assessments of the various potential infrastructure projects that could be financed in the targeted area in order to assess their costs, coverage, beneficiaries etc. Such information will provide the basis upon which unions and community representatives can make an informed decision on which projects to prioritize.

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8. Upon completion of the consultations, the unions will transmit the list of identified priorities to the CDR as implementing agency. To safeguard the decisions stemming from the unions and communities, CDR will send the final list and costing for each union as well as the minutes of the consultations to the Heads of unions for their concurrence. Whilst CDR will handle both procurement and payments, the mayors and unions of municipalities will be responsible for following-up on work progress. They will also coordinate all social activities and will implement them either directly or with the help of NGOs.

9. The OM will establish the guidelines for the composition of the consultative forums, including minimum requirements regarding representation of women, youth, and vulnerable groups. Local social organizations (NGOs, CSOs, charities, etc.) will be expected to contribute to the process. Selection criteria for these groups will also include whether they explicitly represent the interests of women and youth. The local communities and organizations will be consulted throughout Project implementation and will be able to track progress and results through the publication and dissemination of relevant Project information. The team of social scientist will conduct preliminary social and conflict assessment in advance of the first round of consultations in order to get a better understanding of the currently social dynamics and trends, and using this information to: i) prevent any negative social impacts stemming from the Project approach; and ii) better support the communities in the identification of activities under Subcomponent 1B.

10. CDR will report to the LSCTF according to the trust fund’s reporting requirements and as further detailed in the Project OM. CDR will also be responsible for providing the LSCTF with adequate information and recommendations should additional financial contributions to the Project be made available. The LSCTF Steering Committee will decide upon the allocation of the additional funds following the existing design of the Project. This could entail either an expansion of the envelope available to the already identified unions of municipalities or the identification of additional union(s) that could participate in the Project using its established modalities and component allocations.

11. The Project will coordinate closely with Bank-financed projects such as the Social Promotion and Protection Project and the CHUD, as well as other donor initiatives targeting municipalities and host communities. Although much of the donor support to Lebanon has been humanitarian in nature and targeted primarily at Syrian refugees, there has been increasing attention to addressing the needs of host communities. A few donors have been directing their support to municipalities and communities, including UNHCR, UNDP and the EU. UNHCR funding is largely channeled through UN agencies, including UNDP, and is primarily responding to urgent needs for minor rehabilitation, procurement of equipment for solid waste management, water, and other social activities. UNDP has mobilized over US$20 million from various donors for support at the local level with a focus on three main areas: i) livelihoods and economic development; ii) social cohesion; and iii) social (municipal) services. UNDP’s program will initially cover 19 municipalities. The EU is channeling US$16 million through the Economic and Social Development Fund, financing municipal services in the North. The EU is also financing US$14 million worth of larger solid waste infrastructure rehabilitation (sanitary landfills) and equipment in six additional municipalities.

12. The Project will work closely with these planned and existing initiatives targeting host communities. Where donor-funded initiatives are closely aligned with the planned activities under MSEP, such as the UNDP Host Communities Support Programme or the EU support to municipalities through the Economic and Social Development Fund, concrete collaboration is expected on issues such as targeting, participatory mechanisms and monitoring and evaluation. Where there are common elements of sectoral and/or geographical targeting with other development

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or humanitarian projects, the use of common data and sharing of data and analysis will be sought through existing platforms. In addition to the responsible Government entities, the Project will coordinate and collaborate with a number of other bilateral and multilateral actors operating in Lebanon.

B. Financial Management, Disbursements and Procurement

Financial Management

13. Staffing: CDR’s Funding Division, currently handling the FM arrangements related to other Bank-financed projects will support the FM of the Project. The CDR FM team has adequate experience in managing World Bank financed projects and has acquired the appropriate knowledge of the World Bank’s FM reporting requirements.

14. Project Accounting Software: CDR has customized accounting software in place that has been used for the FM implementation of previous Bank-financed projects. The software will also be used for this Project to record accounting transactions and generate the Project’s Interim Un-audited Financial Reports (IFRs). The FM unit of the CDR Funding Division will be responsible for recording the daily transactions in the accounting system and ensuring that the required project IFRs are issued on quarterly basis for submission to the Bank.

15. Internal Control: CDR has adequate internal controls in place for preparation and approval of transactions and segregation of duties related to Bank-supported projects.

16. Budgeting and Flow of Funds: Project allocations and categories of expenditures will be disclosed in the financing agreement to be approved by the Council of Ministers. Quarterly and annual budgets and periodical disbursement plans will be maintained by CDR based on the Project procurement plan and implementation schedule to ensure timely availability of funds. It will be used as a tool for comparing planned and actual expenditures and monitoring any variances. Advances will be channeled through the Ministry of Finance Treasury Account for Donations & Grants to the account of the Council of Ministers and then will be transferred without further delay to the Designated Account (DA) opened under the Treasury Account at the Central Bank of Lebanon (CBL) for the Project. Disbursement methods will include advances, replenishments, reimbursements, and direct payments. In requesting disbursements into the Treasury Account and then to the Council of Ministers account to be transferred to the DA for expenditures incurred, CDR will make use of a Statement of Expenditure (SOE) record according to nature of expenditure and threshold. Disbursements for services and goods exceeding the set thresholds would be made in accordance with respective procurement guidelines and provisions in the financing Agreement and Disbursement Letter against submission of full documentation and signed contracts.

17. SOE will be used to accompany requests for Reimbursement of Reporting Expenditures from the DAs. Record of Expenditure will be required for all Withdrawal Applications except for (a) works contracts less than US$ 500,000, (b) goods and non-consulting services contracts less than US$ 250,000, (c) consulting firm contracts less than US$ 100,000 and (d) individual consultants contracts less than US$ 50,000. Disbursements for services and goods exceeding the foregoing limits would be made in accordance with respective procurement guidelines and provisions in the Grant Agreement and Disbursement Letter against submission of full documentation and signed contracts.

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18. Interim Un-audited Financial Reports (IFRs): The Project’s IFRs, prepared in accordance with International Public Sector Accounting Standards (IPSAS) – Cash Basis and generated through the Accounting System, will be sent to the Bank no later than 45 days after the end of each quarter. The format and content of the IFRs was agreed with CDR during Project preparation and will be confirmed during negotiations. The IFRs will be composed of:

(a) Statement of Cash Receipts and Payments by category for the year ending and cumulatively from inception date to the year ending, (b) Accounting policies and explanatory notes including a footnote disclosure on schedules:

(i) Statement of DA reconciling opening and end balances for the period;(ii) Statement of project commitments, showing contract amounts committed, paid, and unpaid under each project’s signed contract;(iii) Statement of expenditures by category for the quarter and cumulative; and(iv) A comprehensive list of fixed assets.

19. Project Financial Statements (PFS): The PFSs, prepared in accordance with IPSAS – Cash Basis - should contain the same information as the quarterly IFRs but cover an annual period. The audited PFS would be submitted to the Bank no later than six months after the end of each fiscal year16 .

20. External audit: The PFS will be audited by an independent private external auditor acceptable to the World Bank. The audit will be comprehensive and will cover all aspects of the Project, including review of effectiveness of the internal controls system, and compliance with the Financing Agreement. The audit will be carried out in accordance with International Standards on Auditing. The audit report and PFSs, along with management letter, will be submitted to the Bank no later than six months after the end of each fiscal year. In addition, the project management letter will contain the external auditor assessment of the internal controls, accounting system, and compliance with financial covenants in the financing Agreement. The audit terms of reference will be finalized and agreed upon with the Bank three months after Project effectiveness. The external auditor is expected to be engaged within six months of Project effectiveness. Moreover, according to the new Bank disclosure policy effective July 1, 2010, the Bank makes publicly available the borrowers’ audited annual financial statements for all investment lending operations for which the invitation to negotiate is issued on or after July 1, 2010, as per OP/BP 10.02, Financial Management. Accordingly, this Project’s audited annual financial statements will be made available to the public.

Disbursement Arrangements

21. The proceeds of the grant will be disbursed in accordance with the Bank's disbursements guidelines for projects and as outlined in the Disbursement letter. Transaction based disbursement will be used under this Project. Accordingly, requests for payments from the grant will be initiated through the use of Withdrawal Applications either for Advances, Reimbursements, Special commitments and Replenishments to the MOF Treasury Account for Donations and Grants to be transferred to the Council of Ministers account and then transferred to the DA of the project. All Withdrawal Applications will include appropriate supporting documentation including detailed Statement of Expenses for reimbursements and replenishments.

22. The following table indicates the grant allocation and disbursements by component:

16 Project fiscal year ends December 31.

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A. Component Amount of the grant Allocated (in US$)

Component 1 : Emergency Response

3,500,000

Component 2 : Rehabilitation of critical infrastructure

5,500,000

Component 3 : Project Implementation Support

1,000,000

Total 10,000,000

23. E-Disbursement. The World Bank has introduced e-disbursement for all Lebanon supported projects. Under e-disbursement, all transactions will be conducted and associated supporting documents scanned and transmitted online through the Bank’s Client Connection system. E-disbursement will considerably speed up disbursements and facilitate project implementation.

24. A DA will be opened for this Project under the Treasury Account of the Ministry of Finance and will be managed by CDR. The funds will be transferred first from the World Bank to the Ministry of Finance’s Treasury Account for Donations and Grants and then will be transferred to the Council of Ministers account and finally to be transferred to the project DA. The disbursement methods will be: advance, direct payments, reimbursement, and special commitments. The minimum amount per withdrawal application will be 20 percent of the Designated Account Advance for Direct Payment, Reimbursement and Special Commitment Issuance applications. Project disbursement guidelines are documented in the disbursement letter. All documentation showing expenditures shall be retained by CDR and shall be made available to the Bank and its representatives for audit, if requested.

25. The Bank will honor eligible expenditures completed, services rendered and goods delivered by the Project closing date. A four months' grace period will be granted to allow for the payment of any eligible expenditure incurred (i.e. services, goods or works, received and accepted) before the grant closing date.

26. Authorized Signatories: Authorized signatories will be nominated by CDR to sign the withdrawal applications. Names and corresponding specimen of their signatures will be submitted to the Bank prior to the receipt of the first withdrawal application (advance to DA). Each application will be approved and signed by the authorized signatories.

27. Governance and Anti-Corruption: Fraud and corruption may affect the Project resources, thus negatively impact outcomes. The World Bank FM team worked closely with the Project team to develop an integrated understanding of possible vulnerabilities and agreed on actions to mitigate the risks. Having CDR managing the Project’s FM procedures increased the FM capacity of the Project and enhanced control procedures over payments. CDR’s substantive experience in implementing Bank financed projects, the above proposed fiduciary arrangements and reporting, and the required external audit are expected to address the risk of fraud and corruption. In addition, the monitoring and evaluation function would contribute to improved efficiency and transparency. The Bank will be following closely on all activities in order to ensure that the funds will be used for their intended purposes and will coordinate with all concerned departments as needed.

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28. Implementation Support Plan: An implementation support mission will be conducted at least twice a year based on the risk assessment of the Project. The implementation support mission objective is to ensure that strong financial management systems are maintained throughout the life of the Project. The IFRs will be reviewed on a regular basis by the World Bank staff and any issues will be examined during supervision missions. Financial audit reports will be reviewed and issues will be identified and examined by the Project Financial Officer. Additionally, during supervision missions, the Project’s financial management and disbursement arrangements (including a review of sample payments and financial movements of the DA) will be reviewed to ensure compliance with the Bank’s minimum requirements.

Procurement

29. Implementing agency: CDR shall be in charge of implementing the project in close collaboration with the beneficiary municipalities. The Public Accounting Law of 1963, supplemented by several decrees, constitutes the legal foundation of Lebanon’s organizational and institutional framework for procurement. The current system has remained entirely centralized, with the Central Tender Bureau in the General Inspection, being in charge of public procurement. CDR constitutes an exception to the Public Accounting Law of 1963. Since its establishment in 1977 as a legally and financially autonomous state agency, CDR has operated under special procurement regulations. This was formalized in 1980 through a decree covering CDR’s financial and accounting transactions assigned to CDR by the Minister of Finance. CDR is permitted by the decree to establish its own financial, accounting and procurement regulations. However the procurement methods adopted by CDR are similar to the ones in the country’s general procurement framework. CDR has managed to follow international financiers’ procurement Guidelines to handle the financed projects.

30. Past experience of the implementing agency in internationally funded projects: CDR has extensive experience in implementing donor financed projects (including the EU, IBRD and AFD). CDR has proven capable of handling large and complex projects. The institution has adopted a strong matrix organization by “projectizing” project management and delegating the responsibility of each project to a team headed by an experienced manager, who deals with all aspects of project and contract management. CDR also has a unit for monitoring and evaluation. The Project will be implemented through the project unit currently managing the CHUD (IBRD and AFD financing). The management of the unit is solid and is staffed with procurement and technical specialists as needed by the Project design. Diligence is observed in record keeping and quality of evaluation. The procurement processing and contract management has been rated satisfactory for the past two years. The unit is familiar with the Bank’s bidding documents and when local bidding is conducted, the standard document was reviewed and found acceptable to the Bank. CDR has proven to keep proper records, maintain procurement plans, process satisfactorily procurement, publish notices adequately, display awarded contracts on their website, address complaints diligently, and appoint external auditors. Shortcomings are nevertheless observed in lengthy bureaucratic clearances and contract management, resulting in delayed decision makings and eventual payments, delayed hand over of completed works, and delayed contract amendments and extensions.

31. Staffing: CDR has a centralized system of accountability covering responsibilities that include procurement decision making. The agency and its experienced procurement staff, which have been trained on international procurement, have the capacity to outsource and benefit from both individual consultants and consulting firms to enhance its capacity whenever needed. Still, CDR is at times challenged by the shortage of manpower in relation to the number of projects being implemented.

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The complexity of dealing with several donors and their regulations also adds to the strain on its staff, increasing the possibility of mistakes.

32. Record Keeping: All the records of procurement activities are maintained by the CDR procurement team. The filing rooms are at times used for meetings due to lack of space, a practice that should be avoided to prevent any unauthorized access and possible loss of files.

33. Procurement planning: The agency has firm experience with procurement planning, especially within those units working on Bank-financed projects.

34. Audit: The institution exercises internal audit and appoints an External Independent Auditor that reviews all implemented projects. The current auditor has been appointed for three years and his audit opinion was clean (“unqualified”). Audit reports are received on time and of satisfactory quality.

35. Applied taxes: The government observes the following taxation: (i) Stamp Duties of (a) three per thousand (3‰) of the contract price for contract registration at Ministry of Finance, and (b) three per thousand (3‰) on each payment; (ii) Value Added Taxes (VAT) of 10 percent applied on consultants and contractors who are registered and eligible for VAT; and (iii) Income Taxes that are a flat rate of 7.5 percent for non-registered consultants and variable for registered consultants (Taxpayer Identification Number), depending on their job classification at Ministry of Finance. Exemption of consultants from Income Taxes may be observed if they are registered in countries that have entered with Lebanon into agreements prohibiting double taxation. Contracts financed by international donor proceeds are exempted from VAT (Law No 379 dated December 14, 2001).

Overall Procurement Risk Assessment:

36. The procurement risk rating is Substantial and mainly related to: (i) delay in procurement processing and implementation; (ii) readiness of the subprojects of intervention by Grant Agreement signing; (iii) coordination with other concerned stakeholders, ministries, etc.; and (iv) contract management. It can be mitigated to Moderate upon: (i) assigning project coordinators with a reasonable decision authority to interact with external partners, municipalities in particular; (ii) concluding on a first tranche of projects to be immediately implemented and decide within two months on a second tranche; and (iii) assigning field consultants to monitor contracts.

Proposed Procurement Arrangements:

37. Project guidelines: The following shall be applied to the Project: (i) “Guidelines On Preventing and Combating Fraud and Corruption in Projects Financed by IBRD Loans and IDA Credits and Grants” dated October 15, 2006 revised in January 2011; (ii) World Bank “Guidelines: Procurement of Goods, Works and Non-consulting Services under IBRD Loans and IDA Credits and Grants by World Bank Borrowers” dated January 2011; and (iii) World Bank “Guidelines: Procurement of Goods, Works and Non-consulting Services under IBRD Loans and IDA Credits and Grants by World Bank Borrowers” dated January 2011.

38. Methods of Procurement and prior review threshold:

a. Procurement methods for goods and non-consulting service: For the procurement of Goods, Works and Non-Consulting Services, the following methods shall be used: (i) International

38

competitive bidding (ICB); (ii) National competitive bidding (NCB) for which shall be used either ICB -or a translated version- or Standard Bidding Documents acceptable to the Bank as mentioned in clauses 3.3 and 3.4 of the procurement guidelines; (iii) Shopping; (iv) Framework agreements; (v) Force account, and (vi) Direct contract.

b. Selection of Consultants: For the selection of consultants, the following methods shall be used: (i) Quality-and-Cost-Based-Selection, (ii) Selection under a Fixed Budget; (iii) Least-Cost-Selection; (iv) Selection based on Consultants’ Qualifications; (v) Use of Non-Governmental-Organizations; (vi) Single Source Selection; (vii) Selection of Individual Consultants.

c. The use of particular methods are justified by the following:

1.c.1. Selection of NGOs: NGOs may be uniquely qualified to assist in the preparation, management, and implementation of projects, essentially because of their knowledge of local issues, community needs, and participatory approaches. NGOs may be included in the short list if they express interest and provided that the Recipient and the Bank are satisfied with their qualifications. For assignments that emphasize participation and considerable local knowledge, the short list may entirely comprise NGOs (consultants’ guidelines clause 3.16).

1.c.2. Force account: When works quantities cannot be defined in advance, works are too small and scattered, urgent repairs to prevent further damages requires prompt attention, or works need to be carried out in conflict-affected areas where private firms may not be interested, it is advisable to use the Force Account, which are works such as construction and installation of equipment and non-consulting services carried out by a government department of the Recipient’s country using its own personnel and equipment. The use of Force Account requires that the Borrower sets maximum aggregate amounts for its use, to which the Bank shall give its no objection, and applies the same rigorous quality checks and inspection as for contracts awarded to third parties (procurement guidelines clause 3.9).

1.c.3. Framework agreement: A Framework Agreement is a long-term agreement with suppliers, contractors and providers of non-consulting services which sets out terms and conditions under which specific procurements (call-offs) can be made throughout the term of the agreement. Framework Agreements are generally based on prices that are either pre-agreed, or determined at the call-off stage through competition or a process allowing their revision without further competition. They may be permitted as an alternative to the Shopping and NCB methods for: (a) goods that can be procured off-the-shelf, or are of common use with standard specifications; (b) non-consulting services that are of a simple and non-complex nature and may be required from time to time by the same agency (or multiple agencies) of the Recipient; or (c) small value contracts for works under emergency operations (procurement guidelines clause 3.6).

1.c.4. Shopping: The Project may use shopping of goods of contracts up to US$100,000 and of small works for up to US$200,000.

1.c.5. Single sourcing of consultants: CDR may explore using the method under the following circumstances: (i) for tasks that represent a natural continuation of previous work; (ii) in response to emergency situations; (iii) for very small contracts (below US$100,000), (consultants’ guidelines clause 3.9).

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1.c.6. Direct contract of goods, works and non-consulting services: Due to the emergency nature of the Project, CDR may use this method, especially for the immediate activities to be carried out in the first six months, and under the following circumstances: (i) an existing contract awarded in accordance with procedures acceptable to the Bank may be extended for additional activities of a similar nature; (ii) standardization of equipment or spare parts to be compatible with existing equipment. For such purchases to be justified, the original equipment shall be suitable, the number of new items shall generally be less than the existing number, the price shall be reasonable, and the advantages of another make or source of equipment shall have been considered and rejected on grounds acceptable to the Bank; and (iii) in response to emergency situations (procurement guidelines clause 3.6).

39. Based on the satisfactory assessment, and in view of the experience of CDR in implementing Bank’s operations, the Project shall be subject to low risk prior review threshold, making the Project mostly subject to post review.

40. Proposed Project Staff: The unit at CHUD has customized the procurement resources and financial management to support the implementation of the Project. Qualified staff with extensive experience in the implementation of donor-financed projects are already employed by the institution.

41. Project Operation Manual: Detailed Project procurement arrangements will be specified in the Project OM.

42. Procurement plan: An initial procurement plan has been developed by the Government. It defines the prior review and procurement methods thresholds. It will be updated and reviewed by the Bank at least twice a year or as deemed necessary. The initial procurement plan was agreed at negotiations of the grant and is attached to the minutes of negotiations.

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Procurement plan for Project implementationUnion Type Procurement Method Description Amount $ Award Date

Estimation of Duration /

MonthsWorks Single source Civil Infrastructure Works 120,000 Aug-14 4Goods Shopping Equipments 180,000 Aug-14 7Services Consulting services Social Activities 50,000 Apr-15 20Works Single source Civil Infrastructure Works 210,000 Aug-14 4Goods Shopping Equipments 90,000 Aug-14 7Services Consulting services Social Activities 50,000 Apr-15 20Works Single source Civil Infrastructure Works 195,000 Aug-14 4Goods Shopping Equipments 105,000 Aug-14 7Services Consulting services Social Activities 50,000 Apr-15 20Works Single source Civil Infrastructure Works 180,000 Aug-14 4Goods Shopping Equipments 120,000 Aug-14 7Services Consulting services Social Activities 50,000 Apr-15 20Works Single source Civil Infrastructure Works 160,000 Aug-14 4Goods Shopping Equipments 40,000 Aug-14 7Services Consulting services Social Activities 40,000 Apr-15 20Works Single source Civil Infrastructure Works 150,000 Aug-14 4Goods Shopping Equipments 50,000 Aug-14 7Services Consulting services Social Activities 40,000 Apr-15 20Works Single source Civil Infrastructure Works 160,000 Aug-14 4Goods Shopping Equipments 90,000 Aug-14 7Services Consulting services Social Activities 45,000 Apr-15 20Works Single source Civil Infrastructure Works 100,000 Aug-14 4Goods Shopping Equipments 150,000 Aug-14 7Services Consulting services Social Activities 45,000 Apr-15 20Works Single source Civil Infrastructure Works 100,000 Aug-14 4Goods Shopping Equipments 100,000 Aug-14 7Services Consulting services Social Activities 40,000 Apr-15 20Works Single source Civil Infrastructure Works 200,000 Aug-14 4Goods Shopping Equipments 50,000 Aug-14 7Services Consulting services Social Activities 45,000 Apr-15 20Works Single source Civil Infrastructure Works 50,000 Aug-14 4Goods Shopping Equipments 250,000 Aug-14 7Services Consulting services Social Activities 50,000 Apr-15 20

Works NCB Medium Size Civil Infrastructure Works

2,500,000 Jun-15 24

Works NCB Medium Size Civil Infrastructure Works

2,500,000 Jun-15 24

Jabal el sheikh

Al Bouhayra

Al Kayteh

Baalbek

Tyre

Com

pone

nt 2

Central Bekaa

Zahle

Al Arkoub

Al Chafit

Al Sahel

Com

pone

nt 1

Kalaat el Estikla

43. The frequency of supervision mission and post procurement review is foreseen twice and once a year respectively. In post procurement review, a sample of ten percent of contracts eligible for post review shall be covered.

Environmental Safeguards

44. The Project is classified as environmental category “B”, in accordance with Operational Policy OP 4.01. Since exact subprojects are not determined at the onset of the Project and will be decided during implementation based on demand and consultations with the concerned municipalities and communities, the instrument of OP 4.01 is determined as ESMF. The ESMF identifies the policy triggers for the Project, the screening criteria of sub-projects, the environmental and social impacts for the likely subprojects and the mitigation measures to mitigate the identified risks, an assessment of the institutional capacity of the implementing agency and measures for capacity-filling gaps, and an estimate of the budget needed for the implementation of the ESMF and related instruments. The ESMF has been prepared and consulted with the targeted municipalities. It has furthermore been reviewed and cleared by the Bank, and disclosed both in-country (CDR web site and at premises of concerned municipalities) and on the Bank Infoshop on April 14, 2014.

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45. According to initial assessments, refugee-impacted municipalities in Lebanon are likely to undertake/request: (i) procurement of power generators for wastewater pumping stations, street lights, sewage tankers and sewage networks flushing equipment, water tankers and water filters for schools, street cleaning equipment, solid waste compactors, matching garbage bins, and earth moving equipment; (ii) rehabilitation and construction civil works, including roads and sidewalks rehabilitation, construction of additional classrooms in schools, playgrounds and public gardens, and community centers; (iii) infrastructure projects such as small scale wastewater treatment plants and solid waste sorting, recycling, and composting facilities (design capacity estimated around 10,000 cubic meters per day for the wastewater treatment plan and 100 tons per day for the solid waste facility); and (iv) communal activities that promote social interaction and collaboration, such as sports teams, events, information or outreach campaigns etc.

46. No subprojects of category “A” will be eligible for funding. For the projects described in item (iii) above, the Project will prepare Environmental and Social Impact Assessments (ESIA) that will define and quantify all risks, including site sensitivities which might entail a higher environmental category. Eligibility will be contingent on alternatives (including site selection) that exclude any of the environmental, social, or cultural sensitivities. For procurement of goods under item (i) above, in lieu of a subproject ESMF, guidelines for use and handling will be developed and applied within the provisions of the bidding documents and technical specifications.

47. No impacts on physical and cultural resources or natural habitats are anticipated under the Project. A chance find procedure is included in the ESMF in case chance finds are encountered during project implementation.

48. For all subprojects which may include civil works, i.e., items (ii) and (iii) above, a social and environmental safeguards screening tool will be applied, along with the specific subproject level instruments that will be necessary to cover both social and environmental aspects, including subproject ESIAs and ESMPs if determined necessary. Additional measures will support the implementation, monitoring, and compliance to the ESMF, including; (a) annual fiduciary audits/ post-review of a subset of subprojects with respect to design and implementation of ESMPs; and (b) Project supervision missions by the Bank will include social and environmental implementation expertise to support client during the entire project cycle.

49. The Project is expected to produce substantial positive environmental impacts through improved community service delivery. In terms of solid waste management, improved capacity of the targeted municipalities is expected for collection, recycling, composting, and thus reduction in landfill disposal. The interventions are expected to improve water supply to schools, improved quality and continuity of wastewater networks collection and treatment. The interventions for road rehabilitation and street lighting are expected to improve access, road safety and reduce dust. The community centers, playgrounds, and gardens will improve the overall environmental and social conditions in targeted communities. The negative impacts anticipated for the Project activities are minor and of temporary nature during the construction phase, including dust, noise, waste generation, disruption to traffic and movement, damages to existing utilities, and easily mitigated by the ESMPs that will be included in the bidding documents. Environmental Health and Safety procedures during construction and operational phases will be also prepared for subprojects as necessary.

50. CDR is familiar with the provisions of the Bank’ safeguards policies relevant to this operation, including the implementation and monitoring of the ESMF and related instruments due to

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their experience with the CHUD project. Any capacity gap that becomes evident during implementation will be addressed via provision of appropriate skills and/or further training. Safeguards management of this operation will benefit from the safeguards modalities established under CHUD, herein the existing PMU, the provision of environmental consultants, and will utilize and build on the existing safeguards documentation including baseline reports, ESMF, subproject screening checklist, a safeguards monitoring and evaluation framework, municipality toolkits, and social and environmental audits. The costs for the implementation of the ESMF, ESMPs, and other instruments (e.g., additional subproject ESIAs) are estimated and included in the Project budget.

Social Safeguards

51. All activities financed by the Project are relatively small scale. Land requirements are therefore expected to be modest and subproject investments will be carried out primarily on municipally owned lands, or other government owned lands. However, the project implementation may impact squatters or encroachers on government owned lands or result in the involuntary taking of land. Since the location of subprojects cannot be determined prior to project appraisal, a RPF has been prepared to mitigate the potential resettlement impacts.

52. Key Principles: The principles outlined in the World Bank’s OP/BP 4.12 have been adopted in preparing the Project RPF, including:

(a) Acquisition of land and other assets, and resettlement of people will be minimized to the extent possible. Where land acquisition is unavoidable, the Project will be designed to minimize adverse impact on the project-affected persons (PAP), especially vulnerable groups;(b) All PAPs will be compensated, relocated and rehabilitated, if required, so as to improve their standard of living, income earning capacity and production capacity, or at least to restore them to pre-project levels;(c) All PAPs residing on, or cultivating land, or having rights over resources within the subprojects areas are entitled to compensation for their losses and/or income rehabilitation. Lack of legal right to the assets lost will not bar the PAP from entitlement to such compensation, rehabilitation and relocation measures;(d) The rehabilitation measures to be provided are: (i) compensation at full replacement cost for houses and other structures; (ii) compensation for land acquisition; (iii) dislocation allowance and transition subsides; (iv) full compensation for crops, trees and other similar agricultural products at market value; and (v) other assets, and appropriate rehabilitation measures to compensate for loss of livelihood;(e) Land-for-land is the preferred option. Land-for-land may be substituted by cash provided that: (i) land is not available in the proximity of the subproject area; (ii) PAP willingly accept cash compensation for land and all assets on it; and receive full replacement value without any deductions for depreciation; and (iii) cash compensation is accompanied by appropriate rehabilitation measures which together with project benefits results in restoration of incomes to at least pre-subprojects levels;(f) Resettlement plans will be implemented following consultations with the PAPs, and will have the endorsement of the PAPs;(g) Any acquisition of, or restriction on access to resources owned or managed by PAP as common property will be mitigated by arrangements ensuring access of those PAP to equivalent resources on a continuing basis.

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53. Valuation Method of Compensation: The valuation of losses in physical assets will be carried out by a compensation committee. The value of compensation will be determined based on the market value of the assets, if known, and estimating the replacement cost. Replacement cost is simply calculated as the cost of replacing the lost assets plus any transaction costs associated with brining the asset to pre-displacement value. The valuation of crops will be mainly relied upon the price lists developed by the Agriculture directorate and revisited annually.

Procedures for preparing and approving RAP

54. Project Screening. Once the subprojects are identified by unions or municipalities, the PMU will obtain all permits/approvals related to the Project. Thereafter, they will cooperate with unions or municipalities to carry out social screening to determine whether or not the subprojects will result in any resettlement impact. The PMU will then decide on the need for the preparation of a Resettlement Action Plan (RAP) or an abbreviated RAP.

55. Socioeconomic and Inventory Survey. Following the identification of the subprojects that may involve involuntary resettlement, the PMU in cooperation with unions and municipalities will carry out a socio-economic study and census survey, in which baseline data within the subproject’s target areas is collected. This information shall include the PAPs and related household members or dependents, total land holdings, and affected assets. This information will be put in writing and shall be used in determining the appropriate compensation and assistance for each affected individual/household.

56. RAP preparation, review and approval. Once the census survey is completed, the PMU will work with relevant unions and municipalities to prepare the RAP. The RAP, including the proposed mitigation measures within the plan, will be reviewed and approved by CDR’s Board and subsequently sent to the World Bank for final review and approval.

57. RAP disclosure and implementation. Once the RAP is approved by the Bank, it will be translated into Arabic and disclosed locally as well as in InfoShop at the Bank. The PMU and unions and municipalities are responsible for the implementation of the RAP.

Grievance Redress Mechanisms

58. A multi-level grievance redress mechanism has been established for the proposed Project. The procedures for handling grievances are as follows:

The affected person should file his/her grievance in writing to the relevant municipality. The municipality should respond within 14 days.

If the aggrieved person does not receive a response or is not satisfied with the outcome from the municipality within the agreed time, s/he lodges her or his grievance to CDR’s Expropriation Committee. The Committee will attempt to resolve the problem (through dialogue and negotiation) within 14 days of the complaint being lodged.

If the grievances cannot be solved by the Expropriation Committee, the person can submit the case to the Appeals Committee.

Public Consultations

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59. Consultations have been carried out with municipalities during preparation of the RPF. During project implementation, when resettlement impacts are involved and a RAP needs to be prepared, consultations with affected persons will be carried out as part of the RAP preparation process.

Vulnerable Groups

60. The Project will pay specific attention to the needs of the following vulnerable groups: a) Persons below the poverty line and the landless; b) PAPs who may not be protected through national land compensation legislation; and c) Elderly, women and children, indigenous peoples, etc.. Vulnerable people will be identified at socio-economic survey stage and assistance program will be developed and included in the RAP.

Resettlement Monitoring and Evaluation Arrangement

61. Internal monitoring the implementation of the resettlement activities will be carried out by the PMU through quarterly monitoring and results and findings will be included in the quarterly project progress report. The report will mainly cover the compensation standards, resettlement progress, delivery of resettlement compensation, provision of development and transitional assistance to PAPs (especially vulnerable groups), implementation schedule, fund disbursements, land or structure allocation, and grievances redress. External monitoring might be required to ensure that the overall objective of the resettlement plan is achieved in an equitable and transparent manner and ensure the effectiveness of the monitoring. By the time of project closure, an evaluation will be carried out by CDR to ensure the objectives set forth in the RAP are met.

Budget and Sources of Funding

62. The actual resettlement cost and budget will be included in the RAP which will be prepared during project implementation. The budget shall consider all of the anticipated impacts under the Project and calculate the cost according to actual replacement costs. CDR and the relevant unions and municipalities are fully responsible for funding any compensation for land acquisition.

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Annex 4: Operational Risk Assessment Framework (ORAF)


Risks

.

1. Project Stakeholder Risks

1.1 Stakeholder Risk Rating Substantial

Risk Description: The status of the Government may hinder its ability to make timely approvals related to the LSCTF and the Project.

The fluidity of the political situation may manifest itself in rivalries and friction between the involved Lebanese institutions leading to delays or suboptimal solutions in implementation.

Mayors and heads of union may try to circumvent the participatory processes to cater to their own interests.

Risk Management: Grant-financed projects only require Council of Ministers approval, which is expected to be expedited given the Cabinet's endorsement and ownership of the Roadmap.

The Bank will continue to engage will all stakeholders to ensure a broad and sustained ownership of the Project approach and benefits.

Resp: Govt Status: Ongoing

Stage: Prep/Impl Recurrent:

Yes Due Date:

Frequency:

Continuous

Risk Management: The Project will support outreach activities in the targeted unions ahead of consultations, as well as the dissemination of their results hereby making it difficult for heads of unions to avoid or ignore the voice of the communities. The Project will track the proceedings on a continuous basis to monitor the quantity and quality of the consultations.

Resp: Bank Status: Not due

Stage: Impl Recurrent:

Yes Due Date:

Frequency:

Continuous

2. Implementing Agency (IA) Risks (including Fiduciary Risks)

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2.1 Capacity Rating Moderate

Risk Description: As main beneficiaries, the municipalities may not have the capacity to take charge of the demand-driven decision making process delaying the implementation of subprojects.

CDR may not have flexible enough mechanisms to ensure timely delivery of the priority subprojects identified by unions and communities.

Risk Management: Many of the municipalities already have community consultation platforms that are called to advise on municipal priorities and projects, and the modalities of such procedures are therefore well known. CDR will support the unions through dedicated social team that will provide assistance in the preparation and outreach, facilitation, and reporting on the consultations as needed.

CDR will make use of its fast-track procedures to ensure that the emergency nature of the Project is respected. The Project will monitor and report on the Project’s ability to deliver the subproject identified by the unions under Subcomponent 1A. To mitigate the risks associated with procurement, the Project will assign project coordinators with adequate decision authority and filed consultants to monitor contracts.

Resp: Govt Status: Not due

Stage: Impl. Recurrent:

Yes Due Date:

Frequency:

Continuous

2.2 Governance Rating Moderate

Risk Description: The limited targeting of only eleven unions may lead to accusations of favoritism and unfair distribution of funds.

Risk Management: The choice of participating unions and municipalities has been prepared based on a list created by key UN agencies in collaboration with the Government, with a view to ensure geographic and demographic diversity. The Project will collaborate with other bilateral and multilateral partners to prevent overlap of activities and in total increase coverage of the country.

Resp: Govt/Bank

Status: Not due


Yes Due Date:

Frequency:

Yearly

3. Project Risks

3.1 Design Rating Moderate

Risk Description:Municipalities may choose projects that are not based on public participation and/or demand.

Competition over limited Project resources may lead to increased tension within and between communities

Risk Management: Clear criteria will be established on the basis of readiness of subprojects and the absence of already funded operations. A consultative process will also be established at the local level in order to respond to the most urgent needs and demands of the beneficiary communities.

Resources have been set aside for communications to ensure that citizens are aware of the participatory nature of the Project and the roles and responsibilities of the unions and municipalities. Further, CDR will support and track the consultation events to ensure the quality and quantity of consultations. Finally, the mid-term review will assess the participatory aspects of subproject prioritization, planning, implementation

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The limited funding available may lead to resources being spread too thinly to have an impact.

and oversight.

A team of social specialists in CDR will undertake preliminary social and conflict assessments in advance of the first round of consultations to gauge both the potential for negative social impacts due to project design as well as understand how component 1B can be best utilized as a tension reduction tool.

The Project interventions financed under component 1 will be low-cost, but targeted and with a high level of visibility. It is thus expected that relatively small amounts will have a concrete impact on stressed communities.

Resp: Govt/Bank

Status: Not due


Yes Due Date:

Frequency:

Continuous

3.2 Social and Environmental Rating Moderate

Risk Description: The investments to be implemented, particularly in solid waste, could bear important environmental impacts.The communities living in the vicinity of infrastructure works could also be affected.

Risk Management: A dedicated Environmental and Social Safeguards Specialist will be engaged and will be responsible for safeguards oversight. Annual technical audits will cover safeguards compliance.



Yes Due Date:

Frequency:

Continuous

3.3 Program and Donor Rating Moderate

Risk Description: New donors may wish to change the design of the Project according to their priorities.

The Project may fail to attract additional funding from donors, thereby exacerbating the design risk of spreading benefits too thinly.

Risk Management: At the time of appraisal, the Project is being financed by the LSCTF for US$10 million. Additional financing is likely to be channeled through the LSCTF, which is co-chaired by the World Bank and the Government. The flexible design of the Project will give some leeway for donors to set their mark on the Project; however, any additional financing would have to remain within the framework of the described project modalities.

The Project will prioritize interventions that have immediate impact on the ground to showcase its ability to deliver quick results, thereby increasing its value to potential donors. The Bank and the Government will continue to make efforts to raise further funds to cover more of the critical needs at the municipal level.

Resp: Bank and

Status: Ongoing

Stage: Prep/Impl Recurrent:

Yes Due Date:

Frequency:

Yearly

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LSCTF

3.4 Delivery Monitoring and Sustainability Rating Substantial

Risk Description: The distribution of investments across different sectors and locations may render progress monitoring difficult.

Due to municipal fiscal constraints, investments in infrastructure may not be maintained.

Risk Management: The Project implementation team will be decentralized, with engineers and social specialists based at the local level, providing direct support to the mayors and the unions of municipalities. A dedicated staff will be assigned to conduct monitoring and evaluation.

The relevant line ministries will be consulted in the process of choosing infrastructure subprojects in order to ensure that their operation and maintenance will be included in sector budgets. The Project will also conduct specific training and provide assistance on the setting adequate operation and maintenance procedures at the municipal level.


Stage: Impl Recurrent:

Yes Due Date:

Frequency:

Continuous

4. Overall Risk: Substantial

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Annex 5: Implementation Support Plan


Strategy and Approach for Implementation Support

The World Bank’s implementation support to the Project will comprise of technical, fiduciary, safeguards and evaluation support as follows:

(i) Technical assistance: The Bank’s policy guidance and advice has been an integral part of preparation of the Project. There are two areas that merit extra focus during implementation:

a. Participation of beneficiary communities in the selection of investments and activities to be implemented through the Project: given the emergency nature of the Project, it will be difficult to ensure full participation of the beneficiary communities, particularly at Project inception. The Bank team is confident, however, that the participatory processes applied through the implementation of the Cultural Heritage and Urban Development Project will be most relevant to the MSEP. The Bank will also assign social scientists to assist in the process.

b. Using municipal level interventions to reduce tension. This is a relatively new area for both Bank and the Government. The Bank team will seek the services of experts from other units of the Bank working on conflict and social development as well as other external experts during implementation to support and advise the relevant stakeholders in Lebanon.

(ii) Fiduciary and safeguards management support: The Bank team includes fiduciary management staff and safeguards specialists to provide routine supervision of FM and procurement activities as well as safeguards issues. Since CDR is wholly familiar with relevant Bank rules and guidelines on fiduciary aspects and safeguards, major issues are not anticipated. In addition, Bank’s fiduciary staff will provide guidance on FM guidelines, preparation of IFRs and withdrawal applications, compliance with the Bank guidelines and other issues as they arise during the implementation.

(iii) Monitoring and verification support. The mainstay of monitoring will be semi-annual progress reports as well as annual third party technical and fiduciary audits. The Bank team will provide support to organize these audits, including inputs for the preparation of terms of reference and support to CDR to monitor the work of the audit firms. Finally, impact evaluations will be carried out by the Bank team independently using external resources.

Implementation Support Plan

Time Focus Skills Needed

Year 1-2o Technical support for community outreach and

participatory planning.o Fiduciary management support

o FM, procurement and safeguards specialists

o Participation specialists

o Conflict and violence experts

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Year 1-2 o Training for municipalities on Project OM and other relevant Bank rules and guidelines

o Municipal engineerso FM, procurement and

safeguards specialists

Years 2-3 o Technical support for annual assurance audits. o FM, procurement and safeguards specialists

Year 1-3 o Monitoring, verification and evaluation support o Monitoring and Evaluation specialists

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