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ASIAN DEVELOPMENT BANK

RRP: BAN

REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE BOARD OF DIRECTORS ON A PROPOSED LOAN TO THE PEOPLES REPUBLIC OF BANGLADESH FOR THE SECOND SMALL-SCALE WATER RESOURCES DEVELOPMENT SECTOR PROJECT

June 2001

CURRENCY EQUIVALENTS (as of 31 May 2001) Currency Unit Tk1.00 $1.00 = = Taka $0.01735 Tk57.65

The value of the Bangladesh Taka is fixed in relation to a basket of currencies, with the US dollar as the intervention currency for exchange rate adjustments. For the purpose of calculations in this report, an exchange rate of $1.00 = Tk54.10 has been used. This was the rate generally prevailing during the appraisal of the Project. ABBREVIATIONS ADB BWDB BWFMS DAE DOF EIA EIRR FAP FFYP IEE LCS LGED LGI MOLGRDC NGO NWMP NWP O&M PMO PRA SDR SSWRDSP TA WMA Asian Development Bank Bangladesh Water Development Board Bangladesh Water and Flood Management Strategy Department of Agricultural Extension Department of Fisheries environmental impact assessment economic internal rate of return Flood Action Plan Fifth Five-Year Plan initial environmental examination local contracting society Local Government Engineering Department local government institution Ministry of Local Government, Rural Development and Cooperatives nongovernment organization National Water Management Plan National Water Policy operation and maintenance project management office participatory rural appraisal special drawing rights Small-Scale Water Resources Development Sector Project technical assistance water management association

NOTES
(i) (ii) The fiscal year (FY) of the Government and its agencies ends on 30 June. In this report "$" refers to US dollars.

GLOSSARY

beel baor boro haor jalmohal khal khas Para Union Upazila Zila

natural depression that may or may not retain water throughout the year oxbow-shaped lake or dead arm of river in the moribund delta of the Ganges irrigated rice grown in the dry season large natural depression state-owned water body leased out for fishing natural or artificial channel state-owned land or water body administrative unit (subdivision of union) administrative unit (subdivision of upazila) administrative unit (subdivision of zila) administrative unit (district)

CONTENTS Page LOAN AND PROJECT SUMMARY MAP I. II. III. THE PROPOSAL INTRODUCTION BACKGROUND A. Sector Description B. Government Policies and Plans C. External Assistance to the Sector D. Lessons Learned E. ADBs Sector Strategy F. Policy Dialogue THE PROPOSED PROJECT A. Rationale B. Objectives and Scope C. Cost Estimates D. Financing Plan E. The Executing Agency F. Implementation Arrangements G. Environmental and Social Measures PROJECT JUSTIFICATION A. Financial and Economic Analyses B. Environment C. Impact on Poverty D. Risks ASSURANCES A. Specific Assurances B. Conditions Loan Effectiveness C. Conditions for Civil Works Contracts RECOMMENDATION ii v 1 1 1 1 5 6 7 8 9 11 11 12 15 16 16 17 23 26 26 27 28 29 29 29 31 31 31 32

IV.

V.

VI.

VII.

APPENDIXES

LOAN AND PROJECT SUMMARY Borrower Project Description Peoples Republic of Bangladesh The Project aims to improve the development of the water resources sector through participatory rehabilitation and management of small-scale (less than 1,000 hectares [ha]) water resources infrastructure and supported by sector-wide policy and institutional reforms. The project design builds on the lessons learned from the ongoing Small-Scale Water Resources Development Sector Project (SSWRDSP) that was successfully implemented in 300 subprojects in the western part of the country. The Project aims to improve livelihoods and reduce poverty by undertaking a further 300 subprojects located in the eastern and western parts of the country. The Project will assist stakeholders to form water management associations and to upgrade physical facilities including (i) flood management, (ii) drainage improvement, (iii) water conservation, and (iv) command area development. The Project accorded high priority under the Governments medium- and long-term investment plan for smallscale water resources development.

Classification

Poverty Intervention Thematic: Economic Growth Category B. An initial environmental examination was undertaken and the summary is included in an appendix. Since 90 percent of the countrys poor people live in rural Bangladesh, agriculture and rural development are critical elements of the Governments poverty reduction strategy. Key constraints for rural poverty reduction include (i) lack of physical infrastructure; (ii) lack of support services including extension, marketing, and financial services; (iii) lack of high-quality agricultural inputs; (iv) suboptimal utilization of water resources; and (v) lack of access to basic social services. Water is the foundation for many rural livelihood activities of the rural poor, and effective water resource management is fundamental to addressing pervasive rural poverty problems while promoting economic growth in Bangladesh. This critical water resource has to be managed in a strategic, integrated, and participatory manner that includes the mobilization, organization, and empowerment of stakeholders. Based on the Governments main instrument to have the strategy implemented, the SSWRDSP was launched in 1996 to enhance rural incomes by developing community-based water management associations (WMAs) and communitymanaged, small-scale infrastructure; this has proved to be an effective means to reduce rural poverty. Participatory water resources development and management is necessary to effectively implement key principles by strengthening the implementation framework; this was demonstrated under the

Environmental Assessment Rationale

iii SSWRDSP. Expansion of small-scale water resources development is one of the key elements in effectively reducing rural poverty. Objectives and Scope The overall goal of the Project is to support the Governments poverty reduction effort by increasing sustainable agricultural and fishery production. The project objective is to develop sustainable stakeholder-driven, small-scale water resource management systems with special attention to the poorer section of the population. The objectives will be achieved by (i) developing improved means of beneficiary participation in the selection, design, implementation, and operation and maintenance of smallscale water resource management development systems; (ii) rehabilitating and constructing small-scale water resource management infrastructure with appropriate agricultural extension, fisheries extension, and aquaculture development; (iii) developing effective management of environmental and social impacts of subprojects, including on those engaged in practicing floodplain capture fisheries; and (iv) developing institutional strengthening and capacity building of relevant Government and stakeholder organizations to ensure adequate support for smallscale water resources development at all levels. Total project costs are estimated at $78.0 million equivalent, consisting of $15.9 million in foreign exchange costs (20 percent) and $62.1 million equivalent (80 percent) of local currency costs. ($million) Source ADB Netherlands Government Beneficiaries Total Foreign Exchange 7.6 8.3 0.0 0.0 15.9 Local Currency 26.4 16.0 17.3 2.4 62.1 Total Cost 34.0 24.3 17.3 2.4 78.0 Percent 44 31 22 3 100

Cost Estimates

Financing Plan

ADB = Asian Development Bank.

Loan Amount and Terms

The equivalent in various currencies of SDR26,985,000 from the Special Funds resources of the Asian Development Bank (ADB). The term will be 32 years including a grace period of 8 years, with an interest charge of 1.0 percent per annum during the grace period and 1.5 percent per annum thereafter. Until 31 December 2009 Local Government Engineering Department (LGED) under the Ministry of Local Government, Rural Development and Cooperatives. A project steering committee will be formed and consist of representatives of all ministries and agencies concerned. A project management office is established in LGED to manage the

Period of Utilization Executing Agency

Implementation Arrangements

iv Project with subproject implementation delegated to district LGED offices. Planning and implementation committees at the district and local levels will ensure smooth coordination. Local governments, LGED district offices, and facilitators recruited from nongovernment organizations or firms will be involved in assisting the formation of viable WMAs. After their formation, the physical works will be initiated. Completed schemes will be turned over to the WMAs for operation and maintenance after intensive training. Procurement All supplies, equipment, and services will be procured in accordance with ADBs Guidelines on Procurement. Civil works contracts for structures will be awarded under local competitive bidding procedures. Earthworks contracts valued at less than $5,000 will be carried out by LGEDs force account utilizing labor contracting societies. Supply contracts not exceeding $500,000, will be awarded in accordance with international shopping procedures. Other miscellaneous equipment and supplies, with each package valued below the equivalent of $100,000, will be procured by direct purchase procedures. Consulting services will assist project implementation with capacity building and institutional strengthening. A total of 937 person-months of consulting services are required, including 808 person-months of domestic and 129 person-months of international consulting inputs. The Government of the Netherlands will provide an untied grant that will be administered by ADB. The consultants will be selected by ADB and engaged and administered by the Government of Bangladesh in accordance with ADBs Guidelines on the Use of Consultants and other arrangements on the use of domestic consultants satisfactory to ADB. 30 June 2009

Consulting Services

Estimated Project Completion Date Project Benefits and Beneficiaries

The Project will benefit some 280,000 farming households directly. About 1.7 million people will benefit. About 75 percent of the farmers in the four sample subproject areas are smallholders and marginal and landless farmers. The share of total incremental financial benefits going to the poor is calculated to range from 35 to 56 percent. The direct benefits will be increased foodgrain and fish production from subproject areas better served by rehabilitated infrastructure and by better water management through the WMAs. The estimated economic rate of return for the subprojects ranges from 21 to 36 percent and for the Project as a whole is 19 percent.

I.

THE PROPOSAL

1. I submit for your approval the following Report and Recommendation on (i) a proposed loan to the Peoples Republic of Bangladesh for the Second Small-Scale1 Water Resources Development Sector Project and (ii) proposed administration by the Asian Development Bank (ADB) of a grant for the Project to be provided by the Government of the Netherlands. II. INTRODUCTION

2. The Government of Bangladesh sought assistance from ADB in 1999 to finance preparation of a project aimed at improving water management to magnify the impacts of the ongoing Small-Scale Water Resources Sector Project (SSWRDSP).2 Project preparation was carried out under ADB-financed technical assistance (TA).3 Following completion of the TA, factfinding was carried out in 2000 and ADB appraised the Project from 12-25 March 2001.4 This report is based on the feasibility study and the Appraisal Missions discussions with representatives of Government agencies, nongovernment organizations (NGOs), target beneficiaries and their communities, and bilateral and multilateral aid agencies in Bangladesh. The project design is summarized in the project framework in Appendix 1. III. BACKGROUND

A.

Sector Description 1. Rural Poverty in Bangladesh

3. Bangladesh remains one of the poorest countries in the world with a per capita income of approximately $360 in 1999. With a population of over 130 million living in a total area of 148 thousand square kilometers (or 880 persons per square kilometer), it is one of the most densely populated countries in the world. Among this population, over 80 percent live in rural areas mainly engaged in agriculture and related nonfarm activities. Endowed with limited land and other natural resources, and with a high population density, poverty is a pervasive problem in rural Bangladesh. The recent countrywide income poverty data shows that the head count index of poverty in 1995/96 was 51 percent in rural areas compared with the urban index of 26 percent, and the national average of 46 percent.5 In monetary terms, the annual per capita

1 2

Schemes with a command area of less than 1,000 hectares. Loan 1381-BAN: Small-Scale Water Resources Development Sector Project, for $32.0 million, approved on 26 September 1995 and cofinanced by International Fund for Agricultural Development, for $10.4 million, on 7 December 1995, is being implemented in the western divisions of Bangladesh and will be completed in 2002. This project is being supported by TA 2564-BAN: Beneficiary Participation and Project Management, approved on 2 May 1996 and funded by the Government of Netherlands for $6.8 million. TA 3358-BAN: Second Small-Scale Water Resources Development Sector Project, for $400,000, approved on 22 December 1999. Loan 1381-BAN(SF): Small-Scale Water Resources Development Sector Project, for $32 million, approved on 26 September 1995. A participatory process has been adopted in preparing the Project. Two national workshops were conducted by inviting concerned stakeholders. Several local workshops were also conducted to consult with beneficiaries of the ongoing project. The Mission comprised Toshio Kondo, Senior Project Economist/Mission Leader; K. Yokoyama, Project Engineer; S. Wendt, Social Development Specialist; and A. Goswami, Counsel. P. de Vries and M. Verwijk, First Secretaries, Royal Netherlands Embassy in Dhaka, and two experts, J. Luijendijk and B. Woersem participated in the Mission. O. Shresta, K. H. Ryu, and K. Talukdar from the Bangladesh Resident Mission assisted the Mission. Sen, Binayak. 2000. Bangladesh Poverty Analysis: Trends, Policies and Institutions. Prepared with financial support from ADB.

2 income at the level of moderate and extreme poverty was estimated at Tk6,100 (about $120 equivalent) and Tk5,100 ($100) respectively for 1999.6 4. Poverty in rural Bangladesh is multifaceted, reflected in low standards of living, poor health and nutrition, and lack of education and health services, abandonment in particular of women and children, and vulnerability to natural disasters such as floods and cyclones. The basic causes of poverty are lack of access to productive resources (mainly land and water) and basic infrastructure (such as road and electricity), to public services such as education and health services, and to employment opportunities. Lack of social and government safety-net entitlements makes poor people particularly vulnerable. These phenomena are largely attributed to insufficient economic growth in rural areas. Given that nearly 90 percent of poor people live in rural areas, enhancing poverty reduction in rural areas through rural and agricultural development is the key challenge facing the country. Subprojects under the ongoing SSWRDSP have already generated substantial benefits to rural people. These subprojects have also provided substantial incremental opportunities to the landless. 2. Water Resources

5. For the countrys rural residents, access to productive resources is of fundamental importance to their livelihood. For the poor, water resources are particularly important. Water is the foundation for many traditional livelihood activities, including the countrys main rural activitiesagriculture and inland and coastal fishing, transportation, water supply, and rural industries. However, located at the confluence of three major river systems of the South Asia regionthe Brahmaputra, Ganges, and Meghnamanaging water resources poses an extraordinary challenge for the country. These river systems bring about massive floods in the monsoon season7 and severe water scarcity in the dry season, along with serious riverbank erosion threatening the livelihood of vulnerable people living along the rivers, and siltation of watercourses causing widespread drainage congestion. Periodic natural disasters such as cyclones and tidal surges exacerbate hardships by decimating life and property in coastal areas. 6. In addition to these severe physical challenges, the demands of water management that have evolved in Bangladesh are complex and diverse. Agriculture, particularly rice cultivation, is the most dominant activity in rural life, and often calls for the protection of agricultural land from seasonal floods to ensure sufficient income and food security to rural people. However, many rural families, particularly the poor, also need water for capture fisheries, livestock breeding, jute processing, and other economic activities for subsistence purposes in the monsoon season. Most waterways of the country also serve as an important transport network. Rural households need access to adequate and safe domestic water, which is increasingly under competition with groundwater exploitation for irrigation purposes in the dry season, and is also in many cases threatened by arsenic contamination. Finally, water is a vital resource for the maintenance of the countrys natural ecosystems and biodiversity, particularly wetlands, which are deemed to be among the richest in the world. Given these diverse interests in water resource use against a backdrop of poverty the paramount need of the country is to manage this critical resource in a strategic, integrated, and participatory manner.

Japan Overseas Consultants Co. Ltd. et al. Poverty Impact Study: Southwest Road Network Development Project (ADB Loan 1478 BAN-SF). Monsoon floods inundate about 30 percent of the land on average.

3 3. Water-Related Economic Activities

7. Agriculture is Bangladesh's major economic activity, and supports the vast majority of its population. While the sectors share has declined to 32 percent of gross domestic product and 13 percent of exports in recent years, it employs about 60 percent of the country's labor force of 56 million. Food crops represent about 72 percent of the value added by agriculture, followed by fisheries (11 percent), livestock (10 percent), and forestry (7 percent). Fisheries and livestock activities are of particular importance to the rural poor who have limited access to land. As many as 70 percent of rural households are partly or fully involved in subsistence fishing, whereas livestock activities employ about 20 percent of the rural labor force. Fisheries also have strong implications for the nutritional status of the poor, accounting for over 60 percent of the animal protein intake. 8. The food grain production in fiscal year 1999/20008 has exceeded the food selfsufficiency target. The resulting reduction in food grain prices has particularly benefited the poor not only in urban but also in rural areas, given that 70 percent of rural households are net purchasers of rice. This robust growth is largely attributed to increased groundwater irrigation and adequate supply of key agricultural inputs such as fertilizer, fuel, and high-yielding varieties of seeds at stable prices, and increased availability of agricultural credit. The Governments proactive policies have also contributed to this process, including the removal of import restriction on irrigation pumps, and liberalization of trade in agricultural inputs. 9. Notwithstanding this achievement, continued significant growth of food crop production is critically needed to tackle rural poverty problems. Efforts to increase food grain production need to be continued to keep pace with the growth of Bangladeshs population and to ensure food security for the poor.9 Providing effective and sustainable water management infrastructure is an important part of these challenges. 10. Inland fishery production, which comprises capture and culture fisheries, has also strongly performed in the late 1990s, achieving an annual growth rate of over 8 percent. Given the importance of fisheries resources to the rural poor as a source of income as well as nutrition, enhancement of this trend is essential. 11. The importance of providing enabling physical infrastructure for poverty reduction is well documented. Studies have concluded that water resource infrastructure such as embankments, roads, and water control structures have impacts in terms of (i) improving income opportunities for food crop production; (ii) developing culture fisheries in areas protected by embankments, (iii) ensuring access for the poor to public water bodies; and (iv) inducing relevant nonagricultural activities that have forward linkages that are engaged by the poor. 4. Water Sector Institutions

12. The countrys sector institutions including the Ministry of Water Resources and Bangladesh Water Development Board have been relatively weak in addressing complex water management issues. Past planning efforts have tended to focus on construction of infrastructure for the protection of agriculture and urban land that often overlooked this multidimensional aspect of the countrys water resources. Operation and maintenance (O&M) of the infrastructure
8
9

Food grain production for 1999/2000 was 24.9 million tons. Food supply has barely exceeded demand in recent years. The annual rate of population growth decreased between 1991 and 1998 from about 2.2 percent to an estimated 1.7 percent.

4 has remained underresourced and inadequate, with little beneficiary participation and support for local resource mobilization. The Governments efforts to address these challenges and institutional constraints were initiated in the 1990s, and are included in the National Water Policy (NWP) of 1999. 13. During the implementation of the SSWRDSP, the Local Government Engineering Department (LGED)10 demonstrated adequate ability to identify and operate effective procedures and arrangements in undertaking community-based, participatory, water resources management schemes. With the majority of their staff placed at district and subdistrict (or upazila) levels with substantial decentralization in decision making, LGED is well placed to assist local government institutions (LGIs) to develop water management systems and local stakeholder institutions to manage those systems. At the central level, LGED has also managed the process of defining the national Guidelines for Participatory Water Management11 incorporating procedures established under the SSWRDSP. While LGEDs capabilities have fully met the standards required for the sector lending modality adopted for the SSWRDSP, further strengthening in terms of the skills sets required for decentralized small-scale water resources development is required. 14. The development of water management associations (WMAs) is critical to the institutional development of community participation in small-scale water resources schemes and the sustainability of such schemes based on decentralized participation. However, legal framework improvements for WMA institutional development and operationalization under a reformed or alternative legal framework remains a continuing challenge for the sector. 5. Key Sector Issues a. Implementation of the National Water Policy

15. The policy framework for addressing complex water resources issues in a comprehensive and sustainable manner has been weak in Bangladesh. The adoption of the NWP by Bangladesh in 1999 has provided clear policy goals and principles for integrated and participatory water management, decentralization, improved governance, and sustainable O&M combined with transfer of management.12 However, the NWP identifies that the setting of an appropriate legislative framework is fundamental to effective implementation of the policys principles and policy goals. The adoption of such a legislative framework in the form of a national water code is still outstanding. b. Framework for Integrated and Participatory Development of Water Resources

16. Given the complexity and diversity of interests among stakeholders in water resources in Bangladesh, water management interventions must be identified, formulated, and implemented with cross sectoral perspectives and stakeholder consultation. The Government approved the Guidelines for Participatory Water Management in November 2000. These guidelines emphasize stringent stakeholder consultation at the identification stage, agreement with
10

11

12

The Executing Agency for the ongoing SSWRDSP, under the Ministry of Local Government, Rural Development and Cooperatives, has a strong background in rural development. The Guidelines for Participatory Water Management approved in November 2000 recommended that initially the beneficiaries be registered under the Cooperative Societies Ordinance (1984) and Cooperatives Societies Rules (1987) as amended. These guidelines will enhance the active participation of stakeholders. The NWP adopted the principle of management transfer of small and medium schemes (up to 5,000 hectares of command area) to water users associations, which will take responsibility for O&M of the schemes.

5 stakeholders prior to construction of physical works, and sound institutional development and effective use of NGOs for stakeholder participation through the WMAs. Properly operationalizing these principles requires a legal framework that provides an adequate platform for the operation of cooperatives and enables the injection of effective competition to cooperatives as instruments of WMA implementation. The current Cooperatives Ordinance of 1984 and Cooperatives Societies Rules of 1987, as amended, do not sufficiently serve this purpose and no enabling legal provisions are yet available for alternative forms of WMAs. c. Decentralization, Institutional Capacity, and Governance

17. The NWP stipulates that small-scale water resources development schemes with an area of less than 1,000 hectares must be placed under the responsibility of LGIs, whereas medium- to large-scale schemes are under the Bangladesh Water Development Board (BWDB). Under this delineation, LGED assists LGIs in appraising and implementing new and existing self-help groups, other stakeholders, and NGOs assisting the participatory process. Past water management interventions in Bangladesh were centrally oriented leading to single purpose, infrastructure-orientated projects that overlooked diverse social concerns. Lengthy decision making and inflexibility in adapting to local needs exacerbated poor performance. The NWP aims to provide increased local autonomy and foster participation, thereby enhancing sustainable cost recovery and O&M. In particular, LGIs are given responsibility for small-scale schemes below 1,000 ha with the support of LGED. However, if the benefits of such decentralized water management are to be realized, LGEDs capacity to support such development must be adequately built. This must include the ability to address local coordination, ensure more effective identification and formulation of interventions by LGED management from an integrated perspective, and address social and environmental concerns through effective monitoring. 18. In addition to LGED reorganization to serve such needs, effective water sector governance is required to realize the potential benefits of decentralization. This includes the need to (i) build contractual frameworks that ensure water service infrastructure providers are held accountable to communities; such a framework lies at the heart of effective water management; (ii) empower communities through WMA-based participation approaches to smallscale water resource schemes; (iii) develop appropriate water and usage rights under predictable legal framework; and (iv) improve accountability and performance monitoring to ensure quality infrastructure by providing technical, social, and financial audits for WMAmanaged completed schemes. B. Government Policies and Plans

19. The Governments water resources sector investment plan is documented in (i) the Bangladesh Water and Flood Management Strategy (BWFMS) approved in 1995 and updated in 1998 following the Ganges Water Treaty with India, and (ii) the Fifth Five-Year Plan (FFYP) 1997-2002. The BWFMS provides strategies, programs, and the short-term investment portfolio up to 2000 and the medium-term up to 2010. These are integrated into the FFYP, which pursues as its primary investment portfolio objectives of poverty reduction, employment generation, and food self-sufficiency. 20. During the preparation of the Flood Action Plan (FAP),13 the deficiencies of past water sector operations were widely acknowledged. Such interventions ended to be top-down, and
13

The FAP proposed subdividing flood-protected areas into small components to be managed locally in order to secure an environment for intensive agriculture, aquaculture, and integrated rural development.

6 single-purpose of a major structural type that tended to cause adverse social and environmental impacts and poor O&M sustainability. As a result, Government and civil society recognized the need to (i) set up sound policies and an enabling institutional framework to develop integrated, participatory, and sustainable water resource management; and (ii) define a long-term sector policy and plan. The BWFMS therefore called for the preparation of the NWP and the National Water Management Plan (NWMP) as the most urgent requirements. 21. The core water sector strategies in the BWFMS and FFYP include (i) strengthening water sector institutions, (ii) undertaking comprehensive studies on major investments, (iii) increasing efficiency of completed water resource schemes by rehabilitating works and transferring management to local beneficiary organizations, and (iv) providing riverbank protection and channel maintenance. In the investment portfolio, small-scale water resources interventions have been given high priority in the short- and medium-term because they reflect relatively lower costs and higher returns, quicker gestation periods, more manageable stakeholder conflicts, and smaller environmental impacts, and hence greater opportunities to address rural poverty problems in a holistic manner. The medium-term target is to provide water management facilities identified by local people to a total area of 270,000 ha by 2010. 22. The NWMP14 will set forth strategies and programs up to 2025 with an investment portfolio of priority programs. These are to be prepared both at national and regional levels. Based on intensive studies of the lessons learned in past interventions, the NWMP will emphasize the provision of an enabling institutional environment called for by the NWP. 23. In the small-scale water resources subsector, the NWMP will build on the experience of the SSWRDSP. The NWMP is to provide for improved strategies with a strong poverty reduction orientation. The emerging strategies over the next five years will focus on institutionalization of procedures and arrangements for stakeholder-driven, community-based, small-scale water resources development schemes established under the SSWRDSP, and the building of capacity of sector institutions to establish effective water management associations and infrastructure. C. External Assistance to the Sector

24. In the 1980s, major external assistance to the water resources sector was provided in a series of large flood control, drainage, and irrigation projects with support from ADB, the governments of Canada, Japan, the Netherlands, and the World Bank. Loans amounting to over $300 million were provided by ADB for the implementation of such projects during the 1980s. Following the catastrophic floods in 1987 and 1988, external assistance focused on the preparation of an FAP aimed at managing floods in a more systematic manner. 25. After the completion of the FAP, major efforts have been directed to preparing the NWP and NWMP, and implementing high-priority projects. Most water sector projects initiated in the 1990s, particularly after the FAP studies and the related pilot interventions, explicitly address the critical issue of the sustainability of water management infrastructure, and emphasize participation and coordination of local stakeholders to achieve this end. 26. The major external funding agencies are now focusing on the implementation of the key elements of the NWP through reforms of water sector institutions, and effective preparation of the NWMP. While NWMP preparation is funded by the World Bank, the process is under careful
14

The NWMP is due to be finalized in November 2001. It will define the coordination strategy for the improved water sector performance with stakeholder participation in the planning process. ADB has been contributing to the finalization of the NWMP which is consistent with ADBs water policy.

7 review within the framework of the local consultative group of external funding agencies participated in by the World Bank, ADB, and other financiers. The World Bank is also preparing the Water Sector Improvement Project, which seeks to promote institutional improvement of BWDB and participatory rehabilitation of small- and medium-scale water resources development schemes (between 1,000 and 15,000 ha) constructed by BWDB, with a view to transferring the management of smaller schemes (up to 5,000 ha) to WMAs. Appendix 2 summarizes external assistance to the sector. D. Lessons Learned

27. The experience of ADB, other funding agencies, and NGOs indicate that water resources development projects in Bangladesh have complex social, technical, institutional, and environmental dimensions. Projects need to be formulated with close attention to each of these aspects to achieve the envisaged benefits in a sustainable manner. Key requirements include (i) stakeholder participation at all stages of the project cycle including resource mobilization by project beneficiaries for sustainable O&M; (ii) simple technical design reflecting the local conditions followed by careful construction quality control; (iii) strong capacity development of beneficiary organizations and of project management institutions; and (iv) careful environmental impact assessments, monitoring, and management, in particular the impacts on fisheries, which is the main source of income and protein for the poorest segment of the society in general. 28. The ongoing ADB-financed SSWRDSP was initiated in 1996 incorporating these lessons into project design. This project has been implementing about 300 small-scale water resources development schemes to establish water control structures and self-sustaining WMAs, covering an area of about 150,000 ha in the western divisions of Bangladesh. The review missions fielded between 1999 and 2001 concluded that project performance was satisfactory in terms of compliance with covenants, although improvement was needed in terms of stakeholder participation, construction quality, and ensuring sustainable O&M managed by WMAs. A status report of the SSWRDSP that includes preliminary project impacts and lessons learned is given in Appendix 3. Key lessons learned can be summarized as follows. (i) Diverse stakeholder interests in rural society need to be taken into account during an early phase of project preparation and be reflected in the organization of the stakeholder participation and project design. Mechanisms for effective conflict resolution should also be ensured. Subprojects need to be implemented with well-defined strategies and perspective plans for small-scale water resource interventions at local and regional levels. The number of subprojects should be limited to ensure adequate resources for quality control of subprojects. Sufficient time and resources should be provided for the feasibility studies and formation of WMAs. A firm institutional basis should be established before initiating physical works. The approach of ensuring sufficient membership registration and financial contributions from beneficiaries prior to physical works is sound. While the cooperatives framework provides an effective legal basis for WMAs, the existing rules are administratively complex and need to be improved. An alternative institutional framework specialized for WMAs could be developed based on ongoing experience.

(ii)

(iii)

(iv)

(v)

8 (vi) Ensuring the quality of infrastructure is essential for WMAs to effectively take over O&M. This should be pursued through sufficient field surveys and design, beneficiary consultation, and careful construction quality control. Environmental management and land acquisition should be undertaken in a timely and clear fashion with implementation of necessary mitigation measures for those affected by the project. Monitoring of completed schemes using sound, annual, technical, social, and financial audits of WMAs is of crucial importance. Activities to institutionalize WMA-managed O&M should be initiated at the early stages of the subprojects. The capacity of project management institutions is crucial to fulfill the multidisciplinary tasks of promoting small-scale, stakeholder-driven sustainable water resources management. Sufficient institutional support needs to be provided. The role and capacity of local government institutions must be strengthened to support small-scale water resource schemes in line with the NWP and ongoing local government reforms.

(vii)

(viii)

(ix)

(x)

29. These lessons are adequately reflected in the design, implementation, and O&M management of the proposed Project. E. ADBs Sector Strategy

30. The Poverty Reduction Partnership Agreement signed between ADB and the Government in April 2000, consistent with ADBs country operational strategy for Bangladesh, identified poverty reduction as its overarching objective.15 This will be pursued by promoting four priority areas including (i) faster private sector-led economic growth, (ii) creation of better development opportunities for the poor in rural and urban areas, (iii) improvement of human development, and (iv) environmental protection. The country operational strategy also advocates sharpening the focus of ADB operations on policy and institutional development through long-term involvement in a limited number of priority sectors. Agriculture and rural sectors have been accorded high priority, with operational focus on crop and agribusiness credit, rural infrastructure, water resources development, and microfinance. 31. In the water resources sector, ADBs strategy is to support integrated and sustainable water resources development and management by enhancing stakeholder participation and empowerment, improving financial efficiency and sustainability, and improving the living conditions for the poor rural population, while not disturbing the natural environment. Developing the necessary policies and institutional framework and capacities of central and local governments, and community organizations to enable these processes is accorded high priority. ADBs short-term operational focus is placed on (i) effective upgrading and rehabilitation of small-scale water resource infrastructure along with the development of WMAs, which have demonstrated growth and poverty reduction benefits in rural areas across a wide range of stakeholders in the rural areas; and (ii) institutional development for sound water resource management and service delivery systems, including capacity development for strategic,

15

ADB. 1999. Bangladesh Country Operational Strategy: Responding to the Challenge of Poverty. Manila.

9 integrated, and participatory planning and implementation of water resource management schemes. This is in line with ADBs water policy. F. Policy Dialogue

32. The Government has been committed to improving sector performance and has agreed with the following policy actions and implementation time frames. Appendix 4 summarizes these elements. 1. National Water Policy

33. The SSWRDSP has implemented measures in support of the NWP, particularly for the (i) development of participatory processes to involve local communities, including the NGOs as facilitators, in identification, planning, design, construction, and O&M of community-based water management schemes; (ii) approval of identified projects through the upazila development coordination committee and the district-level interagency project evaluation committee; (iii) institutionalization of WMAs; (iv) establishment of a system for signing an implementation agreement before the commencement of construction; and (v) establishment of formal arrangements for the training of personnel and for handover of O&M responsibility to the WMA. 34. The NWP envisages that the ownership of schemes implemented under the SSWRDSP will eventually be transferred to local governments,16 beginning with facilities that WMAs operate and maintain in a sustainable manner. Furthermore, subprojects implemented under the SSWRDSP do not always sufficiently take into account their interaction with existing or planned water management infrastructure in the surrounding areas and the policy thrust of the NWP. The Project has built in adequate mechanisms to address these gaps, in particular through the structuring of contractual rights and obligations under implementation agreements and O&M agreements, as well as eventual transfer of ownership agreements between LGED and the LGIs. In addition, to ensure the deepening of the SSWRDSP initiatives and legislative translation of critical NWP measures across the water resources sector, the Government has undertaken to enact the national water code within 18 months after loan effectiveness. Among other things, this new legislation will define the role of local government in the planning, implementation, and operation of small-scale water resources management and acquisition of water rights by a variety of water users in line with the NWP. 2. Framework for Participatory Water Resources Management

35. The ongoing SSWRDSP has established the legal framework for WMAs by revising the existing Cooperatives Societies Rules (1987) under the Cooperatives Act. These rules have been amended to allow for registration by and contractual capacity of cooperatives to cater to WMAs. While this framework has allowed WMAs to collect fees from beneficiaries, the experience of the SSWRDSP has showed that the existing framework is administratively complex. The Government is in the process of reforming the Cooperatives Act with a view to simplifying administrative procedures, enhancing transparency, and reducing Government intervention both directly and indirectly by encouraging the financial soundness of autonomous cooperatives. The draft law is expected to be approved by Cabinet within six months of the effective date with a view to enactment within one year of the effective date. Policy dialogue with ADB has indicated that the Government regards such enactment as important in fostering the
16

Both the Union Parishad Act and the Upazila Parishad Act confer upon these two local government levels the authority to assume the role of owner of small-scale water management infrastructure.

10 viability of cooperatives as continuing instruments of implementation of WMA beneficiary participation for sustainable small-scale water resources schemes. 36. Under the Project, the WMAs will conclude implementation and O&M agreements with LGED and LGIs. These agreements need to more clearly reflect (i) the local government's ownership of the infrastructure, (ii) the conferral by the local government upon the WMAs of the right to use and the obligation to maintain the infrastructure, and (iii) the role of LGED to assist, in line with its mandate, local government in building the infrastructure and ensuring that it is used appropriately and maintained in good repair. Before loan negotiations, the Government agreed to ensure that these elements were included in a draft implementation agreement and O&M agreement. 37. In addition to developing the long-run institutional sustainability of WMAs for small-scale water resources projects through changes to the legal framework for cooperatives linked with contractual agreements, the NWP referred broadly to the need to develop water user groups without restricting these to cooperatives. Consequently, policy dialogue tested the willingness of the Government to evaluate options for institutionalizing WMAs through types of organizations other than cooperatives. The Government indicated its willingness to explore competitive alternatives to cooperatives as a means of forming WMAs. In the interest of seeking to introduce competitive pressures to enhance performance on small-scale water resources schemes, timebound covenants were agreed with the Government to identify enabling legal provisions for alternative forms of WMA and pilot test alternative forms of WMA under the Project. 3. Reorganization of LGED

38. An ADB-financed study completed in 1998 proposed the organizational reform and strengthening of LGED.17 In general that study proposed that the need to create a larger number of nonengineering positions within LGED so as to strengthen LGEDs capacity to implement small-scale water management schemes should be reviewed, to take into account the needs of participatory water management. On the basis of this study and policy dialogue, strengthening is required in the areas of (i) increasing understanding water management issues; (ii) developing relevant nonengineering skills; (iii) building capacity of community organizers at the field level; and (iv) building managerial capacity of national level staff, including planning and nonengineering aspects of water management infrastructure. In particular, the following positions will need to be created: (i) senior headquarters staff in the areas of institutional development, environment, agriculture, and aquaculture; (ii) socioeconomists in the districts; and (iii) community organizers at the upazilas. 39. To ensure a time-bound and appropriate alteration in LGEDs skills mix, policy dialogue with the Government resulted in the Government agreeing to reorganize LGEDs organizational structure and staff functions within three years of the effective date. The Government provided in principle approval of the reorganization of LGED in terms of nonengineering positions in an adjusted organization; 50 percent of the proposed positions are to be established in the Integrated Water Resources Development Unit (IWRD) of LGED within one year after loan effectiveness and all the proposed nonengineering positions are to be established within three years after loan effectiveness.

17

TA 1809-BAN: Strengthening LGEDs Management Capability, for $470,000, approved on 21 December 1992. The same recommendation has been made by the ADB-financed TA 3358 (footnote 3).

11 4. Holistic Water Resources Development

40. Water resources development benefits those engaged in fisheries. However, water resources development may also result in some local stakeholders, particularly fisherfolk practicing floodplain capture fishery, being adversely affected by such interventions without having the opportunity to share in the intervention's benefits. To mitigate this, the Government agreed, during policy dialogue, that by the conclusion of the implementation arrangements, fisheries development plans would be in place in accordance with the Governments Guidelines on Participatory Water Management and National Fisheries Policy as well as ADBs fisheries policy. The Government will provide the funding for the fisheries development plans for balanced and holistic water resources development from counterpart funds and charges, fees, and dues collected for services and facilities by WMAs from members and nonmembers. 5. Water Sector Governance

41. ADBs policy dialogue with the Government highlighted the importance of water sector governance. The Government agreed to enhance the accountability of water infrastructure provider to WMA-based local communities through implementation agreements and sustainable cost recovery for small-scale water resources infrastructure based on local community participation through O&M agreements and transfer agreements to LGIs. In addition to deepening local participation to support sustainable cost recovery through contractual agreements, the Government also agreed to time-bound covenants requiring the Government to ensure that annual external performance monitoring by a reputable, private, external consulting firm could be effectively carried out and external evaluation by an external institute accomplished within one year of the effective date. IV. A. Rationale THE PROPOSED PROJECT

42. Since 90 percent of the countrys poor live in rural Bangladesh, agriculture and rural development are critical elements of the poverty reduction strategy of the Government. Key constraints for rural poverty reduction include (i) lack of physical infrastructure; (ii) lack of support services including extension, marketing, and financial services; (iii) lack of high-quality agricultural inputs; (iv) suboptimal utilization of water resources; and (v) lack of access to basic social services. These were also identified as priority areas of intervention under the framework of the partnership agreement signed by the Government and ADB in April 2000. 43. Water is the foundation for many rural livelihood activities of the rural poor, including fisheries, transportation, water supply, and agriculture. Effective water resources management, then, is fundamental when addressing pervasive rural poverty problems while promoting economic growth in Bangladesh. This critical water resource has to be managed in a strategic, integrated, and participatory manner that includes mobilizing, organizing, and empowering stakeholders. 44. The Governments commitment to a system of sound water resources management addressing these issues was reflected in the BWFMS and FFYP developed by the mid-1990s. Based on the Governments main instrument to have the strategy implemented, the SSWRDSP was launched in 1996 to enhance rural incomes by developing community-based WMAs and community-managed, small-scale infrastructure. It has been an effective means to reduce rural poverty.

12 45. Participatory water resources development and management is necessary to effectively implement key principles by strengthening the implementation framework; this has been demonstrated under the SSWRDSP. Key elements still be incorporated include (i) ensuring stringent coordination of stakeholders at the earliest stages of the project cycle through effective internal quality control and support; (ii) delineating increasing roles for LGI involvement in line with the local government reforms along with necessary capacity development of LGIs; (iii) reorganizing LGED as an effective water resources sector agency with the necessary managerial capacity for nonengineering issues; and (iv) supporting completed subprojects with sound financial, social, and technical audits. Expansion of small-scale water resources development is one of the key elements to reducing rural poverty effectively. B. Objectives and Scope

46. The overall goal of the Project is to support the Governments poverty reduction effort by increasing sustainable agricultural and fishery production. The Projects objective is to develop sustainable stakeholder-driven, small-scale water resources management systems with special attention to the poorer section of the population. This objective will be achieved by (i) developing improved means of beneficiary participation in the selection, design, implementation, and O&M of small-scale water resources management development systems; (ii) rehabilitating and constructing small-scale water resources management infrastructure with appropriate agricultural extension, fisheries extension, and aquaculture development; (iii) developing effective management of environmental and social impacts of subprojects, including on those engaged in practicing floodplain capture fisheries; and (iv) developing institutional strengthening and capacity building of relevant Government and stakeholder organizations to ensure adequate support for small-scale water resources development at all levels. 47. During the project preparatory (footnote 3), a comprehensive study was carried out in the four sample subprojects, which were selected to represent about 300 small-scale water resources schemes scattered in the entire country. The study indicates that these subprojects will deliver agricultural benefits meeting local needs priorities. Environmental, social, and poverty impacts are expected to be positive. Approximately 75 percent of the farmers in the four subproject areas are smallholders and marginal and landless farmers. The proportion of poor (a range from 60 percent to 70 percent) among project beneficiaries is larger than their proportion in the overall population of the country (46 percent). 48. The Project will be implemented in 61 of the countrys 64 districts.18 While the ongoing SSWRDSP concentrated on the western parts of the country, the new project will be implemented across the entire nation in line with medium- and long-term investment plans for small-scale water resources development. Approximately 300 planned subprojects are expected to result in sustainable water engagement infrastructure benefiting between 180,000 ha, and 200,000 ha of land cultivated by over 280,000 farm households. Subprojects will cover a command area of up to 1,000 ha with an average of some 650 ha of benefited area in line with experience to date. Consistent with a sector approach and in accordance with the NWMP and NWP, the Project will help the Government develop sustainable small-scale water resources for better sector performance. The Project will be implemented by strengthening LGED, which has performed satisfactorily under the SSWRDSP.

18

The Project will not be operating in the Chittagong Hill Tracts considering the different physical, institutional, and sociocultural conditions. Interventions for submersible embankments in the northwest region will be considered only if it can be proven that beneficiaries have the capacity to sustainably manage such structures, given the unsatisfactory experience with such structures in the past.

13 49. The project activities are grouped into two components: Participatory Water Resources Development, and Institutional Strengthening of the Small-Scale Water Resources Sector. 1. Component A: Participatory Water Resources Development

50. Component A will support participatory development of the anticipated 300 small-scale water resource subprojects. To achieve this, the Project will utilize a process of subproject selection, appraisal, and design involving area stakeholders throughout its implementation. WMAs will be established and provided with substantial institutional support for 3.5 years before and during construction. The WMAs are expected to be involved in design discussions as well as in overseeing the construction process and will later take full responsibility for O&M once the subprojects are handed over to them. To expedite beneficiaries productive adjustment to their new water regimes, postconstruction fishery and agricultural programs will work with the WMAs. Monitoring and quality control mechanisms will gauge environmental and benefit attainment issues in each subproject. a. Mobilization of Beneficiary Participation

51. The Project will provide extensive training for mobilizing beneficiaries to participate in subproject selection, planning, implementation, and O&M. Participatory rural appraisals (PRAs) will be conducted to assess stakeholders needs and their concept of the proposed subprojects. Subproject appraisals will go through the selection process as well as provide the foundation for designs that will incorporate appropriate social, economic, and engineering aspects. NGOs will be contracted to facilitate WMA development in subproject areas. This will include (i) training and fielding of male and female facilitators and community organizers; (ii) organizing and training labor contracting societies (LCSs); and (iii) training of upazila and district-level engineers on the procedures and skills required for beneficiary participation and WMA development. The training of WMA members will include the basic requirements regarding cooperative management and administration, construction supervision, and O&M planning and management. The full backing of each local community will be focused through the WMAs and any resource-use conflicts identified (and, if possible, resolved) at the outset of the process. b. Community-Based Infrastructure Development

52. The Project will support the development of new civil works to rehabilitate and/or upgrade the following types of water management schemes: Flood management. Rehabilitate and construct embankments and/or sluice gates to reduce the extent and duration of flooding of farmland. (ii) Drainage improvement. Reexcavate drainage canals to increase the capacity of drainage systems to benefit fisheries and local navigation as well as agriculture. (iii) Water conservation. Develop the water retention capacity of existing baors, beels, and canals to increase availability of irrigation water by installing a water retention structure and by reexcavating of the bed of the water body. (iv) Command area development. Improve the existing irrigation system by providing better distribution systems (improved canal networks, lining of canals, installation of water control structures, etc.) to extend the irrigable area. Where needed, fish-friendly structures will be incorporated into the designed infrastructure. (i)

14 53. Designed by private Bangladeshi consulting firms, the water management infrastructure will be built by local contractors. The design and operating modalities of the infrastructure will minimize the negative impact on fisheries and provide for appropriate mitigation measures such as controlled partial flooding of the subproject area. The WMAs will be closely involved in design and construction, and responsible for the eventual O&M of the infrastructure. c. Water Resources Oriented Support Programs

54. The Project will provide agricultural extension services in the subproject area through local offices of the Department of Agricultural Extension (DAE) to promote rapid adoption of improved, environmentally sound agricultural practices made possible or more attractive to farmers through their subprojects water resources development. In particular, the Project will support (through training and services such as soil testing) (i) introducing integrated pest management to encourage optimum use of agrochemicals, (ii) expanding production of high yielding variety rice crops, and (iii) diversifying cropping patterns to increase farm revenues and improve nutrition. These activities address (i) measures necessary to adjust cropping patterns and intensity in the subproject area, and (ii) mitigation of the loss of floodplain fisheries. 55. The Department of Fisheries (DOF) will provide fisheries extension to the concerned stakeholders and train them in managing the fisheries resources available to them in the subproject area's beels, khals and other open and semiopen water bodies. Culture fishery opportunities such as those created in the khals behind water retention structures will be reserved for the poor and those having lost access to floodplain fisheries. Khas water bodies within the subproject boundaries will be leased out to the poor for a nominal fee. d. Monitoring and Quality Control

56. The Project will ensure the effective identification and management of environmental impacts at each subproject site by applying procedures and guidelines developed under the SSWRDSP for (i) undertaking an initial environmental examination (IEE) environmental impact assessment (EIA) during the PRAs and feasibility study periods; (ii) preparing an environmental management plan; and (iii) monitoring and managing impacts, both inside and outside the subproject benefit area. Environmental indicators, including water quality, will be monitored during construction of the infrastructure and during the infrastructure's subsequent O&M. Appropriate corrective measures will be taken in cases where the value of an indicator is found to lie outside the acceptable range of values. A biodiversity baseline study will be carried out. As part of the environmental program, a selection of local stakeholders will receive training in the use of sensitive ecosystems. Such training is intended to both encourage responsibility for activities relative to the environment and enable local people to more effectively monitor environmental effects of their subprojects. 57. A monitoring system will be utilized to enable project management to effectively control the quality of both institutional and construction aspects of the Project. In addition, benefit monitoring functions will help track the effectiveness of completed subprojects in fulfilling the Projects objectives of enhanced agricultural production and poverty reduction. 2. Component B: Institutional Strengthening of the Small-Scale Water Resources Sector

58. Institutional strengthening provided under component B will enhance the capacity of concerned sector organizations to effectively participate in small-scale water resources

15 development. This program will include (i) the advisory services of an international consulting firm in association with a national firm or firms, and (ii) the training of organizations (other than WMAs)19 involved in the Project's implementation. a. Support for Project Management

59. Consulting services will be provided to assist LGED in building up its capacity at the national, district, and upazila levels to manage the planning and construction of small-scale water management infrastructure and in managing the use and maintenance of the infrastructure on behalf of local government. Assistance will primarily be provided to (i) refine and develop the systems and procedures established under the SSWRDSP for subproject planning, design, construction, O&M, environmental monitoring, social monitoring, and benefit monitoring and evaluation; (ii) refine the systems and procedures established under the SSWRDSP to prepare environmental reports and implement mitigation plans and monitoring of environmental impacts; (iii) review bylaws for WMAs; (iv) facilitate the planning, programming, and quality control of subprojects; and (v) guide LGED in meeting ADB's reporting requirements. By the end of the Project, LGED will be expected to have an improved capacity to undertake small-scale water resources development without substantial additional TA. b. Capacity Building for Sustainable Management

60. According to perceived needs, the Project will provide training for institutional strengthening within various organizations involved in the small-scale water resources sector. While some of this strengthening is aimed at enhancing performance in the implementation of the water resources development activities of the Project, the training program is largely intended to enhance the long-term abilities of the institutional stakeholders involved to carry out small-scale water resources development according to the NWP. The Project will support establishment of a water resources development unit within LGED headquarters capable of managing the development process. The training program will develop awareness of upazilaand district-level staff of the principal engineering and nonengineering dimensions of small-scale water resources development; and build capacity of staff to play a meaningful role in the participatory identification and planning of subprojects, and to effectively manage the implementation of subprojects. 61. The consulting services team will design the programs, select and contract competent agencies to provide the training, and supervise and evaluate the delivery of the training program. The training will be designed in response to well-defined needs and provided in accordance with priorities based on the urgency of those needs. C. Cost Estimates

62. The project cost is estimated at $78.0 million, of which $15.9 million is the foreign exchange cost (20 percent) and $62.1 million equivalent (80 percent) the local currency cost. Table 1 summarizes these cost estimates, the details of which are set out in Appendix 5.

19

Training of the WMAs is part of the mobilization of beneficiary participation subcomponent of component A.

16 Table 1: Cost Estimates ($ million) Component A: Participatory Water Resources Development B: Institutional Strengthening of Small-Scale Water Resources Sector Subtotal (A&B) Service Charge TOTAL D. Financing Plan Foreign Exchange 10.7 4.2 14.9 1.0 15.9 Local Currency 55.9 6.2 62.1 0.0 62.1 Total Cost 66.6 10.4 77.0 1.0 78.0

63. ADB will provide a loan equivalent to $34.0 million from its Special Funds resources to finance about 44 percent of the total cost of the Project. The loan will finance foreign exchange costs estimated at $7.6 million (48 percent of the total foreign exchange cost) and $26.4 million of the local currency cost. The Government of the Netherlands confirmed that it will provide grant funds totaling $24.3 million (to cover $8.3 million of the foreign exchange cost and $19.8 million of the local currency cost) for part of component A for NGO services and civil works, and most of component B for consulting services and training. The Government will provide the local currency cost estimated at $17.3 million equivalent (22 percent of total cost) for incremental project staff, taxes and duties, and land acquisition and compensation. In addition, the beneficiaries are expected to contribute approximately $2.4 million equivalent in the form of O&M costs incurred during the project implementation. The financing plan is summarized in Table 2 and details are provided in Appendix 5. Table 2: Financing Plan ($ million) Source of Financing Asian Development Bank Netherlandsa Government Beneficiaries Total
a

Foreign Exchange 7.6 8.3 0.0 0.0 15.9

Local Currency 26.4 16.0 17.3 2.4 62.1

Total Cost 34.0 24.3 17.3 2.4 78.0

Percent 44 31 22 3 100

The Netherlands Government has assured ADB that grant funds would be approved before loan effectiveness scheduled for the fourth quarter of 2001. About $8.53 million equivalent will be provided for consulting services. The consultants will be selected by ADB, and engaged and administered by the Government of Bangladesh.

E.

The Executing Agency

64. The LGED under Ministry of Local Government, Rural Development and Cooperatives (MOLGRDC) will be the Executing Agency for the Project.

17 F. Implementation Arrangements 1. Organizational Arrangements

65. The implementation arrangements developed under the SSWRDSP will be applied for the Project with improvements. A project steering committee will be formed and consist of representatives of all ministries and agencies concerned.20 The committee will be chaired by the secretary of MOLGRDC, with the chief engineer, LGED as member-secretary. Representatives from ADBs Bangladesh Resident Mission and the Government of the Netherlands will participate in the committee as observers. Committee meetings will be held semiannually during the first year and annually from the second year to provide overall coordination, or whenever an issue requiring interministerial coordination arises. 66. The organization chart in Appendix 6 shows the relationships of the various entities participating in project implementation. The project management office (PMO), established at LGED headquarters in Dhaka since July 1995 to manage implementation of the ongoing SSWRDSP, will be transformed to the PMO for the proposed Project by 31 October 2001. A senior engineer of LGED of the rank of executive engineer or higher heads the PMO as project director. The PMO will have full authority to execute the Project and liaise with ADB. The PMO will (i) coordinate with other agencies concerned; (ii) prepare an overall implementation plan and annual project work plans and budgets; (iii) review and approve subproject appraisals; (iv) review and approve designs; (v) supervise LGED district offices in preparing tender documents, evaluating bids, and awarding contracts for equipment, civil works, and other project activities; (vi) maintain financial accounts; (vii) prepare periodic reports on implementation progress; and (viii) monitor project progress and evaluate environmental impact,21 social impact, and project benefits for poor people. 67. Under close guidance and supervision of the PMO, LGED district offices will be responsible for the day-to-day implementation at the subproject level with assistance from the LGED upazila offices. The LGED district executive engineer will act as subproject manager and (i) prepare individual subproject implementation plans in consultation with local stakeholders; (ii) coordinate with other agencies and NGOs, firms, and institutes concerned; (iii) help local stakeholders to organize into WMAs with support from NGO, and firm facilitators and LGED community organizers; (iv) carry out field surveys with support from the PMO quality control assurance (design) unit;22 (v) supervise construction activities and make payments to contractors; and (vi) monitor and report subproject development to the PMO. 68. A district-level small-scale water resources development committee chaired by the deputy commissioner with the assistance of the LGED district executive engineer, as member-secretary will meet when required to coordinate the activities of the Government

20

21

22

The Project Steering Committee will include Ministry of Finance Ministry of Water Resources, BWDB, Water Resources Planning Organization, Ministry of Agriculture, Department of Agricultural Extension, NGO Affairs Bureau, Ministry of Land, Ministry of Youth and Sports, Department of Youth Development, Department of Women's Affairs, Rural Development and Cooperatives Division of MOLGRDC, Department of Cooperatives, Ministry of Fisheries and Livestock, DOF, Department of Environment, Economic Relations Division, Implementation Monitoring and Evaluation Division, and Planning Commission. The results of monitoring the environmental impact will be submitted to Department of Environment. This unit will recruit a senior design engineer, hydrologist, four midlevel engineers, four junior water resource engineers, and supporting staff.

18 agencies.23 MOLGRDC will issue an order requiring the Upazalial Development Coordination Committee, composed of the union chairpersons and upazila-level officials, to put the review of the subproject progress on the agenda of all its regular meetings. LGED district offices will maintain close coordination with BWDB through the Inter-Agency Project Evaluation Committee to ensure that proposed subprojects do not conflict with planned or existing BWDB projects. 69. In support of LGEDs implementation, DAE will provide technical input during identification, appraisal, and design of each subproject, and training and extension for increased crop production and diversification. DOF will provide technical input during identification, appraisal, and design of each subproject. DOF will contribute to the fisheries development activities focusing on the support to the project-affected persons. Department of Environment will review the IEEs/EIAs of subprojects and monitor the environmental impact of the Project independently. Qualified national NGOs, firms, or institutes will be recruited for PRAs and beneficiary mobilization of the WMAs to ensure effective subproject screening and stakeholder involvement and to form and train WMAs and LCSs. Such NGOs, firms, or institutes will be selected by the PMO in consultation with the consultants. NGOs will also assist the LCS participants in identifying sources for credit and other assistance. 2. 70. (i) Subproject Selection, Processing, and Environmental Assessment

To qualify for inclusion under the Project, a subproject must meet the following criteria: The subproject must be in line with the district strategies and guidelines for smallscale water resources interventions to be developed during the process of the NWMP as approved. More than 40 percent of the subproject benefit area will be operated by landless sharecroppers, and marginal or small farmers (up to 1.0 ha); preference will be given to subprojects with higher percentages of land operated by these farmers and to subprojects located in food-deficit areas.24 Each subproject will entail rehabilitating or upgrading an existing water control system, which may include new supplementary structures in existing systems. Not more than 30 percent of the households depend on full-time or part-time capture fisheries within the subproject area. The subproject cost must not exceed $1,000/ha for command area development schemes and $500/ha for other schemes without ADB approval. The benefited area served by the subproject must be more than 50 ha and must not exceed 1,000 ha. Each subproject must be technically feasible; economically viable (the economic internal rate of return [EIRR] should be more than 12 percent); and socially and environmentally sound (requiring no or minimal displacement of people and land acquisition. The IEE or EIA study has been undertaken and appropriately approved after consulting the beneficiaries and those affected by the project, concluding that the subproject is environmentally sound and the negative consequences can be mitigated.

(ii)

(iii) (iv) (v) (vi) (vii)

(viii)

23

24

It will include the additional deputy commissioner (revenue), the concerned LGED upazila engineer, and the district-level representatives of DAE, Department of Cooperatives, DOF, Department of Womens Affairs and Department of Youth Development. The meeting will address issues like access of WMAs to the public water bodies and land acquisition. This will be applied to ensure that the proportion of poor among project beneficiaries will be substantially higher than national average.

19 (ix) Local stakeholders of each subproject must have indicated support for the proposed subproject and willingness to form a WMA, or in the case of a subproject with mainly fisheries benefits, fisherfolk must support the undertaking. Recurrent maintenance costs of each subproject beneficiary will be covered by the O&M budget of the WMA's O&M committee, and funds collected from the direct subproject beneficiaries in proportion to the benefit they receive.

(x)

71. On the basis of the selection criteria and in consultation with stakeholders, the union parishad will initiate a subproject proposal. The LGED upazila engineer will prepare the subproject proposal and submit it to the UDCC for clearance. Then, the LGED upaliza engineer will submit the proposal to the PMO through the LGED district executive engineer. The PMO will prescreen the proposal during a multidisciplinary field reconnaissance visit. This is followed by (i) a PRA with the engagement of contracted NGOs, firms, or institutes, and (ii) a feasibility study with the engagement of private firms, both undertaken by the PMO in consultation with beneficiaries and affected persons, Union Parishad, and the Upazalial Development Coordination Committee. Viable subprojects will be cleared by the Inter-Agency Project Appraisal Committee. The detailed design will be prepared by the PMO after the prescreening of the subproject proposal. 3. Water Management Associations and Infrastructure Development

72. Following subproject approval, the process of establishing WMAs will be initiated under the legal framework of the Cooperatives Societies Ordinance (1984) and Cooperative Societies Rules (1987) as amended; the new Cooperatives Act, which is due to be enacted; or alternative legal framework, which may be framed pursuant to the recommendations of the Interagency Task Force on Guidelines for Participatory Water Management. Contracted facilitators will promote membership enrollment, collection of beneficiary contributions, preparation for election, conflict resolution, and registration. The PMO will also undertake engineering design work in consultation with stakeholders. A resettlement (land acquisition) plan, if relevant, along with an environmental mitigation plan will also be drafted in consultation with those affected,25 with union parishads providing coordination support.26 This process will culminate in the signing of a formal implementation agreement by the WMA, local government representatives, and LGEDs district executive engineer. To sign the implementation agreement, the WMA must have achieved a number of preconditions including (i) WMA enrollment of at least 70 percent of beneficiary households;27 (ii) collection of beneficiary contributions equivalent to an annual O&M requirement, deposited in a joint account by LGED and the WMA; and (iii) Borrowers approved plans in consultation with people-affected by the environmental mitigation and resettlement. 73. Subsequent to the implementation agreement, tender invitation and LCS training will be initiated. The WMA will actively participate in observing construction and may complain to the upazila engineer or higher authorities under a complaints procedure. Final payment to contractors will only be effected after sign off by a quality control engineer before the final bill. LGED will also undertake effective internal office inspection and performance audits with
25

26

27

The resettlement plan and the environmental mitigation plan will be signed-off by LGED and WMA to confirm that those are prepared in order. For conflicts that cannot be resolved at this level, the matter will be raised to a committee established for this purpose through a notice in the official gazette issued by MOLGRDC called the Local Conflict Resolution Committee. Until there is an elected chairperson at the upazila, the committee will be chaired by the upazila nirbahi officer. The members will be authorized to conduct inquiries and to take measures to enforce its decisions and to take preemptive action. The facilitators will facilitate this process. At the same time, enrollment of at least the same percentage of large- and medium-sized farm households will also be checked and confirmed.

20 qualified engineers from the PMO and the consulting team. To direct benefits to the poor, all earthworks of the Project will be carried out by an LCS comprising vulnerable persons; destitute women will be given particular preference. The WMA will also receive DAE and DOF support to prepare agriculture and fisheries development plans. DAE and DOF will organize training for WMA representatives who will work as liaison extensionists to beneficiaries. 4. Operation and Maintenance Arrangements

74. In line with the NWP, each water control system rehabilitated and/or upgraded under the Project will be turned over to the WMA concerned within one year after completion. The WMAs will have primary responsibility for O&M, including all routine and periodic maintenance, while the Government will provide assistance for major improvements and repair of catastrophic damage due to events exceeding the design standards of the infrastructure. Through registration of WMAs and leases of Government land, WMAs will be ensured adequate authority to implement their O&M responsibilities, including enforcing decisions, mobilizing resources from beneficiaries through fees, and managing embankment lands, waters, and other parts of the scheme. The Government land comprising water bodies, embankments, and drainage canals will be leased to the WMAs, which will promote income generating activities that use scheme facilities, such as tree planting on embankments and aquaculture in ponds and canals. These will be targeted at providing opportunities for the poor. 75. To establish sustainable O&M arrangements, the WMA will form an O&M committee during the construction period, which will prepare a takeover schedule, beneficiary list and maps, and an O&M plan comprising operating guidelines, maintenance plan, and resource mobilization plan, with assistance from the PMO. After civil works are completed, the PMO will provide on-the-job training to the WMA for up to a full year to undertake (i) annual inspection through a joint walk-through by the WMA and LGED upazila staff, (ii) identification of maintenance needs, (iii) preparation and implementation of an annual O&M plan, and (iv) raising and collecting of O&M fees. After this period and satisfaction of preconditions for sustainable O&M, the WMA will enter into a formal O&M agreement with the local government on project facilities. After the O&M agreement is signed, the WMA will have access to the funds placed as the beneficiary contribution, which will be jointly managed by district executive engineer and the WMA. To ensure sustainable operation of the WMA, LGED upazila staff will conduct annual inspections and provide technical guidance as needed. Annual audits will be undertaken by Department of Cooperatives. 5. Institutional Framework of WMAs

76. The Project will help the Government study alternatives to cooperatives, such as WMAs, by (i) assessing the effectiveness of the existing institutional framework in attaining its objective of sustainable O&M, (ii) identifying potential measures for improvement including the possibility of defining an alternative legal framework, and (iii) preparing actions for pilot testing, establishing, and operating the potential improved measures. The study will be conducted at the early stage of project implementation after inception, in collaboration with the interagency task force that prepared the Governments guidelines for Participatory Water Management, which has endorsed the existing institutional framework of WMAs under ongoing SSWRDSP. 6. Implementation Schedule

77. The Project will be implemented over seven years, including one-year for O&M support. Implementation of 40 subprojects whose WMA formation was initiated under the ongoing

21 SSWRDSP will commence in the first and the second year. These subprojects are followed by 260 new subprojects. The proposed implementation schedule is given in Appendix 7. An implementation schedule comprising four batches of subprojects (one batch commenced per year for four years) has been prepared on this basis, with adequate overprogramming of subprojects under the institutional development process. The Project will also monitor and supervise the O&M of schemes developed under the SSWRDSP. 78. A typical subproject will take about two years for development of the WMA followed by two years for construction and an additional year for guidance on O&M, concurrently with agricultural and fishery extension support, totaling five years from identification to O&M turnover. Project progress will be jointly reviewed biannually by the Bangladesh Government, ADB, and the Government of the Netherlands to ensure that the required rate of progress is achieved without compromising project quality. 7. Procurement

79. Supplies to be procured under the Project, estimated to cost about $2.4 million and consisting generally of service vehicles, construction equipment, computers, and survey and laboratory equipment, will be packaged, procured, and awarded in accordance with ADBs Guidelines for Procurement. Supply contracts not anticipated to exceed the equivalent of $500,000 will be awarded in accordance with international shopping procedures. Other miscellaneous equipment and supplies, with each package valued below the equivalent of $100,000, will be procured by direct purchase procedures. 80. Civil works envisaged under the Project will consist mainly of small labor-intensive construction activities at widely dispersed locations. Construction techniques will be simple and of a type extensively used in Bangladesh. The total cost of civil works contracts is estimated at $37 million, with an average cost of about $125,000 per contract. Such small contracts are unlikely to attract international contractors and are within the capability of local contractors. Therefore, all civil works contracts, except small earthwork contracts with LCSs will be awarded under local competitive bidding procedures following standard LGED procedures acceptable to ADB. A summary of prequalified contractors and the results of prequalification will be provided to ADB for information. Award of contracts valued above $300,000 equivalent will be subject to prior approval of ADB. Small earthwork contracts valued at less than $5,000 equivalent will be carried out by LGEDs force account utilizing LCSs of disadvantaged poor groups. 8. Consulting Services

81. The consultants will be selected by ADB and engaged by the Government in accordance with ADBs Guidelines on the Use of Consultants and other arrangements on the use of domestic consultants satisfactory to ADB. A total of 937 person-months of consulting services is required, including 808 person-months of domestic and 129 person-months of international consulting inputs. The total cost of the consulting services is estimated at about $8.3 million equivalent, and will be financed by the Government of the Netherlands on an untied grant basis. The grant will be administered by ADB. Appendix 8 shows the outline terms of reference for consulting services. 9. Loan Disbursements

82. To ensure timely release of funds for small payments, an imprest account will be opened in the name of the Project at a commercial bank designated by the Bangladesh Bank

22 immediately after loan effectiveness. The initial deposit of the imprest account will not exceed $3 million and be based on estimated expenditures of the first six months of project expenditure. The statements of expenditure procedure will also be adopted to facilitate reimbursement and liquidation of a large number of small contracts, with a ceiling of $50,000 per contract in accordance with ADBs Loan Disbursement Handbook (2001). 10. Monitoring and Evaluation

83. The monitoring and evaluation of subprojects will be carried out under the direction of the PMO. Necessary surveys will follow the prescriptions of ADBs Handbook on Benefit and Monitoring and Evaluation (1992), Environmental Guidelines for Selected Agricultural and Natural Development Projects (1991), Guidelines on Incorporation of Social Dimension in Bank Operations (1993), and Environmental Assessment Requirements and Environmental Review Procedures of the Asian Development Bank (1993). Within six months of loan effectiveness, LGED will have established a management information system based on the system developed for SSWRDSP. This management information system will be used, among other things, for continuous effect monitoring and evaluation of all subprojects in the implementation plan of the SSWRDSP and the proposed Project in a manner acceptable to ADB.28 Specific indicators to be monitored will include crop type, area, and yields; fisheries production and beneficiaries; water levels, infrastructure operational status, water quality, institutional membership, financial status, meetings, and elections, and O&M budgets, plans, funds collected, and funds disbursed. 84. BME requires useful and statistically valid assessments and, to be meaningful, will be carried out by independent specialized organizations contracted by the PMO. BME studies will be conducted on 10 percent of subprojects in the implementation plan and the impact assessment study will be carried out five years after subproject completion. The Government will engage an organization, which will be contracted to carry out both the baseline and the impact assessment studies. The BME shall assess farm income for different farm categories, daily wages, additional employment creation (gender disaggregated), in/out migration, distributive impacts of changes in fish production (distinguishing between capture and culture fishery), and perceptions of subproject benefits. 85. In addition, the Government will engage a consulting team: 11 person-months of international consulting and 22 person-months of domestic consulting to undertake external performance monitoring and evaluation throughout the duration of the Project. This team will review work progress against implementation plans, assess the quality of institutional development and construction activities, and provide advice leading to an overall improvement in project performance. 11. Accounts, Audit, and Reports

86. LGED will establish and maintain accounts for expenditures incurred under the Project. Based on successful performance of accounts, the Government will ensure that all accounts and related financial statements are audited by auditors acceptable to ADB. An audit report with certified accounts and financial statements will be submitted to ADB within 12 months after the end of each fiscal year. The imprest account and expenditures reimbursement or replenished and liquidated under the statement of expenditures procedure will be included in the audit

28

Data quality is expected to improve in the proposed Project because baseline data collection will be outsourced; trained permanent staff of LGED will collect postproject effect data.

23 report, and the opinion will be included separately in the audit report. The audit may be carried out as part of the regular annual audit of LGEDs general accounts. 87. The PMO will prepare quarterly progress reports giving details on progress in the standard format described in the project administration memorandum, and will submit them to ADB and the Royal Netherlands Embassy in Dhaka, within one month after the end of the period under review. The PMO will also submit benefit monitoring and evaluation reports, the midterm review report, and the project completion report (three months before the loan closing date). 88. The Project will contain a component for external performance review for monitoring the subprojects of the ongoing SSWRSP and the proposed Project on the (i) status of WMA development and sustainability, (ii) progress of social and environmental measures, (iii) quality and functional status of infrastructure, and (iv) condition of O&M. Annual external performance monitoring will be conducted by separate consulting firms. 12. Advance Procurement Action

89. Upon request of the Government, ADB management has approved advance procurement action to facilitate timely implementation of the Project. Advance procurement action was required for procurement of urgently needed consulting services, materials, equipment, and vehicles. The Government was advised that approval of advance procurement action does not commit ADB to finance the Project. 13. Midterm Review

90. A comprehensive midterm review will be conducted jointly by the Bangladesh Government, ADB, and the Government of the Netherlands, in the third year of implementation. The review will include (i) progress of the Project, including planning and design, stakeholder participation, physical works construction quality, irrigation/drainage area rehabilitated and/or upgraded, and possibilities for modifying the project scope; (ii) future implementation plans and targets; (iii) allocation of funds among loan categories; (iv) effectiveness of the project management structures and implementation arrangements including TA consultants, and any need for modifications; (v) environmental, social, economic, and technical aspects of the Project; and (vi) institutional sustainability and progress on developing an adequate institutional framework at all levels. Compliance with loan covenants and reporting requirements will also be reviewed. G. Environmental and Social Measures 1. Environmental Measures

91. The Project is classified under environmental category B. IEEs were carried out in four sample subproject areas in accordance with ADBs environmental guidelines to assess possible adverse impacts arising from the Project. These subprojects include the four main types of infrastructure development to be carried out: flood control and management, drainage improvement, water conservation, and command area development. All the subprojects were considered environmentally sound as the possible negative consequences can be mitigated to an acceptable level. A summary IEE is attached as Appendix 9.

24 92. An IEE or EIA will be carried out for all subprojects, at the feasibility study level. When warranted, a full-scale EIA, or other studies to deal with specific issues, will be undertaken. LGED will consult with the stakeholders about the environmental assessments prior to approval of all the subprojects to be constructed and forward a copy to the Department of Environment. Before undertaking subproject construction, the subproject must be shown to be environmentally feasible and that any negative consequences can be mitigated to an acceptable degree. Reports for subprojects that cost more than $1 million equivalent, must be submitted to ADB for approval before their implementation. At its discretion, ADB may request to review a report before implementation of subprojects with costs estimated at less than $1 million equivalent. Baseline water quality information will be established by taking and analyzing representative samples of surface and groundwater for each subproject. 93. The water management schemes to be upgraded and/or rehabilitated under the Project are relatively small. They are generally within existing flood control, drainage, and irrigation systems, and as such, will not significantly affect the hydrology of the system. Most subprojects identified will improve flood control and drainage, and reduce the effects of early floods during the premonsoon period and water logging during the postmonsoon period; they will have a favorable environmental impact. Other subprojects will provide water storage to enable additional irrigation during the dry season. 94. LGED has established an environmental monitoring program for the Project to quantify effects on the environment in environmentally sensitive subproject areas. The Government has recognized potential problems associated with intensive agricultural production and has supported initiatives to introduce integrated pest management. The Project will continue to expand integrated pest management activities through training and extension services, and the provision of essential equipment for monitoring water quality. 95. LGED capacity will be developed to support the imparting sustainable resource use ethic among beneficiaries. This will form an integral part of an expanded training program for O&M personnel in the WMAs and local LGED staff, as well as representatives from the union parishad. An important aim of this approach is to ensure wetland and aquatic habitat is preserved as fish breeding sanctuaries and important biodiversity sites are not violated. 96. To reduce any adverse impact on subsistence floodplain fisheries, subprojects will include improved design and management for sluice gate operation to ensure environmental requirements are met for fish migration and land inundation during critical periods. Aquaculture will be introduced in canals, borrow pits, ponds, and beels. 2. Social Measures

97. A socioeconomic analysis was carried out in four subproject areas,29 to assess the expected socioeconomic impact of the Project. The majority of farmers in the subproject areas are marginal farmers, with 0.2 to 0.5 ha of land (40 percent), and small-scale farmers, with 0.5 to 1.0 ha (25 percent); 10 percent are landless farmers, and 25 percent have medium- and large-size holdings. The incidence of poverty is high. The landless and marginal farmers live below the extreme poverty line and the majority of smallholders fall below the moderate poverty line. The Project will contribute to increased agricultural production, improve food security, and address the viability of poor rural people. Agriculture benefits from the subprojects are likely to accrue mainly to landowners. However, the project design ensures that the poor, including
29

Abatpur, Choto Kumira, Purba Sayedpur, and Sriramkandi.

25 landless and marginal farmers, at least share equally in the distribution of the income growth benefit from the Project through increased agricultural production and employment opportunities (Appendix 10). The benefit gained by landowners due to increased value of land is expected to be marginal. 98. Groups of fisherfolk may be negatively affected by the Project. Where neither design, nor planning, nor implementation can reduce these groups losses, mitigation measures will ensure access to new opportunities for those who have lost out in capture fisheries. A fisheries development plan will be developed in a participatory manner in accordance with the Guidelines on Participatory Water Management and ADBs fisheries policy ensuring that affected people maintain their original standard of living at a level at least equal to what they enjoyed prior to the Project. Compensation will be provided by ensuring user rights to water bodies within the project area for the affected poor people (priority will be given to poor fisherfolk and destitute women) and by providing training to poor fisherfolk to increase the possibility of accessing alternative income-generating activities. To facilitate this process the Project will provide assistance to establish contact with existing microfinance programs. Additionally, preference will be given to poor fisherfolk and destitute women in terms of access to working opportunities generated by the Project. 99. Indigenous peoples issues are not anticipated to be significant in the Project (Appendix 10). However, where issues related to indigenous peoples may be identified, ADBs Policy on Indigenous Peoples (1999) will be applied. 100. The SSWRDSP found that womens equal participation and involvement in small-scale water management projects is essential for the sustainability of subprojects. A gender strategy will be developed for this Project,30 to ensure that gender concerns are addressed and dealt with in the most effective and efficient manner. The Project will provide training (confidence building and management skills) for women to enable them to participate in WMAs and will also give specific attention to employment of female staff at all levels. Priority will be given to local poor women in (i) formation of LCSs, (ii) employment opportunities generated by the Project, and (iii) O&M work of the Project. Additionally, all relevant training activities included in the Project will address gender concerns, and at least 30 percent of participants in training activities should be women. All facilitators, community organizers, socioeconomists, assistant engineers, and engineers will be trained in gender issues within the sector, and special training will be provided for women on various aspects, such as vegetable gardening and production. 101. Resettlement and land acquisition effects are not anticipated to be significant in the Project (Appendix 11). However, where land acquisition may be required, a land acquisition plan and resettlement plan will be prepared in accordance with ADBs involuntary resettlement policy and Handbook on Resettlement (1998), as amended from time to time.

30

An international gender specialist and a national gender specialist will be posted at the PMO to develop and implement a gender strategy for the Project.

26 V. A. PROJECT JUSTIFICATION

Financial and Economic Analyses 1. Financial Analysis

102. With the Project, farm financial returns (as indicated by increased net cropped income for benefited farms) are expected to range from Tk4,400 to Tk6,100 per ha, a 25 to 56 percent increase, depending on the subproject. To produce this additional agricultural output, labor demand will also increase. Labor income (combining both wage income and returns to family labor) will, on a per ha basis, be expected to rise by an additional Tk1,900 to Tk2,600. The ratio of expected benefits to regular O&M costs (for which landed beneficiaries are responsible) ranges from 12 to 1 for Abatpur to 47 to 1 for Choto Kumira. Financial returns, in other words, are such that farmers can easily undertake their O&M responsibilities and still have a large incentive to adopt the more intensive crop production made possible by the Project. 103. The poor (including marginal farmers and smallholder households, as well as the actual and functionally landless) are expected to have a share in this increased income. The annual income per household (from both agricultural production and increased labor usage) of this group is expected to rise by Tk3,000 to Tk3,900 (depending on the subproject). The share of total incremental financial benefits going to the poor is calculated to range from 44 percent in Choto Kumira to 62 percent in Purba Sayedpur. In economic terms, in which the opportunity cost of labor in the whole country is taken into account, the share of total incremental benefits accruing to the poor, however, may range only from 35 to 56 percent (with a per/ha weighted average of 39 percent); this more closely approximates the proportion of land owned by the poor within their respective subprojects. The efficiency of the Project in delivering benefits to the poor can be calculated (also in economic terms) by taking the ratio of the present value of benefits going to the poor to the present value of public investment in the four subprojects. By this measure, the poor can be expected to receive Tk1.4 in project benefits for every taka of public investment. 104. Based on the analysis of the sample subprojects, for the Project as a whole various results can be expected: (i) rice production will increase by 180,000 tons, producing incremental net crop income from rice of Tk820 million/year; (ii) overall net crop income will rise by Tk975 million (or 35 percent) in project areas; (iii) local labor demand will increase by 7.8 million days a year (or about Tk420 million); (iv) about 280,000 households (1.7 million people) will benefit, at an average of Tk4,900/year/household; (v) beneficiaries will cover Tk47 million in regular O&M costs, saving the Government (which would otherwise be responsible) $870,000 equivalent per year or $17.4 million over the 20-year life of the Project. The incremental benefits of participating beneficiaries will sustain O&M costs of subprojects. 2. Economic Analysis

105. The Project is expected to cover roughly 195,000 ha incorporated in about 300 subprojects. Over 280,000 farm families (1.7 million people) live in this aggregated area. While direct beneficiaries will be families with land, many smallholders and marginal farmers as well as the functionally landless will attain some level of output benefit. In addition, increased cropping intensity and a shift to high-yielding crop varieties will increase labor usage and family wage income.

27 106. Drainage infrastructure can bring more land into production and/or allow land to be productive throughout more of the year. Flood management projects reduce losses from flooding and allow the use of high-yielding varieties on more land. Water conservation schemes will allow supplementary irrigation in addition to increasing retained soil moisture after the rainy season. Command area development directly increases irrigation and leads to a shift to higher productivity irrigated agriculture. 107. Four sample subprojects (Abatpur, Choto Kumira, Purba Sayedpur, and Sriramkandi) were studied. The economic analysis (Appendix 12) of these subprojects produced EIRRs ranging from 21 to 36 percent. Sensitivity analyses showed these results to be fairly robust. Tests were conducted to see what would happen to returns if the rice price dropped (despite the World Bank projections for an increase) or general benefits were to decrease. Additional sensitivity scenarios included a possible increase in the cost of construction, a delay in construction completion, and a decrease in subproject life (which might occur if beneficiaries do not adequately fulfill their O&M responsibilities). While the subprojects remain economically viable at the tested levels of all of these items, the greatest risk to project returns would appear to be a substantial delay in construction completion. A decrease in subproject life, on the other hand, would seem to have limited effect on returns; the minimum subproject life span of 4 to 7 years (compared with the 20 years assumed for the base case) would still produce an EIRR of at least 12 percent. 108. The sample subprojects can be seen as reasonably representative of their types flood management and water conservation schemes); these types comprise 83 percent of the 300 expected subprojects to be constructed. To get a picture of the expected results for the full Project, the economic results from these sampled subprojects can be extrapolated on a per ha basis. The overall project EIRR based on this method is 19 percent when costs of the participatory water resource development component (including social mobilization, subproject selection, project management, monitoring, and postconstruction agricultural and fisheries programs) are included. If the costs of the institutional strengthening component are also included, the EIRR becomes 17 percent. B. Environment

109. Traditional agricultural practice in Bangladesh includes small-scale fish farming in private or village-owned ponds. These ponds also serve as homes for fish stock during the dry season and for floodplain fisheries during the wet season. Farming of fish in rice fields is also practiced. A significant part of farmers income is derived from this source. Because of these practices water management at the local level must be closely integrated to ensure that benefits from multiple uses can be maximized. The technical design of subprojects aims to balance these needs to maximize benefits. In undertaking the economic analysis for the Project, income from farming, fishing, and aquaculture sources have been included. The cultivated areas of floodplains and wetlands also form important breeding grounds for natural fish stock in lakes, rivers, and coastal areas. Lower areas in floodplains form biodiversity sanctuaries for fish, birds, small mammals, insects, and vegetation. These areas will be identified in environmental management plans and maintained in subproject areas. Where reasonable to do so, they will be rehabilitated. A biodiversity component is included in the environmental monitoring arrangements for the Project. 110. The intensified agricultural and fisheries development that will occur as a result of implementing the Project will bring with it increased use of fertilizers and pesticides with associated environmental and economic risks. The Government has supported initiatives to

28 introduce integrated pest management programs. The Project will continue to expand the introduction of integrated pest management by supporting this initiative through training and extension services for landholders in subproject areas. The Project will support capacity building in LGED by providing essential equipment for monitoring water and soil quality, and training in carrying out these activities. Capacity building will be provided to all levels of LGED staff to support the planning and management functions to ensure sustainable use of natural resources by beneficiaries in subproject areas. This will also form an integral part of an expanded training program for O&M personnel in the WMAs and representatives of union parishads. The important aim of this is to ensure that the wetlands and aquatic habitats will be preserved as protected fish-breeding areas. C. Impact on Poverty

111. The Project will have direct positive impacts on the income employment opportunities and the food security situation of poor people in the subproject areas included in the Project. Over 280,000 families (1.7 million people) live in this area. The Project will contribute to improving the rural economy by enhancing agricultural production. Drainage infrastructure can bring more land into production and/or allow land to be productive throughout more of the year. Flood management subprojects reduce losses from flooding and allow the use of high-yielding varieties on more land. Water conservation schemes allow supplementary irrigation in addition to increasing retained soil moisture after the raining season. Command area development directly increases irrigation and leads to a shift to higher productivity irrigated agriculture. 112. Agricultural benefits from the subprojects are likely to accrue mainly to the landowners. The poor, defined as landless, marginal, and smallholders, however, can also be expected to benefit in the with project scenario as labor income from the land area owned by the poor will increase and the poor will be hired on a wage basis to cover a part of the increased labor needs of medium and large landholders. In addition, labor for earthworks and other project-related construction and maintenance work will be drawn from local poor households. Overall, when combining crop production and labor income, the poor may attain a total of 49 percent of local benefits (in financial terms) of the project in Abatpur, 44 percent in Choto Kumira, 62 percent in Purba Sayedpur, and 58 percent in Sriramkandi. Finally, in some subproject areas, the Project will generate employment opportunities due to increased access to captured fisheries.31 113. In Choto Kumira, 853 poor households live within the project area (small, marginal farmers, landless laborers, and destitute women). While distribution within this group is likely to be uneven, the average incremental annual income per household (in financial terms) among the poor is expected to be Tk3,025 per year. In Purba Sayedpur 585 poor households are expected to benefit by Tk3,162 per year. In Abatpur and Sriramkandi subproject areas, 540 and 254 poor households, respectively, are anticipated to receive an average incremental annual income of Tk3,630 per year and Tk3,940 per year respectively. 114. The rise in local household income and agricultural production will result in improved welfare for the population in subproject areas. Water conservation is likely to have multiple uses in addition to irrigation, namely for livestock and domestic purposes. Adequate provision of water supply for domestic purposes can reduce the time spent for women collecting water, lead to better health, and improve vegetable growing. Additionally, SSWRDSP subprojects have
31

In five subprojects implemented under the SSWRDSP, 4 person-months of employment were created for 670 individuals benefiting close to 4,000 family members. The average daily income was around Tk75, combined with the volume of work (average 4 months per individual), this had a considerable poverty reduction impact on the families concerned.

29 shown that the SSWRDSP has had an impact in terms of crop diversification. Production of sugarcane, vegetables, and chilies has increased, generating employment opportunities for landless farmers and women in harvesting, cleaning, and drying. 115. The Project is based on participatory processes during selection, design, implementation, and O&M of subprojects. Participatory processes empower people and the institutions that affect their lives, to enable them to influence decisions that are made about their development and the resources involved. The Project contributes to poor beneficiaries managing and controlling water resources that are essential to their livelihood. Managing and controlling water resources reduce the vulnerability of marginal farmers and smallholders significantly, and thereby improves the possibility that they can move out of poverty. D. Risks

116. Project risks center around areas of sustainability and project implementation capacity. These risks are addressed by the Project. 117. Much attention in project design has been paid to the sustainability of the subprojects to be developed. O&M is to be the responsibility of those benefiting most from a subproject and who are closest to it. The WMAs must demonstrate their ability and intent to undertake their O&M responsibilities by contributing an amount equivalent to 3 percent of the construction costs of earthworks and 1.5 percent of the cost of concrete structures, before construction can begin. This amount is equivalent to the average annual amount that O&M functions are expected to cost. During subproject preparation, construction, and a postconstruction break-in period, a great deal of effort is to be put into preparing the beneficiaries to take over these O&M tasks. The result should be WMAs that are both capable of and willing to perform their O&M tasks. 118. Project sustainability will be further assured by the reorganization of LGED, which will continuously support small-scale water resources development activities in a much improved manner. In addition, an increased sense of ownership of subprojects implemented under the proposed Project will contribute to improved maintenance of small-scale water resources. 119. During the SSWRDSP, management capacity has steadily increased its rate of subproject implementation. Systems are in place and will be improved by the Project for survey and data collection, the feasibility analysis of subprojects, and construction management. The mobilization of effective WMAs has been troublesome in the past. However, for the Project, an improved system of contracting effective NGOs to be fully responsible for community mobilization is planned to be in place. The Project is also designed to have substantial input into strengthening the small-scale water resources sector, which should have the payoff of improving implementation of development activities within the sector. Disruption of existing production systems during the construction will be minimized because construction activities will be scheduled in the dry season (November-May) when construction will not disrupt the cultivation of monsoon crops or increase flood risk. VI. A. Specific Assurances ASSURANCES

120. The Government has given the following assurances in addition to the standard assurances, which have been incorporated in the legal documents.

30 (i) Within 18 months after the effective date, the Government will have enacted a national water code satisfactory to ADB based on the NWP and the Guidelines for Participatory Water Management, including provisions governing the ownership of small-scale water resources projects by LGIs, the role of LGIs and WMAs in the development of small-scale water resources projects, an appropriate accompanying regulatory framework, and acquisition of water rights in accordance with ADBs environmental guidelines and ADBs water policy. Within six months of the effective date, the Cabinet will have approved a cooperatives bill satisfactory to ADB, including provisions that address the requirements of implementation and O&M agreements between WMAs and LGIs pursuant to the Governments Guidelines on Participatory Water Management. Within one year after the effective date, the Government will have enacted a Cooperatives Act satisfactory to ADB. Within six months of the effective date, the Interagency Task Force on Guidelines for Participatory Water Management (the Interagency Task Force), including the Water Resources Planning Organization, will have established terms of reference satisfactory to ADB to examine the identification of alternative water management organizations, the need for enabling legal provisions for viable alternative water management organizations, and the feasibility of pilot testing alternative water management organizations. The Government shall ensure that the recommendations, if any, of the Interagency Task Force will be taken into account prior to enactment of the national water code. Within three months from the effective date, the Government will have issued an NWMP satisfactory to ADB based on the NWP and the BWFMS. Within one year of the effective date, the Government will have implemented 50 percent of the nonengineering positions within the integrated water resources unit of LGED under the reorganization of LGEDs adjusted organizational structure and staffing functions to meet the requirements of small-scale water resources development in accordance with the Government- sanctioned action plan of LGED satisfactory to ADB. Within three years of the effective date, the Government will have completed implementation of all the positions under the reorganization of the LGEDs adjusted organizational structure and staffing functions to meet the requirements of small-scale water resources development in accordance with the Governmentsanctioned action plan of LGED satisfactory to ADB. To enable annual external performance monitoring for the Project, the Government will ensure that all necessary data, information, and cooperation will be provided on a timely basis to a reputable, private, external consulting firm whose experience, qualifications, and terms of reference are acceptable to ADB. To enable an external evaluation of the Project within one year of the effective date, the Government will ensure that all necessary data, information, and

(ii)

(iii)

(iv)

(v)

(vi)

(vii)

(viii)

(ix)

31 cooperation is provided on a timely basis to an institute whose experience, qualifications, and terms of reference are acceptable to ADB. (x) The Government will ensure that prior to concluding implementation agreements between LGED, LGIs, and WMAs under the Project, there will be fisheries development plans agreed upon with ADB in accordance with the Governments National Fisheries Policy, the Governments Guidelines for Participatory Water Management, and the fisheries policy of ADB.

B. 121.

Conditions for Loan Effectiveness Prior to loan effectiveness (i) the Local Government Division of the Ministry of Local Government, Rural Development and Cooperatives will have approved the project proforma for the Project; and the Government will have obtained the Netherlands grant or have made other arrangements, satisfactory to ADB, to commit the provision of foreign exchange funds intended to be provided by the Netherlands grant.

(ii)

C.

Conditions for Civil Works Contracts

122. Prior to tendering of civil works contracts for subprojects under the Project, the execution of implementation agreements between LGED, the LGIs, and the WMAs satisfactory to ADB will have been duly authorized by all necessary corporate and governmental action. Prior to the award of civil works contracts for subprojects under the Project, (i) all necessary land and rights in land free from any encumbrances required for the execution of the subproject will have been acquired or made available on a timely and transparent basis in accordance with the laws and procedures of Bangladesh, including the Acquisition and Requisition of Immovable Property Ordinance of 1982; and (ii) all resettlement-related compensation, other assistance, or both will have been made available to people affected by the Project in accordance with ADBs involuntary resettlement policy. VII. RECOMMENDATION

123. I am satisfied that the proposed loan would comply with the Articles of Agreement of ADB and recommend that the Board approve (i) the loan in various currencies equivalent to Special Drawing Rights 26,985,000 to the Peoples Republic of Bangladesh for the Second Small-Scale Water Resources Development Sector Project, with a term of 32 years, including a grace period of 8 years and with an interest charge at the rate of 1 percent per annum during the grace period and 1.5 percent per annum thereafter, and such other terms and conditions as are substantially in accordance with those set forth in the draft Loan Agreement presented to the Board; and (ii) the administration by ADB of a grant in an amount not exceeding the equivalent of $24,300,000, to be provided by the Government of the Netherlands on a grant basis , to the Peoples Republic of Bangladesh for the Second Small-Scale Water Resources Development Sector Project.

TADAO CHINO President 15 June 2001

32 APPENDIXES Number Title Page Cited on (page, para.) 1, 2 7, 26 7, 28

1 2 3

Project Framework External Assistance to the Water Resources Sector in Bangladesh Small-Scale Water Resources Development Sector Project: Status of Implementation and Lessons Learned Policy and Institutional Reforms and Implementation Matrix Cost Estimate Summary Project Organization and Staff Deployment Implementation Schedule Outline Terms of Reference for Consulting Services Summary Initial Environment Examination Social Dimensions and Poverty Assessment Summary Resettlement Plan Economic and Financial Analyses

33 37 39

4 5 6 7 8 9 10 11 12

43 45 47 48 49 52 59 65 67

9, 32 15, 62 17, 66 21, 77 21, 81 23, 91 25, 97 25, 101 27, 107

SUPPLEMENTARY APPENDIXES (available on request) A B C D E F Detailed Cost Estimate and Financing Plan Detailed Implementation Arrangements and Capacity Building Plan Poverty Study Detailed Terms of Reference for Consultants Detailed Financial and Economic Analyses Short Resettlement Plan

33 Appendix 1, page 1 PROJECT FRAMEWORK


Design Summary
Goal Support the Governments poverty reduction effort by increasing sustainable agricultural and fishery production Incremental rice production of 180,000 tons per annum Increased rural net incomes of Tk975 million Incremental employment of 7.8 million person-days per annum Independent impact assessments Benefit monitoring and evaluation (BME) Review missions Government agricultural and employment statistics No major natural disaster Government committed to policy and institutional reforms and support of rural development Commodity prices allow financial and economic viability

Performance Targets

Project Monitoring Mechanisms

Assumptions and Risks

Purpose/Objective Increase agricultural production in subproject areas through sustainable stakeholder-driven, smallscale water resource management systems 300 subprojects operated in line with the long-term investment plan Water management associations (WMAs) are operating successfully in all subprojects Shift to more high yield variety cultivation and increased cropping intensity resulting in an increment of 180,000 tons of paddy production by year 10 Quarterly progress reports Annual institutional performance assessment of Local Government Engineering Department (LGED) and local government institutions Review missions Midterm Review Project completion report (PCR) Annual WMA audits BME reports Government committed to sustainable development of small-scale water resources Government committed to enhancing capacity of LGED

Outputs Small-Scale Water Resources Development Mobilization of Beneficiary Participation Participatory selection and development of subprojects Viable WMAs at subproject sites, capable of financing and undertaking operation and maintenance (O&M) Local contracting societies (LCSs) organized and trained for earthwork at subproject sites. Community-Based Infrastructure Development 70% of beneficiaries are members of a WMA 390 potential subprojects examined and appraised 100 percent of beneficiaries fully contributed required annual O&M amounts in each subproject

Project progress reports


and review missions PCRs

A majority of beneficiaries in the subproject areas appreciate the value to themselves of collective action

Infrastructure of good quality constructed conforming to: (i) district water resources development strategies

All project management office (PMO)/LGED Second Small-Scale Water Resources Development management positions filled in first year. Water resource control systems completed in about 300 subprojects

Viable strategies established at local levels for small-scale integrated water resources development

34 Appendix 1, page 2
Design Summary
(ii) environmental impact mitigation measures (iii) resettlement plan

Performance Targets
Effective O&M practices in place

Project Monitoring Mechanisms

Assumptions and Risks


Effective LGED construction contract management and quality control

Water Resources- Oriented Support Programs

Agricultural and fisheries extension provided to 300 subprojects constructed

Progress reports and


review missions

Monitoring and Quality Control IEE reports received BME reports PMO office established and operating efficiently

Initial Environmental Examination (IEE)/ Environmental Impact Assessment (EIA) reports completed for each feasibility study BME systems established PMO fully operational by loan effectiveness

Progress reports and


review missions

Active field-level participation of Department of Agricultural Extension (DAE) and Department of Fisheries (DOF) LGED and Department of Energy (DOE) commitment given to provide resources to undertake effective monitoring of quality of IEEs Government commitment on institutional reforms LGED provides PMO with appropriately qualified staff

BME reports Progress reports and


review missions

Progress reports and


review missions

Institutional Strengthening in the Small-Scale Water Resources Sector Support for Project Management Multidisciplinary consultancy team fielded Project review missions Project progress reports Midterm project review PCR

Capacity Building for Sustainable Management Improved capacity of local government to assume ownership of small-scale water management infrastructure Improved capacity of concerned agencies to undertake feasibility studies, including baseline data collection Improved capacity of nongovernment organization (NGO) entities to undertake community mobilization, including formation and training of WMAs Improved capacity of LGED to manage smallscale water resources development Local government officers trained Local government initiated to assuming ownership of small-scale water management infrastructure

Number of actual feasibility studies completed versus budget All WMAs and their O&M committees trained in O&M by handover LGED staff trained Institutional reform undertaken as scheduled

35 Appendix 1, page 3
Design Summary
Project Activities Small-Scale Water Resources Development Activities Mobilization of Beneficiary Participation NGOs/firms engaged to facilitate beneficiary involvement in participatory rapid appraisal (PRA), environmental surveys, social surveys, and feasibility study investigations Undertake awareness and motivational program to ensure beneficiaries know how and where to lodge a request for consideration of their idea for a subproject Project resettlement plan PRAs completed Feasibility studies completed WMA training completed LCS formed to provide jobs for poor women Community-Based Infrastructure Development Final designs for subprojects completed Construction of subprojects completed Subproject handover completed Water Resources-Oriented Support Programs $4.7 million Progress reports and review missions NGOs given appropriate orientation and support LGED adopts appropriate quality control strategies and corrective action methodologies

Performance Targets

Project Monitoring Mechanisms

Assumptions and Risks

390 subprojects have awareness campaigns.

Institutional monitoring Progress reports and review missions

390 PRAs 358 feasibility studies. Training completed in all 300 subprojects. Local contracting societies (LCSs) formed for all 300 subprojects $44.6 million Construction monitoring Progress reports and review missions PMO resources are efficiently and effectively applied LGED engages competent contractors Timely allocation of budget Timely staff posting Progress reports and review missions Timely input of consultants

325 designs completed 300 subprojects 300 subprojects

$6.0 million

WMA agriculture and fisheries development plans completed and implemented DAE delivered training to subproject beneficiaries on integrated pest management DOF delivered training on fish culture to subproject beneficiaries Monitoring and Quality Control

Agriculture programs completed in 300 subprojects Fisheries programs in about two thirds of subprojects

Timely support from DAE and DOF

$11.3 million

BME reports

36 Appendix 1, page 4
Design Summary
Environmental monitoring Engagement of environmental consultant Implement environmental testing program Monitoring and evaluation. BME surveys of completed subprojects External review mission and quality control audit System operation Equipment procured Contracts let and completed Institutional Strengthening in the Small-Scale Water Resources Sector Support for Project Management Engage a team of international and domestic consultants Hold workshops and seminars Subproject planning and design procedures reviewed and strengthened Capacity Building for Sustainable Management Update capacity building plan Implement capacity building training in LGED Awareness training for local government officials Training of NGOs on WMA responsibilities Project orientation for stakeholders including DAE, DOF, and Department of Cooperatives Total project completion $1.8 million Implement nine capacity building modules for about 11,000 trainees in LGED, other agencies, NGOs, and local government Progress reports and review mission $8.6 million Progress reports and review missions Timely fielding of consultants

Performance Targets
Environmental labs equipped

Project Monitoring Mechanisms


Progress reports and review missions Progress reports and review missions

Assumptions and Risks

Environmental evaluations completed in all subprojects 200 subprojects surveyed two years after construction. Review mission completed in first year Quality control audit implemented annually

Environmental labs with sufficient staff and resources

Participating departments and organizations commit necessary resources

Total cost: $76.7 million + $1.0 million of interest during implementation

37 Appendix 2, page 1
EXTERNAL ASSISTANCE TO THE WATER RESOURCES SECTOR IN BANGLADESH (1990 onward) Source/ Project/Purpose/Technical Assistance
Canada North East Regional Study (FAP 6) and pilot works BWDB Accounting System Modernization Dampara Water Management Kalni-Kushiyara Community Development Denmark Flood Action Plan (FAP 25) Surface Water Simulation Model (3rd Phase) Expansion of FFW Services Meghna Estuary Study (FAP 5B) Japan Narayanganj Narsingdi Irrigation Narayanganj Narsingi Irrigation Phase III Naranyanganj Narsingdi FCDI Netherlands System Rehabilitation Compartmentalization Pilot Project (FAP 20) Early Implementation Water Sector Advisory Services TA Flood Action Plan (FAP 25) Environment Study (FAP 16) Char Development and Settlement Water Investigation Survey Small-Scale Water Resources Development Meghna Estuary Study Gorai River Restoration United Kingdom Flood Action Plan (FAP 12) Flood Action Plan (FAP 2) Fisheries Study (FAP 17) Asian Development Bank Second Pabna Irrigation & Rural Development Second Bhola Irrigation Review of Options for Ground & Surface Water Dev. Southwest Area Water Resources Mgt Study Northeast Minor Irrigation Dhaka Integrated Flood Protection Second Bhola Irrigation Operation & Maintenance Strengthening of the Second Bhola Irrigation Second Coastal Embankment Rehabilitation (Supl) Small-Scale Water Resources Development Study on Privatization of Minor Irrigation Command Area Development Khulna-Jessore Drainage Rehabilitation Second Water Supply and Sanitation Khulna-Jessore Drainage Rehabilitation Southwest Area Water Resources Development Socio-Environmental Assessment of the MeghnaDhonogoda Irrigation Project

Currency

Amount (million)
17.00 2.80 4.50 2.60

Year Committed
1991 1994 1997 1997

Loan Grant
Grant Grant Grant Grant

Canadian Dollar Canadian Dollar Canadian Dollar Canadian Dollar

Denmark Krone Denmark Krone US Dollar US Dollar

13.30 4.10 8.09 5.30

1993 1994 1993 1994

Grant Grant Grant Grant

Yen Yen Yen

1,796.00 977.00 339.00

1990 1991 1998

Grant Grant Grant

Guilder Guilder Guilder Guilder Guilder Guilder Guilder Guilder Guilder Guilder Guilder

26.43 13.41 38.51 1.71 0.02 0.33 3.12 7.00 12.00 13.30 47.83

1990 1991 1992 1992 1992 1995 1995 1995 1996 1996 1998

Grant Grant Grant Grant Grant Grant Grant Grant Grant Grant Grant

Pound Sterling Pound Sterling Pound Sterling

0.09 1.40 1.70

1990 1990 1991

Grant Grant Grant

US Dollar US Dollar US Dollar US Dollar US Dollar US Dollar US Dollar US Dollar US Dollar US Dollar US Dollar US Dollar US Dollar US Dollar US Dollar US Dollar US Dollar

0.25 0.25 0.17 2.15 73.00 93.99 39.80 0.79 0.19 0.50 0.54 0.44 0.92 29.88 48.40 0.25 0.11

1990 1990 1990 1991 1991 1991 1992 1992 1992 1992 1992 1992 1993 1993 1993 1993 1993

Grant Grant Grant Grant Loan Loan Loan Grant Grant Grant Grant Grant Grant Loan Loan Grant Grant

38 Appendix 2, page 2
Study of the Socioeconomic Impact of the Sirajgonj Integrated Rural Development Project Small-Scale Water Resources Development Command Area Development Flood Damage Rehabilitation Southwest Flood damage Rehabilitation The World Bank BWDB Systems Rehabilitation (SRP) National Minor Irrigation Project Shallow Tubewells & Low-lift Pump Irrigation Gumti Project Phase 1 (FCD 1) Naogaon Polder 1 (FCD-3) Madhumati-Nabaganga Project (FCD-4) River Bank Protection Coastal Embankment Rehabilitation Gorai River Restoration European Commission System Rehabilitation Project National Minor Irrigation Project North Central Regional Studies River Survey Project Cyclone Protection II Priority Works Coastal Embankment Rehabilitation Project Jamuna Dhaleshwari Left Bank Studies

US Dollar US Dollar US Dollar US Dollar US Dollar

0.06 32.00 30.00 104.00 67.80

1994 1995 1995 1998 2000

Grant Loan Loan Loan Loan

US Dollar US Dollar US Dollar US Dollar US Dollar US Dollar US Dollar US Dollar US Dollar

40.80 38.10 52.20 23.00 21.00 11.00 121.90 53.00 3.00

1990 1991 1991 1991 1991 1992 1996 1996 1998

Loan Loan Loan Loan Loan Loan Loan Loan Loan

Euro Euro Euro Euro Euro Euro Euro

13.50 65.00 1.87 12.60 2.50 15.00 4.00

1990 1990 1990 1990 1991 1993 1993

Grant Grant Grant Grant Grant Grant Grant

International Fund for Agricultural Development Small-Scale Water Resources Development United Nations Development Programme Flood Action Plan

US Dollar

10.40

1995

Loan

US Dollar

0.688

1990

Grant

39 Appendix 3, page 1 SMALL-SCALE WATER RESOURCES DEVELOPMENT SECTOR PROJECT: STATUS OF IMPLEMENTATION AND LESSONS LEARNED A. Status of Implementation

1. The objective of Small-Scale Water Resources Development Sector Project (SSWRDSP)1 is to attain sustainable growth in agricultural production and incomes in western Bangladesh by establishing infrastructure and self-sustaining institutions for small-scale water resources management, covering an area of about 150,000 hectares. As of March 2001, 280 subprojects had water management associations (WMAs) formed, 192 had initiated construction of infrastructure, and 52 were completed respectively. The overall implementation progress was estimated at 66 percent against a loan elapsed period of 73 percent of the project period. A project midterm review undertaken in October 1999 noted that the project implementation was generally satisfactory, and would be completed as per original objectives and scope, although improvement was required in terms of (i) increasing beneficiary participation, and (ii) improving the quality of construction. These findings were also reaffirmed by reviews in May and October 2000, and February 2001. The Government has been progressively developing its own capacity. The loan covenants have generally been complied with. B. Preliminary Project Benefits and Poverty Impacts

2. The envisaged project benefits include (i) cereal and noncereal production by 75,000 tons per annum by 2005, and (ii) incremental employment opportunities of hired and family agricultural labor by 2.81 million person-days per annum. According to the Projects effect monitoring and evaluation system, the data collected in the completed schemes covering about 18,000 ha indicate that targets for cereal and noncereal production are being achieved. 3. A preliminary assessment of poverty reduction impacts for completed representative subprojects are shown in Table A3.1. The percentage of poor households among beneficiaries in these subprojects is higher than the national average. These subprojects have already generated substantial benefits for rural people. In terms of agriculture, production has increased by 30130 percent, thereby substantially improving the food security for low-income farm households. Vulnerability to external shocks such as floods has also been reduced from the completed flood protection works. These subprojects have also provided substantial incremental employment opportunities to the landless, marginal, and small farm households. In terms of fisheries, the subprojects have also demonstrated strong impacts. The experience of Jabusha Beel subproject is illustrative, with the substantial increase in fishery production benefiting the significant proportion of subproject households including the poor.2 Likewise, the sample subprojects have also showed strong impacts in terms of social mobilization of the poor, providing opportunities for participating in key decision making of the WMAs and their activities by accounting for the majority of their membership. C. Lessons Learned

4. Important lessons can be learned from the implementation of the SSWRDSP for the design of the Second Small-Scale Water Resources Development Project; these are summarized in Table A3.2.
1

Loan 1381-BAN: Small-Scale Water Resources Development Sector Project, for $32.0 million, approved on 26 September 1995; Loan 391-BAN: Small-Scale Water Resources Project, for SDR7.0 million, approved on 7 December 1995; and TA 2564-BAN: Beneficiary Participation and Project Management, for $6.8 million, a grant provided by the Government of the Netherlands, and administered by ADB, approved on 2 May 1996. The subprojects located in coastal areas have similar potential through fish culture.

Table A3.1: SSWRDSP Poverty-Related Impacts of Selected Subprojects


Subproject Name Total Benefit Area (ha) Beneficiary Households % of Poor Households Among Beneficiaries Project Facilities Jabusha Beel FCD 790 1,090 56% - Embankment resectioning: 5.7 km - Canal reexcavation: 5.2 km - Regulators: 5 locations - [Monsoon] Protection from saline water intrusion - [Dry season] Water retention in dry season - Rice production increased by 130% to 2,500 tons - Substantial reduction of food deficit in many households - Hired labor increased by 20,000 person-days for landless and marginal farmers - Fish production increased by 135 tons through tidal water retention valued at Tk11 million 420 farmers, 40 genuine fishers, and 100 landless are engaged - The subproject helped local people to unite and regain control over land that had been taken up by outsiders for saline water shrimp cultivation - With majority of members who are poor, WMA is providing fish culture benefits to the poor Brajamul Bhitikhal FCD 504 616 53% - Embankment resectioning: 1.2 km - Canal reexcavation: 2.8 km - Regulators: 3 locations - [Monsoon] Flood protection - [Dry season] Drainage improvement - [Dry season] Water retention - Rice production increased by 30% to 2,500 tons - Noncereal production increased by over 50 percent - Hired labor increased by 25,000 persondays, for landless and marginal farmers Reduced vulnerability to floods - Culture fishery was introduced to produce 9 tons or Tk0.7 million, engaging genuine fisherfolk Rampur FCD 212 400 49% - Embankment resectioning: 1.4 km - Canal reexcavation: 1.9 km - Regulator: 1 location - [Monsoon] Flood protection - [Dry season] Water retention

Main Project Benefits

Agriculture Benefits

Fishery Benefits

- Cereal production increased by 70% to 950 tons, with crop diversification - Substantial reduction of food deficit in many households - Hired labor increased by 2,500 person-days for landless and marginal farmers - Reduced vulnerability to floods - No fish production pre-project - WMA is initiating fish culture with the engagement of the landless

40

- WMA initiated microcredit to the poor - WMA initiated microcredit to the poor using shares and savings; they are using shares and savings engaged for rice husking, - Poor people participate in WMA poultry rearing, transport , and decisions as members fishery - 14 poor WMCA members received - Poor people participate in WMA an average Tk1,000 microcredit loan decisions as members - 39 poor Water Management Cooperative Association members got on average Tk2,500 microcredit loan FCD = flood control and drainage, ha = hectare, km = kilometer, WMCA = Water Management Cooperative Association, WMA = water management association. Social and Participatory Issues to Reduce Poverty

Appendix 3, page 2

Table A.3.2: Summary of Lessons Learned in SSWRDSP and Measures Taken for the Proposed SSWRDSP
Key Issues A. Policy-Related Issues Present Cooperatives Act: Water management associations (WMAs) are formed following the cooperatives rules, which are administratively complex. B. Subproject Selection and Processing B-1. Identification: While the Project takes a strong demand-driven approach, subprojects are identified at the field level without clear strategic guidance. Lessons Learned/Recommendations Measures Taken in the Proposed SSWRDSP

- The administrative requirements of cooperatives rules need to be simplified to suit the WMAs.

- Cooperatives rules will be revised based on policy dialogue. Assessment of alternative framework will also be pursued.

- Strategies and guidelines must be defined for project identification. Given diverse stakeholder interests, selecting interventions with minimum conflicts should be the prime principle. - Efforts should be made to ensure meaningful consultation with all stakeholders. Mechanisms for effective conflict solution should be strengthened.

B-2. Processing: Participatory rural appraisal (PRA) is undertaken by contracted nongovernment organizations (NGOs), but its quality is not always appropriate. B-3. Feasibility Studies: The standard of feasibility reports for subprojects needs improvement including their compliance with the social and environmental guideline of the Asian Development Bank. The process is constrained by lack of time and resources as well as supervision. C. Beneficiary Participation C-1. Formation of WMAs: WMAs are formed with the support of NGO facilitators. In earlier subprojects construction was initiated without sufficient WMA formation. C-2. Beneficiary contribution: The Project requires capital cost recovery.

- The Local Government Engineering Department (LGED) is developing districtlevel strategies and guidelines within 2001. Subproject selection criteria are also improved to select subprojects with minimum conflicts. - Quality of PRA has been improved by engaging more experienced NGOs, firms, or institutions. - More detailed data collection and field surveys are mandated. - The total number of subprojects is fixed at 300 based on the SSWRDSP experience.

- Sufficient time and resources should be allocated for the feasibility field survey and analysis. - The number of subprojects should be limited to ensure adequate resources for ensuring quality.

41

- Sufficient time and motivational input should be provided for the formation of sound WMAs. A firm institutional basis should be established before initiating the physical works. - The approach of collecting financial contributions up front is sound. The fund should be used for operation and maintenance (O&M) activities of WMAs in line with National Water Policy (NWP). - Plans to ensure quality of environmental management and land acquisition should be firmly put in place. Identification of affected persons and preparation of mitigation plan should be done during the WMA development stage, prior to physical works.

- These procedures and arrangements were established for the SSWRDSP, and are operational with improved quality control arrangements. - This recommendation will be operational in the proposed SSWRDSP.

Appendix 3, page 3

C-3. Environmental and Social Issues: Environmental mitigation plans and land acquisition plans are duly prepared, but their implementation and monitoring systems need strengthening.

- These are to be ensured during the WMA development stage through highly qualified NGOs/firms. More stringent internal quality control arrangements are also applied.

Key Issues D. Water Resource Infrastructure Development D-1. Field data and engineering design: Available topographical maps are old and of less credible quality. D-2. Quality of construction: Scope exists for improving the quality of construction in particular of the hydraulic structures and embankments.

Lessons Learned/Recommendations - The quality of the field data needs to be ensured through sufficient field surveys. The design process should be carried out with beneficiary consultation. - LGEDs capacity in hydraulic structures is limited and requires strengthening. LGED needs to establish sound construction quality control system.

Measures Taken in the Proposed SSWRDSP - Design specifications of maps and figures will be improved. Design firms will also be given training on participatory design. - A quality control engineer will be fielded under technical assistance (TA).

- LGED improved internal office inspection and performance audit. - Operational in the SSWRDSP.

E. O&M of Water Resource Infrastructure by WMA - So far management of 30 subprojects have been turned over to WMAs. The sustainability of all WMAs established under the Project needs to be ensured.

- Intensive activities to institutionalize O&M by the WMAs should be initiated at early stages of subproject implementation cycle. - Supervising completed schemes through sound annual technical, social, and financial audits of WMAs is of crucial importance.

- Operational in the SSWRDSP, but the proposed SSWRDSP will increase their focus as more subprojects enter the O&M stage.

F. Institutions for Project Implementation F-1. LGED: LGEDs capacities for small-scale water resources development are improving through training and management of subprojects, although operational capacities are still limited for sustainable water resource interventions. F-2 Local government institutions (LGI): LGIs capacities are not systematically strengthened. The union parishad (UP) plays a role in the project preparation phase, but is not actively taking part at all stages of the project cycle.

42

- LGEDs capacity at national and local levels still need to be strengthened particularly in integrated water resource planning and scheme implementation addressing nonengineering issues. - The role of local governments for small-scale water resources schemes should be clearly defined, including effective transition arrangements and ownership transfer issues. - A specific training package and modules should be developed, especially for UP leaders/office bearers.

- These capacities will be further developed in accordance with the capacity development plan through the institutional strengthening activities.

- Ministry of Local Government, Rural Development and Cooperatives (MOLGRDC) will define the roles of the LGIs in small-scale water resources management in accordance with the NWP with the assistance of TA. - Developed under the SSWRDSP. Further refined and applied in the proposed SSWRDSP.

Appendix 3, page 4

POLICY AND INSTITUTIONAL REFORMS AND IMPLEMENTATION MATRIX


Proposed Action 1. National Water Policy Local Government Engineering Department, Ministry of Local Government and Rural Development and Cooperatives (LGED, MOLGRDC) to elaborate the role of local government in the planning, implementation, and operation of small-scale water resources schemes in the enactment of the National Water Code. LGED, MOLGRDC, Ministry of Water Resources (MOWR) Within 18 months of loan effectiveness Action by Agreed Action Date

2. Framework for Participatory Water Resources Management a. To incorporate medium- and long-term strategy for smallscale water resources development in National Water Management Plan (NWMP) and reflected in the Sixth FiveYear Plan b. To establish local-level institutional framework for sustainable small-scale water resources development (i) (iii) Cabinet approves new Cooperatives Bill Government enacts new Cooperatives Bill LGED, Planning Commission, Water Resources Planning Organization (WARPO), MOLGRDC Within three months of loan effectiveness

MOWR, MOLGRDC, WARPO, Bangladesh Water Development Board (BWDB), LGED, consultant Within 6 months of loan effectiveness Within 1 year of loan effectiveness

43

c. Alternative Legal Frameworks for Water Management Organizations Within 6 months of effectiveness (i) Interagency Task Force to prepare terms of reference for identification of alternative water management organizations, need for enabling legal provisions for viable alternative water management organizations, and feasibility of pilot testing of alternative water management organizations Interagency Task Forces recommendations to be taken into account for the National Water Code Interagency Task Force on Guidelines for Participatory Water Management (including MOWR, MOLGRDC, WARPO, BWDB, LGED) Within 18 months of loan effectiveness

Appendix 4, page 1

(ii)

Proposed Action 3. Reorganization of LGED To implement action plan for LGEDs reorganization to better serve sustainable small-scale water resources management. (i) 50% of proposed nonengineering positions in the Integrated Water Resources Development (IWRD) implemented Completion of implementation of all proposed IWRD including nonengineering positions

Action by

Agreed Action Date

LGED/MOLGRDC Ministry of Establishment, Ministry of Finance Within one year after loan effectiveness

(iii)

Within three years after loan effectiveness

44

4.

Holistic Water Resources Development Development and approval of adequate fisheries development plans in accordance with ADBs fisheries policy, the Governments national fisheries policy, and the Governments Guidelines for Participatory Water Management. Ministry of Land (MOL)/MOLGRDC Ministry of Youth and Sports (MOYS)/Ministry of Fisheries and Livestock (MOFL) Before concluding implementation agreements between LGED, local government institutions and WMAs

Appendix 4, page 2

5. Water Sector Governance (i) In addition to enhancement of participation, transparency and decentralization, annual external performance monitoring by reputable, private, external consulting firm. External evaluation by an external institution. LGED/MOLGRDC Annually

(ii)

Within one year of loan effectiveness

COST ESTIMATE SUMMARY Table A5.1: Expenditure Accounts by Components ($'000)


Institutional Strengthening in the Small-Scale Water Resources Sector

Item A. Investment Costs 1. Civil Works a. Civil Works: Design b. Civil Works: Structures c. Civil Works: Earthworks Subtotal (1) 2. Land Acquisition and Contribution 3. Material 4. Vehicles and Equipment Purchase a. Vehicles b. Equipment Subtotal (4) 5. Surveys and Investigation 6. Training a. Training: WMAs and Beneficiaries b. Training: Staff Subtotal (6) 7. Management Information System 8. Consulting Services a. Foreign Exchange Consulting Services Costs b. Local Currency Consulting Services Costs Subtotal (8) 9. Supervision and Implementation Costs a. Staff Costs Project Staff b. Implementation Support Costs Office Costs Office O&M Subtotal (9) 10. NGO Staff 11. Vehicles and Equipment O&M Subtotal (A) Recurrent Costs 1. Subproject O&M 2. Embankment Trees O&M Subtotal (B)

Mobilization of Beneficiary Participation Water Management Association Participatory and Labor Subproject Contracting Selection and Society Preparation Development

Participatory Water Resources Development CommunityWater Resources Based Oriented Support Infrastructure Programs Development

Total

Monitoring and Quality Control

Crops Adjustment Program

Fisheries Mitigation and Training

Environmental Monitoring

Monitoring and Evaluation

System Operation

Support for Project Management

Capacity Building for Sustainable Management

0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 383.3 0.0 0.0 0.0 0.0 0.0 0.0 0.0

0.0 0.0 0.0 0.0 0.0 0.0 333.3 0.0 333.3 0.0 785.9 0.0 785.9 0.0 0.0 0.0 0.0

679.3 24,509.2 12,165.9 37,354.5 4,309.3 0.0 0.0 0.0 0.0 463.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

0.0 0.0 0.0 0.0 0.0 1,080.0 71.1 0.0 71.1 0.0 448.2 0.0 448.2 0.0 0.0 0.0 0.0

0.0 0.0 0.0 0.0 0.0 0.0 71.1 0.0 71.1 0.0 2,136.7 0.0 2,136.7 0.0 0.0 0.0 0.0

0.0 0.0 0.0 0.0 0.0 928.0 11.1 240.4 251.5 9.3 27.8 0.0 27.8 0.0 0.0 0.0 0.0

0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 167.7 0.0 210.0 210.0

0.0 0.0 0.0 0.0 0.0 0.0 1,054.1 594.1 1,648.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

0.0 0.0 0.0 0.0 0.0 0.0 202.6 0.0 202.6 0.0 0.0 0.0 0.0 0.0 4,161.0 4,153.0 8,314.0

0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 90.0 0.0 1,705.8 1,705.8 0.0 0.0 0.0 0.0

679.3 24,509.2 12,165.9 37,354.5 4,309.3 2,008.0 1,743.3 834.5 2,577.8 945.6 3,398.6 1,705.8 5,104.4 167.7 4,161.0 4,363.0 8,524.0

45

0.0

0.0

0.0

0.0

0.0

0.0

0.0

3,634.2

0.0

0.0

3,634.2

0.0 0.0 964.9 0.0 1,348.1 0.0 0.0 0.0 1,348.1

0.0 0.0 1,693.5 583.3 3,396.0 0.0 0.0 0.0 3,396.0

0.0 0.0 0.0 0.0 42,126.8 2,436.1 0.0 2,436.1 44,562.9

0.0 0.0 622.2 124.4 2,346.0 0.0 720.0 720.0 3,066.0

0.0 0.0 622.2 124.4 2,954.5 0.0 0.0 0.0 2,954.5

0.0 0.0 0.0 187.7 1,404.3 0.0 0.0 0.0 1,404.3

0.0 0.0 0.0 0.0 377.7 0.0 0.0 0.0 377.7

2,607.4 6,241.6 0.0 1,585.0 9,474.8 0.0 0.0 0.0 9,474.8

84.0 84.0 0.0 0.0 8,600.6 0.0 0.0 0.0 8,600.6

0.0 0.0 0.0 0.0 1,795.8 0.0 0.0 0.0 1,795.8

2,691.4 6,325.6 3,902.8 2,604.9 73,824.7 2,436.1 720.0 3,156.1 76,980.8 1,019.6 78,000.4 6,507.3 14,860.4 1,019.6 15,880.0

Appendix 5, page1

B.

Total Project Costs


Interest During Construction Total Costs to be Financed Taxes Foreign Exchange Interest During Construction Total Foreign Exchange

0.0 0.0

258.3 491.7

4,520.3 8,060.3

84.0 115.6

51.6 115.6

118.2 292.8

0.0 0.0

1,272.3 1,623.5

202.6 4,161.0

0.0 0.0

O&M = operation and maintenance, WMA = water management association. Source: Mission estimates.

Table A5.2: Financing Plan ($'000)


Item A. Participatory Water Resources Development 1. Mobilization of Beneficiary Participation a. Participatory Subproject Selection and Preparation b. Water Management Association and Labor Contracting Society Developme Subtotal (1) 2. Community Based Infrastructure Development 3. Water Resources Oriented Support Programs a. Crops Adjustment Program b. Fisheries Mitigation and Training Subtotal (3) 4. Monitoring and Quality Control a. Environmental Monitoring b. Monitoring and Evaluation c. System Operation Subtotal (4) Subtotal (A) B. Institutional Strengthening in the Small-Scale Water Resources Sector 1. Support for Project Management 2. Capacity Building for Sustainable Management Subtotal (B) Total Disbursement Interest During Construction Total Costs to be Financed Asian Development The Government Bank Amount % Amount % Beneficiaries Amount % Netherlands Amount % Total Amount % Foreign Exchange Local (Excl. Taxes) Duties & Taxes

0.0 258.3 258.3 8,829.7 228.0 51.6 279.5 118.2 0.0 7,514.0 7,632.2 16,999.7 286.6 0.0 286.6 17,286.3 17,286.3

0.0 7.6 5.4 19.8 7.4 1.7 4.6 8.4 0.0 79.3 67.8 25.5 3.3 0.0 2.8 22.5 22.2

0.0 250.0 250.0 23,574.9 2,838.0 2,903.0 5,741.0 1,286.1 167.7 1,960.8 3,414.7 32,980.6 0.0 0.0 0.0 32,980.6 1,019.6 34,000.2

0.0 7.4 5.3 52.9 92.6 98.3 95.4 91.6 44.4 20.7 30.3 49.5 0.0 0.0 0.0 42.8 43.6

0.0 0.0 0.0 2,436.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 2,436.1 0.0 0.0 0.0 2,436.1 2,436.1

0.0 0.0 0.0 5.5 0.0 0.0 0.0 0.0 0.0 0.0 0.0 3.7 0.0 0.0 0.0 3.2 3.1

1,348.1 2,887.7 4,235.8 9,722.2 0.0 0.0 0.0 0.0 210.0 0.0 210.0 14,168.0 8,314.0 1,795.8 10,109.8 24,277.8 24,277.8

100.0 85.0 89.3 21.8 0.0 0.0 0.0 0.0 55.6 0.0 1.9 21.3 96.7 100.0 97.2 31.5 31.1

1,348.1 3,396.0 4,744.2 44,562.9 3,066.0 2,954.5 6,020.5 1,404.3 377.7 9,474.8 11,256.8 66,584.4 8,600.6 1,795.8 10,396.4 76,980.8 1,019.6 78,000.4

1.8 4.4 6.2 57.9 4.0 3.8 7.8 1.8 0.5 12.3 14.6 86.5 11.2 2.3 13.5 100.0

0.0 491.7 491.7 8,060.3 115.6 115.6 231.1 292.8 0.0 1,623.5 1,916.3 10,699.4 4,161.0 0.0 4,161.0 14,860.4 1,019.6 15,880.0

1,348.1 2,646.0 3,994.2 31,982.2 2,866.5 2,787.4 5,653.9 993.3 377.7 6,579.0 7,950.0 49,580.3 4,237.0 1,795.8 6,032.8 55,613.1 55,613.1

0.0 258.3 258.3 4,520.3 84.0 51.6 135.5 118.2 0.0 1,272.3 1,390.5 6,304.7 202.6 0.0 202.6 6,507.3 6,507.3

46

Source: Mission estimates.

Appendix 5, page 2

47 Appendix 6 PROJECT ORGANIZATION AND STAFF DEPLOYMENT




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48 Appendix 7 IMPLEMENTATION SCHEDULE


Component Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7

A: Small-Scale Water Resource Sector Development Activities


(Projected number of subprojects in parentheses) Subproject Selection and Preparation (For batches of the 260 subprojects B1 to B3 starting preconstruction activities in SSWRDSP II) Proposals and initial evaluation (780) '(180) Subproject reconnaissance (520) PRA (390) Awareness campaign (390) Base data collection (358) Feasibility study and IEE/EIA (358) WMA and LCS Institutional Development Preconstruction inst. devel. (325) (1.5 yr. each) Inst. devel. during constr. (300) (2 yr. each) Infrastructure Development (By batches of subprojects. Most preconstruction activities would have been done in SSWRDSP I for groups A61 and A62.) Detailed design (365) Group A1 construction (20) Group A2 construction (20) Group B1 construction (60) Group B2 construction (100) Group B3 construction (100) Fisheries infrastructure (where needed) Followup O&M training/supervision (for 3 yrs) (including some phase 1 subprojects) Water Resource-Oriented Support Programs Embankment tree planting program Postconstruction crop adjustment program (450) (including subprojects just finishing construction at the end of SSWRDSP I) Postconstruction fisheries mitigation and training program (where needed) Monitoring BME surveys (200) Environmental monitoring Project Management Vehicle and equipment purchase Project staff deployment '(72) '(3) '(20) '(26) '(66) '(100) '(85) '(212) '(234) '(254) '(64) '(100) '(205) '(310) '(120) '(90) '(90) '(82) '(82)

'(300) '(200) '(150) '(150) '(138) '(138)

'(300) '(200) '(150) '(150) '(138) '(138)

'(40)

'(75)

'(125)

'(125)

B: Institutional Strengthening in the Small-Scale Water Resource Sector


TA consulting Capacity building training

BME = benefit monitoring and evaluation, EIA = environmental impact assessment, IEE = initial environmental examination, O&M = operation and maintenance, PRA = participatory rapid appraisal.

49 Appendix 8, page 1 OUTLINE TERMS OF REFERENCE FOR CONSULTING SERVICES 1. The consulting services will be provided by an international consulting firm in association with domestic consulting firms, engaged in accordance with the Asian Development Bank's Guidelines on the Use of Consultants. The consulting firm will ensure that the Local Government Engineering Department (LGED) receives the required support in accordance with a predetermined mobilization schedule. The consultants will be engaged under a single contract, comprising the services of the international and domestic consultants acting as one team of experts. 2. A total of 937 person-months of consulting services is required, including 808 personmonths of domestic and 129 person-months of international consultant inputs. International input will be provided as follows: (i) water resources development adviser (for 50 personmonths), (ii) participatory development specialist (39), (iii) planning and monitoring control specialist (22), and (iv) gender and development specialist (18). Domestic input will be as follows: (i) planning and design specialist (for 77 person-months), (ii) participatory development specialist (77), (iii) environmental specialist (44), (iv) two rural sociologists (121), (v) gender and development specialist (77), (vi) agronomist (44), (vii) aquaculture specialist (44), (viii) training and communication specialist (40), (ix) operation and maintenance specialist (44), (x) institutional monitoring and quality control specialist (100), and (xi) construction monitoring and quality control specialists (140 person-months each). A. International Consultants 1. Water Resources Development Adviser - Team Leader

3. The adviser will (i) be the team leader and guide and coordinate the activities of the consulting team; (ii) liaise with and assist project management to prepare and implement work plans, (iii) prepare reports on schedule, (iv) coordinate project activities with other development projects in the water sector, (v) assist with the development of arrangements for devolving responsibilities to local government, (vi) maintain liaison with donors, (vii) assist LGED in strengthening project monitoring and evaluation systems, and (viii) assist LGED to further develop the investment plan and strategy for small-scale water resources development throughout Bangladesh. 2. Participatory Development Specialist

4. The specialist will (i) help the Government to formulate its approach to stakeholder participation, (ii) help LGED implement the Government's people's participation policy; (iii) develop training programs for people's participation at all levels, (iv) oversee the implementation of training programs, and (v) design and develop operational guidelines for participatory smallscale water resources subproject planning and implementation. 3. Planning and Monitoring Control Specialist

5. The specialist will (i) assist the Government in developing an operational framework for establishing district-level perspective water resources development plans, (ii) assist LGED in preparing such plans and train concerned LGED personnel, and (iii) review existing planning and design criteria for small-scale water resources development infrastructure.

50 Appendix 8, page 2 4. Gender and Development Specialist

6. The specialist will (i) identify, analyze and compile gender related issues; (ii) develop a strategy and guidelines to ensure women s participation in water sector project and (iii) design the training programs for male and female water user groups to prepare gender sensitive training program. A. Domestic Consultants 1. Planning and Design Specialist

7. The specialist will (i) assist the team leader in all aspects of project planning and implementation; (ii) act on behalf of the team leader in the team leaders absence; (iii) maintain close liaison with line agencies involved in small-scale water resources development; and (iv) help the project management office review the planning and design standards for subprojects. 2. Participatory Development Specialist

8. The specialist will (i) work with the international Institutional development specialist in assisting LGED with implementing the Government's people's participation policy; (ii) assist LGED in the development of participative processes to form water management associations; (iii) assist the PMO in drafting Terms of Reference for NGOs participating in subproject planning and implementation; (iv) develop programs for training NGOs; and (v) help the PMO in implementing NGO training and oversee the implementation and monitor the training's effectiveness. 3. Environmental Specialist 9. The specialist will (i) review the guidelines and processes for undertaking initial environmental evaluations (IEEs) and environmental impact assessments (EIA) of subprojects; (ii) oversee environmental data collection for subprojects; (iii) propose environmental impact mitigation measures; and (iv) assist the PMO in implementing appropriate environmental management and monitoring systems for subprojects. 4. Rural Sociologists

10. The specialists will (i) assist the PMO in ensuring that the PRA process leads to subprojects meeting the people's needs; (ii) assist the PMO in identifying the special needs of the landless and the marginal farmers; (iii) develop processes for resolving conflicts identified during the planning of subprojects; (iv) assist the PMO in developing and overseeing the role of the district socio-economist; and (v) help the PMO in overseeing appropriate practices regarding involuntary resettlement, land acquisition and compensation. 5. Gender and Development Specialist

11. The specialist will (i) assist the PMO in identifying the special needs of disadvantaged women; (ii) assist LGED in gender development activities related to small-scale water resources development; and (iii) design income generating activities for disadvantaged women in the subproject area and oversee their implementation by NGOs.

51 Appendix 8, page 3 6. Agronomist 12. The agronomist will (i) assist the PMO in mobilizing agricultural extension services and supervising their work; (ii) develop integrated management of water for fisheries and crop production; (iii) develop income generating activities on embankment land and water bodies; (iv) develop integrated pest management for selected subproject areas; and (v) prepare benefit monitoring reports for completed subprojects. 7. Aquaculture Specialist

13. The specialist will (i) assist LGED in identifying suitable aquaculture and fisheries management techniques for subproject water bodies; (ii) develop fisheries extension materials; and (iii) assist the PMO in mobilizing fisheries extension services and supervising their work. 8. Training and Communication Specialist

14. The specialist will (i) help LGED review training programs and prepare training materials; (ii) assist LGED in planning, organizing and implementing training activities; (iii) develop training programs for capacity building of NGOs, specifically in relation to participatory processes and conflict resolution; (iv) assist LGED in developing programs for creating stakeholder awareness of possibilities of small-scale water resources development; (v) assist LGED in establishing better communication between PMO and district offices; (vi) develop information, education and communication materials suitable for subprojects and WMCAs; (vii) assist PMO to public project bulletin; and (viii) assist LGED to disseminate project activities to wider audience, home and abroad. 9. O&M Specialist

15. The specialist will (i) prepare O&M guidelines for small-scale water resources development projects; (ii) prepare training materials for O&M training of WMAs; (iii) assist Upazila Engineers in developing O&M plans in conjunction with WMAs; (iv) assist Upazila Engineers in implementing sustainable O&M and administration mechanisms within WMAs before hand-over; and (v) develop cost recovery measures and collection arrangements and ensure that they are applied fairly and efficiently by the WMAs. 10. Institutional Monitoring and Quality Control Specialists

16. The specialists will (i) assist LGED in the development of simplified legislation for the establishment of water management associations; (ii) review and recommend changes if necessary, to LGED's organizational structure, staff functions and skill profile to better respond to the requirements of small-scale water resources development; (iii) assist in developing the capacity of local government to assume the responsibilities associated with the ownership of small-scale water resources infrastructure; and (iv) assist the Government in developing a policy allowing for increased access to public water bodies and wetlands by the poor living in subproject areas. 10. Construction Monitoring and Quality Control Specialists

17. The specialists will (i) help the PMO set up quality control systems for the design and construction of water management infrastructure; and (ii) supervise the functioning of these systems.

52 Appendix 9, page 1 SUMMARY INITIAL ENVIRONMENTAL EXAMINATION A. Introduction

1. This appendix describes the summary initial environmental examination (SIEE) prepared from the initial environmental examination (IEE) reports with respect to three representative core sample areas selected for feasibility study for the Second Small-Scale Water Resources Development Sector Project. 2. On the basis of site-specific existing problems and probable solutions, the sites were classified by type of activity as follows: (i) Choto Kumira khalwater conservation, (ii) Purba Sayedpurdrainage improvement and water conservation, and (iii) Sriramkandiflood management and drainage improvement. B. Description of the Project

3. The proposed Project falls under Category B of the environmental classification of the Asian Development Bank (ADB). The project area encompasses the entire country of Bangladesh from the northern hills through the southern coast of the Bay of Bengal. The main objective of the Project is to achieve sustainable agricultural development through institutionalization of stakeholders for integrated management of water resources. Enhancement of accessibility for employment for the landless poor and women is another target of the Project. The Project is expected to benefit approximately 200,000 hectares (ha) of land cultivated by over 180,000 farm households. 4. The Project will include approximately 300 subprojects of different categories with a unit area of 1,000 ha or less. The subproject types will be water conservation, drainage improvement, flood management, and command area development. The major physical interventions for these types of subprojects will be reexcavation/excavation of canals, rehabilitation/construction of embankments, and construction of water-regulating structures. The time frame for the proposed Project will be 2002-2009. C. Description of the Environment

5. The Environmental Profile of Bangladesh1 states that the countrys environment is seriously threatened by deforestation (3.3 percent of the forest is lost per year), declining soil productivity and land degradation, biodiversity loss, poor water management, and water quality degradation and water pollution. The report also mentions nine points mainly responsible for environmental degradation in Bangladesh, of which, the following three are of prime concern to the Project. (i) (ii) (iii) high population pressure and low environmental awareness at all levels; improper cropping sequences, unbalanced use of fertilizer, and pesticide misuse in agriculture; and poorly designed flood control, drainage, and irrigation works without environmental impact assessment.

6. To make matters worse, Bangladesh is now facing a serious problem due to pollution of groundwater with arsenic. This problem has spread all over the country and a number of people have been diagnosed with arsenic poisoning. A report published by the Water Resources Planning
1

Asian Development Bank. 1998. Environmental Profile of Bangladesh. Policy Coordination Unit, Office of the Director, Programs Department (West), Manila.

53 Appendix 9, page 2 Organization,2 states that the problem is acute in tube wells, which abstract groundwater from depths of more than 10 meters and less than 100 meters in the southeast, south-central, and southwest regions. Also affected, although to a lesser extent, is the eastern part of the northeast region, and the very southern fringe of the north central and northwest regions along the Ganges River. More than 20 million people are estimated to drink water exceeding the Bangladesh standard for arsenic of 0.05 milligram/liter (mg/l) and this standard is more liberal than that of the World Health Organization guidelines that establish the tolerable level of arsenic in potable water at 0.01 mg/l. Thousands of cases of arsenic poisoning have been recorded with some deaths also being reported. D. Choto Kumira Khal Water Conservation Subproject

7. The subproject has a gross area of 1,290 ha of which the net cultivable area is 987 ha. Homesteads, water bodies, roads, forest, etc. cover about 303 ha. The subproject area is located on the tidal floodplain at the foot of the Chandranath Hills. The area is gently sloping with land elevations ranging from 4.5 meters (m) along the highway down to 3.2 m near the coastal embankment. The village platforms with their associated gardens are above 4.5 m. 8. The area is very prone to flash flooding from storms in the hills, and water congests in low areas along the embankment. However, the area has no significant wetlands. The khal3 is regarded as perennial, but with little base flow in the rabi4 season. It has a strong tidal flow, with the larger tides penetrating to the highway and water within this reach of the channel is saline between November and April. About 75 percent of the area is used for agriculture. Because of the land type, soil characteristics, and water available for irrigation, the area is dominated by rice cropping. Double cropping is practiced on most of the land. A large portion of this double-cropped land consists of local variety broadcast aus5 followed by local variety and high-yielding variety transplant aman.6 The present cropping intensity is 186 percent. 9. The area has little wildlife. Wildlife comprises mainly coastal bird species, reptiles, and amphibians endemic to the area. The aquatic habitat is limited to Choto Kumira khal. The mudflats outside the embankment have been planted to mangroves. The area is one segment of a long identical coastal plain and has no special ecological features. 10. The population density is 600 per square kilometer, which is much less than the national average of 850. The area is accessible by village roads from a number of points on the highway to Sayedpur Ghat and the embankment. Sayedpur has one bridge, the remainder are footbridges. The khal can no longer be used for navigation. One growth center is located on the highway. The subproject area has no items of cultural or heritage significance in the area. E. Purba Sayedpur Drainage, Irrigation, and Water Conservation Subproject

11. The gross area of the subproject is 892 ha of which the net cultivated area is about 565 ha. The homesteads, homestead gardens, water bodies, roads, forest, etc. cover about 327 ha of the total area of the subproject. The subproject area includes mostly highland (F0 i.e., 0-30 cm flood depth) and medium low (F1 i.e., 30-90 cm flood depth) type of land, which covers 565 ha of agricultural land. The terrain is flat and surrounded by dendretic channels of the Lower Meghna

3 4 5 6

Water Resources Planning Organization. 1999. The Environmental Setting, Topic Paper No.4, National Water Management Plan Project. Dhaka. Natural or artificial narrow water channel. Crop production season during the months November-March. Rice produced during March-June. Rice produced during July-December.

54 Appendix 9, page 3 floodplain. Kochua khal and beel7 are located in the central part to the area. Both water bodies are affected by tidal flow and also by flooding from upstream. Large numbers of coconut, date palm, and betel nut trees are found around the homesteads and native forest remains on the higher ground in the south. Trees and homestead platforms surround the central beel and cover about 30 percent of the gross area forming refuges and corridors for wildlife. The agricultural landscape and beel are treeless. The area has no special ecological features distinct from the surrounding district. 12. The environment has been considerably modified by human activity: (i) (ii) (iii) (iv) (v) (vi) the area is now protected from tidal surge by the Rahmatkhali khal regulator, the open water fishery has been depleted by overexploitation and obstruction to spawning migration, Kochua khal is largely an artificial borrowpit excavated to construct a road, the khal is pumped out annually to irrigate the boro8 crop, the beel wetland has been drained by a network of canals, and native forest has been cleared for rice fields from 60 percent of the area.

13. This notwithstanding, the landscape is very attractive, and does not appear to be suffering from any environmental problems. Because of the land type, soils, and availability of irrigation water, rice crops dominate the subproject area. Double cropping, which covers about 378 ha of net cultivated area, is practiced on most of the land and single cropping occurs on about 26 ha of land. A large portion of this double-cropped area consists of high-yielding variety boro followed by transplanted aman (both local and high-yielding varieties). Present cropping intensity is 139 percent. 14. Within the community, 64 percent of the households depend directly on farming. About 12 percent of these households are landless people and depend on farm employment. The remaining 36 percent of the households have other occupations as their major source of income. However, at least 15 percent of these including entrepreneurs, fisherfolk, unemployed, and some women are indirectly dependent on farming. Unemployment is a problem, particularly among the younger people and women. About 25 percent of the labor force is working in towns or out of the country. Among the farmers, the average landholding is 0.66 ha. However, large- and medium-size landholders own 45 percent of the land. For half of this group, farming is not their primary occupation. Twenty-two percent of the land is owned by the nonfarming sector. Marginal farmers and landless, who comprise 45 percent of the area population own 15 percent of the land. F. Sriramkandi Flood Management Drainage and Irrigation Subproject

15. The gross area of the subproject is 333 ha, including 38 ha of noncultivated highland occupied by homesteads, 275 ha of net area, and 20 ha of noncultivated permanent water bodies. The land elevations range from 5 m to 7 m with highland located mostly in the northern half of the area near the river. The mean annual rainfall is 1,878 mm and the mean monsoon flood level is 6.75 m. This causes inundation of extensive areas on both sides of the river. The riverine environment surrounding the subproject has been extensively influenced by flood control, irrigation, and river improvement interventions. The subproject area includes mostly medium low (F2) land, which includes 245 ha of agricultural land. The major crops grown in the area are transplanted aman, boro, pulses, sugar cane, oil seeds, and jute. The present cropping intensity is 170 percent. The project area has been extensively cleared for agriculture, which covers 80 percent of the landscape. Life in the area is still dominated by flooding. Floods exceeding 6.75 m can occur at any time between July and October. Flooding of the lower land is much more frequent and can occur between June and October. The
7 8

A saucer shaped land connected with natural water body through a canal. Rice produced during January-May.

55 Appendix 9, page 4 estimated minimum river levels are above the lowest land for four months of the year. There are continuous stands of riparian vegetation along both streams, and remnant patches throughout the northern embankments. The village platforms with their associated gardens are located against the river in this northern half providing a forested perimeter. The southern polder is largely treeless agricultural land, with an extensive swamp in the southern corner. The area is one part of an extensive floodplain and has no special ecological features. The aquatic habitat is extensive but badly damaged. It has the full range of habitats with the two rivers, the internal khal, the seasonal beels, the floodplain, and an estimated 20 ha of village ponds. Few fish exist in the rivers, and as a result all of the river fisherfolk have moved on. 16. The population of the subproject area is estimated at about 2,800 with a population density of 850 persons per square kilometer. About 470 families live in five villages. The NoaparaModhukali road, and the Bhatiapara railway are located on either side of the project area, the later forming a flood refuge. A metal road from Noapara comes within 1 kilometer of the area. It enters the area as a gravel road via a concrete bridge over the Chandana River and runs on the embankment across the center of the area to Bhimpur Bazar. Bhimpur Bazar has a growth center but no industries. The subproject area has no apparent items of cultural or heritage significance. G. Screening of Potential Environmental Impacts and Mitigation Measures 1. Choto Kumira Khal Water Conservation Subproject

17. The proposed construction of a 2.7 meter diameter rubber dam across the Choto Kumira khal will serve a net area of up to 957 ha for rice and vegetables cultivation with dry season irrigation. The estimated storage volume is 163 000 m3. The expected benefits are an increase in annual production by 20 percent (Tk7,018,000). Saline intrusion in the dry season will be prevented upstream of the dam. Downstream, the brackish section of the khal will not be affected as no brackish nursery zone or mangrove plants exist within the boundary. Choto Kumira khal will become a more permanent pool in the dry season. This occurs now with the construction of mud bunds, so is not expected to significantly affect the water quality and other components of the aquatic environment. Reduction of the salinity level may improve the present water quality condition. Baseline water quality data will be established as part of the design process for the subproject and water quality will be monitored on a regular basis. Construction of the dam will raise the water level in the pools of the khal by a minimum additional depth of 0.3 m. This will create a congenial environment for fish. Some seasonal siltation may exist at the khal head, but this will be minimal as the dam is only inflated in times of low flow during the dry season. 18. The operation of the rubber dam proposed for Choto Kumira khal will be operated to take advantage of the annual cycle of movement and breeding of fish and prawns. Agricultural production is expected to increase significantly by 1,150 tons, including 685 tons of rice and 460 tons of vegetables. This amounts to 90 kilograms (kg) of vegetables per person living in the area. The improved food supply will potentially be reflected in better nutritional status, health, and general well-being of the community. Employment in farming is expected to increase by 21 percent mainly as the result of increased vegetable production specially beans. On the other hand, use of chemical fertilizer and pesticide will increase. This will impose a negative impact on agricultural soil quality and water quality in the khal as well. Application of integrated pest management techniques could mitigate these adverse impacts in the agricultural fields. Soil analysis and soil fertility level determination in the crop fields could better manage the soil resources without further degradation. 19. The fish population of the khal has been significantly reduced by existing embankments and regulators, the current use of mud bunds and extreme fishing pressure, particularly around the structures and in drainage ditches. Inflation of the rubber dam during the lean period is unlikely to

56 Appendix 9, page 5 affect fish breeding. Provision has been made for a bypass to provide environmental flows if required. 2. Purba Sayedpur Drainage Improvement and Water Conservation Subproject

20. The proposed construction of a 9 m wide x 2.6 m high automatic gate on Kochua khal at Purba Sayedpur will retain an estimated 700,000 cubic m of water for irrigation and improve flood security. It will facilitate cultivation of irrigated boro, wheat, winter crops, and fish culture. During premonsoon rainfall, Kochua beel will be unaffected, as the gate will open automatically if upstream levels exceed 2.8 m and the tide level is lower. This level is lower than the land level of Kochua beel. Drainage from the beel will also be unaffected. So, mostly there will be no impact. Tidal flooding on the other hand will be reduced, as the smaller tides up to 3.8 m will be excluded. This level is exceeded in 17 percent (1 in 5) of years and the highest level reached is 4.4 m. The gate chosen has been designed specifically to meet environmental concerns, including ensuring fish passage in the Zandvlei estuary in South Africa and is considered the most suitable available. The operation of the gate could be refined in the final design if required. Gate operation will be set to take advantage of the annual cycle of movement and breeding of fish and prawns. The operation is detailed in the IEE of the subproject. The automatic gate has been considered more likely to allow fish access than the possible alternative structures, such a regulator. The timing and frequency of openings is likely to be more suited to fish movement and the larger opening and lower velocity flow should allow fish to pass. The Project will not result in a reduction of agricultural land, but it may allow cultivation to extend further into the beel. This will depend on water level behavior once the more frequent tidal flooding is removed. 21. Farm outputs are expected to increase by 27 percent (Tk9,313,000) and employment in farming should increase by 66,930 person-days worth Tk37,50,000. Use of chemical fertilizer and pesticides will increase. Consequently, the soil of agricultural lands may be degraded. Application of integrated pest management techniques can mitigate this impact. Soil analysis and soil fertility level determination in the crop fields can protect the lands from degradation effects. It is not likely to have any adverse impact on open water fisheries. Rather, introduction of rice-fish culture is expected to increase floodplain fish production. 3. Sriramkandi Flood Management and Drainage Improvement Subproject

22. The proposed resectioning and completion of the embankments with sluice will exclude all but the most severe floods and allow drainage when river levels permit. This will have a positive impact on agriculture by protecting the boro crop and aus crops from premonsoon floods and allow a good start to the aman crop. In line with agricultural crop production, use of chemical fertilizer and pesticide will also increase. Application of integrated pest management in crop fields, and agricultural land management through soil analysis and soil fertility level determination, will mitigate the possible impacts of soil quality degradation and water quality deterioration. 23. The floodplain in the subproject area may be affected significantly. The northern wetland will be maintained by internal run-off unless the drainage is improved, however it will become seasonal and be smaller in size. The khal is still likely to have some permanent water. The southern wetland is expected to drain completely once the entrance khal is built and the area is used for increased agricultural production. 24. The riverine fishery is already badly damaged and may not suffer a measurable loss from so small a project. However, the loss of the floodplain fishery is likely to impact both on the species available in the area and the fish biomass. Those who catch fish and those who depend on the open water fishery to supplement their diet will share this fishery impact. The floodplain fish loss can be compensated by introducing aquaculture practice in the area. An increase in the yield per

57 Appendix 9, page 6 ha of the 20 ha pond area from existing 1,200 kg to 2,050 kg is quite possible following the modern production technology. 25. The floodplain fish loss can be reduced to a minimum by allowing entry of fish/prawn seeds, juveniles, and young through the regulator gate. This will require opening of the gate intermittently at the onset of flood and during monsoon. The frequency and duration of gate opening at the peak period of breeding (mid July) will be increased. H. Institutional Requirements and Environmental Monitoring Program

26. Subproject beneficiaries are the caretakers of their local resources and they will be the ultimate manager of water control structures. Thus, they must understand the sustainable use of natural resources, be able to manage them properly, and operate the structures in a planned and responsible way. So, an extensive general awareness training program needs to be conducted initially to make them understand the human role in changing the environment, measures for protection and conservation of the environment, environmental legislation, best use of water resources with maintenance of water quality standards, etc. In the second stage, a training of trainers course needs to be held with the most competent attendees of the general awareness training program. The prepared trainers are expected to organize and continue the future awareness training program in their own locality. This concept is working well in the ongoing subprojects of the ongoing Small-Scale Water Resources Development Sector Project (SSWRDSP). 27. To mitigate adverse impacts arising from increased pesticide use, a total of 62 integrated pest management field farmers schools (FFS) have been established in 59 subprojects of the SSWRDSP; 1,240 farmers have received training. These farmers subsequently worked with 3,879 other farmers to encourage them to adopt the technology. To protect against any kind of environmental degradation as well as to encourage economical fertilizer use, a soil health card has been introduced among 300 farmers who are now fixing fertilizer doses themselves according to soil requirements in their croplands. In the fisheries sector, a new concept for simultaneous use of inundated floodplains to cultivate two crops: rice and fish together has been introduced. This has resulted in partial compensation for floodplain natural fish loss, economic benefit to the farmers, and maintenance of communal harmony between agricultural crop producers and fish farmers. All these activities need to give due attention during planning phase for environmentally sustainable institutional capacity building of the beneficiaries of the proposed Project. 28. The Local Government Engineering Department (LGED) has two environmentalists in the project management office, one environmental specialist and one environmental laboratory specialist with the advisory technical assistance. Three laboratory facilitators and 11 laboratory assistants are located in the LGED district laboratories. LGED has established three regional environmental laboratories with additional facilities and sophisticated instrumental set up at Barisal, Khulna, and Rangpur, and 11 greater district laboratories in the western half of Bangladesh equipped with water test kits usable in the field. These laboratories are in operation for the SSWRDSPs water quality monitoring activities in selected subprojects. The same kind of laboratory is to be set up in the eastern part of the country for the same monitoring purposes. Most importantly, LGED does not have enough qualified technical personnel to handle and operate these instruments to conduct analytical works in such laboratories. To develop the in-house technical capability of LGEDs laboratory staff, training on environmental laboratory and water quality testing is ongoing, and a similar program needs to be designed for the proposed Project with recruitment of additional technical human resources.

58 Appendix 9, page 7 I. Findings and Recommendations

29. The water conservation and drainage improvement type of subprojects are likely to have no direct negative environmental consequences. These subprojects are expected to benefit the agriculture sector by extending dry season irrigation facility in highland areas and quick drainage of tidal water in coastal areas. The water conservation subprojects are also expected to have positive impact on fisheries production in the khals. An indirect negative impact is likely in water conservation and drainage improvement types of subprojects as the result of increased use of agro-chemicals. To mitigate this impact integrated pest management training with the establishment of field farmers schools will be necessary. Moreover, farmers will be required to assist and support agricultural land and soil management. The flood management type of subprojects may have little adverse environmental impact for floodplain fisheries production. But this can be partially mitigated by proper design and structure operation, for example, construction of submersible embankments, and timely operation of sluice gates. The fisherfolk in flood management subprojects will be partially affected by the impact on floodplain fish. This impact can be compensated by imparting training to the fishers on rice-fish culture on floodplains. Fish cultivators can also benefit from the same training. If properly adopted then the floodplain fish production loss can easily be overcome through rice-fish culture as well as alternative fish production in ponds. 30. The experiences from the ongoing SSWRDSP show that all the subprojects including those of the command area development type have positive impact on quality of life values. The proposed Project can therefore be recommended with appropriate mitigation measures, monitoring requirements, compensatory plan, and other components of the environmental management plan as summarized here: (i) integrated pest management training for the farmers and establishment of field farmers integrated pest management schools to mitigate the adverse impact of chemical fertilizer and pesticides use; establishment of an environmental laboratory to strengthen LGEDs institutional capability; water quality impact monitoring to verify any long-term impact on fresh water ecology; soil analysis and soil fertility level examination to assist farmers in determining fertilizer mixes and applications, and to verify any long-term effect on soil quality degradation; biodiversity impact monitoring to verify any long-term impact on aquatic habitat and wetland species diversity; environmental education and training for raising awareness among the stakeholders on sustainable use of local resources; and fish production training to compensate for the partial loss of floodplain fish production and to introduce modern aquaculture technology in khals and ponds.

(ii) (iii) (iv)

(v) (vi) (vii)

J.

Conclusions

31. The SSWRDSP II is environmentally feasible and can be implemented provided that all the environmental issues discussed here are taken into account and the respective measures are put in place within the scheduled time frame and with proper allocation of fund as in the environmental management plan. A full-scale environmental impact assessment is not required at this stage.

59 Appendix 10, page 1 SOCIAL DIMENSIONS AND POVERTY ASSESSMENT A. Poverty and Social Characteristics

1. Bangladesh has made notable progress in income-poverty reduction since the 1970s. At the national, poverty has declined from 70.6 percent to 46.5 percent, and the percentage of rural people living below the poverty line declined from 71 percent in 1973/74 to 51 percent in 1995/96.1 The human poverty index (HPI), which captures human deprivations in longevity, knowledge, and economic provisioning, also shows that incidence of human poverty has declined from 61.3 percent in 1981-1983 to 47.2 percent in 1993-1994 and to 40.1 percent in 1995-1997.2 However, inequality in income distribution has worsened since the early 1990s, rising from 35 percent in 1983/84 to 38.4 percent in 1995/96. 2. Poverty in rural Bangladesh is multifaceted. It is reflected in low standards of living, poor health, lack of education, abandonment of women and children, and vulnerability of most rural households to natural and manmade disasters. The basic causes of poverty are lack of access to productive resources (mainly water and land), to public resources such as health provisions, education, and transport and to particular employment. Lack of social and governmental safetynet entitlements makes the land-poor and landless particular vulnerable. The large and mediumsize landholders have access to credit and other necessary agricultural input. Their access to cash has allowed many of them to diversify into nonfarm activities and act as local moneylenders, often a very lucrative business. This, combined with their status as landlords and political connections, has secured them a comfortable position in rural society. However, even within the social group of medium-size landholders, about 25 percent live below the poverty line (footnote 1). 3. Rural poverty is very much related to land. The incidence of poverty in the category of landless (less than 0.2 hectares (ha) of land) is as high as 64 percent compared with only 16 percent recorded for large landowners (owning more than 2 ha).3 The incidence of poverty is considerable among marginal farmers as well; 44 percent of this group lives below the poverty line, and among small landholders, 34 percent live below the poverty line. 4. Rural households are often involved in a bundle of income-generating and cash-saving activities. A household may be farming some of its land, leasing in a plot from someone else while at the same time leasing out one or more of its own plots. One or more members of the household may work off and on as a day laborer. Others may move off to towns and cities to seek employment. Homestead land is often used to produce vegetables, fruits, poultry, and livestock. Traditionally fisheries are a major part of rural livelihood strategies. The many rivers, khals, boars, haors, ponds, etc., are ideal for fish production. Fisheries for subsistence use are widespread among all categories of rural households. However, fish stock has been limited significantly over the last decades. The scope for aquaculture seems considerable, although partly restricted by multiple ownership of water bodies.4 5. The four subproject areas, Abatpur, Choto Kumira, Purba Sayedpur, and Sriramkandi, are dominated by a rural economy, on average 80 percent of the households in the areas are
1
2 3

Sen, Binayak, 2000. Bangladesh Poverty Analysis: Trends, Policies and Institutions. Prepared with financial support from ADB. HPI substantially varies at district level, HPI of 17 districts out of 64 total districts are higher than 40.1. The categorization of farmers is based on following definition: marginal farmers own between 0.2-0.5 ha, smallholders 0.5-1 ha, medium-size landholders 1-2 ha, and large landholders more than 2 ha. In some places, flood protection has enhanced the scope for aquaculture by protecting ponds from flooding.

60 Appendix 10, page 2 dependent on or involved in farming. A significant feature in the subprojects is the high number of small and marginal farmers, and unequal distribution of land. In Abatpur and Purba Sayedpur, large and medium-size landholders (44 percent and 33 percent of all farmers) own 44 percent and 63 percent of the total arable land in the two subproject areas. Marginal and landless farmers (44 percent), on the other hand, own only 15 percent in Purba Sayedpur and 17 percent in Abatpur. Figures on cultivated land per household indicate that marginal and landless farmers gain access to and cultivate on average 20 percent of the total arable land in subproject areas. Even though sharecropping is mainly found among landless, small and medium-size landholders may also work as sharecroppers. The most common system of share cropping is that the sharecroppers and the landowners share the benefits gained from agricultural production (50/50). Exact figures on the prevalence of sharecroppers in the project areas is not available; however, the majority of sharecroppers are likely among the landless and marginal farmers. In addition, to sharecropping, landless farmers supplement their income through fishery and vegetable growing. In Choto Kumira, the landless owned on average 0.08 ha of pond and homestead land. 6. The occupational distribution within the agriculture sector also reflects the unequal distribution of land. On average, 40 percent of household heads farm their own land, 30 percent are sharecroppers, and 10 percent depend on farm labor. The remaining 20 percent depend on jobs such as rickshaw-pulling, daily labor, fishing, trade, and business. Women are employed in domestic duties, harvest works, and cottage industries. Poor women collect fuel and work as wage laborers. Destitute women reported earth work and domestic labor as the main sources of income. 7. The majority of the male population in the four subproject areas are engaged in full-time employment (between 65-76 percent), and 25 percent of the male population are inadequately employed.5 Studies indicate that the groups most affected by unemployment are youths, day and agricultural laborers, small holders, sharecroppers, and destitute women. Destitute women reported having 4 months of unemployment during the monsoon period. 8. According to the detailed poverty study in the four subproject areas, the annual income per household is Tk27,900 for landless and Tk24,600 for marginal farmers. Medium-size landholders have an annual income on Tk77,500. The average income of destitute women is approximately Tk15,000, and household expenses are managed within this income. On average, 75 percent of spending is on food. The per capita income adopted for moderate poverty is Tk6,000 and for extreme poverty Tk5,000.6 Based on a household population of six, the group of landless and marginal farmers falls below the extreme poverty line.

5 6

They are employed less than 10 hours a day. Local Government Engineering Department. 1999. Poverty Reduction Impact Study, Southwest Road Network Development Project, Dhaka. Draft final report.

61 Appendix 10, page 3 Table A10.1: Poverty Incidence in Subproject Areas7 Marginal farmers Small farmers Medium farmers Large farmers

Item
Productive Assets (Farmland) Hectare per household Annual income (Tk) per household Annual expenditures per household (Tk) Nutrition intake gram per capita per day Loan taken during last year (avg. per HH (Tk))
hh = household.

Landless

0.072 27.900 29.316 113 1,000

0.188 24.660 24.696 167 14,636

0.316 54.072 50.952 341 10,333

1.332 77.544 70.008 683 10,000

2.784 137.400 119.748 978 10,000

9. The main problems in the four subproject areas, as identified by the landless and marginal farmers are shortage of land and income opportunities. The community groups expectations of the benefits and impacts of the Project are (i) increased income opportunities,8 (ii) development of road and water communication, (iii) increase in the value of mortgaged agricultural land by between 15-25 percent per hectare, (iv) increase fish production, and (v) more opportunities for disadvantaged groups to become involved in farming. All women interviewed expected to benefit from the Project mainly through employment opportunities, better pay, and general improved socioeconomic conditions through postharvest work and earthwork in particular. B. Social Dimensions 1. Vulnerable Groups - Fisherfolk

10. Where neither design, nor planning, nor implementation can reduce fishery losses, mitigation measures can often do so. Most often these measures will focus on culture (instead of capture) fisheries. Ensuring not only an increase in production, but also accesses to new opportunities for those who have lost out capture fisheries is essential. To compensate fisherfolk for their losses (if any) and ensure that they are not worse off due to the Project, fisheries development plans will be developed in a participatory manner in accordance with Guidelines on Participatory Water Management and ADBS fisheries development plans prior to the conclusion of implementation agreements. The funding of fisheries development plans will be underpinned with Government counterpart funds and charges, fees, and dues collected for services and facilities by WMA. 2. Indigenous People

11. In Bangladesh, 20 ethnic minority groups are recognized, they are mostly found in plans or hills of Chittagong Hill tracts. As the Project does not include Chittagong Hill tracts,
7 8

See financial and economic analysis, Appendix 12 of the RRP. In regard to the increased possibilities for income-generating activities, construction/earth work was mentioned, rickshaw-pulling, increased fish production, and more possibilities for sharecropping.

62 Appendix 10, page 4 indigenous peoples issues are not anticipated to be significant in the Project. However, where indigenous peoples may be affected by subprojects, ADBS Policy on Indigenous People will be applied. 3. Resettlement and Land Acquisition

12. Resettlement and land acquisition effects are not anticipated to be significant for the Project. However, reflecting the importance ADB places on careful and effective implementation, a land acquisition and compensation plan will be prepared based on ADB guidelines. A summary resettlement plan is in Appendix 11. 4. Participatory Development

13. The Project is driven by the needs and demands of the communities that recognize water management as important to realize the productive potential of their land and captured fisheries. Subproject selection is based on participatory consultations at the village level in conjunction with the district level administration and nongovernment organizations (NGOs). These stakeholders will also be involved in project preparation, implementation, and monitoring and evaluation. Women will have an equal opportunity to participate in project activities, and they will be adequately represented in training and other project activities. 5. Gender Issues

14. The issues of gender in the water sector do not simply involve access to water. They involve questions of rights, responsibilities, and participation at all levels. When women do not get the opportunity to participate in water management, they are simultaneously delinked from the urgent effort to protect these vital natural resources. 15. The Project will provide training (confidence building and management skills) for women to enable them to participate in the water management association 1/3 of the members should be women, and will also give specific attention to employment of female staff at all levels. The Project will give priority to local poor women in (i) formation of the local contracting society, (ii) employment opportunities generated by the Project (tree planting, embankment work, etc.), and (iii) in operation and maintenance work of the Project. Additionally, all relevant training activities included in the Project will address gender concerns, and at least 30 percent of participants in training activities should be women. This includes training of Local Government Engineering Department staff and water management association members. All facilitators, community organizers, socioeconomists, assistant engineers, and upazila engineers will be trained on the importance of womens involvement in the Project. Special training will be provided for womenonly on various aspects, such as homestead, vegetable gardening, duck rearing on on-farm income-generating activities, and seed and vegetable production. 16. Gender-specific monitoring indicators will be identified and gender-relevant information will be documented. An international and national gender expert will be posted in the project management office. The gender experts will among other things develop and implement a gender strategy for the Project. C. Expected Social and Poverty Impact of the Project

17. While the Project will not address core poverty interventions, positive and significant impacts on poverty reduction in project areas are expected. Direct benefits are expected

63 Appendix 10, page 5 through increased household income in subproject areas both by the incremental net value of agricultural production, as well as by the returns to the labor that is involved in that incremental production. The increase in water supply at critical times of the year for irrigation projects is expected to allow for increased high yield variety rice production as well as additional crops. Temporary employment opportunities will be generated through construction work during subproject implementation. Table A10.2 gives a summary of the expected poverty impact of the Project. 18. Overall when combining crop production and labor income, the poor may attain 49 percent, 45 percent, 63 percent, and 58 percent of the full local financial benefits of the Project in Abatpur, Choto Kumira, Purba Sayedpur, and Sriramkandi, respectively.9 On an annual basis the average incremental increase in household income among the poor is expected to be Tk3,900.00, Tk3,900.00, Tk3,160.00, and Tk3,000.00. 19. In addition, to the benefits mentioned, indirect or secondary employment opportunities are expected to increase due to rise in agricultural production. The rise in local household income and food production will result in an improved status of nutrition and welfare for the subproject population. Water conservation by Projects is likely to have multiple uses in addition to irrigation, namely for livestock and domestic purposes. The subprojects in Abatpur and Sriramkandi also provide opportunities for increased income from fisheries, through construction of ponds. 20. Agricultural production benefits are likely to accrue almost entirely to the owners of the land. While the poor (defined as small and marginal farmers, in addition to the actual and functionally landless)10 own only on average less than half of the total arable land in the benefited areas, they can also be expected to benefit from increased labor income resulting from the subproject crop production. In addition, labor for earthworks involved in project construction is likely to be drawn from local poor households. 21. The efficiency of the Project in delivering benefits to the poor can be calculated by taking the ratio of the present value of benefits going to the poor to the present value of public investment in the four subprojects. By this measure it can be noted that the poor can be expected to receive Tk1.4 in project benefits for every taka of public investment.

9 10

See the financial and economic analyses of the Project for more detailed information. The poor own 32 percent of the net benefited area in Choto Kumira subproject, 54 percent in Purba Sayedpur subproject, 32.5 percent in Abatpur, and 43 percent in Sriramkandi.

64 Appendix 10, page 6 Table A10.2: Summary Poverty Impact in the Four Subprojects Item
Benefit. Land (ha) No. of poor households % of total benefits going to the poor (financial) Incremental annual income per poor household % total benefits going to the poor (economic) Incremental annual income per poor household Benefits to the poor/public investment (see para. 20)

Abatpur
531 540 48.8

Choto Kumira
987 853 44.3

Purba Sayedpur
565 740 61.9

Sriramkandi
275 254 58.5

3,635

3,025

3,162

3,943

38.7 2,594

34.6 1,663

55.6 2,190

46.8 2,423

0.96

1.54

2.4

1.12

ha = hectare. Source: Local Government Engineering Department. 2000. Feasibility reports on the Small-Scale Water Resources Development Sector Project, Dhaka.

65 Appendix 11, page 1 SUMMARY RESETTLEMENT PLAN A. Introduction

1. One of the components of the Small-Scale Water Resources Development Sector Project is to construct water management infrastructure. Three subprojects were identified and assessed in terms of resettlement and land acquisition issues. The assessment indicates that none are expected to have a significant impact in terms of resettlement and land acquisition. 2. The draft summary resettlement plan provides an estimate based on design data for three subprojects in Sonotala flood control drainage (FCD); Sriramkandi flood control drainage; and Madhukhali flood control drainage. 3. The resettlement plan will be updated prior to commencing works. Receipt of the updated final resettlement plan acceptable to the Asian Development Bank (ADB) will be a condition for commencing construction. This will be reflected in the loan covenants to ensure compliance. B. Resettlement Policy

4. Resettlement will be implemented according to the following legislation of the Government of Bangladesh and in accordance with ADBs policy on involuntary resettlement (November 1995). The basis under the Constitution and laws of the Peoples Republic of Bangladesh are The Acquisition and Requisition of Immovable Property Ordinance of 1982. C. Minimization of Resettlement Impact

5. The Project will adopt a policy of minimizing adverse resettlement impacts and reducing the number of affected persons by continuously reviewing the design to minimize land acquisition and resettlement requirements. D. Resettlement Impact

6. The three core subprojects assessed have only insignificant impacts in terms of resettlement. In the Sonatala flood control drainage subproject, embankment, canal, regulator, and sluice gates have been constructed on 4.72 hectares (ha) of private land and 1.36 ha of government (khas) land. To construct infrastructure, 0.0300 ha have been taken from each of the 157 plots (private). Loss to individual owners compared with the benefits is insignificant. The people affected do not need to be resettled or relocated. For the Sriramkandi subproject, a flood protection embankment with two regulators will be constructed on 4.00 ha of Water Development Board (WDB) land and 0.41 ha of private land. Concurrence of the WDB for use of their land will meet the legal requirements. The private cultivated land will be compensated at an agreed rate. Ten households now residing on WDB land as squatters will have to be relocated. For the Ramkrisnapur drainage subproject, no land acquisition or resettlement will be acquired. E. Resettlement Principles and Entitlements

7. Those affected will be assisted to maintain their original standard of living, at least equal to what they enjoyed prior to the Project. All possible means will be explored to minimize resettlement and land acquisition impacts by modifying the engineering designs. This will be carried out in close consultation with those affected. Plans for acquisition of land and to address

66 Appendix 11, page 2 those affected will be implemented in consultation with the people affected to ensure minimal disturbance. Financial and physical resources for compensation will be made available as and when required. 8. People affected may resettle themselves or be resettled in close proximity to their respective villages. Legal owners and tenants of land will be compensated and assisted with rehabilitation. 9. No works under any contract awarded under the Project will commence until all required funds are made available to the concerned land acquisition collector and compensation payments and/or other assistance have been made available to those affected. 10. When the design of subprojects is finalized, an entitlement matrix will be prepared for each subproject in accordance with ADBs resettlement policy. An independent review of the resettlement operation will be commissioned by ADB after completion of the Project to assess whether those affected have regained or improved their livelihoods and standards of living. F. Consultations and Grievance Procedures

11. Social preparation is an essential part of the planning and implementation of the resettlement process. The Local Government Engineering Department (LGED) and upazila officers will enlist the assistance of local nongovernment organizations to inform the affected persons of the project impacts, and their entitlements and rehabilitation options under the resettlement plan. The resettlement plan will be designed and implemented in consultation with the water management association and those affected. Grievance redress of the people affected may be provided through the local conflict resolution committee, constituted with the local upazila officer, upazila engineer, LGED, the assistant commissioner (land), local union parishad chairperson, a female member of the union parishad, WMA chairperson, and a representative of those affected. G. Implementation Arrangement

12. The subprojects under the Project have insignificant resettlement effects and the scope for resettlement will not be large. Therefore establishment of a resettlement unit to take care of resettlement issues independently will not be necessary. The project management office may extend support through a resettlement and land management consultant. H. Cost

13. Average resettlement cost per subproject has been estimated at Tk250,000.00. The estimated resettlement cost of all subprojects will be firmed up when the design of the subprojects has been finalized. The full costs of resettlement and compensation will be the responsibility of the Government.

67 Appendix 12, page 1 FINANCIAL AND ECONOMIC ANALYSIS A. Introduction

1. The Second Small-Scale Water Resource Development Sector Project will have a direct impact on the rural economy by enhancing agricultural production. Drainage infrastructure can bring more land into production and/or allow land to be productive throughout more of the year. Flood management projects reduce losses from flooding and allow the use of high-yielding varieties on more land. Water conservation schemes allow supplementary irrigation in addition to increasing retained soil moisture after the rainy season. Command area development directly increases irrigation, leading to a shift to the higher productivity of irrigated agriculture. 2. This is a sector development project and the actual number of subprojects and their coverage areas are therefore not definitively mandated in advance. However, about 300 subprojects (covering roughly 195,000 hectares [ha]) are expected to be constructed. Using the experience of the first Small-Scale Water Resources Development Sector Project (SSWRDSP), an expected mix of subproject types (between flood management, drainage, etc.) for the proposed Project can be assumed as the Project expands to include the eastern sections of the country. Four prospective subprojects have been intensively examined and their expected financial and economic returns, discussed here, can be seen as indicative for the remaining potential subprojects. An overall project return can then be determined as costs not specific to subproject development are incorporated into the analysis. 3. To determine the expected direct benefits of the subprojects in question, quantifiable effects are valued by comparison of with- and without-project scenarios. In addition to quantifiable benefits and costs included in this analysis, however, the Project can be expected to have various nonquantifiable effects. Flood management and drainage schemes can provide protection for households, for example, and embankments can serve as easier access to some parts of subproject areas not well served by regular roads. The rise in local household income and food production will result in an improved status of nutrition and welfare for the subprojects populations. Fish habitat, on the other hand, may change. The quantity of local fish production can be mitigated through the construction of fish ponds as part of the Project, but access to fisheries by traditional users may be negatively affected in some circumstances and will need to be adjusted through institutional means. B. Approach and Methodology

4. Prices used in the analysis were identified through a variety of secondary sources in addition to field trips to the proposed subproject areas. Basic assumptions used in the economic part of the analysis include the following: (i) (ii) (iii) (iv) A world price numerair is used. Values are expressed in constant year 2000 prices to exclude inflation. The Bangladesh taka (Tk) is the unit of account; the rate of exchange used here is the prevailing rate at the time of appraisal: Tk 54 per US dollar. For nontraded goods and services, a standard conversion factor of 0.9 and a shadow wage rate of 0.85 are used.1

The derivation of economic values in the water sector in Bangladesh is laid out in the Government of the Peoples Republic of Bangladesh. August 2000. Draft Development Strategy, Volume No. 8, Annex J: Economics, National Water Management Plan Project, Water Resources Planning Organization, Ministry of Water Resources. Dhaka.

68 Appendix 12, page 2 (v) (vi) For major tradable commodities, economic values are based on border parity pricing (footnote 1). Standard methods of deriving farmgate output/input prices are applied. Transfer payments such as taxes and subsidies are excluded in the calculation of economic values.

5.

The four sample subprojects analyzed are (i) (ii) (iii) (iv) Sriramkandi (Faridpur) flood management, Abatpur (Sunamgonj) (flood management partially submersible embankment), Purba Sayedpur (in Lakshmipur District) water conservation scheme, and Choto Kumira (Chittagong) water conservation scheme.

6. For each of these subprojects cropping patterns and technologies both with and without the Project have been estimated based on the expected changes in land use due to flood protection and/or increased availability of water for crops. Per hectare costs of production and returns for relevant crops have also been calculated for both situations and translated into economic values. For the subprojects net benefited area, the incremental value of production was calculated. To be conservative about field data, for the calculation of economic returns agricultural benefits have been adjusted to 90 percent of their nominal values. 7. Some subprojects (for example Sriramkandi) may be expected to have an effect upon capture fisheries. These subprojects typically involve the building of embankments and control structures and have the possible side effect of preventing the normal production of fish in low-lying areas. While flood protection may actually increase production in privately owned fish ponds, for the more open areas harboring fish when flooded, flood management structures may damage production. When such conditions are expected, appropriate adjustments to benefits are made and/or provision is made for fishponds to be included in subproject implementation plans so as to mitigate the expected fishery effects. 8. Given the available information on the planned structures and earthworks to be built, the cost of each subproject has been determined. These costs have also been converted to economic values. Operation and maintenance (O&M) costs (to be borne by benefiting farmers) have also been estimated at 3 percent of construction costs for earthworks and 1.5 percent of the cost of structureswith some exceptions where higher rates are used. For example, 6 percent O&M is assumed for the partially submersible embankments in Abatpur. In addition, an allowance in the calculation is made for a major repair of the infrastructure in year 15 of project lifegenerally assumed to be equivalent to 40 percent of the original construction cost. 9. Both benefits and costs are expressed as cash flow streams over an expected 20 years of subproject life. From these cash flows, net present values and the economic rates of return are calculated. Finally, sensitivity analyses are performed on the results by assuming various scenarios relating to particular risk factors such as shortened project life due to poor O&M, delays in project implementation, increased construction costs, decreased benefits, and a drop in the price of rice.2 10. Expected subproject impacts on poverty are also examined. Agricultural production benefits are generally assumed to accrue to landowners. Household income is expected to increase from
2

World Bank commodity price projections of April 2000 predict a general rise in rice prices over the next decade and a decline of prices for two of the three fertilizer prices of relevance (with some rise in the third). While these predictions may indicate little price risk, the possibility of future price changes that may negatively impact the project is dealt with through the sensitivity analysis regarding the price of rice. To be somewhat more conservative than the World Bank price projections, the base analysis is built on the assumption of constant relative prices.

69 Appendix 12, page 3 incremental labor utilization with the subprojects. Improved water resource regimes allow farmers to more fully adopt high-yielding variety technology, and labor inputs can be expected to rise to some extent. Assuming the degree of unemployment and underemployment that is typical of rural Bangladesh, in local financial terms this increase in labor income (either through wages or as returns to labor on a households own land) can add substantially to household income, particularly that of the poor. On a national level, however, the economic opportunity cost of labor must be taken into account and the incremental wage effect on poverty is a good deal less than it is in local financial terms. C. Economic and Financial Appraisal

11. To consider the results of the economic and financial analysis, one of the four sample subprojects is examined in some detail in this text and in tables A12.1 and A12.2. Full comparable details in tabular form, however, can be found for all four subprojects in tables A12.3 and A12.4. 1. Sriramkandi

12. Sriramkandi subproject in Faridpur district is designed to provide flood management benefits for farms covering 275 ha. When the area is better protected from floods with the Project, farmers choices of cropping pattern, intensity, and technology are expected to adapt positively to the new opportunities. In financial terms, once farmers have fully adapted to their new water regime, the value of net incremental crop production is expected to be about Tk1.3 million a year, or Tk4,660 per hectare (Table A12.1). Of this, Tk1.1 million will be from incremental rice production (261 tons) and Tk0.2 million from other crops. Cropping intensity is expected to rise from its present 170 percent to 184 percent with the Project. Rice output/ha is expected to rise by about 14 percent, due to higher inputs on the existing mix of rice varieties and a shift to more high-yielding varieties. 13. This subproject, however, is expected to have a fisheries effect. Without the Project, in roughly 5 years out of 10, approximately 250 ha of floodplain can be expected to be flooded with sufficient water to provide a temporary habitat for fish. This fish production (expanded to an average annual basis) is valued at over Tk300,000 and will be lost once the subproject is implemented. To mitigate for this effect, 7 ha of fishponds are proposed to be constructed within the subproject area. These ponds are expected to provide a catch worth over Tk400,000 per year enough to compensate for lost fish production and for the pond cost. 14. The construction cost of the subproject is estimated at Tk4.2 million, which will lead to an expected Tk71,300 in annual O&M expenditures. In addition, the proposed fishponds will cost Tk300,000 and incur annual O&M costs for stocking, pumping, and embankment maintenance totaling Tk32,750. Total regular O&M is, then, Tk105,050, or about Tk380 per ha. A comparison of financial benefits per ha with this expected O&M figure would indicate that project beneficiaries should have no problem meeting their O&M responsibilities. Assuming funds are put aside for the projected year 15 major repair, this cost can be covered by an additional Tk365/year/ha. 15. In Table A12.2 the economic valuations of the subprojects costs and benefits can be seen.3 The life of the Project is expected to be 20 years and the agricultural benefits are phased in over the first four years following construction. The economic net present value (NPV), assuming a 12 percent opportunity cost of capital, is Tk2.6 million. The economic internal rate of return (EIRR) is 21 percent and the benefit-cost ratio is 2.4/1.
3

These figures assume the 90 percent adjustment noted earlier.

70 Appendix 12, page 4 16. Various sensitivity analysis scenarios focus on a number of risks that may face the Project. What will happen to returns if the rice price drop (despite World Bank projections for an increase) or general benefits are less than estimated? Similarly, if the cost of construction increases or the construction period is prolonged (delaying project benefits), what would happen to the EIRR? Or, if O&M is not adequately performed and project life is subsequently shortened to less than 20 years, how much will returns be affected? (i) If the price of rice (the primary crop in this subproject) were to drop by 20 percent, the EIRR would decrease to a still-acceptable 16 percent. The sensitivity indicator for this drop is 3.2, meaning that a drop in rice price causes a proportionately 3.2 times larger drop in returns (as measured in NPV). If general benefits were to drop by 20 percent, the EIRR would decrease to 14 percent. The sensitivity indicator is 3.9 and the switching value (the percentage decrease in general benefits beyond which the EIRR drops below the 12 percent cutoff) is 25 percent. If construction costs (and associated O&M costs) were to be 20 percent higher than estimated, the EIRR would drop to 17 percent. Here the sensitivity indicator is 1.7 and the switching value is 160 percent of estimated construction costs. If the project life were to be shortened by 5 years (to 15), the EIRR would be minimally affecteddecreasing only to 20 percent. The NPV would decrease by a quarter. The switching value, indicating the minimum number of years of project life that would maintain at least a 12 percent EIRR is 7 years. If construction is prolonged for an additional 2 years, in effect delaying the start of project benefits, the EIRR would drop to 16 percent, and be associated with a 46 percent decrease in NPV.

(ii)

(iii)

(iv)

(v)

17. Overall, these sensitivity tests indicate that the economic viability of this subproject can withstand the levels of change in the risk factors that have been tested. Sensitivity indicators and switching values would imply that substantial deterioration in the levels of the risk factors could jeopardize subproject performance, with the exception of the risk of shortening subproject life for which there appears to be a good deal of leeway. Generally, however, these results can be seen as moderately robust, and indicate a level of returns that are at a sufficiently high level to accommodate a reasonable share of the overall Projects additional costs of management, subproject selection, monitoring, etc. 18. Household income in the subproject area is likely to increase both by the incremental net value of agricultural production as well as by the returns to the labor that is involved in that incremental production. Assuming the degree of unemployment and underemployment that is typical of rural Bangladesh, in financial terms the households of the area are likely to benefit from an increase in wage income (or its equivalent in on-farm returns to family labor) of more than Tk700,000 per year. On a per ha basis (to make it comparable to the incremental value of crop production), this incremental labor income is expected to be about Tk2,560/ha. 19. The poor own 43 percent of the 275 ha of net benefited area within the subproject. They are expected to get, then, 43 percent of the incremental production income from the Project. In addition, they can also be expected to benefit from the with-project increased labor income from their own land, and to be hired on a wage basis to cover a part (50 percent is assumed here) of the increased labor needs of medium and large landholders. The poor may, then, claim something over 70 percent of the incremental wage income resulting from the subproject. In addition, labor for earthworks involved in project construction is likely to be drawn from local poor households. Overall, when combining crop production and labor income, the poor may attain 58 percent of the

71 Appendix 12, page 5 full local financial benefits of the project. On an annual basis this group is likely to gain Tk1.0 million per year. Two hundred and fifty-four subproject households are classified as small and marginal farmers, or laborers and landless. While distribution within this group is likely to be uneven, the average incremental increase in household income among the poor is expected to be Tk3,945 per year. (In economic terms, in which the national opportunity cost of labor is included, the poor are expected to receive 47 percent of total project benefits, which is Tk615,000 or an average of Tk2,420 per poor household.) 2. Summary of Four Sample Subprojects

20. Tables A12.3 and A12.4 present a number of financial and economic statistics for all four subprojects including Sriramkandi. The EIRRs range from 21 percent for Sriramkandi to 36 percent for Choto Kumira. NPVs range from Tk2.7 million in Sriramkandi up to Tk13.5 million in Choto Kumira. As for poverty impacts, in local financial terms benefited poor households may expect a rise in annual income of Tk3,020 to Tk3,940, depending on their subproject. In economic terms, this annual income rise for poor households is calculated to range from Tk1,660 to Tk2,600. 3. Full Project

21. The four sample subprojects can be seen as reasonably representative of their types (flood management and water conservation scheme), and their types comprise 83 percent of the 300 expected subprojects that will be constructed by the Project. For various reasons, two other possible types of subproject (drainage and command area development) were not included among the sampled subprojects. Nevertheless, an approximation of full project returns can be devised if the results of the sample subprojects are extrapolated on a per ha basis to the entire project area (estimated to be about 195,000 ha) and the nonconstruction project costs (in economic valuation terms) are included in the calculation. The Project as a whole can be expected to have an EIRR of 19 percent when costs of the subproject development component (including social mobilization, selection, project management, monitoring, and postconstruction agricultural and fisheries programs) are included. If the costs of the institutional strengthening component are also included, the EIRR is 17 percent. 22. Aside from economic returns, a number of additional full project figures can be calculated by extrapolation from the four sample subprojects: (i) rice production will increase by 180,000 tons, producing incremental net crop income from rice of Tk820 million/year; (ii) overall net crop income will rise by Tk975 million (or 35 percent) in project areas; (iii) increased local labor demand will be 7.8 million days a year (or about Tk420 million); (iv) about 280,000 households (1.7 million people) will benefit, at an average of Tk4,900/year/household; (v) beneficiaries will handle Tk47 million in regular O&M costs, saving the Government (which would otherwise be responsible) $870,000 equivalent (per year or $17.4 million equivalent) over the 20 year life of the Project.

Table A12.1: Net Agricultural Income With and Without the Sriramkandi Subproject, Faridpur

 
 
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Table A12.2: Subproject Indicative Farm Budget Analysis


       

  


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73

   

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Table A12.3: Subproject Economic and Financial Impact Summaries


Choto Kumira 987 ha Financial Economic Purba Sayedpur 565 ha Financial Economic Abatpura 531 ha Financial Economic Sriramkandia 275 ha Financial Economic

Item Costs Capital Cost (Tk) O&M Cost Total/year (Tk) O&M Cost/year/ha (Tk) Benefits Incremental Benefits Total/year (Tk) Incremental Benefits per ha/year (Tk) Incremental Benefits as multiple of O&M cost per year (Tk) Returns NPV (Base) (Tk) IRR - Base Sensitivity Analysis IRR if 20% decrease in rice price Sensitivity indicator of rice price decrease IRR if 20% less benefits Sensitivity indicator of general benefit decrease Switching value: % decrease in benefits IRR if 20% more construction cost Sensitivity indicator of increase in cost Switching value: % increase in construction cost IRR if 5 years less project life % decrease in NPV due to 5 year decrease in project life Switching value: Minimum years of project life IRR if 2 year delay in project completion % decrease in NPV due to 2 year delay in proj. completion Poverty Impacts % Total benefits (by NPV) going to the poor Average Incremental Income per poor household per year (Tk)
c b

6,693,950 91,454 93

5,988,505 81,690 83

4,859,959 67,106 119

4,363,760 60,142 106

12,393,220 10,992,186 348,505 302,195 656 569

4,509,009 104,026 378

4,008,226 92,131 335

4,333,420 4,390 47

4,305,922 4,363 53

2,899,875 5,133 43

3,102,238 5,491 52

4,155,536 7,826 12

4,221,507 7,950 14

1,389,783 5,054 13

1,486,422 5,405 16

13,467,037 36%

9,579,055 35%

8,493,552 23%

2,664,047 21%

74

30% 1.44 30% 1.43 70% 31% 0.43 330% 35% 15% 4 25% 28%

27% 2.11 30% 1.45 70% 31% 0.45 320% 35% 15% 4 25% 28%

18% 2.36 17% 2.82 37% 18% 1.55 160% 22% 22% 7 17% 42%

16% 3.18 14% 3.85 25% 17% 1.72 160% 20% 25% 7

Appendix 12, page 8

16% 46%

44.3% 3,025

34.6% 1,663

61.9% 3,162

55.6% 2,190

48.8% 3,635

38.7% 2,594

58.5% 3,943

46.8% 2,423

IRR = internal rate of return, NPV = net present value. Sriramkandi and Abatpur figures include fishery costs and benefits. b To be conservative about field data, agricultural benefits have been adjusted to 90% of their nominal values in the calculation of NPV and IRR. c The numbers of poor are approximately by the categories of landless, marginal and small farmers (i.e., less than one hectare of land).
a

Table A12.4: Total Project Economic Returns


a

Average ha Taka Year 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27

A61

A62a 13170 Taka '000

B1a 38660 Taka '000

B2a 65000 Taka '000

B3a 65000 Taka '000

Totala 195000 Taka '000

13170 Taka '000

Full Project Costb Taka '000 (409,613) (408,357) (556,562) (789,266) (825,708) (531,840) (160,284)

Net Benefit Cash Flowb (Full Cost) Taka '000 (409,613) (408,357) (539,149) (739,097) (693,737) (238,201) 355,404 712,180 863,631 939,357 939,357 939,357 939,357 939,357 939,357 939,357 895,110 895,110 809,473 720,979 720,979 939,357 875,915 812,472 626,238 313,119 978,018 16.6%

Development Project c Cost Taka '000 (291,176) (313,207) (474,820) (713,476) (759,185) (471,591) (107,710)

Net Benefit Cash Flowc (Devel. Cost Only) Taka '000 (291,176) (313,207) (457,407) (663,306) (627,213) (177,952) 407,978 712,180 863,631 939,357 939,357 939,357 939,357 939,357 939,357 939,357 895,110 895,110 809,473 720,979 720,979 939,357 875,915 812,472 626,238 313,119 -

1,322.2 2,487.2 3,652.2 4,817.2 4,817.2 4,817.2 4,817.2 4,817.2 4,817.2 4,817.2 4,817.2 4,817.2 4,817.2 4,817.2 1,457.6 4,817.2 4,817.2 4,817.2 4,817.2 4,817.2

17,413 32,756 48,100 63,443 63,443 63,443 63,443 63,443 63,443 63,443 63,443 63,443 63,443 63,443 19,196 63,443 63,443 63,443 63,443 63,443

17,413 32,756 48,100 63,443 63,443 63,443 63,443 63,443 63,443 63,443 63,443 63,443 63,443 63,443 19,196 63,443 63,443 63,443 63,443 63,443

51,115 96,155 141,194 186,234 186,234 186,234 186,234 186,234 186,234 186,234 186,234 186,234 186,234 186,234 56,349 186,234 186,234 186,234 186,234 186,234

85,942 161,667 237,393 313,119 313,119 313,119 313,119 313,119 313,119 313,119 313,119 313,119 313,119 313,119 94,741 313,119 313,119 313,119 313,119 313,119

85,942 161,667 237,393 313,119 313,119 313,119 313,119 313,119 313,119 313,119 313,119 313,119 313,119 313,119 94,741 313,119 313,119 313,119 313,119 313,119

17,413 50,169 131,971 293,639 515,689 712,180 863,631 939,357 939,357 939,357 939,357 939,357 939,357 939,357 895,110 895,110 809,473 720,979 720,979 939,357 875,915 812,472 626,238 313,119 -

75 Appendix 12, page 9

ENPV EIRR

1,358,020 19.3%

b c

Benefits are extrapolated from four sample subprojects, weighted on a per ha basis. To be conservative, the base case for those subprojects utilizes only 90% of the nominal incremental benefits calculated. Column labels A61, A62, B1 through B3 refer to subproject construction batch and partially processed during Phase 1 but with construction in Phase 2. Batches B1 to B3 will be fully processed as well as constructed within Phase 2. Projects costs are as budgeted for the full Project. Development costs are the costs of the Small-Scale Water Resources Sector Development Activities Component and represent 88% of full project costs. Development costs are the budgeted full project costs minus costs for the Institutional Strengthening Component.