MINISTRY OF FOREIGN AFFAIRS

PROGRAMME COMMITTEE MEETING

TITLE: Concept note for “Design and Implementation of the Saidabad III

Water Treatment Plant in Dhaka, Bangladesh”

Meeting date: 23rd April 2015

PRESENTING UNIT: Department for Green Growth – Danida Business Finance

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CONCEPT NOTE

DESIGN AND IMPLEMENTATION OF THE SAIDABAD III WATER TREATMENT PLANT

PROJECT, DHAKA, BANGLADESH

Strategic questions The programme committee will discuss and advice on the following matters:

Which modality is considered suitable to facilitate a “partnership” between Dhaka Water Supply and Sewerage Authority (WASA) and Danish Water Companies for institutional development and capacity building?

How can a tariff structure be developed to ensure “social responsibility” giving the poor access to clean and affordable drinking water, financial sustainability promoting autonomy in the water sector and political stability?

How far must implementation of the transmission mains have advanced before signing the construction contract with a Danish Contractor for the Saidabad III water treatment plant project?

Summary of Conclusions

To build a sustainable water supply in Dhaka, the Water Master Plan is scheduling a shift from

use of ground water to surface water, which will require substantial investments in

infrastructure. The Government of Bangladesh has requested Danida Business Finance to fund

the Saidabad III water treatment plant and the sludge treatment facilities for Saidabad I, II and

III.

The water treatment plant includes a significant amount of advanced technology, where Danish

companies are world leading and internationally competitive. In order to operate such plants in

sustainable and cost efficient manner, broad-based institutional capacity building with focus on

organizational strengthening is required. The Water Companies in Denmark have the required

technical and managerial skills and have expressed interest in providing support to institutional

capacity building in connection with projects funded by Denmark. As they can only participate

on a no-risk and cost recovery basis, a new model for technical assistance would need to be

established. Collaboration between Dhaka WASA and the Danish Water Companies would be

a supplement to the technical capacity building support (through consultants, contractors

and/or suppliers) under this project.

Investments in the water sector will require increment of water tariffs in order to achieve

financial sustainability. At present, Dhaka WASA’s ability to raise tariffs is limited by law. The

current tariffs cover operation but are insufficient to cover maintenance and depreciation. In

order to achieve sustainability and financial autonomy in the water sector, tariffs would have to

more than double, which is considered to be possible. Currently the large middle class is paying

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the same tariffs as the poor. Thus, there are good opportunities to increase revenue collection

among consumers using larger quantities of water. Legal reforms on water management and

pricing are in progress. Laws have been drafted but are awaiting adoption and implementation.

Subsequently, it is expected that Dhaka WASA will be allowed to charge full cost recovery.

A Corporate Social Responsibility plan for Dhaka WASA should be developed with specific

focus on providing affordable water for all. The tariff structure must be developed to ensure

that water can be supplied to the poor at a low price, which may require cross subsidisation.

A new water transmission main has to be constructed to provide good quality raw water for

Saidabad. The transmission line is expected to be financed by Agence Française de

Développement (AFD) and European Investment Bank (EIB). Construction of the new

transmission line must be in progress before construction of the water treatment plant starts

and completed before the Saidabad III water treatment plant is ready for testing and handing

over.

Context

The capital city, Dhaka, is densely populated with approximately 15 million inhabitants. Dhaka

is one of the fastest growing cities in the world and it is expected that the population will be

between 20 and 25 million in 2035. The requirement for clean water is therefore increasing.

The main water source for the city is ground water. However, as a result of high demand,

ground water levels are declining between 1 and 2 meters per year, which is a serious

environmental concern.

In order to meet the sharp increases in demand, the Government of Bangladesh has decided to

use surface water sources, despite the higher treatment costs. With the increasing scarcity of

good quality ground water and rising costs of abstracting ground water, the comparative

economy of using surface water is increasingly advantageous. A Master Plan has been

developed, aiming at a gradual shift towards using surface water for production of clean water.

In 2002, the water treatment plant Saidabad I was constructed to utilise abundant surface water

resources. Subsequently, Dhaka Water Supply and Sewerage Authority (WASA) requested

Danida Business Finance to provide funding for Saidabad II. The contract for design and

construction of the plant was tendered by Dhaka WASA and awarded to MT Højgaard A/S in

an amount of DKK 565 million. The project was completed on time and within budget. The

plant has been in operation since December 2012 and performs according to requirements.

Saidabad I and II each produces 450.000 m3 per day, supplying water for approximately 2

million people.

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The Government of Bangladesh has initiated several similar projects in order to meet the

targets stipulated in the Water Master Plan. Based on previous good experience, Dhaka WASA

has requested Danida Business Finance for funding of the Saidabad III water treatment plant

and the sludge treatment facilities for Saidabad I, II and III. The land available for Saidabad III

is currently occupied by sludge drying beds. Therefore, release of land for the Saidabad III

water treatment plant will require construction of sludge treatment facilities.

Saidabad III will produce 450 m3 per day, supplying water for approximately 2 million people.

Objectives, relevance and justification for Danida Business Finance1 support

The development objective is:

Improvement of public health through provision of safe drinking water.

The intermediate objective is to:

Develop a safe and sustainable water supply for approximately two million people and

thereby contribute to meet the needs of the fast growing population in Dhaka through

a gradual change to use surface water as the main source for production of clean water.

These objectives are in line with Water Master Plan, which is based on the Poverty Reduction

Strategy for Bangladesh.

The present main water source for the city is ground water. However, the result of the high

demand has caused the ground water levels to decline between 1 and 2 meters per year, which

is a serious environmental concern. Currently, 78% of clean water production is sourced from

ground water and the target is to have this reduced to 30 % in 2021.

In order to achieve this target, Dhaka Water Supply & Sewerage Authority (WASA) has to put

in place infrastructure to extract, transmit and process surface water from the rivers around

1 Danida Business Finance offers interest-free loans with 10 years’ maturity to Danish priority countries. The

concessionality level is 50 % for LDC’s according to the OECD Consensus Agreement. The subsidy covers the

interests of the loan, the export credit guarantee premium and a cash grant to reduce the principal of the loan.

The loan is granted in EUR or USD by a Danish bank and preferably with the Ministry of Finance in the

recipient country as borrower. Loan repayment is made in equal, semi-annual instalments, starting six months

after the commissioning of the project.

The grant receiving authority shall report to Danida outcome indicators identified during appraisal of the project,

on an annual basis for five consecutive years starting one year after the issue of the taking-over certificate.

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Dhaka, before it can be can be distributed to the consumers as clean and safe drinking water. In

order to meet the demand, the following projects are all scheduled:

Gandharbapur Water Treatment Plant (capacity 500.000 m3 per day). The project is

at planning stage but financing has been secured from Asian Development Bank

(ADB), Agence Française de Développement (AFD) and European Investment Bank

(EIB).

Padma Water Treatment Plant (capacity 450.000 m3 per day). The project is at

implementation stage and financed by China.

Saidabad I (existing plant – capacity 225.000 m3 per day) was completed in 2002 and

financed by the World Bank, Agence Française de Développement (AFD) and the

Government of Bangladesh.

Saidabad II (existing plant – capacity 225.000 m3 per day) was completed in 2012 and

financed by Danida Business Finance.

Saidabad III (capacity 450.000 m3 per day). The project is at planning stage and it is

expected that Agence Française De Développement (AFD), European Investment

Bank (EIB) and Danida Business Finance will fund the project.

The Water Treatment Plant under the Saidabad III project is relevant and can be justified by

the increasing demand for clean water in Dhaka and the need to substitute ground water with

surface water.

The outcomes of the project are:

Improvement of institutional capacity through partnership with Danish water

companies.

Construction of water treatment plant Saidabad III to increase the water production

capacity with 450.000 m3 per day. Raw water will be sourced from the river Meghna.

Provision of clean water for 2 million people.

The project is in line with the Country Programme for Bangladesh 2016 – 2021, which was

presented to the Programme Committee on 19 November 2014. The Country Programme is

based on the Denmark-Bangladesh Country Policy Paper 2013-2017, outlining Danish policy

priorities vis-à-vis Bangladesh. Of the overall objectives stated in the Country Policy Paper, the

following two are directly related to development cooperation:

Contribute to poverty reduction, growth and sustainable development

Contribute to promotion of democracy, respect for human rights, rule and law and

good governance.

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The country programme is aligned with the priorities set out in Bangladesh’s national

development plans and with “The Right to a Better Life”, Denmark’s own strategy for

Development cooperation.

Project description

The Saidabad III project consists of the following infrastructure components:

1. Water intake, pumping station and transmission lines (24 km.) from the river Meghna

to Saidabad.

2. Saidabad Water Treatment Plant III (WTP III) and Sludge Treatment Plant for

Saidabad WTP I, II and III.

3. Primary main distribution lines.

Component one, which will be financed by the Agence Française de Développement (AFD)

and European Investment Bank, provides raw water for Water Treatment Plant Saidabad I, II

and III (900.000 m3 per day). The quality of raw water from the nearby river, currently used by

Saidabad I & II, is of poor quality and a new water supply is therefore urgently needed. The

new water supply under component 1 will be the only water supply for Saidabad III and thus, it

has to be completed before the Saidabad III water treatment plant is ready for testing and

handing over.

Danida Business Finance has been requested to finance component 2. The land, which is going

to accommodate the new water treatment plant Saidabad III, is currently used for sludge drying

beds. Therefore, sludge treatment facilities for Saidabad I, II and III must be put in place

before the construction of the Saidabad III water treatment plant can start.

Saidabad III water treatment plant will be technically advanced and in order to operate the

facilities in a sustainable and cost efficient manner, there will be a need to strengthen Dhaka

WASA and develop its capacity. It is proposed that technical assistance for institutional

development is provided through a “partnership” with Danish water companies. Such support

will focus on:

Performance of the water treatment plants, including technical and financial

sustainability;

Improvement of revenue collection systems;

Monitoring of water resources to ensure that the use of ground water is reduced as

planned;

Operation, maintenance and energy efficiency using Supervisory Control and Data

Acquisition (SCADA) systems;

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Staff incentives (salaries, training etc.);

Development of managerial/technical skills and

Corporate Social Responsibilities (CSR) with specific focus environmental and social

risks.

The three largest water companies in Denmark 1) Hovedstadsområdets Forsyningsselskab

(HOFOR), 2) Vand Center Syd (VCS) and 3) Aarhus Vand (AaV) have established a

cooperation named 3Vand. The objectives of 3Vand are to create international cooperation

with counterpart organisations and to promote export of Danish water technology. 3Vand has

established cooperation with Chicago, Hanoi, Singapore and other cities. Developing a

partnership between 3Vand and Dhaka WASA would expand the existing (3Vand) network for

mutual benefit.

In addition, capacity development will be provided by suppliers, contractors, consultants and

water companies with relevant knowledge and experience.

According to the feasibility study, the estimated budgets for Saidabad III are:

Component US$ million DKK million EUR million

1 314 1871 252

2 227 1352 182

3 51 300 40

Total 592 3523 474

Source: Saidabad III Feasibility Study Report, Volume I, Main Report, April 2014, Chapter 13.

Note: Exchange rates: 1.25 USD/EUR, 7.45 DKK/EUR

Note: VAT rate in Bangladesh is currently 15%

Note: An infrastructure surcharge of 2.5% is charged on imports.

With Danida Business Finance funding, Danish private sector companies could benefit from

getting further business opportunities in Bangladesh and the region.

Tender of the project

Consultancy and works contracts will be tendered by Dhaka WASA to Danish companies. A

meeting with potential consultants and contractors/suppliers was arranged on 7 January 2015

to present the project and to find out whether there would be sufficient interest from the

private sector for this type and size of project once tendered. The meeting was arranged by

Danida Business Finance in collaboration with the Danish Construction Association (Dansk

Byggeri). It was concluded that 3-4 of the largest Danish contractors with international

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experience are in a position to tender for the project and intend to submit a bid. The same was

concluded for 2-3 of the largest consultancy firms.

The project will be tendered as a Yellow FIDIC (design-build). When the bids are evaluated,

the contract is usually awarded to the cheapest bidder. However, in order to enhance the weight

given to quality and sustainability (such as energy efficiency), it will be considered how to reflect

long-term operational cost savings as well as capital costs in the evaluation criteria related to

cost. With higher importance attached to operational cost savings, energy efficiency, life cycle

costing, Danish technology would be highly competitive.

There will be focus on Cooperate Social Responsibility for the private sector companies

involved in the project with specific focus on labour and working conditions as well as

environmental risks during construction.

Previous experience and risk.

Danida Business Finance (DBF) funded Saidabad II and the project was implemented within

time and budget. The output targets were achieved and the project is therefore considered to be

a success. Danida Business Finance and the Danish Embassy in Dhaka have a positive and

constructive collaboration with Dhaka WASA. However, large infrastructure projects are

always associated with risks during planning as well as implementation. Hence, it is critical to

focus on risk mitigation at all stages of the project. Danida Business Finance will have a

procurement/monitoring/verification consultant to follow the project and visit Dhaka on

regular basis.

The main transmission line will be constructed to provide raw water for Saidabad I, II and III.

Currently, Saidabad I and II get raw water from the nearby Shitalakhya River, which is

unsustainable, as the water is highly polluted. The new water transmission line is a precondition

for Saidabad III, as this will be the only supply of raw water to Saidabad III and therefore the

timing is critical. This will be monitored closely as there are risks of delay, related to

expropriation and settlement of compensation payments, which could be more time consuming

than anticipated. However, this is considered a minor issue, as the land for the raw water intake

has been acquired. The major part of raw water transmission line is to be constructed on public

land. This shall be monitored by DBF’s monitoring consultant to ensure the raw supply is

ready, when the Saidabad III water treatment plant is ready for testing and handing over.

The water supply from Saidabad III will partly substitute existing ground water sources, which

are being depleted, and partly serve as additional supply of water to meet demand from

additional customers in the service area of the Saidabad Water Treatment Plant.

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The project involves construction of water distribution networks to carry treated water from

Saidabad to consumers in Demra, Sabujbagh, Khilgaon, Shyampur and Narayanganj Sadar

Districts. All districts have large slum areas, which do not currently have access to clean and

safe water.

Investments in the water sector will require increased water tariffs in order to achieve

sustainability, otherwise the project has to be subsidised through government support. At

present Dhaka WASA’s ability to raise tariffs is limited by law. The current tariffs cover

operation but are insufficient to cover maintenance and depreciation. Legal reforms on water

management are in progress. Laws have been drafted but are awaiting adoption and

implementation. Subsequently, it is expected that Dhaka WASA will be allowed to charge fees

that will lead to full cost recovery. In order to ensure that water will be accessible and

affordable for all, cross subsidization will be required. This issue shall be discussed in detail

during appraisal and targets shall be agreed.

The project would provide short- to medium term employment opportunities and on-job

training for skilled workers, technicians and engineers during construction. In addition business

opportunities for domestic sub-suppliers would be created, which could have medium to long

term effects. The technology transferred from Denmark would potentially lead to increased

knowledge in Bangladesh through sub-supplier contracts for maintenance of the equipment

installed.

Institutional capacity building is necessary to transform Dhaka WASA to a modern and

sustainable organisation. Therefore, the project will provide assistance to promote collaboration

between a 3Vand (an association of the three largest water companies in Denmark) and Dhaka

WASA in order to focus on strengthening of the organisation (including staff development,

staff incentives to retain staff, opportunities for promotion etc.). There is a risk that technical

assistance only will focus on training of individuals and therefore a model for collaboration

with Danish Water Companies needs to be developed. This shall be addressed during appraisal.

Budget

The total budget for Saidabad III, component 2 is project is DKK 1,354 million (EUR 182)

million). The Danida grant of DKK 929 million is calculated based on estimated exchange rates

and interest rates and will therefore include a factor of uncertainty.

The project will be implemented over a period of four (financial) years.

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Budget (DKK/EUR 7,45)

Project budget: Contract costs:

- Water Treatment Plant – Saidabad III DKK 862.41 m.

- Sludge Treatment (Dewatering) Plant DKK 138.00 m.

- Supervision and Utilities DKK 30.73 m.

- Contingencies (10%) DKK

103.11 m.

- Taxes (according to feasibility study) DKK 220.09 m.

Total financed amount2 DKK 1354,34 m.

Financing type:3 Tied

Loan: Loan amount:4 DKK 948,24 m.

Duration:5 10 years

Subsidy element /concessionality level:6 Current country exposure (DKK) Potential country exposure incl. loan (DKK)

50 per cent 600 m./4600 m. (13 pct.)7 1.560 m./5.560 m (28 pct).

Danida Business Finance grant:

Total million DKK

Total Million Euro .

Interest:8 188.86 25,36

EKF-premium:9 109,53 14,71

Bank margins:10 18.43 2,48

Cash grant:11 406.12 54,52

Technical assistance:12 20.00 2,69

Budget margin 25 per cent:13 185.74 24,94

Total grant:14 928.68 124.70

2 The part of the project financed by DB Finance. 3 Whether the project is tied to Danish suppliers or untied i.e. tendered to companies in OECD countries. 4 The loan amount financing the contract, with the deducted cash grant to reduce the principal of the loan (to be repaid by the borrower). 5 Repayment period. 6 The grant element required according the OECD Agreement on Officially Supported Export Credits. 7 In case the loan defaults, any realized losses will be covered by the guarantee issued by EKF. As the guarantee

is backed by the Ministry of Foreign Affairs of Denmark, any final repayments will be covered by funds finance act § 06.32 Development Aid. Therefore, any new exposures should be considered based on the total country engagement also taking into account the country risk classification (EKF) which for Bangladesh is 6. The classification ranges from 0-7, the higher the number, the higher the risk. 8 The total amount to cover interests during the implementation period and the repayment period. 9 The project is guaranteed by EKF in case of default on the loan. The EKF premium is calculated based on the country risk and covers 95 per cent of the loan. The bank will cover the remaining 5 per cent. 10 Covers additional expenses besides interests added to loan. 11 Cash grant that reduces the principal of the loan. Is applied to reach the required subsidy level by OECD. 12 Technical assitance in connection with tender, training, monitoring and verification of the project. 13 Budget margin to cover any increase in the estimated interest rates, currency, price increases etc. 14 The total grant includes interests, EKF premium, bank margins, cash grant, technical assistance and budget margin.

Annex 1

Process Action Plan

Activity Timing Responsibility

Project Appraisal June 2015 GRV

Presentation to the External Grant Committee October 2015 GRV

Approval of contract for Engineer January 2016 GRV

Approval of commercial works contract January 2017 GRV

Approval of loan agreement March 2017 GRV

Final approval to the Danish lending bank May 2017 GRV

Start of implementation of project June 2017 Contractor

Annex 2

Results framework

Thematic

Programme

Objective

The development objective is to: Improvement of public health through provision of safe drinking water.

The intermediate objective is to: Develop a safe and sustainable water supply for approximately two million people and thereby contribute to meet the needs of the fast growing population in Dhaka through a gradual change to use surface water as the main source for production of clean water.

Impact Indicator This is not measured under this project.

Outcome indicator Indicator for partnership with Danish Water Companies

Baseline Year 2014 To be defined (during identification/formulation of support)

Target Year 2021 To be defined (during identification/formulation of support)

Target Year 2026 To be defined (during identification/formulation of support) Outcome indicator Water produced by Saidabad I, II and III

Baseline Year 2014 450,000 m3 per day

Target Year 2021 900,000 m3 per day

Target Year 2026 900,000 m3 per day

Outcome indicator Water quality (a set of technical indicators)

Baseline Year 2014 Water quality from Saidabad I and II is not satisfactory during the dry season.

Target Year 2021 Water quality from Saidabad I, II and III is satisfactory all year round.

Target Year 2026 Water quality from Saidabad I, II and III is satisfactory all year round.

Outcome indicator Sales of water (in physical terms)

Baseline Year 2014 According to Dhaka WASA records (max. 450.000 m3 per day)

Target Year 2021 900,000 m3 per day.

Target Year 2026 900,000 m3 per day.

Outcome indicator Number of consumers to get water from Saidabad

Baseline Year 2014 2 million

Target Year 2021 4 million

2

Target Year 2026 4 million

Outcome indicator Increasing percentage of total water supply produced by surface water

Baseline Year 2014 22%

Target Year 2021 30%

Target Year 2026 45%

Output indicators Construction of sludge treatment facility and water treatment plant Saidabad III.

Target Year 2019 Sludge treatment facility is completed and handed over.

Target Year 2021 Water treatment plant Saidabad III is completed and handed over.

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Annex 3

Risk Management Matrix

Contextual Risks

Risk factor Likelihood Background to

assessment

Impact Background to

assessment

Risk response

Political and Social

Government of Bangladesh

(GoB) is unable to the follow

the Water Master Plan and

proceed with the

implementation of the water

act as well as the act on water

regulatory authority.

Medium Laws are drafted, but

focus on implementation

is required.

High Dhaka WASA’s

revenues, based on

current tariff regime,

and assessment of

Dhaka WASA’s costs

of operating the new

assets.

Support to

implementation of

reforms. GoB must

set millstones for

implementation of

reforms – as the

production is

unsustainable with the

current tariffs.

This shall be address

in detail during

appraisal.

Programmatic Risks

Risk factor Likelihood Background to

assessment

Impact Background to

assessment

Risk response

2

Contextual Risks

Risk factor Likelihood Background to

assessment

Impact Background to

assessment

Risk response

Resources

Construction: Contractor does

not deliver on time and within

budget.

Low Prior experience

(Saidabad II)

Low This risk will be

monitored by the

Supervision/Engineer.

Dialogue between the

Employer, Engineer

and Contractor

Operations: Dhaka WASA is

unable to increase tariffs to

secure full cost recovery.

Medium Currently Dhaka WASA

is allowed to increase

tariffs by 5% p.a. in

nominal terms.

Preparations have been

made for legislative

reforms, but they have

not yet been

implemented.

High If tariffs are not

increased, Dhaka

WASA will not be able

to operate its assets

according to

requirements. Repair

and maintenance will

be postponed and the

assets will deteriorate.

Dialogue with Dhaka

WASA, City of Dhaka,

and Ministry of

Finance of Bangladesh

is required.

This shall be assessed

in detail during

appraisal.

Operations: Dhaka WASA is

unable to increase billing as

large quantities of water is lost

(non- revenue water).

Medium Dhaka WASA is making

efforts to reduce the

amount of non-revenue

(currently 26%).

Medium The less revenue billed

and collected, the

harder it will be to

operate, maintain,

repair and replace the

assets of the water

supply system.

Dhaka WASA receives

support from Asian

Development Bank to

address this issue.

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Contextual Risks

Risk factor Likelihood Background to

assessment

Impact Background to

assessment

Risk response

Operations: Dhaka WASA is

unable to operate the assets

due to lack of inputs such as

power.

Low Dhaka WASA has

recently invested in an

upgrade of the power

supply and installation of

uninterrupted power

supply units.

Low Depending on the

severity of power

breaks, their impact

would be limited.

Securing priority

power from the grid

and installing

uninterrupted units

will reduce the risk.

Health:

Currently, Saidabad I & II use

raw water from the river

Shitalakhya, which is heavily

polluted during the dry season.

A new transmission line will be

constructed and deliver raw

water for Saidabad I, II & III.

Medium Expropriation and

payment of

compensation are often

time consuming.

Medium The transmission lines

may not be ready for

testing of the water

treatment plant

Saidabad III.

This shall be

monitored closely and

addressed during

appraisal.

It shall be discussed in

detail how this risk can

be monitored/

mitigated.

Health:

Deteriorating raw water quality

leads to poorer quality of

potable water

Medium The river Shitalakya

close to Dhaka City was

used as source of water

for Saidabad I and II.

However, the quality of

water in the river

deteriorated due to the

Low The envisaged raw

water intake is at a

much larger river

(Meghna), yet its water

quality could

deteriorate for the

same reasons:

Dialogue with Dhaka

City and National

Environmental

authorities to ensure

reduced pollution and

increased protection

of the rivers, with

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Contextual Risks

Risk factor Likelihood Background to

assessment

Impact Background to

assessment

Risk response

expansion of Dhaka City

and poor environmental

controls.

Expansion of Dhaka

City and poor

environmental

controls.

focus on the parts

closer to Dhaka.

Financial: AFD and/or EIB do

not deliver on funding for

component 1 and 3.

Low AFD has expressed its

commitment to Saidabad

III and EIB have

provided positive

responses.

High Without funding

secured for Package 1,

DBF should abstain

from funding Package

2.

Close dialogue and

coordination with

AFD and EIB.

Institutional Risks

Operations: Dhaka WASA is

unable to hire or retain

qualified staff.

Medium Current staffing situation

at Dhaka WASA show

that it is difficult to retain

good employees on

government salaries.

Medium The ongoing contract

for operation of

Saidabad II has helped

Dhaka WASA to gain

capacity.

Staff incentives shall

be reviewed in order

to build a sustainable

organization.

Collaboration with

water companies in

Denmark will be

assessed during

appraisal.

Annex 4

Budget Support Assessment15

Assessment according to the five budget support criteria.

Criterion Comments

1. Fundamental values Indicators: Fundamental values, encompassing a minimum respect for human rights, pluralistic democracy and rule of law, including independence of the judiciary. Human Rights (HRs) The assessment of the fundamental values for budget sup-port shows a mixed picture, but the general situation has worsened. On the one hand the Government of Bangladesh (GoB) has initiated a number of initiatives to improve the institutional and the regulatory frameworks. The laws, policy and plans are generally supportive within the field of human rights and good governance from the GoB’s vision 2021, the text in the Constitution, the 6th Five Year Plan (FYP), the concept note for the 7th FYP and various de-clared polices, including the engagement in the UN sup-ported UPRs. However, rule of law remains weak across the country with widespread human rights abuses. Implementation of plans and strategies to strengthen governance and actually address HRs issues and problems, including implementation of the legal framework, has been weak and the country is faced with tremendous challenges in terms of HRs for vulnerable groups, increasing levels of political violence, abductions, unrest and conflicts, which have increased over the past year. The situation has been influenced and worsened by the political situation, the tensions with major conflicts between the Government, led by Awami League (AL), and the main opposition party - the Bangladesh Nationalist Party (BNP). The crisis centres on the one-sided general elections held on January 5, 2014, which the major opposition party boy-cotted, and hence leaving the AL coalition with a clear majority in the Parliament.

The overall conclusion is that although there have been some improvements in the policies, in legal framework, in the esta-blishment and operations of institutions to improve HR and the judiciary as well as targeting of the high level of corruption, the general HR situation in the country remains problematic, and the political situation is volatile. The HR situation needs to be closely monitored, and test cases will be the GoB’s commitment to effective address the problems with political violence, abductions, extra-judiciary cases of violence and killings, and corruption observed at all levels of government. The press and the NGOs, will have an important advocacy, awareness raising and suppor-ting roles, but their means of operations and autonomy to function should be carefully monitored and supported. The existing situation with absence of a fully pluralistic parliament, combined with the severe situation in HR and democracy and lack of GoB

15This Budget Support Assessment was prepared for the Bangladesh Country Programme 2016-2021. Danida Business Finance funding is provided as project support and a separate Budget Support Assessment not considered to be relevant.

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Criterion Comments Since the election in January 2014, problems with unrest, violence, extra-judiciary killings, abduction of people, have continued and tend to worsen, especially in connection with the recent Upazila Parishads elections (which included the opposition in the election process). NGOs have felt an increasing pressure on their existence and operations, and some of the critical NGOs have been threatened by the government or put under undue pressure to reduce voice/ activities. The Constitution guarantees all fundamental rights and freedoms as justiciable rights, and equal rights and contains affirmative actions to support women, children, and under-privileged groups of citizens. The legal framework also bans torture, but allow death penalty in rare cases Furthermore, a number of laws support human rights improvements, including the Act on National Human Rights Commission (NHRC), the Rights to Information (RTI), Act 2009, Domestic Violence Act, 2010, which refers to the CEDAW, Prevention of Money Laundering, 2012, etc. Also a number of policies, e.g. National Child Labour Elimination Policy, 2010, National Women Development Policy 2011, National Children Policy 2011, etc. have been issued in the recent years to support the vulnerable and disadvantages groups of the society. However, implement-tation of these acts has been very weak, and the weak capacity and functioning of especially the judiciary system and HR agencies has led to a significant backlog of cases at all levels of the court system. The GoB is a party to the UN Universal Period Review and the most recent reports from the GoB and independent observers (2013) show that the general legal framework on HR has improved and that a number of institutions and agencies have been established to support improved HR, anticorruption and transparency, but that implementation is weak. The judiciary functions have formally been separated from the executive, but the judiciary system is struggling with lack of capacity and efficiency and tremendous delays, inefficiencies and political interference and control. One of the key constraints facing the judiciary is the large number of backlog in cases, which is in the tune of around 1.8 million cases (of which 300,000 are at the high court level). Those cases involving violence against

commitment so far to improve it significantly, does not argue in favour of changing the aid procedures towards more budget support oriented modalities. The review shows the need to focus on both the supply and demand side to strengthen HRs, accountability and anti-corruption initiatives, and opportunities especially at the local governance level to impact on strengthening the progress.

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Criterion Comments women, which make it to court, require an average of two to five years for com-pletion. It is generally recognized that delays can prompt a variety of responses to injustices, including extra-judicial, or extra-constitutional, means of dispute resolution, which may involve discriminatory or arbitrary practices, or result in outcomes, which further increase the vulnerability of the poor. The backlog is placing considerable pressure on the court system and is hampering access to justice, especially for the vulnerable groups. Despite significant challenges in improving access to justice through the formal court system, a combination of factors has created an opportunity to strengthen the Judiciary16. The appointment of a Chief Justice committed to improve the effectiveness and efficiency of the Judiciary is noteworthy. The establishment of the Supreme Court “Special Com-mittee” for reform also demonstrates some willingness to invest time and resources in questions related with proce-dural reform and improvement. Important structural changes have also taken place in recent years, including the formal separation of the Judiciary from the Executive. Strengthening of the judiciary is mentioned as a key com-ponent of the government’s outline prospective plan and five-year plan, and is supported by various DPs, including especially UNDP. Some progress has also been noted in meeting some of the HR related MDG targets. Poverty has been brought down from 40 % in 2005 to 31.5 % in 2010, and there are good prospects of meeting the poverty MDG targets by 2015. Bangladesh is also on track on the child mortality rates, on the maternal mortality rates, and has improved the service delivery in other areas (e.g. education and agriculture), also due to a favourable economic development with stable progress in growth. GoB has taken important initiatives to support vulnerable groups, specially the women. MoWCA, with support from DPs, especially Danida, has launched a comprehensive program and action plan to address violence against women, through establishment of helpline, crises centres, hotlines, support to the legal framework and access to justice, etc.17 and initiatives are taken to improve workers rights, especially child workers, and other vulnerable

16 According to the UNDP, Justice program, 2012. 17 Reference is made to the independent UPR Report, 2013 page 19.

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Criterion Comments groups. However, and especially due to the weak judiciary system, there are major gaps in tackling the problems. Although the HR demand side is rather vibrant with many NGOs actively working, there have been some recent signs to restrict the rights of NGOs, through e.g. slow registra-tion procedures, warnings, threats, etc.18. Corruption Corruption level is still rampant and amongst the highest in the region. According to Transparency International’s (TI’s), Bangladesh ranked 136/177 in 2013, with a score of 27/100. In 2012 the ranking was 138/177 and in 2011 144/177. Progress made in fighting corruption is stagnant and poor. Democracy and rule of law Whereas the election to the parliament in 2014, was not reflecting the full range of parties, in the period of 2009-2012: 5,509 elections across tiers of governance (4,421 UPs, 481 UZP and 282 municipalities were conducted and there has recently been election to the UZs). The Upazila election has just been completed from February to May 2014 in six phases, after the last Upazila election was held in 2009. Elections have been held in 458 or the 487 Upazilas. However, the election has been characterized by violence and irregularities. Although there has been a number of achievements with the Chittagong Hill Track peace process and the follow-up on the Peace Accord, the progress has been mixed and the implementation of the CHT is seen as somehow disap-pointing by the independent UPR, 201319 and initiatives to protect and support the minority groups are weak (note that minority groups are not recognized in the official policy).

2. Solid national policies and plans for poverty reduction, good governance and sustainable development. Indicators: Solid public policies to achieve poverty reduction, good governance and sustainable development, including assessment of relevance, progress and political will as well as public sector capacity

Although GoB’s 6FYPs (and the draft input to the 7th Plan) provide a comprehensive overview of the challenges and means to address these, there are major gaps within this criterion for GBS, especially in

18 Reference is made to the independent UPR Report, 2013, page 3. 19 UPR, 2013, page 6.

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Criterion Comments to implement policy and reforms. Policy framework for monitoring progress of public policies should also be assessed. The partnership between the development partners and the receiving country and experiences from cooperation up to date. Government policies to achieve poverty reduction and political commitment. The overall vision for development and poverty reduction is guided by the Bangladesh Vision 2021, which is a compre-hensive document developed to provide the strategy for Bangladesh to become a middle-income country by 2021, to promote development and to reduce poverty, has the GoB’s ownership and commitment. It was developed by a diverse group of government officials, academic, private sector with consultation with civil society during the care-taker government, and has since then been accepted by the GoB as the main guiding tool for development, and has been referred to in the more specific sixth Five-Year-Plan (6FYP), 2011-2015 and in the coming concept note for the 7th FYP (2016-2020), which is the main strategic instrument after the end of previous poverty reduction strategies (PRS). It is also recognized and referred to in the recent proposal for the annual budget FY 2014/15. The current 6FYP provides a comprehensive analytical work on the current challenges and the way forward in reduction of poverty. The 7th FYP will be developed in close collaboration and consultations with DPs, with academics, with GoB agencies and with NGOs/CBOs, and about 21 analytical inputs/ studies will be provided over the coming months, with the aim to have a draft ready by beginning of 2015. Poverty targeting and achievements Bangladesh has been successful in achieving a significant reduction in poverty since 1990. The 6FYP shows that there has been a significant decline in poverty occurred from 1991-92 to 2010 (latest official figure) and an expected continuation of this. National poverty headcount declined from 58.8 percent in 1991-92 to 31.5 percent in 2010, while the extreme poverty rate declined from 41.0 to 17.6 percent over the same period. Furthermore, improvements have been made in some of the core MDG areas such as especially reduction in child and maternal mortality and increase in enrolment in primary education. However, there is still a sharp variation in the rate of poverty reduction across regions and very high inequality rates. The growing income inequality is of major concern to the

the linkages between the plans and budgets (which are delinked), within the result monitoring frame-work and level of action planning and follow-up, which are largely missing. Furthermore the harmonisation and alignment by DPs with government procedures and systems is still weak and project mode-based and use of joint basket funding arrangements (not budget support) are the main instruments due to weak-nesses in the core government systems and procedures throughout all phases from planning to auditing. There is no drive amongst the bilateral DPs to pursue neither GBS nor request within the GoB, and no overarching framework to apply. There have been some progress and good initiatives to promote greater level of harmonisation across DPs through basket funding arrangements, common programs/engagements until the GoB procedures for full alignment are in place, which is likely not to be the case in the short to medium term, i.e. within the 7th FYP. The partnership framework is still incipient, but is gradually emerging, although with major gaps in the overall coordination, action planning and in the results monitoring, and in the GoB’s commitment to stronger alignment and coordination between initiatives (various line ministries and

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Criterion Comments Government, and the 6FYP seeks to address the income inequality problem through a range of measures including creating better access to high productivity, high income jobs; improving farm productivity and incomes; sharpening the focus on equity aspects of public spending on educa-tion, health, family planning; nutrition and water supply; reducing the regional disparity of growth; and improving the access of the poor to means of production (fertilizer, seeds, water, electricity and rural roads); and by improving the access of the poor to institutional finance. The main strategic focus has been on increased growth and employment generation as a vehicle to reduce poverty, combined with some improved services and social pro-tection programs for the poorest of the poor. This focus is likely to be continued in the coming 7th FYP (as per the Concept Note), and some of the challenges experienced with the 6FYP such as lack of local govern-ment (LG) reforms, HR weaknesses, governance, and institutional bottlenecks will be addressed20. The 7th FYP will be based on analytical inputs, national consultations and a longer period of reviews, refinements and adjustments. The GoB also plans to have a stronger focus on “equity” in the coming plan. The overall development plans are comprehensive, are targeting many of the main challenges, bottlenecks and issues, but have been weakened in implementation from the lack of clear linkages between the medium term planning and budgeting (MTBS) and the annual plans and budgets, an issue also being addressed by the (delayed) PFM process and program, see below. There is still a significant delink between the planning process and the actual budgeting process, which makes plans highly unrealistic, coupled with lack of a strong system to ensure budget execution in accordance with the plans and budgets. Commitment to address weaknesses in the public sector systems Despite the intensions in the plan to strengthen gover-nance, the LG reform process and the overall capacity of the civil service system and some examples on HR im-provements, progress on these fronts have been slow, hampering the effective implementation of some of the intended services and improvements. This is also a fact, which is recognized by GoB to have slowed down growth

agencies have different stakes in this). The system generally lacks an overall measurement system for tracking of the performance and agreements made. Through the support to both supply and demand side within governance and especially related with the local gover-nance/LG reform support, Danida will have an entrance point, where it can have potential impact and support GoB to mitigate some of the challenges observed in the 6FYP implementation, inclu-ding through support to the work in the LG working group and on the current dialogue on overall LG reform process in the Steering Committee under the coming successor to the Union Parishad Governance Program.

20 This is also mentioned in the proposed budget for FY 2014/15.

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Criterion Comments compared to the original targets. The challenges in ensuring effective government systems and procedures and good governance was mentioned in the 6FYP, but due to persistent weaknesses in progress on this front, GoB has announced that these areas will be further emphasized in the coming 7th FYP. Budget allocations and poverty targeting Although the overall budget implementation rate has im-proved somehow over the time and from FY 2011/12 to FY 2012/13 (overall it was 92.9 % and 89.2 % respectively for non-development and development expenditures for FY 2012/13) there are great variations across the sectors with some sector spending below targets, e.g. only 75.9 % in social security and welfare, and others e.g. fuel and energy spending above targets: 318.3%21. In terms of poverty targeting, “social welfare and security programs” only account for about 6 % of the total expen-ditures (5.6 % of the total budget resources are allocated to social security and welfare in the draft budget for FY 2014/15)22, and welfare programs have been allocated a lower share of total (actual) expenditures every year since FY 2008/09. Similarly agriculture - an area of importance for poverty reduction and for Danida’s strategy, has also been allocated a decreasing share of the total public expenditures from FY 2009/10 to FY 2011/1223. The accounting system IBAS enables a classification of expenditures for pro-poor areas, but this has not been applied systematically, and not monitored in various budget progress reports and publications. In the first progress review of the Sixth FYP (2012) it was also noted that achievement of the target of 2 % of GDP for spending on social security was not achieved, and that the is likely to be challenging to reach the 3 % in FY 2015 as well. Linkages between plans and budgets A lack of linkage between plans and budgets in the medium term and annual plans/budgets has been a major weakness. The plans and budgets have been characterized

21 MoF: Budget Progress Report: ”Year End Report on Fiscal Position, FY 2011/12, FY 2012/13 and March 2013/14. 22 MoF: Budget in Brief, Annual Budget FY 2014/15, Finance Division, Ministry of Finance (MoF). 23 MoF: End of Year Fiscal Report, FY 2011/12, page 2.

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Criterion Comments by two traditional separate processes – the development budget and the recurrent/revenue side, and with an unrealistic high level of development projects (input-based and without sufficient priorities and linkages with the strategic plan). The plans are not linked to the available funds and without strong priorities. This was supposed to be addressed through the PFM reform process, but progress has been delayed, see the assessment of the PFM criterion. Size of the support from Development Partners The share of the total GoB budget funded by DPs has declined significantly over the past decades, and in the coming budget for FY 2014/15, the foreign grants/foreign loans will only contribute 2.5% and 7.2% respectively of the total public budget, and 36 % of the development budget (which constitutes a part of this overall budget), providing DPs with a reduced tool for leverage in the policy dialogue.24 Experiences with GBS/SBS and Partnership between GoB and Development Partners (DPs) Although improvements have been observed in the align-ment and harmonisation of development support and in the GoB’s coordination of this over the past 5 years, there are still a number of weaknesses in this area, and these reforms are in still very incipient. As highlighted in an OECD-study from 2011: The govern-ment and donors have taken considerable steps towards the implementation of the global aid effectiveness agenda. The Joint Cooperation Strategy (JCS) signed in 2010 outlines a joint vision for aid effectiveness in Bangladesh and contains corresponding partnership commitments both by the government and donors. A comprehensive set of coope-ration arrangements have been developed under this fram-ework with various levels of interactions on aid coordi-nation under the JCS framework with a development forum, overall high level consultative groups (executive committee and plenary sessions) and technical working groups between DPs and GoB in core thematic areas/ sector areas, some of which are active on dialogue and planning. Coordination between the Government of Bangladesh

24 On the other hand smaller project and programs have successfully been able to pilot new initiatives, which have been up-scaled by GoB. An example of this is the piloting of block grants to UPs, which are now scaled-up to the entire country and 4500 UPs.

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Criterion Comments (GoB) and Development Partners (DPs) has been steadily (albeit slowly) increasing over the years. There are three coordination mechanisms between GoB and DPs - the Local Consultative Group (LCG) Plenary, the Aid Effectiv-eness Unit (AEU) in Economic Relations Division (ERD), Ministry of Finance, and the LCG Working Groups (technical groups). In addition, DPs coordinate within themselves through two mechanisms – the LCG DP Plenary and the seven-member LCG Executive Committee. The LCG is composed of the Secretary, Economic Relations Division (ERD), Ministry of Finance, Government of Bangladesh and 48 Bangladesh-based representatives of bilateral & multilateral development partners, including 5 International Financial Institutions, the 13 UN agencies with representational offices in Bangladesh and the UN Resident Coordinator. In order to facilitate in-depth dialogue and collaboration on specific sectors or thematic areas, 18 LCG Working Groups are in operation: addressing Agriculture, Food Security & Rural Develop-ment; Water Management; Water Supply and Sanitation; Education; Health Nutrition and Population; Energy; Transport and Communication; Urban; Poverty; Gender; Governance; Aid Effectiveness; Private Sector Develop-ment and Trade; Climate Change & Environment; ICT – Digital Bangladesh; Macro-economic; and Disaster & Emergency Relief. There is also one region-specific working group for addressing development issues in the Chittagong Hill Tracts. LCG Working Groups are designed to contribute towards effective and coordinated implementation of national policies, strategies, plans and programmes. The scope of work is set out in the LCG working group TOR, annexed to the Joint Cooperation Strategy. This sets a framework for the groups’ activities and processes, but each group has flexibility to adjust the TOR in line with sectoral needs and priorities. The Joint Cooperation Strategy (JCS) signed in 2010 mentioned i.e. that Government and Development Partners will jointly Implement the Bangladesh JCS to improve aid effectiveness in the country, monitor progress towards greater aid and development effectiveness and hold each other accountable on the basis of the JCS Action Plan and the Joint Development Results Framework. Amongst the ongoing initiatives is a comprehensive mapping of all support from development

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Criterion Comments partners and planned dialogue on the 7th FYP. In 2014 the Government introduced the Aid Information Management System (AIMS) which is a one-stop-shop for all information related to foreign assistance in Bangladesh, covering all sectors, projects and donors. Despite these achievements and the fact that coordination challenges have been addressed, there have been limited results within the real alignment and harmonisation, especially in the use of common arrangements and on-budget support, effective results-oriented frameworks and mutual accountability as well as with development of an instrument/results framework to track progress against GoB’s plans. Furthermore the alignment with GoB systems and procedures and use of budget support instruments and SWAPs is limited to few sectors (Education and Health) and very few DPs, with mixed progress in terms of dialogue and compliance with obligations. The major share of the support is still in form of project aid. Major weaknesses are observed in the PFM reform agenda, procurement weak-nesses, lack of transparency and accountability and high level of corruption, inefficiencies in implementation and lack of effective instruments for results monitoring, which are factors which discourage more aligned and harmonised procedures amongst DPs. There are also significant weak-nesses in the realism of the national plans, which are de-linked form the budgets and which are highly unrealistic, and which provide a weak guidance tool for the overall development. Monitoring and Results framework The monitoring of plan and budget progress has gradually been improved and there are reviews of the progress on the 6FYP, with the first review conducted in 2012, and a plan-ned MTR to be completed in 2014. The 6th FYP contains some 35 indicators for progress, but these are often not fully operationalized, and/or there is no data available to track progress. However, there is currently no compre-hensive result framework in place25 with clear benchmarks and indicators and a joint assessment framework (JAF) to monitor plan implementation,

25 This is also recognized by GoB in the First Implementation Review Report of the SFYP, 2012, where it is said that:” The SFYP constitutes the first attempt in the history of Bangladesh to develop and implement RF. It is therefore understandable that there are large gaps in terms of quantitative indicators, data, capacity and accountability. The RF in the Plan document is indicative and is not fully fleshed in the essence that in many areas it is not fully representative of the targets and outcomes in the Sixth Plan. This is particularly through of the sectoral targets”.

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Criterion Comments agreements made and mutual obligations.

3. Stable macro-economic framework. Indicators: Main macroeconomic aggregates identified including potential sources of instability; macroeconomic and fiscal policies are in place and the quality of these, vulnerability to external shocks and efforts to strengthen macroeconomic resilience; efforts to strengthen domestic revenue mobilisation. Overall development in the macro-economic framework Bangladesh has continued to strengthen macroeconomic stability26 and structural policies under the IMF Extended Credit Facility (ECF)-supported program. In spite of a prolonged period of political turmoil and a resulting econo-mic slowdown, international reserves have continued to increase, public debt as a share of GDP is on a downward path, and underlying inflation has been easing. There has also been progress on structural reforms, notably implem-enttation of the new VAT law has continued, several steps have been taken to strengthen public financial and debt management, and the authorities are working to strengthen financial supervision and the state-owned commercial banks. Economic activity was disrupted by political unrest and uncertainty in the run-up to the January 2014 general elections. However, according to IMF, macroeconomic stability was maintained despite this, and international reserve buffers have been built up further. As calm returns following the elections and activity normalizes, IMF expect growth to recover in the second half of the FY: July 2013–June 2014 and in FY14/15, supported by domestic demand. All IMF performance criteria at end-December 2013 (the test date for the fourth IMF review) were met and all structural benchmarks have been completed. IMF also concluded that: “As the program enters its third and final year, policy implementation has remained broadly in line with commitments. Despite the intensification of political unrest in the latter part of 2013, macroeconomic stability has been maintained, with underlying inflation abating and international reserves rising, supported by restrained fiscal and monetary policies. All performance criteria (PCs) for December 2013 (the test date for this review) were met,

The assessment shows that the performance on the macro-economic framework is the strongest of the 5 GBS criteria, with a positive progress and positive trend on most dimen-sions, incl. stable growth, although below GoB’s own targets, stable inflation rates, reduction in the public deficit, and increases in reserves, stable and improved exchange rates, reduction in aid dependency, etc., and an good relationship with the IMF reform and credit program. However, there are some risks that the political turmoil, which slowed down growth somehow in FY 2013/14, can re-appear, and that the institutional and governance reforms needed to speed up development may not be fully implemented or effective. Although this may have a certain impact, it is likely not to have a detrimental influence on the overall development, but may slow down the growth.

26 Based on various reports, but especially the most recent IMF mission report from June 2014: ”Fourth Review of the Three Year Arrangement under the Extended Credit Facility”, 2014.

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Criterion Comments while all indicative targets (ITs) were either met or narrowly missed (Figure 1). Moreover, all five structural benchmarks (SBs) scheduled between December 2013 and March 2014 were completed, though one of them with a slight delay. “

GDP Growth The GDP growth has been stable above 5 % in the last 5 years although below the GoB’s own targets. The GDP growth was 6.7 % in FY 2011, 6.2% in FY 2012, estimated to be 6.0 % in FY 2013 and is expected to be 5.5 % for FY 2014, hence a smaller downturn due to the political situ-ation and challenges with governance reforms and implementation bottlenecks is expected. Inflation rates and exchange rates. Inflation rates has been kept at a stable and relatively low level with 6.75 % for FY 2013 (FY 2012/13) and 7.5 % for FY 2014 (FY 2013/14)27. The exchange rate has also been stable, and with a tendency for the real exchange rate to appreciate. National debt GoB’ has managed to reduce the debt, which has been in the tune of 40-45 % in the past couple of years and declined from 41.5 % in FY 2011 to 40.6 % in FY 2013. Public deficits The public deficit has been stable with a downward trend. It is currently at around 3-4 % and expected to be further reduced in the near future. Similarly the GoB has robust foreign reserves and increasing creditworthiness. Main drivers of growth The current main drivers of growth are the service sector and the manufacturing sector (various industries such as garment factories) and remittances from workers abroad. However, agriculture still has an important play, also for food security reasons and employment creation. Efforts to strengthen revenue mobilisation Bangladesh has one of the lowest tax-to-GDP ratios in the world. It is critical to strengthen revenues in relation to GDP so as to broaden fiscal space for priority spending. The relative size of revenue collections to the size of the GDP is low for the region, and was only 12.9 % in FY 2013.

27 IMF Report, June 2014. Note IMF uses FY 2013 for FY 2012/13 (July 2013 – June 2013).

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Criterion Comments Size of the public sector and of the DP funding The size of the public sector is relatively modest and stood at 18 % in FY 2013 and with GoB’ plans to increase this to 22 % over a five years period from 201428. The significance of aid for the total GoB public budget has been reduced drastically over the past decades, and the share of the DP funding of the total public expenditures is currently below 10 %, divided on 2.5 % from grants and 7.2 % from Loans in the draft budget for the coming FY 2014/15.29 Fiscal risks and vulnerability to external chocks According to IMF (June 2014) the risk of external and public debt distress continues to be classified as low, and the government is relatively resistant towards economic external chocks. The major problems for enhanced growth and more effective service delivery and poverty reduction are that inadequate efficiency of institutions and corruption may slow down growth, challenges in the banking system, low private investment level and ineffective PFM and procure-ment systems and procedures. Another major risk is a resurgence of political unrest, which would led to lower growth, a push up of the inflation rates, and potentially put pressure on the GoB’s reserves. Political unrest and un-certainty also led to delays in the implementation of public investment projects during FY 2013/14, and may impact on the coming FY 2014/15 as well. Political turmoil may also lead to a continuation of the below target private invest-ments caused by lack of sufficient trust in stability and op-portunities, a fact which may reduce the growth somehow compared to GoB targets.

4. Public financial management Indicator: Expert appraisal of quality and capacity in public finance management, including credibility of the budget, anti-corruption measures, comprehensiveness and transparency, policy-based budgeting, predictability and control in budget execution, accounting, recording and reporting and external scrutiny and audit. The GoB’s performance in the area of public financial

Despite some improvements in some parts of the PFM cycle such as budgeting, publication of budget information, and audit quality (although on a pilot basis), there are major weaknesses in the core areas of PFM, which makes tracking and accountability of

28 See the FY 2014/15 Budget Speech by the Minister of Finance, p. 8. 29 See the MoF: Budget Speech, FY 2014/15.

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Criterion Comments management (PFM) remains a major challenge and the reforms have, despite some positive progress in the last decade, moved slowly. The last PEFA rating in 2010 showed major weaknesses in areas such as composition of outturn of budgets, trans-parency in intergovernmental fiscal relations, multi-year budgeting, links between investment and recurrent budgets, tax liabilities, payroll control, commitment control, public access to budget documentation, timeliness in financial audit, internal audit and controls and legislative scrutiny of the budget and execution, - areas which are still in need for targeted support and improvements.

The overall joint DP-GoB PFM support program – Strengthening Public Expenditure Management Program (SPEMP) was launched in 2010 and was supposed be completed in 2014, addresses three major areas: A) Deepening of Medium Budgeting Framework (MTBF) and Strengthening of Financial Accountability; B) Strengthening of the Office of the Comptroller and Auditor General and C) Strengthening of the Parliamentary Oversight, is managed through a Trust Fund in the World Bank. The program has faced major challenges and delays in imple-mentation. The Government and PFM donors recently agreed not to extend SPEMP. However, PFM reforms remain crucial to e.g. public sector accountability and efficient service delivery.

Some of the major problems have been delays in the roll out of the computerised (IBAS++) system, lack of agree-ment on major guidelines and regulations such as forward based estimates (FBE) supposed to bring a stronger link between development planning and actual budgeting, lack of improvements in the legal framework on audit towards independence of the audit institution and separation of auditing and accounting/treasury functions, and weak/ absence of the follow-up and commitment from the GoB on the agreed action-plans and recommendations from the WB review missions, managerial challenges and absorption capacity problems within the GoB.

Despite the overall challenges, there have been some improvements in the introduction of the multi-year budget framework, capacity building of core accounting and auditing staff, improved reporting from the institutions and preparation of new charts of accounts (however not yet approved). All ministries are producing

expenditures and the trust in the GoB’s systems and procedures problematic. There are major gaps in the legal PFM framework in core areas like budgeting and accounting manuals, procedures for medium-term budgeting, and independence of the audit authority (and weaknesses in the coverage, quality and timeliness of audit). These facts, combined with am apparent “mixed” GoB com-mitment to the reform process, and lack of an agreed strategy and program and action plan, mean that the PFM criterion does comply with the general GBS requirements. However, there is an urgent need to continue to strengthen the PFM systems and pro-cedures but with an approach which consider the low absorp-tion capacity of the GoB in this area.

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Criterion Comments multi-year budgets, have established some kinds of budget wings, branches and units, and have improved financial reporting, although there are major gaps in the quality of these. More than 12,000 public servants have been trained in PFM and 100+ staff in auditing standards and accounting. The Parliamentarian oversight committees (including the PAC) have been strengthened and have gradually improved performance (clearing audit backlogs). However, there is an agreement amongst all stakeholders that the entire design of the PFM reform program was overly optimistic, lacked proper sequencing and had a number of design flaws and imple-mentation bottlenecks. This combined with insufficient GoB commitment to implement core pillars of the reform, especially within the legal, regulatory and institutional frameworks has made it hard to achieve major milestones, and there is need for a rethinking of the approach for the next phase of the program. Below are few examples of some of the major weaknesses in areas of importance for the assessment of the feasibility of GBS. Planning and budgeting There are very weak links between the overall five-years plans, the medium term budgets, the annual plans and budgets, and a delinked process of planning of the invest-ment budget and of recurrent budget, leading to difficulties in realistic planning (mostly a wish-list approach is applied). The planning and the development budget is managed by the Planning Commission and the recurrent/ revenue budget by the Finance Division in the MoF, and despite attempts to establish a joint working group and improved dialogue these processes are not linked and effective. There is lack of strategic prioritisation and reflection of the overall development policy and plans in the sector/line-ministries plans and budgets30. Budgeting realism31 The overall budget execution has generally between within the 10 % deviation from the budget in the most recent years. For FY 2011-12, the overall expenditure for non-development budget was at 92.1 % and for

30 See a recent World Bank – SPEMP publication about this subject: “A public Investment Management Review and Reform Roadmap for Bangladesh”, Final Report, May 2014 for a comprehensive description of the weaknesses. 31 Based on MoF, Monthly Budget Progress reports FY 2011/12, FY 2012/13 and FY 2013/14.

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Criterion Comments development expenditure 77.3 %. In FY 2012-13, the similar figures were at 92.9 % and 89.2 % respectively, i.e. a smaller improve-ment. However, the variation across sectors is significant, with some sectors such as Social Security/ Welfare only spending 75.9 % of the budgeted expenditure for non-development where a number of sectors spent below 80 % of the budgeted development expenditures. The revenue collection performance was 92.2% and 96.1 % of the target for FY 2012/13 and FY 2011/12 respectively, hence a smaller decrease in performance, which seems to have continued in FY 2013/14, also due to the unrest related with the election and the political turmoil. Accounting system The existing “home-grown” IBAS is still far from the standards of an international integrated financial manage-ment system, and the charts of accounts need to be up-dated. There are also major doubts in the planned new IBAS++ and the quality and capacity of this system to generate integrated financial systems and procedures of high international standards. System development and procedures have been supported under SPEMP, Project A, but progress have been slow and delayed. A new draft CoA is produced, but still needs finalisation and approval, and the planned IBAS++ has weaknesses and major design gaps. Reporting Financial reporting from the LMs has improved during the SPEMP program period, and most of the LMs are now producing financial reports, although some with delays (1-2 quarters). Internal audit An internal audit strategy has been agreed upon, but the internal audit and roll-out of this is still to be completed, and is still assessed to be weak in all LMs. External audit The office of the comptroller and audit general has been strengthened somehow with CB support, training and exchange programs, and piloting of international compliant audit procedures and practices. However, the audits are still delayed (more than a year), and there is need to roll-out the pilot audits across the board, development of rules and regulations as well as manual

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Criterion Comments and guidelines. However, the major challenge is the lack of an approved Audit Act, which should ensure the independence of the auditor, and sepa-ration of the auditing and accounting functions, and a clear framework for the future auditing. This casts major distrust in the objectivity of all audits conducted by GoB. There are major disagreements between the MoF and the CAGD on this issue, which limits the progress and relevance of the audit reforms. Legal framework on PFM There has been very limited progress in the legal framework on PFM, and there is need for issuing of a number of acts, regulations and manuals to ensure international standards in core areas. Future initiatives The current GoB PFM strategy is from 2006, and there is a need to up-date this as well as to revise the SPEMP and ensure a more focused, realistic and implementable approach to the future reform program. This could be based on urgent analytical studies on the current PFM challenges, culminating in a new up-dated PEFA and a revised GoB PFM strategy by end of 2014, but GoB still needs to sign off on these ideas.

5. Transparency and oversight of the budget Indicators: Disclosure of all relevant fiscal information in a timely and systematic manner. Scrutiny by parliament, auditors, local authorities, civil society organisations and media. The level of disclosure of budget information has improved in the recent years and budgets and budget execution reports are made public. According to a recent WB review (April 2014), since 2006, Bangladesh has made significant improvements in the area of fiscal transparency, as measured through scores on the Open Budget Index (OBI)32 but the vast amount of documents on various home-pages are not providing citizens with a clear picture of trends, e.g. in the poverty targeting of expenditures nor the planned against implemented initiatives, and there is no overall policy for when, how best and which information should be made available and

Transparency and oversight of the budget has improved, also through support from the SPEMP, but there is a long way to go before that system has a strong disclosure of relevant information, and involvement and scrutiny of the various stakeholders in budgeting and execution. The composition of the new Parliament effectively reduces the scope for reforms, and the democratic control of budgets and budget execution. There is therefore a need to explore and support alternative means and ways for

32 SPEMP: Final Open Data Report, April 2014. See Information on Open Budget Survey here: http://survey.internationalbudget.org/# and http://internationalbudget.org/what-we-do/open-budget-survey/ from which the Open Budget Index is constructed (with detailed analysis, methodology and scoring). The score on a scale from 0-100 has improved from 39 to 58 points from 2006 to 2012.

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Criterion Comments in which form. The democratic control of the budget and budget execution is still weak,. The Public Accounts Committee (PAC) and other oversight bodies, established under the previous Parliament, which started operating, supported by SPEMP, therefore may their relevance as a democratic instrument. Although there have been some improvements from 2010-2013 in the follow-up of the audit reports by PAC, it is still to be reflected in follow-up action on the issues and pro-blems raised and sanctions. A few initiatives to strengthen the transparency have been launched such as open budget and disclosure initiatives (e.g. under the citizen component in the SPEMP), but there is need for a strong social accountability element in the future PFM reform program.

accountability.

The Danish Mission’s conclusion Is it feasible to provide budget support and if not what major obstacles have been identified?

It is not feasible to provide GBS to the GoB based on major weaknesses in especially the overall strategic planning and linkages between policy, plans, and budgets, weaknesses in the PFM cycle, and in the collaboration and strategic engagement with GoB, especi-ally the lack of a common results frame-work for assessing progress and mutual obliga-tions. There is furthermore no push from GoB, nor from the various development partners to promote GBS as the major aid modality. The criteria for provision of Sector Budget Support (SBS) have recently been reviewed in the programs supporting agri-culture and climate change en-gagements. SBS is not perceived to be feasible in the proposed Thematic Programmes.

Annex 5

Environmental and Climate Screening Note33

Basic Information

Project title: Design and Implementation of the Saidabad III

Water Treatment Plant in Dhaka, Bangladesh

Country/region: Bangladesh

Estimated grant allocation: 929 Million DKK

Brief description of the Project: The Saidabad III project consists of the following infrastructure components: 1. Water intake, pumping station and two water

transmission lines from the river Meghna to Saidabad (24 km.). The civil works include two river crossings (by tunnelling). The capacity of the water intake and the transmission lines is 900,000 m3 per. day. Land acquisition for the water intake, the pumping facilities and part of the transmission lines is required. Compensation for acquisition of land and resettlement is included in the budget.

2. Saidabad Water Treatment Plant III (WTP III) with a capacity of 450.000 m3 and Sludge Treatment Plant for Saidabad WTP I, II and III.

3. Primary main distribution lines. Dhaka Water Supply and Sewerage Authority has requested Danida Business Finance for funding for component 2.

Dates (expected): Programme committee: April 2015 Appraisal: June 2015

Climate change screening

Assess the status of policies and strategies to respond to climate change in the country and sector. If the issue is inadequately dealt with (indicated by a tick in the “no” box), please add comments and assess the potential impact on the program (see also “next steps” section, below).

Issue: Yes No Comments and further work to be done:

33 This note is based on the Environmental and Climate Screening Note for the Bangladesh Country Programme 2016-2021

2

Are the processes and impacts of climate change documented (e.g. in national communications to the UNFCCC)?

Documented e.g. in Bangladesh’s 1st National Communication to UNFCCC in 2002 and the 2nd National Communication in 2011. Bangladesh was the first developing country to produce a National Adaption Programme of Action (NAPA), submitted to submitted to UNFCCC in 2005, providing also an overview of Bangladesh’s national situation.

Is there a national climate change policy or strategy, including estimates of the economic costs of adaptation?

Building on lessons learnt from the NAPA Bangladesh prepared its national strategy on climate change ’Bangladesh Climate Change Strategy and Action Plan (BCCSAP) in 2008. The BCCSAP is a ‘living document’. The first revision took place in 2009. The programmes of action of the BCCSAP are organized under six thematic pillars and is implemented in two phases, 2009-2013 and 2013-2018.

Have nationally appropriate mitigation actions (NAMAs) and or Low Carbon Development Plans been identified (e.g. targets for renewable energy production)?

Bangladesh is in the process of identifying nationally appropriate mitigation actions (NAMAs). In 2011 Bangladesh made a presentation of Low Carbon Path of Development and NAMA to UNFCCC, indicating that it plans to reduce emissions by at least one third by 2030. Bangladesh stresses that economic growth and poverty alleviation should not be compromised by mitigation efforts. Energy consumption will increase, but there is scope to reduce emissions with appropriate international capacity building, financing and technology support. Though there is no Low Carbon Development Plans for the country as such, one of the six thematic areas of BCCSAP is aimed at mitigation activities to attain low carbon development pathways. The Renewable Energy Policy (2008) envisions 5% of total generation from renewable sources by 2015 and 10% of the same by 2020.

Has a national adaptation programme of action (NAPA) been approved identifying key

The Bangladesh NAPA identifies key sectors where adaptation is required: - Water, coastal areas, natural disaster and

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sectors where adaptation is required? health - Agriculture, fisheries and livestock - Biodiversity, forestry and land use - Industry and infrastructure - Food security, livelihood, gender and local governance- Policies and institutes

Are there effective and operational meteorological and disaster preparedness organizations?

Ministry of Disaster Management and Relief is the focal ministry for the implementation of policies and responsible for coordinating national disaster efforts across all agencies. Department of Disaster Management - the technical arm of the ministry - oversees all activities related to disaster management from national down to the grass-root level. It also coordinates the national technical and scientific organizations dealing with DRR related activities.

Summarize the overall assessment of climate change impacts and responses:

Bangladesh is widely recognized to be one of the most climate vulnerable countries in the world. The Fourth Assessment Report of IPCC identifies Bangladesh as one of the worst victims of climate change, although one of the lowest per-capita emitters historically and currently. The Government of Bangladesh recognizes the vulnerability of the country, its people and overall development, to the adverse effects of global warming and climate change. Since 1992, the country’s political leadership has expressed its concern in many formal and informal fora, at national, regional and global levels. Bangladesh is party to a number of international environment-related conventions. The list includes the United Nations Framework Convention on Climate Change (UNFCCC), the United Nations Convention to Combat Desertification (UNCCD), and the United Nations Convention on Biological Diversity (UNCBD) and the Ramsar Convention on Wetlands. In 2008, Bangladesh prepared another strategy “Bangladesh Climate Change Strategy and Action Plan” (BCCSAP) which was aligned to a ‘multi donor trust fund’ established following the massive destruction caused by cyclone SIDR in late 2007. The BCCSAP, which was updated in 2009, aims to build a climate resilience economy and society in Bangladesh especially through adaptation activities to climate change. The said action plan also aims to undertake mitigation activities to attain low carbon development pathways. The BCCSAP outlined medium and long-term actions through six thematic areas under 44 programmes. The Action Plan demonstrates Bangladesh’s genuine commitment to all the areas of the UNFCCC’s post-2012 negotiations: long-term cooperative action on emissions reduction, adaptation, mitigation, technology development and transfer and financing.

Screening of Country Green Growth Framework

Assess the status of policies and strategies for green growth and the procedures for environmental impact assessment in the country and sector. If an issue is inadequately dealt with

4

(indicated by a tick in the “no” box), please add comments and indicate further work to be undertaken (see also “next steps” section, below).

Issue: Yes No Comments and further work to be done:

Do national procedures and legislation for Strategic Environmental Assessment (SEA) and Environmental Impact Assessment (EIA) exist?

EIA is legally established in Bangladesh since the issuance of the Environmental Conservation Act in 1995. Procedures were defined through the Environmental Conservation Rules of 1997. The EIA process in Bangladesh leads up to the issuance of an Environmental Clearance Certificate, which is required for this type of project. The central EIA authority in Bangladesh is part of the Ministry of Environment and Forest (MoEF). An SEA system is not (yet) established in Bangladesh.

Are there operational Green Growth Strategies/actions plans and/or National Environmental Action plans?

Though there is no stand-alone Green Growth Strategy for the country, many of the policy documents e.g. Vision 2021, stress the importance of Green Growth. On Green Growth Strategies in particular, Theme 5 of the BCC SAP ‘Mitigation and low carbon development’ emphasizes carrying out of a series of activities to reduce Bangladesh’s carbon emission, now and in the future On environmental issues, major policies include: Environment Policy, 1992; Forest Policy, 1994; National Environment Management Action Plan (NEMAP), 1994-1995; Environment Conservation Act (ECA), 1995; Environment Conservation Rules (ECR), 1997 etc.

Are there regularly updated state of the environment reports and green growth monitoring systems with indicators?

Bangladesh publishes state of environment report but they are not updated regularly.

Is there sufficient institutional and human capacity for green growth and environmental management in the sector concerned?

Summarize the overall impression of the Country Green Growth Framework:

5

In Bangladesh the concept of green growth is still in its early stage and green growth is predominantly conceptualized as power generation from renewable sources. Bangladesh undertook its Renewable Energy Policy in 2008. This Policy was formulated by the Government in line with its Vision 2021 for bringing electricity to the entire by 2020. In line with this, the Policy has identified different renewable energy sources like solar, wind energy, biomass, biogas, hydro-power. The Energy Policy 2008 envisions 5% of total generation from renewable sources by 2015 and 10% of the same by 2020. For institutionalising the process, the Policy proposed establishing a Sustainable and Renewable Energy Development Authority (SREDA) under the Companies Act, 1994, as a focal point for sustainable energy development and promotion, where ‘sustainable energy’ comprising renewable energy and energy efficiency with an overall objective to support capacity building, technology and market development. The Policy also proposed to provide financial support in the research and development of renewable energy. Moreover, proposals have been made to establish a renewable energy financing facility that is capable of accessing public, private, donor, carbon emission trading (CDM) and carbon funds and providing financing for renewable energy investments. At local level, the Policy proposed setting up a network of micro-credit support system especially in rural and remote areas to provide financial support for purchase of renewable energy equipment. As part of low carbon development, both the private sector and the Government have invested heavily in renewable energies by providing solar home systems, biogas stoves and are now moving towards developing solar mini-grids and wind energy as pilot projects. However, financing for such expensive technologies still remain a major challenge.

Climate change and Green Growth opportunities and risks of programme

Assess how climate change and environmental opportunities and risks will arise through the

programme:

Will the programme ... Opportunity:

Risk: None:

1. ..support green growth initiatives including livelihood improvements and resource efficiency

2. .. support the creation of decent and green job?

3. .. contribute to effective management and efficient use of natural resources

4. .. have direct or in direct impact on climate change (e.g.

through increasing or reducing emissions of greenhouse gases)?

5. .. have direct or indirect impact on occupational health and safety?

6. .. lead to changes in land and resource tenure and access rights, including the rights of indigenous peoples?

7. .. include activities within or adjacent to protected or

6

environmentally sensitive areas?

8. .. have direct or indirect impact on the resilience of communities in the face of natural disasters?

Summarize and explain climate change and green growth opportunities:

The project will increase the volume of water supply and secure high quality potable water to existing and new users. Improvement of water supply is expected to have a positive impact on employment and commercial activities. As the increased water supply is to be sourced from a river with very large water flow, the project is assessed not to have any measurable impact on that flow, and thus having no “foot print” on downstream economic activities, such as agriculture. The employment and commercial opportunities created by increased availability of water in the districts of Dhaka served by Saidabad would include almost every kind of activity that depends directly on water supply as an input or an important part of the production process. As the project in itself poses no restriction on the ways in which the increased water supply is used, it is too early to provide more specific conclusions about the climate change and green growth opportunities. The general development of business in Dhaka should be monitored by the Government of Bangladesh to avoid negative impacts and support positive effects. Increased water supply will be accompanied by increased production of wastewater. This would have adverse impacts; hence, improved wastewater collection systems and treatment facilities are required. This issue is being addressed by the local authorities and development partners.

Summarize and explain climate change and green growth risks:

Weak governance, inadequate institutional and technical capacity

Identify requirements for undertaking an Environmental Impact Assessment (EIA). Categories are: [ A ] Full EIA required; [ B ] Partial EIA required; [ C ] No EIA required34.

Intervention Name Category A, B or C:

1: Saidabad III. A – Full EIA

Will national regulations and procedures for EIA be applicable to activities of the programme that have potential environmental impacts? – Yes - No As a part of the feasibility study, a full scale environmental and social impact assessment (ESIA) of the proposed project has been carried out by Bureau of Research, Testing and Consultation (BRTC), Bangladesh University of Engineering and Technology (BUET), Dhaka. As per the Environmental Conservation Rules 1997 (GoB, 1997) of the GoB, the proposed project

34 Category A = Intervention is likely to have adverse environmental impacts that may be sensitive, irreversible, and significant in scale/scope; B = Intervention is likely to have negative impacts, but which are less significant, not as sensitive, numerous, major or diverse; C = The environmental risk of the intervention are of little or no concern.

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involving construction of raw water transmission line, water treatment plant, and treated water distribution line, falls under “RED category”. Though construction of intake structure is not specifically mentioned in the ECR 1997, an intake structure is a major part of a surface water transmission and treatment plant, and preliminary assessment suggests that construction and operation of such an intake structure (including construction of raw water transmission line) may result in significant environmental impacts. Therefore, carrying out an Environmental and Social Impact Assessment (ESIA) in accordance with the Environment Conservation Act 1995 and the Environment Conservation Rules 1997 is mandatory. The environmental and social impact assessment (ESIA) for the proposed project addressed the potential impacts during construction and during operation. The ESIA report of March 2014 includes impact assessments and proposals for mitigating measures.

Next Steps – process action plan

Need for further work during the preparation, appraisal and implementation of the programme arising from the climate change and green growth screening:

Suggested activity: Action needed

Comments and elaboration:

Assessment of green growth and climate change opportunities in sector development plan.

N /A

Assessment of capacity for green growth and climate change management in the sector/country.

N / A

Prepare ToR for and conduct Country Analytical Work.

N / A

Prepare ToR for and conduct SEA(s) of sector policies or plans.

N / A

Prepare ToR for and conduct EIA(s) for programme interventions.

N / A

Initiate donor harmonisation in the sector on green growth and climate change.

N /A

Review partners capacity in these areas (climate, green growth, EIA) during design and agree how systems can be strengthened to align with Danida standards.

N / A

Signature of Screening Note

Place and date ……………………………………………………….(name) GRV

1

Annex 6

HRBA / Gender Screening Note35

Tool for Human Rights Based Approach (HRBA) and Gender Equality Screening

Purpose: The HRBA and Gender Screening Note complement the HRBA Guidance Note and the up-coming Gender Equality Strategy and the Gender Equality Toolbox. The purpose of the note is to facilitate and strengthen the application of the Human Rights Based Approach and mainstreaming of gender equality programming related to Danish development cooperation. It can be used as an inspirational checklist by all staff. The information in the note should be based on the analysis undertaken as part of the preparation of the Country policy paper and should draw on major Human Rights and gender equality analysis relevant for the country such as UPR-processes, reports and documents from OHCHR, EU HR Strategy, CEDAW-reporting as well as relevant analysis prepared by other major donors. The Screening Note should be attached to the country programme concept note, and the questions raised below should be reflected in the country programme document. Appraisal of country programmes will include a specific focus on HRBA and Gender Equality.

Basic info

Title Saidabad III

Country/ region Bangladesh

Budget in million DKK

929

Starting date and duration

1st February 2017

Human Rights Based Approach

Assess whether a Human Rights (HR) Based Approach has been applied in the programme:

Human Rights Assessment and Standards

Issues: Yes No Explain:

Have major HR analysis relevant for the country been consulted (UPR, OHCHR, EU HR Strategy, other relevant donor documents)

Yes

Reference is made the HRBA Note, Bangladesh Country Programme 2016-2021.

Bangladesh is party to more than 18 major international human rights instruments. The major HR analysis that have been consulted for the preparation of the

35 This note is based on the HRBA note for the Bangladesh Country Programme 2016-2021

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Country Programme include: - UPR 2013 – Bangladesh - CEDAW sixth and seventh period reports on Bangladesh, 2011 - EU: Gender Country Profile, 2014 - OHCHR: Report of the Special Rapporteur on Violence against Women, 2013 - OHCHR: Joint report of the independent expert on human rights/extreme poverty and the independent expert on human rights/access to safe drinking water and sanitation, 2010 - EU: Civil society mapping and recommendations, 2014

Have key international HR standards and/or mechanisms influenced choice and formulation of outcome areas?

Yes Choices and formulation of the Country Programme have generally been influenced by two key international HR standards namely; International Covenant on Civil and Political Rights, and International Covenant on Economic, Social and Cultural Rights (ICESCR) and Universal Declaration of Human Rights (UDHR). The UDHR, in its Preamble, states that “the United Nations have determined to promote social progress and better standards of life in larger freedom”. The ICESCR reiterates the right “to an adequate standard of living” and “to the continuous improvement of living conditions”. Again Article 2 & 3 of ICESCR and Civil & Political Rights underscore the principle of non-discrimination, equal rights of men and women. It i.a. also takes into account UN General Assembly Resolution 59/201 that cites, a number of “essential elements of democracy,” including “transparency and accountability in public administration’

Where relevant, is application at national level, including major gaps between human rights in principle vs. human rights in practice, evaluated and identified?

Yes There are still significant gaps between human rights in principle vs. human rights in practice.

The gaps include difference in labor wages between man and women, discriminatory

3

laws limiting women’s ownership on land resources and usage of land, gender insensitive poverty reduction strategies, limited role of women in decision making process on rural and urban development, extrajudicial killing by the law enforcing agencies etc.

Are key recommendations from UPR for the thematic programmes and from any treaty bodies, special procedures, INGOs, HNRIs etc. that require follow up at national level considered?

Yes The recommendations from UPR that are accepted by the government of Bangladesh: - Continue its efforts to promote and protect human rights, in particular the economic, social and cultural rights of its citizens with the support and assistance of the international community - Give continuity to fighting poverty and underdevelopment - Continue government efforts to fully realize the right to development - Continue working at the national and international levels of the issue of human rights and climate change

Are rights-holders identified? Yes In the Dhaka Water Master Plan special attention has been given to low-income households and dwellers in slum areas.

Are duty-bearers identified? Yes Dhaka WASA and the Dhaka City Authorities are the main duty-bearers.

In addition there are relevant ministries, Bangladesh National Human Rights Commission, Local Government, Private Sector, Civil Society etc.

Assess whether Human Rights Principles have been applied in the preparation and in the design of the programme?

Non-discrimination: Are any groups among rights-holders excluded from access and influence in the thematic programme areas identified?

Yes Dhaka WASA, the Dhaka City Authorities, NGOs and development partners have made significant efforts to ensure that all, including the most marginalised groups, have access to sufficient volumes of good quality water at affordable prices.

No group among the rights-holders is

4

excluded from access or influence. However, discriminatory legislation and customary perception remains a major challenge in ensuring meaningful participation of women in discussions and decision making processes.

Are disaggregated data available on most vulnerable groups?

Yes The Dhaka Water Master Plan includes disaggregated data on the major segments of the population in Dhaka, including the most vulnerable groups.

List any key support elements included to promote non-discrimination

Yes An equitable water distribution plan is part of water master plan

Training on the principles of human rights both for programme workers at the local level and, separately for local government leaders will promote non-discrimination. The project will impart capacity building trainings to rights holders on HRBA to capacitate them to claim rights from duty bearers.

Participation and inclusion: Are barriers for participation, inclusion and empowerment of rights holders identified?

Yes Social and cultural norms create barrier for the women in their active participation in decision making process. Limited political space for accepting criticism and sometimes political oppression act as a barrier to participation and inclusion of dissenting voice. Income poverty acts as a barrier to access to better health, education, justice, land, finance, clean water, etc. Various NGO projects address the access of low-income users to sufficient and safe water. There are also physical barriers such as lack of house connections in the slums, but the distribution network is being extended, and the number of street taps is increasing.

Widespread corruption especially in the

5

public sector’s service providing agencies is a major barrier to participation and inclusion of rights holders in the provisions of good governance.

List any key support elements included to promote participation and inclusion

Yes The Environmental and Social Impact Assessment (ESIA) included comprehensive stakeholder consultations.

Stakeholder consultations will also be arranged when planning the water distribution network.

Transparency: Is the extent to which information is accessible to rights holders including marginalised groups assessed?

Where relevant, whether information is available in other than official languages of the country in question should be indicated.

Yes In 2009 the government of Bangladesh enacted the ’Right to Information Act’ to ensure free flow of information and people’s right to information. The aim and objectives of this Act are; a) To ensure the accountability and transparency of the government, autonomous and statutory bodies, of the national and international funded organizations, b) To decrease corruption and c) To increase good governance along with financing However, access to information by rights holders (even by many duty bearers) often does not materialize in practice. Initiatives by civil society organizations to communicate national policies in popular versions have been useful. Dhaka WASA makes efforts to maximise transparency regarding its services, but the outreach might be larger, and the amount of information on the Dhaka WASA web site and other means of information could be expanded and further detailed. Information is only available in English.

List any key support elements included to promote transparency

Yes The project will be tendered through the public procurement procedures to Danish Consultants and Contractors.

The tender procedures will be followed closely to by Danida’s monitoring consultant.

6

Are key accountability mechanisms in the relevant area – both horizontal and vertical listed?

Yes Dhaka WASA makes efforts to improve on the mechanisms of accountability.

The project will provide support for institutional capacity building with focus on accountability. This include a collaboration with the Danish Water Companies in order to address institutional building in a wider context.

Training on technical matters will be provided by consultants, contractors and suppliers.

Are obstacles, e.g. capacity and political-economy incentives that duty-bearers and rights holders face to exercise their obligations and rights listed?

No The main obstacles to a sustainable water supply system are lack of:

- reform of the water supply sector, and thereby lack of ability of Dhaka WASA to adapt tariffs towards full cost recovery levels;

- capacity at Dhaka WASA to operate and maintain the water supply infrastructure, and to effectively monitor the operations.

Both of these main obstacles are currently being addressed by the main stakeholders.

List any key support elements included to promote accountability

The project will be implemented by a Danish Contractor, supervised by a Danish Consultants.

The consultant and the contractor will forward their requests for payment to Dhaka WASA. After approval, the payment request will be send to the Danish Bank (providing the loan financing) for payment.

The project will be audited by the Auditor General of Bangladesh, as part of general Government procedures.

Institutional capacity building provided under the project and the collaboration with the Danish Water Companies will

7

enhance accountability in general.

Results/Indicators

List any indicators designed to monitor the realisation of specific human rights

N/A

List any indicators designed to monitor the integration of the four principles

N/A

List any key indicators chosen to track capacity of key partners (both rights holders and duty bearers)

N/A

Dialogue Partners

Define key dialogue partners (duty bearers) to be addressed by the Project

Dhaka Water Supply and Sewerage Authority (WASA)

Define key alliance partners, including other likeminded donors, multilateral partners and CSO’s

Agence Française de Développement (AFD), European Investment Bank and Asian Development Bank

State major dilemmas/risks associated with the policy dialogue and proposed mitigation measures (incl. reference to Framework for Risk Assessment)

N/A

Gender Screening Tool

Are key challenges and opportunities for gender equality identified?

No The Appraisal should consider making an assessment of this issue.

Are reference made to CEDAW-reporting, UPR, and other relevant gender assessments?

No The Appraisal should consider making an assessment of this issue.

Identify opportunities/constraints for addressing gender equality issues

No The Appraisal should consider making an assessment of this issue.

Describe key strategic interventions to promote gender equality within each thematic programme?

No N/A

Explain how gender specific purposes with be reached, which strategic approach, what activities are planned

No N/A

Define expected outputs. No N/A

Identify gender equality indicators aligned with national targets on gender if possible.

No N/A