Document of

The World Bank

FOR OFFICIAL USE ONLY

Report No. P-6727-BD

MEMORANDUM AND RECOMMENDATION

OF THE

PRESIDENT OF THE

INTERNATIONAL DEVELOPMENT ASSOCIATION

TO THE

EXECUTIVE DIRECTORS

ON A

PROPOSED CREDIT

OF SDR 78.4 MILLION

TO THE

PEOPLE'S REPUBLIC OF BANGLADESH

FOR A

RIVER BANK PROTECTION PROJECT

NOVEMBER 13, 1995

This document has a restricted distribution and may be used by recipients only in the performance oftheir official duties. Its contents may not otherwise be disclosed without World Bank authorization.

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CURRENCY AND EQUIVALENT UNITS(April 1995)

Bangladesh Taka 1 US$0.0248US$1 Tk 40.25

WEIGHTS AND MEASURES

I meter (i) = 1.1 yards (yd)I kilometcr (kin) = 0.61 mile (mi)1 hectare (ha) = 2.47 acres (ac)

ABBREVIATIONS AND ACRONYMS

BRE - Brahmaputra Right EmbankmentBWDB - Bangladesh Water Development BoardCAS - Country Assistance StrategyCr. - CreditCY - Calendar YearERR - Economic Rate of ReturnFAP - Flood Action PlanGDP - Gross Domestic ProductGOB - Government of BangladeshICB - International Competitive BiddingNCB - National Competitive BiddingNGO - Non-Government OrganizationNPV - Net Present ValueNW`P - National Water PlanO&M - Operations and MaintenancePCR - Project Completion ReportPPAR - Project Performance Audit ReportR-AC - Regional Accounting CenterRAP - Resettlement Action PlanSDR - Special Drawing RightWARPO - Water Resources Planning Organization

GOB FISCAL YEARJuly I - June 30

GLOSSARY

Grovne - A rigid structure built out from the shore to stop erosion by deflecting thecurrent.

Minor Irrigation - Irrigation using mechanical pumps typically in units of 50 ha or less.

Monsoon - Period of annual rains starting in June and ending in October.

Project Proforma - An internal Government document required to obtain authorization for theinclusion of a project in the investment budget.

Revetment - A facing of stone or concrete to protect an embankment from erosion.

FOR OFFICIAL USE ONLY

BANGLADESH

RIVER BANK PROTECTION PROJECT

MEMORANDUM OF TRE PRESIDENT

Credit and Proiect Summars

Borrower: People's Republic of Bangladesh.

Imnlementing Agency: Bangladesh Water Development Board.

Beneficiarv: Not Applicable.

Poverty: Not specifically focused, but flooding and river bank erosion disproportionatelyaffect the poor who have minimal assets to buffer flood losses or involuntaryrelocation. Many of the poorest are former erosion victims.

Amount: SDR 78.4 million (US$121.9 million equivalent).

Terms: Standard, with 40 years maturity.

Commitment Fee: 0.5% on undisbursed credit balances, beginning 60 days after signing, less anywaiver.

Financing Plan: See Schedule A.

Economic Rate of Return: The beneficiaries of the project would be the estimated 2-3 million people living inthe area of potential disaster caused by the Brahmaputra breaching its right bank atMathurapara-Sariakandi to flow down the Bangali river channel. About 125,500urban people will be protected from severe property loss, impoverishment andphysical displacement caused by river bank erosion or chronic flooding at Sirajganjand Sariakandi. Flooding of the approaches to the Jamuna Bridge would disruptlocal trade. The project would protect agricultural production over an area of about100,000 ha from annual flooding and control erosion at Sirajganj which is essentialfor the security of the Jamuna Bridge. Property losses prevented in the first five-year period would include 16,400 houses and shops, 75 factories, at least 9,000traditional dwellings and considerable public infrastructure. The economic rate ofreturn (ERR) for the project is 39%, and 45% and 35% respectively for theSirajganj and Sariakandi-Mathurapara subprojects. The ERR does not include thenational water planning or BWDB institution building component.

Staff Appraisal Report: Report No. 15090-BD.

Maps: IBRD No. 27505: River Bank Protection Project.IBRD No. 27506. Simulated Area Flooded by Merger of Brahmaputra and Bangali

Rivers at Sariakandi.

Project Identification Number: BD-PA-9545.

I This document has a restricted distribution and may be used by recipients only in the performance of theirofficial duties. Its contents may not otherwise be disclosed wiihout World Bank authorization.

MEMORANDUM AND RECOMMENDATION OF THE PRESIDENTOF THE INTERNATIONAL DEVELOPMENT ASSOCIATION

TO THE EXECUTIVE DIRECTORSON A PROPOSED CREDIT TOTHE PEOPLE'S REPUBLIC OF BANGLADESH

FOR A RIVER BANK PROTECTION PROJECT

1. I submit for your approval the following mcmorandum and recommendation on a proposeddevelopment credit to the Pcople's Republic of Bangladesh for SDR 78.4 million, the equivalent ofUS$121.9 million, on standard IDA terms with a maturity of 40 years. This credit will help financeriver bank protection to stop the Brahmaputra from disastrously breaching its right bank and floodingthe hinterland, secure the Jamuna Bridge and two towns through erosion protection works, and assistwater sector institutional development.

Sector and Proicct Background

2. Land and Water Scctor. Bangladesh, one of the poorest countries of the world, occupies thefloodplains and delta formed by the confluence of the Ganges and Brahmaputra Rivers at the head of theBay of Bengal. Consequently, the country's agricultural and economic development is constrained bymonsoon floods, salinity, tidal inundation, cyclones, river bank erosion and continuous meandering ofthe major rivers. The severity of some major floods and cyclones often attains disaster proportions as inthe 1988 flood and 1991 cyclone. Agriculture is still the mainstay of the economy and accounts forabout 36% of GDP and about 60% of employment. Processed and unprocessed agricultural productsaccount for about 32% of exports. Despite vulnerability to flood damage, the country's foodgrainproduction rose from 9.9 million tons in 1961/62 to over 19 million tons in 1993/94. About two-thirdsof this increase came from dry season cropping facilitated by the Government of Bangladesh's (GOB)successful policies of introducing and expanding the use of small pumps, tubewells, high-yielding ricevarieties and fertilizers and by policy reforms in the late 1980s liberalizing trade in minor irrigationequipment and fcrtilizer. About one-third of the net cultivable area is now irrigated and, for the firsttime in recent memory, Bangladesh is now self-sufficient in rice production in years of normal weather.Nevertheless, Bangladesh still has to import wheat and other food products. Continued rapid populationgrowth (reduced somewhat to 2.0% per annum) means that Bangladesh must continue substantial effortsto accelerate agricultural growth.

3. Sector Issues. Given the success with minor irrigation, the principal land and water sectorissues relate to the formulation of long-term policies and investments which will: (a) ensure equitableaccess to water for all users; (b) foster further agricultural growth by encouraging more minor irrigationby private farmers using abundant groundwater resources; (c) enable viable and environmentally benignpublic and private sector investment in flood control and drainage works; (d) not exceed theimplementation and maintenance capacity of the Bangladesh Water Development Board (BWDB); and(e) enable stakeholders, other agencies, non-government organizations (NGOs) and the private sector toparticipate in water sector planning, implementation, and operation and maintenance. As a result ofGOB and donor conccrns arising from the severe floods in 1988, the World Bank prepared the FloodAction Plan (FAP) Study program in 1989 and has since served as the program's coordinator. The FAPis a five-year program consisting of: (a) routine studies to formiulate a portfolio of structural and non-structural investment projects to mitigate major flood hazards; (b) studies to formulate a river bankerosion control program for the Brahmaputra and Meghna Rivers; (c) various pilot projects to testinnovative concepts of flood and river bank erosion control; and (d) various supporting studies toinvestigate social, environmental and disaster management issues arising from project proposals. Thefinal report of FAP, "Bangladesh Water and Flood Management Strategy" (August 1995), nowrecognizes that flood management has to be seen witlhin the context of year round water managementand development, and that many of thic earlier technical solutions for flood control have significantproblems. In consequence, GOB is planning a more integrated approach to water and flood

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management with particular attention being paid to environmental impacts, particularly fisheries,peoples' participation in project planning, implementation, operation and maintenance (O&M), andinstitutional strengthening. At the same time, the FAP report recognizes that major institutional reformsare needed to improve water sector planning, implementation capacity, and maintenance of completedworks. The FAP will be conmpleted in December 1995, and its functions will be integrated within theWater Resources Planning Organization (WARPO) which will require substantial strengthening tobecome a fully effective national water planning organization.

4. Brahmanutra Rivcr Bank Erosion Impacts. River bank erosion is a persistent hazard facedby land owners and cultivators of land adjacent to the meandering major rivers. Such erosion leads tothe landward collapse of the river bank over stretches of several hundred meters at a time. On theBrahmaputra River, erosion rates vary greatly from year to year, averaging about 100 meters, butsometimes reaching up to 800 meters in a peak year. Such erosion results in loss of fertile land anddestruction of buildings, major bridges, embankments, ferry terminals and other essential infrastructureat major riverbank towns. Along the Brahmaputra River's west bank, cumulative erosion results indiscernible westward migration of the river channel in some reaches. This erosion periodically breachesthe 220 km long Brahmaputra Right Embankment (BRE) which is home to some 100,000 sqatters -most of whom are former erosion victims - and widespread flooding affects areas that have enjoyedsignificant economic development since construction of the embankment over 25 years ago. To preventsuch breaches and the consequential flood damages, sections of the BRE have been realigned since the1970s to the extent that only 70 km of the structure still follows its original alignment.

5. Erosion along the Brahmaputra River's banks has a significant social impact. The loss of land,crops and property has led to landlessness and impoverishment for thousands of households. Over theperiod 1980-92, land capable of supporting 405,000 people was eroded. Allowing for continuedincrease in population density, it is estimated that about 578,000 people may be displaced by erosionover the next 20 years and about 400,000 may be forced to migrate from the area, many of whom mayend up in the peri-urban slums around the major towns and cities.

6. The economic value of losses to the economy of the northwest region from bank erosion alongthe Brahmaputra river is considerable. At five locations, where erosion is currently very active(Fulchari, Sariakandi-Mathurapara, Kazipur, Sirajganj and Betil), the total cost of erosion losses overthe next five years is estimated to be about US$75 million (in 1991 prices), but erosion protection canonly be economically justified where significant property and infrastructure are at risk (see para.11).Losses consist of productive agricultural and u.ban land, severe damage to property (houses, shops,public buildings) and infrastructure (roads and bridges, power and telephone lines, and railwayembankments). If present erosion rates are sustained, there is a strong likelihood that a total of about11,700 ha would be eroded in the coming 30 years in the vicinity of Sirajganj town and near the villagesof Sariakandi and Mathurapara. The potential loss of 1,500 ha of the built-up area of Sirajganj is ofparticular concern. The town is an important administrative and trading center with a population of over100,000. It has agro-industrial enterprises (textile, oil, sugar and jute mills) and a river ferry terminalfor rail and boat traffic. The town is protected from flooding by a section of the BRE which has beenincorporated into existing bank stabilization works which were constructed in the early 1970s whenerosion first threatened the town. When erosion became more serious in the 1980s, the RanigramGroyne was constructed north of the town. Both structures have performed well, but they weredamaged by the severe floods of 1987 and 1988 and a larger than normal flood could cause widespreadfailure of the existing works which could result in the erosion of one-third of the area at Sirajganj(500 ha) - including its commercial district - within five years. As a direct consequence, the BREwould have to be realigned behind the town leaving the rest of the town exposed to major floods. The

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stability of the Jamuna Bridge (Cr. 2569-BD) which is under construction about 5 km downstreamn isdependent, inter alia, on erosion being controlled at Sirajganj.

7. At Sariakandi, as a result of erosion, the Bangali and Brahmaputra rivers are presentlyseparated by a strip of land about 1 km wide. Some protection to Sariakandi is provided by the KalitolaGroyne which was designed for a small side-spill channel of the Brahmaputra River. However, it isnow exposed to the main force of the river and is in an advanced state of structural deterioration due toadjacent bank erosion. Further realignment of the BRE is not possible because of the proximity of theBangali River. Without further protection, the narrow strip of land separating the Bangali River fromthe Brahmaputra River will be completely eroded within 5 years with the loss of Sariakandi town(population 15,000) and a merger of the Bangali and Brahmaputra rivers would then occur. A mergerof these two rivers would result in perennial flow from the Brahmaputra into the Bangali River andwould be a major environmental disaster. This would permanently augment the Bangali River'sdischarge, increase its flood potential, and result in greater depths of inundation and larger areasflooded. Not only would crop and property damage be caused in the incremental areas flooded, but theaugmented flooding in the Bangali River floodplain would damage the road network leading to theJamuna Bridge and disrupt local trade.

The Proiect

8. Progect Ohiectives. The project's principal objective is to prevent the erosion of land at twolocations on the west bank of the Brahmaputra by the construction and maintenance of improved riverbank protection works, which would: (a) protect Sirajganj town's built-up and semi-urban areas frommajor damage and cumulative destruction; and (b) prevent the merger of the Brahmaputra and BangaliRivers in the vicinity of Sariakandi and consequential increased regional flooding. Further objectivesare to assist GOB in: developing permanent institutions for improved water sector planning; preservingthe institutional capacity developed under FAP; making multi-disciplinary planning part of Bangladesh'snormal water sector planning processes; and to assist BWDB's institutional reform program throughimprovements in its accounting and management information systems.

9. Project Description. The proposed project consists of the following components:

a) Rehabilitation and construction of river bank protection works at two sites on theBrahmaputra River's west bank, including realignment of about 8 km of the BRE tolink the bank protection works near Sariakandi and Mathurapara;

b) Land acquisition and a program of resettlement for people displaced by project works;

c) Technical assistance for implementation and maintenance support of worksconstructed under the project;

d) Establishment, staffing and initial funding support for an O&M Unit in BWDB tomaintain the protection works constructed under the project, and procurement ofvehicles and equipment for the O&M Unit;

e) Institution building technical assistance to WARPO to integrate the FAP within theframework of national water planning, produce a national water management plan anda portfolio of investment projects for the medium and long-terrn, and upgradeintegrated water sector planning capability; and

The Brahmaputra River is also known as the Jamuna River, thus the Januna Bridge crosses the BrahmaputraRiver.

4

f) Institutional capacity building technical assistance to BWDB to improve the operationof the new regional accounting centers (which includes training), and provision ofequipment and transport to improve project supervision capability in the field andinternal communications.

The proposed project would be implemented over a five-year period starting in early CY 1996.

10. The project's cost is estimated at US$156 million equivalent, with a foreign exchangecomponent of about US$58.6 million (38%) and duties and taxes of US$18.5 million. A breakdown ofproject costs and the financing plan are presented in Schedule A. Amounts and methods of procurementand disbursement, and the estimated disbursement schedule are in Schedule B. A timetable of keyproject processing events and the status of Bank Group Operations in Bangladesh are shown inSchedules C and D, respectively. Two maps (IBRD No.27505, 27506) are also attached. The StaffAppraisal Report, No. 1 5090-BD, dated November 10, 1995, is being distributed separately.

11. Site selection and design of the river bank erosion protection works are based on an extensivefield and laboratory research and testing program. This includes examination of design, construction,operation and maintenance of 11 existing river bank erosion protection schemes and 31 other hydraulicstructures along the Brahmaputra River's right bank, the investigations and design of the JamunaBridge's river training works, physical and mathematical model studies, and review of engineeringdesign practices in India and the USA. A master plan short-listed 10 potential sites for civil works, andthe three having the highest economic return - Sirarjganj, Sariakandi and Mathurapara - were selectedfor detailed design. At Sirajganj, the only physical solution was protection of the river bank, whereas atSariakandi-Maturapara, diversion of the Bangali River was considered as an alternative solution toprevent the merger of the Brahmaputra and Bangali. High cost, the large area of land to be acquiredand thousands of people to be resettled eliminated this alternative. Of the two feasible erosionprotection methods (groynes or revetments), or a combination of the two, revetments were selected forall sites on the basis of type of erosion monitored for more than 15 years along the Brahmaputra,experience with the performance of groynes since 1978, and cost-effectiveness given the constructionmaterials available and required maintenance.

12. Proiect Implementation. All project components other than National Water Planning wouldbe implemented by BWDB. A Project Director at Bogra, assisted by a Project Coordinator at Dhaka,would coordinate implementation. In view of BWDB's limited experience with the proposedconstruction technology, construction contract management and engineering supervision would beundertaken by experienced international consultants on behalf of BWDB. These consultants would bevested with the powers and duties of "The Engineer" as specified in IDA's Standard Bidding Documentsfor major civil works. Selected BWDB staff would be seconded to the consultants' constructionsupervision team, to ensure technology transfer to BWDB personnel. A specialized O&M Unit wouldbe established under the project for monitoring erosion and maintaining bank protection works.Technical assistance would be provided to train the O&M Unit's staff in maintenance technology andmanagement. BWDB has established a Project Management and Resettlement Unit (PMRU) tocoordinate resettlement activities, with assistance from consultants and an NGO. PMRU staff andconsultants will work with the District Commissioners to ensure prompt provision of compensation foracquired assets in accordance with the law, and will administer provision of additional compensationand rehabilitation assistance in accordance with an agreed Resettlement Action Plan. The smallcomponents for assistance in improving BWDB's accounting and management information systemswould be coordinated in Dhaka by BWDB's Member Accounting and Member Administrationrespectively. Project coordinating committees, at the national and district levels, would assist incoordinating project implementation and dissemination of information concerning project activities.

S

13. The National Water Planning Component would be implemented by WARPO, which isresponsible for strategic planning of water resources, reviewing and evaluating water sector plans andprojects, and collecting and disseminating water sector data. A cabinet level National Water Councilwill provide policy guidance. Consultants financed under the project will assist in policy guidance, planformation and institution building. GOB has agreed to finance an international Panel of Experts whichwould provide an independent review of WARPO's work programs, strategic planning, and projectproposals.

14. Experience under Prior Projects. IDA-financed projects implemented by BWDB have beenaffected adversely by dclays in land acquisition and processing of civil works contracts, insufficientlocal funding allocations, poor quality construction and inadequate maintenance. However, in recentyears adequate funding of IDA-financed BWDB projects has not been a problem. Based upon priorsector work, a BWDB institutional reform program was agreed in September 1994 and performance todate in implementation of the program has been satisfactory. Key measures include approval ofGuidelines for People's Participation in project design and operations, introduction of an improvedaccounting system, a phased program to separate staff and responsibilities between construction andO&M, and reforms in personnel policies. This project has been designed to take account of problemsobserved under prior operations. Use of contractor prequalification and International CompetitiveBidding (ICB) for major civil works and supervision by experienced consultants with the powers andduties of "The Engineer" are expected to improve performance in contracting and construction quality.Improved land acquisition procedures and improved compensation payments are modeled on theexperience gained from the Jamuna Bridge project, and are also expected to reduce delays. For thesmall embankment realignment component to be awarded through National Competitive Bidding(NCB), agreement has been reached to use Class A contractors2 (or expatriate firms with equivalentqualifications). The establishment of a specialized O&M Unit for riverbank protection works and thetraining to be provided by consultants to the Unit's staff are expected to improve maintenanceperformance.

15. Proiect Sustainability. The project implementation arrangements described above aredesigned to: (a) ensure safe and timely construction according to design specifications and fixedseasonal schedules; (b) create an organizational and recurrent budgeting focus for O&M of rivertraining and bank protection works in general, and project works in particular; and (c) ensure the properequipping of an O&M Unit and training of its staff. While in the short-run this project will add to theGOB's development expenditure for erosion and flood protection, the chronic loss of publicinfrastructure to erosion and property damage caused by flooding that would occur without the project -averaging about US$1.7 million per year - will more than offset the US$1.2 million cost of operationand maintenance. The annualized O&M costs is less then 0.5% of BWDB's annual budget, andrepresents about 4% of the FY94 O&M allocation for BWDB. GOB has been meeting its undertakingunder the Systems Rehabilitation Project (Cr. 2099-BD) to increase allocations to BWDB's O&Mbudget by 10% annually (net of inflation). The overall GOB financial allocation for BWDB'smaintenance works (excluding work financed under the food-for-work program) has increased nine-foldsince FY 1989. In consequence, this project should not crowd-out of essential rehabilitation and O&Mactivities. The sustainability of the National Water Planning component is strengthened by GOBapproval on September 11, 1995 of the "Bangladesh Water and Flood Management Strategy" at theCabinet level. GOB will place this document before an international conference of developmentpartners, NGOs and the public in late November 1995 to reach a consensus on the strategy and how toimplement it, and this gives further indication that GOB's commitment to the program is strong. Thedesire within GOB for additional water sector projects arising from FAP studies and the strong position

2 This is the GOB classification of local contractors having the greatest capability and capacity for civilengineering works.

6

taken internally by the NGOs and externally by the donors for reformed multi-disciplinary planningprocedures, increase the likelihood for the sustainability of this component.

16. Rationale for IDA Involvement. IDA's involvement in the proposed project stems from theAssociation's past support for river bank erosion control works and protection of towns andinfrastructure from erosion damage. The need for river bank erosion control projects was endorsed byIDA's 1991 Environmental Strategy Report. IDA has played a leading role in supporting recentcomprehensive design studies which have developed and recommended improved technologies suited tobank erosion control for major rivers such as the Brahmaputra. The scale of economic damage andsocial disruption that would result from not undertaking adequate and early preventative measures attwo key locations on the Brahmaputra River's west bank prompted GOB to seek IDA assistance. Ourrole in coordination of the FAP studies (para. 3) puts us in the best position to take a leadership role inplacing the improvements in sectoral planning and strategy initiated under FAP on a permanent basis.

17. Country Assistance Strategv. The project is fully consistent with the revised CountryAssistance Strategy (CAS) which was discussed by the Executive Directors on November 9, 1995. TheCAS emphasizes, inter alia, the importance of agricultural growtIh, development of rural infrastructure,institutional reform and capacity building and the need to reduce the negative impact of flooding onpeople's lives and livelihood.

18. Agreed Actions. During negotiations, agreement was reached with GOB that it would:

a) undertake all land acquisition and resettlement in accordance with an agreed ResettlementAction Plan (RAP);

b) ensure that only Class A contractors would be allowed to bid for minor civil works contractsunder NCB procedures, and that contracts for earthworks would have a minimum size;

c) appoint civil works contract management and supervision consultants not later than the date ofsignature of the first river bank protection contract and appoint selected BWDB staff to theconsultants' supervision team;

d) maintain project coordinating committees during construction of civil works, and undertakeproject implementation reviews according to agreed schedules and arrangements;

e) prior to May 31, 1997, establish an O&M Unit for project works, appoint consultants formaintenance support, and procure all specialized survey equipment for the O&M Unit's use;

f) hold annual consultations with the Association on the level of expenditure required for O&M ofproject works and provide adequate funds for this purpose during the project and after itscompletion;

g) have all disbursements applications for civil works, resettlement, or O&M activities certifiedby the implementation support or maintenance support consultants;

h) appoint key WARPO multi-disciplinary staff by June 30, 1996 and appoint by April 30, 1996 aconsulting firm and members of the Panel of Experts to assist in strengthening national waterplanning, and prepare a National Water Management Plan by June 30, 1998; and

i) the Project Proforma for the national water planning component of the project would beapproved by February 28, 1996;

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19. Since negzotiations, GOB has: (a) approved the revised RAP; (b) appointed the ProjectDirector, the Project Coordinator, and the professional staff of PMRU; (c) contracted for consultingscrvices for land acquisition and resettlement for land and other assets required for the first year'sconstruction program and completed field work for the joint verification of the value of such assetsusing the services of an NGO acceptable to IDA; and (d) received the tenders for the two ICB contractsand consultancy proposals for construction supervision. Conditions of effectiveness are: (a) GOBapproval of the Project Proforma for the componcnts of the project to be implemented by BWDB; and(b) approval by the Ministry of Water Resources of a draft Project Proforma for the National WaterPlanning Component.

20. Environmcntal Impact. The proposed project has been placed in environmental impactcategory B. The project's revetment works are waterfront structures that are confined to 0.4-2.0kilometers of river bank at each site. They do not destroy river fisheries or interfere with fishmovement. A fish pass structure to be incorporated in the section of the BRE to be retired under theproject will remove impediments to fish movement caused by the current embankment. The proposedworks would not affect sediment transport processes more than a few tens of meters beyond the riverbank and thus would not have any impact on growth and decay of major sand bars and islands in theRiver. Project works would have minor and temporary adverse environmental and nuisance impactsarising out of dredging and land-based civil works operations during construction. These impacts aremitigable, and an enforceable Environmental Mitigation Plan has been included in the constructioncontracts. Thus any deviation from specified environmental and behavioral standards by the contractorwould result in immediate repair or redress at his expense. Only bricks from coal-fired kilns would bepermitted to be used to prevent illegal consumption of timber as kiln fuel.

21. Project Objective Cate2ories. The project, as part of the GOB's Five-Year DevelopmentProgram, would address natural resources management, environmental improvement and povertyreduction objectives.

22. Project Bencfits. The project has three principle sets of benefits derived from: (i) preventionof damages caused by river bank erosion; (ii) improved project sustainability as a result of theintroduction of sound water sector planning; and (iii) enhanced institutional capability for projectconstruction supervision, financial control, and for operation and maintenance.

23. Benefts from the Prevention of Erosion Damage. Benefits arise from the prevention of: (i)river bank erosion damages to land, housing and infrastructure; and (ii) local and regional floodingresulting from erosion-induced breaches of the BRE and merger of the Bangali and Brahmaputra rivers.The quantifiable benefits arise from avoiding the following damages: (a) destruction of land, propertyand infrastructure caused by erosion; (b) resultant loss of wages to unemployment; (c) damage to crops,livestock, property and infrastructure on 400 ha near a BRE breach; (d) damage to crops, property andinfrastructure in the region caused by increased flooding due to the breakthrough of the Brahmaputra tothe Bangali River at Safiakandi/ Mathurapara; (e) reduction in the value of agricultural production dueto farmers changing to a more flood tolerant and low yielding cropping pattern in response to morefrequent and deeper flooding; and (f) costs to repair sections of the BRE breached by river bank erosionthat would not be necessary with the project.

24. The project's river bank protection works would protect about 7,800 ha, including the urbanand peri-urban areas of Sirajganj (population 104,000) and the semi-rural areas of Sariakandi andMathurapara. The works at Sirajganj would also reclaim a 25 ha area for public use and squatterresettlement. Surveys indicate that the total property loss prevented within a five-year period wouldinclude about 16,400 masonry houses and shops, 75 manufacturing enterprises, at least 9,000 traditionaldwellings and considerable public infrastructure. A severe impact on the regional economy caused bythe loss of Sirajganj town and flooding of the road network serving the Jamuna Multi-Purpose Bridgewould be prevented. On an incremental area of about 100,000 ha, the risk of farmers changing to lower

8

yielding but more flood resistant crops would be avoided. Regression of the monsoon agriculturaleconomy to a state comparable with the physical environment existing in the 1950s, prior to the BRE'sconstruction, would be prevented.

25. Strengthening National Water Planning. Tens of millions of people are affected annually byflood damage, river erosion and periodic droughts. Most of these people are in the lowest nationalincome groupings, many of whom are landless which includes many female-headed households, andthus sound water planning Icading to good water projects would have direct impacts on povertyalleviation. Ovcr the longer term, demand for water in Bangladesh will increase rapidly as thepopulation is projected to increase by about 70 million to total about 190 million by the year 2025, andat current rates of urbanization, the urban population will increase six-fold to 120 million in the sameperiod. Sound water planning and management is critical for the continued and accelerated growth ofthe urban areas, agricultural sector and environmental management. It is particularly important todesign investments for agricultural growth in ways to avoid damage to fisheries which provide the mainsource of animal protein in the Bangladeshi diet. In particular, the poorest rely almost entirely onsubsistence fisheries for their protein. It will also become increasingly important to provide safe watersupplies and protection from erosion and flooding of essential infrastructure to urban and industrialareas which are required to secure a growing conimercial and industrial base. Efficient publicinvestments in water, flood management and sanitation services can be a significant factor in creatingthe necessary conditions for attracting both domestic and foreign investment. The proposed project willassist GOB to develop water strategies that focus clearly on facilitating and anticipating structuralchanges in the Bangladesh economy, institutionalize and operationalize lessons learned from FAPstudies, and through its integrated and participatory approach, avoid the harmful externalities and publicresistance associated with many earlier water sector projects.

26. Enhanced Institutional Capability. The capacity of the BWDB to supervise, operate andmaintain erosion protection projects would be significantly enhanced by on-the-job, local and overseastraining of GOB personnel who will service a specialized river bank protection operations andmaintenance unit. Support for the establishment of BWDB's Regional Accounting Centers and trainingof their staff will facilitate financial accountability, while technical assistance to upgrade BWDB'sinternal communications and management information systems will improve management andsupervision. WARPO's capacity to undertake multi-disciplinary planning will increased byappointment of non-engineering staff, through training, and the experience of producing a nationalwater plan assisted by international consultants under the peer review of an international Panel ofExperts.

27. Bcneficiarics. The direct beneficiaries of the project would be the estimated 2-3 million peopleliving in the potentially flood-affected area including about 125,500 people - of whom 32,000 aresquatters - who would be protected from severe property loss, impoverishment and physicaldisplacement as a result of bank erosion or chronic flooding. While this project is not specificallypoverty focused, experience in Bangladesh shows that lower income groups are the least able to recoverfrom losses caused by erosion or severe flooding and become permanently marginalized. In particular,small farmers who lose their holdings or are forced to sell land as a result of financial difficulties causedby flooding, never recover but migrate elsewhere and often become paupers and squatters (cf. Para.5).Conversely, although high income groups lose considerable assets by erosion and sustain majorfinancial damages as a result of BRE breaching, their ability to recover is relatively high and rapid. Byprotecting the built-up areas of Sirajganj and Sariakandi from erosion damage, the project would protectformal and non-formal wage-earners and entrepreneurs against temporary loss of employment andincome as a result of destruction of manufacturing establishments and commercial enterprises. It isestimated that about 25,000 and 4,300 wage-earners in Sirajganj and Sariakandi, respectively, would beaffected and that it would take these wage-earners several months to find alternative sources ofemployment and income. The prevention of an adverse change in cropping pattern induced by chronicflooding would maintain the employment of hired labor needed for the current labor-intensive cropping

9

pattern. In addition, about 43,000 person-years of employment would be generated by the project in thethree year construction period.

28. Economic nnalvses were carried out separately for the Sirajganj and Sariakandi-Mathuraparasubprojects, based on the benefit categories described in para. 22 for the most cost-effective solutions asdetermined from the studies of alternatives described in para. 11. The economic rate of return (ERR)for the river bank protection component of the project is 39%, and those for the Sirajganj andSariakandi/Mathurapara subprojects are 45% and 35%, respectively. At a 12% discount rate, the netpresent value (NPV) of project incremental benefits is US$62.2 million and those of Sirajganj andSariakandi-Mathurapara are US$21.6 million and US$40.6 million, respectively. Moreover, the fiscalimpact of the project is affordable as described in para. 15. No attempt was made to quantify thebenefits from the national water planning or BWDB institution building components.

29. Proiect Risks. The operation is subject to several risks:

a) Delayed Land Acquisition and Procurement could result in the loss of the 1996/1997construction season. Failure to complete the bank protection works at Sariakandi-Mathurarpara byJune 1998 would significantly increase the risk of erosion of the remaining land separating theBrahmaputra and Bangali rivers and greatly increase project costs. Delays beyond five years couldnullify the efficacy of the project as the Bangali may by then have become an establisheddistributary of the Brahmaputra-Jamuna river. The project preparation schedule has addressed theimplementation delay risk by advance procurement and the risk of delayed land acquisition throughinitiating work prior to Board presentation, an agreed timetable and the fair and generousprovisions of the Resettlement Plan.

b) Major Flood or Erosion Damage could cause either major structural damage or failure. Themorphology of the river was extensively monitored and erosion trends have been determined fromground surveys, analysis of maps since 1830 and satellite imagery since 1973. To minimize risk,these empirical data were used to construct several physical and mathematical models whichsimulated 25 years of local hydrology and river morphology in order to determine flood and scourdesign events. In consequence, the civil works have been designed to cope with historic erosionpatterns and floods 1 m above the 1 in 100 year flood level, and for scour depths 10 m greater thanthat likely to occur in 1 in 100 years. The materials to be used in the river revetment worksconform to the best international design practice and quality assurance monitoring will be a majorcomponent of construction management.

c) Construction Cost Overruns. Past experience has demonstrated that most BWDB projects havesuffered from severe cost ovcrruns due to (a) inappropriate design; (b) inexperienced contractors;(c) insufficient funding to complete projects on time; and (d) poor construction supervision. Thedesigns were undertaken by internationally recruited consultants and subject to international peerreview. To ensure appropriate construction standards and timely completion, prequalifiedinternational contractors have bid for the construction contracts under ICB conditions, and aninternationally recruited expatriate consultant firm will be appointed as "The Engineer."Insufficient local funding has not been a problem in recent years.

d) Risks of Inadequate Operation and Maintenance. The physical design and materials used in theriver bank protection works are new to Bangladesh and there is a risk that they would not beproperly maintained. Inadequate financing of O&M would reduce the life of the investmentsrequiring premature rehabilitation. O&M sustainability risks are mitigated by the recent history ofimproved funding (para. 15), and establishment and training of a project dedicated O&M Unit.GOB has agreed to hold annual consultations with IDA concerning the level of expendituresrequired for O&M of the works constructed.

10

e) Water Sector Reform and Planning. There is a risk that GOB might not continue with the watersector reform efforts due to waning of political commitment, nor give WARPO the independenceand support it will need to ensure objective planning. However, GOB approval of the BangladeshWater and Flood Management Sirategy as noted in paragraph 15 above, the Government desire fordonor support for subsequent water sector projects, and the strong views expressed internally by theNGOs and externally by the donors, are expected to reduce the risk substantially.

30. Sensitivity analyses were undertaken to determine the effects on the ERR of: (a) delays inproject benefits resulting from slow implementation; (b) increases in project costs resulting frominefficient management, higher than predicted rates of river bank erosion, delays over land acquisitionand procurement, or shortage of counterpart funds; and (c) additional protection works in the futurerequired by accelerated erosion upstream of the project. The aggregate project return is not madeunacceptably low by a one or two-year delay in obtaining benefits, but the ERR of the Sirajganj sub-component falls to 10% with a two-year delay. At a three-year delay, the aggregate return is 13%.These results underscore the necessity for a speedy project completion. The aggregate return falls to23% with a 25% cost increase and to 16% with a 50% increase. The effect of cost overruns atSirajganj is particularly strong, as a 50% increase would reduce the ERR to 10%. Increases in projectcost are most likcly to occur bccause the risk of a severe flood increases the longer the project isdelayed. Such floods could cause accelerated river bank erosion and scour which may require a deeperrevetment, or partial loss of incomplete civil works. Such delays could be caused by procurementproblems, difficulties over land acquisition, or poor project management, hence the emphasis given tothese subjects in project design. The cost for additional upstream erosion protection works, althoughthey are not included in the financing plan of the project, would reduce the estimated ERR for the entireproject to 32% and at Sirajganj to 40%. Additional works at Sariakandi-Mathurapara would reduce theestimated ERR to 28%.

31. Rccommendations. I am satisfied that the proposed development credit would comply withthe Articles of the Association and recommend that the Executive Directors approve it.

James D. WolfensohnPresident

Attachments: Schedule A-D

Washington, D.C.November 13, 1995

11

Schedule ABANGLADESH

RIVER BANK PROTECTION PROJECT

1. Estimated Project Costs (US$ Million)"

Local Foreign Total1. River Bank Protection and BWDB Institutional Development

Civil EngineeringMajor Civil Works 67.3 36.0 103.3Minor Civil Works 1.2 0.2 1.4Land Acquisition 0.8 0.8Resettlement 0.7 0.7BWDB Project Management 3.5 3.5

Works MaintenanceSurvey and O&M Equipment 3.1 2.2 5.3O&M Recurrent Costs 1.0 1.1 2.1BWDB Management 1.1 0.1 1.2

Technical AssistanceProject Support - Construction Supervision 1.3 3.4 4.7Project Support - O&M 0.4 1.1 1.5BWDB Institutional Support & Training 0.3 0.4 0.7Vehicles 0.3 0.2 0.5Equipment 0.6 0.4 1.0

2. National Water PlanningWARPO Management and Support

Personnel & operating costs 0.6 0.1 0.7Vehicles 0.6 0.4 1.0Equipment 0.3 0.2 0.5

Technical AssistanceInstitutional development 1.0 4.5 5.5Training 00 0.2 0.2

Total Baseline Costs 84.1 50.5 134.6Physical Contingencies 10.2 6.0 16.2Price Contingencies 3.1 2.1 5.2Total Project Costil 97.4 58.6 156.0a/ Including duties and taxes of US$18.5 million equivalent

2. Financing Plan:Local Foreign Total- .---(USS mnillion)

Government 34.1 - 34.1IDA 63.3 586 121.9

Total 97.4 58.6 156.0

12

Schedule BPage 1 of 2

BANGLADESH

RIVER BANK PROTECTION PROJECT

Method of Procurement(US$ Million)!'

ICB NCB Othersw TotalCivil Works:

Major Civil Works 120.2 120.2(99.8) (99.8)

Minor Civil Works 1.7 1.7(1.4) (1.4)

Land Acquisition 1.1 1.1

Resettlement 0.9 0.9

Operation and Maintenance 2.0 1.8 3.8(0.8) (0.8) (1.6)

Vehicles & Enuipment:Vehicles 1.6 1.6

(0.7) (0.7)Equipment 1.1 0.4 0.1 1.6

(0.6) (0.1) (0.7)Survey and O&M Equipment 6.2 6.2

(2.6) (2.6)Technical Assistance & Training:

Consultants 13.6 13.6(13.6) (13.6)

Overseas Training 0.2 0.2(0.2) (0.2)

GOB Proiect Manaeement: 5.1 5.1(1.3) (1.3)

Total 129.1 4.1 22.8 156.0(103.7) (2.3) (15.9) (121.9)

Figures in parenthesis are amounts to be financed by IDA.' Others includes national shopping and procurement of consultants' services under IDA

procedures, and GOB procedures for land acquisition and line agency support (includingforce account maintenance activities).

13

Schedule BPage 2 of 2

BANGLADESH

RIVER BANK PROTECTION PROJECT

Disbursement

Amount Percentage of ExpendituresCategory (USS million) to be Financed

Civil Works (excluding resettlement) 91.10 83%

Resettlement 0.45 50%

Vehicles and Equipment 3.55 100% of foreign expenditures, 100%of local expenditures (ex-factory cost)and 70% of local expenditures forother items procured locally.

Operation and Maintenance of Civil 1.70 85% through FY98Works (excluding BRE Realignment) 65% in FY99

and 45% thereafter.

Consultants for Civil Works; Operation 6.75 100%and Maintenance; Resettlement; BWDBInstitutional Strengthening; and Trainingfor BWDB Institutional Strengthening.

Consultants Services and Training for 6.00 100%National Water Planning

Unallocated 12.35

TOTAL 121.90

Estimated Disbursement of IDA Credit

IDA FY: 1996 1997 1998 1999 2000 2001Annual 25.2 41.9 33.2 18.6 2.6 0.4Cumulative 25.2 67.1 100.3 118.9 121.5 121.9

14

Schedule CPage 1 of 1

BANGLADESH

RIVER BANK PROTECTION PROJECT

Timetable of Key Processin! Events

(a) Time taken to prepare: 53 months (February 1990 - June 1995). v

(b) Prepared by: GOB assisted by a team of internationally recruitedconsultants, with assistance from IDA.

(c) First IDA mission: October 1990.

(d) Appraisal mission departure: July 1992.

(e) Negotiations: August 14-19, 1995.

(f) Planned Date of Effectiveness: January 15, 1996.

(g) List of relevant PCRs and PPARs:(i) Chandpur Irrigation Project, Cr. 340-BD,

PPAR Report No. 3436, dated April 30,1981;

(ii) Karnafuli Irrigation Project, Cr. 605-BD,and Barisal Irrigation Project, Cr. 542-BD,PPAR Report No. 6521, dated November 21,1986;

(iii) Muhuri Irrigation Project, Cr. 725-BD,PPAR Report No. 8654, dated May 16, 1990;and

(iv) Drainage and Flood Control Project, Cr.864-BD,PPAR Report No. 8805, dated June 29,1990.

a/. Project processing was delayed by about a year pending agreement on BWDB institutionalreform program and preparation of an acceptable resettlement action plan.

15

Schedule DPage 1 of 2

THE STATUS OF BANK GROUP OPERATIONS IN BANGLADESHA. STATEMENT OF BANK LOANS AND IDA CREDITS

(As of September 30. 1995)

Amount iUS$ miilhonj

'iscal F ess cancelHationsl

Credit No. Year Borrower Purpose Bank iDA Undisburseu

2 Loans and 147credits nave been fully disbursed 56.56 4239 32of which SECALs, SALs and Program Credits !a 1446.53

Cr. 1 827-BD 1987 Bangladesh Road Rehab. & Maintenance 102.00 18.117Cr 1870-BD 1988 Bangladesh SM Sc. ;CD & Irrigation II 81.50 8.41Cr. 1930-BD 1988 Bangladesh Urban Development ' 38.81 26.98Cr. 1940-BD 1988 Bangladesh Rural Roads and Market 62.30 19 99Cr. 2016-BC 1989 Bangladesh Power Distribution 116 Townsl 87.00 34.22Cr. 2099-BD 1990 Bangladesh BWDB System Rehab. 40.82 33 92Cr. 2118-BD 1990 Bangladesh General Education 146.09 60 43Cr. 2129-BD 1990 Bangladesh Rural Electrification IlIl 105.C0 66 5.Cr. 2146-BD 1990 Bangiadesn Rishenes l 44.60 40.50Cr. 2232-BD 1991 Bangladesh Inland 'i'/ater T(arnsoort 45.00 43 85Cr. 2233-BD 1991 Bangladesh Agric. Suoport Se-vices 35 Co 26 85Cr. 2246-BD 1991 Bangladesh National Minor Irrigation 32 74 34 02Cr. 2259-BC 1991 Bangladesh Populat:on & Health IV! 180.00 88.75Cr. 2263-BC 1991 Bangladesh LPG Distribution 67.20 73.39Cr. 2340-BD 1992 Bangladesh Private Sec. lndus:.nal Credit 25.50 24 12Cr. 2393-BC 1992 Bangladesh Technical Assistance 25 00 17 76Cr. 2397-BC 1992 Bangladesh Forest Resources Management 49.60 37 74Cr. 2469-BD 1993 Bangladesh Female Secondary School 68.00 63.09

* Cr. 2567-BD 1994 Bangladesh Jute Sector Adj. Crecit 247.00 209.14Cr. 2569-BD 1994 Bangladesh Jamuna Bridge 200.00 147 94

Cr. 2638-BD 1994 Bangladesh Second Road Rehab & Maint. 146.80 126 61Cr. 25672-BC 1995 Bangladesh Jute Sector Adj. Credit 3.20 3.44Cr. 2720-BD 1995 Bangladesh Gas Infrastructure 120.80 1 24.33Cr. 2735-BD 1995 Bangladesh Nutrition 59.80 59.31

Total 56.86 6253.58 .;b 1389.53 /bof which has been repaid 24 00 163 82

Total now held by Bank and IDA 32.86 6069.76

Amount sold 0.37of which repaid 0.37

Total Undisbursed 1389.53

/a Approved during or after FY80

/b The principal amounts of IDA credits are shown in US Dollar equivalent at date of negotiations, as shown in thePresident's Report. Undisbursed amounts shown in US Collar equivalent are valued at the exchange rateapplicable on the date of this statement. In some cases, therefore, the undisbursed balance indicatesa dollar amount greater than the original principal credit amount expressed in dollars.

* SAL. SECAL or Program Loan

16

Schedule DPage 2 of 2

THE STATUS OF BANK GROUP OPERATIONS IN BANGLADESH.B. STATEMENT OF IFC INVESTMENTS

(As of September 30, 1 995)

Amount ($millions)

Date Borrower Purpose Loan Equity Total

1969 Karnaphuli Paper Mills Timber, Pulp and Paper 3.12 0.37 3.491 979 Highspeed Shipbuilding Industrial Equipment 1 .20 0.36 1.561982 Industrial Promotion Development Financing 1.05 1 .051985 Industrial Development Capital Markets 3.02 0.15 3.171985i86 Bata Shoe Company General Manufacturing 3.04 0.51 3.551992 Dynamic Textile Textiles 2. 50 0 _ _ 2.50

Total Gross Commitments 1 2.98 2.44 15.32

Less Cancellations, Termination ExchangesAdjustments, Prepayments and SalesWriteoffs and Sales 10.33 0.99 11.32

Total Commitments now held by IFC 2.55 1.45 4.00

Total Undisbursed (including participants' portion) 0.00

K.Pitman/Lilac ThomasMAkeithpit\rbppmop2. docOctober 28, 1995 01:24 PM

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