Document of

The World Bank

FOR OFFICIAL USE ONLYReport No: 19916

IMPLEMENTATION COMPLETION REPORT(Intensive Learning Model (ILM) of ICR)

ONA

TRUST FUN) CREDIT

IN THE AMOUNT OF US$20 MILLION

TO THE WEST BANK AND GAZA

FOR THE SECOND EMERGENCY REHABILITATION PROJECT(ERP-2)

(Trust Fund Credit No. 26058)

PROJECT ID: P045576

L/C NUMBER: 26053; 26058

December 22, 1999

Infrastructure Development GroupMiddle East and North Africa Region

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

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CURRENCY EQUIVALENTS

(Exchange Rate Effective October 15, 1999)

Currency Unit = NIS

New Israeli Sheqalim "NIS" 1 = US$ 0.2342US$ 1 = New Israeli Sheqalim "NIS" 4.2693

FISCAL YEARJanuary 1 - December 31

ABBREVIATIONS AND ACRONYMS

AHLC Ad Hoc Liaison CommnitteeB2000 Bethlehem 2000 Project AuthorityCDP Community Development ProjectDOP Declaration Of PrinciplesEAP Emergency Assistance ProgramEEGP Emergency Employment Generation ProgramEHRP Education and Health Rehabilitation ProjectERP Emergency Rehabilitation ProjectFY Financial YearGNP Gross National ProductICR Implementation Completion ReportIDA International Development AssociationIMF Intemational Monetary FundMIDP Municipal Infrastructure Development ProjectOT Occupied TerritoriesPA Palestinian AuthorityPECDAR Palestinian Economic Council for Development and ReconstructionPCD Project Concept DocumentPLO Palestine Liberation OrganizationSAR Staff Appraisal ReportTAP Technical Assistance ProgramTFGWB Trust Fund for Gaza and West BankUNRWA United Nations Relief and Works AgencyUNSCO United Nations Special Coordinator in the Occupied TerritoriesWBG West Bank and Gaza

Vice President: Kemal DervisCountry Manager/Director: Joseph Saba

Sector Manager/Director: Jean-Claude VilliardTask Team Leader: Kingsley Robotham

FOR OFFICIAL USE ONLY

WEST BANK AND GAZA

EMERGENCY REHABILITATION PROJECT No. 2(Trust Fund Credit No. 26058)

CONTENTS

Page No1. Project Data 12. Principal Performance Ratings 13. Assessment of Development Objective and Design, and of Quality at Entry 14. Achievement of Objective and Outputs 55. Major Factors Affecting Implementation and Outcome 116. Sustainability 147. Bank and Borrower Performnance 158. Lessons Leamed 159. Partner Comments 1610. Additional Information 17Annex 1. Key Performance Indicators/Log Frame Matrix 18Annex 2. Project Costs and Financing 20Annex 3. Economic Costs and Benefits 22Annex 4. Bank Inputs 23Annex 5. Ratings for Achievement of Objectives/Outputs of Components 24Annex 6. Ratings of Bank and Borrower Performance 25Annex 7. List of Supporting Documents 26Annex 8. Beneficiary Survey Results 27Annex 9. Stakeholder Workshop Results 30

MAP IBRD 27791

(This report is accompanied by a short video highlighting the sub-projects and the comments ofbeneficiaries.)

This document has a restricted distribution and may be used by recipients only in theperformance of their official duties. Its contents may not otherwise be disclosed withoutWorld Bank authorization.

Project ID: P045576 Project Name: EMERGENCY REHAB. IITeam Leader: Kingsley 0. Robotham TL Unlit: MNSIDICR Tvpe: Intensive Learning Model (ILM) of ICR Report Date: December 29, 1999

1. Project Data

Name: EMERGENCY REHAB. II L/C Number: 26053; 26058Countly/Department: WEST BANK AND GAZA Region: Middle East and North

Africa RegionSector/subsector: MY - Other Non-sector Specific

KEY DATESOriginal Revised/Actual

PCD: Effective: 05/15/96 05/30/96Appraisal: MTR: 02/15/97Approval: 04/25/96 Closing: 12/31/97 06/30/99

Borrower/Imiplementing Agency: /Palestinian Economic Council for Development and ReconstructionOther Partners:

STAFF Current At AppraisalVice President: Kemal Dervis Kemal DervisCountry Manager: Joseph P. Saba Odin KnudsenSector Mlanager: Jean-Claude Villiard Alastair McKechnieTeam Leader at ICR: Kingsley Robotham Ali KhadrICR Primaiy Author: Kingsley 0. Robotham

2. Principal Performance Ratings

(HS=Highly Satisfactory, S=Satisfactory, U=Unsatisfactory, HL=Highly Likely, L=Likely, UN=Unlikely, HUN=HighlyUnlikely, HU=Highly Unsatisfactory, H=High, SU=Substantial, M=Modest, N=Negligible)

Outcome: S

Sustainability: L

Institutional Development MImpact:

Bank Performance: S

Borrower Perfbrmance: S

QAG (if available) ICRQuality at Entry:

Project at Risk at Any Time: No

3. Assessment of Development Objective and Design, and of Quality at Entry

3.1 Original Objective:

Introduction: This Second Emergency Rehabilitation Project (ERP-2) was prepared in early 1996 inresponse to a growing employment crisis in the West Bank and Gaza (WBG). The latter resulted from thenear total closure of the borders with Israel. ERP-2 was a part of the Bank's contribution to a wider donoreffort to provide emergency employment relief to WBG. One of its objectives was to create employment

quickly, using the framework of the existing and well established First Emergency Rehabilitation Project

(ERP- 1). Employment targets were only partially achieved. The reasons are various, but the mostsignificant are that:

* The "crisis" abated shortly after project effectiveness;

* The Bank and donors successfully developed alternative mechanisms for addressing the difficultemployment issue on a more sustained basis.

Combined, these factors undermined the employment generation rational. In response, the focus of ERP-2was modified. It became, in effect, an extension of the successful ERP- 1. Judged on this basis. ERP-2 wasalso a considerable success.

The above highlights some of the problems of policy making in a highly unstable environment -- an issue towhich is discussed later in this review.

Background: Following the signing of the historic September 1993 Declaration of Principles (DOP),between Israel and the Palestine Liberation Organization (PLO), the Bank was asked to take the lead indeveloping a program of support. It responded by developing the US$1.2 billion Emergency AssistanceProgram for Occupied Territories (EAP: December 1993) and the supporting US$20 million TechnicalAssistance Program for the Occupied Territories (TAP). In further support of the EAP, the Bank itselfcontributed US$50 million from its net income to establish a special Trust Fund for Gaza and the WestBank (TFGWB). The Emergency Rehabilitation Project (ERP-1) was the first Bank project to be funded

3/

from TFGWB, and thus was the first in the Bank's own program of assistance to the Palestinian people.

ERP-1 aimed "to help alleviate the current crisis by delivering widespread and tangible benefits to broadsectors of the Palestinian population as quickly, equitably and effectively as possible" (SAR - p.4, para12). It planned to do this by:

- removing the most critical infrastructural bottlenecks;

- improving essential facilities and services;

* creating productive employment;

* building capacity; and

* providing institutional support in the area of project and program management.

1/ ERP-I was successfully completed in Dec. 1998 (see ICR dated June 25, 1999).

2/ Our earlier projects refer to "the Occupied Territories (OT) ". The territorial designation was later changed to West Bankand Gaza or "WBG". At the time of appraisal, WBG was not (and still is not) a member country of the Bank and hence theBank could not lend to it directly. The TFGWB was established as a vehicle for lending.

3/ The current total stands at 1 Zprojects at an estimated cost of about US$282 million equivalent.

In March 1996, the period during which ERP-2 was being prepared, WBG was in a severe crisis. Tensionwas high; borders with Israel were closed; movement of people and goods were severely restricted; foodwas becoming scarce in Gaza; unemployment was escalating; and the Palestinian economy washemorrhaging. Direct losses in external labor income were running at an estimated $1.5m per work-day.The following highlights the situation at the time:

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The Palestinian economy's present state of crisis calls for urgent help from the donor community. Inresponse to four suicide bombings within Israel, which claimed more than 50 lives in late Februaryand early March, the Israeli authorities have imposed one of the tightest border closures in recenthistory on the West Bank and Gaza Strip (WBGS), with severe consequences for the Territories'economy. To address the growing crisis, the donor community has already taken steps to acceleratethe flow of assistance to the Palestinians by, inter alia: restructuring their programs to ensurespeedier delivery of tangible benefits to the worst-affected Palestinians, notably through rapidemployment creation projects, and, in some cases, pledging prompt new assistance aimedspecifically at relieving present hardships.

[SAR, ERP-2, April 18, 1996 , p.l]and:

In short, an economic depression on a scale unseen since the Peace Process began is in the making.Unemployment (broadly defined to include underemployment), already a record-high 51 percent inthe Gaza Strip and 33 percent in the West Bank in late 1995, has by all accounts soared since theclosure began. The closure's impact on the poor and vulnerable cannot yet be reliably assessed, butan abundance of UTNRWA and other reports, notably on household conditions in the refugee camps,point to serious distress for many whose savings have been depleted by the impact of previousclosures. While any estimates of full-year losses in income are still highly tentative at this stage, arecent IMF mission has projected a 17 percent decline in real GNP in 1996, on the assumption thatthe closure on goods is gradually lifted by the summer, but that restrictions on labor remainsignificant for the rest of the year. This compares with a pre-closure forecast of 5-6 percent growthin 1996 real GNP over its 1995 level; in total, therefore, almost a quarter of this year's projectedGNP will have been lost.

[SAR, ERP-2, April 18, 1996, p 2&3]

Of course, crisis was not new in WBG. It had been in a very deep and pervasive crises for a considerabletime. The situation in early 1996 was particularly urgent, however. The peace process, itself, was at risk.

ERP-2's Objectives: ERP-2's objectives were similar to ERP-l's, (see above) but even more urgent. Inaddition to its main objective of removing critical infrastructural bottlenecks and improving essentialfacilities and services, ERP-2 also aimed to help respond quickly and directly to the crisis. It sought, interalia, to relieve the severe unemployment pressure by generating:

* 77,000 person days of employment in the first 3-4 months;

* 225,000 person days of employment in the first 10 months;

* 60% of the above jobs in Gaza.

This was to be accomplished by quickly implementing some $20m of high priority infrastructuresub-projects.

3.2 Revised Objective:

ERP's core objectives were not changed. However, as noted above, its employment generation expectations

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were altered soon after project effectiveness. The reasons for the change in focus with respect toemployment has already been indicated and will be further discussed in Section 4.

3.3 Original Components:

Rating Component Cost ($m)

S Works 18.44S Goods 0.36S Consultant Services 0.60S Incr. Op. Expenses 0.60

3.3 Revised Components:

The basic components were not revised though some programmatic shifts did occur. The original Workscomponent was modified during implementation by the introduction of $3.47m in specifically designedlabor intensive projects, including $2.Om in micro-projects. The latter were included to help extend thegeographic reach of ERP-2, as well as to increase its labor intensiveness.The Works component was alsoexpanded by $3.49m equivalent as a result of the receipt of the Italian cofinancing midway through projectimplementation. These funds went mainly to water and sanitation projects in Gaza.

The revised components and rating are as follows:

Ratin_ Component Revised Cost ($m)

S Works 21.38S Goods 0.10S Consultant Services 1.07S Incr. Op. Expenses 0.94

3.4 Quality at Entry:

The project was prepared in a great hurry and the normal appraisal and appraisal documentation werewaived. Only a "Memorandum of the President" was prepared. This procedure was justified at the time by:(1) the urgency of the situation; and (2) the fact that the project vehicle was the on-going and successfulERP- 1. The justification seems reasonable in the circumstances. Never-the-less, a number of issues arise asfollows:

* was the project adequately conceived (i.e., was it an appropriate response to the problem)?

* was the project adequately prepared (e.g., were the employment and implementation targets andarrangements realistic)?

These issues are also addressed in Section 4.

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4. Achievement of Objective and Outputs

4.1 Outcoome/achievement of objective:

This report concludes that the project's core objectives were fully achieved. The basis for this conclusion isset out below. In proceeding, achievement with respect to employment generation is first examined,together with the context within which the achievement took place. The broader objectives are thendiscussed and an overall judgment is given.

Employment Targets and Their Achievement: This is summarized in the table below:

Indicator Unit Target Actual % Achievement

Employment Generation

First 3-4 months Person days 77,000 27,000 35%

First 10 months Person days 225,000 103,000 46%

Total NA NA 188,000 NA

Distribution of Employment

Gaza (First 3-4 month) % 60% 24% 40%

Gaza (First 10 month) % 60% 48% 80%

Gaza (Total) % 60% 49% 82%Note: Emnployment figures include on-site employment and employment directly related to local materials supply.

It can be seen from the above that the employment target for the first 3-4 and the first 10 months were only35% and 46% achieved, respectively. The distributional target with respect to Gaza was largely achieved,though not during the supposedly crucial first 3-4 months. On the basis of the above it would bereasonable to conclude that the project had failed to meet the employment generation target. This would besimplistic however. The issues are examined more closely below.

Closure and Employment: Closures had been afact of life in WBG since the fall of 1994 andbecame particularly severe 1995. In this year the 2_-_border with Gaza was closed for some 102 days, or 18 --.-about one third of the year. The severity of closure 14lvaried considerably throughout the year, with peaks 12occurring in February and October when the c 10.borders were closed for more than one half of themonth. Only two months, June and December, were"closure free" (see Fig. 1).2

1/ ThedatainthissectionarefromtheMinistryofLaborandUNSCO. 4 0 Z a

Fig. 1

-5 -

Closures were reinstated in January 1996, and Go%uein 196

continued almost unabated till June 1996 (see Fig.2). It is this series of closures and the resultingnegative impact on employment which gave rise to 3_0_

ERP-2 as a part of the Bank's contribution to awider donor relief effort. It can be seen from Fig.3that labor flows to Israel drop precipitously from rjust over 40,000 per day in January 1996 to 15virtually zero in March. We do not have good data 10on the impact on employment and earnings duringthis period, but we do know that it was severelynegative. Also, we know from experience with 0 s aERP-1 that the disruption of economic activity was 0 z

considerable, and that even after closure has been Fig. 2lifted it takes sometime before things return to"normal". Given WVBG dependence on employment F.Ii..tdL.br Fw.tt.AD 1-H C.0-1kdA .. hr, F.-itH.Id-

in Israel, a crisis quickly arose. The existence ofthis crisis is amply documented in the ERP-2Memorandum and other Bank papers (see, for 1Iexample, "West Bank and Gaza - The World Bank'sResponse to the Current Economic Crisis: AnInterim Strategy", dated April 23, 1996).

Fig. 3

The situation does not begin to improve significantly until June 1996 when the flow of workers to Israelrises to just over 15,000 per day (one third of the January figure), peaks at just over 30,000 in August anddeclines again to just over 10,000 in October. From October it again begins to climb, but it is not untilJanuary 1997 that the January 1996 figure is once again attained and slightly exceeded. The labor flowpeaks in January and February 1997 and thereafter begins to decline.

To summarize, the "crisis" which gave rise to ERP-2 began to develop at least as far back as July 1995,peaked in March 1996 and began to abate by June 1996 -- less than one month after ERP-2's effectiveness.

Bank and Donor Response: The Bank and donors began formulating responses as far back as November1994. This followed a series of closures in the fall of 1994 which exacerbated an already difficultemployment situation, particularly in Gaza where some 33% of the population already lived in poverty.The issue of job creation first came up at the Ad Hoc Liaison committee (AHLC) meeting in November1994. At this meeting the First Emergency Employment Generation Program (EEGP) was created as jointeffort by PECDAR (The main Palestinian Implementing Agency), the UN Agencies and the Bank. It aimedto finance small-scale infrastructural activities, and was supported by the Bank and donors through theHolst Fund. This program ran with some success during 1995 though its often "make-work" components(street sweeping, wall painting, etc.) did not find favor in all quarters.2/ See "Emergency Employment Program: An overview of on-going activities, " United Nations, Office of the Special Coordinator for the OccupiedTerritories, Gaza, May 10, 1996.

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The closures in the first few months of 1996 placed the employment issue squarely on the agenda onceagain. On March 28, 1996, US secretary of State Warren Christopher announced the main elements of anEmergency Employment Plan. This met with general agreement, and the issue became the main item at theBrussels AHLC meeting on April 12, 1996. At this meeting the Bank announced in its report that itintended to begin creating some 50,000 short term jobs by May 1996 at a cost of $73m, of which $23mwould be through the Holst Fund (i.e., through restructuring EEGP). The original allocation of $4m to theHolst Fund for the clean up of Gaza was to be expanded to $10m. It is in this context the ERP-2 wasconceived, as part of the Bank's contribution. Not only would ERP-2 contribute to relieving theemployment situation, it would continue the important work of ERP-1 and help maintain buoyancy in theconstruction industry at a time of economic downturn. The revived EEGP was strongly supported by theBank and donors, and was successfully implemented. Its expansion and consolidation ran parallel to thedevelopment of ERP-2. In this context it should be noted that in early 1996 the Bank was also preparing anew generation of urban projects, beginning with the Municipal Infrastructure Development Project One(MIDP- 1, FY '96). This project continued the work began under ERP- 1, but also aimed to begin addressingsome of the more deeply entrenched institutional and financial issues in the local government sector.MIDP-1 was presented to the Board in May 1996 and became effective in July 1996.

Beneficiary Response to Small Scale Rural Sub-projects: Quite early during implementation of the newEEGP and of ERP-2, Bank staff in WBG realized that the small scale rural infrastructure component ofboth projects filled a very important void. Not only did it help relieve employment in many towns andvillages in WBG, it also met with considerable enthusiasm, particularly from the villages. Many of thesevillages, which are a core feature of social and economic life on the West Bank, were receiving attentionand investment literally for the first time in decades. So much did they appreciate this un-accustomedattention that they began volunteering contributions in money and kind to expanding the scope of theprojects serving their communities. It was further realized that the small scale interventions in the villageswere paying disproportionate dividends in opening up access, reducing social hardship, improving thequality of life and sparking economic activity -- from increasing private transportation activity to fosteringnew business ventures.

Drawing on the above lessons, in October 1996 Bank staff in WBG began developing the very successfulfirst Community Development Project (CDP-1). This was presented to the Board in March 1997 andbecame effective in May 1997. Thus, by the fall of 1996 the Bank had four separate vehicles throughwhich to address the employment issue in WBG -- three operational (EEGP, ERP-2 and MIDP- 1) and oneor the drawing board (CDP-1). This was so at a time when the "crisis" had eased considerably, althoughclosures and unemployment had by no means ceased to exist (see Figs. 2 & 3). It is in the above contextthat changes in ERP-2's employment generation targets begin to occur.

Other Contributory Factors: Three other factors are important in explaining the early change in trajectoryof ERP-2 with respect to employment generation. First, the ERP-1 type sub-projects which formed theoriginal basis for developing ERP-2 were not particularly labor intensive, but none of the professionals(Bank, Govemment or Consultants) wanted to engage in "make-work" sub-projects or to build up a largecadre of public sector workers. Private contractors were also reluctant to adopt specifically labor intensivetechniques while keeping their expensive equipment idle. Some time was thus lost in sub-project redesignand dialogue with consultants and contractors in an attempt to raise the labor content of conventionalinfrastructure projects. The second factor is that in March through August 1996 PECDAR was undergoingsignificant internal change involving the departure of many of the senior managers, and the appointment ofa new managing director and a new director for projects in Gaza. These changes reduced theresponsiveness of the organization, though not for very long. Even a short hiatus, however, can have a

- 7 -

large impact on a crisis response program. The third factor is that while closure had been lifted and theemployment crisis had eased, things did not return to "normal" in Gaza. In particular, significantrestrictions were placed by Israeli Authorities on the transport of critical building materials (cement, steel,aggregate, asphalt, etc.) from Israel, and through Israel into Gaza. This naturally had a negative impact onthe ability of the construction industry to respond quickly to the challenge of employment generation.

The main outputs and achievements of ERP-2 are discussed below.

4.2 Outputs by components:

These are presented in the table below, based mainly on the ERP-1 objectives.

Obiective Target (Indicator) Achievement

i) Water and Sanitation * Water (km): NA * 89.5km of networks constructedRehabilitation and improvement 89.5km if nezok consrceof networks and systems 83.2km in Gaza, 6.3km in WB.

* Sewage (km): NA * 22.5km of networks constructed, 16.5 inGaza and 6 in WB.

* Storm drainage (km): NA * 3km constructed, lin Gaza and 2 in WB.* Projects (no): Gaza: 7 West Bank: 0 * 6 in Gaza and 3 in WB.

Beneficiaries (no): NA * 219,700 in total, 179,000 in Gaza and40,700 in WB (6 communities in Gazaand 4 in WB).

Rehabilitation and Improvement : Rds (km): NA * 121.5km constructed, 8.5 in Gaza and 113of Networks i WB.

- Projects (no): Gaza: 6 West Bank: 27 * 5 in Gaza and IO in WB.- Beneficiaries (no): NA * 325,000 in total, 57,000 in Gaza and

268,000 in WB (6 communities in Gazaand 30 in WB).

iii) Mirco-ProjectsRehabilitafion of Networks, * Roads (km): NA * 2.6km in GazaSystems and Facilities

* Sidewalks (km): NA * 3.6km in Gaza* Water(km):NA * 12.4kminGaza

S Sewage (kim): NA * 3.5km in Gaza* Storm drainage (kin): NA * 1.3km in Gazaa Classrooms (no): NA * 65 in WB (serving 2,300 students/yr. 60%

of which are girls)* Clinics (no): NA * 3 in WB* Public Buildings (no): NA * I in Gaza and 2 in WB* Projects (no): Gaza: NA * 14 in Gaza and 30 in VWB

West Bank: NA* Beneficiaries (no & no of communities): * Total of 191,000 persons in 40

communities in WBG (11 communities inGaza and 29 in WB).

iv) EmploymentIncrease in employment * Total, first 3-4 months (Person-days): * 27,000 Person-daysopportunities 77,000

* Gaza, first 3-4 months (Person-days): * 6,500 Person-days46,200

* First 10 months (Person-days): 225,000 * 103,000 Person-days

* Total (Person-days): NA * 188,000 Person-days

v) Projects Implemented * Projects (Total no): 40 * 68 Projects

It will be seen from the table that 89km of water networks were improved or rehabilitated, 83 in Gaza and6km in the West Bank. Also, 2 reservoirs were constructed, one in each region. With respect to sewage

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networks, 16.5km were constructed in Gaza and 6km in the West Bank. With respect to storm drainage,some 3km were constructed, most of it in Gaza. With respect to roads, 121.5km were constructed, ofwhich 113km were in the West Bank. With respect to micro-projects, several km of water, roads andsewage networks and sidewalks were constructed, mostly in Gaza; and 65 classrooms and 3 clinics wereconstructed in the West Bank. In all, some 800,000 persons in some 86 communities benefited. It is worthnoting here that micro-projects (costing between $50 - $100,000) were not part of the original projectdesign. They were introduced to increase the job creation potential of ERP-2 as well as to respond to the"demand" noted above with respect to villages and poor communities. This component proved highlyeffective, generating 25% of the jobs and enabling ERP-2 to considerably extend its reach. Finally, itshould be noted that 68 sub-projects were successfully implemented compared to the 40 targeted at projectpreparation.

3/ Apart from employment generation, few quantitative targets were set.4/ The employrnent data have already been discussed above.

Other Outputs and Benefits: But, like ERP- 1, the numbers do not tell the full story. As noted above, it isthough the implementation of the village access road sub-projects in ERP-2 that it was first realized thatvillagers on the West Bank were willing to volunteer to contribute money and time to expanding the scopeof projects which served their long neglected needs. This, plus the EEGP experience, led directly to thecreation of CDP-1. The other impacts, also already noted, were the increase in private economic activitiesin the villages; improvements in the quality of life due to the development of higher quality and morefrequent transportation services and increased accessibility; and the reduction in social hardship. Forexample, reviews with beneficiaries revealed that the incidence of lost pregnancies among women decreasedas a result of better roads and transport services as well as improved access to health care facilities in thetowns and cities. Also, the improvements facilitated school attendance by girls who previously had to stayclose to home. Further, increased accessibility facilitated the travel of women teachers to the outlyingvillages, strengthening the education system for girls in those villages. The above should be added the factthat about 60% of the classrooms constructed through the micro-projects on the West Bank were for girls.Thus, the gender and children benefits were considerable, and were certainly appreciated by the women inthe villages.5' The economic benefits referred to above were also considerable and are not adequatelyreflected in the data. Apart from the expansion of transport activity, the increased accessibility facilitatedthe development of many new small business activities in the villages, creating employment and increasing

6/

wealth.5/ Evidence of the above has been clearly captured on the film which accompanies this ICR6/ These increased activities are also documented in the video which accompanies this document.

A Balance Sheet: To summarize, then, ERP-2's objectives were achieved but its initial employmentgeneration focus was altered very early in its life. The change in focus is explained by a number of factors:

1. An abatement of the crisis which undermined the original project rational;

2. The parallel development by the Bank of alternative, competing and seemingly more appropriatemechanisms to respond to the employment issue;

3. The "discovery" of the potential of the small scale rural infrastructure sub-projects;

4. The fact that the original set of ERP-2 sub-projects were not particularly labor intensive, andrequired some adaptation to make them more so -- resulting in loss of time and relevance;

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5. Organizational changes in PECDAR which slowed initial responsiveness; and

6. Changes in the responsiveness of the construction industry occasioned by changes in the buildingmaterial supply regime following the lifting of closure.

As a result of the above, within six months of its effectiveness ERP-2 became, in effect, simply anextension of ERP- 1-- a very successful extension.

Was the change in focus wise? It could be argued that the situational changes described above could, andshould have been foreseen by the project preparation team. To some extent this is true, but in early 1996only a very bold person would claim to have been able to anticipate the future course of events in WBG. Itcould also be argued that the original project design could not have achieved the ambitious employmentgeneration goals. To some extent this is also true. But it should be borne in mind that March 1996 was atime of crisis, the very nature of which requires action but precludes prior detailed analysis. Finally, fewwould argue that the Bank should have stuck with the original employment targets when the situation hadin fact changed.

The Positive Side: It should not be forgotten that the operating environment in WBG is very unstable. Thisinstability was at a peak in 1996. In such an environment it is critical that the Bank be able to respondquickly. It cannot afford exhaustive prior analysis and deliberations. It must be prepared to act quickly,"learn" quickly, and to make corrective changes as it learns. Also, it must implement effectively despiteinstability. On the basis of these criteria and other implementation factors mentioned below anddiscussed in Section 5.1, the Bank's performance in WBG, and on ERP-2, must be adjudged a significantsuccess.

Now to return to the questions posed in Section 3.4, Quality At Entry:

1. Was the Project Adequately Conceived? The answer must be "yes"! Given the urgency of thesituation the project preparation team responded using the "tools" and "structures" that were at hand.These turned out to be inadequate for the job so new tools and structures were devised (CDP- 1). Theteam learned quickly from experience and the problem was addressed -- though through differentchannels;

2. Was the Project Adequately Prepared? The answer is a "qualified yes"! It seems unlikely that theemployment targets could have been achieved without significantly modifying the original sub-projectsset to make it more labor intensive. There is also no way the targets could have been met within theoriginally stated time frame given the turbulence during the period. Never-the-less, as will be shown inSection 5, ERP-2's performance in the first year one half far outstripped that of ERP-1. The projectwas 80% disbursed in one and one quarter years, a considerable achievement.

4.3 Net Present Value/Economic rate of return:

Not Assessed. This was an emergency project and calculations of NPV and ERR are not required.

4.4 Financial rate of return:

Not applicable.

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4.5 Inistitutional development impact:

The project did not include institutional objectives save for effective project management. It was relatively wellmanaged by PECDAR so thus the objective was fully achieved. While not an important objective of ERP-2, thecapacity building impact of ERP-2 was considerable. The achievements with respect to the institutionalization ofPECDAR and the strengthening of the consulting and contracting industry are well documented in the ERP- 1 ICR

7/

and are thus not repeated-here. In almost every respect ERP-2 continued and deepened the achievement ofERP-1.

7/ See ERP-1 ICR dated June 25, 1999, pp. 5 & 7.

5. Major Factors Affecting Implementation and Outcome

5.1 Factors outside the control of government or implementing agency:

Most of the issues affecting implementation and outcomes have already been discussed above. The onlysignificant remaining issue is that of implementation delay. The most critical factor outside of Governmentand implementing agency control was, of course, closure. Here the implementing agency and the PA hadno leverage whatsoever.

During the originally planned implementation period (June '96 - December '97) there were 129 days ofclosure. At the end of calendar 1997, the originally scheduled closing date, the project was 90% committedand 80% disbursed. The project was thus about 20% behind schedule. The contribution of closure to thedelay during this period is difficult to determine but was probably about 20%. This can be compared withERP-1 which experienced 13 closures totaling some 150 days over a 4 year period, and which contributedsome 30-40% to ERP-l's time delay. Fig. 4 indicates the pattern of disbursements for ERP-2, and Fig. 5compares these patterns for ERP-1 & ERP-2. In reviewing the above it should be borne in mind thatItalian cofinancing became effective in July 1997, two thirds of the way through the plannedimplementation period. The additional time needed to prepare and implement the new Italian sub-projectsmade it necessary to extend ERP-2's closing date twice, first from December 1997 to December 1998, andthen to June 30, 1999 -- doubling the implementation period.

ERP - 2 Disbursement (Planned VS Actual)

4O 0 r__v --

1 4 ~ - ... ..__. _ _ ._ _.0-

4 0 0 0 0 0 0 0 0 0 0 0 0 0

o a a a a a a a a a a a aCQuarter

- -- - IDA Planned % -.- IDA Actual %l l - -- Italy Actual % --- ERP-2 Total Actual %

Fig. 4

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Corm parative D isbu rsem ent % ( ERP 2 vs ER P- I)

120~~~~~~~~~~~~~~~~~ r-; 0 8>

8 0 -

2 0 - - ---- -....- --*

0

Despite the fact that ERP-2 only achieved 80% of its disbursement target at the end of December 1997, thisperformance is highly commendable -- even spectacular -- in the circumstances. Few Bank projects canclaim to have disbursed 80% of their funds in 1.5 years the planned ERP-2 disbursement period. Thisperformance is also much better than the very successful ERsP-e (see Fig. 5) and demonstrates that, despiteall the turbulence, implementation during the planned period was well handled. The IDA component wasalmost fully disbursed by June 1998, i.e., in 2 years -- a creditable performance by any standard, and veryfavorable when compared to ERP-1. After June 1997, the disbursement curve begins to flattenconsiderably. The reasons are twofold. First is the normal "S" curve behavior of construction projects inwhich disbursements always tends to flatten out towards the end of the project life. Second, is the inceptionof the new Italian component noted above.1/ It may not be entirely fair to compare ERP-2 with ERP-1 in this way, however. The latter took the brunt of the closure as well as experiencedmost of the "learning" that occurred with initial project implementation in WBG. ERP-2 obviously benefited considerably from this experience.2/ The Italian component is still not closed due to a number of institutional problems encountered towards the end of the planned June '99 completion

period. It is proposed to keep this component open until March 2000 in order to resolve these problems. This issue is discussed in Section 5.3.

5.2 Factors generally subject to government control:

This is a very difficult call to make in such an unstable environment. Perhaps the one area that may havebeen subject to PA control was the delay due to the management transition period at PECDAR in mid-1996(see discussion in Section 4). This may have contributed 10% or so to the overall project delay, but this isvery difficult to assess.

5.3 Factors generally subject to implementing agency control:

The build up of PECDAR's capacity (discussed at some length in the ERP-1 ICR and hence not repeatedhere) had a positive impact on project implementation. Project preparation, bidding and financialmanagement and monitoring were generally very well handled. On the other hand, PECDAR's inability toanticipate some of the issues related to the implementation of the Italian component (admittedlycomplicated non-technical -- see discussion below) contributed somewhat to delays after December 1998.

Cost changes during the construction period were relatively insignificant. Most sub-projects werecompleted within or relatively close to budget, and the overall project was completed within budget. Fig. 6tells a somewhat different story with respect to time, however. While 70% of the projects were completedon time -- a creditable achievement -- the time delay was still significant. The average delay relative to

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planned construction time was 23%. It was much higher in Gaza (60%), and relatively negligible on theWest Bank (5%). The water and sanitation sector experienced the greatest average time delay of 67% (87%West Bank and 64% Gaza). The roads sector was next, experiencing an average time delay of 26% (68%Gaza and 10% West Bank). The micro-projects in the West Bank experienced the least delay (almost zero).About 23% of sub-projects (mainly in Gaza) experienced extreme delay (greater than 50%), and 7% ofsub-projects (again mainly in Gaza) experienced moderate delays (20-50%).

ER P- 2 Project Delays(%)

8

~~~~~~- ° N 0

Delay (%)

| fGaza *Gaza Micro Projects ii*Gaza Italian 1OW est Bank *West Bank Micra Projects

Fig 6

Delay Factors: A review of the delay factors in Gaza, where (on average) most of the delay occurred, leads to thefollowing broad conclusions:

Delay Factors °/ of Delay

1. Building permits & land acquisition 65%2. Building materials shortages due to closure 20%3. Inadequate design 10%4. Contractor inexperience (mainly micro-projects) 5%Total 100%

It can be seen from the above that problems with land acquisition and building permits accounted far abouttwo thirds of the delay on the Gaza projects. This may be compared with closures which contributed onlyabout one fifth.

To summarize, cost management was very effective and time management was relatively good. The mainproblem area in terms of time delay was in Gaza. Here issues related to land acquisition and buildingpermits were most important three times as important as closures in contributing to time delay. This isclearly an area within PECDAR's control which needs improvement. In sectoral terms, the water andsanitation sector was the most problematic in terms of time delay -- with the West Bank being moreproblematic than Gaza. Again, this is an area for PECDAR's attention. With respect to quality, thestandard of design and implementation was reasonably good though there is significant room forimprovement. However, as the ERP-1 ICR notes, significant quality improvements have already beenexperienced and it is expected that this will continue. Taken overall, PECDAR's performance has beengood -- very good in some areas.

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Italian Cofinancing, The Jabalia Water Project Issue: It has been noted above that the ItalianCofinancing component has not been closed. Closing has been extended to March 2000 to facilitate theresolution of a number of non-technical but none-the-less important issues. The issues arise out of the factthat despite the successful completion of the water network in Jabalia many beneficiaries are reluctant tomake household connections. Thus the new network is not being effectively utilized. The reasons are manybut the following appear to be the most significant:

1. Households used to receive free water from the former supplier -- UNRWA. They are now beingasked to pay for these services;

2. Reluctance of UTNRWA to continue to be involved in service delivery because of decliningavailability of funds;

3. Householders fear that if UNRWA, the current supplier of services, begins to withdraw from thearea they will lose other significant related benefits;

4. Water sourcing problems which are not fully resolved between the municipality, UNRWA and thePalestine Water Authority (PWA).

Most of these issues were, on the face of it, predictable, and should have been anticipated by PECDAR andthe Bank at the sub-project identification and appraisal stage. Prior beneficiary and institutional analysisshould have revealed them. This points to the need for a more sophisticated approach to projectedpreparation by PECDAR and the Bank, particularly as the development program shifts from "!emergency"approaches to begin to tackle the more complex institutional and financial problems. The other side of thecoin is whether this sub-project should have been included in ERP-2 in the first place, given the obviouscomplexities involved. Several lessons should be learned here.

5.4 Costs andfinancing:

There are no significant issues. As noted above, the project was completed within budget. The originalproject cost total was increased from US$20m to US$23.49m due to the receipt of Italian cofinancing. Theadditional funds went to water and sanitation projects in Gaza. There was some internal reallocation of theIDA funding for works (see para 3.3) and minor reallocations in other categories (see Annex 2).

6. Sustainability

6.1 Rationale for sustainability rating:

ERP-2 is adjudged to be sustainable. This is evidenced by four factors: i) ERP-2 has been followed byfive Bank (IDA) projects which have built on the foundations established under ERP-1 and enhanced underERP-2;" ii) it has been followed by several donor infrastructure projects with an estimated value of morethan US$0.5 billion equivalent; iii) the latest set of IDA projects (MIIDP-1, CDP-1 and 2, B2000, and theupcoming MIDP-2), building on ERP- I and ERP-2 foundation, have moved from emergency approachesinto longer-term policy reform and capacity building; and iv) the institutional capacity built up at PECDARunder ERP-1 and ERP-2 has been considerable, and has served as the basis for further Palestinian projectand program development.

1/ As has been noted repeatedly above, ERP-2 was in effect a continuation of ERP-1. It is thus realistic to treat them together.

6.2 Transition arrangement to regular operations:

As noted above, ERP-2 was followed by MIDP- 1, CDP- I & 2, B2000 and the upcoming MIDP-2 (FY

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'00). Thus the transition to regular operations is well underway, though by no means complete. WVBG isnot yet a "regular" place.

7. Bank and Borrower Performance

Bank7. 1 Lending:

Performance here must be judged satisfactory (S). The Bank moved quickly to respond to an urgentproblem in a difficult situation.

7.2 Supervision:

Performance here is judged satisfactory (S). The Bank supervision team learned quickly and reactedquickly and effectively to changing circumstances. But the difficulties arising late in the project with timeoverruns and close out of the Italian financed component.

7.3 Overall Bank performance:

This is judged satisfactory (S), see Sections above.

Borrower7.4 Preparation:

This must be judged satisfactory (S). All agencies and ministries cooperated well in expediting projectpreparation, with PECDAR taking the lead.

7.5 Government imiplementation performance:

(See "7.6" below).

7.6 linplementingAgency:

PECDAR took the lead and bore the main responsibilities for preparation and implementation. As noted inSection 5.3, their performance has been good in most areas and very good in some. Overall, PECDAR'sperformance was satisfactory (S). As is the case with Bank supervision performance, some of the close-outdifficulties experienced late in the project somewhat was an otherwise very good perfonnance.

7. 7 Overall Borrower performance:

Satisfactory (S), see conclusions at Section 7.6 above.

8. Lessons Learned

During the course of implementing ERP-2, many lessons were learned. Some were also learned on ERP- 1and are repeated here. Others are unique to ERP-2.

ERP-2 Lessons:1. Planning and implementing in a highly unstable environment such as WBG requires an unconventional

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approach. Often decisions have to be made without adequate information or analysis. To do otherwiseis to risk being irrelevant. In this context misjudgments will be made. In these circumstances thechallenge is not that of meeting some rigidly predefined set of objectives. It is to act quickly on thebasis of the best existing information, but to learn, leam quickly, and modify behavior based onlearning. This may require continual redefinition of objectives and even project redesign duringimplernentation.

2. Productive emergency job creation is not an easy task and requires special planning if resources are tobe effectively deployed. Simple adaptation of conventional sub-projects and institutional structures isnot likely to produce desired results. New types of sub-projects and specially designed implementationstructures are required.

3. It is critical that beneficiaries be adequately consulted during project preparation in order that theirneeds and priorities are properly reflected in project design.

4. Communities are willing to participate in program formulation and contribute directly (up to 20% ofproject costs) for projects which directly benefit their communities.

5. As the development program shifts from "emergency" operations and begins to tackle more complexissues, the Bank and implementing agencies must develop the capacity to undertake more sophisticatedproject appraisal.

6. Greater attention needs to be paid by the borrower to the timely acquisition of land and buildingpermits if significant implementation delays are to be avoided.

ERP-1 and ERP-2 Lessons:1. There must be strong ownership by, and good dialogue with the borrower and its constituent

organizations if necessary implementation decisions are to be taken on a timely basis.

2.. Adequate "slack" time must be provided for if the vicissitudes of border closures (political risks) are tobe weathered.

3. The provision of operating support to implementing units is critical to establishing managerial andtechnical capacity.

4. Close on-the-ground supervision and willingness to be flexible in adapting the project to local realitiesis essential. It can also contribute significantly to mitigating risks.

5. Without the authority that has been delegated to the WBG staff in the field, the responsiveness to crisisand change described in this document would have been almost impossible.

9. Partner Comments

(a) Borrower/in2plementing agency:

These are presented separately at Annex 8.

(b) Cofinanciers:

Not yet received.

(c ) Other partners (NGOs/private sector).

None.

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10. Additional Information

A stakeholders' workshop was held on November 3, 1999. The minutes of the workshop are attached atAnnex 9. While there were some critical comments the response of stakeholders was generally positive.

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Annex 1. Key Performance Indicators/Log Frame Matrix

Outcome I Impact Indicators:

Indic:ator/Mabbrix-'..':.--IXif ;--LY

NA NA NA

Output Indicators:

Indi4at *:MrI _____________ 40t-W

1. INFRASTRUCTURE REHABILITATION AchievementsAND IMPROVEMENT:a) Water and SanitationRehabilitation and improvement ofnetworks and systems:

- Water (km): NA - NA - 89.5km of networks constructed, 83.2 inGaza and 6.3 in WB

- Sewage (km): NA - NA * 22.5km of networks constructed, 16.5km inGazaand6inWB

- Storm Drainage (km): NA - NA - 3km constructed, I in Gaza and 2 in WB

-Projects (no): NA -7 in Gaza and 0 in WB - 6 in Gaza and 3 in WB

- Beneficieries (no): NA - NA - 219,700 in total, 179,000 in Gaza and40,700 in WB (6 communities in Gaza and 4in WB)

b) RoadsRehabilitation & improvement of roads:

- Roads (km): NA -NA -121.5km constructed, 8.5 in Gaza and 113in WB

-Projects (no): NA - 6 in Gaza and 27 in WB -S in Gaza and 10 in WB

- Beneficiaries (no): NA - NA - 325,000 in total, 57,000 in Gaza and268,000 in WB ( 6 communites in Gaza and30 in WB)

c) Micro-ProjectsRehabilitation of Networks, Systems andFacilities

-Roads (km): NA -NA -2.6km in Gaza- Sidewalks (km): NA - NA - 3.6km in Gaza- Water (km): NA - NA - 12.4km in Gaza- Sewage (km): NA - NA - 3.5km in Gaza- Storm drainage (km): NA - NA - 1.3km in Gaza- Classrooms (no): NA -NA -65 in WB (serving 2,300 studentslyr, 60%

of which are girls)- Clinics (no): NA -NA -3 in WB- Public Buildings (no): NA -NA - 3 in total, 1 in Gaza and 2 in WB- Projects (no): NA - NA - 14 in Gaza and 30 in WB- Beneficiaries (no): NA - NA - 191,000 in total, 49,500 in Gaza and

141,500 in WB (11 communities in Gaza and29 in WB)

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2. EMPLOYMENTIncrease in employment opportunities - First 3-4 months (Person-days): 77,000 - 27,000 person-days

- Gaza:First 3-4 months (Person-days): 46,200 - 6,500 person-days

- First 10 months (Person-days):225,000 - 103,000 person-days

- Total (Person-days): NA - 188,000 person-days

3. PROJECTS IMPLEMENTED - Projects (Total no): 40 -68 Projects

End of project

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Annex 2. Project Costs and Financing

Project Cost by Component (in US$ million equivalent)Appraisal ActuallLatest Percentage ofEsitmate Estimate Appraisal

Project Cost By Component US$ million USS millionWater Supply & Wastewater 4.90 6.39 130.4Roads 10.43 11.62 111.41Design & Preparation 1.40 1.07 76.43Labor Intensive Projects 1.47

(Emergency Employment Generation)Micro Projects 2.00

(Emergency Employment Generation)Incremental Operation Expenses & Institutional Support 0.40 0.94 235Contingencies I (Physical) 1.71Contingencies 2 (Price) 1.16

Total Baseline Cost 20.00 23.49

Total Project Costs 1 20.00 23.49Total Financing Required 20.00 23.49

Note: An Italian Contribution of US$3.495 million was received in mid 1997, two third of the way through project implementation. The closing dateof the Italian co-financed projects has been extended from June 1999 until March 2000.

Project Costs by Procurement Arrangements (Appraisal Estimate) (US$ million equivalent)

Ex onditur CategoryProcurement MethodExpenditureCategory ! ICB NNBF.F Total Cost

1. Works 0.00 18.44 0.00 0.00 18.44(0.00) (18.44) (0.00) (0.00) (18.44)

2. Goods 0.00 0.00 0.36 0.00 0.36(0.00) (0.00) (0.36) (0.00) (0.36)

3. Services 0.00 0.00 0.60 0.00 0.60Consultancies (0.00) (0.00) (0.60) (0.00) (0.60)4. Incremental Operating 0.00 0.00 0.60 0.00 0.60Expenses

(0.00) (0.00) (0.60) (0.00) (0.60)

5. Micro Projects 0.00 0.00 0.00 0.00 0.00(0.00) (0.00) (0.00) (0.00) (0.00)

Total 0.00 18.44 1.56 0.00 20.00(0.00) (18.44) (1.56) (0.00) (20.00)

Note: IDA Financing is represented in(S).

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Project Costs by Procurement Arrangements (Actual/Latest Estimate) (US$ million equivalent)

Procurement MethodI Expenditure Category JB N.rnF. Total Cost

1. Works 15.93 3.45 19.38

0 (15.93) 0 0 (15.93)2. Goods 0.06 0.04 0.10

()____ ___ ___ __ _ o(0.06) 0 0 (0.06)3. Services 0.60 0.47 1.07Consultancies 0 (0.60) (0.47) 0 (1.07)4. Incremental Operating 0.00 0.00 0.94 0.00 0.94Expenses

(0.00) (0.00) (0.94) (0.00) (0.94)

5. Micro Projects 2.00 2.00

()_____________ o(2.00) 0 0 (2.00)Total 0.00 18.59 1.41 3.49 23.49

(0.00) (18.59) (1.41) (0.00) (20.00)Notes: IDA Financing is presented in ( ).

Cofinancing by Italy. The closing date of the Italian co-financed projects has been extended from June 1999 till March 2000.

Figures in parenthesis are the amounts to be financed by the Bank Loan. All costs include contingencies

Includes civil works and goods to be procured through national shopping, consulting services, services of contractedstaff of the project management office, training, technical assistance services, and incremental operating costs related to(i) managing the project, and (ii) re-lending project funds to local govemment units.

Project Financing by Component (in US$ million equivalent)Percentage of Appraisal

Component Appraisal Estimate Actual/Latest EstimateBank Govt. CoF. Bank Govt. CoF. Bank Govt. CoF.

WVater Supply & 4.90 2.90 3.49 59.2 0.0 0.0WastewaterRoads 10.43 11.62 111.4 0.0 0.0Design & Preparation 1.40 1.07 76.4 0.0 0.0Labor Intensive Projects 1.47 0.0 0.0 0.0(Emergency EmploymentGeneration)Micro Projects (Emergency 2.00 0.0 0.0 0.0Employment Generation)Incremental Operation 0.40 0.94 235.0 0.0 0.0Expenses & InstitutionalSupportContingencies 1 1.71 0.0 0.0 0.0Contingencies 2 1.16 0.0 0.0 0.0

Total 20.00 20.00 3.49 100.0 0.0 0.0

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Annex 3: Economic Costs and Benefits

Not assessed.

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Annex 4. Bank Inputs

(a) Missions.Sta e of Proect Cycle . No. of Persons and Specialty Performance Ratin

(e.g. 2 Economists, I FMS. etc.) Implementation Development_ MonthlYear Count Specialy Progress Objective

Identification/PreparationApr/96 NA NA

Appraisal/NegotiationApr/96 3 Economist, Urban Planner

and Roads Engineer.

SupervisionJun/97 2 Urban Planner, Roads S S

EngineerDec/97 2 Urban Planner, Roads Engineer S SJun/98 2 Urban Planner, Water & S S

Sanitation EngineerDec/98 2 Urban Planner, Water & S S

Sanitation EngineerJun/00 2 Urban Planner, Water & S S

Sanitation Engineer

ICRNov/99 4 Urban Planner, S S

Environment Engineer,Roads Engineer, Water &Sanitation Engineer.

(b) Staff

Stage of Project Cycle Actual/Latest Estimate_____._____....___________ .No. Staff weeks US_ (_000)Identification/Preparation NA NAAppraisal/Negotiation 6.4 18.3Supervision 52.8 94.9ICR 4.0 20.0Total 63.2 133.2

Note: The costs shown here are underestimated. Additional supervision costs were incurred. However, these were charged tothe Resident Mission's budget under previous accounting rules.

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Annex 5. Ratings for Achievement of Objectives/Outputs of Components

(H=High, SU=Substantial, M=Modest, N=Negligible, NA=Not Applicable)

RatingM Macro policies O H OSUOM O N * NA

O Sector Policies O H OSUOM O N * NAZ Physical *H OSUOM ON ONA* Financial O H OSUOM O N * NAO Institutional Development 0 H 0 SU O M 0 N 0 NAZ Environmental O H * SU O M O N O NA

SocialF2 Poverty Reduction O H *SUOM O N O NAZGender OH *SUOM ON ONAO Other (Please specify)

• Private sector development 0 H O SUO M 0 N 0 NAO Public sector management 0 H O SU O M 0 N 0 NAO Other (Please specify)

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Annex 6. Ratings of Bank and Borrower Performance

(HS=Highly Satisfactory, S=Satisfactory, U=Unsatisfactory, HU=Highly Unsatisfactory)

6.1 Bank performance Rating

Z Lending OHS OS OU OHUZ Supervision O HS O S OU OHUI Overall OHS OS O U O HU

6.2 Borrowerperformance Rating

? Preparation OHS O S O U O HUX Government implementation performance O HS O S 0 U 0 HUZ Implementation agency performance OHS OS 0 U O HUZ Overall OHS OS 0 U O HU

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Annex 7. List of Supporting Documents

1. ERP-2 Memorandum to the President2. ERP-2 Legal Agreement3. ERP-2 Italian Co-financing Legal Agreement4. ERP-2 Minutes of Stakeholders Workshop, Nov. 3, 19995. West Bank and Gaza - The World Bank's Response to the Current Economic Crisis: An Interim

Strategy, April 23, 1996.6. See "Emergency Employment Program, An overview of on-going activities, "United Nations Special

Coordinator for the Occupied Territories (UNSCO), Gaza, May 10, 1996.7. Palestinian Ministry of Labor Closure Statistics8. ERP-1 ICR, June 25", 1999.9. ERP- 1 Staff Appraisal Report (SAR)

10. MIDP Staff Appraisal Report (SAR)11. CDP-1 Staff Appraisal Report (SAR)12. EEGP Reports13. PECDAR'S Quarterly Reports14. The World Bank - Program Status Reports - West Bank and Gaza

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Annex 8. Beneficiary Survey Results

]S PALESTINIAN ECONOMIC COUNCIL

| -ip For Development & Reconstruction

PECDR

Mr. Kingsely RobothamTask managerWorld Bank MissionWest Bank & Gaza

Subject: IMPLEMENTATION COMPLETION REPORT (ICR).WEST BANK AND GAZA

SECOND EMERGENCY REHABILITATION PROJECT (ERP-2)(Trust Fund Credit # 26058 and 26053)

Dear Mr. Robotham

Please find attached to this letter the final draft copy of PMO and finance department FMSreport detailing the status of the civil and technical assistance components.

Following the workshop conducted on the 3rd of November 1999, with participation of thebeneficiaries in the world Bank premises, myself and colleague worked in the project would like tothank you and your team for the support and commended work throughout the implementation phase.Moreover, and after going through the draft copy of the ICR report prepared by your team there is notmuch to comment but to congratulate.

The main objectives of the fund was fully and successfully utilized and provided the tool toremove bottlenecks and created direct and indirect, immediate and long term, employment for over120,000 person over the implementation period. With the fund available it was possible to execute 7projects in for the water services (88Km of water and pipes and fittings and 5000m3 water reservoirs,16 water and wastewater pumps) in 6 major cities in Gaza. In addition to 1 project to supply thenecessary equipment for the maintenance and successful operation of the implemented projects. Alsoit was possible to implement wastewater drainage networks (15Km) and the re-pavement andasphalting of 12Km. At the same time in the West Bank and through the micro-projects component itwas possible to construct 180 classrooms accommodating 7200 pupils. Three primary health careclinics and 132Km of new roads connecting villages with the main cities. This in addition to the waternetworks (20Km) and reservoirs.

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The job opportunities were for the direct and indirect laborers associated to the constructionindustry and several related economic and financial services. Immediate and long term social benefitswere also achieved through the implementation of the multi-sector micro-projects that enforced thecommunity participation, both in kind and in money, and paved the way, from within, for real spirit ofrehabilitation and reconstruction of the devastated infrastructure. The civil works component wasimplemented under the strict compliance with the World Bank procurement guidelines. This ensuredfair competition and reasonable construction cost. The tangible indicators that shaped theimplantation phase of ERP2 could be summarized as follows:

1- The main overall objectives and merits of implementing the fund:

ERP2 created the atmosphere for the development of the construction industry, whichabsorbed skilled and semi-skilled laborer. Moreover, the technical consultancy services wasevolved and matured throughout the project implementation.The projects aimed at the rehabilitation of multi-sectors that was vital to support the socialand peace initiatives targeted by all the region parties.

* Many support services were also developed such as banking and insurance services.* The rehabilitation of water networks relieved the suffering and the public health hazard that

normally associated with water contamination.* The rehabilitation of road networks paved the way to more investment and preservation of the

rural areas and the agriculture sector. In addition it encourages small business to be allocatedin the villages and minimized the repositioning of people to towns.

* The rehabilitation of the storm and waste water networks delivered both health andenvironmental benefits.

2- Weakness factors affected the rapid implementation:

* Although the ERP2 fund paved the way for co-financing, the needs for rehabilitation of thedevastated sectors is enormous. This put stress upon the decisions makers and planners tomobilize the fund and to achieve the targets in a short time.The capacity building of many LGU's institutions including PECDAR was underdevelopment which slowed down the implementation in the first period as anticipated by theSAR.The weak and modest capacity and mobility either financial or technical of the private sector(contractors and suppliers) to mobilize fund was main factor in slow disbursement of thecommitted allocation.The technical team had to work with very limited historical technical records.

* The repetitive complete and semi complete closures of the Palestinian areas hampered anddiscouraged the flow of goods and investment in a local construction industry.

3- Difficulties faced during the implementation with the assigned time horizon:

* Implementation of the physical projects was initiated at the time when the LGU's changedmanagement, therefore, many of the technical issues took longer time to resolve.There was no designed documents nor definite or clear planning or operational strategies ofmany of the listed projects.It was important to re-specify many of the construction methodology to fit with theemployment target and to the encouragement of local investment.

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ERP2 complemented the many projects that were initiated after the successful launching of ERP 1.Although the project execution period were extended twice it was to accommodate the newco-financing from the Italian government and to ensure proper quality and management of the worksand good deliveries, see chart below. The budget of the sub-components were kept in line and withoutany major changes, this is a good indicator of proper design and quality control of the project.

The sustainability of the projects needs enforcement with allocation of proper operation andmaintenance resources. This is an important issue to PECDAR and confirmation from thebeneficiaries regarding this issue must be vigorously followed as it hampered the long-term benefits ofthe implemented project.

Again I thank you and your team for the successful implementation of the ERP2 and the trust andencouragement to PECDAR to carry on its objectives to create healthy sustainable investmentenvironment.

Best regardsDr. K. A. NigimPMO - PECDAR

cc: Managing Director, PECDAR;Financial Director, PECDAR;ERPI coordinator, PECDAR;File.

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Annex 9. Stakeholder Workshop Results

ERP-2 ICRMinutes of Stakeholder Workshop, November 3rd, 1999

The ERP-2 Stakeholder workshop was held on Wednesday Nov. 3rd, 1999 to evaluate the projectobjectives and outcomes, lessons learned from the process and how to improve the planning andimplementation processes.

The workshop was held at the Bank's office in Dahiat Al-Barid and attended by officials from PECDAR,Ministry of Local Government, Ministry of Planning and International Cooperation and Mayors andcommunity leaders whose towns and villages have benefited from the project. (see list attached)

Opening remarks were made by Dr. Majed Al-Bayya, Project Officer at the Bank, welcoming theparticipants and stressing the special relationship established between the Bank and PECDAR (theimplementing agency for ERP-2) to identify and respond to the Palestinian people needs.

Dr. Mohammed Shtayyeh, Director General of PECDAR, also emphasized this partnership between theBank and PECDAR and assured a continuous cooperation in the future.

Mr. Kingsley Robotham, Team Leader of the Infrastructure Sector at the Bank, explained the missionstatement of the World Bank and its various activities currently undergoing in the infrastructure sector inthe West Bank and Gaza. He also introduced the objectives of the ERP-2 and the main purpose of thisworkshop and emphasized that the main outcome of this workshop should be in terms of lessons learnedand how all stakeholders can perform their responsibilities better and more efficient in the future.

Dr. Khalid A. Nijim, PMO Director at PECDAR, reviewed the processes of the ERP-2 which was initiallyfinanced by the World Bank (IDA=US$20 million) over the period of June 1996 - June 1999 includingtwo-one year-extension periods primarily due to incoming grant contribution from the Italian Cooperation(US$=3.495 million).

Dr. Nijim also addressed the following:

A. Positive characteristics of the ERP-2 including:1. Employment generation in the engineering and construction and building material sector whichtriggered new local industries;2. Rehabilitation of infrastructure for needy Palestinian towns and villages;3. Incentives creation of local investments in the construction, banking services and related insurancebusiness;4. Capacity building at the supervision and contracting level and improved knowledge of the WorldBank procedures, criteria, product quality and adherence to time schedules for delivering the product;5. Improved sewage collection systems and sanitation and reduced disease out breaks;6. Improved transportation network between the villages and the bigger urban centers for people,goods and laborers;7; Improved access for villager to medical centers in the towns and cities;8. Environment protection due to improved sanitation.

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B. Constraints:1. Limited financial support compared to the needs;2. Delays in disbursement of funds;3. Terms and conditions posed by donors and financing institutions;4. Limited technical and management capacities at all levels including ministerial, municipal,engineering and contracting;5. PECDAR's internal management reorganization led to delays in project implementation;6. Limited availability of needed local building material especially during the closures and Israelilimits on imports;7. Continued Israeli security closures of the Palestinian Territories;8. Absence of accurate and organized data at all levels.

C. Difficulties:1. Working under pressure imposed by stakeholders;2. Absence of master-plans;3. Redesign of plans to adhere to the objectives of ERP-2 including employment generation;4. Working towards identifying alternative local building materials needed for ERP-2 implementation.

D. Challenges and Threats:I . Absence of a clear mandate for the various ministries and municipalities;2. Absence of a clear process for VAT collection;3. Implementation of projects despite the absence of master-plans and as-built plans;4. Lack of contractor's adherence to necessary safety precautions;5. Inadequate capacities of contractors to perform the job without regular financial compensation.

Mr. Ibrahim Dajani, member of the Infrastructure Team at the Bank, presented the various sectorsaddressed in the ERP-2 including water and wastewater, roads, education and health. He also presented thedistribution of projects which aimed at benefiting as many communities as possible both in the West Bankand Gaza. Charts also showed the distribution of funds compared to number of projects per sector and perbenefiting communities.

Mr. Hisham Labadi, Project Officer in the Infrastructure Team at the Bank, then lead a discussion overbenefits received by the communities from the ERP-2.

Mayors and community leaders indicated the following benefits due to ERP-2:I . Improved transportation system and accessibility to primary services i.e. education, health andwork locations;2. Reduced suffering due to inaccessibility to primary health care centers;3. Improved opportunities for women's education and opening of women's social clubs;4. Improved opportunities for teachers accessing schools in remote communities;5. Contributed to human development especially women and children through accessing neighboringcommunities;6. Reduced traffic accidents related to poor road conditions;7. hnproved environmental quality through reduced groundwater pollution;8. Reduced travel-time compared to pre-access roads development;9. Reduced travel costs in general, and in specific, it encouraged higher education through reduced

costs for university students;10. Reduced water costs due to reduced transportation costs;I1. Provided opportunities for the development of the local agricultural and industrial sectors;

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12. Increased the building and construction activities generating more employment opportunities;13. Reduced the village/city migration and encouraged the return of people to live in their homevillages;14. Improved commercial activities;15. Encouraged the public transportation sector;16. Improved social activities among neighboring communities;17. Provided better communication links and dialogue between the communities and the implementing

-agency;18. Increased residents' confidence in their local representatives;19. Resulted in an increase in municipal and village council revenues due to an increase in economicactivities.

Mayors and community leaders also indicated the following concerns for the future:1. The need to increase pledges from donor community and to disburse donations more efficiently andmore effectively;2. Improve communication and consultation between the donor, implementing agency and the localcommunity;3. Remove obstacles and constraints quickly during the project implementation stages;4. Ensure good quality and sustainable products;5. Improve capacities to prepare maintenance plans for the developed projects.

CONCLUSIONThis pioneer stakeholders workshop provided an opportunity to all parties (The Bank Staff, PECDAR asthe Implementing Agency, and Stakeholders representatives) to exchange opinions over the implementationand impact of ERP-2. Comments from the stakeholders were not limited to recognizing the benefits ofERP-2 and the positive impacts on their daily lives but also addressed other urgent issues that needimmediate attention. On the whole, the response to ERP-2 was very positive. As for Bank Staff, it waslessons learned that were important in understanding how to do things better in the future including the needfor improved communications between the stakeholders, Bank Staff and the implementing agency.

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List of Participants:

1. PECDAR (West Bank and Gaza/ PMO, Finance Dept.) (7)2. Ministry of Local Government (Ramallah, Hebron, Nablus, Jenin) (8)3. Ministry of Planning and hiternational Cooperation (1)

West Bank Governorates:4. Jenin Governorate (3)5. Qalqilia Municipality (2)6. Qaffin Municipality (1)7. Balaa Municipality (1)8. Beit Leed Municipality (1)9. Illar Municipality (1)10. Assamou Municipality (2)11. Kufer al-Labbad Village Council (1)12. Arrabuneh Village Council (1)13. Akkabeh Village Council (1)14. Ein Yabous Village Council (2)15. North Beit Qad Village Council (1)16. Arraneh Village Council (1)17. Raba Village Council (2)18. Deir Ghazaleh Village Council (1)19. Odala Village Council (2)20. Jalqamous Village Council (1)21. Al-Jalameh Village Council (1)22. QarawatBani Zeid (I)Gaza Governorates:23. Gaza Municipality (1)24. Rafah Municipality (2)25. Nusseirat Municipality (1)

The World Bank (5)

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