PROJECT INFORMATION DOCUMENT (PID)



PROJECT INFORMATION DOCUMENT (PID)

CONCEPT STAGE

Report No.: AB2187

|Project Name |Zambia Local Development Fund (LDF) |

|Region |AFRICA |

|Sector |Other social services (40%);Health (20%);Primary education (20%);General water, sanitation and |

| |flood protection sector (10%);Roads and highways (10%) |

|Project ID |P095193 |

|Borrower(s) |REPUBLIC OF ZAMBIA |

|Implementing Agency | |

| |Ministry of Local Government & Housing |

| |Zambia |

|Environment Category |[ ] A [X] B [ ] C [ ] FI [ ] TBD (to be determined) |

|Date PID Prepared |February 20, 2006 |

|Estimated Date of Appraisal Authorization |March 20, 2006 |

|Estimated Date of Board Approval |July 6, 2006 |

1. Key development issues and rationale for Bank involvement

The proposed operation will support the Government’s Public Sector Reform Program. The Government of Zambia has recently re-formulated its Public Sector Reform Program (PSRP) around three pillars: (i) Public Service Management (PSM) implemented by the Cabinet Office; (ii) Public Expenditure Management and Financial Accountability (PEMFA) implemented by the Ministry of Finance; and (iii) Decentralization. Over the last year, the program has gained momentum as the first two pillars--PSM and PEMFA- are being supported by a number of cooperating partners including the World Bank under two Sector Wide Approaches (SWAps). The implementation of the third decentralization pillar has moved slower. A National Decentralization policy was approved in November 2002. Subsequently, in November 2003, the Government, with support from UNDP, established a Decentralization Secretariat, currently housed under the Ministry of Local Government and Housing (MLGH), to facilitate the operationalization of the National Decentralization Policy. The Secretariat developed a draft Decentralization Implementation Plan (DIP) which is expected to be presented to Cabinet shortly once consultations are complete and the document is finalized.

The Government’s Fifth National Development Plan (NDP) (2006-2011) includes a chapter on Local Government and Decentralization, which draws largely on the draft DIP, with a specific budget line for a proposed Local Development Program (LDP). The NDP proposes to start preparing the ground for transferring authority and resources to local administrations for decision-making related to collection, expenditure and management of financial resources, hence fiscal decentralization, with a budget line for local government restructuring. To this effect, in September 2005, the Ministry of Finance and National Planning (MOFNP) requested the World Bank (WB) to provide fast-track technical assistance to design an inter-governmental fiscal architecture (IFA) which would define a financial transfer system to local authorities to be piloted in 2006 and fully implemented in 2007. This work has started and will be supported by a grant from the Cities Alliance to be managed jointly by the WB and the MOFNP. Following this, in October 2005, the Government has requested a Project Preparation Facility (PPF) to prepare the proposed Local Development Program as a follow-on project to the Zambia Social Investment Fund (ZAMSIF) in support of the national decentralization policy.

The proposed operation is part of the current CAS and supports the following strategic objectives: (i) improved lives and protection of the vulnerable; and (ii) effectively and efficiently managed public sector. It intends to build on the momentum created with the PEMFA and PSM to move the decentralization agenda forward and broaden support to local economic development in addition to social and economic infrastructure. The proposed LDP also intends to carry forward the rich experiences and lessons learned from a number of community and local development initiatives supported by WB, GTZ, SNV, UNCDF, JICA, DCI and others, and provide broad support to the implementation of the decentralization policy within a programmatic approach with the overall aim of building national systems. These donor supported interventions have been complimentary to the recently closed ZAMSIF program. Preliminary reports of the ZAMSIF and other similar interventions indicate that they have been successful in strengthening district administration capacities for participatory planning, budgeting of development activities and accountability of administrations vis-à-vis communities.

The Bank team has been in active dialogue and collaboration with the members of the Sector Advisory Group and Technical Working Group on Decentralization and will continue to work jointly in the design and implementation of the proposed program. A number of cooperating partners have already expressed interest and/or provided resources for the preparation of the proposed program.

2. Proposed objective(s)

The program will aim to support the implementation of the national decentralization policy which has the following objectives: (i) to transfer decision-making authority, functions, and resources from the center to the lower administrative levels with matching financial resources with a view to improve effectiveness and efficiency in service delivery; and (ii) to develop the capacity of Councils and communities in development planning, financing and coordinating delivery of services.

3. Preliminary description

The proposed program is a follow-on project to the Zambia Social Investment Fund (ZAMSIF) which closed on December 31, 2005. It will draw on the experiences of the Zambia Social Investment Fund, and build on existing institutional mechanisms. In particular, a core group from the ZAMSIF implementation team will be responsible for the preparation of the proposed program carrying the lessons learned forward, and during implementation, for providing technical support to local administrations to improve their financial performance and service delivery capacity to become fully functional in a decentralized system. The new project will be designed with an exit for the implementation team, that is, mainstreamed implementation arrangements by the end of the project will replace the current implementation team.

The proposed LDP will have two entry points for program implementation: (i) PEMFA/PSM; and (ii) fiscal decentralization. The LDP menu of activities will be primarily determined by the objective of making local authorities functional and preparing the ground for sector devolution. Following the June 2005 identification mission, the Government, WB and cooperating partners discussed and confirmed the proposed components as stated below:

i) Support for social and economic investments through the provision of grants to local authorities; and

ii) Support for capacity development for MLGH, districts and sub-district structures in planning, budgeting, expenditure management, M&E and others

4. Safeguard policies that might apply

[Guideline: Refer to section 5 of the PCN. Which safeguard policies might apply to the project and in what ways? What actions might be needed during project preparation to assess safeguard issues and prepare to mitigate them?]

The program will primarily focus on capacity development but will finance local investments similar to the Zambia Social Fund. The environmental assessment done for ZAMSIF will be reviewed and updated/ supplemented if necessary before negotiations. This document will include all necessary actions to be incorporated to project implementation.

5. Tentative financing

|Source: |($m.) |

|BORROWER/RECIPIENT |20 |

|INTERNATIONAL DEVELOPMENT ASSOCIATION |28 |

|GERMANY: KREDITANSTALT FUR WIEDERAUFBAU (KFW) |16 |

| Total |64 |

6. Contact point

Contact: Wim H. Alberts

Title: Sr Social Protection Specialist

Tel: (202) 473-8484

Fax:

Email: Walberts@

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