ASIAN DEVELOPMENT BANK TAR: THA 30274

TECHNICAL ASSISTANCE(Financed from the Japan Special Fund)

TO THE

KINGDOM OF THAILAND

FOR THE

BORDER TOWNS URBAN DEVELOPMENT PROJECT

October 1997

CURRENCY EQUIVALENTS(as of 15 October 1997)

Currency Unit - Baht (B)B1.O0 = $0907$1.00 = B36.15

The baht is in the managed floating exchange rate regime.

ABBREVIATIONS

BMR - Bangkok Metropolitan RegionCIPO - Center for Integrated Plan of OperationsGMS - Greater Mekong SubregionI MT-GT - Indonesia-Malaysia-Thailand Growth TriangleTA - Technical Assistance

NOTES

(1) The fiscal year of the Government ends on 30 September.(ii) In this Report, $" refers to US dollars.

L INTRODUCTION

1. During the 1996 Country Programming Mission, the Government of the Kingdomof Thailand requested technical assistance (TA) to prepare a project to support thedevelopment of selected border towns through the creation of an improved physical, policy, andinstitutional environment that will help the Government realize its ultimate objective of regionallybalanced, equitable, efficient, and sustainable urban development. In response to this request,and following incorporation of the TA in the 1997 Country Assistance Plan, a Fact-findingMission for the proposed TA was fielded in August 1997. The Mission held discussions withrepresentatwes of the Central Government, and the provincial and local governments, externalaid agencies, and other stakeholders including urban residents and nongovernmentorganizations; and reached an understanding with the Government on the objectives, scope,cost estimates, financing plan, and implementation arrangements for the TA.1

ii. BACKGROUND AND RATIONALE

2. The urban population in Thailand is estimated at 22 million, or 36 percent of thecountrys population. A striking feature of the urbanization process is the excessiveconcentration of population and economic activity in Bangkok and its vicinity resulting ingrowing environmental problems in the Bangkok Metropolitan Region (BMR), 2 and interregionalincome disparities across the country. About 50 percent of the urban population live in theBMR. In the northeast, where 35 percent of the population reside, and the north, where 20percent of the population live, the average per capita incomes are only 30 percent and 40percent, respectively, of the income in the BMR. Current population trends show that BMR'spopulation growth rate (3 percent per annum) is declining, while growth in some regional citiesand towns is acce'erating by up to 6 percent per annum. Some border towns, with populationsranging from 10,000 to 40,000 and with current growth rates of up to 4 percent per annum, arealso becoming increasingly important in the urbanization and development process mainlybecause of opportunities related to cross-border economic activities.

3. The Government is concerned with the excessive concentration of economicactivity in the BMR and its environmental and socioeconomic consequences, and is pursuingphysical decentralization policies. A number of measures that the Government is implementingto promote decentralization include (i) strategic plans for developing regional economies; (ii)investment in infrastructure; and (iii) fiscal and banking measures to stimulate privateinvestment in the target regions. The Regional Cities Project, which attempted to channelresources to regional centers, and the eastern and southern seaboard development projects, inwhich the Government is establishing deep-sea ports and industrial estates in the eastern andsouthern regions, are examples of the Government's specific efforts to achieve regionaldispersal of economic activity and population. Subregional cooperation is also considered apotentially important instrument for balanced urban development. The Indonesia-Malaysia-Thailand Growth Triangle (IMT-GT) is seen as playing a significant role in developing thesouthern region, and the Greater Mekong Subregion (GMS) is regarded as a contributing factorto the development of the north and northeast. Further, a number of strategically located bordertowns, emerging as centers of economic activities in the process of subregional cooperation,are considered crucial for stimulating decentralization to peripheral areas. One important target

The TA first appeared in ADB Business Opportunities in July 1997.The BMR covers Bangkok Metropolitan Administration area and the neighboring five provinces.

2

area defined by the Eighth National Economic and Social Development Plan (1997-2001) isdevelopment of border provinces and towns, particularly those that have potential as economicbridges linking Thailand with neighboring countries.

4. The Bank's country strategy, which is in line with the Governments policy,includes (i) development of infrastructure and related policy and institutional reforms in lessdeveloped regions with a view to equitable development and promotion of decentralization; (ii)human resources development; and (iii) effective management of the environment forsustainable development. The north, northeast, and the south are the priority areas for theBank's assistance. Two ongoing Bank TA projects, which are expected to lead to loans forimproving water supply and sanitation, target the northeast. The advisory TA2 beingimplemented aims to strengthen the Government's capacity to formulate and monitor policiesand programs on decentralization. Another dimension of the Banks strategy in Thailand islinking economic activities in periphery regions to those in neighboring countries. Since 1992,the Bank has provided various TA programs to promote subregional cooperation in the GMSand IMT-GT. Some priority projects identified under these programs have already progressedtoward Lmplementation. The feasibility studies for the East-West Transport Corridor, linkingnortheast Thailand with the Lao People's Democratic Republic (Lao PDR) and Viet Nam, andthe highway linking Bangkok to Phnom Perth and Ho Chi Minh cities were prepared under TAfrom the Bank. The issue of nonphysical barriers to subregional cooperation was alsoaddressed under advisory TA.3

5. Several other development partners are involved in the urban sector and bordertown development. The Australian Agency for International Development provided TA for thedevelopment of Nong Khai town on the Thailand/Lao PDR border. The United NationsDevelopment Programme is embarking on a study to optimize the benefits for economictransition and sustainable human development in the process of subregional cooperation. Thestudy, which will cover the border area connecting the southern part of northeast Thailand toneighboring countries, will basically focus on social issues such as gender and health care. TheJapan International Cooperation Agency is about to start TA for the preparation of a regionalmaster plan covering the northeast region. The Norwegian Agency for International Cooperationrecently provided assistance in the preparation of the Spatial Development Framework with aview to coordinating the major investments of many public and private agencies affecting spatialdevelopment of the country. An ongoing World Bank study, Urban Development Under theEighth and Ninth Plans, focuses on setting up an urban development fund and strengtheninglocal governments in selected regional cities.

6. There is already evidence that the contribution of border towns to the nationaleconomy is increasing. Trade in these towns has increased considerably. For example,Mukdahan, which is on the route of the East-West Transport Corridor and which lies oppositeSavannakhet of Lao PDR along the Mekong River, accounts for 30 percent of the total value .ofthe border trade between Thailand and Lao PDR. At Aranyaprathet on the route of the

TA No. 2568-THA:Notheast Region Water Supply and Sanitation, for $600,000, approved on 14 May 1996:and TA No. 2698-THA:Khon Kaen Water Supply and Sanitation, for $550,000, approved on 4 December1996.TA No. 2364-THA:Stxngthening Policy, Planning and Programming for Decentralization and RegionalDevelopment, for $400,000, approved on 19 July 1995.TA No. 5686-THA:Mitigation of Nonphysica/ Bamers to Cross-border Movement of Goods and People, for$180,000, approved on 29 May 1996.

proposed highway from Bangkok to Phnom Penh and Ho Chi Minh cities, the border trade is ofutmost importance to the economy with the current trade volume estimated at 8120 million to150 million per month. Along the Malaysian border, the volume of exports has increased to 28percent of the total exports of the country. Some border towns are also playing increasinglyimportant roles in the tourism industry, which is one of Thailand's major foreign exchangeearners. At Sadao on the Malaysian border and the route of the north-south expressway fromThailand to Malaysia and Singapore, the number of tourists entering Thailand, over the last tenmonths, has reached 500,000, much higher than the previous year. Chiang Saen in the north, agateway to the Golden Triangle, receives 2,500 domestic and foreign tourists daily, In addition,some of these towns are expected to become the locations of industrial cooperation withneighboring countries under various subregional economic schemes. 1 With the completion ofongoing and planned projects in the process of subregional cooperation, it is expected that thepace of development ri border towns will further accelerate.

7. There are, however, impediments to the development of border towns. Althoughthere is a clear Government policy on physical decentralization, the policies in other relatedsectors, which have a direct bearing on the spatial distribution of economic activity, are not fullysupportive of this policy. The incentive policy, which provides the highest incentive to theentrepreneurs investing in regions outside the extended BMR and the ten adjacent provinces,covers a large geographical area, and thus becomes ineffective to make a desired impact onspecific areas. Regulatory constraints, such as trade and labor barriers, pricing issues, andexchange control hinder cross-border economic activities. The poor state of infrastructure,insufficient urban services and environmental management are other major obstacles to theexpansion of economic activities and improved quality of life in the border towns. The healthand productivity of the urban population are threatened by the lack of safe water, and poor solidwaste management and drainage systems. Urban growth is taking place in an ad hoc manner,particularly in those areas where border check points and markets are located. Development isconstantly undermined by lack of coordination between urban institutions, the fragmentednature of the urban administration structure, 2 limited power, and inadequate capacities of localgovernments in urban management and resource mobilization. Despite the Government'sadministrative decentralization policy and local governments being formally mandated toprovide most urban services, the centralized fiscal pattern of the country prevents localgovernments from raising and having access to the required funds for their tasks. These towns,with their present capacity, are not prepared to cope with the pressure of the growth alreadybeing experienced.

8. A wholistic approach and concerted efforts are imperative to harness thedevelopment potential of border towns and make them an effective means of physicallybalanced and equitable urban development. There is a need to develop a comprehensivepackage of development strategies for border towns linking the country's decentralization

The Ministry of Industry (MOl) has completed a study to develop models for the establishment of SpecialBorder Economic Zones in Mukdahan and Mae Sot. Government approvals of the Mukdahan and Mae Soteconomic zones are expected in October 1997. Further, a feasibility study was conducted by MOl forspecial economic zones in several districts including Betong and Tak Bal on the Malaysian border takinginto account the IMT-GT. Some border towns on the Malaysian border are seen as having considerablepotential to attract some industrial activities from northern Malaysia.

2 There are sometimes several rocal administrations responsible within the same urban area or urbanagglomeration such as in Sadao district where there are the Sadao municipality, Sadao Subdistrict TambonAdministrative Organization, and Pedang Besar Sanitary district.

4

process to subregional cooperation efforts. Interventions in urban development to be based onthe overall strategy should focus on providing adequate infrastructure and service facilities toenhance the economic performance of border towns and urban services for the growingpopulation. Policy and institutional constraints to urban development need to be addressedalong with a comprehensive capacity-building program for local governments to ensuresustainable urban development. The TA is needed to prepare an overall development strategyand an investment package for urban development in selected border towns.

Ill. THE TECHNICAL ASSISTANCE

A. Objective

9. The aim of the TA is to prepare a Project that will support the creation of animproved physical, policy, and institutional environment in selected border towns. The Project isintended to help the Government in its decentralization efforts to achieve the ultimate objectiveof equitable. efficient, and sustainable urban development.

B. Scope

10. The scope of the TA will comprise preparation of (i) a strategic framework and acomprehensive package of development strategies, including (a) an assessment of thedevelopmental roles of border towns in light of resource endowments, locational advantageand policies and programs on decentralization, and opportunities emerging from subregionalcooperation; (b) selection of towns and assessment of constraints to productive capacity as wellas the potential for development; (c) strategic investment areas in both private and publicsectors, and forecasts of future growth; and (d) a set of strategies in priority sectors,infrastructure, policy, regulatory, financial, and institutional terms; and (ii) an investmentpackage for improving infrastructure, urban services, and management in selected bordertowns, including (a) detailed feasibility studies and preliminary cost estimates; (b) social,financial, economic, and environmental analyses for Project components; and (C) Projectproposals and implementation arrangements.

11. The TA will take into account the earlier Bank TAs on decentralization andsubregional cooperation. Coordination will be maintained with the ongoing projects undertakenby the Bank, the Government, and other aid sources. The TA will incorporate a participatoryapproach. A total of ten towns will be selected for detailed study at a tripartite meeting at theend of the first month. It is envisaged that the ensuing Project will comprise investments basedon the strategic framework, and on the specific needs of each town in infrastructure and urbanservices such as wastewater treatment, solid waste management, drainage, sanitation, watersupply, basic services for the urban poor, transport infrastructure and services, economicinfrastructure such as industrial sites, markets, and capacity building of local governments.

C. Cost Estimates and Financing Plan

12. The estimated cost of the TA is $1,000,000 equivalent comprising a foreignexchange cost of $467,000 and a local currency cost of $533,000 equivalent. The Bank willfinance the entire foreign exchange cost and $333,000 equivalent of the local currency cost,totaling $800,000 equivalent, on a grant basis from the Japan Special Fund, funded by theGovernment of Japan. The Government contribution of $200,000 equivalent covers the

5

remuneration of counterpart staff, office accommodations, surface transportation for counterpartstaff, and counterpart funds for part of the workshop activities. The details of the cost estimatesare in Appendix 1. The Government was informed that approval of the TA does not commit theBank to financing any ensuing project.

D. Implementation Arrangements

13. The Center for Integrated Plan of Operations (CIPO) of the National Economicand Social Development Board, the key central planning agency, will be the Executing Agencyfor the TA. CIPO, with its high caliber staff, is specifically assigned to undertake integratedplanning studies, planning and implementation of regional development, and specific areadevelopment programs of national concern. The overall guidance for the TA will be provided bya steering committee composed of representatives of the Ministry of Interior, Fiscal PolicyOffice, Ministry of Industry, Ministry of Science, Technology and Environment, and localgovernment representatives in the Project towns. The TA will be implemented over an eight-month period from February 1998 to October 1998, and will include workshops to discuss theinterim and draft final reports with all stakeholders, including beneficiaries and nongovernmentorganizations. CIPO will provide a TA coordinator, counterpart staff equivalent to about 70person-months, support staff, office space, and facilities and local transportation for counterpartstaff in Bangkok and the border towns. CIPO wilt be responsible for coordinating, steering, andmonitoring the counterpart activities.

14. The TA will be undertaken by a consulting firm recruited in accordance with theBank's Guidelines on the Use of Consultants and other arrangements satisfactory to the Bankon the engagement of domestic consultants. About 48 person-months of consulting services wiUbe required, includingabout 16 person-months of international and 32 person-months ofdomestic specialists. The team will comprise international experts in developmentplanning/economics, urban development, municipal engineering, and economic and financialanalysis: and domestic experts in development planning/economics, industry/finance,engineering, urban planning and management, local governance/finance, and sociology. Theoutline terms of reference for the consulting services are in Appendix 2.

15. By the end of the first month after commencement of services, the consultantswill submit an inception report including the description of the scope, approach, work program,confirmation of the selection of towns, and preliminary analyses. An interim report containingthe strategic framework for border town development, and prefeasibility studies of the Projectcomponents will be submitted after the fourth month, and a draft final report describing thescope, implementation arrangements, and the feasibility of the Project components sevenmonths after the commencement of the TA. Tripartite meetings will be held with theGovernment, the Bank, and the consultants to discuss the TA reports. A final report will besubmitted one month after comments on the draft final report are made by the Government andthe Bank.

IV. THE PRESIDENT'S DECISION

16. The President, acting under the authority delegated by the Board, has approvedthe provision of technical assistance, on a grant basis, to the Government of the Kingdom ofThailand in an amount not exceeding the equivalent of $800,000 for the purpose of the BorderTowns Urban Development Project, and hereby reports such action to the Board.

288 - 288

224 224

78

78

27

27

30

30

8

a

5

55

17

17

10

10

8

8

58

42

100

467

333

800

48110

248

10

200

1,000

6 Appendix 1

COST ESTiMATES AND FINANCING PLAN($'OOO)

Item Foreign Local TotalExchange Currency Costs

A. Bank Financing (JSF)

1. ConsultantsRemuneration

International ConsultantsDomestic Consultants

Per DiemInternational ConsultantsDomestic Consultants

international Travela2. Reports3. Communications4. Workshops5. Local Travel6. Support Services7. Socioeconomic and Engineering Surveys8. Contingencies

Subtotal (A)

B. Government Financing

1. Office Accommodatibn and Facilities2. Counterpart Staff Remuneration3. Local Transportationb4. Equipmentc5. Workshops

Subtotal (B)

Total

- 48

- •110

- 24

- 8

- 10

200

467 533

aIncludes the expenses of one Government representative to attend contract negotiations.

b For Central Government and provincial government counterparts, including domestic air fares.Provision of office equipment such as fax and photocopier, and telephone for use by counterpart staff andconsultants. Cost of report reproduction and computer use are not included under this component.

(Reference in text: page 5, para. 12)

7 Appendix2,pagel

OUTLINE TERMS OF REFERENCE FOR CONSULTING SERVICES

A. Strategic Framework

1. Overall Strategy

1. The consultants' responsibilities will include the following:

(1) Review all previous reports and studies related to urbanization and economicdevelopment in Thailand, economic decentralization, regional development, andsubregional cooperation with implications on the pace and pattern ofdevelopment in border towns. Identify data gaps. and collect and analyzeinformation on the socioeconomic, physical, and demographic attributes ofborder areas.

(ii) Review the r&evant Government policies and programs ri urban and regionaldevelopment: physicai decentralization, e.g., policies on industry and trade, thepolicies and operations of the Ministry of Industry, and Board of Investment ineconomic decentralization, and macroeconomic policies, that have a bearing onthe spatial distribution of population and economic activity; and subregionalcooperation - Greater Mekong Subregion and the Indonesia-Malaysia-Thailand-Growth Triangle. Assess their implications for the border towns.

(iii) Review organizational and management structures, and systems related toregional development, including the availability of a regional information systemto assist in planning and monitoring regional development. Review the urbaninstitutional and legal framework within which urban local government operates.Review the administrative decentralization policy and trends in local governance.

(iv) Review the investment proposals. e.g., major transport corridors, and policyreforms proposed under various studies on decentralization and subregionalcooperation, including the Bank's technical assistance (TA) and the CountrySynthesis of Postevaluation Findings in Thailand (1995). Assess theeffectiveness of policy reforms for the ongoing activities and the likely impact ofproposed policy reforms, and ongoing and planned investments of theGovernment and external agencies on border towns.

(v) Review and assess the selection process, justification, and criteria for the tenborder towns 1 identified by the National Economic and Social DevelopmentBoard. Confirm, if appropriate, the inclusion of these towns in the TA for detailedfeasibility studies based on objective criteria including (a) economic growthpotential and prospective role in regional, national, and subregional contexts; (b)projected population growth; (c) infrastructure and service needs: and (d)willingness to participate in the Project and commitment to implement themeasures with regard to local resource mobilization and cost recovery.

These towns are Aranyaprathet, chiang Khong, Chiang Saen. chong Mek, Huay Khon, Mae Sa. Mukdahan. NakhonPhanom, Sadao (includes Pectang Besar and Sadao border check point), and Sunga Kolok.

(Reference in text: page 5, para. 14)

8 Appendix 2, page 2

(vi) Identify the present and future composition of the economic output of the selectedtowns and the sectoral products, e.g., agro-industry, trade, and tourism, for whicheach border town has a comparative advantage in light of its own resourceendowments, e.g., labor, capital, natural resources, and infrastructure; locationaladvantage; subregional infrastructure linkages; and other opportunities.

(vii) Identify activities that are currently nonexistent and underdeveloped but are likely toemerge and be viable after the completion of major initiatives in the context ofsubregional cooperation. Asses the feasibility of creating special economic zones inkey border towns in coordination with the operations of and studies carried out bythe Ministry of Industry.

(viii) Identify the prospective developmental roles, including forecast of the futureeconomic growth and additional employment opportunities to be generated, thatthese towns will play in their hinterland in a national and subregional context aver aten-year planning horizon.

(ix) Identify policy, institutional, infrastructure, and resource constraints, i.e., human.financial and capital, local entrepreneurship, availability of know-how, and credit andbanking facilities. Assess particular social problems that constrain the developmentand welfare of populations in the border towns.

(x) Design and implement throughout the TA a participatory process to (a) identify theperceived priorities of the local people to be affected by the ensuing Project; (b)create opportunities for all stakeholders, i.e., the community, private sector,nongovernment organizations, locally elected leaders, and government officais, tointeract with each other for forming partnerships for the development of bordertowns; and (C) build consensus on the Project proposals.

(xi) Based on the above analysis, identify the areas of intervention that will mitigate theconstraints to development of the border towns; and prepare developmentstrategies, including (a) strategc investment and infrastructure requirements ofpriority sectors; (b) policy, regulatorj, and fiscal strategies to induce privateinvestment and economic activities in the border towns and encourage privatesector participation in infrastructure development; remove nonphysical barriers tocross-border economic activities, and movement of goods, people, capital, andlabor; and promote services such as credit facilities, and know-how onentrepreneurship; (c) urban development strategies that are consistent with andsupportive of the roles of the border towns, and take into account social andenvironmental concerns; (d) institutional strategies facilitating concerted efforts ofvarious agencies involved in the development of border towns, and reinforcingdecentralization for proactive urban Local governments, which can combine externalstrategies with local concerns; and (e) resource generation and managementstrategies, i.e., human, financial, and environmental.

(xii) Assess the costs and benefits including the social and environmental costs andbenefits of implementing the strategic framework.

9 Appendix 2, page 3

2. Town-Specific Urban Development Strategies

2. The consultants will undertake the following:

(I) Conduct investigations to prepare detailed socioeconomic, demographic,environmental, and physical profiles of the selected border towns (Project towns).Based on the analysis in Section I, make projections for future urban growth.

(ii) Assess key infrastructure and service deficiencies in these towns. Identify andevaluate the severity of existing or potential environmental problems, and assessany pollution control requirements.'

(iii) Conduct sample surveys of the towns populations and interview local leaders toascertain public perception of problems. and satisfaction with the level of urbanservices and development priorities. Carry out participatory meetings.

(iv) Determine the infrastructure and service needs of the present and potentiaJeconomic activities in line with the overall strategic framework in each Project townDetermine household needs for infrastructure and services of present andestimated future population of the towns, and assess the affordability andwillingness of residents to pay for the services. Identify high priority needs ofhouseholds. Assess the scale and scope of the basic needs of the urban poor.

(v) Assess the requirements for infrastructure and spatial linkages with the large scaleinvestments, e.g., transport corridors, taking place in the vicinity of the towns andmake proposals for the establishment of appropriate linkages that will maximize themutual developmental impact of the Project towns and the investments proposed.

(vi) Identify urban expansion needs, and make recommendations on the anticipatedand desired future directions of the growth of residential, commercial, and industrialactivities, and public amenities in the Project towns taking into account existingdevelopment plans. Prepare broad outlines of indicative plans to be used as a basefor urban infrastructure expansion proposals. Assess the need for land developmentto cater to present and future requirements, and make proposals for innovative landdevelopment schemes. Where there are clusters of settlements, e.g.. Sadao, wherethere are three urban settlements, including Sadao municipal area. Pedang Sesarand Sadao subdistrict border check point, apply an integrated approach consideringthe interlinkages between these settlements.

(vii) Review the nature and extent of the development, if any, taking place in adjacentareas outside the municipal boundaries of border towns and the issue ofadministrative fragmentation. Review the viability of options to address this issue,including annexation through extension of municipal boundaries, creation ofcoalitions of local governments, or other options that would enhance developmentcoordination between these different administrative units.

(viii) Review and advise on plannng and design standards adopted by the Governmentfor urban infrastructure, services, and land development.

10 Appendix 2, page 4

(ix) With respect to various local administrations, analyze administration structure,personnel policy, revenue and expenditure patterns, the recent Government'sreform initiatives on taxation, capital financing and local government revolvingfunds, intergovernmental fiscal relationship, financial management practices, andperformance in the delivery of urban services. Assess structural, procedural.cultural, and resource constraints to effective, efficient, and equitable urbanmanagement. Examine the opportunities for establishment of urban administrationsin Project towns where no municipal administration exists. Identify the constraints toprivate sector participation in the delivery of urban services.

(x) For each Project town, prepare specific development strategies for a time frame often years including (a) strategic investment areas in both private and public sectors:(b) consistent urban expansion and infrastructure development program, taking intoaccount social and environmental objectives: (C) resource requirements tompIement strategies and proposals for financing the investment: (d) measures forcreating an enabling environment in which local governments increasingly playpivotal roles; and in which communities, the private sector, the nongovernmentorganizations. and the public sector cooperate in the delivery of urban services: e)specific approaches for private sector participation in the provision of infrastructureand the delivery of services: (f) proposals for mobilizing local resources, andimproving the system of intergovernmental fiscal transfers; and (g) phasing forshort- and medium-term development in the Project towns, and an action plan toimplement the proposed institutional, policy, and regulatory reforms.

B. Feasibility Studies and Project Preparation

3. The consultants will have the following responsibilities:

(I) Determine the scope of the Project components based on the strategic framework,and plans and priority needs of each town, as well as on a review of the Bank'sSector Synthesis of Postevaluation Findings in the Urban Development andHousing Sector.

(ii) Assess the feasibility of the proposed Project package for investment, including thepreliminary design of the Project, which is expected to comprise urban infrastructureand services including drainage; wastewater treatment: sanitation; solid wastemanagement; water supply; basic services for the urban poor: transportinfrastructure and services, e.g., roads, bridges, culverts, bus and truck terminals,and traffic management; economic infrastructure and services, e.g., establishmentof special economic zones, provision of serviced industrial sites, and developmentof retail and wholesale markets; and land development.

(iii) Through identifying the extent of improvements based on the absorptive capacty oflocal governments, develop a package of proposals for a comprehensive capacitybuilding program in urban management in the Project towns including transfer oftechnology for (a) developing a simple system of strategic planning, outlining broaddevelopment objectives and a vision of the future, and providing guidance forprioritization of investments and for the annual budgeting process with availableresources; (b) urban planning practice as an integrated effort with strategic

11 Appendix 2, page 5

investment planning, providing a structure for present and future urban growth, andthe spatial configurations of key infrastructure; (c) strengthening the operation andmaintenance capabilities; (d) increasing the ability in revenue generation. efficienttax collection, and efficient use of resources. Develop a comprehensive package oftraining for local staff and elected officials.

(iv) Prepare detailed cost estimates subdivided into direct and indirect foreignexchange, Focal currency costs, and customs duties and taxes. Prepare a financingplan for the Project.

(v) Describe how the operation and maintenance of Proiect facilities will be affected,and the sustainability of the Project will be ensured. Undertake sustainabiityanalysis to show (a) affordability of the Projects components to municpalitiesincorporating an analysis of municipal revenues as well as subsidies, and b) costrecovery measures.

(vi) Evaluate in detail the environmental and social impacts. and benefits of the Projectin accordance with relevant Bank guidelines and publications, including therequirements of the Environmental Assessment Requirements and EnvironmentalReview Procedures, the Bank's Environmental Guidelines for SelectedInfrastructure Development Projects, Guidelines for Incorporation of SocialDimensions in Bank Operations, Handbook for Incorporation of Social Dimensionsin Projects, Mainstreaming Participator,' Development Processes, Guidelines onGender Analysis, and the Bank's policy on involuntary resettlement, and theGovernment's procedures for environmental and social assessment.

(vii) Carry out in-depth financial and economic analysis of the Project components inaccordance with the Bank's Framework for the Economic and Financial Appraisal ofUrban Development Sector Projects. including calculation of the economic internalrate of return for nonrevenue-generating components, and the financial internal rateof return and the economic internal rate of return for revenue-generatingcomponents in accordance with the Bank's Guidelines for the Economic Analysis ofProjects and Interim Guidelines for the Economic Analysis of Water SupplyProjects, and a transparent analysis of Project-related subsidies in accordance withthe Bank's Criteria for Subsidies.

(viii) Based on a detailed analysis of beneficiaries, descnbe expected benefit distribution,including an assessment of the poverty reduction impact, in quantitative terms andspecify indicators to monitor the benefits of the Project, and establish proceduresfor benefit monitoring and evaluation in accordance with the Bank's BenefitMonitoring and Evaluation: A Handbook for Bank Staff Staff of Executing Agenciesand Consultants.

(ix) Propose Project implementation arrangements, and demonstrate the relationshipbetween relevant institutions and indicate the responsibilities of each unit in aparticipatory framework.

(x) Describe procurement methods and packages, and draft outline terms of referencefor Project implementation and management consulting services.