PROJECT INFORMATION DOCUMENT (PID) CONCEPT STAGE Report No.: AB959 Project Name. Amazonas: Regional Development Project Region
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1 PROJECT INFORMATION DOCUMENT (PID) CONCEPT STAGE Report No.: AB959 Project Name Amazonas: Regional Development Project Region LATIN AMERICA AND CARIBBEAN Sector Health (34%);Water Supply and Sanitation (33%) and Sustainable Development (33%) Project ID P Borrower(s) STATE OF AMAZONAS Implementing Agency Secretariat of Planning Environment Category [ ] A [X] B [ ] C [ ] FI [ ] TBD (to be confirmed) Safeguard Classification [ ] S 1 [ ] S 2 [ ] S 3 [ ] S F [X ] TBD (to be determined) Date PID Prepared June 7, 2004 Estimated Date of September 26, 2005 Appraisal Authorization Estimated Date of Board December 15, 2005 Approval 1. Key development issues and rationale for Bank involvement Spanning 1.5 million km, Amazonas (AM) is Brazil s largest state comprising 18.5 percent of its territory and 31 percent of the nine-state Amazon Region (AR). The State s 2.8 million inhabitants, about 2 percent of Brazil s population, is evenly split between Manaus, the capital city, and interior municipalities. Economic activity is heavily concentrated in the capital where the Manaus Free Zone Trade (MFTZ) is located. The MFTZ generates 97 percent of State GNP and accounts for 95 percent of tax revenues, but only employs 20 percent of the EAP. (The service sector, also concentrated in Manaus, employs another 34 percent). Urbanization has accelerated throughout AM. In 2000, 75 percent resided in urban areas compared to 42 percent in Much of recent growth is occurring in small and mid-sized towns in the interior of AM. Unlike other areas of the AR that have lost 20 percent of the forest cover, AM retains about 97 percent, as climatic conditions are unfavorable for large scale cattle ranching and agricultural production. However, the forest is threatened by high poverty and unemployment rates, particularly in the interior where a large proportion of the population is economically dependent on exhaustible resource extraction. Human development indices have improved over the last decade, albeit at a slower pace than in other states in the AR. Nevertheless, AM is one of only two states in the AR to display an increase in the proportion of its population living in poverty (from 30 percent in 1996 to 40 percent in 2001). Over this same period, income concentration increased, surpassing the already highly unequal national average. AM s interior is characterized by low levels of human capital, skilled labor and economic activity combined with abundant extractive resources and environmental capital. Municipalities are vast in size, containing widely dispersed, small communities with significant communication challenges between them and with the nearest pole municipality as transport and logistics are predominantly river-based. For nearly all social and economic development indicators, AM s interior lags, displaying significantly lower levels of income and access to basic services, and
2 higher rates of unemployment, infant mortality and illiteracy. In 2000, over half of the interior s municipalities were ranked in the bottom quartile nationally, according the IBGE human development index (IDH-M). In contrast, Manaus was ranked in the upper quartile. Specific characteristics of the economic and social situation in the interior are as follows: Economic Activity: AM s interior is characterized by inadequate infrastructure (communication, transport, energy, etc.), high illiteracy rates and low levels of technical capacity. Timber extraction is the main economic activity followed by mining and agriculture, but most of the population depend on subsistence activities, such as low-productivity and small-scale agriculture, fishing, extractivism (both timber and non-timber forest products) and commerce. Monetary income in the interior municipalities is mostly based on salaries paid to public employees, and on social security payments, which sustain local commercial activities. Value-added industrial activities are uncommon and usually reliant on very basic technologies. The interior s economic potential rests in its abundant, diverse natural resources. However, in comparison with other states in the AR, the availability of infrastructure and human resources is so low that this potential has not been transformed into economic activities that could add value and benefit for local communities. The concentration of investment and institutions in Manaus, migration to the capital, and the lack of clear development strategies for the interior, have reinforced this stagnant situation. Water Supply and Sanitation: Water supply and sanitation (WSS) coverage in AM s 61 interior municipalities is generally very poor and service quality extremely precarious. Service provision to municipal capitals has deteriorated further following the loss of cross-subsidies after privatization of Manaus WSS system in 2000, and government policies devolving the responsibility for WSS to municipalities. No strategic vision was developed for this process, no TA or capacity building provided to municipalities, and no development undertaken of service models that provide economies of scale by grouping municipalities. An initial diagnosis shows that: (i) the problem is not the quantity of water that existing systems can produce, but the frequency, pressure and quality of the services; (ii) many municipalities have incomplete civil works for WSS systems and ad hoc alternative supply systems have been implemented by communities or municipalities, but adequate universal coverage remain elusive; (iii) operational control of services, potable water quality control, and preventive maintenance are inexistent; (iv) municipalities lack trained, skilled personnel to run the systems; and (v) sanitation systems are inexistent or inadequate, and micro-drainage systems often mix wastewater and storm water. Health: Communicable diseases such as malaria, leishmaniasis, meningitis and hepatitis are endemic in many interior regions (incidence is two to three times national levels). Vaccination rates for many infectious diseases are significantly lower than national averages. AM s disease surveillance system suffers from under-registration, estimated at 50 percent for interior municipalities, but still, available data suggest that infant and maternal mortality in the interior is significantly higher than Manaus as well as national averages. This reflects poor pre-natal coverage and dysfunctional referral systems. Incidence of diarrhea and respiratory disease is unacceptably high, with diarrhea disease accounting for more registered deaths than any other infectious disease, and probably the main killer of infants. State and municipal health agencies institutional capacity to formulate and implement policies, and manage and monitor service delivery is very low. Human health consequences of high rates of infectious disease, caused
3 partly by inadequate WSS service provision, lower labor productivity and generate higher treatment costs, which absent effective health finance and delivery systems, raises out-of-pocket spending and further reduces welfare. Public Governance and Management: Current GoA structures are not geared toward an environment conducive to creating economic opportunities or producing effective and efficient delivery of social and other servicess, especially in the interior of the state. Results are worse than expected given the level of government spending. Practices related to human and financial management, procurement, logistics and maintenance are inefficient, as best. Although such challenges are present throughout the country, and particularly acute in interior municipalities of the North and Northeast, the peculiarities of the demographic and geographic characteristics of AM and its interior municipalities exacerbates efficient governance and public service management AM faces tough development choices. Rising poverty and unemployment has increased pressure to create jobs, accelerate economic growth and improve access to basic social services. Economic development will depend on sustainable development policies that foster efficient use of the State s natural resources, protection of environmental resources and improvement of social conditions. 2. Proposed objective(s) The overall objective is to reduce the poverty rates in the interior of AM by improving economic conditions and quality of life while protecting the environment. The program will support a strategic framework that consists of: integration of economic, social and environmental policies and interventions, targeting of priority regions, enabling of effective community and stakeholder participation and strengthening of institutional capacity to monitor progress and ensure accountability. During an initial phase activities will focus on: sustainable economic development, WSS and health. By project conclusion, beneficiary communities should display higher levels of income, quality of life and health status generated through improved economic opportunities and access to basic health and WSS services. 3. Preliminary description Choice of Instrument: Project objectives will be supported through a two phase (each four years) programmatic APL. Three factors led the team to consider the AOPL approach: (i) the proposed project would be the first loan to AM, implementation capacity is untested and the APL instrument would provide greater flexibility to sequence the development and implementation of development actions; (ii) the project s cross-sectoral nature would require a long-term partnership with AM to operationalize, monitor and evaluate its strategic framework; and (iii) the APL-driven performance triggers would provide evidence of progress, allowing the team to expand or restrict activities under the different components during the subsequent phase. Preliminary Project Description: The first phase of the APL will consist of three components and cost an estimated US$220 million. Specific objectives and a brief description follow:
4 1. Regional Targeting of Priority Interventions: This component aims to raise health status, improve the quality of life and increase income by fostering environmentally sustainable economic activities and services for impoverished populations residing in priority regions of AM s interior. To enhance development impact, the proposed project will incorporate a crosssectoral approach in which financed activities are effectively linked on-the-ground, are directed to specific regions, build on participatory and demand driven processes and are part and parcel of a coherent, strategic framework integrating economic, environmental and social goals (see Box). Specifically, the project aims to reduce infant and maternal morality, decrease the incidence of infectious diseases, increase access to sustainable WSS services and improve economic conditions of impoverished populations residing in AM s interior. This will be achieved by: (i) extending coverage of basic health care, improving the quality of diagnostic services and effectiveness of referral systems, and strengthening disease surveillance systems; (ii) promoting operationally, socially, environmentally and financially sustainable service delivery for integrated WSS services (water supply, sanitation, solid waste management, and drainage) in urban agglomerations and - in response to demand in rural communities; and (iii) financing community-based economic subprojects, small-scale value-added private sector initiatives and small-scale infrastructure subprojects. 2. Institutional Development and Capacity Building: This overall objective of this component is to create an enabling institutional environment to support high performing and sustainable GoA development policies and program implementation, and to deliver the outputs and outcomes anticipated in the first component. Interventions will be directed to the state, regional and municipal levels. The project will aim to develop a public sector framework to strengthen governance and management practices and create accountability systems to improve public performance. This framework and corresponding instruments will be piloted, through the proposed project, in the GoA counterpart secretariats responsible for providing health, WSS and economic activities. Other activities would entail: (i) reorganization of the managerial, delivery, and supervisory/regulatory aspects of services based on a regionalized, pole model that can provide outreach support to municipalities and communities; (ii) strengthening oversight and governance practices through introducing results-based planning and management, and strengthening input management, monitoring and evaluation, and regulation; (iii) preparation and implementation of a model, and of a policy and legal and regulatory framework, for integrated WSS service provision in the interior; (iv) technical assistance, capacity building and other strategic support to the state, municipal and community stakeholders in the execution of interventions in integrated WSS and health in selected municipalities; and (v) strengthening communities and productive activities by building technical and managerial capacity, providing adequate technical assistance and building social capital in community based organizations; and (vi) environmental education and capacity building, and strengthening of local and regional capacity for environmental enforcement. 4. Safeguard policies that might apply The team considers that the following policies will apply the proposed project: Indigenous peoples and forestry. Prior to appraisal, indigenous peoples and forestry Action Plans will be prepared to assess and enhance the proposed project effectiveness to reach its environmental and social objectives, as well as to define mitigation actions as appropriate. A qualified technical
5 team will prepare the aforementioned assessments to be submitted to a public hearing and review. 5. Tentative financing Source: ($m.) BORROWER 20 INTERNATIONAL BANK FOR RECONSTRUCTION AND 200 DEVELOPMENT Total Contact point Contact: Gerard Martin La Forgia Title: Sr Health Spec. Tel: Fax: glaforgia@worldbank.org Location: Brasilia, Brazil (IBRD)
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