LE AR N I NOG BY DO IN G - World Bank · Urbanization offers the promise of economic high unit...

LE AR N I NOG BY DO IN G

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WORLD BANK LENDING FOR

URBAN DEVELOPMENT, 1972-82

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L E A R N I N G B Y D O I N G

WORLD BANK LENDING FOR

URBAN DEVELOPMENT, 1972-82

THE WORLD BANK

WASHINGTON, D.C. 20433, U.S.A.

2 LEARNING BY DOING

is now significantly below the Bank average. Staff only at the demonstration phase. Furthermore, asinput for processing projects varies according to Chapter Six affirms, urban growth in the decadethe type of project, with urban shelter and trans- ahead will continue to pose severe problems, andport projects close to the Bank average, while our understanding of these problems remains farintegrated urban development and regional devel- from complete.opment projects require substantial additional in- Nonetheless, substantial momentum has beenputs. Judging by the decline in staff time required generated by the first decade of activity. In someper project between fiscal 1972 and 1981, urban cities, initial projects that began in a single sectoroperations will increasingly conform to Banknorms as experience is gained within the Bank are now being expanded to encompass broaderand with borrowers. urban concerns, such as urban management andmunicipal finance. More than ninety projects areChapter Five shows that urban lending, though under consideration and preparation for the fiscalmodest in amount (it had risen to only 4.1 percent 1982-86 lending program, amounting to about $4of total Bank lending in fiscal 1981), has had a billion. Projects are proposed in about fifty coun-significant impact on the way urban issues are tries, of which half would be new borrowers.being analyzed and solutions formulated and im-plemented. Policy changes in line with the Bank's The proposed program reflects growing awarenessapproach are under way in more than thirty-five of urban problems in developing countries andcountries. Appropriate project design has reduced growing credibility by potential borrowers in thethe cost of providing shelter and infrastructure by expertise of the Bank. As in the past, the contribu-as much as 75 percent in many projects, and tion of the Bank's projects is expected to be smallextensive direct benefits are being generated. in relation to the size of the problem. Nonethe-Some 1.9 million households, or about 11.4 mil- less, it is expected to be catalytic. The majorlion persons, have benefited from shelter projects challenge, therefore, is to assist borrowers in repli-alone. Seventy percent of all projects devote large cating successful projects in broader programsshares of total costs to the urban poor. Estimated that draw on a variety of resources. Experiencerates of return for each type of urban project are has demonstrated, however, that replicability willhigh, with the fiscal 1981 average for eight proj- require doing more than just repeating projects onects at 21.9 percent. Furthermore, a convergence a larger scale. It will require addressing con-of the Bank's approach to the provision of shelter straints in housing markets, institutional capacityand infrastructure and those of other multilateral and finance, and urban management. In 1972,and bilateral donors has occurred over the past given the lack of solutions to urban problems,decade, leading, in some cases, to cofinancing of coupling learning with doing was the only sensibleprojects with the Bank and a growing consensus approach the Bank could take as it entered a newwithin the development assistance community on sector of lending. In 1982, based on a decade ofthe objectives to be achieved in the sector, experience, that strategy continues to be sensible,

because there is still much to learn and much toThese achievements have to be placed in their be done.proper context, however. Problems in implemen-tation remain, and, in some countries, projects are

3

1 The Setting of Objectives

The increasing importance of urbanization pated needs. Policymakers and technicians often

in the developing countries was recognized by lacked adequate technical and financial solutions

development specialists at the beginning of the to the problems they anticipated.

1970s. Projections of past trends suggested that By 1970, the problems of urbanization appeared

more than half of the world's population would particularly difficult to resolve to development

live in urban areas by the year 2000. The urbanpopulation was expected to grow from 1.3 billilon spcait,bcueteraaeeso'ra edpopu3blation, wasincrease expec to growhfrom 1.3bhad developed at the same time as an internationalto 3.3 billion, an increase equivalent to the

world's populan iconsensus was emerging that the rural sector

world's popula,tio in 1965.itea antiipthe should be the priority for assistance. Urban invest-that in Africa, the least urbanized region of the ment was discouraged on grounds that it wouldworld, the urban population would quadruple be- dvr eddrsucsfo h ua etr

tween 1980 and 2000. Thus, countries that have dMvert needed resources from the rural sector.been argey rual ae bengtansfrme withi Much of the urban investment at the time was

been largely rural are being transformed within subsidized by governments and benefited only a

two generations, and this transformation is likely minority of erpoultion. M eoer, urba eto brin both romiseand prblems.minority of the population. Moreover, urban serv-

ices, because of their high standards and therefore

Urbanization offers the promise of economic high unit costs (even with subsidies), were too

growth. As cities have grown, they have become expensive for the urban masses. It was therefore

increasingly important centers of industry, com- essential that a new approach be found which

merce. and trade. They have attracted large capi- acknowledged that the urban sector could and

tal investment and have offered job opportunities should pay for itself and which provided services

and higher incomes to migrants from rural areas. the urban poor needed and could afford.

In most countries, urban economic activity has

provided a substantial share of gross national The Primary Objective:

product and many of the goods and services re- The and Equity

quired for the development of other sectors. The E a E

economic and physical growth of cities has also Within this context, the Bank identified its pri-

brought increasing demand for shelter, water, san-itation. transportation, and communications. mary objective in the urban sector in broad terms:

Without these essential services, congestion can to asscst member governments to develop ap-

substantially raise the cost of urban residence and proaches for the efficient and equitable provision

employment. As costs increase, productivity de- of urban services and employment. This objective

clines or, at best, grows at a slower rate. To implied the need to coordinate citywide invest-maintain high poments in shelter, infrastructure, transport, em-

maintain high productivity, therefore, cities re- p'yet an oilsrie,adt hf h

quire coherent policies and efficient investments ployment, and social services, and to shift the

in urban services. Unfortunately, the need for bfinancal burden for urban development from the

sound policies and appropriate investments was public sector to the private sector and the urbansotfundpliciesy a appr oprated ianthe inveostmeount wpopulation itself. It also implied the need to directnot fully appreciated in the 1 960s in most coun- these investments to the needs of the urban poor,

tries. Governments frequently mounted expensive who cnvstitu th majority of the urban popra

public-housing schemes, extended water supply who constitute the majority of the urban popula-

networks, and built roads without considering tion in most developing countries.

how each project related to the others or to antici- These requirements, in fact, became concrete sec-

4 LEARNING BY DOING

ondary objectives for the short and medium term. This strategy was deliberately intended to beThey included the following: experimental. Projects staff would explore differ-* To demonstrate low-cost technical solutions for ent technical solutions with borrower agencies inshelter, infrastructure, and transport, which the order to identify solutions appropriate to individ-

urban population could afford and which could ual countries and cities. This research and devel-be improved over time. opment stage would be difficult, given the lack of

Bank experience in the urban sector, and would* To demonstrate that it was possible to provide require a substantial investment in staff time, asservices for most of the urban poor on a non- both the Bank and its borrowers gained experi-subsidized basis.

ence in preparing, appraising, supervising, and. To demonstrate the feasibility of comprehensive implementing projects. The urban lending pro-urban planning and investment procedures suit- gram would be closely monitored, and early proj-able to rapidly changing urban conditions. ects would be evaluated to determine their appli-

* To demonstrate the replicability of projects cability to similar situations in other countries.incorporating these objectives, that is, the ability Accordingly, the Bank launched a parallel urbanof such projects to be self-financing and self- research program, within the Urban and Regionalsustaining and thus to be extended or repro- Economics Division of the Development Eco-duced elsewhere. nomics Department, and in collaboration with the

These objectives were first presented in 1972 in International Development Research Centre ofthe Bank's Urbani-ation Sector Working Paper, Canada, to evaluate early projects in Senegal, Elwhich identified the scale and nature of the prob- Salvador, Zambia, and the Philippines. It alsolems posed by the urban sector in the Bank's began longer-term research on urban subjects suchas housing land, municipal finance, and nationalmember countries. It noted that many Bank activ- al straing,y.ities in the water supply, transport, education, and spatial strategy.industry sectors were already located in urban The Bank's urban lending strategy was not pri-areas and were thus contributing to urban devel- marily intended to transfer Bank resources asopment. However, these sectoral efforts were not much as it was intended to provide technicalintegrated into a framework that took advantage assistance to establish a framework for investmentof the many complementarities between shelter, from other sources. The financial requirements ofinfrastructure, employment, transport, and loca- the sector were, in any case, far too large to be mettion. Recognizing the dimensions and complexity by the Bank alone, or indeed, by external assis-of urban problems and the false starts that had tance as a whole. The Bank's strategy was embod-been tried by other aid agencies in the 1 950s and ied in a new program of urban lending for the1 960s, the paper counseled selectivity in the types five-year period, fiscal 1972-76, comprising a totalof projects undertaken and an approach of "learn- of thirty-eight operations. Two-thirds were to being by doing," which could be expanded as the "sites-and-services" projects to encourage the poorBank gained experience in the urban sector. to construct their own homes on vacant sites thatThrough this strategy the Bank would not "solve" were provided with basic services. The emphasisurban problems, rather, it would "exert a catalytic on such projects reflected the perceived need toor dynamic influence on the pattern of growth provide affordable shelter and infrastructure tothrough the project itself, or through the linkages low-income urban residents through the mobiliza-with other sectors and the overall planning in- tion of private savings and self-help construction.volved."' It was recognized at the outset that The remaining projects included urban regional-individual projects would achieve only limitedimpact initially. Over time, projects would ad-dress broader policy and institutional issues and Urbanization Sector Working Paper (Washington, D.C.: Thewould eventually have a sectorwide impact. World Bank, June 1972), p. 57.

The Setting of Objectives 5

The squatter upgrading projectin Lusaka, Zambia, was one of

the first Bank-assisted urban

projects. The photo is of a

young Zambian who is beingtrained to help residents im- 4P

prove their construction skills.

| i

development schemes, urban transport, and other specialists outside the Bank, which had convened

intraurban investments. Although these efforts in October 1974. However, additional issues had

were seen as points of entry for the Bank into the been raised in the field which suggested broaden-

urban scene, they were also intended explicitly to ing the approach. The panel had concluded that

improve the "efficiency of the urban centers both upgrading existing settlements should have equal

for production and living."2 The Bank's first urban priority with developing new sites and services, in

lending operation, a sites-and-services project in part because of the advantages in physical access

Senegal, got under way in June 1972. Other proj- to employment that settlements provided to the

ects were soon begun in Botswana, El Salvador, poor. Access was considered an important link

India, Indonesia, Jamaica, Kenya, Nicaragua, between shelter, employment, and services, and

Tanzania, Tunisia, and Zambia. thus a key factor in the efficiency of the city. In

this context, the issue of urban transport was also

Initial Objectives in Shelter raised. In short, it was emphasized that efficient

By early 1974, several major policy issues had been project design should take greater account of the

raised during the preparation of the initial urban complementarity of urban services.

projects. These included the extent to which the These discussions, as well as two years of initial

Bank should finance the construction of completed contacts with governments, led to the establish-

shelter units or cores, the income levels of benefici- ment of guidelines or conditions for urban lend-

aries of Bank-assisted projects, and the relation of ing. As elaborated in the Housing Sector Policy

shelter or housing projects to other investment Paper (May 1975), these conditions included the

programs in individual cities. The approach pro- following:

posed in the 1972 sector working paper had been

supported by a panel of experienced urban 2 Ibid., p. 55.

8 LEARNING BY DOING

Small enterprises help boost urban employ-ment. Here, a tailoring shop in Madras, India.

| ,*~~~__ 44\ <

decision to make urban poverty the major theme many sectors. Their target was to be the urbanof the President's speech to the 1975 Annual poor, identified according to the income levelsMeeting. Throughout 1975 there was considerable and living conditions found in individual cities.debate within the Bank over its objectives in The President's statement that the Bank was pre-urban areas. In addition to the agreed objective of pared to assist member governments along theseimproving urban services for people with low lines prompted many requests for Bank help.incomes, there emerged strong interest in the need In addition to the impetus given to urban lending,to generate employment for the growing urban the 1975 speech also led to the decision that otherpopulation. Thus, the President's speech recom- B a amended more programs that used credit, training, oBank activities affecting urban areas should be

.' monitored within a Bankwide urban poverty pro-organization, marketing, and other forms of assis-tance to encourage the creation of small enter- grBamT program hdtecti ves: b t motor Bank progress in directing the benefits ofprises, which could boost urban employment. The urban-related lending toward the urban poor andcost of job creation was to be kept low in order to . ° . . .provide the largest number of jobs with the im- to provi

on urban povert. Starting in 1975 the Urbanited capital available. This well-intentioned objec- Projects Deprtmentproided a te t otherProjects Department provided assistance to othertive has remained elusive, however (see Chapter sectors, such as industrial development andTwo).

finance or water supply and sanitation, in devel-Individual projects were to include shelter, infra- oping approaches to provide benefits to the urbanstructure, related social services, and employment poor. In fiscal 1978-80, for example, some sixcomponents. As such, projects became integrated manyears of support were provided to thirty-eighturban-investment programs, requiring the partici- water supply projects. This support resulted in anpation and coordination of institutions from increase in the share of poverty-oriented lending

The Setting of Objectives 9

in water supply projects from 14 percent to 18 Towards an Urban Perspective

percent over the three years and a jump from $52 Throughout the 1 970s there was a consensus that

million to $145 million in benefits accruing to the the Bank should address problems in the urbanurban~~~~~~~~~~~h poor.udades rblm nth ra

urban poor. sector broadly and not restrict itself to subsectoral

At the same time, the design of projects in other areas such as housing or transport. Nonetheless,

sectors was monitored to evaluate the benefits of extensive discussions occurred within the Bank

Bank lending directed toward the urban poor. over whether projects and policy dialogue should

This work was placed under the guidance of the be focused on urban development or urban pov-

Urban Poverty Task Force, which prepared regu- erty, whether subsectoral projects would promote

lar progress reports and technical papers. The discussions between the Bank and borrowers over

objective was to create an environment in which sectoral policy, or whether integrated projects

consciousness was raised about the significance of could be expected to produce jobs while also

urban poverty and the opportunities that Bank improving infrastructure. Interest in generating

activities offered to alleviate it. urban employment resulted in lengthy discussionsbetween departments over the best approach: for

Meeting Basic Needs in Shelter example, whether it was more efficient to target

By 1980, many of the Bank's policy objectives of job-creation programs to particular groups or to

the 1 970s were being seen within the framework establish broader citywide employment programs.

of "basic needs." even though the Bank's ap- In some cases, it was felt that national policies

proach stressed improving the efficiency of urban and economic factors were likely to be more im-

services. All of the projects then under implemen- portant than individual city-level efforts in gener-

tation aimed at achieving basic levels of shelter, ating employment.

infrastructure, and health. However, the Bank was The process of elaborating the Bank's objectives

aware of the vast scale of the shelter problems in in the urban sector also demonstrated the diver-

developing countries.'0 It was realized that urban sity of conditions that lending in the urban sector

shelter and infrastructure programs on the scale would have to address. Perspectives varied tre-

required for a country to meet its basic needs mendously from region to region, reflecting the

would continue to exceed the resources available extent of urbanization, urban poverty, and gov-

in that country-unless the shelter programs ernment policies in individual countries. These

could be undertaken at standards low enough to conditions suggested that some cities might be

be affordable by the beneficiary population. Only appropriate for broad, integrated citywide

in this way could self-sustaining, large-scale pro- approaches, while others could not effectively

grams be launched. The preconditions to financial handle large-scale investment. It was apparent

replicability were appropriate standards and that urban policy objectives would have to be

sound pricing policies, while the precondition for achieved through different strategies over varying

physical implementation, cost recovery, and periods, according to local conditions. Identifying

maintenance was the strengthening of housing operational targets for those strategies was the

and infrastructure institutions in the urban sector. next step.

These goals represented a more informed restate-

ment of the Bank's initial objectives as established lo Anthony A. Churchill, Shelter (Washington, D.C.: The

in 1972. World Bank, September 1980).

10

2 The Development of an Urban Lending Program

After the Bank set its objectives for urban * Shelter projects have fallen into two subcate-lending, the formulation of lending strategies and gories. Slum-upgrading projects have beenthe choice of projects were left to the urban proj- intended to improve existing substandard hous-ects staff. The lending program they developed ing by providing residents secure land tenurehad to take account of great differences in the and better access to credit for construction andurban conditions, the population, the level of by upgrading infrastructure such as water sup-development, and the technical sophistication of ply, sewerage, electricity, roads, and sidewalks.potential borrowers. Requests from borrowers Sites-and-services projects have been designedvaried tremendously, with India seeking major to encourage individuals to construct their ownassistance for Calcutta, while less urbanized coun- homes on serviced sites, again by providing landtries such as Botswana requested support for solu- tenure, access to loans, and a variety of essentialtions to problems in small towns like Gaberone infrastructure and social services.and Francistown. Some governments were well * Urban transport projects have included efforts toaware that the housing, transport, and employ- improve urban traffic management, to upgradement problems of their cities were often interre- bus and rail service in cities, and to improvelated. Others took a narrower approach, viewing roads and pedestrian walkways.the spread of squatter settlements as simply ahousing problem or traffic congestion as a result * Integrated urban projects have been either city-of too few expressways or buses. All officials felt wide investment programs or multisectoral proj-their capital, whether it was Bamako, Mexico ects that usually have included more ambitiousCity, or Seoul, was too large and that migration transport and business-support componentshad to be stopped. than was possible in subsectoral projects in shel-The shared problems of shelter, infrastructure, ter or transport.transport, and institutional weakness in many * Regional development projects have been effortscountries suggested that the major thrust of Bank to extend the multisectoral approach of inte-lending strategies in the urban sector should be to grated urban projects beyond individual cities toorient the thinking of local officials toward regions as a whole.broadly integrated solutions to urban problems,rather than individual subsectoral approaches. It Table shows the continuing emphasis on-andwas clear, however, that such a view could be demand for-shelter and infrastructure projects.achieved only gradually. Lending operations In fiscal 1977-79, there was an increase in theneeded to address the major issues as govern-. mene to addrcesse them, major iues as govateran -nnumber of integrated urban projects, reflecting theronmentsin perci them, Basnwl asd cathe arnmenv- Bank's increasing emphasis on addressing urbanronment in which the Bank and the governments pvrytruhamlietrlpormwticould develop a clearer understanding of urban poetyhruhamlicoalrgamwhncoluldonsin developa clarecunstanding of urban individual cities. Urban transport projects have

remained few in number, although borrowers' re-This chapter examines the different lending strate- quests have begun to increase as initial projectsgies and project types that were developed in have proved successful. Regional developmentresponse to the variety of urban problems among has been largely focused on Korea, where twoborrowing countries. projects are being implemented.

The Development of an Urban Lending Program 11

Table 1: URBAN PROJECTS: LENDING AND COSTS, BY TYPE, 1972-81

TotalType and Number ol Amount lent project costsfiscal year projects (US$ millions) (US$ millions)

Shelter 2 1 3 16D1972 103 126.01973 1 20 0 6. 01974 2 180 39

1975 5 78.0 140

1976 2 536 108 2

1977 2 652 1293

1978 7 1203 1978

1979 3 1790 431 1980 ~~~~~~~7 192 8 314 4

1981 5 2050 4589

Total 36 942 2 1,906

Transport1972 0 00 0

1973 1 16 0 31 7

1974 2 60 0 95 9

1975 0 0.0 0 0

1976 1 26 0 65 0

1977 1 25 0 50 5

1978 2 104 5 280 3

1979 1 16.0 34 0

1980 1 56 0 121 7

1981 1 90.0 257 0

Total 10 393 5 936 1

Integrated

1972 0 00 0

1973 0 00 0

1974 1 35 0 96 9

1975 0 00 0

1976 0 00 0

1977 2 68 0 174.3

1978 4 143 8 304 3

1979 4 114 5 295.6

1980 1 35 0 133.3

1981 -1 42 0 84 0

Total 13 438 3 1,088 4

Reinl1972 0 0 0 0 01973 0 00 0

1974 0 0.0 0 0

1975 1 15 0 25 0

1976 0 00 0

1977 0 0.0 0 0

1978 0 00 0

1979 0 00 0

1980 1 65 0 154 8

1981 1 16-40 468

Total 3 244 0 647 8(Continluedt

12 LEARNING BY DOING

Table 1: URBAN PROJECTS: LENDING AND COSTS, BY TYPE, 1972-81 (Continued)

TotalType and Number of Amount lent project costsfiscal year projects (US$ millions) (US$ millions)

All urban projects1972 2 10.3 16 21973 2 36 0 57 71974 5 113 0 232 11975 6 930 17901976 3 796 17321977' 5 1582 354 11978 13 3686 78241979 8 3095 76121980 10 348 8 724 21981 8 5010 1298 2Total 62 2.018 0 4.578 3

Table 2: URBAN PROJECTS: LENDING AND COSTS, BY REGION, 1972-81

TotalRegion and Number of Amount lent project costsfiscal Year projects (US$ millions) (US$ millions)

Eastern Africa1972 0 0 01973 0 0 01974 1 3 0 4.41975 3 445 8751976 0 0 01977 0 0 01978 3 700 11121979 0 0 01980 2 210 23 81981 1 15 0 24 5Total 10 1535 2514

Western Africa1972 1 80 1291973 0 0 01974 0 0 01975 0 0 01976 0 0 01977 1 44 0 122 31978 1 8.2 10 81979 1 12.0 15 31980 1 17 8 36.61981 0 0 0

Total 5 900 1979

The Development of an Urban Lending Program 1 3

Total

Region and Number of Amount lent project costs

fiscal Year projects (US$ millions) (US$ millions)

Europe, Middle East,and North Africa

1972 1 2.3 3.3

1973 0 0 0

1974 2 60.0 95 9

1975 0 0 0

1976 0 0 0

1977 0 0 0

1978 2 32.0 58.6

1979 1 19.0 45.0

1980 0 0 0

1981 2 57.0 138 6

Total 8 170.3 341.4

Latin America andthe Caribbean

1972 0 0 0

1973 1 20.0 26 0

1974 1 15.0 34 9

1975 1 8.5 15 5

1976 1 21.6 43 2

1977 1 12 7 24 5

1978 5 162.8 400 9

1979 3 176.5 501 0

1980 3 88 0 2109

1981 2 254.0 725 0

Total 18 759 1 1 9819

South Asia1972 0 0 0

1973 0 0 0

1974 1 35.0 96 9

1975 0 0 0

1976 0 0 0

1977 2 49 0 102 5

1978 1 87.0 183.7

1979 0 0 0

1980 1 56.0 121 7

1981 1 420 840

Total 6 269 0 588.8

East Asia andthe Pacific

1972 0 0 0

1973 1 16 0 317

1974 0 0 0

1975 2 40 0 76.0

1976 2 58.0 130 0

1977 1 52.5 104 8

1978 1 8 6 17.2

1979 3 102 0 199 9

1980 3 166.0 331 2

1981 2 133.0 326 1

Total 15 576.1 1 2169


The size of the lending program has varied from 'region to region, reflecting, to some degree, differ-ences in urbanization and institutional capacity - A(see Table 2). The regions of Latin America and A Athe Caribbean and East Asia and Pacific accountfor over half the urban lending program. Initially,however, many countries in Latin America, themost urban region, were not receptive to the low-cost, nonsubsidized urban projects that the Bank i__ was prepared to finance. In contrast, countrieswhere Bank assistance was actively sought, as inBotswana, rather quickly accepted the Bank ij Iapproach. Changing governmental attitudes to-ward the urban poor and more effective staffcommunication with Latin American govern- i7ments led to a rapid expansion of lending duringfiscal 1977-79, with nine projects begun in threeyears, including three in Brazil and two in Colom-bia. The consolidation of the program in the EastAsia and Pacific region in the last three years NWreflects successful early experience in Indonesia, -wthe Philippines, and Korea.

The regional lending patterns also reflect major _ -

differences in types of projects, as shown in Table3. All regions except South Asia have experi- mented to some degree with shelter projects, withEastern Africa concentrating most heavily on 4,shelter projects. The other regions have widened i t B - s -their scope by experimenting with the other types seres poet in SankSalvador, Eltsaldoof projects. Integrated urban projects have beenthe major focus from the outset in South Asia, than the urban middle class, who benefited mostreflecting the multiple needs of the large Indian from existing subsidies for urban services. Al-cities. though standards of project design varied from

Urban Shelter Projects city to city, they were deliberately set low so thatservices would be affordable by the poor. This

As noted in Chapter One, the first urban shelter approach, it was assumed, would permit projectsprojects assisted by the World Bank reflected an to recover their costs and thus be replicable on aapproach that differed significantly from what larger scale.most governments-and practically all develop- As a basis for discussion with borrowers, thement assistance institutions-were doing at the approach proved to be a strategic point of entrytime. The projects were designed to encourage the into the urban scene, because most governmentsmobilization of private savings and self-help could afford neither the financial cost of conven-efforts. Public-sector interventions were to be lim- tional housing solutions nor the political costs ofited to services that people could not provide for bulldozing existing squatter settlements. They hadthemselves, such as citywide planning and con-' . . . ~~~~~~~to examine other alternatives.struction of infrastructure. Projects were aimed atthe majority of the urban population living in Shelter projects dealt with two fundamental prob-unserviced slums and squatter settlements, rather lems: the need for new shelter units and the need


Table 3: URBAN PROJECTS. LENDING AND COSTS, BY REGIONS AND TYPES, 1972-81

Total

Region Number of Amount lent project costs

and type projects (US$ millions) (US$ millions)

Eastern Africa

Shelter 10 153 5 251 4

Transport 0 0 0

Inlegrated 0 0 0

Regional 0 0 0

Total 10 153.5 251 4

Western Africa 6.

Sheller 3 34 0 60.3

Transport 0 0 0

Integrated 2 56 0 137 6

Regional 0 0 0

Total 5 900 1979

Europe, Middle East.

and North Africa 141 9

Shelter 3 593 11

Transport 2 60.0 959

Integrated 3 510 1036

Regional 0 - 0 -

Total 8 1703 3414

Latin America andthe Caribbean

Shelter 10 257 3 546 0

Transporl 3 19425 537 3


Regional 1 164 0 468 0

Toial 18 759 1 1,981 9

South AsiaSheller 0 0 0

Transport 2 81 0 172 2


Regional 0 -0 0

Total 6 269 0 588 8

East Asia and Pacific

Shelter 1 0 438 1 906 4

Transport 3 58 0 1307

integrated 0 0 0

Regional 2 80 0 179.8

Total 15 576 1 1.2169

to improve existing substandard units. The first vador, Jamaica, Kenya, Peru, Senegal, and Tan-

problem was met through sites-and-services proj- zania were largely focused on sites and services.

ects. The sites-and-services approach was

intended to be flexible and did not imply precon- I The initial application of the concept, even by Bank staff,

ceived notions about architecture, costs, or build- however, tended to be rather rigid. Greater flexibility

ing materials.' Early projects in Bostwana, El Sal- resulted from implementation experience.


Urban Shelter in Francistown

In 1974. Francisio%%n. sith a population orabout The gomernment lelt the need to introduce order22.000. %%as the regional urban center for nornh- into this process of urbanizaiion. It %as anlici-ern Botswana. As a result Of the newk mining pated that peoples' inc.omes would nse as em-acti ity associated with newvly discosered nickel plo ment opporlunities grew and ihai more per-and copper deposits, the to'An was grow.ing rapid- manent housing "sould be necessarN and shouldly-rural migranis were mo% ing into town to find be affordable lo the majont) of residenis.

I work. t Unlike examples from elsewhere-in wkhich| the migrant workers form an arms of single men. The protect called for the upgrading of existingtheir families left behind to tend to traditional squaller areas (affecting 1.000 households). provi-agricultural acii' ities-the migration inio Fran- sion of 1.00(1 settlement plots for iraditional

cistown kas a fiamil affair. A hole households housing. pro% ision of 800 sites-and-services plots.moved into the area so ihaL iheir children could and-for the people occupxing ihem-loans toaLtend school. Families (average size of five) usu- buN building matenals. In order that benefitsally lied in traditional "rondavel' or other could touch even the poorest, each of the threemakeshift housing as squatters on ihe edges of ways in which ihe need for shelter %%as to belosW n. Because average incomes were loA ($75 per tackled-upgrading. acquisition of ploLs. and sitesperson annually). housing was consiructed of' and serx ices-was designated for different in-materials scavanged from the local en% ironment. come groups.

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- -- .-.

'A ~ ~ ~ ~ ~ ~ ~ ~ A

Rondavels in Francislown *vere consiructed ol malerials scavenged Irom tre local en,,fonment

The second problem was addressed through Both approaches required that households receiveslum-upgrading projects, which assumed that security of land tenure, thereby providing anhouseholds would be permitted to stay in their incentive for the mobilization of savings and self-existing settlements and that, with only minimal help efforts. In both cases, households were to paydemolition and relocation, infrastructure-infor infrastructure provided by public-sector agen-cluding water supply, sanitation, roads, footpaths, cies and finance their own housing. Designs ofdrainage, and electricity-would be extended into individual projects depended on the income levelsthe settlements. Projects in Colombia, India of the households themselves.(Calcutta and Madras),2 Indonesia, Upper Volta,and Zambia emphasized upgrading. 2 Both projects included shelter components of this type.


Initially, debate marked the preparation stages of ' -both types of projects. Most governments argued ' -

on political and technical grounds that reduced 4

standards were unacceptable because they were"not good enough for our people." This subject

was often followed by disagreements over the

recovery of investment costs, particularly where . ,_

colonial traditions and political imperatives had I Z} i^ s e=

resulted in the free distribution of water or other . "t --

services to the urban population. The sites-and- , @ jY XMservices approach challenged building codes by - -

asserting that households should be able to build _

houses according to their own preferences, includ-ing design, materials, schedule, and finish.

Despite substantial resistance in some countries,the initial projects demonstrated that both sitesand services and slum upgrading representedfeasible alternatives to the continued growth ofuncontrolled, unserviced settlements. Once gov-ernments were convinced of the approach, as inIndia, Indonesia, Kenya, Nigeria, and the Philip-pines, projects were designed either to increase the _'

scale of programs in the same city or to extend the _-__

concepts into other urban areas. Pilot projectsdemonstrated that it was possible to reduce costs k

dramatically for shelter and infrastructure. These Tondo (Manila): two scenes, one prior to upgrading,

projects also demonstrated that it was possible to the other, after.

improve the living conditions of the urban poor. million during fiscal 1972-76 to $65.3 million in

By 1981, projects were reaching to about the low- fiscal 1977-81. Amounts lent have increased to

est twentieth percentile in the urban income dis- $30.4 million, and the average number of house-

tribution, while upgrading projects reached lower. holds each project provides with services has

These impacts are described in greater detail in grown to 62,000 in fiscal 1981. Although there

Chapter Three. have been problems of varying severity in imple-

Between fiscal 1972 and 1981, thirty-six urban mentation, the projects have had substantial suc-

shelter projects-at an average total project cost cess in reducing plot sizes and unit costs forinfrastructure, and in shifting government agen-

of $53.2 million, of which 37 percent was in ciestrdcture, cost-effhitivernmenthe

foreign exchange-were approved by the Bank. cies toward more cost-effective approaches in the

The average amount lent for the shelter projects shelter sector (see Chapters Three and Five).

has been $24.9 million. Shelter projects, on the The enduring success of these shelter projects

average, have devoted 65 percent of total project depends on a simultaneous improvement of insti-

costs to their primary components, either sites tutions working in the sector. The scale of subse-

and services or upgrading. They have benefited quent projects, even after policy differences and

some 25,000 households per project. Over time, implementation problems have been resolved,

these figures have increased, as both the Bank and will be determined by the ability of agencies to

its borrowers have gained confidence in their abil- staff their operations, to plan and budget effec-

ity to prepare and implement these projects. The tively, and to carry out their responsibilities dur-

average total project cost increased from $29.0 ing implementation. Institutional development,


therefore, is the next major step in further devel- in cities in developing countries and were recom-oping urban shelter projects, and, indeed, is the mending that transport investments focus on im-precondition for national replicability. proving existing facilities and services for the

urban poor. This approach, however, proved to beUrban Transport Projects difficult to achieve in many cities, as their physi-

As noted in Chapter One, the Bank had quickly cal expansion frequently required transportidentified the importance of urban transport to investments of all types. Furthermore, in contrastthe management of specific cities and the sector as to shelter projects, transport lending reflecteda whole. Many cities were devoting sizable much greater variation in city conditions.amounts of capital to the construction or im- From 1972 to 1981, the Bank approved elevenprovement of major road and rail systems and to urban transport projects and another eleven urbanthe purchase of buses in order to meet growing projects that included significant transport com-needs, yet few governments had a coherent view ponents. The total costs of the eleven transportof the sector as a whole, particularly the long-term projects amounted to some $1,254.5 million, offinancial implications of these investments. which the Bank financed $546.9 million. In addi-Lending for urban transport started relatively tion, the transport components of urban projectsslowly in 1972-73, with projects in Malaysia, Iran, cost some $275.1 million, of which the Bankand Tunisia, and transport components in inte- financed $139.5 million. Taken together, urbangrated urban projects in India (Calcutta) and transport lending in these two forms amountedTurkey. Each of these projects represented differ- to $686.4 million. The size of projects variedent approaches to transport problems: Some 91 from $159 million for the second Brazil Urbanpercent of the project costs in Malaysia were Transport Project in Porto Allegre to $0.3 mil-allocated to road construction; half of the costs in lion for components in the second Urban Devel-Iran were devoted to the purchase of buses and opment Project in Kenya.another 20 percent to traffic management; the Table 4 indicates that 56 percent of the Bank'sTunisia project combined various transport urban transport investments went to improve-improvements, including the purchase of buses, ments in transport infrastructure (road and rail),with broader support for the newly created Dis- which was not the primary thrust of the 1975trict of Tunis. Transport subprojects in the initial policy paper. It is important to add, however, thatCalcutta project were almost exclusively focused much of the investments in road infrastructureon road construction and improvements, while was designed to benefit public transport vehiclesthe Istanbul project financed technical assistance and low-income areas. The low proportion offor transport planning. The diversity of this costs devoted to traffic management reflects theapproach reflected the Bank's early emphasis on relatively low cost of such measures, not theirexperimentation and learning. 3 importance. As shown in Table 5, some 38 per-After these initial efforts, there was a pause during cent of project components were devoted to traffic1974-75, when a number of projects and compo- management and technical assistance, and thusnents were under preparation, but no operations faced up to issues of policy and use of existingwere approved. During this period there was ex- facilities. Furthermore, a significant number oftensive discussion about the direction of Bank projects promoted better traffic-control measures,lending in the subsector, culminating in the improved financial management of bus compa-approval of the Urban Transport Policy Paper in nies, more efficient programming of road invest-May 1975. As noted in Chapter One, this paper ments, and better understanding of the recurrentestablished a framework for lending, which gained budget implications of transport investments. Asome momentum thereafter. At this time, Bank

3 This approach was envisaged in the Urbanization Sectorurban staff were taking strong positions against Working Paper (Washington, D.C.: The World Bank, Junethe construction of major roads and rail systems 1972).


Table 4: URBAN TRANSPORT INVESTMENT AS Integrated Urban Projects

A PERCENTAGE OF TOTAL PROJECT COSTS Integrated urban projects comprise various com-

-- - - - -binations of components dealing with shelter,Road construclion improvement maintenance 32 infrastructure, transport, solid-waste manage-

Rail systems3 24

Bus acquisition. tacililies priorities 22 ment, busiess support, health, nutrition, andTraftic management 9 education. They were intended to provide broadTraining and lecinical assistance 6 improvements throughout the city, even if indi-

Other tsector lending) 6 vidual components were not launched on a city-

Pedestrian lacilities 1 wide basis. The rationale for citywide approaches,

Tolal l00 which had been developed in urban studies at the

30ne suburoan railwaa protect in Porlo Alegre Brazil end of the 1960s, argued that complementaryurban investments were likely to have a greater

impact on urban development than more narrow

Table 5:URBANSTAPECNSPOR COMPONENTS subsectoral efforts. Cities that had identifiedAS A PERCENTAGE priorities across sectors through comprehensive

OF TOTAL PROJECT COMPONENTS planning thus became experimental sites for city-

wide lending. The case of Calcutta was the firstRoad construction improvement maintenance 27Busd acqnsruition. tacilities.prioritiese 25 effort of this type by the Bank, which respondedBus acquisition, facilities. priorities 25 Tecnnical assislance and training 22 to deteriorating conditions in the city and to theTratic management 16 urgent request of the Government of India. ThePedestrian facililies 6 project consisted of components that were treatedRail systems 3 as elements of an urban investment program

Otlher sector lending) 2 rather than as self-contained subprojects. Finance

Tolala 100 was included for some 44 of 160 subprojects over

aTotal aoe-. nor agree .,1ith sum brecause ot rounding six sectors within the investment program of the

Calcutta Metropolitan Development Authority(CMDA). In addition to its intended benefits for

conclusion from this experience is that, while

the institutions responsible for urban transportare relatively well developed in some countries, - .

they generally require strengthening to manage _

the sector and its variety of subcomponents. ' _ -

Where strong federal urban transport institutions Iexist, with well-developed policies and financial

mechanisms, it is possible to develop largeurban transport lending programs rapidly. In _ -,

Brazil, for example, three projects, amounting to .

$339 million in lending, were approved in the

four-year period, fiscal 1978-1981.

Given the diversity of approaches, the Bank isnow reviewing its experiences in the urban trans- Calcutta: the request for help was an urgent one.

port sector to identify current and future issues.Those issues include determining regional strate- the city population, the project sought to

gies, conserving energy, setting priorities for rail strengthen the capacity of CMDA to plan, finance,

systems and maintenance, and reassessing road execute, and supervise projects. It was intended as

pricing, an issue whose introduction has proved the first in a series of Bank projects, and it set the

politically unacceptable in some cities. stage for a second and a third IDA credit, the


latter now in preparation. Evaluation of the first interrelationships among different types ofCalcutta project has demonstrated the success in investment.the strengthening of CMDA, now an institution Developing this approach took some time, butwith a staff of more than 4,000. It also pointed to resulted in a group of integrated urban projects,the many benefits of improving coordination of which were first financed in fiscal 1977. Theseinvestments across sectors. hc eefrtfnne nfsa 97 hs*nvestments across sectors. projects were distinguished from shelter projectsWhile the Calcutta project involved direct financ- by the scale of individual components, the num-ing and has had concrete achievements, two other ber of agencies involved within a citywide frame-efforts, in Istanbul and Bogota, had less positive work, and the effort to integrate investments.outcomes. In Istanbul, the Bank financed a city- They were designed from a broad conceptual per-wide planning exercise that included preparation spective that attempted to achieve an overallof a master plan for the city, a detailed urban "urban" view-rather than a subsectoral one-attransport model, and several pilot projects to be the outset. The development of this approach isidentified during the planning effort. Although still very much in progress and, as with the otherthis exercise produced a master plan and, to some types of projects, implementation experienceextent, improved the understanding of the long- across the regions has provided useful lessons forterm needs of the city, the Istanbul experience the improvement of the design of subsequentdemonstrated to many Bank staff that compre- projects.hensive master planning was a slow process thatcould not keep up with the rapid changes in mostcities. Emphasis on physical issues often diverted . 'attention from the more important institutional -.and financial problems that would ultimatelydetermine the extent of physical investments.Simultaneously, the Bank's experience as execu-ting agency for the Bogota urban study producedthe same conclusion and added to growing skepti- jcism about conventional master-planning -approaches. This perspective was also extended to ____

sophisticated urban economic models, which had l Sbeen developed during the 1960s. A Bank reviewof these models concluded that they did not have - -much relevance for developing countries. 4 In Madras, loans met about one-third of the cost ofconstruction. The rest of the money came fromIn place of these approaches, Bank staff increas- personal wealth, from previously unproductive as-ingly focused on the need for complementary sets, such as jewelry.investments in shelter, infrastructure, transport, The increased number and scale of individualbusiness support, and social services over specific components and the inclusion of institutionalperiods. This approach included: support resulted in projects that were somewhat

. Relating resurcIavilailtyflarger than the urban shelter projects. Averagep Relatnedingvresourcent availabilitytothescaleoftotal project costs were $84.0 million, with an

average amount lent of $33.7 million. The* Emphasizing short-term and medium-term foreign-exchange component of total project costs

priorities consistent with several long-term op- was about 31 percent, somewhat less than thetions, rather than aiming for an optimum long-term plan. 4 Rakesh Mohan, Urban Economic and Planning Models:

Assessing the Potentialfor Cities in Developing Countries. Paying ateninocopentrti(Baltimore, Md.: The Johns Hopkins University Press,* Paying attention to complementarities and other 1979).


shelter projects. Their estimated rates of return region. The second project included shelter, infra-

were about 24 percent.5 structure, industrial-development zones, water

Although it is difficult to evaluate many of the supply and transportation, fisheries development,

integrated projects because they are still being and technical assistance. This experience hasimplemen yhave provided important demonstrated the efficacy of complementary

implemented, they iesign.ide imporat Investments in related sectors. However, suchinsights into project design. The integrated proj- efforts require extensive preparation and close

ects require extensive preparation and the partici- coordination. Implementation problems can also

pation of many agencies during implementation. substantial. Nonementation developmens

They have encountered implementation problems, be substantial. Nonetheless, regional development

but they have had broad effects, which justify the may be cost effective, given the impact in return.

effort (see Chapter Five). The major lesson drawn A third regional development project, located in

to date from this experience is that integrated southeastern Mexico, was approved in 1981 and

projects should continue to have many subsectoral involves a multisectoral approach to the prob-

objectives, but only one or two should have pri- lems of ten towns within the region. The project

mary emphasis.6 In the case of a follow-up project includes sites-and-services and upgrading pro-

in Madras, for example, the Bank decided to grams to improve shelter; citywide efforts to

emphasize the shelter and transport objectives and improve infrastructure, municipal facilities, and

to lessen the prominence that the other subcompo- services; and activities to promote economic

nents had in the first operation. development, including credit to artisans andsmall-scale enterprises, creation of industrial

Regional Development Projects zones, training and promotional programs, and

As its shelter projects have increasingly moved technical support and studies.

out of capital cities toward secondary urban cen- The design of the three regional projects takes into

ters, the Bank has developed a broader concern account the need to strengthen the regional per-

for regional growth. Multicity projects now repre- spective within existing institutions, while also

sent 50 percent of the urban lending portfolio. improving individual sectoral agencies. In each,

These projects, however, rarely have had explicit the programming of investments, operations, and

regional development objectives. In contrast, maintenance is complicated. However, many of

three efforts, two in Korea and one in Mexico, these activities would occur without the projects,

have explicitly been regional development proj- although at lower levels of investment. The proj-

ects, with components designed to have a broad, ects thus fit within an ongoing regional effort to

multisectoral impact on whole regions. The improve efficiency within areas that have long-

Korean projects have emphasized the urban and term economic potential.7 The choice of a region

industrial aspects of regional development, whilethe Mexican project is more related to agriculture.

The first of these projects, the Secondary Cities The methodology used for calculating the rates of return forthese projects involved calculating the weighted average of

Region Project in Korea, approved in fiscal 1975, rates of return for individual components, and did not take

was located in the Gwangju region, a relatively into account possible benefits from the complementarities.

remote area which had not benefited from Even if higher rates of return were likely to result in such

national economic growth. The project included complementarities, no methodology exists to take these intonationalt e coa n ominfrastructgro th. re pro t fin dedaccount.

shelter and infrastructure in three towns, a fishery 6 Insights on this question are being provided by the City

harbor complex, a city market, access roads, and Study, a Bank-financed research project focused on Bogota,

technical assistance to strengthen regional plan- Colombia, which examined many of the interrelated parts of

ning in the area, as well as to support improve- the urban economy.

ments in water supply. This project, costing some 7 The Bank maintains an ongoing research program on the$e2ts mlion, waterksupply. This proeca , cting s e 9economics of employment location and regional

$25 million, worked quite well and led, in 1979, development to improve approaches to project design for

to a larger project ($154.8 million) in the same regional investments.


Regional Development In Korea 260 24

360 -)The first program of regional urban de'elopment Y /C'flk,to be assisted b) the World Bank was in the )e/ 0 4Republic of Korea. A S15 million loan. appro%ed Sea /in 19'5i. came after detailed studies financed b>the Linited Nations De%elopment Programme ofthe CiG angju region (considered at the time to beihe poorest region in the counir)) had been com-pleted. The projeci fit within the Goernment's -;.a n-g,ude%elopment straiegx for the region. %hich in- 35 0 -

eluded measures aimed both at increasing agncul- LGM t 'p -"t ;tural produciivitN and direeting industrial incest- M go ,-' -i nient. panicular, in manufactunng. awas from Su- L Seoul. Busan. and Daegu towards the countn&'ssouthweslern corner ln'estment in urban infra- ('

structure was intended to support ihe planned C -expansion of GAangju's cities as manufactunngand marketing centers lor increased agricultural -Rguon.ol planr.ng boundoriesoutput and as new sources for regional emploN- -540 Roads 340nient. 1260 270 1280

The $25 million proiject included sites and sen- Beyond its direct in%estmenis. the major etfect ofices in the cities oflGwangju. Mogpo. and Yeosu: the pro;ect was to increase the Korean govern-the construction ofla fishen harbor complex. ment's capabilitN to prepare and implementtogether with an industnal-processing zone in%estments integrated Within a regional frame-in N eosu. building a citN market in Suncheon: work. The gosernment's sophistication in thisconsiruction oflaccess roads to N'eosu and area permitted a much larger project to be pre-Nlogpo. and technical assistance in regional plan- pared: a second project begun in 1981 at a cost ol'ning, management. and fcbr preparation of l'urther $154.8 million and assisted b) an IBRD loan ofprojecis Implementation of 'he project proceeded $90 million, aims at expanding the suppl) Ofso smoothls that cost savings vere used to im- shelter. infrasiructure, and services needed toprove water-supplN l'acilities in ' eosu. The esti- complement investments in indusiry and fisher-maLed rate of' reurn of lhe project was 28 percent. ies de% elopmenI.

reflects an evaluation of the region's potential by to be more closely related to these sectoral activi-the Bank and the borrower, as well as the borrow- ties as part of a comprehensive approach toer's decision to bring the region into the process of regional development. It is hoped that the decen-national economic growth. Regional development tralization of urban shelter projects out of capitalis intended to make the most of a region's com- cities into secondary centers will encourage fur-parative advantage, rather than to achieve a theo- ther development of approaches to regionalretical balance among regions. investments by Bank staff and borrower agencies.Considerable work needs to be done in refining Employment and Productivity inthe Bank's approach to regional development. proymenThe three projects undertaken to date have raised Project Designmany questions about the definition of objectives More than half of all urban projects the Bank hasof a regional project, the relationships among assisted include measures intended to supportcomponents, and the criteria for evaluating their small businesses as a means of improving employ-performance. Many efforts in other sectors, such ment opportunities in urban areas. Direct mea-as agriculture, industry, and transportation, all sures have included provision of services to landgreatly affect regions. Urban lending needs used for business purposes, construction of mar-


kets and sheds, and greater access to credit, as well ing urban productivity. The forms of assistance

as technical assistance and training. In addition, mentioned previously have been directed largely at

employment concerns have been incorporated in improving the efficiency of the private sector and

the selection of project sites, the integration of increasing its ability to provide income-generating

residential and commercial industrial develop- opportunities. It has become apparent, however,

ment, the inclusion of business plots in projects so that many of the constraints on private-sector

that surpluses may be generated to subsidize more development and the productivity of individual

residential plots for low-income people, and the cities result from the inefficiencies of the public

promotion of the construction industry. These sector. These inefficiencies include technical ina-

efforts have been experimental and have reflected dequacies in the output and distribution of serv-

interest in urban employment at many levels in ices and economic distortions associated with in-

the Bank and in borrower agencies. As of 1982, correct pricing policies. Such inefficiencies

there is a general consensus that the employment increase the costs of economic activity within

objectives have not been achieved, for both urban areas and reduce opportunities for employ-

project-level reasons and more important concep- ment and income generation.

tual problems. As the Bank has gained experience in Lagos,

At the project level, business-support components Cairo, and other cities, it has made the need to

have been relatively small, and thus have not had reduce these public-sector constraints on private-

enough leverage to initiate needed changes. The sector development an important objective of

provision of credit illustrates this problem: The project design. In some cases, eliminating these

small amounts of credit made available within a constraints is thought to be more important than

typical urban project have not provided sufficient providing direct support for the private sector.

incentives for participating institutions to change This strategic decision, however, must be based

their procedures to facilitate allocation of credit to on an analysis of local conditions and a judgment

small entrepreneurs. Even if credit is provided, of the feasibility of generating employment on a

small components have not been able to ensure sufficient scale through direct measures as men-

that the credit is put to efficient use, that goods tioned earlier.

and services are produced and marketed, and that The Bank's choice of projects for its urban lending

the financial return is accounted for properly. program has depended upon the strategy adopted

Business-support components that have sought to for specific countries. Those strategies have devel-

deal with all the steps in the process have become oped on the basis of sectoral analysis, but, over

cumbersome, adding substantial organizational time, project experience itself has become an

problems to the already limited institutional capa- important input into sectoral analysis and has

city found in cities. As Bank staff have become influenced sectoral lending strategies. The impor-

increasingly aware of these complexities, they tance of this process is reflected in the changing

have tended to limit the size of these components, character of urban sector work within the Bank.

frequently restricting them to the construction of Initially, sector work attempted to provide a gen-

markets or sites for small businesses. Recently, eral perspective on urban policies and conditions.

there has been a tendency for urban projects to Recent work has been focused on specific problem

exclude components for credit, training, and other areas, such as housing finance in the Philippines,

forms of support, as they have become parts of institutional capacity in Kenya, the role of munic-

projects prepared by other divisions of the Bank. ipalities in Ecuador, citywide investment strate-

Despite early enthusiasm with the business- gies in Lagos, and the choice of secondary centers

support components, there has been a growing in India or Peru. These studies will provide the

understanding that urban employment should be rationale for future project design.

considered within the broader objective of improv-

24

3 Experience in Implementation

While the implementation experience of scale programs. They are usually more severe inurban projects shares many of the features of first projects, but ease with experience, suggestingprojects in other sectors, as documented by the the importance of looking at urban developmentOperations Evaluation Department of the Bank, from the long view.the most significant questions about urban proj-ects concern their suitability as replicable models Institutional Frameworkfor financially and technically sound urban devel- One of the early problems encountered duringopment. Implementation experience is an impor- implementation has been the organization of proj-tant criterion in this regard. However, given the ect activities. As in other sectors, debates haverelatively brief experience in implementing urban occurred during preparation over whether projectsprojects-only fourteen of sixty-two projects are should be executed by existing agencies or by newfully disbursed-it is difficult to provide defini- project units. In the urban sector, this debate hastive answers. It is nonetheless possible to identify been complicated by the existence of citywidemajor problem areas. These areas are discussed in institutions that have responsibility for parts ofthe first section of this chapter. The second the activity included in the project. In this con-section describes standard quantitative indicators text, project coordination becomes more thanused by the Bank, and the final section gives an simply the scheduled phasing of complementaryinterim evaluation of the Bank's implementation activities, and involves broader institutional ques-of urban projects. tions of coordination and cooperation within

Before reviewing ths ecities. Because the Bank's approach to urban shel-Befoervieinghisexprenceii iortt t ter, infrastructure, and traffic management is new,note that the strategy of research and development projects have frequently been executed by special

is also reflected in project implementation. Where units, which are expected to be reintegrated intoboth borrowers and Bank staff have approached implemorrwentatond with stafflexle, approbl solg existing institutions when first project activitiesaitude,mprojec wihav progesbed probleasonlyvwel are completed. These new project units have fre-attWtude, projects have progressed reasonably vety quently been difficult to establish, because ofWhere attitudes have been more rigid, for a variety prbesorcuingtafetblhngrc-of institutional and political reasons, both in the problems of recruiting staff, establishing proce-countries~~~~~~~~ an.h ak mlmnainhsbe dures, or allocating space, equipment, budgetarycountries and the Bank, implementation has been resources, or technical assistance. It has also beenmore diffcult.

difficult for new units to obtain approval for finalProblem Areas and Replicability engineering, land acquisition, coordination with

The following aspects of implementation have existing agencies, construction and operation ofspecial implications for the replicability of pro- infrastructure, household selection and occupancygrams: the institutional framework of the project, of new sites, and traffic management.land acquisition and tenure, cost recovery, shifts The sixty-two projects vary widely in the wayson standards, project management, and experi- they have organized project activities. Projects inence with special components. In each case, diffi- countries with weak implementation capacityculties in implementation usually reflect the have tended to work through special units, as innovelty of the approach. If left unresolved, how- Zambia, where a project unit is attached to theever, these problems limit the ability of an execu- Lusaka City Council, or in Mali, where one isting agency to expand initial projects to larger- attached to the Ministry of Public Works. In the

Experience in Implementation 25

Community Participation and maintenance. Evaluation studies, undertakenby FSDVM, demonstrated that the social interac-

The type and level of community participation in tion of community members became a valued

the design of urban projects depend on the nature part of the construction process.of each project. Sites-and-services projects, whichestablish new communities on vacant land, in- The ,quaIler-upgrading prograni carried out in

volve communities in the building of community Lusaka, Zambia, under the administrative res-

services and, in some cases, in self-help housing ponsibility of the Lusaka City Council. also in-

construction. The improvement of existing com- volved a high degree of community participation.

munities usually involves direct participation of Involvement was both general-as when discus-

neighborhood groups in various aspects of project sions on the overall design of the project were

design and implementation. Two project exam- held-and particular, as when groups in specific

ples, which show how this process works and communities worked with technical teams in de-

which demonstrate some of its drawbacks, as signing improvements such as the tertiary road

well, can be drawn from El Salvador and Zambia. network and footpaths. Community involvementwas so successful that the groups did not disband

Two projects implemented by the Fundacion Sal- after the work was completed; they continue evenvadorena de Desarrollo y Vivienda Minima today to work on the various problems of the(FSDVM), a private foundation operating in the community.major cities of El Salvador, have emphasized therole of community "mutual help" in the construc- Both these cases demonstrate the benefits of com-

tion of housing. Groups were assisted by FSDVM munity participation in proj ct design and imple-

social workers and building technicians to facili- mentation. While community involvement can

tate the process and ensure quality in construc- delay and complicate decisions, the drawbacks

tion. Community involvement reduced the cost have been outweighed by the valuable inputsof construction and generated community inter- provided by the community.est, which has led to high levels of cost recovery

Ut

In Lusaka, meetings were held in the settlements with representatives of the ruling government party and the Housing

Project Unit so that agreement could be reached on project design.


case of Zambia, the unit's staff and functions were project, and staff have devoted particular attentionreabsorbed into the city council after completion to the legal aspects of land transfers and tenure. Inof the project. Similarly, in Nairobi, the project Liberia, the land issue proved to be the centralunit for the Dandora Project became part of the factor in urban development and became the basisHousing Development Department of the Nairobi for the major component, land registration, in theCity Council. This approach has generally proposed project. While land acquisition has beenachieved better results than one that uses existing a persistent issue in the implementation of Bankinstitutions. In the Ivory Coast, for example, projects in many sectors, its resolution is critical inwhere a project was administered by a weak local the urban sector if larger-scale replicability is to beagency, expectations proved to be optimistic. In achieved.countries such as India or Indonesia, however, Cost Recoverywhere institutions are stronger, the existing agen-cies have incorporated project activities into their A third difficulty in implementing some projectsown programs and executed project components has been cost recovery. For sites-and-serviceswith less of the special treatment that Bank- projects in Eastern Africa, for example, cost recov-financed activities tend to receive. Most impor- ery appeared low in relation to initial ambitioustant, the organization of second projects often targets. In these cases, the initial record on pay-relies on existing institutions, suggesting that rep- ments by beneficiaries was reasonably good, aslicability is possible. As suggested in Chapter there was a strong element of self-selection andFive, strengthening urban institutions is one of pride associated with the construction of newthe most difficult tasks of individual operations. dwelling units. Problems developed, however,

after the start-up period, as the necessary follow-Land Acquisition and Tenure up services, such as maintenance and social serv-A second common problem has been the acquisi- ices, were not provided as promised. Householdstion of land for new development and the subse- became disillusioned and increasingly reluctant toquent granting of secure tenure to project house- pay. This situation was exacerbated by inadequateholds. This problem has led to major delays in collection methods, the lack of sanctions for non-projects in all six regions, even in projects that are payment, and the absence of political will tosuccessful in other respects, such as in Madras. enforce collections. Project experience thus con-The Bank's research into urban land policy has firmed that the ability existed to pay the chargesrevealed an array of problems that can complicate as developed during project design, but thaturban projects.' In some cases, traditional cus- diminishing willingness to pay, together with inef-toms are in conflict with civil law at the initiation fective collection systems, resulted in decliningof a project, as in Upper Volta, making the acqui- performance.sition of project sites a lengthy process and, in Cost recovery has been even more difficult insome cases, an almost irresolvable problem. slum-upgrading projects. By definition, the popu-Urban projects have sought to reconcile compet- lation already occupies the neighborhoods anding land-tenure systems, as in Ecuador, to intro- houses alred oriproveme They have ndduce~~~ ~ som lea ore inoastaio'htdfe houses selected for improvements. They have not

duce s l o ralways agreed, however, on either the need forcollection of property taxes and promotes ineffi-cient settlement patterns. In some cases, as in upgrading or the obligation to pay for improve-ments. Even if the majority of households agreesLesotho, projects have been used with some suc-

cessas vhices fr pogresiv polcy hang on to pay, the existence of a nonpaying minoritycess as vehicles for progressive policy change on creates problems for the credibility and financialland issues. In others, the financial interests creates oble fore credibilya fincinvolved in urban land markets have createdpolitical obstacles that delayed implementation.In order to overcome these problems, most urban -- _Ioretooecmthepolm,msua See Harold B. Dunkerley et al., Urban Land Policy: Issuesprojects now require procurement of land before and Opportunities (New York: Oxford University Press,the project is under way, as in the second Madras 1983).


Residents of Tondo (Manila) line up their water

cannisters in front of a communal standpipe.Though the cost of providing the water is 1' --

recovered, residents pay far less than they did

when they bought water from private vendors. K - _

-d ~ ~ ~ ~ ~ ~~I

1 a ~ ~ ~ 41

F-#~~~

collections and lack of sanctions have been most order to ensure that some reasonable level of

severe in existing neighborhoods that formed recovery is attained to permit future replicability.

cohesive community blocks, thereby raising the Increased attention to issues of municipal finance

political stakes. These problems have been over- has been supported by extensive Bank research on

come In some projects where, from the outset, this subject, which is beginning to provide a

neighborhoods have had to propose themselves framework for evaluating alternative approaches

for improvement before they could be included in at the city level.'

the program, as in Bolivia; this experience is the Cost-recovery issues have also arisen in transport

exception and not the rule, and integrated development projects, where

In cities where the municipal tax system is increases in bus fares or water tariffs have provoked

relatively well developed, such as in Jakarta, it has controversy. Where project components are small,

been possible to use the property tax as the cost-

recovery mechanism. This solution has been 2For example, Johannes E. Linn, The Incidence of Urban

feasible because the unit costs of improvements Property Taxation in Developing Countries, a T-heoretical

have been small enough, on a per capita basis, to and Empirical Analysis Applied to Colombia. World Bank

allow using municipal revenues for the program. Staff Working Paper No. 264 (Washington, D.C.: The WorldBank, August 1977) and Cities in the Developing World:

This alternative is being considered for other cities, Policies for Their Equitable and Efficient Growth (New York:

but it must be developed on a case-by-case basis in Oxford University Press. 1983).r


there has been little leverage to obtain increases. The multiple tasks to be accomplished by projectA common example has been difficulty in raising agencies require effective management from thethe price of water obtained from standpipes in outset, which may be undermined by proceduresurban project areas. Nevertheless, increases in bus internal to the execting agencies or by difficultiesfares have been preconditions for processing of of coordination with other institutions. Althoughtransport projects in Calcutta, Bombay, and there are many areas requiring improvement forMadras, and have led to major improvements. almost every project, it appears that project man-Shifts in Standards agement by itself has not been a major source of

implementation problems. Increased attention byA fourth issue that has affected the implementa- Bank staff to simplifying procedures wherevertion of some projects has been an effort by agen- possible-for example, by helping to reduce thecies to design and provide services at higher stan- number of trips to various public agencies thatdards than agreed at appraisal. After substantialdebates over appropriate standards, some agencies h.ueod utmk ooti prvl nhave sought to revert to higher standards by signatures-has significantly improved the man-

agement of project activities. Once procedures arechanging designs during final engineering or even simplified and implementation teams are in place,during construction. In the Upper Volta project, a s ee to plessntatio rily n pport-' projects seem to progress satisfactorily. Support-new government proposed to alter radically the ing these efforts with training and technical assis-standards of an ongoing project; alterationsstandards of an ongoing project;alteratance is useful in some cases, but in others it isincluded the demolition of portions of the neigh- apparent that projects are implemented mostborhood to be upgraded. The Bank refused to effectively after expatriates have left and localaccept final engineering designs and therefore staff have full responsibility. This impression isdelayed implementation until some agreement was sreached. In other cases, construction loans or presented in the ection oIndcatrsiof tmpmebuilding specifications have been too costly,implying that households should build overly large mentation Status" (page 29).units all at once, rather than starting modestly and Experience with Special Componentsimproving dwellings over time. One area of particular difficulty has been theIn order to resolve these problems, urban staff implementation of special components, such asnow have a less doctrinaire attitude toward health, nutrition, and community development.standards than in the past. Greater attention is Many projects have included the participation offocused on the affordability of proposed solutions, community groups in the design and execution ofrather than their physical characteristics. neighborhood improvements. Projects in theMe todologies have been developed to permit urban sector have tried to encourage this process,better evaluation of alternative options for plot probably to an extent greater than in any othersizes and levels of infrastructure and to relate sector of Bank lending. It was hoped that suchfinancial and physical criteria. 3 Projects now participation would support important aspects ofinclude a wider range of plot options and service project design such as cost recovery, maintenance,levels, permitting more heterogenous settlements and organization of social services throughand more politically acceptable standards. strengthened community cohesion. In some cases,Prdmojet Maniticagem acceptable standards. community support has been an effective, though

time-consuming, input. In others, neighborhoodAnother group of implementation issues that has politics have been beyond the effective reach ofbeen found in many projects includes steps such the Bank and its intermediaries.as the procurement of construction services, thedisbursement of resources, the allocation of serv- - -iced sites, the scheduling and supervision of See The Bertaud Model: A Modelfor the Analysis ofAlternativesfor Low-Income Shelter in the Developingactivities, the settlement of households, and main- Wbrld, Urban Development Technical Paper No. 2tenance. (Washington, D.C.: The World Bank, December 1981).


nents limited to the construction of clinics withinproject neighborhoods.

-'V The six problem areas discussed here represent

*g sr _ only a partial view of the implementation experi-

ence of urban projects. They do not capture thevariation across types of projects or regions, but

* f -- - rather, focus on the ultimate goal of urban lend-ing: assistance to governments in establishingreplicable programs for the provision of urbanservices. To complement this qualitative picture

quantitative indicators of progress of implementa-tion status.

Indicators of Implementation Status

Because implementation of most projects in theBank's urban lending portfolio is an ongoing proc-ess, much of the available information on imple-mentation is not complete. Detailed ratings forimplementation status have only been undertakensince 1977; earlier information is available only insummary form. Despite these limitations, projectscan be classified by their implementation statusaccording to ratings used throughout the Bank

* t. t - _(based on reports filed by Bank staff describing

-e '' s implementation experience), and comparisons_ -- _ _ L can be made with other aspects of Bank lending

One component included in the Tondo upgrading generally, such as in rapidity of disbursements.

project concerns infant nutrition. Here, a child is Summary Status

weighed at a commmunity health clinic.

The implementation of social-service compo- Summary indicators from field reports suggest

nents, such as health and nutrition, has also that, for some fifty-five projects for which first-

proved difficult, both for internal and external year data were available, only 7 percent had major

reasons. On the Bank side, urban staff lacked the problems (see Table 6). This pattern worsens

technical expertise in these fields and the time tomaster their social dimensions within specific Table 6: SUMMARY

cities. In the countries, social-service components IMPLEMENTATION STATUS OF PROJECTS,

have been affected by the often confused and BY YEAR OF IMPLEMENTATION

highly political character of existing social servicesin cities. Furthermore, because social-service Problemfreeor Moderate Major Number

components are often a small part of the whole Year of minorproblems problems problems of

project, they may be overshadowed by infrastruc- implementation (%) (%) (%) projects

ture works during implementation. Preventivepublic-health measures, for example, have not First year 47 46 7 55

been integrated easily into complex urban pro- Second year 22 63 15 46

grams, despite the Bank's advocacy of them. This Fourth year 32 55 10 232

experience has led to a gradual simplification of

projects, with special health and nutrition compo- Source: World Bank reports,


somewhat in the second and third years of imple- are being taken to improve performance. On thementation, with an improvement in the fourth average, urban projects take about four years toyear. Overall, about 30 percent of the projects are reach the 50 percent disbursement mark and eightrelatively problem-free, while another 60 percent years to be fully disbursed, roughly six monthshave moderate problems through the four years of behind the Bank average. IDA credits tend toimplementation. This finding is consistent with disburse slightly faster than IBRD loans, probablythe general impression that start-up problems may because of the use of the Bank's Project Prepara-be severe, particularly in Africa, but once a team tion Facility 4 for IDA countries, which involvesis organized and concentrates its effort on the an immediate disbursement of funds as soon asspecific tasks of implementation, projects have they are formally made available to the borrowerprogressed without exceptional problems. by the Bank (referred to as the point of "effective-Financial Indicators ness" for projects).The financial indicators suggest that project status The Bank's earliest urban projects tended to dis-deteriorated during the four years and that delays burse funds more rapidly than those begun later.became more evident (see Table 7). They were not This trend, reflects in part, the greater numbermade up, as might have been expected. Despite and more complex nature of the later projects.delays, project finances and estimated costs did The later projects, however, closely resemble thenot generate major problems, probably because Bank's overall disbursement profile. A 1981 studyprojects were restructured and reduced in size in on disbursements placed urban projects in sixthresponse to changing conditions. place among nine sectors, ahead of projects inThe disbursement performance of urban projectshas been a matter of concern for the urban proj-

4 The Project Preparation Facility provides advances toects staff, as reflected in the ratings given for borrowers to finance the preparation of projects. Thesedisbursements for individual projects, and steps funds are to be subsequently included in loans or credits.

Table 7: FINANCIAL INDICATORS FOR PROJECTS APPROVED IN FISCAL 1977-80(percentage)

Year ofimplementation Estimated Anticipated Project

and status Disbursements cost completion finances

Firsl yearProblem free or minor problems 56 71 67 79Moderale problems 26 25 25 17Major problems 17 4 8 4

Second yearProblem-free or minor problems 31 65 54 58Moderate problems 69 27 35 38Major problems 19 8 11 4

Third yearProblem free or minor problems 47 59 35 65Moderate problems 41 41 41 18Major problems 41 0 24 18

Fourth yearProblem-free or minor problems 38 50 25 63Moderate problems 25 50 50 37Malor problems 38 0 25 0


water supply, agnrculture, and education and only three years for projects prepared before fiscal

slightly behind those in transportation and 1979, were unrealistic. Recent efforts to link

telecommunications (see Figure 1). implementation schedules to sectoral disburse-ment profiles may help to make implementation

Disbursement patterns by types of project areshown in Table 8. Although data are scanty, they schedules more realistic.

indicate that urban shelter projects have tended to

disburse about half as fast as urban transport and Project Mangement Indicators

integrated urban projects. Integrated urban proj- Over time, the management of urban projects

ects have tended to disburse fastest of all threeproject types, probably reflecting the strong per- leveas sonably Horyvat the indict

level, as shown in Table 9. However, these indica-

formance of the Indian projects. tors may be somewhat illusory, given the field

Disbursement findings are also related to delays experience found in projects across the regions.

in the anticipated date of completion. This indica- No major problems were identified by the fourth

tor, like disbursements, showed that problems year of implementation for compliance with loan

were not satisfactorily resolved by the fourth year covenants, despite earlier indications of problems.

of implementation. Implementation of the aver- Early problems with management performance,

age Bank project (5.4 years) requires 40 percent usually associated with the start-up period of proj-

more time than originally estimated (3.8 years). It ects, seem to have improved substantially by the

is not yet possible to determine statistically fourth year of implementation. Similarly, procure-

whether the urban projects match the Bank norm. ment problems were also resolved by the fourth

Nevertheless, the average of eight years required year. Nonetheless, these data do not suggest that

to complete disbursements suggests that the initial project management issues will necessarily be easy

implementation schedules, which were typically to handle as the scale of projects increases. The

Figure 1: Disbursement Profiles of Selected Sectors: Agriculture, Education,

Telecommunications, Transporlation, Urban, Waler Supply

100-~~~~~~~~~~~~~~~~~~~~~~~~~~10

90 * -*80-

70 #' .*m~~~~~~~~~~~~~# 50'/ /; .;S 60-

C / / ;Jt .@ el,culh,re30- a ' ; ....---- Eaucai,cn

/ / ;";,j -- -____Telecommunr,iat,ors20- ' 9 * //s / lJ{Jo--------------- irban

10- \ Naipr S,ppi,

Elar.id T,nr,e J ,ears ,ears 9 e3rs


Table 8: ESTIMATED AND ACTUAL DISBURSEMENTS OF URBAN PROJECTS, BY TYPE ANDYEAR OF IMPLEMENTATION, 1972-81

Year ofimplementation Sites and services Transport Integrated Regional

First ,earEstimaled(%) 21.8 21.2 18 6 20 0Aclual (%) 6.2 9.2 3.7 5.5Number of projects 25 6 11 2

Second yearEstimated ("oi 60.0 60.1 52.4Actual (%) 18.3 21.7 22.9Number of projects 17 6 7

Third yearEsrimated (% 84.2 93.1 80 2Actual (O.) 26.0 42.5 47 5Number ol projecis 11 4 4

Table 9: PROJECT MANAGEMENT INDICATORS FOR PROJECTS APPROVED IN FISCAL 1977-80(percentage)

Year of Complianceimplementation with loan Management

and status conditions performance Procurement

First YearProblem Iree or minor problems 58 46 86Moderale problems 33 46 13Major problems 8 8 0

Second YearProblem lree or minor problems 62 38 58Moderale problems 27 54 42Major problems 11 8 0

Third YearProblem-free or minor problems 59 29 71Moderale problems 35 59 24Malor problems 6 12 5

Fourth YearProblem free or minor problems 63 63 100Moderale problems 37 25 0Malor problems 0 12 0

issue of institutional development, therefore, of urban projects is satisfactory. Project officers,remains, despite these successes at the project level. through their reports, acknowledge moderate

Toward an Interim Evaluation, problems, but the trends through the first fouryears of implementation show improvement by

Taken together, quantitative indicators suggest the fourth year. The problems fit within overallthat, aside from problems in disbursements and patterns identified by the Bank for improvement,delays in the start-up of projects, implementation with the most important being greater realism in


the scheduling of activities. This problem seems ties, and the simplification of projects to facilitate

to apply to both simple and complex projects, achievement of primary objectives will continue to

although complexity by itself requires greater co- be important during the implementation of subse-

ordination, which may delay implementation. quent projects. Experience with second projectssuggests that encouraging progress on these issues

Both the quantitative and qualitative analyses of has been made during the first project period. In

the implementation of the Bank's urban projects countries where third and fourth projects are under

suggest that establishing the foundation for pro- implementation, such as in Indonesia or the Phil-

gram replicability will require continued atten- ippines, implementation issues have become much

tion. Issues such as the institutional framework more specific at the agency and city level, where

for urban development, the procedures for land they can be effectively dealt with. As such, imple-

acquisition, the recovery of costs, the setting of mentation reflects a process of learning by doing

appropriate standards, the management of activi- for both the countries and the Bank.

34

4 The Management of Urban Operations

Because of the Bank's inexperience in Few of these people were available in the Bank,dealing with the broad range of urban problems, and it was often difficult to recruit them, becausethe management of its urban operations over the most professionals in these disciplines had notpast decade has had a distinctive character: It has worked on low-cost approaches to urban infra-relied on training and on the development of its structure and shelter. This situation was compli-own style in order to mobilize staff, attract the cated by changes in the needed mix of skills asattention of borrowers, and develop working rela- project design evolved. Architects and engineerstionships with other parts of the Bank at a time were in great demand at the outset; when projectswhen expansion was occurring in many sectors. shifted toward institutional and broader financialAs urban operations have been gradually trans- questions, personnel experienced with mainte-ferred to regional offices within the Bank, the nance of municipal services, employment genera-urban staff has begun working more closely with tion, and social services in developing countriesregional programs and projects divisions. This were particularly needed. They were also hard toprocess appears to be proceeding well, as reflected find. While those recruited often brought excellentby the more than ninety urban operations under skills and field experience, they were unfamiliarconsideration and preparation for fiscal years with the Bank's procedures and sometimes felt1982-86. This lending program suggests that they were being pushed into operations beforedespite the unresolved issues in project design and they were fully acquainted with their employer.implementation, urban lending will become Inside the Bank, this lack of experience with inter-increasingly significant, particularly in Asia, Latin nal procedures and policies on occasion led toAmerica, and the Middle East. This chapter will problems in coordination and communication.describe the management experience of urban Thus, the rapid expansion of the urban operationslending and attempt to fit it into broader concerns staff required the Urban Projects Department toof the Bank.safrqle h ranPoet eatettof the Bank. introduce many new staff members to Bank pro-

Staff Development and Training cedures and to train them to take on managementresponsibilities. Training in the management ofOne of the most noteworthy features of the Bank's missonsfomltechnica isits bankgperson

urban lending expefience has been the rapid missions (formal technical visits by Bank person-development of staff expertise. The Bank began nel to member countries) and in the organizationdevelpmen of taffexperise.The ank egan of activities during the preparation of projectsurban operations with only ten professional staff po ities prioi tak Inearin projc smembers; by July 198 1 there were eighty-three. proved to be priority tasks. Internal proceduresmebes by Jul 191 thr wer eihytre were also established to maximize learning andAt that time, six regional urban divisions were .created and transferred to the regional projects the delegation of responsibility.departments of the Bank.

The expansion of urban staff is significant in Internal Proceduresseveral respects. The staff recruited for urban Because the Bank's understanding of urban issueswork included architect-planners interested in was rapidly changing, there was, from the outset,low-cost design, engineers with experience in basic a need to communicate to borrowers and projecturban infrastructure, economists familiar with teams the most recent state of the art concerningurban economics and the characteristics of the specific issues, ranging from infrastructure designurban poor, and financial analysts with experience to cost-recovery policy and differential pricing.in municipalities and housing institutions. Departmental expertise for some components,

The Management of Urban Operations 35

such as business support or health and nutrition, divisions. The continuity of personnel, first as

was severely limited, requiring a few staff to work consultants and then as staff, helped overcome

on a large number of projects. In order to supple- some of the problems of rapid expansion,

ment individual preparation efforts, senior although continuity still remains a problem in

departmental personnel, including the director, some regions.frequently traveled to project sites. This policyresulted in improved understanding of individualurban problems and current practice by both the Some of the standard Bank indicators of adminis-

department and the project teams. trative performance suggest that urban operationshave been processed in less time and with less

Field support was continued atpotadsar- staff input as experience has grown within the

esions throh brioefingsta andvanjc offapprasa m- Bank and borrower agencies. Although measuressions, which allowed staff and project officers to ofsaftmanelpdtietvrousagsf

disus crtia isue lieyt.efcddnn of staff time and elapsed time at various stages ofdiscussal issues likelto befe during urban projects were initially high, as they might

appraisal. Missions consequently were able to take be for any new undertaking, by 1981, urban oper-

positions on issues which had already been fully tons w ereared , apprise , a resn o

explored. This process set the stage for the major athBns Bo 'rardo Execuive adretorsdfor

review of each project-articulated in the Bank's a alkin abou twenty oh core wit

preliminary draft appraisal reports-which approval in about twenty months, compared withabout twenty-seven months for the average Bank

became the single most important vehicle for dis- project. Within regions, the processing of urban

cussion, debate, and communication of depart- operations from appraisal to Board presentation

mental policy. Meetings held to discuss these also compares favorably with Bank averages. Inreports served as a forum for policy development Eastern Africa, for example, such processing took

and staff training by bringing together representa- 13.3 months for all sectors and 11 months for

tives from each of the Bank's urban project divi- urban operations in fiscal 1981. Furthermore, the

sions to decide such issues as whether the costs of elapsed time from Board approval to first dis-

off-site infrastructure would be recovered, how bursement has declined substantially for urbanland was to be treated in the calculation of total operations, demonstrating that conditions deter-

project costs, how affordability and poverty mining effectiveness are no longer slowing downimpact were to be measured, and how economic the start-up process, as they did in early years.

rates of return should be calculated.Averaged over the period 1972-81, the processing

Insterna pochreduires forobugetin teamstaplshed r a of urban operations from identification to Boardsystem which required project teams to plan their presentation required 176.5 staffweeks per project.manpower needs within their project budgets,

which wee then agregatedto deterine divi This average, however, masks large differencesamong types of projects. Urban shelter and trans-

sional and departmental budgets. This process port projects required less than average invest-

involved the devolution of management responsi- ment in staff time, at 158.7 and 143.5 staffweeks,

bility for individual projects to project officers respectively. The more complex integrated urbanand permitted the program to expand rapidly. projects, in contrast, required 219.9 staffweeks,

A related internal procedure was the general prac- and regional development projects required 299.4

tice of delegating decisions for manpower plan- staffweeks. Nonetheless, substantial efficiencies

ning of missions to the project officer. In effect, have been achieved in some regions. Eastern

project officers were responsible for organizing African projects undertaken in fiscal years 1980

their teams, using consultants as well as staff. By and 1981 required 40 percent less staff time than

1978, a pattern had emerged in which each divi- urban projects overall; Latin American projects in

sion had a group of experienced consultants who the same period could be processed with half the

were used regularly. Two years later, many of overall requirement. At 104 and 88 staffweeks,

them had joined the Bank staff in these same respectively, urban projects in Eastern Africa and


In the background, a "core" unit at thesites-and-services project in Dandora(Nairobi). The unit consists of a living/

A sleeping area, a toilet, and a washingA area. Work has already begun (fore-

ground) on expanding the unit.

Latin America demonstrate that, as experience is The investments in supervision and technical as-gained within the Bank and with borrowers, urban sistance that the Bank has made in its urbanoperations increasingly conform to Bank norms. operations have moved borrowers toward a coher-

ent approach to the sector as a whole and, in fact,The amount of staff time during implementation hav bee th.oiaigfreisalsigaof urban projects remains high beyond the fourth onon foo pojectsintorte un lendingyear. This amount, measured as a -supervision ongorng flow of projects into the urban lendingcoefficient," however, reflects, in part, the consid- program. Major borrowers In East Asia and Latincoefficient," however, re s in pAmerica are now capable of implementing oneerable technical assistance provided to borrowers urban operation each year. It is thus possible forwho lack experience with the approaches under the Bank to capture efficiencies in processing newimplementation. Coefficients are expected to loans to these borrowers. In some cases, urbandecline as the majofity of first projects are com- operations are moving toward sector lending,pleted. There are significant differences in super- much like the Bank's model for industrial andvision coefficients according to types of projects, development finance. This model shifts lendingwith initial shelter projects requiring high levels

into he eghthyearwhiletranportand nte-operations from direct, or "'retail,"' distribution ofinto the eighth year, while transport and inte- loans and credits to a "wholesale" approach ofgrated urban projects drop sharply after the third lending to local development institutions, whichor fourth year. then finance and oversee projects. This processAlthough urban performance indicators generally involves increasing the responsibility for technicalfit within the norms of Bank operations, they do preparation and implementation within borrowernot, by themselves, justify one type of operation agencies and is thus an important indicator of theover another. That justification necessarily is learning process itself.based on the problem to be tackled in specificcountries and on the benefits that a given projectare likely to generate.

37

5 Impact of Urban Lending

Given the relatively short duration of the ment. Insisting on this perspective is an importantBank's urban lending-at most ten years but con- contribution, because it has begun to change the

siderably less in many countries-it is too early to impression that the urban sector should be a

evaluate progress toward the Bank's primary ob- privileged enclave within national economies. In-

jective: to assist member governments to develop stead, the Bank's approach accepts the importance

approaches for the efficient and equitable provi- of the rural sector and insists that, in financial

sion of urban services and employment. Achiev- terms, the urban sector should pay for itselfing such an ambitious objective, it is recognized, through cost recovery. Urban project design is

will take time and will be easier in some countries based on the assumption that investments in im-

than in others; it will also be difficult to measure proving urban living conditions should improve

quantitatively. It is possible, however, to review urban productivity and should be done without

progress toward the secondary objectives outlined taking away scarce resources needed for rural

in Chapter One, which have been more directly development or adding to the financial burden on

reflected in project activities and sectoral dia- public institutions. The sites-and-serviceslogue. Drawing on implementation reports, proj- approach answers many of the criticisms of inap-

ect completion reports, and monitoring and eval- propriate architecture and planning in the con-

uation studies, this chapter will attempt to gauge struction of public housing by turning over these

the impact of the Bank's urban lending in the responsibilities to the beneficiaries themselves

following dimensions: and by allowing solutions to develop over time.

* Impact on national urban policies. By demonstrating that it is possible to develop

* Impact on project design, planning, and invest- affordable solutions for the poor, the Bank's shel-ter projects have changed the terms of discussion

ment programming. in many countries, including Bolivia, India,

. Impact on institutional development. Nigeria, and the Philippines. Many governments

Impact on policies and programs in specific are now aware that if building codes or zoningcities. regulations that require unaffordable measures to

Cities. be taken are eliminated and land tenure is

* Impact on project beneficiaries, especially the assured, households will respond by investing in

urban poor. urban shelter, often to an extent far beyond whattheir income levels would suggest possible. Bank

nitma projects that create new opportunities for thisnity. investment are showing the vitality of the urban

Impact on National Urban Policies poor and the validity of the so-called progressive

The Bank's urban activities to date are demon- development model, that is, that households will

strating to borrowers that it is possible to apply improve their housing over time.

economic, financial, and technical methods of This finding applies in new developments, such as

analysis to urban problems without distorting Dandora in Nairobi or Arumbakkam in Madras,

other sectors of development. Recognizing the or in the upgrading of existing neighborhoods, as

important contribution of urban areas to national in the kampungs of Jakarta or the compounds of

economic growth reinforces the need for sound Lusaka. Its impact on national urban policy has

economic and financial policies for urban develop- been noticeable not only in countries where


! The Madras Experience inhabited by 23.000 households: the purchase of285 buses and the construction of bus terminals

NMadras is the most rapidly growing metropolitan and depots: rehabilitalion of water and sanitationarea in India: its population ol'about 3 million is s1slems: "industrial parks" for small and coutageincreasing at a rate of about 3.8 percent a wear. it industries employing almost 10.000 people: andis also a metropolitan area that is populated b! technical assistance to the MMD.A to increase itsthe poor. About 70 percent of the city's house- abilil to plan funherydeelopmeni programs.holds (average size: six people) hare monthlyincomes belou& $70. In 1976. half the population NMost ol' the features ol' the project were executedlived in slums that had no water supply. sanita- on schedule, and so successful was the projecttion. access lo streets. or electncity. Serious drain- that a second scheme. costing $87.9 million. uasage problems existed throughout the city. Rapid begun in 1979. This second project. assisted by anpopulation growth overwhelmed the existing IDA credit of $42 million. included the pro% isiontransport facilities and health sen ices and gener- of'sites and ser"ices for 14,900 householdsated a large. unmet demand for employment. The (89.400 persons). improvement to slumsscale and pace of growth, coupled with the ex- inhabited b about 300.000 people. the purchasetreme po'erty of the population. dictated the of 555 buses. assistance to the Madras Municipalneed l;r a metropolilanwide view of the cilt's Corporation for solid-waste management. andproblems and the formulation ofa long-term technical assistance to v arious urban agencies toplanning and investment strategy. improve sectoral planning and investment pro-

In response lo a request in 1976 from both theslate and federal governments for assistance. the The increased scale in the provision of. and im-World Bank began to work with ihe government pro% ements to. shelter was linked to imponantof Tamil Nadu state and ils Niadras Meiropolitan policy changes by ihe Tamil Nadu stale go%ern-Development Authorily (MMDA) to develop a ment, which increased the share of its invest-program of high-priority invesiments in shelter, ments in shelter to solutions successfully demon.infrastructure. transport. road and traffic im- strated in the first project. These low-cost solu-pro'emenis, health. education. and employment tions offer the possibility that the backlog ofgeneration. A first project, costing $52 million. substandard shelter might be reduced signifi-was begun in 1977: over five years. these invest- cantlv and that the continuous demand. on aments were pul into place: sites and services for citywide basis. for shelter might be met.13.500 households: improvements to 85 slums

- h. ~ ~~ ~CTIONS

e cl p sl it -M

,,Tecnstruction ol industirat parkXs swas included in the first Bank assisted protect in Madtas

Impact of Urban Lending 39

Neatly laid out blocks of houses can be

seen in this aerial view of Chawama

Compound, Lusaka.

projects have worked well, such as in Bostwana of technology transfer that can have a profound

and Indonesia, but in countries where projects effect on national investment in the urban sector.

have not been implemented smoothly, such as in Traffic-management schemes have produced high

Senegal, which has adopted the sites-and-services rates of return by improving traffic speeds,

approach because other more expensive programs increasing traffic volumes, and reducing acci-

were unaffordable, both for public agencies and dents, and also through savings achieved by

the intended beneficiaries. Even in countries avoiding additional transport investments.

where projects have not yet been financed by the

Bank, such as in Algeria, the new policy approach Impact on Project Design, Planning,

to shelter has been reflected in nationally financed and Investment Programming

programs. Publicly constructed housing, themodel of the 1950s and 1960s, is giving way to Major changes have occurred in the following

private investment through self-help, thereby areas of design of urban shelter and transport

reducing the role of the public sector. The list of projects: setting design standards, recovering

countries that have moved in this direction costs, reaching the poor, providing land tenure,

includes Brazil, Burundi, Ecuador, Jordan, Kenya, and changing design procedures.

Lesotho, Mali, Morocco, Tanzania, Thailand, and Setting Design Standards

Tunisia.Tunisia. Policies on design standards for shelter and infra-

The impact of Bank operations is less clear in structure projects are changing in many countries,

regard to urban transport policies, in part because as governments realize that it is possible to pro-

the Bank has financed fewer projects and has vide acceptable shelter and infrastructure at affor-

adopted a less focused approach to transport dable unit costs without public subsidies. In

issues. It is nevertheless apparent that a signifi- Nigeria, the cheapest house financed by the public

cant number of governments are coming to realize sector and built to conventional standards cost

that heavy investment in transport infrastructure $40,000 in 1978. By contrast, in the same year,

can be postponed if existing facilities are used the shelter unit financed in the Bank's first project

more efficiently. Countries such as Brazil, Costa in Bauchi, Nigeria, was estimated to cost less than

Rica, India, Ivory Coast, Kenya, and Thailand are 10 percent of the previous type. Public housing in

using affordable solutions in urban transport in Madras, India, cost about Rs. 12,000 per unit in

some cities, which are less costly than the technical 1976. The first Madras project has provided units

approaches used earlier in developed countries. at Rs. 3,000 per houshold, even with an interest

The concept of traffic management is an example rate of 12 percent, which is about three times the


.1 -1 ,The right lane in thisstreet in Abidjan (Ivory

.~ sj \ - -Coast) is reserved for- 6 F x @ @ jE the use of buses.

r _t.-,i- -.-

-- -~ ' ,

prevailing interest rate for low-income housing in disappointing, but in Indonesia, an alternativeIndia. Many of the cost savings achieved in the approach, which does not include direct recovery,Bank's shelter projects have resulted from reduc- but relies on citywide tax revenue to finance thetions in standards for infrastructure works, as well program, has proven feasible, in part because ofas from more efficient land use. Sites and services the low investment cost of about $37 per capita.and upgrading have consequently become the new This approach, also adopted in Thailand, allowsorthodoxy in some countries. The participants in longer-term replicability, but suggests that broaderthe Economic Development Institute's Urban municipal-finance approaches will be necessaryProjects Course for francophone countries, held in for recovery.Abidjan in 1980, concluded that "sites and serv- Urban transport projects have also achieved highices is the only solution," certainly an overstate- levels of cost recovery. In cities such as Bombayment, but nevertheless an indication that a major and Madras, fare increases for bus companiesshift in thinking has occurred. have covered operating expenses. Efforts toRecovering Costs improve financial management for these compa-As reduced standards lower the costs of urban nies have raised broader issues of fleet expansionservices, governments are better able to recover and supporting facilities, which have resulted incosts if they have the political will and adminis- more efficient links between costs and pricing.trative capacity to collect. Many governments no The most dramatic case of cost recovery in urbanlonger question whether cost recovery is desirable: transport has been the area licensing scheme inrather, they are now addressing the issue of how Singapore, which, although it was not a Bank-to achieve it. Urban projects have demonstrated financed scheme, was nonetheless carefully moni-that revenues can match outlays, although they tored by Bank staff. For numerous organizationalhave not always been able to do so, particularly in and political reasons the scheme has not beencountries with weak local institutions. Despite the replicated elsewhere. However, the experimentsetting of ambitious targets, the cost-recovery per- has added a new dimension to discussions offormance of sites-and-services components was financing the transport sector.'initially satisfactory, but suffered when follow-upmeasures such as maintenance did not occur. I Peter L. Watson and Edward P. Holland, Relieving TrafficCongestion: The Singapore Area License Scheme, StaffRecovery for upgrading in various projects, in- Working Paper No. 281 (Washington, D.C.: The Worldcluding those in Madras and Lusaka, has been Bank, June 1978).


11~~~~~~~~~~~7 mm_ I A1

s~~~~~~~~~~~~~~~~ P

_~~~~RSRCE ?, --=.

~~~~~a -

The Government of Singapore spent $3 million to create an orderly traffic system at rush hours that would

reduce congestion.

Reaching the Poor ~~~Housing and Urban Development Corporation'sprograms toward the Bank's approach.

Another impact of urban lending has been thenew-found capacity of governments and institu- Providing Land Tenure

tions, such as housing banks and corporations, to As noted earlier, land tenure was identified as a

provide services for the poor. Projects in major issue to be addressed at the outset of Bank

Botswana, Brazil, Tanzania, and Thailand, among lending, because it was felt that without secure

many others, have demonstrated that it is possible tenure, households would not invest their own

to design upgrading projects that reach people in limited resources in housing. The Bank's insis-

the lowest tenth of the income-distribution scale. tance that existing settlements be legalized

For example, the Tanzanian Housing Bank has through granting of land tenure has resulted in

made about 60 percent of its loans to households major changes in the Bank's member countries.

with monthly incomes below $120, of which 75 Projects have, in effect, been urban land-reform

percent are to those below $85. In addition to programs in cities where land issues have been

reducing standards and costs, projects have used among the most burning of political questions.

differential pricing to provide services at afforda- The bulldozer has been replaced by the deed or

ble levels. In India, several states have taken this long-term lease as the leading instrument for land

new approach to public programs, and the policy. This impact of Bank operations cannot be

national government has decided to direct the emphasized enough, because its potential effects


on income distribution and welfare are enormous. Impact on Institutional DevelopmentMoreover, this process has occurred in almost Another measure of the impact of projects is theirevery one of the projects having shelter compo- success in strengthening institutions within thenents. scesmsrntem ntttoswti hurban sector. Implementing the changes in policyChanging Design Procedures and approach that have occurred as a result of theBank activity in the urban sector has also Bank's urban operations has required reorientingprompted changes in the design process itself, many institutions, from the national to localwhich have permitted steps toward sector lending levels. Institutional development, in fact, hasby the Bank and greater national responsibility for become the leading priority for the Bank, oncepreparation and appraisal of urban operations. agreement with borrowers is reached on policyThese changes, identified by urban projects staff directions. The Bank's efforts have been compli-working in South Asia, include the following: cated, however, by the endemic problems of

urban institutions and the inherent difficulties ofa Broader and less compartmentalized planning, improving internal organization, procedures, andbringing together physical, economic, and finan- staff while, at the same time, asking institutions tocial considerations in investment programming. take on new roles and responsibilities.

* More iterative and less sequential planning The problems of institutional development in theprocesses, in which goals and instruments are urban sector have several special features. First,more carefully related. there has been a proliferation of institutions oper-

* Wider exploration of alternatives in the choice ating in urban areas, each with subsectoral respon-of technical solutions, thereby linking technol- sibilities within individual cities and towns; yetogy and cost more explicitly. frequently there is little overall coordination. Sec-

ond, municipal governments, usually the only in-* Greater attention to affordability in establishing stttin wit juidito ove man subsctorstitutions with jurisdiction over many subsectorsparameters within which technical solutions are within a city, have traditionally been poorlyfound. staffed and insufficiently financed. National insti-

* Increased adoption of programmatic planning tutions frequently undermine municipal efforts toapproaches, relating individual projects to the achieve greater autonomy, particularly in finan-scale of the problem to be addressed, thereby cial terms, and refuse to finance needed localpermitting more realistic goals to be set, particu- improvements. Third, investment in the urbanlarly in phases over time. sector as a whole has suffered from changing

priorities within subsectors at different institu-These changes are found in organizations such tional levels. If capital development is uncoordi-as the Madras and Calcutta Metropolitan Devel- nat the curet fnciloand t ncalopment Authorities, the Project Development nated the recurrent financial and technicalDepartment of the Federal Mortgage Bank of responsibilities for operations and maintenanceNigeria, EBTU (Empresa Brasileira dos Trans-portes Urbanos) in Brazil, the Banco del Vivienda Because problems are severe and institutionalin Ecuador, and the Ministry of Housing in development is necessarily a slow process, it isMorocco. Although some agencies would assert premature to evaluate the impact of the Bank'sthat they were changing their procedures along urban operations in this regard. If acceptance ofthese lines before becoming involved with the new policy objectives and implementation of newBank, it is nevertheless true that these improve- types of projects can be taken to indicate institu-ments have occurred over the past decade-a tional improvement, some progress has alreadydecade in which the Bank has played a leading role been achieved. Only, however, in cases wherein the evolution of urban development thinking institutions themselves have taken on increasingand practice. responsibilities for developing projects within the


context of a broad urban program can it be said physical environment in the city as a whole

that real institutional development has occurred. through many relatively small improvements and

This has been the case in Calcutta, where CMDA extensions of infrastructure networks. Most

has prepared a detailed metropolitan investment important, the Calcutta Metropolitan Develop-

program for the next five years and will be res- ment Authority has developed as an effective

ponsible for coordinating its implementation. investment agency. An early shelter project in

This pattern is beginning to emerge as the Bank's Manila, the Tondo Foreshore Project, has led to

urban operations begin sector lending in various several subsequent operations and substantial dia-

countries. For example, in countries as diverse as logue between the Bank and the various institu-

Brazil, India, Indonesia, Korea, Nigeria, Peru, the tions involved in the sector, including the National

Philippines, and Thailand, experiments are under Housing Authority and the Ministry of Human

way in which local agencies identify, prepare, and, Settlements. These discussions have given birth

in some cases, appraise components of Bank- to concepts like the Capital Investment Folio,

assisted projects. Typically, Bank appraisal mis- which is intended to coordinate investments in

sions are focusing attention on several towns, the metropolitan Manila region. Other efforts to

leaving programs in others to be prepared and develop citywide frameworks, such as the ten-

appraised by the executing agencies. year development study and strategic investment

The decision to experiment in this way assumes program in Abidjan and the creation of

that national institutions now have the capacity totranslate technical findings into investment pack- . t 1 •2%ages and subprojects. By adopting a "wholesale" e l '1.rather than "retail" approach, these experiments di

follow the Bank's model for industrial and devel-

to be developed and procedures adopted to ensurethat the quality of projects is not lessened. How- s>_ _ ^

ever, the evidence to date suggests that these

experiments are working reasonably well. Ulti- a -

mately, the test for institutional development will C--

be whether such programs can be sustained with- -out external assistance, a course that is in the bestinterests of the country and the Bank. -

Impact on Policies and Programs -,X! - UUb

in Specific Cities 4Two types of impact can be identified in specific - -'

cities: (1) citywide, cross-sectoral impact as a

result of improved urban planning, investment ' .programming, and management; and (2) citywide, -_

single-sector impact as a result of improved policyand program design.

The first has occurred in cities such as Calcutta A,O

and Manila, where single or multiple operations K \ rtJ, 1have resulted in new integrated approaches to -

In this aerial view of Tondo (Manila), upgradedcitywide investment. While Calcutta continues to areas are in the foreground. A more economic and

face many shortages of essential services, two rational use of land results in higher occupancy

projects there have significantly upgraded the density in the upgraded area.


Kampung Improvement Program broadest co%erage of an5 municipal infrasiructureprogram in the deLeloping uorld. In 1980. theThe kampung Impro%emeni Program (KIP) was program uas a%arded the Aga Khan pnze. given

launched hb the Indonesian gomernment in 1969 annuall fiorachievement in social architectureto improme the h% ing conditions of the majorit) and in'rastructureot'thc population ol'Jakarna. a cit% now of morethan 7 million people. The program in,olhed the The KIP has signtincanilh impro'ed householdpro6 ision of drainage. access roads. footpaths. Ii, ing condilions in Jakarta's kampungs. E%alua-and ukater suppl. clinics. schools, and other lion studies ol' KIP's impacl. camed out duringsocial ser% ices in 399 kampungs. or neighbor- the penod 1976- 81 b! ihe Indonesian go% ern-hoods. co%ering an area ol').2 16 hectares. Since ment. reneal that residents atinbute better healih.its beginning, about halt'ihe cit%'s population-or better access to education, impro%ed neighbor-some 3.5 million people-ha%e benefited from hood secunit. and impro'ed o%erall welfare tothe program. Ahich uas implemented bN the the program.Municipalits of.lakara. The protect cost about$130 million, or some $37 for each person The \Aorld Bank has assisted ihe Go,ernment ofhelped. Its relati'e simplicitN ofdesign and its Indonesia in its work through ihree successivelouA cost have enabled the program to expand loans ior the KIJP in Jakarta. and ior similarrapidly; as a result. the KIP has achieved the programs in other cities of the country

s- X~~ I-_3 ~ _

0~~~~~1 ~1- . *' -v

V--

L A I pical sireel scene n an impromed kampung

the District of Tunis, have been less successful, This programmed application of a proven techni-but have nevetheless, provided a broader urban cal solution has now been extended to other citiesperspective for development in those cities. in Indonesia. Another example is Madras, where

two projects have increased the capacity of twoThe second type of impact has occurred in Jakarta setraece,teTmlNd osn orthrough the successful Kampung Improvement and the Tamil Nadu Su Cla nc BoardProgram, which has improved basic infrastructure provide sit ad ServiCesrandl improve-for 3.5 million people over the past ten years.


ments, respectively. By 1981, the production of declined from 6.5 per 10,000 km in 1974 to 1.8

serviced sites had reached 5,000 per year, with the per 10,000 km in 1980. At the same time, bus

likelihood that by 1983-84, this level will more ridership increased 70 percent (or 7.9 annually),

than triple to some 18,000 units a year. Slum- riders per bus decreased 25 percent, network

improvement programs are now reaching 10,000 coverage grew 100 percent, and the bus fleet

households each year and expect to rise to 15,000 expanded 69 percent. These are impressive

per year. Success with these programs has led the results in a city where some 70 percent of trips

state government to shift funds from conventional were by foot in 1970. Mobility has been

programs into sites-and-services and slum- increased significantly. Other impacts have come

improvement schemes, thereby reducing overall from the introduction of busways, as in Abidjan,

unit costs while increasing the coverage of the which carried some 26,000 passengers per hour

program. The foundation of the sites-and-services and reduced travel time by 50 percent within six

program, cost recovery, has been quite successful, months of operations, even before traffic-signal

with defaults amounting to only 5 percent of all controls were operating.

loans in the Madras program. In addition, reve-nues created by shelter programs have grown by O e o isome Rs 7 million crores per year, or 40 percent upgrading programs in La Paz, Bolivia, and

of the previous year'muncipaLusaka, Zambia; the land-registry system inof the previous year's muncial revenue Te Bamako, Mali; and the rehabilitation of socialrevenues are thus an Important new source OfIevcsi ugdugu pe ot.Mn

services in Ouagadougou, Upper Volta. Manymunicipal finance for the city.' other activities are in progress and are yet to be

Single-sector, citywide impacts have also occurred documented. It is nonetheless clear that Bank

through urban transport projects. In Tunis, for urban operations are improving living conditions

example, a combined program of traffic manage- and management in a large number of cities in

ment, bus purchase, suburban rail reconstruction, borrower countries.

and institutional development has improved pub-lic transport service, despite large increases in

private car ownership, usage, and overall mobil- 2 Additional impacts in Madras include financial

ity. Specifically, the number of buses in service strengthening of the Pallavan Transport Company, betterplanning by the Madras Metropolitan Development

(outshedding) in Tunis increased from 60 percent Authority, and improved management of the Madras

in 1973 to 82 percent in 1980. Bus breakdowns Municipal Corporation.

Table 10: AVERAGE ECONOMIC RATE OF RETURN OF URBAN PROJECTS, BY TYPE, 1973-81

Sites and Services Transport Integrated Regional

Rate of Number Rate of Number Rate of Number Rate of Number

Fiscal return of return of return of return of

Year (%) projects (%) projects (%) projects (%) projects

1973 9.5 2 37.0 1 10.0 1

1974 12.7 2 19.5 2 -

1975 16.4 5 - - 28.0 1

1976 28.5 2 30.0 1 - - - -

1977 38.5 2 28.0 1 32.0 2 - -

1978 21.3 7 34.0 2 17.3 4 - -

1979 46.7 3 28.0 1 23.8 4 - -

1980 17.6 7 23.0 1 21.0 1 23.0 1

1981 17.9 5 50.0 1 22.0 1 14.0 1


Table 11: ESTIMATED NUMBER OF HOUSEHOLDS SERVED BY SHELTER PROJECTS, 1972-81

Total Average numberFiscal Number of number of of householdsyear projects households per project

1972a 1 15 600 15,6001973 1 6,400 6.4001974b 2 11,550 5,7751975 6 249.075 41,5131976 2 43,116 21,5581977 4 305,292 76 3231978C 1 1 408 001 37,0911979 6 257.069 36.7241980 9 161.050 17.8941981 7 432.510 61 787

Total 4 9d 1,889,663 38,565

Nole Transport projects are not included

aTurkey is not includedbEstimales for Calculla I are nol included.CNicaragua is not includeddincludes sneller components of integraled Lrban projects

Impact on Project Beneficiaries frastructure improvements provided by urbanAlthough it is difficult to collect dataontheprojects. The increase in the average number of

households per project in fiscal 1981 reflects abenefits from urban projects, given their recentorigins and status of implementation, it is possi- ging conern with program impact within spe-ble to anticipate the order of benefits likely to be ci. ciis.ssgetderiri h aeoble to atcptteodrobnfMadras. Although the anticipated number of ben-provided. Three indicators of anticipated benefits eficiaries per project varies from year to year,are the estimated economic rate of return, the depending on the particular projects under way,number of urban households likely to receivenumect bernofiturand thousehl likcelya total recevec the overall project average of nearly 40,000 house-direct benefits, and the percentage a pr holds, or about 200,000 persons, is the equivalent

of a medium-sized city-a substantial impact forEconomic Rate of Return each project.Estimated rates of return were high for all types of Project Proceeds Benefiting the Urban Poorurban projects between fiscal 1972 and 1981,thoughrthebsmallanumbernof projects pr fiscal9 Almost three-quarters of all urban projects hadyearhinfuence the sm avlberas pjcnsideral (isel more than 40 percent of their total funds destinedyearbinflue10).Incfiscal 19 aeras c deraby (eew for persons living below the urban poverty thresh-Table 10). In fiscal 1979, for example, a few olds in their individual countries. In Easternprojects produced very high estimated rates of Africa and Latin America, about nine-tenths of allreturn. Urban transport and integrated urban projects met this standard (see Table 12). Shelterprojects were the most consistent in maintaining and integrated projects are able to deliver substan-their levels of return.

tial benefits to the urban poor, while the transportHoouseholds Receiving Benefits projects have broader citywide impacts that can-Table 11 shows the considerable expansion over not be as easily targeted to only the most needythe last decade in the estimated number of urban beneficiaries (see Table 13).households likely to benefit from shelter and in- The major finding to emerge from Tables 10-13 is


Table 12: NUMBER OF URBAN PROJECTS WITH DIRECT BENEFITS TO THE URBAN POOR,

BY REGION. 1973-81

Projects Percentage ol project costs

for which benefiting the urban poor

urban-povertyRegion data are available 0-19 20-39 40-59 60 or more

Easlern Africa 10 - 1 2 7

WVestern Africa 4 - 1 - 3

East Asia an dihe Pacific 1 1 5 1 1 4

South Asia 3 - 1 - 2

Europe. MiddleEast. andNorih Alrica 5 - 2 - 3

Lalin America aridIhe Caribbean 14 - 1 2 I 1

Total 47 5 7 5 30

Table 13: NUMBER OF PROJECTS WITH DIRECT BENEFITS TO THE URBAN POOR.

BY TYPE. 1973-81

Projects Percentage of project costs

for which benefiting the urban poor

urban-povertyRegion data are available 0-19 20-39 40-59 60 or more

Shelter 32 4 2 5 21

Transporl 2 - - - 2

Integraled 10 - 3 - 7

Regional 3 1 2

Total 47 5 7 5 30

Percentage of allurtan projecis 100 8 17 15 56

that the Bank's urban projects provide substantial Impact on the Development

economic benefits and are able to direct those Assistance Community

benefits to the poor. While methodologies are notA consensus has gradually grown in the interna-

avalable to quantify secondary benefits, such asavailable ttional aid community in support of the Bank's

gains in the productivity of workers, it is apparent approaches to the urban sector. Although thethat better shelter, water supply, and sanitation Bank's entry into the urban sector was different

are necessary conditions to improving public from the earlier experience of agencies such as the

health and therefore productivity. In addition, US Agency for International Development (AID),numerous unmeasured benefits, such as savings in the French Caisse Centrale de Coopmration Econo-

foreign exchange, savings mobilized in the econ- mique, the British Overseas Development Admin-

omy, and environmental improvements, also istration, and the United Nations Centre for

result from the projects.


Housing, Building, and Planning, there has been a such as those sponsored jointly by the Bank'sgradual covergence of views on many urban pol- Economic Development Institute with the Unitedicy issues. An example of this convergence is Nations Centre for Human Settlements. TheAID's financing of sites-and-services and slum- methodologies promoted by the Bank and theirimprovement projects and its joint financing with application are discussed in detail in urban stud-the Bank of the first Ivory Coast Urban Develop- ies programs in universities in Britain, Canada,ment Project. A similar shift has occurred in other France, the Netherlands, and the United States, asbilateral assistance programs, as subsidized well as in many programs in developing countries.middle-class housing has given way to sites and There are even cases in which consultant firmsservices. Concepts such as affordability, replicabil- have decided to build up their capacity to work onity, low-cost design, and an integrated urban per- sites-and-services programs, realizing that thespective are now central principles in the urban future of urban assistance lies in this direction.lending of all key agencies. This partial list clearly indicates that the Bank's

urban activities have had a growing impactThe demonstrated effectiveness of this approach ben pct lending.has also prompted a variety of training courses beyond project lending.

49

6 Conclusion: The Task Ahead

After a decade of learning by doing, the recognized their problems and have actively

urban operations of the World Bank have gener- sought Bank assistance in the sector. Despite their

ated substantial momentum, both within the large rural populations, South Asian countries

Bank and with borrower institutions, toward solu- also appreciate the needs and economic impor-

tions to a range of urban problems. This conclud- tance of their large cities. The Middle Eastern

ing section will examine the projects likely to be countries have long experienced urban problems

undertaken in the near future and the outstanding and will continue to require assistance to develop

issues to be faced in the medium term. It is more effective solutions. The least urbanized

important to consider these prospects within the countries, in Africa, while faced with urgent prob-

context of urban growth in the 1 980s. lems of food, health, and education, expect a

Urban Growth in the 1980s quadrupling of their urban populations by theyear 2000, thus creating heavy demands where

Despite the progress made in overcoming prob- there is the least institutional capacity to respond.

lems in the urban sector, the challenge of urban Despite differences in urban conditions and levels

growth has not diminished over the past decade. of development, it is apparent that all regions

Urban populations have continued to grow in share the same long-term prospects in the sector:

every country, even where rural development continued growth in demand for services that are

efforts have been effective and sustained. Higher essential for productivity. Assisting governments

energy costs and worldwide inflation have placed to meet those demands, the Bank's original objec-

new strains on productivity, much of which con- tive in urban lending, thus still remains valid for

tinues to be generated in urban areas in develop- the 1 980s.

ing countries. Supporting services and infrastruc- The Urban Lending Program:

ture essential for efficient urban economic activity Fiscal 1982-1986

continue to be needed in the metropolitanagglomerations, as well as in the new secondary More than ninety projects are now under consid-

urban centers where much of the current growth is eration and preparation in the $4 billion lending

taking place. In the constrained economic and program proposed for fiscal 1982-86. This five-

financial conditions of the 1980s, sound economic year program comprises one-and-a-half times the

and financial policies governing urban develop- number of projects funded in the preceding ten

ment are critical if productivity is to be main- years, and about half the program consists of

tained. Finally, the need to increase institutional repeater projects that build on the success of

capacity, whether in providing new infrastructure earlier efforts.and shelter or in maintaining and operating exist-

ing nvetmens, emais akey essn ofproect The operations are proposed for about fifty coun-

experience. tries, of which twenty-five would be new urbanborrowers, bringing the total number of countries

Projected growth in every region suggests that in which the Bank has undertaken urban projects

urban development efforts will have to be redou- to more than sixty. Major borrowers in this sector

bled over the next decade if the solutions devel- include Brazil, Colombia, Indonesia, Korea,

oped during the 1 970s are to be extended to Mexico, the Philippines, and Thailand. In addi-

growing populations. The more urbanized regions tion, countries that have large urban populations,

such as Latin America and Eastern Asia have such as Egypt, India, Nigeria, and Pakistan, are


also expanding their urban programs with Bank valuable inputs into the design of future Bankassistance. projects and the policy advice provided to bor-

rowers. In this context, three specific aspects ofThe extension of urban lending to twenty-five replicability which are addressed in operationsnew countries reflects the growing consensus that 'mthe urban sector is an integral part of develop- planned for the short term, suggest the directonsment eve incounrie whee i maynothavethe of future lending: the importance of housing

markets, the role of institutional finance, and thehighest priority. These operations are likely to be efficiency of urban management and its links toquite modest in the scope of components and the productivity.scale of investment. It should be noted that thisproposed program will be affected by the avail- The Importance of Housing Marketsability of Bank funds. In most developing countries in the 1 980s, theAlthough the proposed content of these opera- public sector is unlikely to be able to providetions may change, particularly in the later years, more than a small share of needed services. Mostthe majority of operations are expected to focus urban residents now obtain housing without theon strengthening institutions responsible for the direct involvement of public institutions, throughprovision of urban shelter and infrastructure, both self-help and private finance and construction.through specific institutional-development com- This trend is likely to continue as demandponents and through implementation of progres- increases. Although Bank projects have demon-sively larger investment programs. Urban trans- strated low-cost technical solutions and soundport lending is also expected to expand in cities financial principles that should help public insti-where urban shelter and infrastructure operations tutions deal with housing issues, there is nonethe-are already under way and where urban conges- less a need for increased emphasis in future proj-tion and transport problems are growing. ects on encouraging private housing markets to

work more effectively. Projects under preparationin all regions are being designed to use the com-

The Challenge of Replicability parative advantages of both public and privatesectors. Sectoral studies have provided a moreUrban projecsexperencechs dnstrated tt detailed view of the housing markets and a guide

replicating successful projects in broader settings for project design.requires doing more than repeating on a largescale that which was done in the past. The transla- The Role of Institutional Financetion of projects into ongoing programs requires As suggested earlier, projects in many countries arenew ways of addressing constraints in, for exam- seeking to strengthen local institutions so that theyple, institutional capacity, public-sector finance, can channel financial resources from the Bank andand trained manpower. Similarly, policy ques- other lenders in ways that will further stimulatetions concerning the most appropriate division of private investment in the urban sector. As theselabor between the public and private sectors in institutions increasingly finance infrastructure andhousing, institutional finance, and urban manage- leave house construction to private households,ment will have to be faced as cities triple in size they can create conditions in which local housingand an additional billion residents are added to markets can work more efficiently than in the past.the urban population of developing countries in This direction is being followed in all of the sixthe next two decades. The approach of learning by regions of Bank lending. While the speed of changedoing, which has characterized urban lending will be dictated by existing institutional con-since 1972, will have to be supplemented by more straints, upcoming projects will increasingly trans-applied research to provide information necessary form the Bank's role from retailer to wholesaler infor future lending. Ongoing research in such areas urban development finance.as housing finance, housing demand, national spa-tial strategy, and the role of employment location Urban Management and Productivityin regional development is expected to provide The importance of efficient urban management is,

The Task Ahead 51

of course, evident in all countries, but its impor- ments and physical improvements in cities

tance as a prerequisite for productive urban eco- throughout the world, and the Bank is committed

nomic activities is not fully appreciated. When to developing replicable projects to help meet

water, power, or roads are not in place or are not these demands. To do so, it will need greater

operated and maintained adequately, the costs of understanding of the urban conditions within spe-

production and distribution increase substan- cific countries. Furthermore, the Bank's experi-

tially. Because the provision of these services ence with urban projects indicates that such

depends on the ability of municipal finance sys- understanding needs to be combined with thor-

tems to generate sufficient revenues to finance ough evaluation, testing, and improvement of the

operations, how such systems are organized and instruments available to mobilize public and pri-

funded is a vital aspect of urban management. vate resources if further advances are to be

Upcoming projects in large metropolitan areas achieved. In 1972, given the lack of solutions to

deal with these issues on a citywide level, seeking urban problems, the strategy of learning by doing

to identify the improvements required to increase appeared sensible as the Bank entered a new sec-

urban efficiency and thereby maintain and tor of lending. In 1982, based on a decade of

improve the productivity of economic activities. experience, the strategy is not only sensible; it also

The growing demand for urban services in the offers increasingly promising prospects of success.

years ahead will bring forth demands for invest-

52

World Bank Urban Projects-Fiscal 1972-81

Loan amount Credit amount(US$ millions) (US$ millions)

Fiscal Year 1972

Turkey Urban Development 2.3Senegal Sites & Services 8.0

Fiscal Year 1973

Nicaragua Earthquake Reconstruction - 20.0Malaysia Urban Transport I 16.0

Fiscal Year 1974

Botswana, Francistown Urban Development - 3.0India, Calcutta Urban Development - 35.0Iran, Teheran Urban Transport 42.0Jamaica, Kingston Sites & Services 15.0Tunisia Urban & Public Transport 11.0 7.0

Fiscal Year 1975

Kenya, Nairobi Urban Development 8.0 8.0Tanzania National Sites & Services - 8.5Zambia, Lusaka Sites & Services 20.0El Salvador Sites & Services 2.5 6.0Indonesia Urban Development I 25.0Korea Regional Development I 15.0

Fiscal Year 1976

Peru Sites & Services 21.6Malaysia Urban Transport II 26.0Philippines Urban Development I 32.0

Fiscal Year 1977

Ivory Coast Urban Development 44.0El Salvador Urban/Sites & Services II 6.7 6.0Indonesia Urban Development II 52.5 -India, Bombay Urban Transport 25.0India, Madras Urban Development - 24.0

Fiscal Year 1978

Bolivia Urban Development 17.0Botswana Urban Development II 8.0Brazil Urban Transport 88.0Colombia Urban Development I 24.8Costa Rica, San Jose Urban Transport 16.5

Annex 1 53

Loan amount Credit amount(US$ millions) (US$ millions)

Egypt Urban Development I 14.0

India, Calcutta Urban Development II - 87.0

Kenya Urban Development II 25.0 25.0

Mexico, Cardenas Conurbation 16.5

Morocco Urban Development 18.0Tanzania National Sites & Services II - 12.0

Thailand, Bangkok Sites & Services 8.6

Upper Volta Urban Development - 8.2

Fiscal Year 1979

Mali Urban Development - 12.0

Tunisia Urban Development 19.0

Brazil Sites & Services 93.0

Brazil Medium Cities Development 70.0

Colombia, Cartagena Urban Development I 13.5

Indonesia Urban Development III 54.0

Philippines Urban Development II 32.0

Thailand, Bangkok Traffic 16.0

Fiscal Year 1980

Burundi Urban Development - 15.0

Lesotho Urban Development I - 6.0

Nigeria Urban Development I 17.8

Ecuador, Guayaquil Urban Development I 31.0

Nicaragua Urban Reconstruction - 22.0

Panama Urban Development 35.0

Korea, Gwangju Regional Development II 65.0

Philippines Urban Development III 72.0

Thailand National Sites & Services 29.0India, Calcutta Urban Transport - 56.0

Fiscal Year 1981

Brazil Urban Transport III 90.0

Indonesia Urban Development IV 43.0

Jordan Urban Development I 21.0

Korea Urban Housing 90.0

* India, Madras Urban Development II - 42.0

Mauritius Urban Rehabilitation 15.0

Mexico Regional Development II 164.0

Morocco Urban Development II 36.0

54

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Annex 2 55

*12. Income distribution and the economy of the Technical Papersurban household: the case of Belo Hori-zonte. Anna Maria Sant'Anna, Thomas W. 1. Sites and services projects. Technical Paper

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(WP237) Spanish.

*13. Economic growth and income inequality in 2. The Bertaud model: a model for the analysis

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*14. Valorization charges as a method offinanc-ing urban public works: the example of 3. Designing the site and service plot allocation

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(WP254) March 1982.

*15. The measurement of spatial differences in 4. House registration handbook: a modelfor

poverty: the case of Peru. Vinod Thomas. registering houses and plots in unplanned

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*16. Intergovernmentalfiscal relations in develop- 5. Environmental management of urban solid

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Journal Articles No. 5, August 1982.

1. The task ahead for the cities of the develop-ing countries. George Beier, AnthonyChurchill, Michael A. Cohen, and Bertrand

M. Renaud. World Development 4 (May Available only from NTIS, 5285 Port Royal

1976): 363-409. Road, Springfield, Virginia 22161, USA. Titles

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222-241. WP number. Thus, IBRD-WP-281, etc.

Photo credits

Page 5: Edwin G. HuffmanPage 7: Peter G. MidgleyPage 8: Sheila RotnerPage 14: Jaime MartinPage 16: John M. CourtneyPage 17: John M. CourtneyPage 19: Bras MenezesPage 20: Sheila RotnerPage 25: Edwin G. HuffmanPage 27: John M. CourtneyPage 29: Peter C. MunciePage 36: Adrienne K. NassauPage 38: Sheila RotnerPage 39: Edwin G. HuffmanPage 40: Peter G. MidgleyPage 41: Edwin G. HuffmanPage 43: Caroline SewellPage 44: John M. Courtney

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