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1 Public Disclosure Authorized Document of The World Bank Report No: GRD Public Disclosure Authorized PROJECT APPRAISAL DOCUMENT ON A Public Disclosure Authorized PROPOSED LOAN AND CREDIT IN THE AMOUNT OF US$ 5.06 MILLION AND SDR 3.80 MILLION (US$ 5.01 MILLION equivalent) RESPECTIVELY TO GRENADA FOR THE SECOND PHASE (APL 2) OF THE ORGANIZATION OF EASTERN CARIBBEAN STATES EMERGENCY RECOVERY AND DISASTER MANAGEMENT PROGRAM Public Disclosure Authorized GRENADA EMERGENCY RECOVERY & DISASTER MANAGEMENT PROJECT September 15, 2000 Finance, Private Sector and Infrastructure Department Country Management Unit--LCC3C Latin America and Caribbean Region

2 CURRENCY EQUIVALENTS (Exchange Rate Effective June 2, 2000) Currency Unit = EC$ EC$ 1.0 = US$0.37 US$1.0 = EC$ 2.7 FISCAL YEAR January I - December 31 ABBREVIATIONS AND ACRONYMS APL CARICOM CDB CDERA CIDA DDC DFID DMF EU EOC FEMA GEF GOG IAPSO IBRD IDA LDCA MCD MCWPU ME MFP NDC NDP NEAP NEMO NERO NHMC NMS NOAA OAS OECS OFDA ODP PC PCU UNDP USAID Adaptable Program Loan (World Bank) Caribbean Community and Common Market Caribbean Development Bank Caribbean Disaster Emergency Relief Agency Canadian Intemational Development Agency (Canada) District Disaster Committee Department for Intemational Development (United Kingdom) Disaster Management Facility (World Bank) European Union Emergency Operations Center Federal Emergency Management Agency (USA) Global Environmental Facility Govemment of Grenada Inter-Agency Procurement Services Office Intemational Bank for Reconstruction and Development (World Bank) Intemational Development Association (World Bank) Land Development Control Authority Ministry of Community Development Ministry of Communications, Works and Public Utilities Ministry of Education Ministry of Finance an dplanning National Disaster Coordinator National Disaster Plan National Environmental Action Plan National Emergency Management Organization National Emergency Relief Organization National Emergency Mitigation Council National Meteorological Service National Ocean and Atmospheric Administration (USA) Organization of American States Organization of Eastem Caribbean States U.S. Office of Foreign Disaster Assistance Office of Disaster Preparedness Project Coordinator Project Coordination Unit United Nations Development Program United States Agency for Intemational Development Vice President: Country Manager/Director: Sector Manager/Director: Task Team Leader/Task Manager: David de Ferianti Orsalia Kalantzopoulos Danny M. Leipziger Bernard A. Becq

3 GRENADA GRENADA EMERGENCY RECOVERY & DISASTER MANAGEMENT PROJECT CONTENTS A. Program Purpose and Project Development Objective Page 1. Program purpose and program phasing 3 2. Project development objective 3 3. Key performance indicators 3 B. Strategic Context 1. Sector-related Country Assistance Strategy (CAS) goal supported by the project 5 2. Main sector issues and Government strategy 6 3. Sector issues to be addressed by the project and strategic choices 8 4. Program description and performance triggers for subsequent loans 10 C. Program and Project Description Summary 1. Project components Key policy and institutional reforms supported by the project Benefits and target population Institutional and implementation arrangements 13 D. Project Rationale 1. Project alternatives considered and reasons for rejection Major related projects financed by the Bank and other development agencies Lessons learned and reflected in proposed project design Indications of borrower commitment and ownership Value added of Bank support in this project 19 E. Summary Project Analysis 1. Economic Financial Technical Institutional Social Environmental Participatory Approach 22 F. Sustainability and Risks 1. Sustainability 23

4 2. Critical risks Possible controversial aspects 24 G. Main Loan Conditions 1. Effectiveness Condition Other 25 H. Readiness for Implementation 25 I. Compliance with Bank Policies 25 Annexes Annex 1: Project Design Summary 26 Annex 2: Detailed Project Description 31 Annex 3: Estimated Project Costs 37 Annex 4: Cost Benefit Analysis Summary 39 Annex 5: Financial Summary 43 Annex 6: Procurement and Disbursement Arrangements 46 Annex 7: Project Processing Schedule 53 Annex 8: Documents in the Project File 54 Annex 9: Statement of Loans and Credits 55 Annex 10: Country at a Glance 57 MAP(S) see Report No LAC

5 GRENADA Grenada Emergency Recovery & Disaster Management Project Project Appraisal Document Latin America and Caribbean Region LCSFT Date: September 15, 2000 Team Leader: Bernard A. Becq Country Manager/Director: Orsalia Kalantzopoulos Sector Manager/Director: Danny M. Leipziger Project ID: P Sector(s): BY - Other Public Sector Management, MY - Non-Sector Specific Lending Instrument: Adaptable Program Loan (APL) Theme(s): Public Sector Poverty Targeted Intervention: N Program Financing Data..niati FnancigPEstimated APL Indicative Financing Plan. Implementation Period Borrower. -(Bank FY) - IBRDIIDA Others Total Commitnent Closing US$ m % US$ m US$ m Date Date APL /31/99 06/30/2002 St. Kitts & Nevis, St. Lucia, Loanl 14.07/ Dominica. Credit 5.50 APL /16/ /15/2004 Grenada (US$ m total); Loanl 8.03/ St. Vincent & the Grenadines Credit 7.96 (US$ 6.81 m total). APL Reallocated to APL 2 Loan/ 0.00/ Credit o.0o APL /31/99 06/30/2005 APL 1 & APL 2 countries Loan/ 5.00/ following a declared disaster. Credit 5.00 Total Project Financing Data M Loan 1 Credit O Grant O Guarantee El Other (Specify) For LoanslCredits/Others: Amount (US$m): 5.06 IBRD (LIBOR-based single currency loan; 5.01 equivalent - SDR 3.8 million IDA (standard credit). Proposed Terms: Grace period (years): 5; 10 Years to maturity: 15; 35 Commitment fee: 0.75% IBRD; Service charge: 0.75% 0.50% IDA Front end fee on Bank loan: 1.00%

6 GOVERNMENT IBRD IDA Total: Borrower: GRENADA Responsible agency: MINISTRY OF FINANCE AND PLANNING, NERO, MCWPU, MET OFFICE Address: The Carenage, St George, Grenada Contact Person: Mervin Haynes Tel: Fax: Estimated disbursements ( Bank FYIUS$M): FY Annual Cumulative Project implementation period: 3 years Expected effectivenessdate: 11/15/2000 Expectedclosing date: 05/15/2004 OCS APL PAD FO.P FR. MR-. 28h -2-

7 A. Program Purpose and Project Development Objective 1. Program purpose and program phasing: This project for Grenada, along with a similar forthcoming project for St. Vincent & the Grenadines, forms the second phase (APL 2) of an Adaptable Program Loan (PAD Report No LAC) that covers five Organization of Eastern Caribbean States (OECS) member countries. The program aims at strengthening the OECS countries' ability to manage emergency situations efficiently and effectively in order to reduce the likelihood of loss of life and assets. The program also aims at enhancing the capacity of disaster management agencies and mitigating the adverse effects of disasters that regularly strike the island, in particular floods, landslides, storm surges, and hurricanes. To this end, the program aims to support the strengthening of physical infrastructure to better weather natural disasters and enhance institutional. capacity in order to improve responsiveness if a disaster strikes. The entire program will consist of individual lending operations in five OECS countries (Dominica, St. Lucia, St. Kitts & Nevis, Grenada and St. Vincent & the Grenadines). It will be phased over a period of approximately six years, supporting the following comprehensive set of activities: * Physical prevention and mitigation investments: Key social and economic infrastructure will be protected and strengthened before disasters strike so as to reduce the likelihood of loss of life and assets--alternatively, they will be rehabilitated or reconstructed in the aftermath of a disaster. 3 Capacity building and strengthening disaster management capacity: The capacity of national emergency management and disaster preparedness agencies will be strengthened to enable them to perform more effectively. * Community preparedness: Community-level disaster committees will be organized, trained and equipped to enhance their role in disaster preparedness, mitigation and recovery. APL 1: The first phase of the program (APL 1) is currently underway in St. Kitts & Nevis, Dominica and St. Lucia, where credit and loan agreements have been effective since respectively April, June and August By and large, the implementation of these projects has been up to now slow due to a general lack of capacity in Governments, the difficulty to coordinate all agencies involved, and the leadtime necessary to review all proposals and complete tender documents. APL 2: Grenada and St. Vincent & the Grenadines constitute the second phase of the program. In light of the damages caused by Hurricane Lenny, the project for Grenada, and to a lesser extent in St.Vincent and the Grenadines, will require substantially more financing than was originally allocated to Grenada under APL 2 ($10 million vs. $2 million allocated). This, however, does not significantly modify the scope of the project as the additional funds are mostly dedicated to one critical sea defenses investment (about $5.5 million). The rest of the additional funding that is sought stems mostly from an inaccurate original estimate of requirements for a balanced project including both physical mitigation measures and strengthening disaster management capacity. These additional funds will be taken from APL 3, leaving virtually no funds for this phase, which should be canceled. The APL 4 phase, the contingency funds, will remain intact, thus maintaining the comprehensiveness of the program. APL 3: All countries participating in APL I and APL 2 require long-term support in order to improve capacity to prepare and respond to disasters. The APL 3 phase was originally designed to allow the Bank to provide continued support for long-term strengthening of disaster management capacity and focus on continuing and enhancing the process of community outreach and involvement, and to finance additional physical investments for which feasibility and detailed engineering studies will be carried out during APL 1 & APL 2. With this phase cancelled for lack of available funds, APL 1 & APL 2 will thus strengthen the -3 -

8 capacity of the countries to manage disasters and provide for some preventive physical mitigation measures, and APL 4 will allow for quick response following an emergency. Should the countries need additional financing for further capacity building in disaster management and preparedness, or for further preventive physical mitigation measures (which APL 3 would have provided), further World Bank support would take the form of new and separate projects, and/or supplemental loans and credits in accordance to Bank policy. This course of action is justified on the basis of the very slow implementation of APL 1 in all partiticipating countries, and limited results and progress at this stage, as the APL3 phase was to be conditioned by: (i) the satisfactory implementation and completion of APL 1 or APL 2 (depending on the country); (ii) the evidence of adequate maintenance of infrastructure (in particular those funded under APL 1 or APL 2); and (iii) the existence of formal disaster committees and disaster-resilient communities to finance more community-based investments. APL 4: Through APL 4, the program will make contingent financial resources readily available for reconstruction needs to restore, inter alia, critical public facilities in the event of a national disaster emergency. This phase of the program will include contingency funding for any on the five participating countries should a severe natural disaster strike them during the program period (approximately six years). This phase will run in parallel with APL I and APL 2, meaning that as long as a country has signed for either APL 1 or APL 2, they would be eligible to access the contingency funds. The contingency fund was originally to be triggered by the declaration of a national disaster emergency by the respective government seeking to access the fund and recognition by the international donor community of an emergency, and provided that there is evidence of the government's commitment to improving disaster mitigation policies through proper implementation of APL 1 and APL 2. In light of the fact that no country can really afford to declare a state of national disaster emergency, the first trigger would be amended to the declaration of a local disaster emergency by the respective government seeking to access the fund and recognition by the World Bank of such an emergency. 2. Project development objective: (see Annex 1) The primary development objective of this phase of the APL for Grenada (hereafter referred to as "the project") is to strengthen Grenada's resilience, preparedness, and ability to respond to the effects of natural disasters. This objective will be achieved by: * strengthening the country's institutional structures; * building the capacity of the National Emergency Relief Organization (NERO) and other concerned public agencies to perform their respective responsibilities more effectively during a crisis; * implementing physical mitigation, retrofitting and prevention measures to protect key infrastructure and lifeline facilities before disasters strike; * retrofitting shelters to improve the safety of the poorer and most exposed populations; * improving natural resource management; and * promoting community involvement through organizing, training and equipping community disaster committees in disaster preparedness and mitigation, and enhancing their role in disaster preparedness and recovery operations. 3. Key performance indicators: (see Annex 1) The following performance monitoring indicators will be used to measure project progress and impact. Outcome Indicators: * Operational emergency procedures and mobilization guidelines in place as per international standards - 4 -

9 by July * Improved reporting of weather information by the Meteorological Office to NERO as per the following--a) with regularity (at least once daily); and b) quality (verified by missions of the Caribbean Meteorological Organization or equivalent institution). * Enhanced ability of NERO to accurately analyze incoming information and data on emergencies, and serve as a single "clearing house" for early warning information and dissemination (as evidenced by timely decision-making, the triggering of emergency procedures and timely dissemination of warnings by NERO to populations at risk). * Increased number of people serviced by adequate shelters due to the retrofitting program. * No more than one day of interruption to traffic in the Grand Mal Bay area due to weather conditions. * Strengthened capacity in MCWPU to carry out works during emergencies. Output Indicators: * National Disaster Coordinator (NDC) position filled by a full-time permanent civil servant; at least 2 additional professional staff (a Deputy Coordinator and a Technical/Data Specialist) in NERO by December * National Hazard Mitigation Council (NHMC) with defined membership by August * Adequately equipped and staffed Meteorological Office with complete early warning system. * At least 72-hour advance warning from Meteorological Office to NERO of impending tropical events. * Number of District Disaster Coordinators reached, and reduced response time of those coordinators to an emergency. * At least one training course carried out for high level officials in managing emergencies. * Number of shelters retrofitted. * Number of shelter managers actually from communities. * At least one shelter manager per shelter trained and in place. - Dedicated unit in MCWPU capable of erecting on-site metallic bridges of a 6m span in one day. e Training for MCWPU in carrying out EIAs and monitoring and managing mitigation measures. i Sea defenses constructed and road rehabilitated at Grand Mal Bay. 3 Recommendations of studies financed by the project reviewed by Government before the end of 2001 and approved recommendations implemented by the end of B. Strategic Context 1. Sector-related Country Assistance Strategy (CAS) goal supported by the project: (see Annex l) Document number: LAC Date of latest CAS discussion: 05/04/95 The program directly supports two principal goals of the OECS Country Assistance Strategy (CAS): strengthening infrastructure and safeguarding the environment. As Grenada develops further into a service-based economy, strengthening infrastructure and ensuring their reliability will become increasingly important, especially to increase the country's resilience to disasters and prevent economic activities from being interrupted. With regard to the environment, the Government of Grenada (GoG) is developing, with the support of major donors, UN agencies and the World Bank, a framework for environmental management, including National Environmental Action Plans (NEAPs), which have identified disaster prevention and mitigation as a priority, and are an important part of this process. In addition, the program is expected to have a tangible poverty reduction impact, both direct through the provision of shelters which will benefit the poorer populations whose houses cannot withstand strong hurricanes, and early warning and better communications which will allow those populations to seek refuge in time, and indirect by reducing the economic and social risks, income loss, and vulnerability of the usually more exposed poorer populations. -5 -

10 Economic Development Grenada's rapid growth during the 1980s was driven largely by a favorable external environment, characterized by concessional aid flows, which financed a large portion of public investments in infrastructure, preferential market access, favorable agricultural export commodity prices, and fast growth in the tourism sector. In the 1990s, however, real GDP growth has slowed from an annual average of 4.8% in the 1980s to roughly 3.6% for the period This slowdown in growth has been largely due to a reversal in the external environment, with external flows slowing down considerably and concessional aid flows declining rapidly. During the 1990s, the main economic trend in Grenada, as with other OECS countries, has been the rapid transition from an agriculture-based economy to a service-based one, primarily driven by increased tourism. The prospects for GDP growth have improved somewhat and real GDP is expected to grow by an annual average of approximately 4% over the next few years, due mainly to the expansion of the tourism sector in substitution of the agricultural industry as the main foreign exchange earner. The challenge that Grenada faces is that both of its main foreign exchange sources--tourism and agriculture--are particularly vulnerable to natural disasters. 2. Main sector issues and Government strategy: Grenada is very vulnerable to natural disasters stemming primarily from hurricanes, floods and storm surges. During the last century, Grenada was struck by three hurricanes and experienced one major flood, and each year, it is subject to storm surges that batter its coastline. As recently as November 1999, the country was devastated by storm surges caused by Hurricane Lenny. The repercussions of disasters on Grenada and its economy can be severe, evidenced by the hurricane of 1975 which incurred damages of roughly 20% of GDP. The devastation associated with the impact of these hazards also often overwhelms local emergency systems resulting in the need for massive external assistance. Grenada faces special challenges due to its small size--the island is about 340 sq. km., with a population of roughly 100,000 people, and a GNP per capita of US$ 3,170 in In addition, its mountainous terrain and low population densities make the cost of providing, maintaining and repairing economic and social infrastructure high. In order to minimize the adverse impacts of disasters on economic activity and to protect communities, the government has made its top policy priority the strengthening of the institutions responsible for managing natural disaster situations. Tourism andagriculture. Tourism has become the most important foreign exchange earning sector in Grenada, with tourist arrivals showing sturdy growth of 6.3% in Natural disasters can, however, have a devastating impact on the tourism industry since tourists are generally wary about visiting a country that has been struck by a hurricane or tropical storm. In addition, it takes time to rehabilitate the infrastructure needed to serve the tourism industry. However, most hotels have already protection/evacuation plans and emergency procedures, and are-usually the most proactive in repairing their facilities after hurricanes. Agriculture is also vulnerable to natural hazards because of its dependence on foreign trade and since it continues to play an important role in the island's economic wealth. Although declining in total output, agriculture still represented about 9% of GDP in 1998, and exports from the agricultural industry--particularly nutmeg and mace--are an important source of revenue for Grenada. Roughly 60% of the country's nutmeg exports are processed to the north of Grand Mal Bay on the western side of the island, and the other 40% is processed on the eastern side. The harbor from which the exports are transported is located to the south of Grand Mal Bay at the capital, St. Georges, and there is only one access road (the western coast road) that connects the agricultural processing zones with the harbor. Any disruptions due to damages to the road would therefore result in serious losses to agricultural producers, especially if damages are severe and repairs are not immediate. Roads, Transport, and Coastal Areas. The transport and communication networks are increasingly vital to Grenada in terms of transporting both merchandise and people. However, the country's physical - 6 -

11 infrastructure is particularly vulnerable, as witnessed by the damage caused by the storm surges of Hurricane Lenny in November Many populated areas are also vulnerable to recurrent disasters such as landslides and floods, which not only threaten lives, but also have a significant negative impact on road conditions and the road network, thereby causing disruptions in road transport, and eventually hampering economic activities. Selective strengthening of roads and bridges in key sections of the network is needed to help minimize this disruption. There are three major routes in Grenada that fortn the backbone of the strategic highway network, namely the Western Coast Main Road, Eastern Coast Main Road and Grand Etang Road. Both the Western and Eastern Coast Main Roads are coastal over large extents of their length, with the Western having a greater length of road adjacent to the sea. In addition to connecting important production centers with the capital, the western coast road also serves as the only means of access to employment for the population living to the north of St. Georges. To the north of the capital is also located an important fuel depot (the Texaco terminal), which also supplies the airport. This makes this section of the road, between St. Georges and Grand Mal Bay, a critical lifeline for the functioning of the island's economy. The Grand Mal Bay area is also home to roughly 1,300 people, and is also one of the largest fishing villages on the island. Not only is the government's ability to maintain and prevent breakdowns in the physical infrastructure important, but so is its ability to repair critical facilities should they be damaged. Storm surges from Hurricane Lenny caused damages to the Western Main Coast Road between St. Georges and Gouyave Bay. Damages caused at Grand Mal Bay/Fontenoy, especially, disrupted transport between the Texaco fuel depot to the north of St. Georges and the southern parts of the island and resulted in a week-long shortage of gasoline in the gas stations in those areas. As no storage capacity exists at the international airport, air transport services were seriously constrained at this critical time when external aid was also most needed. After Hurricane Lenny, temporary reinstatement works have been carried out to re-establish the circulation along the West coast, but the works done so far need urgent reinforcement to avoid future disruptions. Shelters. The Government of Grenada (GoG) has identified the existence of safe and hurricane-resistant shelters as key to disaster management. Shelters are currently not hurricane resistant and not adequately managed. Some populations, particularly in the poorest and most vulnerable areas, do not have access to any structurally sound public buildings that could serve as shelters. There is also a lack of clear guidelines with regard to shelter management, no regular training for shelter managers, and they are also poorly equipped for effective functioning during an emergency (i.e. lack of generators, water supply, etc.). In addition, the shelter managers tend to be school principals, who may not reside within the community where the shelter is located. There is thus a clear need to improve existing shelters and/or construct shelters in poorest and most exposed areas, and also to strengthen shelter management. Community Involvement in Disaster Management. Currently, fifteen District Disaster Committees exist at the local level, but they are purely voluntary and do not coordinate adequately with local level government structures for disaster management (e.g. the local level health disaster team or the coast guard). They are not well trained, have weak mobilization capacity to handle emergencies, and are not properly equipped to effectively deal with emergency situations. The District Disaster Committees also tend to act as "relief' committees rather than committees that can play an active role in disaster preparedness and mitigation. There is thus a need to restructure these committees, institutionalize them, and facilitate better cooperation between them and local government structures. Public Sector Capacity. Expertise in the public sector is generally very limited with regard to disaster management, in spite of the existence of a dedicated disaster management agency, namely the National Emergency Relief Organization (NERO). NERO is currently understaffed with only one professional staff, - 7 -

12 the National Disaster Coordinator (NDC), and two non-professional office administrators. The lack of capacity within Grenada's public-sector institutions is also reflected by the fact that: (i) there is very little planning for disaster investments and a lack of proactive efforts to improve preparedness measures; (ii) the national disaster plan dates back to 1985, making it operationally outdated, and it has no legal authority; (iii) disaster emergency procedures are not regularly tested; (iv) there is little collaboration between all stakeholders, and for all to be closely associated with emergency measures (e.g. disaster committees, community leaders and organizations); (v) there are no real regulations to prepare and/or enforce zoning and the new building codes; and (vi) there is no effective early warning and emergency communications system. Government Strategies. The govemmenfs strategy to strengthen disaster management capacity is to adopt and implement institutional measures aimed at improving preparation for and response to disaster emergencies, increase staffing in concerned agencies, implement a comprehensive training program, and put in place sustainable procedures to ensure quick response in case of natural disasters. The main thrusts of the government's strategy are to: * strengthen the human resource capacity of NERO through additional professional staff financed by Government as permanent positions, and improved disaster planning and operational emergency procedures; * institutionalize disaster management into mainstream government functions, in particular through specialized technical training for NERO and all concerned branches of government, as well as other agencies, the private sector and communities; * sensitize communities to disaster preparedness and mitigation to demonstrate the effectiveness of properly organized committees representing all sectors of the community such as churches, schools, the business community, etc.; - establish a full-fledged National Hazard Mitigation Council (NHMC) to serve as an inter-ministerial body consisting of a broad representation of concerned ministries and agencies, the private sector, and NGOs; - increase investments in mitigation and prevention measures; and * designate and renovate the NERO building that houses the national Emergency Operations Center (EOC) and also serves as the National Disaster Office (NDO). 3. Sector issues to be addressed by the project and strategic choices: The government's key priority areas are the strengthening of the institutional capacity of disaster management agencies, the construction of priority sea defenses, and the protection of the population through a program of retrofitting shelters. The project will thus support two types of strategic activities: (i) strengthening disaster management capacity through institutional development and capacity-building measures, including a comprehensive training program available to staff involved with disaster management in all concerned agencies, and support to community involvement in disaster preparedness, mitigation and response; and (ii) preventive physical mitigation. The strengthening of disaster management capacity aims at addressing capacity issues and improving the country's preparedness and response to natural disasters. The focus will be to srengthen the principal government agency dealing with disasters, NERO, through focused technical assistance, but also to implement a comprehensive training program open to Government staff and community leaders dedicated to disaster management. In addition, retrofitting the physical structure where NERO and the Emergency Operations Center are located will improve the efficiency of operations before and during disasters. Setting up an effective communications system between NERO, different agencies and communities with the - 8 -

13 proper equipment and training is also a priority, as is setting up an Early Warning System through strengthening weather monitoring and reporting functions of the Meteorological Office. An important aspect of protecting populations is the retrofitting of shelters, which will ensure that the bulk of the population (particularly the poor living in vulnerable homes) has access to safe accommodation during and immediately following a hurricane or other emergency. Thus a number of shelters in low-income and/or particularly vulnerable areas will be retrofitted and shelter management operations improved. District Disaster Committees are at the core of the strategy to respond to and manage disasters and emergencies at the community level, and therefore will be immediate beneficiaries of project activities through training and equipment. The preventive physical mitigation measures are intended to help maintain the smooth functioning of the island during an emergency. The program that Government intends to start is first and foremost intended to address the critical issue of maintaining access in an island which largely depends on road transport, and protect key roads and bridges from storm surges and protect coastal areas where most of the population lives. An important component is therefore the sea defense at Grand Mal Bay that will serve to protect an important and currently very vulnerable segment of the West Coast Road. The section of the road at Grand Mal Bay will be rehabilitated to repair the damages inflicted by Hurricane Lenny, and will ensure that the link between agricultural producers in the north and the port in the south is maintained. It will also ensure that access to the capital and important areas of employment is maintained for the population living to the north, as well as maintain access between the fuel depot at Grand Mal Bay and the airport to the south of St. Georges. The major civil works associated with the sea defense and road rehabilitation at Grand Mal Bay are thus intended to help maintain the smooth functioning of the island during an emergency and immediately following a natural disaster. In addition, providing metallic bridges, gabions and technical assistance to the Ministry of Communications, Works and Public Utilities (MCWPU) is necessary to improve the Ministry's ability to respond in an effective manner to repair damages to infrastructure when disasters strike, which will also help in keeping the island functional during an emergency. This will also enable the Ministry to conduct quality repair works immediately after the disaster. -9-

14 4. Program description and performance triggers for subsequent loans: The detailed program description is provided in Section A. 1 of this document. The table below outlines the triggers for additional investments in all countries participating in the APL program, and the triggers required for APL 4 to be effective. Loan Type Subsequent loans/credits, and/or supplementals to APL1 and APL2 (APL 3 to be canceled) APL 4 Triggers to activate loan I. Satisfactory and on-time completion of physical investments within budget, and with adequate technical quality under APLI and APL2. 2. Evidence of adequate maintenance of infrastructure vulnerable to disasters. 3. Fully staffed Offices of Disaster Preparedness (ODP), National Emergency Management Organization (NEMO), or National Emergency Relief Organization (NERO) as the case may be, with clear mandates and adequate Terms of Reference, and sufficient financial resources. 4. A program of preparedness and mitigation activities at the national and community levels, including a complete National Disaster Preparedness and Response Plan for natural and man-made disasters. 5. An operational plan within ODP/NEMO/NERO to carry out training and other activities related to disaster awareness, preparation and response at the community level, including at schools and private businesses. 6. A fully staffed National Meteorological Office with a clear mandate, adequate Terms of References, and sufficient financial resources to issue timely weather and flood warnings, as well as an operational island-wide communications systems to transmit the information to communities and businesses. 1. Declaration of a local disaster emergency by Government, and approval by the Bank after consultations with the intemational community. 2. Satisfactory implementation progress with APL 1 and/or APL 2, as the case may be. C. Program and Project Description Summary 1. Project components (see Annex 2 for a detailed description and Annex 3 for a detailed cost breakdown): The APL 2 project will consist of two major components: (A) strengthening disaster management capacity, aimed at improving Grenada's capacity to prepare for and respond to disaster emergencies; and (B) preventive physical mitigation, aimed at minimizing damages caused by disasters through preventive infrastructure investments and associated supervision services, as well as the necessary preliminary studies to assess risks and damages, and prepare detailed designs for critical priorities to be financed subsequently. It will also include a project management component to assist Government in discharging its overall coordination, financial management, procurement, and reporting responsibilities. Initially, as outlined in the original PAD prepared for APL 1, the program sought to differentiate and support the funding of both institutional strengthening and capacity building. "Institutional strengthening" - 10-

15 was defined as measures aimed at improving the regulatory framework as it applies to disaster planning and mitigation (such as improving the regulatory framework, developing a national building code, disaster insurance, hazard analysis and vulnerability mapping), and "strengthening disaster management capacity" sought to strengthen the capacity of national institutions responsible for disaster preparedness, mitigation and management (such as staffing, training, and equipment for disaster-related agencies). APL 2 has been slightly restructured to focus primarily on strengthening disaster management capacity rather than on institutional strengthening as defined above due a number of factors: (i) the general lack of preparation of the related activities discussed for funding under the Bank project; (ii) the fact that other donors and organizations in the region--which are better equipped to intervene in these areas compared to the Bank due to their substantial experience in the region in these matters, and their ability to provide funding under more adapted regional procedures--have expressed a willingness to continue financing such activities under the framework provided by the APL program; (iii) the weak capacity of the country to implement and enforce regulatory reforms, so that activities aimed at institutional reform such as mapping and zoning should be pursued only after the govemment's enforcement capacity has been enhanced; and (iv) the need to streamline the Bank projects to fit the assessment that the existing capacity within national institutions responsible for disaster management is still fairly weak. The first component of the project, therefore, will be called Strengthening Disaster Management Capacity and will include four sub-components: 1) strengthening the National Emergency Relief Organization (NERO), including inter alia rehabilitating the Emergency Operations Center (EOC), strengthening its human resource capacity, elaborating/revising emergency procedures (including protection/evacuation plans and emergency procedures), procuring emergency equipment, rescue tools and supplies, and preparing a comprehensive disaster management training program open to other agencies and communities; 2) developing a country-wide early warning and emergency communications system, including technical assistance and procuring specialized equipment; 3) implementing a shelter program, including training and retrofitting selected public buildings; and 4) capacity-building measures for the Ministry of Works, including training and procuring stocks of prefabricated metallic bridges and gabions. The second component, Preventive Physical Mitigation, will include three sub-components: 1) sea defenses to protect against storm surges and rehabilitation of exposed road sections, including (a) civil works at Grand Mal Bay and associated supervision services, and (b) the feasibility and design of a prioritized sea defense investment program; 2) a drainage and flood control feasibility study and the design of protection works for flood-prone areas; and 3) a river training and slope protection feasibility study, and the design of protection works for particularly vulnerable main roads. Project management costs include the funding of: 1) the specialists to be recruited in the PCU (Assistant Project Coordinator/Procurement Officer, Accountant, Administrative Assistant); 2) office equipment; 3) separate technical and financial audits; and 4) operating expenditures

16 Total costs for the projecfts components are listed below. Bank financing is to be understood as the total under the IBRD loan and the IDA credit. A. Strengthening Disaster Other Public Management Capacity. Sector Management B. Preventive Physical Mitigation Other Non-sector Specific C. Project Management Other Non-sector Specific Total Project Costs Front-end fee Total Financing Required Key policy and institutional reforms supported by the project: Institutional reforms and capacity building will be sought in the area of disaster preparedness, prevention and mitigation, in particular through various capacity-building measures, namely: (i) enhancing the capacity of NERO to perform its role effectively and in a timely manner, in particular through appropriate staffing and a recognized authority to act; (ii) ensuring that the National Disaster Plan is updated and related disaster management procedures are in place; (iii) formulating a national environmental protection policy and guidelines, and strengthening the institutional capacity, in particular in the Ministry of Works (MCWPU), to preserve the environment; and (iv) protecting and maintaining infrastructure facilities through increased funding for maintenance, improved construction standards, better capacity to enforce disaster mitigation regulations, and enhanced MCWPU capacity to quickly react during emergencies. The overall program will also finance studies and other initiatives to enhance preparedness to manage future emergency situations in the long-term, such as those related to hazard analysis, vulnerability mapping and risk assessment; building legislation; and seismic and volcano monitoring, which would be funded by other donors or under a next phase of the program. Grenada is committed to reducing its vulnerability to natural disasters through further reforms and restructuring actions, in particular regarding staffing and training, awareness and information, including inter alia, to: (i) appoint a full-time National Disaster Coordinator (NDC) as a high-level civil servant with the unique function of bringing diverse groups together to promote disaster mitigation, stimulate preparedness and to coordinate relief operations; (ii) staff ODP with professional and permanent civil servants; (iii) develop an appropriate institutional process to engage/mobilize all parts of society and stakeholders in disaster preparedness and emergency management; (iv) regularly undertake disaster-related training in order to improve emergency management skills; (v) draft and support laws and regulations to strengthen national and community disaster awareness and protection; (vi) engage business and industry resources to support public projects; (vii) stimulate the private sector to develop plans to protect their own productive capacity; and (viii) improve the degree of preparation of MCWPU to respond to emergency situations and manage disasters through quick removal of debris and repairs

17 3. Benefits and target population: The main benefits of the project would be to: (i) ensure that people can move quickly to safe areas (such as shelter) when a disaster strikes, thanks to a rapid response system; (ii) protect assets through the rehabilitation and retrofitting of infrastructure facilities to better withstand disasters; (iii) protect economic activities by ensuring the constant opening of the critical lifeline facility (the Western Coast Main Road); (iv) contribute to decreasing the cost of disaster management, response and rehabilitation; (v) facilitate protecting the environment, and raise awareness and capacity in this regard; and (vi) increase the effectiveness, timing and coordination of interventions during and following disasters. The main beneficiaries will be the population at large who will benefit from the avoidance or minimization of the disruption of economic activity when disasters strike due to prevention and mitigation works financed through the project, or rapid rehabilitation/reconstruction efforts following a disaster. Local communities will also benefit through the involvement of District Disaster Committees in disaster management in general and in improved shelter management, which will ensure smoother transfer of people to safer areas during emergencies. Government agencies, such as NERO, the planning ministries, and other implementing agencies, especially the Ministry of Communications, Works, and Public Utilities (MCWPU), will benefit from capacity building through training and technical assistance. 4. Institutional and implementation arrangements: Project Coordination and Management A Project Coordination Unit (PCU) headed by a full-time Project Coordinator (PC) has been set up within the Ministry of Finance and Planning to coordinate and manage the project, and will be responsible for project implementation. The PCU will be responsible for managing the different aspects of the project, coordinating implementing agencies, keeping accounts, and reporting to the World Bank. The PCU will include on a full-time basis an Assistant Project Coordinator, an Accountant, and an administrative assistant. The Assistant Project Coordinator will also assume the responsibility of Procurement Officer and will be a fully qualified procurement and contract management specialist. The preventive physical mitigation component will be implemented by the Ministry of Communications, Works and Public Utilities (MCWPU). The shelters program will be implemented jointly by the Ministry of Education and the Ministry of Community Development with assistance from MCWPU. NERO will be the implementing agency for most of the components dealing with the strengthening of disaster management capacity, and will monitor all other activities under this component that are managed by other agencies. The implementing agencies will work under the auspices and direction of the PCU, and will provide progress reports to the PCU on a monthly basis. The Procurement Officer in the PCU will handle the procurement and contract management responsibilities for all components of the project on behalf of the implementing agencies. The PCU will report on a quarterly basis to the World Bank, and an annual performnance review will be conducted. A National Hazard Mitigation Council has been established to serve as an advisory council to the Prime Minister on all aspects of disaster preparedness and management. The committee consists of representatives of relevant sector ministries involved in the program, as well as representatives from the private sector and NGOs. Financial Management, Accounting, and Auditing Arrangements A Financial Management Assessment of the existing financial management procedures, accounting system and administrative controls of the Ministry of Finance and Planning was carried out and cleared by the World Bank in February To assist with financial management, the PCU will hire an internationally

18 qualified Accountant for the duration of the project. The PCU will maintain two separate accounts for project incurred expenditures, one account for IBRD/IDA funds (Special Account) and one account for Government's counterpart funds (Project Account). In accordance with the Bank's Loan Administrative Change Initiative (LACI), the PCU will on a quarterly basis produce and submit to the World Bank a Project Management Report (PMR), which allows for the simultaneous monitoring of financial, physical and procurement activity of the project, while also serving as an application for disbursement from the loan/credit account. PMRs will be due 45 days after the end of each calendar quarter. The assessment of the capacity of the Office of the Auditor General to perform the annual independent audit of the PCU highlighted its limited resources. It was therefore decided that the audit would be contracted to an external accounting firm according to the Bank's procurement guidelines. The PCU will ensure that an annual independent audit is carried out and completed by a qualified international auditing firm, with a final report issued to the Bank no later than three months after the end of the fiscal year. The hiring of an audit firm acceptable to the Bank was a condition of negotiations. D. Project Rationale 1. Project alternatives considered and reasons for rejection: This project forms the second phase of an APL for five OECS countries. The rationale for the entire APL program is described in detail in the Project Appraisal Document for the APL 1 (Report No LAC), and the program's phasing is described in Section A. 1 of this document. One alternative to help the country reduce its vulnerability to hurricanes, which was highlighted by Hurricane Lenny in November 1999, would have been to focus the project on short-term priority measures and mostly finance physical mitigation investments to repair past damages. This quasi ad-hoc approach would have limited the assistance impact as it would not have addressed the key issues which are to improve the country's preparedness to withstand and manage disasters over the long term through both preventive mitigation investments and strengthening disaster management capacity. A second alternative would have been to finance a more complex project, in particular including an institutional strengthening component (as defined in Section C of this document and the original PAD for the APL 1 phase) with such activities as (i) hazard analysis, vulnerability mapping and risk assessment, building codes and zoning regulations; (ii) seismic and volcano monitoring; and/or (iii) disaster insurance. The first two sets of items were not retained due to weak implementation capacity within the country, the number of additional implementing agencies to coordinate which would have had to be involved, and a low degree of preparation of related activities. In addition, a number of other organizations in the region--which may be better equipped than the Bank to intervene in these fields due to their long experience in the sub-region, and which have the capacity to finance regional activities and exchange best practice--have indicated their willingness to finance these types of activities. Some related activities financed by these other organizations are already on-going. Given the high cost of financing such activities, retaining these under the present project could also have been premature as there currently are no accompanying zoning regulations to enable Government to control land use, and capacity to enforce building regulations is weak in general. Regarding disaster insurance, the Bank is currently in the process of preparing a separate regional loan dealing with disaster insurance for the OECS countries. A third alternative would have been to include in the project additional preventive mitigation investments, such as the rehabilitation of river crossings or more sea defenses. This was not retained due to an already fairly high cost for the large sea defenses works at Grand Mal Bay, the generally ill-prepared or

19 insufficiently justified proposals which lacked appropriate engineering studies, and the lack of related environmental impact and economic analysis. In addition, the project is part of a larger program which addresses all needs in a phased way and in coordination with other donors who have committed funds for potential investments. A fourth alternative would have been to prepare a larger infrastructure sector project based on up-front policy reforms to address the need for restructuring a fairly inefficient public sector, increasing infrastructure funding and cost recovery, and organizing adequate routine and periodic maintenance which should be financed under regular Government budget. This would, however, have proved difficult in the disaster management and preparedness context where the overarching objective of the project is to focus on strengthening long-term disaster management capacity rather than just financing physical infrastructure, the priority investments are targeted to prevent or mitigate the impact of disasters. Addressing all infrastrucure sector issues would have resulted in too complex a project which could lose sight of the focus on capacity building for disaster management. The project was elaborated bearing in mind the need for a balance between capacity-building in disaster management and preventive mitigation. A choice was therefore made to include two major components that would both strengthen the country's institutional capacity to manage and respond to disasters, as well as provide preventive physical mitigation measures. About 35% of project costs aim at strengthening the capacity of the main agencies and organizations involved in disaster management (implementing a comprehensive training program for the staff of all agencies concerned, including training District Disaster Committees; focused technical assistance to assist NERO in improving its operational procedures; setting up effective communications and early warning systems; improving shelter access and management for communities; and strengthening the Ministry of Works' capacity to respond to disasters). Roughly 58% of project costs regard preventive physical mitigation, mainly the strengthening of sea defenses and road rehabilitation along the West Coast. Because the cost of sea defenses is high, parallel financing has been sought with the Caribbean Development Bank for other critical areas along the West Coast. The remaining project costs relate to project management. Recognizing the need for a longer term approach to disaster management and prevention, the project will set the foundation for future financing--under additional loans/credits as well as under other donors' programs and Government funding--of priority needs once they have been properly assessed. This project will finance a series of feasibility and design studies to define phased programs of sea defenses, drainage and flood control, and river training and slope protection. These further initiatives will also provide funding for additional support to long-terrn strengthening of disaster management capacity

20 2. Major related projects financed by the Bank and/or other development agencies (completed, ongoing and planned). Latest Supervision Sector Issue Project (PSR) R:tin gs (Bank-financed projects only) Implementation Development Bank-financed Progress (IP) Objective (DO) Improve the preparedness and response OECS Emergency Recovery S S to natural disasters in five OECS and Disaster Management countries. Program (APL I) Introduce pro-competitive reformns in OECS: Telecommunications S S telecommunications sector and increase Project supply of informatics-related skills. Protect the environment and reduce OECS: Solid Waste S S public health risk. Management Project Strengthen monitoring capacity & GEF Planning for Adaption to S S analysis of global climate change to Global Climate Change determine potential impact on coastal Project areas; identify areas vulnerable to (implemented by OAS/ adverse effects of global climate change CARICOM). & sea level rise. Other development agencies USAID Office of Foreign Disaster Assistance (OFDA). Caribbean Development Bank (CDB). DFID UNDP CIDA Institutional support to disaster preparedness agencies opon a regional basis Financing of shelters and sea defenses. Technical assistance for disaster management Technical assistance to CDERA Technical assistance for disaster management IP/DO Ratings: HS (Highly Satisfactory), S (Satisfactory), U (Unsatisfactory), HU (Highly Unsatisfactory)

21 3. Lessons learned and reflected in the project design: Bank-wide experience of successful emergency programs and previous projects undertaken in the Caribbean, including the APL 1 projects, and incorporated into this project are: (i) project simplification with fewer components and implementing agencies to facilitate project coordination and implementation in a weak institutional capacity context; (ii) early dialogue with government on necessary institutional reforms with regard to disaster management and preparedness, and up-front strong government commitment as evidenced by actions to be agreed before negotiations; (iii) longer and better preparation of project components, and clear agreements between implementing agencies and the Bank; (iv) focus on strengthening the capacity of existing institutions to effectively discharge their responsibilities with regard to disaster management and preparedness; and (v) investing in capacity-building measures in this first phase of the program for Grenada to increase the Borrower's ability to mitigate the effects of future disasters and avoid ad-hoc requests for emergency assistance following disasters. Specific lessons from APL 1 are mostly that: (i) preparation in the prevailing emergency situation resulted in a certain number of ill-prepared proposals, delays during implementation to complete tender documents and launch activities, and the need to restructure some components or sub-components; (ii) activities earmarked for co-financing but with undefined donors resulted in the need for an increased effort during implementation to coordinate with other donors, and seek those with a longer experience with certain institutional strengthening issues and a better ability to provide more adapted regional funding; (iii) projects which are very complex by nature (multi-sector and new area of assistance) could not be easily implemented in a context of rather weak project management and administrative capacity; (iv) national institutions responsible for disaster management are still too much in infancy to take on the management of all the complex dimensions of project management and coordination of all concerned agencies; and (v) the Bank was better placed to focus on long-term prevention (both institutional and physical investments) than on short-term emergency measures, which other donors are often better organized to deliver. While this phase will primarily build the institutional capacity of the country with regard to disaster management and emergency response, its preparation has also highlighted weaknesses within various specific government agencies to respond to and manage disasters that are fairly similar to those above-captioned. This was very much accounted for in identifying the key investments and capacity strenthening activities that the project has finally settled on. In addition, the importance of shelters during an emergency has helped identify related assistance necessary for the use of shelters to be effective, general experience with communications and early warning systems has helped restructure these very important sub-components in more easily implementable activities, the lack of capacity to coordinate and manage the projects has resulted in more focused technical assistance to NERO, and the general lack of managerial capacity has helped in the choice to elaborate and implement a comprehensive training program for staff of all concerned agencies, as well as for disaster managers and community committees. This led the project team to streamline this project to focus primarily on capacity-building and preventive physical mitigation. Better up-front coordination with donors allowed for a more focused approach to co-financing and the agreement that a number of key activities such as in particular institutional strengthening (regulatory framework, disaster planning, building code, disaster insurance, hazard analysis and vulnerability mapping) would be financed by other donors within the APL framework. Specifically, for the five OECS countries covered by this APL, the need for training is of utmost importance to ensure rapid response and effective management of the situation during and immediately following a natural disaster. Training in Bank procedures, such as procurement and financial management, will prove vital to successful project implementation. Also, in building the country's institutional capacity

22 with regard to disaster management over time, emphasis is given to technical assistance in the form of training to various government bodies, such as NERO, MCWPU, and the PCU staff, who are part of the Ministry of Finance and Planning. This on-the-job training will build local capacity through actively transferring relative knowledge to local agency staff from both within the country and internationally. Also, Bank assistance through the provision of documents to aid in project preparation has proven to be crucial. Another important aspect given special attention was ensuring that the Borrower was committed to both the short run implementation of the current project, as well as the long run sustainability of a disaster management program. In terms of implementation, the coordination and management role of the PCU vis-a-vis the other government agencies (such as MCWPU) responsible for executing the various project components, was clearly spelled out to avoid conflicts during project implementation. The PCU also needed a clear mandate enabling it to coordinate various other government agencies, and housing it within the Ministry of Finance and Planning aided this process. For disaster management and response, the role and legal authority of NERO has to be clearly defined, and its existence has to be institutionalized and backed by Government, if it is to act effectively during an emergency. In addition, the response at the local level is critical and community involvement via the district disaster committees has been incorporated into the project design. Again, training for both NERO staff, the district disaster committees and communities in disaster management and response is critical. In order to ensure that the shelters are properly utilized and accessible during an emergency, the project has emphasized the need for shelter managers to be selected from, and preferably living in, the local community where the shelter is housed. Inadequate maintenance of physical infrastructure has also been a key issue in increasing the vulnerability of infrastructure facilities, as was witnessed by the damages caused by storm surges associated with Hurricane Lenny. The borrower will submit to the Bank, prior to each annual review, an O&M plan and budget for all relevant physical components financed under the project. 4. Indications of borrower commitment and ownership: Grenada has indicated a strong interest in participating in the program and Government is currently giving a high profile to disaster management. This commitment was enhanced following on the devastating impact of Hurricane Lenny in November The program has strong support from senior officials in the government, as witnessed by the Prime Minister, the Minister of Finance, and the Minister of Works meeting with Bank officials during project preparation. In addition, the PCU has been very efficient in preparing the project for appraisal, through effective and proactive coordination of various government agencies. The strong government commitment, along with the participation and cooperation of numerous high-level officials will be critical for the smooth implementation of this multi-sector project. The Government has taken a number of other steps that demonstrate its commitment to the project and its principles. In the past, the main government agency responsible for disaster management, NERO, was staffed by only one professional, the National Disaster Coordinator and two administrative staff. The Government has since hired two additional professional staff for NERO (Deputy Disaster Coordinator and Technical Specialist). The National Hazard Mitigation Council (NHMC) has also been established, a draft Shelter Policy has been submitted to Cabinet for approval. Other aspects of project preparation are well advanced, with TORs for a number of consultancies ready, preliminary engineering for the civil works complete, bill of quantities for shelters and for the retrofitting of the Emergency Operations Center (EOC) being reviewed, etc

23 5. Value added of Bank support in this project: Disaster Mitigation Experience. The Bank has gained experience, particularly over the last five years, in preparing a number of emergency disaster mitigation projects, including for floods, cyclones, and El Nino effects throughout the Latin America and Caribbean Region, as well as in other developing countries outside this region. The lessons and best practices from these experiences are being applied to this project. The project team was provided advice on disaster management issues through the Bank's Disaster Management Facility (DMF). Regional OECS Projects. The Bank has already worked on a number of regional projects for the OECS/CARICOM countries and has established strong working relationships, as well as experience in coordinating regional efforts. External Expert Advice. The project team from the Bank liaised with seconded staff from the U.S. Federal Emergency Management Agency and National Weather Service. The Bank team also drew upon the experience of the Organization of American States (OAS) and the USAID Office of Foreign Disaster Assistance (OFDA) in practical, operational and state-of-the-art approaches to emergency management. Donor Coordination. The project has been designed in collaboration with donors and other intemational organizations, in particular the CDB, OAS and USAID/OFDA. The Dutch trust fund was used to finance the use of consultants during project preparation. E. Summary Project Analysis (Detailed assessments are in the project file, see Annex 8) 1. Economic (see Annex 4): _ Cost benefit NPV=-US$21.55 million; ERR = 29.7 % (see Annex 4) O Cost effectiveness C) Other (specify) Given the non-revenue generating nature of the project, benefits are estimated based on expected damages averted due to the investments pursued in this project. Expected benefits are a combination of physical losses avoided, and the costs of lost economic activity and disruptions in social welfare minimized. The analysis includes the costs and expected benefits of the physical mitigation measures (sea defenses and road rehabilitation comprising roughly 64% of costs), and strengthening disaster management capacity measures (shelters retrofitting and strengthening various agencies comprising the remaining 36%). The economic analysis is described in greater detail in Annex 4. The NPV and ERR shown above is for the base-case scenario, which assumes (i) that the objective probability of a major hurricane striking Grenada is at least 10% per year (this is the lower bound of the probability range estimated by the U.S. National Ocean and Atmospheric Administration), and (ii) that the minimum damage averted due to the project's investments equals a 10% value of GDP (a tropical storm in 1975 caused damages of roughly 20% of GDP). In Annex 4 the expected benefits are also subjected to sensitivity analysis by varying the probability of a hurricane striking the island and simultaneously varying the value of damages averted (as a percent of GDP). 2. Financial (see Annex 4 and Annex 5): NPV=US$ million; FRR = % (see Annex 4) This analysis is not applicable, since this is a non-revenue generating project

24 Fiscal Impact: The fiscal impact is expected to be limited, with governrment counterpart funding amounting to less than 1% of government's expected budget (of both revenue and expenditure) per year during construction, and a negligible amount in post-project years. The effect on the countiy's debt position is also expected to be minimal given the IBRD/IDA blend nature of the financing. 3. Technical: Sea defense design and country needs: The technical design of the sea defense at Grand Mal Bay is based on existing sea defenses located in the North Western part of the island, which withstood the storm surges associated with Hurricane Lenny in November The proposed sea defense at Grand Mal Bay aims at securing the provision of energy to the island's capital St. Georges and the airport. The project will thus allow for an all-weather link between the oil depot located at Grand Mal Bay and the power station located in St. Georges. Shelters design and standards: The shelters are designed based on technical standards compatible with other OECS countries, especially the specification established under APL 1. The technical design of the rehabilitation and renovation of the existing shelters uses international standards, in terms of materials and structures resistant to hurricanes. The renovation also takes into consideration the minimum requirements needed for the wellbeing of the tenants. The selection of the shelters to be retrofitted prioritizes areas with high concentrations of low-income residents and areas vulnerable to disaster, taking into consideration the costs of the works to be undertaken. Reliability of the cost estimates: The project cost estimates are based on detailed engineering cost breakdown and results of past bidding processes carried out for similar works in the island during the last five years. With regard to the capacity of the local construction industry to carry out infrastructure works, two-thirds of the larger construction firms have the capacity to take on contracts over US$ 1 million. There are many small local contractors able to carry out maintenance works, building construction and repairs. There are thus enough contractors able to handle the scope and quantity of works to be implemented under the proposed Bank-financed project, except for the sea defenses contract, which will fall under ICB and should be carried out by foreign contractors. 4. Institutional: a. Executing agencies: Capacity to handle complex and large projects is generally weak in Government. This is mostly due to under-staffing in a number of agencies, the lack of staff experienced in project management at all levels, and lack of well-defined mechanisms and procedures. This is particularly true with regard to donor-funded projects, except within the Ministry of Finance and Planning (MFP) and the Ministry of Education (ME). It was therefore agreed that a PCU will be established to coordinate the project and that staff would be hired on contract to assist with project management (see below). With regard to community capacity building to manage and respond to disasters, the roles of district disaster coordinators will need to be strengthened. b. Project management: -20 -

25 Both NERO and line ministries are stretched too thin to effectively manage the project, and are also constrained by their current staffing and organizational structures. Capacity-building with regard to project management is thus of the essence, but difficult to achieve due to the small size of the economy, which cannot easily sustain the necessary critical mass of expertise in Government services. The PCU will therefore hire a procurement officer and an accountant for project management purposes. NERO staff will also be strengthened by two additional professional positions, both of which will be civil servant positions. Procurement and the contracting of contractors, suppliers, and consulting firms will follow World Bank guidelines. The PCU will be responsible for procurement and management of contracts, while the implementing agencies will provide input into the preparation of tender documents, TORs for consultancies, lists and specifications for goods, as well as the day to day supervision of the work of consultants and other implementation issues (the respective roles and responsibilities of the PCU vis-a-vis the implementing agencies are provided in the Project Implementation Manual). The publication of the General Procurement Notice (GPN) will take place before effectiveness, and advertisements of Requests for Proposals (RFP) and Special Procurement Notices (SPN)--if required--will be published in Development Business and national newspapers respectively for studies estimated to cost over US$ 200,000 and all ICB works. The detailed design and environmental impact assessment for the sea defense works has been carried out in-house with the assistance of consultants. Advanced Procurement has taken place for the recruitment of the PCU staff and the auditors and retroactive financing will be used to cover the relevant expenses. Retroactive financing will also be used to cover expenditures related to the procurement of office equipment for implementing agencies and the PCU. Total retroactive financing will not exceed US$250,000 equivalent. A Procurement Assessment was carried out and approved by the Banks Regional Procurement Advisor in February Social: No social and resettlement issues associated with the civil works or other project components have been identified. The project is expected to have a positive social impact because a majority of the components would restore and retrofit basic infrastructure such as sea defenses, roads, and schools, infrastructure that is all used on a day-to-day basis by the general population. The project will benefit communities by strengthening the capacities of the agencies that are in charge of warning citizens of impending disasters and improving their ability to manage the situation efficiently and effectively during and after such emergencies. The project will also assist in developing a training program in disaster management activities for the disaster committees and communities. Such training will include the functions of a District Disaster Committee, surviving a disaster, and specialized training like emergency search and rescue, donations management, etc. In subsequent years and phases of the program, additional disaster committees would also be provided with similar training. The training program will also include community-level training and other activities to promote community participation in disaster preparedness and mitigation. As a part of this effort, the project will finance the production of training and education materials, including pamphlets for public distribution through the District Disaster Coordinators and public centers like post offices, community centers, churches and major employers. 6. Environmental assessment: Environment Category: B (Partial Assessment) Key sections of the coastline of the island have been retreating in association with rises in sea level and increasing frequency of storms, trends which are predicted to continue. Because of the inland topography, coastal areas are vital to the country's economy as they are the locus for major population centers and highways

26 The Government has, as a result, prioritized the protection of key sections of the western coastline. In an effort to mitigate these problems, the project proposes to fund major civil works in one critical location (sea defenses at Grand Mal Bay). A local consultant has carried out an Environmental Impact Assessment (EIA), including the definition of mitigation measures for the sea defense investment (document dated February 2000). The environmental issues have been identified by the EIA as not major, although issues with quanrying and the protection of a dove sanctuary situated 5 miles away have been raised. As a result, a condition will stipulate that no quarrying is to take place in Perseverance Estate (which contains a dove sanctuary), and a supplemental environmental assessment and materials investigation study will be carried out prior to issuing the tender documents for sea defense works at Grand Mal Bay with the objective of identifying appropriate quarry sites. In addition, Government indicated that it has already secured funds to finance consultants to review the design and supervise the works (TORs have been submitted to the Bank for its review). Several recent reports (port rehabilitation and road rehabilitation) highlight the fact that EIAs are not required in Grenada by legislation, but are routinely requested by the Land Development Control Authority (LDCA) for large projects. Several attempts were made in the past to introduce various legal documents for land-use regulation and environmental management in Grenada. Currently the Government of Grenada (GoG) is reviewing legislation with regard to environmental management and is preparing the National Physical Development Plan, representing a concerted effort to utilize Grenada land resources in an organized way. Assistance will also be provided to GoG under this project for the strengthening of its capacity in environmental management. Assistance will, in particular, be provided through reviewing environmental legislation and developing EIA standards regarding disaster mitigation and preparedness, and providing training to MCWPU staff in carrying out environmental assessments. The project will also finance three studies to define programs of preventive disaster mitigation investments with regard to i) coastal zone management, ii) drainage and flood control, and iii) river training and slope protection. The TORs for these studies will be reviewed to include appropriate environmental requirements to be accounted for in the design of the future civil works, and make recommendations as to the type of mitigation measures which should be carried out as part of the proposed investments. 7. Participatory Approach (key stakeholders, how involved, and what they have influenced or may influence; if participatory approach not used, describe why not applicable): a. Primary beneficiaries and other affected groups: NERO is the primary stakeholder, and has been involved in project design, and also contributed in preparing TORs, and helped to identify communications gaps and needs regarding equipment and supplies. The MCWPU has been integrally involved in the civil works components, preparing designs, TORs and BOQs. The Meteorological Office has been involved in identifying their own needs, and the Ministry of Education and of Community Development was involved in the preparation of the shelter program. The project will involve communities directly through: * District Disaster Committees, consisting of community volunteers, which will be revived and given training and equipment, including communications equipment, such as hand held radios. * The new Shelter Policy will strive to ensure that shelter managers are from the communities (as opposed to defacto school principals). * Strengthening the communications systems will ensure improved communication and access to warn communities of impending emergencies and enable improved management of a disaster situation at the community level

27 * NERO procedures will be reviewed to focus more on reaching out and consulting with communities. The actual review of the procedures will also be carried out in consultation with communities. b. Other key stakeholders: International donors, such as CDB, OFDA, and DFID, have also aided in the project design process, and parallel financing for a number of components have been agreed upon. Other stakeholders include the private sector and NGOs through their representation on the National Hazard Mitigation Council (NHMC). F. Sustainability and Risks 1. Sustainability: Preventive Physical Mitigation. Inadequate maintenance has been a key issue in the lack of sustainability of infrastructure, as was witnessed by the damages caused during the storm surges associated with Hurricane Lenny. In accordance with Section 9.01 of the General Conditions Applicable to Loan and Guarantee Agreements, each relevant sector ministry will, prior to annual reviews, prepare and submit to the Bank for review and approval an O&M plan and budget for all relevant physical components financed under the project. Although capacity exists among local contractors, there are still some key risks as to the ability of the local construction industry to carry out the smaller civil works appropriately (the large civil works will be an international bid) to ensure that adequate technical standards are maintained. Strengthening Disaster Management Capacity. From a project point of view, both NERO and the line ministries are stretched too thin to manage the project and/or project components as they are currently staffed and organized. The assessment of procurement and contract monitoring capacity, as well as financial management capacity, in line ministries exhibit weaknesses. Besides some existing capacity in the Ministry of Communications, Works, and Public Utilities (MCWPU), and the Ministry of Education due to the Bank-financed Basic Education Project, little procurement capacity exists. The project will provide assistance to NERO in preparing for and managing emergency situations, and support to Government via the PCU on procurement and project management. To ensure sustainability in the long run, the project will seek government commitment to staffing NERO and increasing financial resources to ensure its long-term viability after the project is completed (through requiring two additional staff positions financed by the government in NERO). The bulk of the assistance provided to these agencies from project resources will be in setting up systems for response activities, as well as for equipment and training. This important "setting-up" first phase will be followed by further support for longer-term institutional reforms in disaster preparedness and management through possible additional loans/credits or other donor financing

28 2. Critical Risks (reflecting the failure of critical assumptions found in the fourth column of Annex 1): Risk Risk Rating Risk MKigation Measure From Outputs to Objective NERO has insufficient authority to H Appropriate staffing of NERO and the adoption assume leadership role during an of new emergency management procedures. emergency, and EOC is operational. Emergency and communications M Government budget for maintenance of equipment is neither maintained nor equipment and facilities. adequately used. People are unable to access shelters M Community leaders' involvement and during an emergency. commitment, and access to roads kept open. Physical works are completed at S Adoption of appropriate design standards and technically inadequate standards. construction regulations. Lack of maintenance of key physical H Adequate budget for O&M. infrastructure by Government. Monitoring of human resources by Government. From Components to Outputs Lack of resources devoted to staffing S Government-indicated commitment to hire NERO. additional professional staff in NERO, and technical assistance from project. Communities are unwilling and unable to M Community training programs and assistance to take actions and mobilize themselves district disaster committees. during an emergency. Participation in procedures and drills. Local construction industry has limited M Improved and standerdized design, and capacity to do retrofitting. supervision of small civil works by consultants. MCWPU has no emergency response S Equipment and training provided teams in place. MCWPU has limited capacity to S Technical audits and recruitment of consultants supervise contractors for supervision. Overall Risk Rating Risk Rating - H (High Risk), S (Substantial Risk), M (Modest Risk), N(Negligible or Low Risk) 3. Possible Controversial Aspects: None. G. Main Loan Conditions 1. Effectiveness Condition * The Implementation Manual has been issued by the Borrower * The Project Account has been opened by the Borrower with an initial amount of at least US$850,000 equivalent s

29 2. Other [classify according to covenant types used in the Legal Agreements.] Additional financial covenant: * The Borrower shall deposit into the Project Account the balance of counterpart funding (US$865,000 equivalent) required for the project one year following project effectiveness. Environmental Covenants: * The Borrower shall take all mitigation measures set forth in the Environmental Impact Assessment report prepared for the Project dated February 2000 * No quarrying or any other type of work will be carried out in Perseverance Estate * No invitations to bid for sea defense works in Grand Mal Bay shall be issued unless the supplemental environmental study has been carried out in a manner satisfactory to the Bank and the recommendations of such study have been included in the bidding documents for such works. H. Readiness for Implementation 0 1. a) The engineering design documents for the first year's activities are complete and ready for the start of project implementation b) Not applicable The procurement documents for the first year's activities are complete and ready for the start of project implementation. Z 3. The Project Implementation Plan has been appraised and found to be realistic and of satisfactory quality. El 4. The following items are lacking and are discussed under loan conditions (Section G): 1. Compliance with Bank Policies 1 1. This project complies with all applicable Bank policies. El 2. The following exceptions to Bank policies are recommended for approval. The project complies with all other applicable Bank policies.,/ternrd A. Becq D M. Leipziger alan ulos Team Leader Sector Manager/Dir r Cou ry Manager/Director

30 Annex 1: Project Design Summary GRENADA: Grenada Emergency Recovery & Disaster Management Project Sector-related CAS Goal: Sector Indicators: Sector/ country reports: (from Goal to Bank Mission) Strengthen infrastructure and Social and economic Data on growth, income, and Macroeconomic policy safeguard the environment. disruptions following a natural socio-economic indicators. conducive to growth. disaster. Program Purpose: End-of-Program Indicators: Program reports: (from Purpose to Goal) Ensure that all five APL 1: Reconstruction and World Bank project All countries have a stable participating OECS member rehabilitation of preparation and quality economic and political nations have the ability to infrastructure, and support assurance mechanism. environment. adequately respond to natural disaster mitigation disasters. investments in St. Kitts & Nevis, St. Lucia and Dominica. APL 2: This second phase brings Grenada and St. Vincent & the Grenadines) into the program. The activities supported will be the same as in APL 1, focusing on strengthening emergency preparedness and response systems. Provide additional investment APL 3: Demonstration of: (i) to strengthen both physical satisfactory completion of infrastructure and institutional APL 1 &2 investments; (ii) capacity building. continued govermment commitmento disaster management policies as demnonstrated by effective enforcement of key policies; (iii) adequate maintenance of infrastructure particularly vulnerable to disasters. Continued government commitment to disaster management. Establish contingency credit APL 4: Contingency fund for Donor declaration of an facility for participating use when severe natural emergency and effective donor country to access in the event disaster strikes during the coordination. of a severe natural disaster program period. APL 4 emergency. triggered by: (i) declaration of disaster emergency by govt. at any time during program period; (ii) evidence that govt. is committed to implementing disaster mitigation policies

31 Key Pwformance Hberarchy of 0bjEctives Indica trs itor fin Evalkuation Critical Assumpfions Project Development Outcome / Impact Project reports: (from Objective to Purpose) Objective: Indicators: Strengthen Grenada's Operational emergency Monthly implementation Effective coordination among resilience, preparedness, and procedures and mobilization progress reports from each government agencies. ability to respond to natural guidelines in place as per implementing agency to PCU. disasters. international standards by July Improved reporting of weather PMRs, mission reports of information by the CMO or other equivalent Meteorological office organization NERO--a) with regularity (at least once daily); and b) quality (verified by missions of the Caribbean Meteorological Organization). Enhanced ability at NERO to NERO reports accurately analyze incoming information and data on World Bank missions, MTR, emergencies and serve as a and annual reviews. single "clearing house" for early warning information and dissemination (as evidenced by timely decision making, the triggering of emergency procedures and timely dissemination of warnings by NERO to populations at risk). Increased number of people Beneficiary surveys. serviced by adequate shelters due to the retrofitting program Strengthened capacity in Ministry of Works to carry out EIAs and works during emergencies

32 Output from each Output Indicators: Project reports: (from Outputs to Objective) Component: 1. NERO capable of 1. I National Disaster 1.1 Monthly implementation 1.1 NERO has sufficient effectively managing disaster Coordinator (NDC) position progress reports from each authority to assume leadership situations. filled by a full-time permanent implementing agency to PCU. role during an emergency. civil servant; at least EOC is operational. additional professional staff (a 1.3 Emergency equipment is Deputy Coordinator and a effectively stored, monitored Technical/Data Specialist) in and properly distributed NERO by December during an emergency. 1.2 National Hazard Mitigation Council (NHMC) with defined membership by August At least one training course carried out for high level govt officials in managing emergencies. 2. Country-wide early 2.1 Adequately equipped and 2.1 PCU monitoring and 2.1 Early warning and warning and emergency staffed Meteorological Office reporting. communications equipment is communications system with complete early warning maintained and used operational. system. adequately. 2.2 At least 72-hour advance warning from Met Office to NERO of impending tropical events. 2.3 Number of District Disaster Coordinators reached, and reduced response time of those coordinators to an emergency. 3. Functional shelters. 3.1 Number of shelters 3.1 People are able to access retrofitted. shelters during an emergency. 3.2 At least one shelter manager per shelter trained and in place

33 4. MCWPU able to respond 4.1 Dedicated unit in 4.1 Physical works are quickly to repair infrastructure MCWPU capable of erecting completed at technically following a disaster. on-site metallic bridges of a adequate standards. 6m span in one day. 4.2 Training MCWPU in canrying out EIAs and manage/monitor mitigation measures. 4.2 No more than one day of interruption to traffic on rehabilitated roads due to weather conditions. 5. Improved and maintain 5.1 Sea defenses constructed 5.1 Maintenance of key physical infrastructure. and road rehabilitated at physical infrastructure by Grand Mal Bay. Government. 6. Feasibility studies carried 6.1. Recommendations of 6.1 Follow-up investments out. studies financed by the project and/or adoption of reviewed by Government recommendations. before the end of 2001 and approved recommendations implemented by the end of

34 Project Components Inputs: (budget for each Project reports: (from Components to Sub-components: component) Outputs) NERO strengthening. US$ million Monthly implementation Governiment commitment and progress reports from each resources devoted to staffing implementing agency to PCU. NERO. Emergency communications US$ million Quarterly reports from PCU to Commnunities are willing and and early warning the Bank. able to take actions and mobilize themselves during an emergency. Shelters program US$ million Local construction industry has capacity to do retrofitting. Strengthening MCWPU US$ million MCWPU has emergency capacity response teams in place and is able to monitor environmental measures. Sea defense and road US$ million MCWPU has limited capacity rehabilitation to supervise contractors. Slope protection and river training Drainage and flood control Project management US$ million US$ million US$ million

35 Annex 2: Detailed Project Description GRENADA: Grenada Emergency Recovery & Disaster Management Project By Component: Project Component I - US$4.12 million A. StrenLthenine Disaster Management Capacity The strengthening of disaster management capacity component will finance: (a) strengthening the National Emergency Relief Organization (NERO); (b) developing a country-wide early warning and emergency communications system; (c) implementing a shelter program; and (d) capacity-building measures for the Ministry of Communications, Works and Public Utilities. 1. Strengthening NERO In order to fulfill its mandate, NERO needs, first and foremost, to be adequately staffed. The Government has created two additional professional staff positions in NERO, that of a Deputy Disaster Coordinator and a Technical/Data specialist, with TORs acceptable to the Bank. Both positions will be civil servant positions and financed by the Government. In addition, the project will finance the following activities under this sub-component: (i) technical assistance to review the National Disaster Plan and improve disaster management procedures; (ii) rehabilitation and expansion of the EOC building; (iii) purchase of equipment and supplies to improve the day-to-day functioning of NERO, as well its activities during an emergency; and (iv) training at various levels for NERO staff and other related agencies, and public awareness activities. (a) Inproving Disaster Management Procedures The project will finance technical assistance to update the 1985 National Disaster Plan with particular attention to: (i) streamlining the procedures and conditions under which both a local and full national state of emergency are called; (ii) reviewing NERO's activities; (iii) preparing operational procedures to guide NERO and other government agencies critical to effective disaster management; (iv) review the structure, roles and responsibilities of District Disaster Committees; and (v) consolidating recommendations into a revised National Disaster Plan. The consultancy will include preparation of draft legislation to formalize NERO as an independent government agency, responsible to the Prime Minister's office. The preparation of hazard maps accurately identifying areas that are particularly vulnerable to natural hazards is an important activity, but an expensive one, and one that would be futile unless there is accompanying land use and zoning regulation that would enable the government to control land use. In this first phase of the APL therefore, the consultant(s) financed to review the National Disaster Plan and legislation surrounding disaster management will also prepare a simple draft Land Use/Zoning Code and the procedures to enforce it. This will ensure that once hazard maps are developed (financed either by the government and/or other donors such as the OAS of CDERA), they can be immediately useful. (b) Rehabilitation and Expansion of the Emergency Operations Center (EOC) The EOC building at Fort Frederick must serve multiple functions as: (i) a base for NERO's administrative activities; (ii) a training center; (iii) a national command and emergency communications center in times of emergency; and (iv) a storage center for emergency equipment and supplies. The building is presently

36 inadequate to serve these functions and requires expansion (upwards of 50 people may need to work there in case of an emergency) and rehabilitation to make the existing structure weather-proof and the site secure. The project will therefore finance: (i) building repairs; (ii) conversion of currently under-used areas of the building to workrooms; (iii) minor building extensions including the installation of a communications tower; (iv) installation of central air-conditioning and adequate wiring and power and telephone outlets; and (v) a security system. (c) Equipment and Supplies for NERO The project will finance equipment and supplies to ensure that: (i) NERO can function effectively in its daily operations; (ii) the EOC can effectively coordinate information and make decisions during an emergency; and (iii) local disaster shelters will have access to basic supplies and equipment. The comprehensive list includes office equipment, furniture, training equipment and emergency supplies (portable generators, emergency lighting, plastic sheeting, emergency rescue tools, etc.). Emergency supplies for shelters will be stored at the EOC and distributed to shelters prior to an emergency. (d) Training and Public Awareness Program The project will finance a comprehensive Training Program for disaster preparedness and management, which will benefit NERO staff, District Disaster Committees/communities, shelter managers, key GoG officials, selected volunteer amateur radio and CB operators, construction firms, building inspectors and the PCU staff. A consultant will be hired to prepare a training needs assessment identifying specific people to be trained and the training to be financed. It is envisaged that the modes of training offered will range from off-the shelf training/workshops by regional and international agencies (offered in-country), to specialized courses, and conferences, seminars and study tours. An annual projection of training programs will then be prepared by NERO and the PCU and submitted to the Bank each year for a "no objection". As part of the training program, emergency drills (i.e. full emergency simulation exercises) conducted by regional agencies such as CDERA will also be carried out to test NERO's entire emergency response and management system. These drills will also be used as a monitoring tool to evaluate the impact of the project on Grenada's disaster management capacity. Maximum advantage will be taken of regional training programs as well as free training offered by some agencies. NERO has submitted to the Government a proposal for the restructuring/formalization of the District Disaster Committees on a pilot basis. The project will support this process by focusing initial training on these pilot committees in disaster management activities such as the functions of a District Disaster Committee, surviving a disaster, and specialized training like emergency search and rescue, donations management, etc. In subsequent years, other disaster committees would also be provided with similar training. The training program will also include community-level training and other activities to promote community participation in disaster preparedness and mitigation. As a part of this effort, the project will finance the production of training and education materials, including pamphlets for public distribution through the District Disaster Coordinators and public centers like post offices, community centers, churches and major employers. 2. Emergency Communications and Early Waming Effective management of impending disasters requires a comprehensive system where the right agencies (especially NERO) receive data, information, and weather observations/forecasts in a timely manner, and then are able to communicate decisions, actions and warnings to all stakeholders, particularly the public. This sub-component therefore covers (i) assistance in developing a communication system, and (ii) support

37 to the Meteorological Office which is responsible for forecasting weather patterns. To advance the early warning aspect of emergency management, the TOR of the feasibility study for flood protection, which is a separate sub-component (see below), will include the determination of the numbers and location of the population at risk. (a) Emergency Communications System To facilitate NERO's capacity to receive and transmit data and information and communicat effectively with all stakeholders, particularly during and after an emergency, the project will equip the EOC with HF, VHF, CB and satellite radio communications equipment, with associated power supplies, programmers, cables, connectors, antennas, feeders, etc. The EOC will be equipped for the safe storage and operations of the equipment (including construction of simple towers for antennas), and will also have dedicated fax and phone lines and a computer/printer in the Communications Room. Equipment procured for an emergency communicationsite in Carriacou will be stored at the EOC until an appropriate site has been located with a site manager identified and trained in using the equipment (this should be the appropriate communications sub-committee member from Carriacou). (b) Early Warning The project will strengthen the Meteorological Office in light of the critical role it plays in observing and forecasting weather patterns within the country. In particular, the project will finance: (i) technical assistance to assist the Met Office in preparing specifications for the required equipment and for siting them; (ii) procurement of equipment including two weather observation stations, a psychrometer and computers, printers and software; and (iii) training for Met Office staff in meteorology. The Caribbean Meteorological Organization (CMO), the Caribbean Meteorological and Hydrological Institute (CMHlI) provide free technical assistance to their member countries and will be called upon to provide the technical assistance. The only cost associated with this would be travel and per diem for the consultants involved. Government will make arrangements with one of these institutions or other similar institutions to monitor on an annual basis progress with improving Grenada's early warning capacity. Training for Met staff will be provided in equipment operations and maintenance and in operational meteorology to maximize the information from new technology and to minimize error of misinterpretation of observational data. The World Meteorological Organization (WMO) is responsible for international coordination in meteorology and provides various specialized training in meteorology to its member countries, often at nominal or no cost. Grenada is currently not a member, primarily due to the annual membership fee of US$ 8,000. Grenada should, however, seek to become a member of the WMO, as this would, among other benefits, enable the Governmento take advantage of WMO services, particularly training, at a much reduced cost. Other training in meteorology will be provided by agencies such as the Caribbean Meteorological Institute, and the cost of training could be significantly lower if Grenada joined the WMO. 3. Shelter Program Due to the critical need to retrofit some shelters, particularly for low income populations living in highly vulnerable areas, the Government has specifically requested the Bank to consider the financing of some high priority shelters, despite the absence of a comprehensive program. This component will thus finance a program to retrofit high priority shelters, and seek to help GoG develop a National Shelter Program that would identify all the shelter needs of the country and plan a phased approach to financing the needs. The component will also finance the design and construction of a prototype multi-purpose shelter in a priority

38 area (poor and most exposed population where a structurally sound public building does not exist). A National Shelter Policy (reviewed by the Bank) has already been submitted to Cabinet for approval and will be ratified during the initial stages of the project. The project will also finance the development of a shelter management and maintenance manual. The Ministry of Education and the Ministry of Communications, Works and Public Utilities (MCWPU) are responsible for preparation and implementation of the component with the assistance of NERO and input from the Ministry of Community Development (for the retrofitting of community centers). 4. Strengthening MCWPU Capacity The project will finance MCWPU capacity-building in disaster management response, and to carry out emergency repairs to re-establish accesses after disaster through the procurement of built-on-site metallic bridges. This will involve supplying the MCWPU with a stock of prefabricated metallic components (70 meters of double-single type, enough to erect three 10/15 meter-span bridges and covering the longest 30 meters span bridge) with launching equipment, as well as training of one maintenance crew and the purchase of assembly manuals. In addition, a stock of gabion baskets to protect piers and abutments will also be financed under the project. The project will also assist MCWPU in strengthening its capacity to carry out environmental assessment and to monitor mitigation measures, through technical assistance and training. In particular, the sub-component will assist in formulating TORs for an Environmental Unit, determining staffing and training needs, and defining the organizational and administrative relationships within the Ministry and with each of the other GoG relevant agencies. Project Component 2 - US$6.79 million B. Preventive Phvsical Mitieation In order to take into account the effects of the tidal surge arising from Hurricane Lenny in November 1999, the physical mitigation measures with regard to areas at risk were reassessed. Given the degree of damage caused by the tidal surge and the impact on the country as a whole, GoG indicated that an adequate sea defense system is of prime importance to ensure key access to critical lifeline services such as road transport, power generation, gasoline stocks, and health centers and hospitals. The Western Coast Main Road south of Gouyave, in particular, was identified as critical to maintaining the operation of lifeline facilities and access of the population. It was thus agreed with GoG that physical mitigation investments will be limited during this first phase of the program to priority sea defenses and road rehabilitation at Grand Mal Bay, in order to avoid critical damages to the Western Coast Main Road. The physical mitigation component includes: (a) sea defenses to protect against storm surges and rehabilitation of exposed road sections, including (i) civil works at Grand Mal Bay and associated supervision services, and (ii) the feasibility and design of a prioritized sea defense investment program on both islands of Grenada and Carriacou; (b) drainage and flood control, consisting of the feasibility and d etailed engineering design of protection works for flood-prone areas and particularly vulnerable main roads; and (c) river training and slope protection, consisting of the feasibility and detailed engineering design of river training & slope protection civil works. 1. Sea Defenses and Road Rehabilitation Since 1970, an erosion trend has become apparent along the coastline of Grenada, with the coastline

39 retreating and sea levels rising to the point where certain sections of the road are on the verge of collapsing. This situation constitutes a major hazard as it would cause severe disruptions to the strategic highway network. The project will finance: (i) the construction of one kilometer of sea wall and the reinstatement of the adjacent roads along the Western Coast Main Road at Grand Mal Bay; (ii) a supplemental EIA and materials investigation study for the above captioned works; and (iii) the updating of an existing coastal protection and sea defenses study carried out in 1994 by DIWI Consult GmbH in association with Engineering Partnership, taking into account recent changes in the weather pattern climate in Grenada, including the storm surges of November 1999 associated with Hurricane Lenny. The minor environmental issue of quarrying at the nearby dove sanctuary of Perseverance Estate is being dealt with in three separate legal covenants which i) require the Government to take all mitigation measures set forth in the Environmental Impact Assessment report prepared for the Project dated February 2000; ii) prohibit quarrying in Perseverance Estate; and iii) require that the supplemental environmental study has been carried out in a manner satisfactory to the Bank and the recommendations of such study have been included in the bidding documents for teh Grand Mal Bay works. The risk of inadequate operations and maintenance for the civil works will be dealt with by requiring each relevant sector ministry to prepare and submit to the Bank for review and approval an O&M plan and budget for all relevant physical components financed under the project prior to each annual review of the project. 2. Slope Protection and River Training The sub-component includes an engineering feasibility study in the vicinity of all the island main roads with regard to slope protection, river training and flood risks, and aims at increasing MCWPU's knowledge of landslide, subsidence and flood hazards, and defining possible technical solutions (including road realignment where needed) to mitigate the impacts of heavy rains associated with the rainy and hurricane seasons, directly through landslides and indirectly through floods. This will compensate in a more pragmatic way for the postponement of the hazard mapping/risk analysis sub-component by providing assistance to mapping flood-prone areas, determining the impact on the population at risk, assessing water and electricity infrastructure at risk, carrying out an economic evaluation of the resources and infrastructure at risk, and producing hazard/vulnerability maps and reports to document the analysis for all three islands--grenada, Carriacou and Petit Martinique. Civil works would be financed through a subsequent loan/credit or by other donors as neither a detailed design nor EIA have yet been prepared. 3. Drainage and Flood Control The project will finance a detailed study, including detailed design and ETA, to fine tune the recommendations of a previous study for civil works required to improve drainage and better control flooding at the Tanteen and Grand Anse areas of St. Georges and Grenville. Civil works would be financed through a subsequent loan/credit or by other donors as neither a detailed design nor EIA have yet been prepared. Project Component 3 - US$ 0.83 million C. Proiect Management This component is aimed at assisting Government in meeting its project management obligations through: (i) the appointment of the Project Coordinating Unit (PCU), headed by a full-time Project Coordinator

40 (PC), and including an Assistant Project Coordinator/Procurement Officer, an Accountant, and an Administrative Assistant (last three to be hired under the loan/credit proceeds for the duration of the project). This component will also provide financing for office equipment and other operating expenditures for the PCU, as well as for a technical audit to verify the quality of the sea defense works at Grand Mal Bay, and for financial audits of the entire project every fiscal year

41 Annex 3: Estimated Project Costs GRENADA: Grenada Emergency Recovery & Disaster Management Project Project Costs by Component (US$ '000)

42 % Foreign % Total Local Foreian Total Exchanne Base Costs A. Strengthening Disaster Management Capacity 1. NERO Strengthening Disaster management procedures EOC Equipment and Supplies for NERO Training Subtotal NERO Strengthening Emergency Communications & Early Warning Emergency communicationsystem Early Warning System Subtotal Emergency Communications & Early Warning Shelters Program Shelters Retrofitting and Construction of Prototype , , Design & Supervision of Works Technical Assistance for Comprehensive Shelter Program Subtotal Shelters Program , , Strengthening MCWPU Capacity Metallic Bridges & Gabions TA & Training for Disaster Mngt, EIA & Monitoring Capacity Subtotal Strengthening MCWPU Capacity Subtotal Strengthening Disaster Management Capacity , , B. Preventive Physical Mitigation 1. Sea Defenses & Road Rehabilitation Grand Mal Bay Sea Defense & Road Rehabilitation 1, , , Sea Defense Studies Subtotal Sea Defenses & Road Rehabilitation 1, , , Slope Protection and River Training Drainage & Flood Control Subtotal Preventive Physical Mitigation 1, , , C. Project management 1. PCU staff PCU training Office Equipment Vehicles Technical Audits Financial Audits Operating Expenditures Communications services Subtotal Project management , , , Physical Contingencies Price Contingencies TOTAL PROJECT COSTS 2, , , NERO: National Emergency Relief Organization MCWPU: Ministry of Communications, Works and Public UtilitieS8 _

43 Annex 4: Cost Benefit Analysis Summary GRENADA: Grenada Emergency Recovery & Disaster Management Project The economic rationale for disaster management and mitigation is based on the premise that improved recuperative capacity of the economy will lower any adverse longer term impacts on the country's economic growth trajectory. The costs of disasters can be broken down into two parts, firstly the opportunity cost of not being able to safeguard the population and their property, and secondly the opportunity cost of lost economic activity, especially if damages to physical infrastructure leads to prolonged disruptions in economic activity. The analysis below examines the sensitivity of the expected net economic benefits for the APL 2 phase of the project in Grenada. Expected benefits are adjusted using a combination of the probability of a hurricane striking the island, and the damage averted (expressed as a percent of GDP) due to the mitigating investments and strengthening disaster management capacity measures implemented. Vulnerability can thus be defined as both the frequency at which a particular disaster (hurricane) occurs and the impact it has on the country (i.e. its severity). The effects of severity can be partially offset by mitigation measures aimed at limiting damages and improving response times once a disaster strikes. Summary of Benefits and Costs: The project's investment costs and expected benefits are calculated over a twenty year period. These costs and expected benefits are summarized in Table A4. 1 below. The benefits are adjusted by the probability of a hurricane striking Grenada, which in the base case is assumed to be 10%; that is, the lower bound as calculated by the U.S. National Ocean and Atmospheric Administration (NOAA), which estimates the mean probability of a hurricane striking Grenada in any given year to be in the range of 10%-25%. As for damages averted, this variable is largely unknown, since no extensive and consistent historic data set is available on damages averted due to mitigation measures. Data on damages caused by hurricanes in Grenada specifically is also limited, as is data on the damages caused by the annual storm surges that affect the country. The only estimate available for Grenada is from the November 1975 tropical storm that caused damages valued at roughly 20% of GDP. In the base case, the assumption is that on average the investments from the project can avert (save) a value equal to 10% of GDP, that would otherwise have been destroyed by a major hurricane (or that could result from damages caused by storm surges). The sensitivity analysis below, though, assumes various values for damages averted as a percent of GDP, and both the NPV and EIRR are also subjected to sensitivity tests in order to see how their values change due to variations in the probability of a hurricane and the damages averted due to mitigation investtnents. The probability of a hurricane striking the island is harder to quantify and sensitivity tests are performed in order to see what the lower bound may be for a probability of a hurricane hitting the island in order for the NPV to be greater than zero, i.e. for the project to be economically viable. While Table A4. 1 above shows both gross and expected benefits (as adjusted by the probability a hurricane striking Grenada), the latter is the correct variable to use in calculating the net present value (NPV) and when comparing investment costs with "true" benefits

44 TABLE A4.1 COSTS AND BENEFITS (US$ millions) Investment (yrs 1-4) Operations & Maintenance, Depreciation (yrs 4-20) Costs Institutional Strengthening NERO Strengthening Communications Shelters Ministry of Works Physical Mitigation Sea Defense & Road Rehabilitation Feasibility Studies ProjectManagement Total Costs Benefits (averted costs) Institutional Strengthening Physical Mitigation Project Management Total Benefits (Unadjusted) Expected Benefits (Baseline) Expected Net Benefits Main Assumptions: The main thrust of the economic analysis is to compare the cost of physical mitigation-for both strengthening disaster management capacity and infrastructure rehabilitation-with the present and future costs averted (imputed benefits) from pursuing such investments. The project's costs are defined as the direct investment costs associated with the project and the future operations and maintenance costs plus depreciation of the physical assets. The imputed benefits will be defined as the future costs foregone (or saved), which is also tantamount to the opportunity cost of not undertaking the mitigating investments. A discount rate of 10% will be applied to the costs and the benefits in order to calculate the net present value (NPV) and economic internal rate of return (EIRR) for the project as a whole. For the project's purposes, the NPV calculations are more important, since a zero NPV will yield a positive EIRR, and the economic analysis is generally more concerned with a positive NPV for the project. As for damages averted, this variable is largely unknown, since we have no historic data on damages averted due to mitigation measures. Data on damages caused by hurricanes are also limited, as is data on the damages caused by the annual storm surges that affect Grenada. In fact, the only major disaster-related observation available for Grenada is from the November 1975 tropical storm that struck the island, where it was estimated that 20% of GDP was destroyed. More recently, in November 1999, the island suffered damages from Hurricane Lenny, although the full extent of these darnages have not yet been assessed. In the analysis below, we will assume various values for damages averted as a percent of GDP. In the base case, however, the assumption is that on average the investments from the project can avert (save) at least

45 10% of GDP that would otherwise have been destroyed by a major hurricane or that could result from damages caused by storm surges. Sensitivity analysis / Switching values of critical items: The analysis below examines the sensitivity of the expected net economic benefits for the project. Expected benefits are adjusted using a combination of the probability of a hurricane striking the island, and the damage averted (expressed as a percent of GDP) due to the mitigating investments and the strengthening of disaster management capacity measures. Table A4.2 shows the results from the univariate sensitivity analysis, which allows the probability of a hurricane to vary, while assuming that the value of damages averted remain constant at 10% of GDP. TABLE A4.2 Prob. of Expected Hurricane NPV 1% % % % % % % % % % At a probability of 6% for a hurricane, the project becomes economically viable (NPV > 0). The probability distribution of hurricanes striking the island is then juxtaposed against the value of expected damages averted (costs saved). Table A4.3 summarizes the results of the bivariate sensitivity analysis (covarying both the probability of a hurricane and the damages averted). From this analysis it can be seen that there are two objective "minimal hurdle rates"for this project: first, a probability of 6% for a hurricane with damages of at least 9% averted, or a probability of 9% for a hurricane with damages of at least 6% averted. In other words, if either of these values fall below their respective "minimum hurdle rates" it would not be economically justifiable to pursue the mitigating investments. Thus, the results of the sensitivity analysis helps to establish a baseline under which it would be economically viable to pursue the project. In reality, the probability of a hurricane is unknown and changes in global weather patterns suggests perhaps an increasing occurrence (hence higher probability) of tropical storms. However, given that the data from NOAA show that the probability range for a hurricane striking Grenada in any given year has a lower bound of roughly 10%, we can assume that this project becomes economicaly viable when damages averted equals at least 5% of GDP. The data in Table A4.3 shows the "objective" minimum hurdle rates for the joint events as a probability for a hurricane at 5% per year and damages averted at 10% of GDP. However, given the observed lower bound of a probability of a hurricane of roughly 10%, the "minimum" damages that need to be averted for this project to become economically viable, albeit that the NPV is barely positive, becomes 5% of GDP. Data gathered in other Caribbean island, most notably the observation from the 1975 tropical storm that destroyed 20% of GDP in 1975, suggests that an assumption for the base case of damages averted of 10% of GDP would be a reasonable assumption

46 TABLE A4.3 Prob. of Percent Damage Averted Hurricane 1% 2% 5% 6% 9% 10% 15% 20% 25% 30% 1 % % % % % % % % % % The next step is to calculate the NPV and EIRR using the the minimum hurdle rate (probability = 10%, damages averted = 5%), and the baseline scenario (probability = 10%, damages averted = 10%). The results for the minimum hurdle rates calculations are summarized in Table A4.4 below, along with the base case, which uses the lower 10% bound of the historic probability distribution of a hurricane striking Grenada. TABLE A4.4 NET ECONOMIC BENEFITS AND RETURN Economic Analysis Investment (yrs 1-4) Operations & Maintenance, Depreciation (yrs 4-20) Minimum Hurdle Rate Total Costs Expected Total Benefits Expected Net Benefits (ENB) PV (ENB) Cumulative PV(ENB) NPV (of Expected Benefits) $ Economic IRR 10.4% Baseline Total Costs Expected Total Benefits Expected Net Benefits (ENB) PV (ENB) Cumulative PV(ENB) NPV (Expected Benefits) $ Economic IRR 29.7% While the probability of a hurricane is going to vary by year, and the damages caused will depend on the strength of the hurricanes, the actual values will most likely exceed the minimum hurdle rates we have calculated, which at best are very conservative assumptions

47 Annex 5: Financial Summary GRENADA: Grenada Emergency Recovery & Disaster Management Project Project Components by Year (Including Contingencies) (in US$)

48

49 Total A. Strengthening Disaster Management Capacity 1. NERO Strengthening a. Disaster Management Procedures 73,397 32, ,861 b. Emergency Operations Center Civil Works 324, ,845 Design & Supervision 41, ,941 Generator 21, ,217 Subtotal Emergency Operations Center 388, ,003 c. Equipment and Supplies for NERO 137, ,911 d. Training Training Needs Analysis 20, ,971 Training and Public Awareness 73, ,035 55, ,275 Subtotal Training 94, ,035 55, ,246 Subtotal NERO Strengthening 693, ,499 55, , Emergency Communications & Early Warning a. Emergency Communications System Technical assistance 20, ,971 Equipement 188, ,181 Subtotal Emergency Communications System 209, ,152 b. Early Warning System Equipment 62, ,727 Technical Assistance 15, ,728 Subtotal Early Warning System 78, ,455 Subtotal Emergency Communications & Early Warning 287, , Shelters Program a. Shelter Retrofitting and Construction of Prototype 870,119 1,202, ,072,186 b. Design and Supervision of Works 104, , ,067 c. Technical Assistance for Comprehensive Shelter Program 31, ,456 Subtotal Shelters Program 1,006,428 1,310, ,316, Strengthening MCWPU capacity a. Metallic Bridges and Gabions 470, ,453 b. TA & Training for Disaster Mngt, EIA & Monitoring Capacity 52,427 54,107 33, ,039 Subtotal Strengthening MCWPU capacity 522,879 54,107 33, ,492 Subtotal Strengthening Disaster Management Capacity 2,510,592 1,515,887 89,349 4,115,828 B. Preventive Physical Mitigation 1. Sea Defenses & Road Rehabilitation a. Grand Mal Bay Sea Defense & Road Rehabilitation 2,575,553 3,485, ,061,547 b. Supplemental EIA and Materials Study for Grand Mal Bay 31, ,456 c. Sea Defenses Studies 71, , ,855 Subtotal Sea Defenses & Road Rehabilitation 71,120 2,795,744 3,485, ,352, Slope Protection & River Training 71, , , Drainage and Flood Control 71, , ,914 Subtotal Preventive Physical Mitigation 213,360 3,089,333 3,485, ,788,687 C. Project Management PCU Staff 71, , ,678 78, ,287 PCU Training 31, ,456 Office Equipment 40, , ,352 Vehicles 60,900 31, ,264 Technical Audits 0 54, ,107 Financial Audits 31,456 32,464 55, ,763 Operating Expenditures 10,485 10,821 11,169 32,475 Communications services 5,381 5,650 5,933 16,964 Subtotal Project Management 172, , , , ,668 TOTAL PROJECT COSTS 386,180 5,846,375 5,262, ,474 '11,735,183 NERO: National Emergency Relief Organization MCWPU: Ministry of Communications, Works and Public Ublities _ 45 -

50 Annex 6: Procurement and Disbursement Arrangements GRENADA: Grenada Emergency Recovery & Disaster Management Project Procurement A. Procurement Arraneements Procurement for the proposed project would be carried out in accordance with World Bank "Guidelines: Procurement Under IBRD Loans and IDA Credits", published in January 1995 (revised January/August 1996, September 1997 and January 1999); and "Guidelines. Selection and Employment of Consultants by World Bank Borrowers" published in January 1997 (revised in September 1997 and January 1999), and the provisions stipulated in the Loan Agreement. 1) Procurement methods The methods to be used for the procurement described below, and the estimated amounts for each method, are summarized in Table A. The threshold contract values for the use of each method are fixed in Table B. Civil Works: The civil works under the project consist of the construction of sea defenses, the retrofitting of selected shelters, and the rehabilitation and extension of the Emergency Operations Center of the National Emergency Relief Organization (NERO) totaling US$ million equivalent. The larger sea defenses and road construction contracts will be procured following International Competitive Bidding procedures (ICB), using Bank-issued Standard Bidding Documents (SBDs). Given the expected size of the works, there is, no need for a pre-qualification of contractors under ICB but international advertisement of the project will be done through a Special Procurement Notice (SPN). Contracts estimated to cost less than US$ 0.5 million equivalent per contract, up to an aggregate amount of US$ 2,218 million, may be procured using National Competitive Bidding (NCB) procedures, using standard bidding documents agreed in advance with the Bank. These NCB tenders include shelter retrofitting works that will be packaged in three contracts, and the EOC rehabilitation and extension to be tendered under one contract. Goods and Equipment: Goods procured under this project, totaling US$ million equivalent, would include vehicles; office furniture; computer and office equipment; communications equipment and meteorological equipment; emergency equipment and supplies, rescue tools, and sundry items; and metallic bridges components and gabions. To the extent possible, contracts for these goods will be grouped into bidding packages of more than US$ 100,000 equivalent and procured following International Competitive Bidding (ICB) procedures, using Bank-issued Standard Bidding Documents (SBDs). This concerns two major packages accounting for almost 75 % of the value of the goods to be procured: one for metallic bridges (and its launching system) and gabions for the Ministry of Communications, Works and Public Utilities (MCWPU), and one regrouping various technological equipment in three lots (computers and office equipment, communications equipment, and meteorological equipment). Contracts for goods which cannot be grouped into larger bidding packages are estimated to be procured in packages valued at less than US$ 25,000 each. They may be procured using international or local shopping procedures up to an aggregate amount of US$ 212,000 based on a model Request for Quotations satisfactory to the Bank. International shopping procedures will be used for the procurement of emergency equipment and supplies, rescue tools, and sundry items, in packages estimated to cost less than US$ 25,000 individually up to an aggregate amount of US$ 125,000. Local shopping procedures will be used for the procurement of office furniture, stationary/office supplies, and limited emergency equipment and supplies

51 in packages estimated to cost less than US$ 25,000 up to an aggregate amount of US$ 87,000. Procuremnnt of vehicles estimated to cost less than US$ 35,000 up to an aggregate amount of US$ 93,000 will be procured through UNDP's Inter-Agency Procurement Services Office (IAPSO). Consultants' Services: Consulting services will be contracted under this project in the following areas of expertise: coastal protection and shore management; flood control, slope protection and river training engineering; institutional development and disaster management; works supervision; and project management. These services are estimated to cost US$ million equivalent and would be procured using the Bank's standard guidelines. Firms All contracts for firms would be procured using Quality Cost Based Selection (QCBS) and Selection Based on Consultants' Qualifications (CQ) procedures. Tenders for the studies and design/supervision consultancies (including both design and supervision phases in each bid) will be issued using the QCBS procedure. Short-lists will be prepared based on expressions of interests following the publication of the General Procurement Notice (GPN), and advertisement published in the Development Business and national newspapers for studies estimated to cost over US$200,000. The CQ procedure will be used up to a ceiling amounf of US$ 260,000 for: (i) training contracts estimated to cost less than US$50,000; and (ii) the recruitment of a consulting firm to carry out the supplemental environmental and materials investigation study for the Grand Mal Bay Sea Defense works under a contract estimated to cost US$ 30,000. Time-based contracts will be used for all assignments, except for the auditors who will be paid on the basis of a lump-sum contract. Individuals Specialized advisory services would be provided by individual consultants selected by comparison of qualifications of three candidates and hired in accordance with the provisions of paragraphs 5.1 through 5.3 of the Consultant Guidelines, for contracts estimated to cost less than US$35,000 up to an aggregate amount of US$ 450,000. Terms of reference will in all cases be reviewed by the Bank. Operating expenditures: Sundry items and stationary/office supplies would be financed by the project and would be procured using the local shopping procedure. Other expenditures consisting of various communications services in an amount estimated at US$ 5,000 yearly are to be directly paid for by Government and procured according to its regular procedures. The Project will finance approximately US$ 10,000 during each year of implementation. 2) Prior review thresholds The proposed thresholds for prior review are based on the procurement capacity assessment of the project implementing unit and are summarized in Table B. In addition to this prior review of individual procurement actions, the plan and budget for the PCU operating expenditures will be reviewed and approved by the Bank annually. Two copies of each signed contract should be sent to the Bank prior to making disbursements against these contracts. The first two contracts using international shopping procedures, the first two contracts using local shopping procedures, and the first contract using the IAPSO procedure from UN agencies will require prior review. Thereafter, only the first contract using international shopping procedures and the first using local shopping procedures each year will require prior review. All consultants' services using firms will require prior review by the Bank. All consultants' services using individuals with an estimated cost greater than US$ 35,000 will require prior review. All consultants' services using individuals with an estimated -47 -

52 cost greater than $20,000 and lower than US$ 35,000 will require prior review of the TORs, the consultant's qualifications and the terms of contract. All other consultants' services (under $20,000) will be procured after prior review of TORs. B. Assessment of the agency's capacity to implement procurement Procurement activities will be carried out by the Project Coordination Unit (PCU) in close coordination with the various implementing agencies. The PCU will be headed by a Project Coordinator, and include an Assistant Project Coordinator/Procurement Officer, an Accountant, and an Administrative Assistant. The Implementation Manual (Project Operational Manual) will include, in addition to the procurement procedures, the Standard Bidding Documents to be used for each procurement method, as well as model contracts for goods to be procured under the shopping or IAPSO procedures (among a number of other items related to project management). An assessment of the capacity of the Government to implement procurement actions for the project has been carried out during the pre-appraisal mission of the (report dated February 7, 2000 in project files) and was approved by the Regional Procurement Adviser on February 18, 2000, with an overall level of risk assessed as average. The implementation and procurement plan prepared by the PCU during the preparation stage will be agreed during negotiations, revised by the PCU after effectiveness, and thereafter sent to project files. The risks identified in the assessment include: (i) Government staff inexperienced in procurement and contract management; (ii) slow procurement process currently found in the sub-region; and (iii) the need to establish procurement filing and contract management procedures for the project. The PCU will recruit the above-captioned procurement officer before negotiations, and thereafter establish a monitoring system to maintain control of the procurement actions. C. Procurement Plan The Borrower developed a procurement plan for project implementation which provided the basis for the aggregate amounts for the procurement methods (per Table A). This plan is in the project files. At the beginning of each calendar year, the Borrower will update the Procurement Plan with a detailed procurement schedule for the coming year. D. Frequency of Procurement Supervision In addition to the prior review supervision to be carried out from the Bank Headquarters, a full supervision mission will visit field sites to carry out a post review of contract and procurement actions every 12 months. Based on the overall risk assessment (average) and the limited number of civil works involved, the post-review field analysis should cover all major investments (mitigation measures), and a sample of not less than I in 3 shelters contracts. A Bank project supervision plan is in the project files

53 Procurement methods (Table A) Table A: Project Costs by Procurement Arrangements _ in US$ thousands equivalent) Expenditure Cateaorv Procurement Method. International National Competitive Comptitivo Biddina iiddinn Oter N.B.F. Tobl Project Costs (1) Works 6, , ,458.6 (4,549.3) (2,217.6) - (6,766.9) (2) Goods a) ,047.1 (758.6). (271.5) ' (1,030.1) (3) Consultants'Services b) - 2, , (2,197.1) (2,197.1) (4) Operating Expenditures C) (26.0) (26.0) Total Project Costs 6, , , , ( ) ( ) ( Figurs in parentasis are the amounts to be fnancd by the Bank loanlda redit a) Irnterationsa shopping for emgency equipment an supplies; Naonal hoppin for oia furniture and equipment; From UN Agencies (IAPSO) for vehicles bi Consultnts Serices in Table Al c) National Shoting for supplies and sundry items Note: N.8.F. =Not Bank-financed (inrclud mnts procured under paalle Ico-fi consultanes under trust furds, any reserved procurement. end any other miscellaneous proedures, items). Table Al: Consultant Selection Arrangements (in US$ thousands equivalnt)_ Consultant Services Selection Method Total Cost Exoenditure Catsaorv. finc. contnaencleai OCRs QBS SFB LCS CO Other N.B.F. I. Firms (training& Grand Mal Bay EIA study) IL Individuals (PCU& various) Total OCBS = Quality- and Cost-Based Selection 08S = Quality-based Selection SF8 = Selection under a Fixed Budget LCS = Least-Coat Selection CO = Selection Based on ConsultantW QualHfications N.B.F. * Not Bank-financed. Other = Selection of individual consultants (per Section V of Consultants GuidelIes), Commera Practices, etc. Figures in parenthesis are the amounts to be fiancod by the Bank loan

54 Prior review thresholds (Table B) Table B: Thresholds for Procurement Methods and Prior Review Expenditure Contract Value Procurement Contracts Subject to Category (Threshold) Method Prior Review (USS'000) (USS millions) I. Consultants Firms 50 or more QCBS All <50 CQ All Individuals 20<35 See Section V of Guidelines Review of TORs, contracts, and CVs < 20 See Section V of Guidelines Review of TORs only II. Works 500 or more ICB All <500 NCB All Ill. Goods 100 or more ICB All <25 International Shopping First 2 contracts Then First per year <25 National Shopping First 2 contracts Then First per year <35 From UN Agencies tiapso) First contract Total value of contracts subject to prior review 90%

55 Disbursement Allocation of loantcredit proceeds (Table C) A US$5.06 million loan and a US$5.01 million credit will be extended to Grenada in support of the US$11.79 million (including contingencies and front-end-fee) program of activities described in Annex 2. This project forms part of the second phase (APL2) of an APL that covers five OECS countries for a total of US$ million to be disbursed in four phases. The arrangements and descriptions described here apply to this particular part of APL2 which is for Grenada. The closing date for this project will be May 15, The allocation of loan proceeds for this project is presented in Table C below. Retroactive Financing Allocation of Loan Proceeds (US$ thousands) Loan Credit Total % I. Civil Works 5, , ,860.0 II. Goods 1, Consultants 2, , ,037.4 IV. Operating Expenses V. Loan Fee VI. Unallocated 1, Total It was agreed that retroactive financing would cover expenditures with regard to certain goods and services acquired from July 1, 2000, up to the date of signing of the Loan and Credit Agreement for a maximum of SDR 115,000 (US$150,000 equivalent). These services and goods will be procured in accordance with the procurement provisions set forth in the Loan Agreement. They will cover the following: (i) fees of consultants working for the PCU; (ii) office equipment, furniture and other miscellaneous start-up expenses for the PCU; (iii) office equipment and furniture for NERO and the Meteorological Services; and (iv) the supplemental environmental and materials investigation study for Grand Mal Bay. Special Account and Flow of Funds It was agreed that the project would operate two separate accounts: one US dollar Special Account with an authorized allocation of US$1.5 million at the National Commercial Bank of Grenada, Ltd., on terms and conditions satisfactory to the World Bank, from which payments will be made directly for all eligible works, goods and services; and one Eastern Caribbean dollar account (for Government counterpart funds) in the Eastern Caribbean Central Bank with an initial deposit of counterpart funds in the amount of US$850,000 equivalent prior to project effectiveness, and a subsequent deposit of US$865,000 one year after the effectiveness date. For project activities undertaken under all components of the project, the PCU will procure the works, goods and services as discussed in Annex 2 and defined in the Project Implementation Manual (PIM). Disbursements from the Special Account will be made on the basis of the terms detailed in the Loan and Credit Agreements and the PIM. Government counterpart funds will be used to finance the following

56 categories: 20% of civil works contracts and 20% of operating expenditures. Disbursements for services for communications for the PCU that need to be contracted directly will be financed from counterpart funds (100%) for up to US$5,000 per year, for a total of US$15,000. The project agreed to use the Project Management Reports (PMRs) as the basis of disbursements and reporting. The project decided to use the PMR from the outset of implementation and effectiveness, thereby eliminating the need to change over from the traditional SOE, which would pose some difficulties with the flow of funds to the project. The financial forecasts of the PMR, which are based on the procurement plan and estimated six months of operating expenditures, would be delivered to the Bank no later than 45 days after the end of a three month quarter (January 1 -March 31; April 1-June 30; July 1-September 30; and October 1-December 31). Detailed supporting documentation, including certification, for expenditures will be kept by the PCU for at least one fiscal year and submitted to the Bank. For all contracts requiring the Bank's prior review, full documentation will accompany no-objection requests. Detailed documentation will be retained by the PCU for inspection during supervision missions and for audit by external auditors acceptable to the Bank. The auditors will audit the Special Account and Project Account annually, no more than 3 months after the end of each fiscal year. For the documentation of government counterpart funds, it was realized that other international projects had proceeded through stages of implementation without adequate funding by the government. It was agreed that the PCU would submit a Project Account reconciliation along with Bank statements with each submission of the PMR. This would enable the PCU and the Bank to verify that all sources of funding were adequately based on the financial forecasts and project plans embodied in the PMRs. Assessment of Agency's Financial Management Capacity An assessment of Agency's financial management capacity was conducted on site from January 17-21, 2000, by a Financial Management Officer, and in accordance with guideline OP/BP and the Project Financial Management Handbook dated February The objectives of the assessment were to determine if the Project Management Unit has the capacity to properly manage and account for all project proceeds and to produce timely, accurate and reliable project management reports for use by management and submission to the World Bank. On the basis of the assessment performed, the Financial Management Specialist concluded that, at this time, the project does not yet meet the Bank's minimum financial management requirements (a 4-C certification has been issued) due to a few outstanding items that will complete the financial management preparation of the project. This shortcoming will be remedied by effectiveness and is noted in the action plan shown below. Detailed Action Plan for Financial Management Activity Completed by 1. Financial Procedures drafted October, Installation and customization of software October, Draft formats of PMR October,