FOR OFFICIAL USE ONLY

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1 Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Document of The World Bank FOR OFFICIAL USE ONLY PROJECT APPRAISAL DOCUMENT ON A PROPOSED LOAN IN THE AMOUNT OF EURO 310 MILLION (US$400 MILLION EQUIVALENT) TO THE REPUBLIC OF TURKEY FOR AN Report No: TR ISTANBUL SEISMIC RISK MITIGATION AND EMERGENCY PREPAREDNESS PROJECT April 29,2005 Environmentally and Socially Sustainable Development Unit Europe and Central Asia Region This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. J

2 I CURRENCY EQUIVALENTS (Exchange Rate Effective April 18,2005) t M O M AYM CAS CB EC ECA EIA EMP EMPI ERR FEMA FMR GNP GDCD GIS GO1 IBRD ICB IFIS IGDAS IMM PCU ISKI ISPA JICA MDG MEER M&E MPWS NCB NGO PCN Currency Unit = Turkish New Lira TNLR 1 = US$O.73 US$ 1 = TNLR 1.37 EURO 1 = US$1.29 US$l = EURO0.78 FISCAL YEAR January 1 - December31 ABBREVIATIONS AND ACRONYMS Istanbul Metropolitan Disaster Coordination Center Istanbul Governorship Disaster Management Center Country Assistance Strategy CostBenefit Ratio European Commission Europe and Central Asia Region Environmental Impact Assessment Environmental Management.Plan Earthquake Mitigation Master Plan for Istanbul Economic Rate of Return U.S. Federal Emergency Management Agency Financial Monitoring Report Gross National Product General Directorate for Civil Defense Geographic Information System Govemorship of Istanbul International Bank for Reconstruction and Development International Competitive Bidding Intemational Financial Institutions Istanbul Gas Distribution Corporation Istanbul Metropolitan Municipality Istanbul Project Coordination Unit Istanbul Water and Sewage Company Istanbul Special Provincial Administration Japan International Cooperation Agency Millennium Development Goals Marmara Earthquake Emergency Reconstruction Project Monitoring and Evaluation Ministry of Public Works and Settlements National Competitive Bidding Non-governmental Organization Project Concept Note

3 FOR OFFICIAL USE ONLY PMS SDC SPO SIL TCA TEMAD Project Monitoring System Swiss Agency for Development and Cooperation State Planning Organization Specific Investment Loan Turkish Court of Accounts Turkish Emergency Management General Directorate Vice President: Country Director: Sector Manager: Task Team Leader: Shigeo Katsu Andrew N. Vorkink Joseph R.Goldberg Wael Zakout This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not be otherwise disclosed without World Bank authorization.

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5 TURKEY SEISMIC RISK MITIGATION-TR CONTENTS Page A. STRATEGIC CONTEXT AND RATIONALE Country and sector issues Rationale for Bank involvement... 2 Higher level objectives to which the project contributes... 3 B. PROJECT DESCRIPTION Lending instrument... 3 Program objective and Phases... 3 Project development objective and key indicators... 4 Project components Lessons learned and reflected in the project design... 5 Alternatives considered and reasons for rejection... 6 C. IMPLEMENTATION Partnership arrangements Institutional and implementation arrangements Monitoring and evaluation of outcomeshesults Sustainability Critical risks and possible controversial aspects Loadcredit conditions and covenants D. APPRAISAL SUMMARY Economic and financial analyses Technical Fiduciary Social Environment Safeguard policies... : Policy Exceptions and Readiness Annex 1: Country and Sector or Program Background... 16

6 Annex 2: Major Related Projects Financed by the Bank and/or other Agencies Annex 3: Results Framework and Monitoring Annex 4: Detailed Project Description Annex 5: Project Costs Annex 6: Implementation Arrangements Annex 7: Financial Management and Disbursement Arrangements. 48 Annex 8: Procurement Arrangement Annex 9: Economic and Financial Analysis Annex 10: Safeguard Policy Issues Annex 11: Project Preparation and Supervision Annex 12: Documents in the Project File Annex 13: Statement of Loans and Credits Annex 14: Country at a Glance Map TBRD34015

7 Date: April 29,2005 Country Director: Andrew N. Vorkink Sector Managermirector: Joseph R. Goldberg TURKEY SEISMIC RISK MITIGATION-TR PROJECT APPRAISAL DOCUMENT EUROPE AND CENTRAL ASIA ECSSD Team Leader: Wael Zakout Sectors : Sub-national government administration (40%); Information technology (30%); Health (15%); General education sector (15%) Themes: Natural disaster management (P);Municipal governance and institution building (S) Project ID: PO78359 Environmental screening category: Partial Assessment Lending Instrument: Specific Investment Loan Safeguard screening category: Limited impact Project Financing Data [XI Loan [ ]Credit [ ]Grant [ ]Guarantee [ ] Other: For Loans/Credits/Others: Total Bank financing: Euro 31 million (US$40 million equivalent) Proposed terms: Variable-Spread Single Currency Loan denominated in EURO Grace period (years) 4 Years to maturity: 17 Commitment Fee: 0.75% Front end fee (FEF) on Bank loans: 1% (less any waiver) Source BORROWER INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT Total: Local Foreign Total Borrower: Republic of Turkey Responsible Agency: Istanbul Special Provincial Administration

8 Y 2006 mual hmulative Project description [one-sentence summary of each component] Re$ PAD B.3.a, Technical Annex 4 Component A: Enhancing Emergency Preparedness This component will enhance the effectiveness and capacity of the provincial and municipal public safety organizations in Istanbul to prepare for, respond to and recover from significant emergencies, especially those arising from earthquakes. Component B: Seismic Risk Mitigation for Public Facilities This component will reduce the risk of future earthquake damage to critical facilities in order tc save lives and ensure their continued hnctioning in the event of an earthquake, througl! retrofitting of hospitals, schools and other priority public facilities. Component C: Enforcement of Building Codes This component will support innovative approaches to better enforcement of building code and compliance with land use plans. Component D: Project Management This component will support the Istanbul Provincial Administration to implement the project ir efficient and transparent manner, and build the institutional capacity to sustain tht

9 implementation of Seismic Risk Mitigation and Preparedness program beyond the life of the project. Which safeguard policies are triggered, if any? Re$ PAD 0.6, Technical Annex 10 Environmental Assessment Cultural Property Significant, non-standard conditions, if any, for: Re$ PAD C.7 Board presentation: May 26,2005 Loadcredit effectiveness: August 10,2005 Covenants applicable to project implementation: - Maximum funds for re-construction of buildings will be limited to 20% of allocation for civil works. Reconstruction of buildings will require Bank no-objection (Schedule 5; para 5) - The IPCU will submit an annual work plan and budget for Bank review and comments by August 31 each year. (Schedule 5; para 7a) - The IPCU will update a procurement plan in accordance to guidelines acceptable to the Bank, and furnish such update to the Bank not later than 6 months after the date of the preceding Procurement Plan, for the Bank s approval (Article 111; section 3.03b) - The IPCU will submit to the project Steering Committee and the Bank a progress report by March 31 and September 30 of each year, starting March 31, (Schedule 5, para 7a) - The IPCU will prepare the mid-term review report by March 3 1, 2008 and facilitate the mid-term review of the project by May 30,2008. (Schedule 5; para 8)

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11 A. STRATEGIC CONTEXT AND RATIONALE 1. Country and sector issues Turkey is highly vulnerable to natural disasters, particularly earthquakes. In the 1999 Marmara earthquakes, the death toll reached over 17,000 with a direct economic impact estimated at about US$5 billion, or around 2.5 percent of GIW. Within the nation s high-risk context, Istanbul is most vulnerable because of its seismic-prone location on the North Anatolian Fault, and its high population and commercialhdustrial densities. According to recent assessments carried out by JICA (Japan International Cooperation Agency) experts, the probability of a major earthquake affecting Istanbul in the next 30 years is 62% & 12%, while the likelihood of such a devastation in the next decade is 32% & 12%. This is roughly comparable to the risk faced by Los Angeles and San Francisco, but with a damage potential that is much higher because of Istanbul s greater structural vulnerabilities. If a seismic event of the same magnitude as that in 1999 were to occur near Istanbul, the human suffering as well as the social, economic, and environmental impacts would be dramatically higher than in the Marmara region, as Istanbul is not only the financial, cultural and industrial center of the country, but is also a nexus of inter-continental importance and home of about 15 million people. An interruption of Istanbul s social, economic and financial life would be felt for many years to come. Some sources estimate the economic impact of such a disaster would be more than U S20 billion. The JICA study estimates that an event similar to the Marmara earthquake could result in up to 87,000 fatalities, 135,000 injuries and heavy damage to 350,000 public and private buildings. The Government of Turkey is aware of the critical need to develop and to implement a comprehensive hazard risk management strategy for the country. With Bank support through the Marmara Earthquake Emergency Reconstruction (MEER) project, a risk transfer mechanism through a catastrophe insurance scheme was successfblly launched, and has received a significant international recognition. The MEER project also initiated establishment of a decentralized emergency management system through creation of the Turkey Emergency Management General Directorate (TEMAD). Albeit after long initial delays, there has been some progress made in upgrading the newly established TEMAD to become an efficient national disaster coordination agency. In parallel to changes in the emergency management structures at the central level, considerable efforts and resources have been invested at the regional and local levels to better prepare at-risk-communities against future disasters. The Istanbul province, both the municipality and the governorship in particular has demonstrated a high level of commitment and ownership in earthquake mitigation efforts, and has initiated numerous valuable seismic risk assessment and planning activities in collaboration with national and international experts, with some support from international donors. One of the key initiatives is development of the Earthquake Masterplan for Istanbul, prepared by the Metropolitan Municipality of Istanbul. The plan is comprehensive in its treatment of risks and mitigating measures and has received international recognition as a strategic instrument for addressing seismic risks in highly vulnerable mega-cities. The proposed ISMEP project has been prepared within its framework and conceptual comprehensive approach. Japan International Cooperation Agency [JICA]: The Study on a Disaster PreventiodMitigation Plan in Istanbul Including Seismic Microzonation in the Republic of Turkey; December

12 The overall purpose of the initiatives described in the Masterplan is to enhance safety and total quality of life in the city by: integrating mitigation measures in city management processes, protecting natural and historical assets, reclaiming urban quality and identity, engaging local communities, rehabilitating high risk areas, and retrofitting or demolishing of unsafe buildings.. * A particular area of concern for Istanbul, as for other urban areas in Turkey, has been lax enforcement of building codes, development control and compliance with land use plans, caused by institutional and social factors, including the process transparency issues, and leading to a built environment which is poorly protected against seismic events. The basic regulatory framework for construction supervision has been amended since 2000 and provides for legal mechanisms, though often criticized, for better construction quality. The statutory responsibility for the building codes enforcement and land use planning is vested with the municipalities which, however, do not have enough capacity, to successfully control the built environment. Indisputably, Istanbul municipalities have made notable efforts and advanced their land planning and management functions, nevertheless, the effective compliance and enforcement of the codes is still lacking and need to be addressed at the lower administrative level, and possibly through engaging the professional engineering community and building local awareness. The proposed project strives to address these key systemic issues in order to have lasting impact, and would provide a financial support to achieve many of the safety objectives listed in the Earthquake Masterplan. 2. Rationale for Bank involvement The Bank has established a long history of financing emergency rehabilitation projects following disasters in Turkey and other countries globally. Recently, however, more attention has been given to mitigation programs enhancing governmental capacities to respond to disasters and reduce their risk, including strengthening of organizational frameworks, emergency response management systems, risk reduction investments, insurance programs, etc. The Bank has been engaged in disaster mitigation operations in other ECA countries, including Romania, Kyrgyzstan, Poland, and Russia. With this background, the Bank has, a unique ability to focus not only on the physical, but also the economic and social aspects of hazard risk management, as well as the associated critical policy and institutional reforms. The Bank can provide effective assistance as the Government of Turkey shifts from a reactive to a more proactive approach to disaster management. In Turkey, the impact of numerous efforts at the provincial and local levels to mitigate natural hazards has not yet been fully realized due to the limited scope of activities and lack of adequate funding. A comprehensive framework is still needed to integrate these activities and to strengthen Istanbul s seismic risk mitigation and emergency preparedness, in order to enable the community to cope with the risk of an eventual seismic disaster. The Bank is well positioned to play this role through application of its expertise and financial assistance, which taken together, can leverage the already ongoing or new initiatives, and serve as a catalyst for other resources from international financial institutions and bilateral donors. 2

13 3. Higher level objectives to which the project contributes In the higher level strategic context, the project contributes to the objective spelled out in Section IV of the Millennium Development Goals (MDG) Declaration which states the goal to intensify our collective efforts to reduce the number and effects of natural and man-made disasters. In the most recent Country Assistance Strategy (CAS) of October 2, 2003 (Report No TU) and covering the planned assistance program for FY04-06, one of the key development objectives for that period is to increase disaster preparedness and minimize losses from natural disasters. The project-supported assistance is also aligned with the CAS program of poverty reduction, which aims at, among others, making the economy more resilient to crises (including natural disasters) that disproportionately affect the most vulnerable. Moreover, the project will contribute to the governance agenda through more transparent processes for building codes enforcement. The proposed project will support activities which will increase the disaster prevention and management capacities of the government, both at the regional and provincial level in the Istanbul area. The World Bank ECA region is now promoting the importance of mitigation and improvement of governments capacities to respond to emergencies. The underlying principle of the strategic framework, as reflected in the recently completed ECA Hazard Risk Management Strategg, is that both loss of life and economic impact of disasters can be reduced by advance planning and investment, that it is cost effective to do so, and that this is governmental responsibility. The ISMEP fully applies this proactive approach by introduction of disaster mitigation activities which address long-term emergency preparedness and risk mitigation needs prior to occurrence of a possible major disaster. B. PROJECT DESCRIPTION 1. Lending instrument The Specific Investment Loan (SIL) was selected as the most suitable lending instrument, which will provide support to the specific investments together with a limited and focused technical assistance. 2. [If Applicable] Program objective and Phases Not Applicable. 2World Bank: Preventable Losses: Saving Lives and Prouertv through Hazard Risk Mitigation - A Strategic Framework for Reducing the Social and Economic Imuact of Earthquake. Flood, and Landslide Hazards in the Europe and Central Asia Region ; October

14 3. Project development objective and key indicators The proposed project will initiate a process that aims at transforming Istanbul in the next years into a city resilient to major earthquake. The overall goal of the proposed project is to save lives and reduce the social, economic and financial impacts in the event of future earthquakes. The specific objective of the project is to improve the city of Istanbul s preparedness for a potential earthquake through enhancing the institutional and technical capacity for disaster management and emergency response, strengthening critical public facilities for earthquake resistance, and supporting measures for better enforcement of building codes and land use plans. Following are the key indicators of the expected project outcome: a a a Key public facilities are retrofitted to resist a major earthquake; Skills and technical capacities of the relevant emergency response units are strengthened; and Improvement in compliance with building codes and land use plans. 4. Project components The project consists of the following components and activities: Component A: Enhancing Emergency Preparedness The objective of this component is to enhance the effectiveness and capacity of the provincial and municipal public safety organizations in Istanbul to prepare for, respond to and recover from significant emergencies, especially those arising from earthquakes. Specifically, the component will support: a a Improvement of emergency communications systems Establishment of an emergency management information system a Strengthening of institutional capacity of AYM - Istanbul Governorship Disaster Management Center a a Upgrading of emergency response capacity in Istanbul Public awareness and training Component B: Seismic Risk Mitigation for Public Facilities The objective of this component is to reduce the risk of future earthquake damage to critical facilities and lifelines in order to save lives and ensure their continued functioning in the event of an earthquake. The component will consist of the following key activities: a a a Retrofittingheconstruction of priority public facilities such as hospitals, clinics, schools, administrative buildings and infrastructure, etc. Risk assessment of lifelines and vital infrastructure Risk assessment of cultural heritage buildings Component C: Enforcement of Building Codes 4

15 The objective of this component is to support innovative approaches to better enforcement of building codes and compliance with land use plans. The component will support: 0 Public awareness campaigns 0 Further development of regulato y framework for enforcement of building codes enforcement land use plans 0 Volunteer accreditationhaining of engineers 0 Streamlining of building permits issuance procedures and promoting transparency and accountability in selected district municipalities Component D: Proiect Management The objective of this component is to support the Istanbul Special Provincial Administration (ISPA) to implement the project in efficient and transparent manner, and build the institutional capacity to sustain the implementation of Seismic Risk Mitigation and Preparedness program beyond the life of the project. Specifically, the component will comprise: 0 Project management support, including support to monitoring and evaluation 5. Lessons learned and reflected in the project design The Marmara earthquake, with the resulting damages, low effectiveness of response, the recovery efforts, and the following Bank MEER project, provided the key lessons based on ' which the ISMEP project was designed. The earthquake of August 17, 1999 created a crisis in emergency management which exposed the weaknesses of existing disaster response systems, as well as the poor quality of construction deriving from a lack of building codes enforcement and inadequate land use practices. Communication systems linking the affected provinces with outside agencies and organizations collapsed. Essential emergency response resources were either destroyed or severely damaged. The Turkish disaster response was unable to meet the demands created by the Marmara earthquake. Immediately after the catastrophe, some critical elements of the national infrastructure failed. This included damage to the main fiber optic cable between Istanbul and Ankara, the link which formed a backbone of the communication with the earthquake region. The disaster virtually incapacitated local response capabilities of the affected provinces. Basic repairs to the communication and electric power connections took too long and critical rescue opportunities were practically lost and the response effort was in disarray. The MEER project prepared in the aftermath of the Marmara earthquake strived to tackle the above problems and strengthen the emergency management and response system through creation of a national, comprehensive emergency management structure for Turkey that would focus on the coordination and integration of risk reduction strategies, preparedness, response and recovery. The restructuring of the national emergency management system is gradually progressing through a range of activities designed for institutional strengthening of TEMAD. Though the national coordination is of key importance, the focus should now also be given to a lower, sub-national level of the government, and to the region bearing the highest'risk in terms of disaster probability, and importance and impact on the whole country. 5

16 The design of ISMEP project takes into account international experience which demonstrates that reducing life loss and minimizing property damage in the immediate aftermath of major earthquakes is most effectively achieved by what is done by agencies, authorities and resources and individual residents in the affected area. Outside assistance is essential when local capacity is exceeded as a result of the scale of the event, but, ultimately, all disasters are local. The most fundamental effectiveness of any emergency management system depends upon the ability, organization, skills, and commitment of a community - its government officials, private industry, NGOs and residents - to prepare for emergency situations. These efforts should be locally based and managed, but they must be consistent with the national and provincial systems, standards and programs. Building local capacity, therefore, is the most effective strategy for improving emergency preparedness. Consequently, the ISMEP project promotes a decentralized approach to implementation of the risk reduction efforts and strengthening the regional institutions, which already showed a notable initiative since the Marmara earthquake to prepare for future disasters. The project strives to improve the building code enforcement practices and development in line with land use plans and regulations through activities to be implemented at the municipal level. Given the already introduced amendments to the legal framework and further discussions and work on the relevant legislation, the ISMEP takes a route of designing a road map with monitorable actions to be taken by municipalities who commit themselves to a better compliance to building code enforcement. 6. Alternatives considered and reasons for rejection Three main alternative approaches were considered for the proposed ISMEP project: (i) implement geographically-expanded risk mitigation and emergency preparedness activities covering not only Istanbul but also other provinces throughout Turkey; (ii) continue to focus on the support to the national level institutions responsible for risk mitigation and emergency preparedness; (iii) implement a seismic strengthening program aimed not only at public assets and lifelines, but also on the private residential buildings. For the first alternative, given that the degree of institutional capacity and disaster mitigation needs vary considerably across different provinces, it was agreed that a uniquely-tailored program focusing on one area would have the potential to deliver the highest impact at the local level. Istanbul was chosen because of the provincial government s demonstrated ownership and commitment, the province s high potential risk and vulnerability, and its vital importance to the country and the region as a whole. It is expected that key lessons may be learned and replicated in other provinces in the future. The rationale for rejection of the second option of providing support focused on the national level is based on the lessons learned from the MEER project, as described in section B.5. The ongoing MEER project provides tremendous assistance for strengthening the central level emergency management functions. The ISMEP project will support activities at the local level, where such support is greatly needed, where must be effective, where there is a strong will and commitment to implement them, and where the authorities showed remarkable initiative to better prepare for emergencies since the Marmara earthquake. 6

17 The project will include the mechanisms which will ensure compatibility and consistency of the actions taken in Istanbul as well as the systems developed with the national programs. For this purpose, the Turkish Emergency Management General Directorate (TEMAD) will be part of the project Steering Committee as well as part of the user groups in the development of the communication system and the emergency management system to ensure that these systems are compatible with the national and other regional systems. In regard to the third alternative, it was considered to pilot under the project innovative approaches to financing retrofitting of private housing through undertaking vulnerability assessment and extending a financing mechanism for interested household owners whose buildings were found to be unsafe. This option was dropped for the following reasons: (i) the Government did not approve providing a subsidy (including the bearing of foreign exchange risk) for the most prosperous region of the country, and in these circumstances the private banks were not interested in the project; and (ii) the willingness of households to pay for retrofitting was found low given the costs and low level of information available to the communities about the risks and benefits of retrofitting. Another pilot considered was on urban transformation. The potential pilot included demolition of unsafe buildings and re-building the entire block(s). The pilot was withdrawn by the Greater Municipality of Istanbul so that discussions about its feasibility and the financial model would not delay the processing of the retrofitting activities for public buildings. C. IMPLEMENTATION 1. Partnership arrangements (if applicable) The proposed project is being developed in close coordination with other international donors. It is envisaged that parallel financing will be provided by the, Swiss Agency for Development and Cooperation (SDC) for support to neighborhood volunteers emergency response groups, which complements activities under sub-component A.5 (Public Awareness and Training). The Government of Turkey is also discussing possibilities for additional funding for disaster mitigation activities in Istanbul from other International Financial Institutions. 2. Institutional and implementation arrangements In line with government decentralization agenda, project implementation would be placed under the responsibility of the Govemor of Istanbul. A small Istanbul Project Coordination Unit (IPCU) would be, established under the Istanbul Special Provincial Administration (ISPA). The Unit would be headed by a highly qualified project Director who will report directly to the Govemor or his designee, and the General Secretary of ISPA. Each relevant agency (such as Provincial Directorates of Health, Education, Public Works, etc.) will nominate a senior staff to be a liaison between the IPCU and their mother agency. The IPCU will be responsible for project coordination, procurement, financial management, contract management, monitoring, and evaluation and reporting. The core IPCU staff will include, in addition to the Director, 2 Deputy Directors (one technical and the other for administration and finance), 2 procurement officers, 2 financial management officers, 5 7

18 engineers, a social scientist, an environmental engineer, and a monitoring and reporting officer. The number of positions is indicative and might be revised during project implementation. In order to ensure full coordination Tong the various relevant agencies and the IPCU, Implementation Coordination Protocols will be signed between the ISPA and these agencies. Some staff from the existing PIU under the Prime Ministry Office (implementing, among others, the MEER project) will be temporarily assigned to the IPCU, and once the ISMEP project becomes effective these staff may be permanently transferred to IPCU. A Project Steering Committee would be established to oversee project implementation and provide strategic guidance. The Steering Committee would be chaired by the Governor of Istanbul, and may include Directors of the provincial departments of the concerned ministries, representatives of Istanbul Municipality, Treasury, SPO, TEMAD, Ministry of Public Works and Settlements, and the Director of the PIU under the Prime Ministry Office. 3. Monitoring and evaluation of outcomes/results Evaluation of the results through thorough monitoring is of key importance for drawing lessons for future applications in Turkey and elsewhere. In the case of the Enhancement of Emergency Preparedness component, many of the emergency communication and response functions will be enhanced for the daily use by the relevant agencies. Therefore, the improvements made can be to some extent monitored and evaluated. Measuring of the results of the Seismic Risk Mitigation for Public Facilities component is rather straightforward and its outcomes will be evaluated through assessment of physical investments and the number of facilities retrofitted. The monitoring and evaluation function will be particularly important, and indeed instrumental, for the building code enforcement activities at the selected district municipalities. A part of'this component will be establishment of a monitoririg framework, including an independent audit system for building code enforcement to assess the progress made in this area. In the context of evaluating project results evaluation, it should be noted that most of the outcomes of the envisaged activities will not be precisely known unless severe earthquake strikes the city. 4. Sustainability Institutional sustainability. The commitment to the project objectives, a good indicator of its sustainability, is shown by activities already carried out which were initiated by Turkish government and financed from their own sources. Development of the Master Plan, command centers for the coordination of post disaster actions, and technical studies constitute vital steps towards broadly based improvements in the capacity to mitigate the effects of earthquakes and other disasters. Borrower ownership has been made clear during project preparation, where responsible entities have worked together to support the project and provide all necessary counterpart inputs with great efficiency. The prime example of this cooperation has been the 8

19 prioritization process for the public facilities to be selected for retrofitting, involving many public institutional owners. In order to ensure institutional sustainability beyond the life of the project, the proposed project would provide assistance to the Governor s Emergency Management Center through support to the development of organization structure and operations procedures and strengthen the capacity of the AYM to effectively carry out the roles assigned to it. Technical sustainability. The maintenance of the seismically strengthened structures in the time beyond the project implementation period will follow normal procedures used for buildings. The long-term sustainability of the emergency communication and information system, as well as the response equipment is dependent upon continuing budgetary support from the municipal and provincial governments to maintain the systems and equipment. Given the level of commitment demonstrated by the lead agencies in the Istanbul region to emergency preparedness, and the fact that the communications and emergency response systems and equipment will be used on a dayto-day basis, there is every reason to believe that the initiatives undertaken under the project will continue to be supported. 5.. Critical risks and possible controversial aspects The proposed ISMEP project has certain risks that need to be mitigated in order to help ensure achievement of its development objective. The key potential risks, along with their proposed mitigation measures are the following: Lack of institutional coordination. The prioritization process carried out during project preparation for selection of the public buildings to be retrofitted, showed that inter-sectoral cooperation can be effective if coordinated by one responsible institution, in this case, the Govemor s office. In the implementation phase, the risk of lack of coordination can be mitigated using the same mechanism, and by having the implementation unit vested with responsibilities and temporary ownership, until completion of the investment, for the assets otherwise legally belonging to other public entities. The investments supported by the project in the communication and emergency management information systems will strengthen the linkages, and the process of the interaction should further enhance working relationships and consequently, coordination mechanisms between various institutions, some under the Mayor, others under the Governor, responsible for public safety. (Risk rating: Modest) 8 Municipalities commitment to strict enforcement of building codes and compliance with land use planning regulations. The project will support improvement of building code enforcement at the municipal level through adopting a strategy which will require a full commitment of municipalities to transparency and accountability to achieve improvement in compliance rate with building codes and land use plans. The achievement of this objective will be monitored through an independent audit. The discussions with the Istanbul authorities indicate that there is good will to work on development and application of the necessary measures. Also, community involvement and information dissemination will provide for measures to increase chances of better building code enforcement. However gaps in the regulatory fiamework and resistance by several interest groups may undermine the achievement of this goal. (Risk rating: Substantial) 9

20 6. Loanlcredit conditions and covenants Effectiveness Conditions a Establishment of the IPCU and the appointment of the Project Director, Procurement specialist and Financial Management specialist with qualifications and terms of reference acceptable to the Bank; and a Signing of the Project Implementation Protocol between the Undersecretariat of the Treasury and ISPA under terms and conditions acceptable to the Bank. Loan Covenants Maximum funds for re-construction of buildings will be limited to 20% of allocation for civil works. Reconstruction of buildings will require Bank no-objection (Schedule 5; para 5) The ISPA will submit an annual work plan and budget for Bank review and comments by August 31 each year. (Schedule 5; para 7a) The ISPA will update a procurement plan in accordance to guidelines acceptable to the Bank, and hish such update to the Bank not later than 6 months after the date of the preceding Procurement Plan, for the Bank s approval (Article 111; section 3.03(b)) The ISPA will submit to the project Steering Committee and the Bank a progress report by March 31 and September 30 of each year, starting March 31,2006. (Schedule 5, para 74 The ISPA will prepare the mid-term review report by March 31, 2008 and facilitate the mid-term review of the project by May 30,2008. (Schedule 5; para 8b) D. APPRAISAL SUMMARY 1. Economic and financial analyses Cost Benefit Analysis Methodolonv. There exist a number of methods for performing a cost benefit analysis of a disaster with widely varying data requirements and degree of sophistication. For the most part, estimation of project costs is easier and straightforward. These costs are borne at the beginning of the period and are subject to a greater degree of certainty. However, there are problems associated with the estimation of project benefits. First of all, one does not know in advance if and when a disaster will occur, and at which intensity it will occur. Secondly, one does not know in advance how effective the overall mitigation efforts will be in avoiding the possible loses based on vulnerability assessments. Therefore, in large-scale disaster mitigation projects the costs are defined while benefits, which are largely derived from avoided losses, are at best probabilistic. For disaster mitigation project involving earthquakes, the principal gain is saved human lives in addition to avoided property loss and income in case of commercial and industrial sites. Most of the conventional cost-benefit models heavily rely on the notion of assigning a monetary value to human life which commands a much greater monetary amount as opposed to property. Although quite appropriate for insurance and actuarial purposes, and intrinsically appealing, this approach provokes controversy because of disagreements whether a monetary value could be ascribed to human life. Where exhaustive listings of project benefits and assignment of monetary values to human life spared pose practical or moral difficulties, a, 10

21 , macro approach may be adopted, especially for large and complex mitigation projects such as ISMEP. Such a macro-economic approach is pertinent for ISMEP, due to problems associated with the reliability and availability of micro-level data. The economic analysis of ISMEP project is based on a macro model (neither attributing values to human life nor exhaustively listing all losses and damages). The analytical framing is based on a simple macro model which strives to arrive at comparable results that would be obtained through detailed micro analyses. Proiect Benefits. Benefits due to individual project components are summarized in Annex 9. The analysis relies on estimating the cross-cutting benefits - rather than individual component or activity benefits - that result from an interaction and interdependence of all the project components. The concept of provincial GNP is used to estimate the damage impact of the earthquake as well as the benefits that would be due to the mitigation effort resulting from avoided earthquake impact. Economic Analysis. Using a macro-economic model, probability weighted annual economic loss in Istanbul due to an earthquake is expected to be around US$ 163 million using a conservative loss scenario and US$ 249 million based upon the most likely loss outcome. FEMA calls this concept annualized damages and losses and it does not apply to them a growth element. The same principles were adhered to in this analysis as well. Mitigation must be centered on reducing this amount of US$ 249 million per year to the highest degree possible. The project's benefits are generated to the same extent as one can reduce this potential loss. However, current loss mitigation capacity is very limited and it can only be gradually built and sustained over a period of time, which is assumed to span some 30 years. Under the above scenarios, the estimated ERR will be 11 % for the conservative case, and 19% for the most likely case for the proposed project, with' a C/B ratio of about (conservative case) and 1.69 (most likely loss scenario). If the loss level is allowed to rise, this would only increase the ERR. For instance, using the most likely scenario assumptions, for a probability of earthquake occurrence fixed at 3 percent, rather than 2 percent, the ERR will be 29 percent (with B/C of 2.53, and for a probability of 4 percent the ERR would be 41 percent (with C/B of 3.37). This is due to the fact that at higher levels of loss there will be more room for mitigation effort and hence generation of mitigation benefits. The computational details are included in Annex Technical The technical approach to the seismic strengthening of public buildings is two fold: retrofitting of structures where this is technically feasible and, secondly, building reconstruction where the existing poor quality does not allow for a reasonable retrofit, and a facility is of key importance. The threshold in this respect i s considered a retrofit cost that is lower than 30% of the cost of replacement with a seismically appropriate structure on the same site. The technical measures, their costs and benefits are subject to site specific feasibility studies. The proposed technical approach to retrofitting buildings is mainly to follow conventional engineering methods that are well-known in Turkey and intemationally, like construction of 11

22 sheer walls and expansion of building foundations. isolation will be introduced where appropriate.. Advanced technologies, such as base Feasibility studies, including cost-benefit analysis to ensure that the cost of retrofitting is below an agreed replacement cost ratio are a part of each design contract for each building. These will be evaluated prior to the start of construction for any given facility. Designs will follow the latest construction code, which experts acknowledge is suitable for the seismic conditions of Istanbul. The local construction industry is fully capable of implementing the work with currently available plant, labor and experience. The bidding process for engineering design and supervision will be based on international selection process to ensure that design and supervision follow international practices. Furthermore, the project will also finance an international seismic engineer to assist the IPCU in reviewing the retrofitting design. 3. Fiduciary Financial Manaaement. The task team has conducted an assessment of the adequacy of the project financial management system at IPCU. The current financial management arrangements for the project are not yet fully satisfactory to the Bank and an action plan to bring these arrangements to a satisfactory level is included in Annex 7. The project accounting will be maintained separately within IPCU which will install a Project Monitoring System that will allow for proper recording of project financial transactions, including the allocation of expenditures in accordance with respective components, disbursement categories and sources of funds and that will generate financial, procurement and output monitoring report. The project expenditures will be financed 100% from the Bank loan as permitted by the new country financing parameters. The Government of Turkey decided that allocating project funds directly to Istanbul Special Provincial Administration (ISPA) is going to speed up project implementation. Therefore, a specific clause which will enable the Treasury to allocate the ISMEP loan to ISPA will be included in the draft Law amending some laws and decree by laws. This law will give the Council of Ministers the authority to make loan allocations to ISPA in cases where these funds are obtained for the purpose of implementing risk mitigation projects in Istanbul. The budgeting and execution responsibility for ISMEP will be vested with the ISPA. The budget will be submitted to the Province General Assembly for approval. These arrangements will also be confirmed in the protocol that will be entered between the Treasury and ISPA for Project Implementation. In any fiscal year, the undisbursed fkds can be transferred to the next year project budget by a decision of the ISPA Secretary General upon the recommendation of the IPCU Director. There will be a special account for the project at the Central Bank of Turkey in Euros. Since the project financing percentage is loo%, payments for all expenditures under the project will be made from this account or through direct payments fi-om the loan account. The IPCU Director and the Governor s Designee will be responsible for signing withdrawal applications. 12

23 Procurement. An assessment of the capacity of the Governorship of Istanbul to implement procurement actions for the project has been carried out in February, The assessment reviewed the organizational structure for implementing the project. The key issues and risks concerning procurement have been identified and include lack of experience with the Bankfinanced projects. Therefore, the IPCU will be composed of competitively selected key staff such as Project Director, Deputy Director(s), FMS Manager, Procurement Manager and adequate number of FMS and procurement experts, reporting, evaluation and monitoring expert, technical staff, environmental and social experts and necessary support staff as well as local and international individual consultants in contract management and supervision when and as needed. Furthermore, IPCU will be supported by consultant firms and individuals for the preparation of designs, bidding documents and supervision of works if and as necessary. Given the fact that the gaps and loopholes existing in the previous legislation which was subject to the recent CPAR conducted in 2001 were substantially removed by the new Public Procurement Law ( Code 4734 & 4735) effective from January 1, 2003 and assuming that the IPCU will have the necessary capacity, including the qualified procurement staff and supported by the MEER PIU which has highly experienced staff in Bank s procurement assisting the IPCU in the preparation of bidding documents, it is recommended that this project be placed initially in medium risk category. The risk rating will be re-evaluated after one year of loan effectiveness and adjustments made accordingly. At appraisal, a procurement plan for project implementation was developed which provides the basis for the procurement methods. This plan was agreed on April 18, 2005, and is summarized in Section C of Annex 8. It will also be available in the Project s database and in the Bank s external website. The Procurement Plan will be updated in agreement with Bank project team biannually or as required, to reflect the actual project implementation needs and improvements in institutional capacity. 4. Social Each of the three components of the project has had social analysis carried out during preparation. The implementation will also include additional social analysis, as needed. For Component A (Enhancing Emergency Preparedness) a study has been commissioned to analyze community mobilization experiences in Turkey. The study will compare several efforts to mobilize community disaster response volunteers, focusing on a number of dimensions, including mobilization techniques, training and organizing, developing and maintaining group morale, and sustainability. The results will feed into the preparation of a community mobilization module that the Swiss Agency for Development and Cooperation (SDC) has expressed a strong interest in supporting. Using principles and techniques refined in their Neighborhood Disaster Support Project, the subcomponent will mobilize, train and equip volunteer teams that are prepared to offer significant first response support in their neighborhoods in case of disaster. As sustaining such groups is a major challenge, the process and results will be monitored carefully to find ways to increase the efficiency and sustainability of the volunteer cadres. 13

24 For Component By Seismic Risk Mitigation for Public Assets, an analysis was undertaken in each of the hospitals where a retrofitting feasibility study was completed to prepare or strengthen a social mitigation plan associated with the work. The plans will identify possible impacts of the retrofitting or reconstruction on operations of the facility, as well as access by clients and the public to the services offered by the facility. The plans will identify steps to be taken to mitigate disruptions in service or access to facilities during construction on site or at an alternative location. The terms of reference for each new feasibility study for buildings to be included in the public assets retrofitting program will include the requirement to prepare social mitigation plans in consultation with staff and management of the facility. Project preparation actively engaged officials and technical staff in several municipalities, as well as decision makers in the Province and Metropolitan Municipality and academics. The various social analyses initiated contact with other stakeholders who will be involved more actively as Component C develops. The project will not involve land acquisition or resettlement, thus it does not trigger OPBP 4.12, Involuntary Resettlement. 5. Environment The environmental assessment category for the project has been determined to be B. This is based on the fact that overall, the environmental risks from the proposed ISMEP project are minor to moderate in scale, local in extent, and are easily identified, mitigated and monitored. The project is, furthermore, environmentally positive as it helps minimize the potentially disastrous environmental consequences of an earthquake, and assure the existence of public infrastructure and major utilities networks in the event of the disaster. The retrofitting works would be performed on buildings that are already in existence and the use of innovative, minimally intrusive technical retrofitting solutions would be promoted. Only on a very limited scale the project might include demolition and replacement of structures which do not qualify for the retrofitting. An environmental management plan that incorporates institutional assessment, identification of specific potential risks along with their mitigation measures and monitoring systems has been prepared by the borrower; consultations with affected stakeholders were included in the preparation. 6. Safeguard policies Safeguard Policies Triggered by the Project Yes No Environmental Assessment (OPBP/GP 4.01) [XI [I Natural Habitats (OPBP 4.04) [I [XI Pest Management (OP 4.09) 11 [XI Cultural Property (OPN 11.03, being revised as OP 4.11) [XI E l Involuntary Resettlement (OPBP 4.12) [I [XI Indigenous Peoples (OD 4.20, being revised as OP 4.10) [I [XI Forests (OP/BP 4.36) [I [XI 14

25 Safety of Dams (OP/BP 4.37) [I [XI Projects in Disputed Areas (OP/BP/GP 7.60)* [I [XI Projects on International Waterways (OP/BP/GP 7.50) [I [XI Involuntary Resettlement. The project will not entail land acquisition or resettlement, as the retrofitting or reconstruction will take place on existing sites. Each feasibility study for retrofitting will include a social mitigation plan to deal with temporary impacts of the work on operation of the facility and access of clients and the public to the services offered in the facility. Cultural Property. The safeguard policy on Cultural Property is considered triggered since retrofitting (and if needed replacement) in Istanbul has a reasonable likelihood of: (i) affecting listed cultural heritage sites, (ii) being in close proximity to such sites, andor (iii) being located in a district under protection. The Bank has in the past reviewed the Turkish regulations concerning interventions with regard to cultural property. The EMP includes an updated review of current regulations and practice, and incorporates the appropriate mitigation planning. Environmental Assessment. During preparation, a pool of buildings that met agreed criteria was established, however, all specific buildings to be strengthened will not be identified until project implementation. Therefore, a range of potential environmental impacts have been assessed and a generic EMP developed based on the potential interventions and environmental impacts. The EMP includes the mitigation plan, Le. measures to be taken to control potential impacts, monitoring plan, and responsible party for the mitigation actions. As part of the formulation of the EMP, the environmental protection regulatory framework was analyzed and institutional arrangements for environmental management clearly specified. The framework EMP for the project has been publicly disclosed prior to the appraisal. 7. Policy Exceptions and Readiness None * By supporting the proposedproject. the Bank does not intend to prejudice the final determination of theparties' claims on the disputed areas 15

26 Annex 1 : Country and Sector Background TURKEY: SEISMIC RISK MITIGATION-TR Seismic Vulnerability. Turkey is highly vulnerable to natural disasters, particularly earthquakes. In the 1999 Marmara earthquakes, the death toll reached over 17,000 with a direct economic impact estimated at about US$5 billion, or around 2.5 percent of GNP. Within the nation s highrisk context, Istanbul is most vulnerable because of its seismic-prone location on the North Anatolian Fault, and its high population and commercialhndustrial densities. According to recent expert assessments, the probability of a major earthquake affecting Istanbul in the next 30 years is 62% f 12%, while the likelihood of such a devastation in the next decade is 32% k 12%. Some sources estimate the economic impact of such a disaster would range between US$20-60 billion. A model of earthquake scenario analysis was developed under the JICA-fhded Seismic Microzonation Study, with the following estimation of human casualties and damages. Model A (most probable case) Model B (worst case) Human Casualties Deaths Severely injured Building Damages /I Heavily Heavily +Moderately Heavily +Moderately +Partly Household Damages /1 Heavily Heavily +Moderately Heavily +Moderately +Partly Public Buildings Located in High Seismic Intensity Areas Educational Health Security Governmental Water Pipeline Damage Points 73,000 (0.8%) 87,000 (1.O%) 120,000 (1.4%) 135,000 (1.5%) 51,000 (7.1%) 59,000 (8.2%) 114,000 (16%) 128,000 (18%) 252,000 (35%) 300,000 (38%) 216, , , ,000 1,116,000 1,300, % 48.5% 43.6% 53.1% 48.0% 53.0% 53.0% 57.2% 59.4% 69.6% 1,400 1,600 I Gas Pipeline Damage Points I 11 I 13 Electric Cable Damages Bridge Damages (high probability of collapse) 820 km (2.5%) 1,080 (3.3%) I I I living without repaidrebuild; Moderately: usable for evacuation, but repairs necessary for living; Partly: usable for evacuation and living, but repair is desirable for living. 16

27 The risk is roughly comparable to the risk faced by Los Angeles and San Francisco, but with damage potential that is much higher because of Istanbul s greater structural vulnerabilities. If a seismic event of the same magnitude as that in 1999 were to occur near Istanbul, the human suffering as well as the social, economic, and environmental impacts would be dramatically higher than in the Marmara region, as Istanbul is not only the financial, cultural and industrial center of the country, but is also a nexus of inter-continental importance. An interruption of Istanbul s social, economic and financial life would be felt for many years to come. International Models for Emergency Management. Emergency management organizations in nations that have a substantial earthquake risk share two common characteristics: (i) There is a strong emphasis on developing municipal and provincial capabilities. Emergencies occur in specific communities, and experience has demonstrated that the most fundamental effectiveness of any emergency management system depends upon the ability, organization, skills, and commitment of a community - its government officials, private industry, NGOs and residents -- to prepare for emergency situations. These efforts must be community based and managed, but must also be consistent with the national and provincial systems, their standards and programs. (ii) There is a single national agency charged with coordination of preparedness, planning, response and recovery activities that is directly linked either to the Executive branch of the government or the Ministry of the Interior. Organization of Emergency Management in Turkey. Historically, Law No. 7269, Measures and Assistance to Be Put into Effect Regarding Natural Disasters Affecting the Life of the General Public sets forth the fbndamental components of disaster management in Turkey. Turkey is divided into 81 provinces governed by administrators appointed by the central government. A provincial disaster committee is composed of senior provincial officials fiom relevant ministries and departments like civil defense, health, education, and includes mayors (who are elected officials) and the Red Crescent Society. In addition, there are approximately 840 sub-districts in the provinces and some 3,200 municipalities. Traditionally, disaster management in Turkey has been highly centralized. Local authorities administer directives fiom the Ministry of Public Works and Settlement (MPWS) which has, in one reading of Law 7269, the lead responsibility for disaster affairs; governors (who are part of the Ministry of Interior) are expected to coordinate and mobilize the resources of other agencies. Mayors have relatively limited direct authority and responsibility for disaster management. Minor crises are to be handled at the district or sub-district level. If the disaster exceeds capabilities at that level, the provincial Governor becomes involved. If it is a major event, representatives of the ministries of the central government become involved and establish crisis centers. If there is a national-scale natural disaster (like the Marmara earthquake), a crisis center is established in the office of the Prime Minister that includes senior representatives of at least 15 ministries, including the military. 17

28 Though the system has been highly centralized, ironically there has been no single national coordinating agency for disaster management, until formal establishment of the TEMAD after the Marmara earthquake. The operational responsibilities at the provincial level reside with governors. Each ministry has a unit responsible for some aspect of disaster management. Rescue and relief operations are the direct responsibility of the provinces or districts, with assistance provided by the central government; the central government, under MPWS, is responsible for reconstruction and rehabilitation. The Red Crescent Society, the General Directorate of Civil Defense (GDCD in the Ministry of Interior), and the military also play a significant role in rescue and relief operations. The enabling law sets forth a basic structure, and each ministrj has a specific plan but there has been no explicit national emergency response plan that defines how all the elements of the government s response system are to be coordinated at each level. The General Directorate of Disaster Affairs (GDDA) of the MPWS, historically responsible for disaster management and mitigation (GDDA is divided into seven major departments: Earthquake Research, Disaster Damage Assessment and Survey, Emergency Relief and Machine Support, Planning and Indemnification of Affected Populations, Disasters Fund Administration, Temporary Housing, and Prefabricated House Construction) has approximately 1200 personnel, including planners, architects, geoscientists, architects and engineers but evidences little interest in emergency operations. The GDCD has some 3000 personnel, with approximately 300 assigned in Ankara. GDCD rescue and relief teams are assigned nationwide, and are expected to intervene at times of disaster to provide immediate assistance, though their level of training, organizational structure, and equipment is inadequate. The GDCD administers the operations of the Civil Defense College in Ankara that trains civilian government employees. In 1999 the MEER project team conducted a careful analysis of the altematives,to enhance the capacity of the Government o f Turkey to the nation s substantial risk fkom natural hazards. As a result of this assessment, two basic strategic objectives were envisioned: (a) creating and empowering a single agency at the national level to coordinate the efforts of all ministries related to disaster preparedness, emergency response and recovery and (b) decentralizing the emergency management system by enhancing the capacities at the municipal level so that the initial emergency response efforts - which have been clearly demonstrated to be the most effective in saving lives and reducing property damage - are strengthened. In June 2000 the Government enacted the Decree to formally establish the Turkey Emergency Management General Directorate (TEMAD) as a national coordination body for emergency management. TEMAD, however, was not able to play a key and significant role in the coordination of disaster preparedness and response for several reasons including: (i) TEMAD did not initiate the process to develop its systems and human resources till only a few months ago; (ii) competing interests among the various entities that deal with disaster management and response; and (iii) the head of TEMAD is at the General Director level, equal to the other important agencies dealing with disasters and there is no proper mechanism to coordinate the 18

29 various activities. Recently, TEMAD prepared a draft law to strengthen disaster management coordination in the country. The draft law calls for strengthening TEMAD s ability to coordinate the various government entities in the case of a major earthquake, and calls for each local government to establish a disaster management team. The draft law has been circulated widely in the country for comments. In parallel to efforts of the central government, individual municipalities have, at their own initiative, undertaken activities to strengthen.their emergency preparedness capacity. Organization of Disaster Management in Istanbul. The overall responsibility for disaster management in the province of Istanbul is under responsibility of the Governor. There are two key disaster management centers in Istanbul: the Istanbul Governorship Disaster Management Center (Am) and the Istanbul Metropolitan Disaster Coordination Center (AKOM); each having different roles and responsibilities. Provincial authorities are responsible for health, education, civil defense, civil works, security (police) and other areas falling under the authority of the national government while the municipal agencies are responsible for the fire brigades, water and gas, and some parts of the transportation networks. In a case of a major disaster, all of these services and sectors within the boundaries of the province are under the responsibility of the Governor. In addition, the provincial authorities, as regional representatives of national agencies, serve as the principal link to the central government s operational facilities in Ankara. Both the provincial government and the metropolitan government have each constructed new emergency operations centers within the.past four years. The municipal center (AKOM) was completed and began operations within a year of the 1999 earthquake. Modeled after a similar facility in Los hgeles County, AKOM contains many state-of-the-art features and accommodations for each of the municipal agencies that would need to respond to a variety of emergencies. The Provincial government has constructed a similar facility (AYM) that, when fully operational, will serve a similar purpose, including training classrooms and facilities for field training. AYM will enable the Governor to lead emergency management operations in a case of a major natural disaster in Istanbul, and will enable the coordination among the national government agencies in Ankara, line agencies in Istanbul, and the metropolitan and district governments. The activities to be supported under ISMEP are designed to build on the self-initiated actions of officials in Istanbul. In this sense, the ISMEP is entirely consistent with the strategies developed in 1999 and, as importantly, consistent with the broader national strategy of the government in 2004 in its emphasis upon decentralization as a fundamental objective. Building Code Enforcement. With the exception of some of the historic parts of the city, Istanbul s housing stock has largely been created without the benefit of city planning and within a laissez faire environment in which scant attention has been paid to either the seismic characteristics of building sites or to applicable building codes. Many buildings, and individual houses, have been built without valid permits, or with permits obtained in spite of the fact that location or construction, or both, were not conforming with norms extant at that time. The latter itself were lax, at least until 1997, when the entire area of Istanbul was finally reclassified as being in a zone of high seismic risk. Repeated amnesties of buildings known to be outside of 19

30 applicable norms, with the most sweeping one in 1983, have further contributed to the problem of inadequacy of housing with respect to seismic risks. The present status, conservatively estimated, is that over 70% of all housing in Istanbul does not conform with current standards o f resistance to the seismic risk that is now generally accepted for Istanbul. Although the problems are widely known in Turkey, effective remedial action remains weak. Enforcement of construction codes and city planning, are the responsibility of municipal governments. These, though, tend to be weak and under funded, with narrow if any, local income. As a result, municipal engineering and planning departments, the instruments for code enforcement and local planning, are equally weak, under funded and understaffed and, consequently, are susceptible to extraneous influences, including extra curricular monetary rewards. Overt, such as the mentioned amnesties, and covert actions by higher authorities, interfering with building practices, have further contributed to the dismal status quo. The series of catastrophic events, including earthquakes, that have hit Turkey in the last 20 years or so, culminating in the devastating 1999 Marmara earthquake whose epicenter was a mere 60 km fiom Istanbul, have been wake up calls. This has coincided with a gradual strengthening of local authorities, a decentralization of power and, most important, with increased public aw.areness. The populations potentially affected by earthquakes, are increasingly vocal in their demands for safer living environments, and local governments also show the willingness to improve the situation. Key Studies Initiated by Istanbul Authorities. Considerable effort and resources have been invested at the regional and local levels to better prepare at-risk-communities against future disasters. The Istanbul municipality in particular has demonstrated a high level of commitment and ownership in disaster mitigation efforts, and has initiated numerous valuable seismic risk assessment and planning activities in collaboration with national and international experts, with some support from international donors. Study on Disaster PreventionlMitination. The JICA study of 2002 emphasizing the likelihood of a large earthquake striking Istanbul focuses on disaster prevention and mitigation planning in Istanbul, outlining the challenge as 1) to integrate and develop seismic microzonation studies in Istanbul as the scientific and technical basis for disaster preventiodmitigation planning; 2) to recommend a citywide preventiodmitigation program against building and infrastructure damages; 3) to recommend disaster prevention considerations in the urban planning of Istanbul City; and 4) to pursue the tfansfer of technology and planning techniques to Turkey. Necessary earthquake disaster mitigation measures are presented as short- and medium- to long-term perspectives. Short-term measures basically include retrofitting important facilities and infrastructure to secure their operational function. Medium- to long-term measures involve nonstructural recommendations. Earthquake Masterplan for Istanbul. The plan is comprehensive in its treatment of risks and mitigating measures and has received international recognition as a strategic instrument for addressing seismic risks in highly vulnerable mega-cities. 20

31 The Masterplan outlines an Earthquake Mitigation Plan for Istanbul [EMPII with the following characteristics. The EMPI is envisaged as a framework for social contracts to be drawn between Istanbul Metropolitan Municipality, the Governorate, local municipalities, institutions, enterprises, NGOs, local community administrations, and individual citizens with the aim of determining the active role of the parties involved, and facilitating their participation and contributions. The overall purpose is to enhance safety and total quality of life in the city by: reducing infrastructural deficiencies, gradually eliminating the unauthorized building stock, integrating mitigation measures in city management processes, protecting natural and historical assets, reclaiming urban quality and identity, engaging local communities in the management of the city, rehabilitating of high risk areas, and retrofitting or removing buildings according to the local revision plans. A particular area of concern for Istanbul, as for other urban areas, has been lax enforcement of building codes and development control, caused by institutional and social factors, and leading to a built environment which is poorly protected against seismic events. Bank Involvement. The project has been developed within the framework of the Earthquake Masterplan for Istanbul and provides financial support to address many of the safety and quality of life enhancing objectives listed in the document. The proposed project strives to address some key systemic issues in order to have lasting impact. This project builds upon and enhances the efforts over the past few years of Istanbul provincial and municipal officials. It is designed to ensure that those responsible for carrying out the plans that have been developed will be continually involved in the process of implementation and in determining the specific solutions to be achieved. 21

32 Annex 2: Major Related Projects Financed by the Bank and/or other Agencies Bank-financed projects: TURKEY: SEISMIC RISK MITIGATION-TR 0 Turkey - Marmara Earthquake Emergency Reconstruction WEER) Project (P068368) [Active; PDO - Satisfactory; P - Satisfactory]. The main objectives of the project are to help restore the living conditions in the region of Turkey that was affected by the August 17, 1999 Marmara earthquake, support economic recovery and resumption of growth, and develop an institutional framework for disaster risk management and mitigation. Closing date has been extended till May 3 1, Turkey - Emergency Recoverv Loan (EERL) (P068394) [Closed; Outcome: Satisfactory]. A key objective o f the loan was to assist the government to respond quickly and effectively to the impact o f the Marmara earthquake of August 17, 1999, and help ensure that social assistance payments to earthquake victims were paid and keep Turkey s economic reform program on track. Turkey - Emergency Flood and Earthquake Recoverv (TEFER) Proiect (P058877) [Closed; Outcome: Satisfactory]. The objective of the project was to assist the government in : (a) restoring basic infrastructure in municipalities and rural areas affected by 1998 flood by repairing structures and facilities of economic and social importance; (b) providing assistance to restore housing in the earthquake affected province of Adana and (c) reducing vulnerability to future floods and earthquakes. Turkey - Earthquake Rehabilitation and Reconstruction Proiect (POO9099) [Closed; Outcome: Satisfactory]. The objective of the.project was to assist the Government in carrying out the emergency reconstruction program for the Erzincan region affected by 1992 earthquake through: (i) rehabilitation and reconstruction, and (ii) development and implementation of seismic risk prevention and mitigation measures. Programs of other donors: Japan International Cooperative Agency (JICA) has financed several risk assessment studies including a major microzonation initiative for the Istanbul metropolitan region. Japan Bank for Intemational Cooperation (JBIC) is providing a loan for seismic strengthening of bridges and viaducts in Istanbul. Government of France via SOFREMI loan will finance procurement of emergency vehicles including rescue helicopters and ships for the Istanbul Metropolitan Municipality. Government of Switzerland - following the 1999 Marmara earthquake the Government of Switzerland has worked with fire brigades and community groups in limit and Adapazari to improve training and public awareness regarding natural disasters. This effort has been 22

33 expanded to Istanbul. The support was also p;ovided through a limited number of specialized search and rescue equipment caches to the General Directorate of Civil Defense in Istanbul, The U.S. AIzencv for International Development (US AID) - supported training programs for neighborhood groups in Istanbul. UNDP - has been implementing in several earthquake-prone locations the local capacity program for disaster prevention and preparedness through public awareness activities, and earthquake preparedness training for volunteer groups. European Investment Bank - in the aftermath of 1999 Marmara earthquake, the EIB has provided, parallel to MEER, loan financing for housing, infrastructure, and lifelines reconstruction in the affected region. Government of Spain - provided hnding for reconstruction and rehabilitation of damaged infrastructure. 23

34 Annex 3: Results Framework and Monitoring TURKEY: SEISMIC RISK MITIGATION-TR Results Framework and facilities) is well prepared to a major earthquake. Outcome Indicators Key public facilities are retrofitted to resist a major earthquake; skills and technical capacities o f the relevant emergency response units are strengthened; building code enforcement and compliance with land use plans are improved. Use of Outcome Information Formulate public policies and xograms for seismic risk mitigation u1 the country risk-prone areas. Intermediate Results One per Component Component A: Capacity of the provincial and municipal public safety organizations in Istanbul to respond to major disasters is enhanced; coordination between regional emergency response agencies, as well as between the Istanbul authorities and the national government are improved. Component B: Key selected public facilities are retrofitted in order to ensure their operation in the aftermath o f a Results Indicators for Each Component Component A: New communication system is installed and fully operational in emergency response facilities. Emergency management information and communication systems are installed and used in daily operations. The Governorship Disaster Management Center (AYM) is strengthened. The public safety units are provided with the adequate emergency response equipment. The relevant agencies and volunteer groups are trained. Component B Around 800 public buildings retrofitted Feasibility assessments o f lifelines and vital infrastructure completed. Vulnerability assessment o f selected cultural heritage buildings completed. Use of Results Monitoring Component A: Assess effectiveness o f the systems and training through a day-to-day application and mock exercises, Define additional training needs. Support municipal and provincial governments with decision-making tools. Performance may feed into institutional changes in emergency management. Component B: Replication on the national scale o f the methodology for the prioritization and strengthening of public facilities, based on transparent criteria. Exposure and wider use o f new seismic strengthening techniques by engineering and construction industry. Informed decisions on retrofittingheconstruction o f lifelines and vital infrastructure. 24

35 Increased donor awareness o f need and opportunities to invest in protection of cultural assets. Component C: Component C: Component C: Better enforcement of building codes and progress made in implementation of land use plans in selected municipalities. Improvement in compliance with building codes and land use plans in selected Istanbul municipalities. Voluntary accreditation and training of engineers has started. Revised policies and procedures for improved code enforcement. I 25

36 0 a.i 2.P c a 0 m U r c c a L r 3 I: e a v) (I) N I I I

37 2 O ~ O O O 0 vi % m - m w w E x s X 0 N 0 : % X 0 N X X X

38 Annex 4: Detailed Project Description TURKEY: SEISMIC RISK MITIGATION-TR Component A: Enhancing Emergency Preparedness (us$73.46 million) Objective. The objective of this component is to enhance the effectiveness and capacity of the provincial and municipal public safety organizations in Istanbul to prepare for, respond to and recover from significant emergencies, especially those arising from earthquakes. Background. In recognition of the expert forecasts on probability of earthquake in North Anatolian Fault, and following the sobering experiences of the August 1999 Marmara disaster, the metropolitan and provincial governments in Istanbul have undertaken a series of initiatives to accelerate the pace of preparedness among public agencies and, through on-going awareness programs, the general public. These efforts have enjoyed the strong, visible support of a series of Governors and Mayors in Istanbul and have galvanized the efforts of numerous agencies, nongovernmental organizations and the general public. While the pace of preparedness at the national level has been slow, the mitigation and preparedness efforts of Istanbul authorities have been substantial. For example, both the provincial government and the metropolitan government have each constructed new emergency operations centers within the past four years. The municipal center (MOM) was completed and began operati,ons within a year of the 1999 earthquake. Modeled after. a similar facility in Los Angeles County, MOM contains many state-of-the-art features and accommodations for each of the municipal agencies that would need to respond to a variety of emergencies. The Provincial government has constructed a similar facility (AYM) that, when fully operational, will serve a similar purpose, including training classrooms and facilities for field training. Both levels of government, as well as mayors of several of the districts in the metropolitan region, have supported risk assessment ' studies like the JICA assessment, inventories of vulnerable structures and facilities, and widespread public awareness programs through informational brochures and media campaigns. A robust geographic information system - Urban Information System -- is being developed that includes the location of critical infrastructures and vulnerable structures. Representatives of the key public safety agencies meet regularly to develop, review and refine plans and procedwes for responding to a major earthquake. Large-scale exercises are held at least twice a year. Officials from the Turkish military are active participants in these planning and exercise efforts and they have developed detailed plans for how they will respond in support of civilian authorities. Though the level of commitment and action by provincial and municipal authorities is impressive, significant and tangible, the level of risk is so severe that important needs remain unmet. For example, budgetary constraints have delayed achieving full operational status for the AYM facility. 28

39 Personnel levels and equipment for the fire brigades and emergency medical services are well below those of other large, high risk metropolitan areas. The provincial ministry of health has 65 operational ambulances and no communications links with area hospitals. 500 fire fighters are on duty at any time. They operate out of 38 stations spread over a large, densely populated city with an intricate and often archaic road and street system that makes access to some high risk areas all but impossible. ' Communications links between the fire, security, emergency medical agencies and the various crisis centers are marginally adequate for day-to-day operations and would be immediately overwhelmed in the aftermath of a significant earthquake or other large-scale emergency. Each function monitors the activities of their public safety colleagues, but they operate on separate frequencies and there is no significant capacity for interoperable communications at the field level. AYM and AKOM, the principal crisis management centers, are not able to share information electronically and the various crisis management centers of other public safety agencies are dependent on the same limited wireless communications networks that are used for dispatch of critical resources. There are no systems in place that would allow each of the crisis centers to have a common situational awareness about conditions following a major disaster or to systematically track resource requests, resource status, and projected needs. In addition, communication and information linkages between the provincial and municipal authorities in Istanbul and key agencies of the national government in Ankara remain much as they were in Since any major disaster in Istanbul will inevitably require prompt assistance from unaffected areas throughout Turkey, rapid notification, reliable communications systems and the ability to share information about what has occurred and what resources are most critically needed will be essential to an effective emergency response. The issues summarized above -- especially those involving communications, information gathering and sharing, and enhancing the response capacity of key agencies -- are the principal areas to be addressed in this project. This project builds upon and enhances the efforts over the past four years of Istanbul provincial and municipal officials. It is designed to ensure that those responsible for carrying out the plans that have been developed will be continually involved in the process of implementation and in determining the specific solutions to be achieved. Component Description Enhancing the emergency preparedness and response systems in Istanbul is to be accomplished through five principal activities: (a) improving the emergency communications systems, capacity and capabilities among and between the key public safety agencies, including linkages to national authorities in Ankara; (b) establishment of an Emergency Management Information System that links the various key crisis centers in the metropolitan area as well as national authorities in Ankara; (c) upgrading the operational capacity of public safety agencies through 29

40 the acquisition of equipment as well as training and awareness programs; (d) strengthening the institutional capacity of AYM; (e) public awareness and training. Sub-component A.l- Emergency Communications System (US$33.16 million) Communications is the cornerstone of an effective emergency response. The current emergency communications systems in the Istanbul metropolitan region have numerous, significant limitations that are widely recognized by the public safety agencies and key governmental officials. Each agency - security, fire brigades, emergency medical - operates its own system that is capable of voice-only transmissions. Each system is essentially an open channel network that operates on a first come, first serve basis with minimal ability to prioritize calls. There is high background noise on the networks. Each agency monitors the other networks at the call centers but there is no effective interoperability, i.e. the ability to communicate between functions on a common network. There is no ability to transmit data over the networks or to arrange for groups to talk clearly. Key facilities, e.g. hospitals, are not linked to the ambulance services. The limitations of the current systems will almost inevitably seriously compromise an effective, coordinated response to a major crisis. The component would support the establishmenthpgrade and installation of an integrated communications system so that all public safety agencies such as police, fire brigades, civil defense, heath care providers and ambulance, at the provincial and municipal levels communicate effectively at the tactical (field) level using both voice and data. The system will also enable the communications to the relevant crisis centers and key facilities including national offices in Ankara. The system will have several layers of backup so that it will continue to be operational in the event of catastrophic event. The component will also support training of system users, training of system maintenance and operations. Currently, a systems analysis is being conducted by international consultants to define the specific technical features and equipment necessary to achieve the objectives of the upgraded system. This work builds upon efforts undertaken by the provincial and municipal governments to consider alternative strategies for, resolving what they recognize are serious limitations with the existing communications systems. Sub-component A.2 - Emergency Management Information System (US$7.50 million) Large-scale emergencies involving multiple agencies and multiple activities are managed at crisis centers. Crisis centers bring together representatives of involved agencies to make critical decisions regarding response priorities, determine what resources are available, identify what resources are needed, locate those resources and ensure that they are deployed and, should the situation change, reassigned. These operations centers are responsible for developing the situational awareness of what has occurred, what the impacts have been and what actions are needed to minimize the effects of the 30

41 crisis. In a large-scale emergency multiple crisis centers will be activated by the municipal and provincial governments, the involved agencies and ministries and at the national level in Ankara. It is important that each center has a shared understanding or common view of what has occurred, what actions are being taken, what priorities have been established and what resources are needed and deployed. An Emergency Management Information System is the key to achieving this coordinated response. ' Currently the multiple crisis centers that would be activated following a major earthquake in Istanbul can only communicate via the same wireless, voice-only systems referenced above. While municipal and provincial authorities are developing a robust geographic information system (GIS) that graphically displays the region's critical infrastructure, this important management tool cannot currently be shared between the centers or integrated with information regarding response priorities and resource allocations. An Emergency Management Information System makes the effective use of GIS during a crisis possible. The sub-component would support establishment of an Emergency Management Information System that can collect, aggregate and display information related to a crisis, in real time, for use by the operations crises centers that would be established both in the Istanbul metropolitan region and at the national level in Ankara. This system should also support daily operations of the public safety organizations such as civil defense, fire brigades, police, traffic control and municipal governments. The component would also support data conversion, training in system operations and system maintenance. Currently a systems analysis is being carried out by international consultants, working in coordination with a users group from the provincial and metropolitan governmental agencies, to define the specific technical features and equipment requirements to support the implementation of an emergency management information system. Sub-component A.3 - Strengthening the Institutional Capacity of AYM - the Governorship Disaster Management Center (US$9.60 million) The provincial government has copstructed a new facility to be used as an operational and training center for emergency management. While the construction has been completed budgetary constraints have delayed making the facility fully operational. Since this facility provides the primary point of coordination between the municipality and the national government in Ankara, the project will provide support and technical assistance to the provincial government to enable the facility to become operational including computers, visual displays, and other equipment. In addition, the project will provide technical assistance to the provincial government to develop the organizational structure and operational procedures to strengthen its capacity to carry out the roles assigned to it. 31

42 Sub-component A.4 - Upgrading the Emergency Response Capacity in the Istanbul Metropolitan Region (US$15.20 million) The primary emergency response agencies (fire, security [police], emergency medical teams) in Istanbul - the first responders - have many critical needs to enable them to cope with the challenges they will face following a major earthquake. While the above-outlined activities under this component will provide much of the communications and information infkastructure to enhance response, it is essential that the units and personnel at the field level have adequate equipment, facilities and training to support their efforts. Because of the nature of the building stock - largely concrete arid brick - there are relatively few structural fires in Istanbul. The fire brigades in Istanbul, much like those throughout Turkey, are staffed at a level below that for large metropolitan areas. Istanbul has 1500 firefighters with 500 on duty per shift assigned to 38 stations. Unique demographic features, including the fact that the metropolitan area is divided by the Bosporus and laced with an intricate road and street system with many areas virtually inaccessible, add to the challenges the department faces. By contrast, the city of Tokyo, which also is faced with a severe seismic risk, as well as a history of catastrophic fires, has over 17,000 fire fighters housed in 80 stations with 207 branches. The City of New York has 11,400 fire professionals and 2800 emergency medical technicians on staff, London has over 7000 fire fighters while the City of Los Angeles has 3,376 fire fighters working out of 103 stations, augmented by the Los Angeles County Fire Department that has over 5500 personnel. The emergency medical services are similarly small in size. Sixty five ambulances are currently available to the provincial Ministry of Health; they have set a goal of having 100 units operational. Emergency communications systems provide for no links to the area s hospitals and, with the exception of arrangements made at a few fire stations, there is little coordination between fire response units and emergency medical actions. This sub-component will support the financing of equipment for first responder agencies in Istanbul as well as training and on-going maintenance costs. A needs assessment is currently underway by international consultants, working in close consultation with local officials, to identify and prioritize the specific needs and equipment standards to be used and to ensure that the initiatives supported through this project are coordinated with efforts undertaken by the government and international donors. The project will support the acquisition of equipment - e.g. response vehicles, upgrades of emergency medical support teams, rescue equipment, command vehicles, and personal protective gear. Sub-component A.5 - Public Awareness and Neighborhood Community Volunteers (US$8.0 million) As part of enhancing emergency response capacities the project will provide support to the disaster awareness program, as well as training for the volunteer groups in the selected areas of 32

43 Istanbul identified to be at a high seismic risk, in an effort to prepare disaster-prone communities to respond to emergencies in a swift and organized manner. This will be realized through the community-based disaster awareness program, as well as training for the volunteer groups. Evidence from earthquakes and other Datura1 disasters, including those in Turkey, clearly demonstrates the importance of a knowledgeable public who can make a critical difference in reducing the loss of life in the immediate aftermath of an earthquake. The project will support public information campaigns aimed at increasing public awareness of seismic risks, and training to school children, community groups, and the business community in preparedness and mitigation measures. This component will disseminate educational and other materials already available but not yet widely distributed as well as develop materials for radio and television. Creating and sustaining volunteer groups to provide assistance in preparedness and response efforts is a challenge worldwide. Numerous groups piloted volunteer initiatives following the 1999 earthquake, with varying degrees o f success. One program that shows particular promise is the Neighborhood Disaster Support (MAG) program funded by the Swiss Agency for Development and Cooperation (SDC). SDC mobilizes neighborhood groups by working through Muhtars (the lowest level of govemmental structure in Turkey). Four to five ten-person teams per neighborhood are targeted and, through experiences gained in projects in Kocaeli province, SDC has developed training programs and equipment caches. The teams participate in a 36-hour training program conducted by professionals from Civil Defense, Fire Brigades and medical associations, and in periodic exercises.. SDC creates a small self-management group that maintains contact information, arranges maintenance, updates training and organizes social activities to strengthen team cohesion. The project will work in coordination with volunteer organizations including SDC; SDC will provide the organizational oversight of the effort and ISMEP will provide fimding to conduct training programs, refresher training and field exercises, as well as equipment caches to support the neighborhood MAG teams to be created in the Istanbul Metropolitan area. The component will be implemented in close coordination with the.general Directorate of Civil Defense, with the support of a professional public relations firm. Component B: Seismic Risk Mitigation for Prioritv Public Facilities (US$ million) Objective. The objective of this component is to implement structural retrofitting measures to reduce the risk of future earthquake damage to essential facilities, in order to ensure their continuing function and to reduce casualties in the event of an earthquake. In the case of especially critical medical facilities where retrofitting is deemed to be unfeasible, some reconstruction may be included in this component. Essential public facilities include those that serve a public function critical to the disaster response and recovery operations of the community and to social and community function in general, as well as buildings regularly used by large numbers of the public where 'life-safety is of special concem. These include schools and hospitals, disaster response and information centers, and governance and public order management centers. Lifelines including gas, water supply, 33

44 power and transport infrastructure is being largely retrofitted by other donors or by the private companies that operate them. However the component will support a Risk Assessment of vital infrastructure (lifelines) to identify remaining gaps, and recommend an action plan to implement needed mitigation measures. The component will also include a small technical assistance program to address the vulnerability of cultural assets, which are important to Istanbul s economy, and which in many cases have global cultural heritage value. Background. The earthquake of 1999 demonstrated the seismic vulnerability of the building stock of the Istanbul and Marmara region. In addition to the human and economic losses, essential facilities such as hospitals, fire brigades, and rescue equipment were rendered inoperable or destroyed, resulting in chaos in the national emergency response activities and delaying the delivery of emergency aid to earthquake victims. After the earthquake, the Municipality of Greater Istanbul and the Governorate of Istanbul began to develop a comprehensive strategy to integrate several initiatives necessary to reduce the city s vulnerability. Among these is addressing the challenge to strengthen key public facilities that must be capable of remaining in operation in the event of an urban earthquake. In response to the Marmara earthquake, parliament passed laws that delegate many of the mitigation and emergency response functions to the provincial and municipal levels of govemment. Local administrations, especially Istanbul, followed up by making quick progress in, among other initiatives, carrying out vulnerability assessments and making investments in retrofitting (structural upgradinglstrengthening). Because of its recognition of the serious risks prevailing in building code enforcement, the Istanbul Provincial Government has carried out an inventory of at-risk structures, establishing priorities for retrofitting activities and initiating some retrofitting work on public assets with support from international donors such as JICA, which supported the drafting of a special report on Istanbul s vulnerability to earthquakes, including limited microzonation and earthquake scenario studies. Istanbul Municipality estimates that the metropolitan area s building stock of approximately 1.5 million structures includes about 12,000 structures serving public functions, many having priority in disaster response and recovery operations, such as hospitals, schools, and emergency management and governance centers. The agencies responsible for critical facilities have begun to fund and implement retrofitting of key structures. In addition, with the help of a $100 million loan from the government of Japan, several heavy volume bridges and overpasses may be retrofitted. The Government has identified about 3,600 public structures remaining in need of retrofitting following the Marmara quake, and estimates that about US$l billion is needed to complete the work. Thus, while much work has been done, the unmet needs remain significant. The earthquake risk reduction activities to be supported through the project under this component are therefore designed to build upon and expand the efforts of local and regional govemments, focusing on critical public facilities and assets. Component Description 34

45 The component will focus on four categories of buildings (outlined below) that are essential to the disaster response and recovery operations or otherwise serve important public functions in the community. These categories include buildings only, and comprise a long list of nearly 2,500 of the 3,600 public structures that require retro-fitting. The Component will finance the retrofitting of up to 840 of these, selected in order of priority based on specific criteria as described below. This represents about a third of the estimated total retrofitting need for public buildings in these categories. A limited number of building reconstructions may also be included, if feasibility studies demonstrate a) criticality for emergency response as well as general function, and b) costhenefit analysis (including life-cycle cost analysis) that brings into question the technical and cost effectiveness of retrofitting. Non-structural elements will also be secured as a part of the structural work, as described further below. The component will also support the development of a vulnerability assessment of lifelines and a vulnerability inventory for cultural heritage assets, which are important to Istanbul s economy. Quality control of design and construction will be provided through a) design review by international seismic experts, b) site supervision and technical control by IPCU engineers experienced with seismic retro-fitting and earthquake reconstruction supervision, and c) on-site internationally procured construction supervision consultants, as done under the previous Bankfunded TEFER and MEER reconstruction projects. The provincial Government, in consultation with the sectoral provincial government agencies, has identified a list of priority buildings planned to be retrofitted. The inventory and prioritization process was developed through a series of meetings between the Governor s office, stakeholders and academicians as detailed below. Component B.1- RetrofittingDXeconstruction of Priority Public Facilities (US$ million) The types of public facilities to be considered eligible for seismic strengthening through project financing are categorized as follows: Category A: Category B: Category C: Category D: Medical Facilities 0 Hospitals 0 District polyclinics. Educational Facilities Schools 0 Student dormitories Administrative Facilities 0 Facilities essential for the administrative functioning of communities at risk after disaster, including communication and coordination centers Social Service Facilities 35

46 Child protection centers Orphanages Elderly housing The cost benefit threshold for eligibility for project financing will be determined through the feasibility studies being carried out with PHRD funding, and is expected to be approximately 30% of replacement cost, depending on function, age and sector operational requirements such as usefulness of the structure s plan from the point of view of bction (potential functional obsolescence-medical function with respect to adaptability to modem medical technology and service provision). Certain hospital structures may be considered for complete reconstruction if feasibility studies demonstrate a) criticality for emergency response as well as general function, and b) costhenefit analysis (including life-cycle cost analysis) brings into question the technical and cost effectiveness of retrofitting In addition to strengthening the hospital buildings to protect the emergency response capacity and the lives of the patients and staff, it is also necessary to secure non-structural components such as medical equipment and infrastructure in order to avoid loss of function and secondary damage and to prevent injury during an earthquake. While this need is especially important in hospitals, it applies also to first response facilities and other structures where technical infrastructure must continue to operate immediately after an earthquake. The retrofitting work under the component will include the securing of such critical non-structural elements. Items to be included are those physical elements required for the continuing safe and effective operation of the facility, such as equipment, stored supplies and technical infrastructure, as well as physical access and circulation within the compound, in the case of hospitals. During the retrofitting operations, the social and functional impact. of structural interventions in hospitals will be minimized through special planning activities involving hospital staff and other stakeholders, the design engineers, and the contractors. The planning for impact reduction as well as its monitoring during construction will be ensured through a consultancy funded under the project. The prioritized list includes a few school buildings of historic and/or cultural importance. Feasibility studies will determine whether cost-effective, non-intrusive retrofitting can be implemented in these cases. Decisions whether retro-fitting is economically and culturally feasible, will be made on a case-by-case basis, including consultations with the Bank. Turkish law governing the protection and reconstruction of these structures would apply. Selection process Under the leadership of the Istanbul Governorship Disaster Management Center (AYM), a comprehensive inventory of critical facilities has been developed through a transparent prioritization process involving stakeholder agencies, using building-specific technical data, transport access data (hospitals and schools), distance from fault lines, importance in the Istanbul Disaster Management Plan, population on-site and general population served and other relevant characteristics depending on the type of facility, taking account criteria for each sector as indicated in the weighting formula tables below. 36

47 The process included workshops that gathered representatives of the sectoral provincial directorates and academicians, to agree on the allocation of project resources between sectors and among types of facilities, as well as criteria for prioritization, including coefficients to be used to weight relative importance for the sectors and role in the overall Istanbul Emergency Management Plan. Conclusions reached during the workshop in regard to the allocations and criteria coefficients served as a basis for completing the priority list of public buildings by the AYM of the Governorate working with a small task group of stakeholders. The process has provided a rationalized prioritized list of facilities requiring seismic retrofitting in order to serve the city in the event of a major earthquake or other disaster. The tables below indicate the selection criteria and weighting formula used for public facilities prioritization and selection. No CRITERIA ACCESSIBILITY DURING DISASTER(X0,20) 0 Access from air (x 0,05) I (yes)-100 I (no)-0 0 Access from ground (x 0,15) between TECHNICAL FEATURES OF BUILDING (X0,20) 0 Construction year after 1980 (40) 0 Construction year before1 980 (I 00) DISTANCE TO EPICENTER (X0,Io) Score I Distance to Fault Line >20km. (40) 0 Distance to Fault Line C20km. (100) Importance in Disaster Management Plan (Strategical Location)* (x0,40) 40 Capacity (bed) (x0,io) bed (30) bed (60) I TOTAL 500 bed and more (I 00) I100 Special features like specialization of hospitals, surrounding open space for potential mobile units, etc., are also taken into account in discussions with health sector officials. 37

48 Table 2: PRIORITIZATION CRITERIA FOR SCHOOLS No. 2' 3. CRITERIA ACCESSIBILITY DURING DISASTER (Xo.10) Access between TECHNICAL FEATURES OF BUILDING (x0.40) 0 Construction Year (x0.20) (a)before 1965' (I 00) (b) between (60) 0 Number of story (x0.20) (c) after 1980 (40) (a) > 5 story (100) I (b) 3-4 story (60) I (c) 1-2 story (20) DISTANCE TO EPICENTER (x0.10) Score I Distance to Fault Line >20km. (40) 1 Distance to Fault Line c20km. (100) Importance in Disaster Management Plan (Strategical Location) (x0.10) 10 Number of Student (x0.20) 20 ~~ ~ student 130) I student (60 j student and more (100) Working Hours (x0.10) 10 Half day (60) Wholeday (100) I TOTAL I 100 Table 3: PRIORITIZATION CRITERIA FOR ADMINISTRATION BUILDINGS No. I. 3m CRITERIA TECHNICAL FEATURES OF BUILDING (X0.20) 0 Construction Year (x0.10) (a) before1 965 (1 00) I (b) between (60) I (c) after 1980 (40) Number of story (x0.10) (a) > 5 story (100), I (b) 3-4 story (60) I (c) 1-2 story (20) DISTANCE TO EPICENTER (x0.10) Score I Distance to Fault Line >20km. (40).. Distance to Fault Line ~20km. (100) Importance in Disaster Management Plan (Strategical Location) (x0.50) 50 Number of Personnel (~0.10) (30) (60) 200andmore (100) Working Hours (x0.10) 10 8 hrs. (60) more than 8 hrs. (100)

49 Table 4: PRIORITIZATION CRITERIA FOR DORMITORIES AND SOCIAL SERVICES BUILDINGS No. 2. CRITERIA ACCESSIBILITY DURING DISASTER (Xo.10) Accessibility between TECHNICAL FEATURES OF BUILDING (X0.40) Score I.I Construction Year (x0.20) (a)before 1965 (1 00) I (b) between (60) I (c) after 1980 (40) 0 Number of story (x0.20) (a) > 7 story (100) I (b) 4-6 Story (60) I (c) 1-3 Story (20) I DISTANCE TO EPICENTER (Xo.10) A n I '" I Distance to Fault Line >20km. (40) Distance to Fault Line c20km. (100) Importance in Disaster Management Plan (Strategical Location) (x0.15) 15 Number of Student or People (x0.25) student (30) student (60) 1000 student or more (100) Table 5: PRIORITIZATION CRITERIA FOR DISTRICT POLYCLINICS No. 1. CRITERIA DISTANCE TO EPICENTER (X0.20) Score Distance to Fault Line >20km. (40) Distance to Fault Line ~20km. (100) Importance in Disaster Management Planning (Strategical Location) (x0.50) 50 Population Served (x0.30) people (30) DeoDle (60) 500 people and more (100) I TOTAL 1100 The process of selection began with a long list of buildings within the four sectors considered to,be in need of retro-fitting, as shown in the table below. The long list totals 2473 buildings out of the approximate total of 12,000 public sector structures (which includes bridges and other structures) in Istanbul, or about 25% of the total. The weighting and prioritizing activities resulted in a short list of 840 buildings estimated to absorb the funds available in the component and covers about 34% of the estimated total need for retrofitting. The list of selected buildings is available in the project files. The final prioritized list includes the numbers of buildings by sector as follows: 39

50 Table 6: Prioritization Results (numbers of buildings) Facility Long Short Percent List List ofll Polyclinics S cho o 1 s % 1783* % I Administration I 68 I % I I Student dormitories % Social Services % total % I *an additional +/- I000 school buildings have been or are being retrofitted The prioritized list includes 25 hospitals with retrofitting designs ready and available from the previously Bank-financed Erzincan reconstruction project, permitting procurement of construction contracts for a number of high-priority buildings early during project implementation. These designs were reviewed during project preparation to ensure appropriateness under the project. Feasibility studies and design work for the additional buildings in the project will be carried out during project implementation. These will be reviewed by international seismic engineers. Opportunities to apply innovative seismic mitigation methodologies will be identified. Sub-component B.2 - Risk Assessment for Lifelines and Vital Infrastructure (US$2.45 million) The project will finance an integrated seismic risk assessment for gas, water supply, power, telecommunications and transport infrastructure. The JICA study provides initial potential damage assessments under two earthquake scenarios which indicate vulnerabilities in the lifeline systems. Considerable mitigation work has been accomplished but a detailed risk assessment is recommended a) to identify remaining needs, and b) to lay the foundation for follow-up work on investments needed to address vulnerability of the lifelines, and vital infrastructure, including prioritization of investment projects, and providing opportunities for other donors contributions to reducing the risk to these critical facilities. In addition, this subcomponent will finance the development of methodologies for risk assessment of commercial and industrial facilities. Sub-component B.3 - Risk Assessment of Cultural Heritage Buildings (US$3.25 million) Istanbul is a cultural and historic center of world importance. Many structures on the World Heritage list are found in Istanbul, and because of these assets, the city has for centuries been a center for the study of eastern and western history and culture. However, perhaps more important to the city s inhabitants and the country as a whole is the fact that Istanbul s cultural assets contribute significantly to the local and national economies because of their strong attraction to tourists and scholars. Interest among international experts to address the seismic vulnerability of Istanbul s cultural patrimony has increased since the Marmara quake, and a number of private and bilateral initiatives have attempted to come to terms with the challenge of 40

51 protecting them. However, both the scale of the problem and the broad interest in taking action have constrained the development of a coordinated approach. Recently, the Government has drafted an action plan comprising i) developing a comprehensive inventory of the cultural assets of Istanbul, ii) conducting detailed feasibility studies to determine seismic vulnerability and recommend technical mitigation measures, and iii) carrying out design and construction under a long-term (20-year) plan. The Component will include funding of the first step (inventory), and funding for applying the second step (detailed feasibility studies) to selected high priority assets, as identified in the first step. The project may also provide limited funding for technical assistance to help establish a coordinated approach that will enable and facilitate action by interested donors and expert groups. Component C: Enforcement of BuildinP Codes (US$7 million) Objective. The objective of this component is to strengthen the institutional and technical capacity of the Greater Istanbul Municipality and district municipalities to enforce building codes and compliance with land use plans. Background. The inadequacy of the housing stock in terms of seismic resistance is the result of a combination of several factors. Constructions have often taken place on sites whose geologic characteristics make them unsuitable for housing or whose characteristics are insufficiently known, making it impossible to apply the correct building codes. In this respect it must be noted that much illegal construction has taken place on state owned land that is illegally occupied due to the insufficient availability of private land. Pertinent building codes have not been followed, as their application was deemed too costly. As a result, many buildings, although technically adequate elsewhere, may not resist expected seismic events on the site of their construction. In the absence of code enforcement, building standards have further slackened as a result of profit maximization, to the point where the buildings would be unsafe. The addition o f extra floors to existing buildings, without obtaining the required permit and other structural changes led to existing configurations which could not be structurally safe in case of major earthquake. Prevalent changes in this respect are often made by shop owners, occupying the ground floors of buildings, in attempts to extend the space available or to make the shop more easily accessible. Cutting of support columns to widen the shop front is probably the most egregious example. Lack of certification and accreditation of engineers, inspectors and contractors have also amplified this problem. Currently, there is no accreditation of engineers or contractors, and potentially any graduate from an engineering school can design a building, and any person in Turkey could be a contractor. Most engineers and contractors have no liability insurance and which is not legally required as part of private construction. While most building permits are issued in accordance with existing building code, often the final buildings do not comply with the original design. There is often collusion between the home owner who would like to have addition floors, the inspector, and the contractor. 41

52 Component Description The project would support the Greater Municipality of Istanbul and the district municipalities to better enforce building codes and comply with land use plans. A study carried out during project preparation identified the following main reasons for lack of enforcement of building codes: (i) gaps in the legal and regulatory framework; (ii) lack of certification of engineers, inspectors, and contractors, (iii) lengthy processes of approvals which open doors for corruption among civil servants, engineers, private inspectors and contractors; and (iv) lack of public understanding of the importance of compliance with building code and land use plans. The component will include the following sub-components: Sub-component C.l - Public Awareness (US$0.23 million) The sub-component will support public awareness campaign to the wider community in regard to the importance for public safety of compliance with building codes and land use plans. This will include advertisement in media, production of TV and radio programs, meetings with contractors, etc. Sub-component C.2 - Development of the Regulatory Framework (US$0.56 million) The sub-component will built on the current work undertaken as part of MEER project, and will further support the Ministry of Public Works and Settlements in further studies and analyses in order to identify solutions and identify gaps in the regulations that would aim to enable the local authorities to better enforce the building code and increase the compliance with land use plans. The component will also support public consultation with stakeholder groups, and drafting of the relevant regulations. Sub-component C.3 - Voluntary Accreditation and Training of Engineers (US$l.20 million) The sub-component will support the accreditation of engineers on a voluntary basis, starting with civil engineers who expressed interest in the scheme. The accreditation would follow the standards used in the EU member countries. This will facilitate the entry o f Turkish Engineers to the EU market. Sub-component C.4 - Streamlining of Building Permits Issuance Procedures (US$5.01 million) The project will provide support to a limited number of district municipalities, on a demand basis, to improve the efficiency of issuance of building permits, ensure transparency, curtail corruption, and strengthen mechanism for public complaints. The purpose o f this focused support is to demonstrate that practical measures can be undertaken to improve efficiency and to streamline building permits issuance while increasing transparency of the process. 42

53 The project will provide the following assistance: (i) re-engineering of building permit issuance, including training, capacity building activities, and installation of computer systems, including hardware, software and data conversion; (ii) hiring of an independent private firm to inspect the compliance with building permits and to identify any illegal construction. The component will also support the establishment of hotline, to be operated by an independent private entity, to receive customer complaints. Files for all complaints will be submitted to the Mayor for investigation and further actions. Component D: Project Management (US$S.O million) The objective o f this component is to support the ISPA to implement the project in efficient and transparent way, and build the institutional capacity to sustain the implementation of Seismic Risk Mitigation and Preparedness program beyond the life of the project. The component will provide support to the Istanbul Project Coordination Unit (IPCU), responsible for project implementation, through provision of contract staff salaries and other expenses, short term technical assistance, office equipment and fumiture, vehicles, training, and incremental operational costs. It would further support monitoring and evaluation. 43

54 Annex 5: Project Costs TURKEY: SEISMIC RISK MITIGATION-TR Local Foreign Total Project Cost By Component and/or Activity us us us $million $million $million Component A: Enhancing Emergency Preparedness Component B: Seismic Risk Mitigation for Priority Public Facilities Component C: Enforcement of Building Codes Component D: Project Management Total Baseline Cost Physical Contingencies Price Contingencies Total Project Costs' Interest during construction Front-end Fee* 2.00 Total Financing Required * To be paid by the Government Disbursement Category Component Total Cost Percentage of Bank Bank Financing Financing (US$) % US$ Civil Works and Tech. Services Goods Consultants Services and Training Incremental Operating Cost

55 Annex 6: Implementation Arrangements TURKEY: SEISMIC RISK MITIGATION-TR Institutional Analysis. Disaster Management Organization and Structure. Traditionally, disaster management in Turkey has been highly centralized. Local authorities administer directives from the Ministry of Public Works and Settlement (MPWS) which has, in one reading of Law 7269, the lead responsibility for disaster affairs; governors (who are part of the Ministry of Interior) are expected to coordinate and mobilize the resources of other agencies. The provincial authorities, as regional representatives of national agencies, serve as the principal links to the central government s operational facilities in Ankara. Mayors have relatively limited direct authority and responsibility for disaster management. Minor crises are to be handled at the district or subdistrict level. If the disaster exceeds capabilities at that level, the provincial Governor becomes involved. If it is a major event, representatives of the ministries of the central government become involved and establish crisis centers. If there is a national-scale natural disaster, a crisis center is established in the office of the Prime Minister that includes senior representatives of at least 15 ministries, including the military. Though the system has been highly centralized, ironically, there was no single national coordinating agency for disaster management, until formal establishment of the TEMAD after the Marmara earthquake. In June 2000 the Government enacted the Decree to formally establish the Turkey Emergency Management General Directorate (TEMAD) under the Prime Minister s office as a national coordination body for emergency management. The mandate of the directorate include: (a) carrying out inter-institutional coordination; (b) supporting establishment of emergency management centers within local governments; (c) preparing emergency response plans; (d) promoting. volunteer efforts; (d) coordinating procurement, warehousing and distribution of relief materials. The General Directorate of Disaster Affairs (GDDA) of the MPWS, historically responsible for disaster management and mitigation (GDDA is divided into seven major departments: Earthquake Research, Disaster Damage Assessment and Survey, Emergency Relief and Machine Support, Planning and Indemnification of Affected Populations, Disasters Fund Administration, Temporary Housing, and Prefabricated House Construction) has approximately 1200 personnel, including planners, architects, geoscientists, architects and engineers but evidences little interest in emergency operations. The GDDA, under MPWS, is responsible for reconstruction and rehabilitation in the aftermath of disasters. The Red Crescent Society, the General Directorate o f Civil Defense (GDCD in the Ministry of Interior), and the military also play a significant role in rescue and relief operations. The General Directorate for Civil Defense (GDCD) has some 3000 personnel, with approximately 300 assigned in Ankara. GDCD rescue and relief teams are assigned nationwide, and are expected to intervene at times of disaster to provide immediate assistance, though their level of training, organizational structure, and equipment is inadequate. The GDCD administers the operations of the Civil Defense College in Ankara that trains civilian government employees., 45

56 Though over the last years TEMAD has not met all expectations in regard to its potential as a single coordinating body, recently it has intensified its efforts by taking the initial steps to enter into contracts to develop the design that would lead to the establishment of the national emergency management center and a state-of-the-art emergency management information and communication systems. These efforts will be coordinated with the initiatives being undertaken as part of ISMEP through on-going interaction between the consultants and the expertise provided by user groups at the national, provincial and municipal levels. The agency also prepared a draft law to strengthen its disaster management in the country. The draft law calls for strengthening TEMAD's ability to coordinate the various government entities in the case of a major earthquake, and for each local goverhment to establish a disaster management team. The draft law has been circulated widely in the country for comments and will be presented to the Cabinet in the coming weeks. The operational responsibilities at the provincial level reside with governors. Each ministry has a unit responsible for some aspect of disaster management. Rescue and relief operations are the direct responsibility of the provinces or districts, with assistance provided by the central government. Organization of Disaster Management in Istanbul. The overall responsibility for disaster management in the province of Istanbul is under responsibility of the Governor. There are two key disaster management centers in Istanbul: the Istanbul Governorship Disaster Management Center (AYM) and the Istanbul Metropolitan.Disaster Coordination Center (AKOM); each having different roles and responsibilities. Provincial authorities are responsible for health, education, civil defense, civil works, security (police) and other areas falling under the authority of the national government while the municipal agencies are responsible for the fire brigades, water and gas, and some parts of the transportation networks. In a case of a major disaster, all of these services and sectors within the boundaries of the province are under the responsibility of the Governor. In addition, the provincial authorities, as regional representatives of national agencies, serve as the principal link to the central government's operational facilities in Ankara. Both the provincial government and the metropolitan government have each constructed new emergency operations Centers within the past four years. The municipal center (AKOM) was completed and began operations within a year of the 1999 earthquake. Modeled after a similar facility in Los Angeles County, MOM contains many state-of-the-art features and accommodations for each of the municipal agencies that would need to respond to a variety of emergencies. The Provincial government has constructed a similar facility (AYM) that, when fully operational, will serve a similar purpose, including training classrooms and facilities for field training. AYM will enable the Governor to lead emergency management operations in a case of a major natural disaster in Istanbul, and will enable the coordination among the national government agencies in Ankara, line agencies in Istanbul, and the metropolitan and district governments. The activities to be supported under ISMEP are designed to build on the self-initiated actions of officials in Istanbul. In this sense, the ISMEP is entirely consistent with the strategies developed 46

57 in 1999 and, as importantly, consistent with the broader national strategy of the government in 2004 in its emphasis upon decentralization as a fundamental objective. Project Management Arrangements In line with government decentralization agenda, project implementation would be placed under the responsibility of the Governor of Istanbul. A small Istanbul Project Coordination Unit (IPCU) would be established under the Istanbul Special Provincial Administration (ISPA). The Unit would be headed by a highly qualified project Director who will report directly to the Governor or his designee, and the General Secretary of ISPA. Each relevant agency (such as Provincial Directorates of Health, Education, Public Works, etc.) will nominate a senior staff to be a liaison between the IPCU and their mother agency. The IPCU will be responsible for project coordination, procurement, financial management, contract management, monitoring, and evaluation and reporting. The core IPCU staff will include, in addition to the Director, 2 Deputy Directors (one technical and the other for administration and finance), 2 procurement officers, 2 financial management officers, 5 engineers, a social scientist, an environmental engineer, and a monitoring and reporting officer. The number of positions is indicative and might be revised during project implementation. In order to ensure full coordination among the various relevant agencies and the IPCU, Implementation Coordination Protocols wi.11 be signed between the ISPA and these agencies. Some staff from the existing PIU under the Prime Ministry Office (implementing, among others, the MEER project) will be temporarily assigned to the 'IPCU, and once the ISMEP project becomes effective these staff may be permanently transferred to IPCU.. A Project Steering Committee would be established to oversee project implementation, and provide strategic guidance. The Steering Committee would be chaired by the Govemor of Istanbul, and may include Directors of the provincial departments of the concerned ministries, representatives of Istanbul Municipality, Treasury, SPO, TEMAD, Minis,try of Public Works and Settlements, and the Director of the PrU under the Prime Ministry Office. 47

58 Annex 7: Financial Management and Disbursement Arrangements TURKEY: SEISMIC RISK MITIGATION-TR I,A. Project Financial Management Summary of Financial Management Arrangements The task team has conducted an assessment of the adequacy o f the project financial management system at Istanbul Project Coordination Centre (IPCU) at Istanbul Special Provincial Administration (ISPA). The current financial management arrangements for the project are marginally satisfactory to the Bank and an action plan to further improve the systems is agreed with ISPA. A summary of the conclusions for the project financial management purposes regarding Bank requirements are as follows: 1. Implementing Entity 2. Funds flow 3. Staffing 4.Accounting Policies and procedures 5. Intemal Audit 6. External Audit 7. Reporting and Monitoring 8. Information systems OVERALL FM RATING RATING Satisfactory Satisfactory Satisfactory Marginally satisfactory Not Applicable Satisfactory Satisfactory Unsatisfactory Marginally Satisfactory COMMENTS IPCU at ISPA will be responsible for project implementation. The procedures will be documented at the project FM manual PCU will purchase and install a project management system. Country Issues. A Country Financial Accountability Assessment for Turkey was camed out in The CFAA report identified some weaknesses in the Turkish financial accountability, in both the public and the private sector. Since 2001 the financial management environment has improved in Turkey. In December 2003, the Public Financial Management and Control Law (PFMC) which establishes the legal framework for harmonizing and modernizing budgetary practices across all of general government is enacted in the Parliament, It will reduce fragmentation and provide for a more comprehensive presentation of the budget. The law will also allow for future decentralization of financial control to spending agencies. Originally PFMC was to become effective in January 2005, but it is now postponed to January 1, The project will be implemented by Istanbul Project Coordination Centre (IPCU) that will be established under Istanbul Special Provincial Administration. The local administrations are subject to PFMC law 48

59 and defined as part of the general govemment. The PFMC Law defines the following structure applicable to local administrations. Budget preparation at SPAs will be done in accordance with PFMC; with a medium term perspective, consistent with the annual programs, development plans and SPAs own strategic plans. This budget will be approved by the Provincial General Assembly and will be sent to the Ministry of Interior. SPAs will prepare Activity Reports at year ends to be submitted to the Ministry of Interior. An internal audit unit will be established at SPA level. SPAs are subject to TCA audit. The current scope of TCA audit is limited to conformity (regularity) audit. With PFMC TCA audit scope was expanded to cover financial and performance audit in addition to conformity audit. The Government as part of its decentralization reform agenda has enacted a new Special Provincial Administration Law on March 4, 2005 which became effective on the date of its publication. This law delegates more authority to SPAs and its financial management clauses (regulating budgeting, accounting, organization structure of financial management, reporting and auditing) are consistent with PFMC. Even though this law was enacted, the President has announced that he will apply to Constitutional Court for cancellation on the basis of his assessment of 13 articles as unconstitutional. Risk Analysis. A summary of the risk assessment for the project in accordance with the Bank requirements is as follows Risk Comments INHERENT RISK 1. Country FinariciaLManagement Risk 2. Project Financial Management Issues Overall Inherent Risk CONTROL RISK High Moderate High Based on the CFAA report prepared in Implementing Entity 2. Funds Flow 3. Staffing 4. Accounting Policies and Procedures 5. Internal Audit 6. Extemal Audit Moderate Negligible Moderate Moderate NIA Negligible 49

60 7. Reporting and Monitoring 8. Information Systems Overall Control Risk Moderate Substantial Moderate Risk Mitigation Strategy Country financial management risk -the CFAA has identified major weaknesses in the Turkish financial accountability, in both the public, private and the banking sector. These risks together with the developments in the sector incurred after the preparation of CFAA has been explained in detail in the Country Issues section. The project financial management will be centralized at IPCU that will be established at the Istanbul Special Provincial Administration. Control risk - Until IPCU is hlly established and experienced in project implementation the PIU currently implementing the MEER project will provide support to IPCU in complying with the action plan. The MEER PIU is very experienced in the implementation of Bank projects. Implementing Entity Project implementation responsibility will belong to the Istanbul Special Provincial Administration (ISPA). An Istanbul Project Coordination Unit (IPCU) would be established under the ISPA. The Unit would be led by a project Director who will report directly to the Governor or his designee and the General Secretary of ISPA. Each relevant agency (such as Provincial Directorates of Health, Education, Public Works, etc.) will nominate a senior staff to be a liaison between the IPCU and their main organization. IPCU will be responsible for project coordination, procurement, financial management, contract management, monitoring, and evaluation and reporting. The IPCU will include, in addition to the Director, 2 Deputy Directors (one technical and the other for administration and finance), 2 procurement officers, 2 financial management officers, 5 engineers, a social scientist, an environmental engineer, and a monitoring and reporting officer. The number of position is indicative and might be revised in the course of project implementation. Some staff from the existing Project Implementation Unit (PIU) under the Prime Ministry Office (implementing, among others, the Marmara Earthquake Emergency Reconstructi on (MEER) project) has been transferred to the IPCU, and these staff might be re-hired once the ISMEP project becomes effective. Until the IPCU is fully functional MEER PIU will continue to provide support in purchasing and installing the Project Management System (PMS) and preparing the financial management manual for the project. The MEER PlU is very experienced in the implementation of Bank projects and is hlly capable of providing support to IPCU. The risk associated with the implementing entity is assessed as moderate. Staff is already assigned to IPCU and its formal establishment will be completed following the negotiations. Funds Flow The project expenditures will be financed 100% from the Bank loan as permitted by the new financing parameters. The borrower will be the Undersecretariat of Treasury. The Public Finance 50

61 and Debt Management Law (Law number 4749, dated March 28, 2002) gives the Treasury the right to allocate loans obtained from foreign sources to general and annex budget institutions. Since ISPA is a special budget institution, the Treasury is not able to allocate the loan for ISMEP to ISPA under the current legislation. However the Government of Turkey decided that allocating project funds directly to ISPA is going to speed up project implementation. Therefore, the Law which amends some laws and decree by laws is expected to be enacted in the coming months. The proposed Law would authorize the Council of Ministers to transfer funds for the implementation of the project. In the new' Public Financial Management and Control Law (PFMC), special provincial administrations are included in the description of general govemment. The PFMC regulates the general framework of budget preparation and reporting procedures for SPAs. The new SPA Law approved by the President on March 4, 2005 regulates the budget allocation and execution procedures of SPAs. The SPA budgets and final accounts will be agreed by the Province General Assembly and ISMEP will also be approved by the Province General Assembly. Its budgeting and execution will be the responsibility of ISPA. There will be a special account for the project at the Central Bank of Turkey in Euros. Since the project financing percentage is loo%, payments for all expenditures under the project will be made from this account or through direct payments from the loan account. The IPCU Director and the Governor's Designee will be responsible for signing withdrawal applications. The risk associated with the flow of funds is considered as negligible. Staffing. Three staffs with satisfactory experiences and qualifications are provisionally assigned from the Prime Ministry PIU to IPCU. These staffs are at senior level, one for financial management and one for procurement. The remaining positions will be advertised and recruitment to these positions including the second financial management staff will be completed by August 1, Until full staff assignments to IPCU are completed, the MEER PIU will provide support IPCU. The required funding for the recruitment of staff will also be provided from the MEER project. The risk associated with staffing is considered as moderate. Provisional staff assignments from MEER PIU are completed and additional staff will be recruited as required. Accounting Policies and Procedures The project accounting will be maintained separately within IPCU. The project accounting will be on a cash basis. The MEER PIU has prepared the terms of reference for a consultant to establish a Project Monitoring System (PMS) at IPCU that will be used for project accounting, monitoring and reporting. The PMS will generate financial reports, procurement reports and will also be used for contract management. The MEER PIU will prepare the main chart of accounts and the draft project financial management manual for the project. The TOR has been prepared 51

62 by MEER PIU and the contract with the consultant will be signed by 29 April Accounting procedures will be set out in. the financial management manual for the project. The financial management manual will cover (a) the financial and accounting policies and procedures for the project (b) organization of the financial management (c) the financial management information system (d) disbursements (e) procedures for budgeting and financial forecasting (f) project reporting and (g) project planning procedures to be finalized. The draft project financial management manual will be prepared by April 29,2005. The risk associated with accounting policies and procedures is considered as moderate. The MEER PlU has satisfactorily completed the preparation of the TOR for the project financial management system and the contract with the consultant will be signed by April 29,2005. Internal Audit Currently there is not an internal audit unit at ISPA. However the PFMC law which will be effective on January 1, 2006 requires the establishment of internal audit unit at SPAS. Until such structure is established no reliance will be placed on internal audit. Reporting and Monitoring The IPCU will maintain records and will ensure appropriate accounting for the funds provided. Financial statements for the project will be prepared by the IPCU. The Financial Monitoring Reports 0;MR) will be prepared quarterly' and will be submitted to the Bank no later than 45 days after the end of the quarterly period. The format and the contents of the FMR have been agreed between the Bank and the MEER PIU. The FMR for ISMEP includes financial reports, output monitoring reports and procurement reports. The financial management manual of the project will include a section on the FMR. The PMS will be capable of producing all these reports. The risk associated with reporting and monitoring is assessed as moderate. The formats of the FMRs are agreed with. They will be generated automatically by the system once it is installed at IPCU. Information Systems The MEER PIU has prepared the terms of reference for a consultant to establish a Project Monitoring System (PMS) at PCU that will be used for project accounting, monitoring and reporting. The PMS will generate financial reports, procurement reports and will also be used for contract management. The contract with the consultant to implement the PMS is required will be signed by April 29, The PMS will be financed from the PHRD grant received for project preparation purposes and there is allocation in the grant for this purpose. The risk associated with information systems is assessed as substantial. A contract with the consultant will be signed by April 29,2005. Strengths and Weaknesses 52

63 a The significant strengths that provide the basis of reliance on the project financial management system are (a) centralization of all project financial management functions at IPCU (b) support of the well established and very experienced MEER PIU. The significant weakness in the project financial management system is that this is the first Bank project in Turkey that will be implemented by a Special Provincial Administration and therefore there is no accumulated experience in the functioning of financial management procedures at the provincial level. Action Plan It is concluded that the current financial management arrangements for the project are marginally satisfactory and the following action plan is agreed with the borrower to bring the unsatisfactory arrangements to a satisfactory level. Action 1. Contract will be signed with the consultant to establish the Project Monitoring System (PMS) 2. Draft Project Financial Management Manual prepared 3. Draft FMRs produced by the PMS 4. Recruitment of additional FM staff completed Due Date April 29,2005 April 29,2005 May 15,2005 August 1,2005 Supervision Plan During project implementation, the Bank will supervise the project s financial management arrangements in two main ways: (i) review the project s quarterly financial management reports as well as the banks and project s annual audited financial statements and auditor s management letter; and (ii) during the Bank s supervision missions, review the project s financial management and disbursement arrangements (including a review of a sample of SOEs and movements on the Special Account) to ensure compliance with the Bank s minimum requirements. As required, a Bank-accredited Financial Management Specialist will assist in the supervision process. B. External Audit. ISPA is audited annually by Turkish Court of Accounts. However TCA audit is geared towards compliance auditing only. With the PFMC and the draft TCA law which is expected to be enacted soon, TCA s audit scope will include financial and performance audits as well. Audits of all project audits in Turkey are done by Treasury Controllers and the annual project financial statements for ISMEP will also be audited by the Treasury Controllers in accordance with International Standards on Auditing (ISA) and under TOR that will be cleared by the Bank before negotiations. The risk associated with extemal audit is assessed as negligible. 53

64 Disbursement Arrangements The project will be disbursing on the traditional disbursement techniques and will not be using FMR based disbursement. One special account will be created for the project. A special account will be opened by the Treasury for ISPA in Euros at the Central Bank of Turkey. The special account will have an authorized allocation of Euros 20 million. Two authorized signatures who will be specified in the project FM manuals will sign the withdrawal applications. At the start of the project, the initial deposits will be limited to Euros 10 million and the remaining portion of the authorized allocation will be requested after cumulative disbursements reach a level of Euros 30 million. The minimum application size for payments directly fiom the loan account for issuance of special commitments is 20% of the special account allocation. Applications for replenishment of the Special Account will be submitted to the Bank on a monthly basis, or when the balance of the Special Account is equal to about half of the initial deposit or the authorized allocation, whichever comes first, and will include a reconciled bank statement as well as other appropriate supporting documents. Use of statements of expenditure (SOEs): disbursements would be made against Statements of Expenditures for (i) works, under contracts costing less than $5,000,000 equivalent each; (i) goods, under contracts costing less than $500,000 equivalent each; (ii) services of consulting firms under contracts costing less than $200,000 equivalent each; (iii) services of individual consultants under contracts costing less than $50,000 equivalent each; (iv) training; and (v) incremental operating costs, all under such terms and conditions as the Bank shall specify by notice to the Borrower. Detailed documents evidencing these expenditures would be reviewed and retained by IPCU. Disbursement for the financing of contracts exceeding the above limits would be made on the basis of full documentation. Disbursement and procurement documents using SOE procedures would be retained by IPCU for a period of at least two years after disbursement and made available to World Bank staff and external auditors. 54

65 Annex 8: Procurement Arrangements TURKEY: SEISMIC RISK MITIGATION-TR A. General Procurement for the proposed project would be carried out in accordance with the World Bank's "Guidelines: Procurement under IBRD Loans and IDA Credits" dated May 2004; and "Guidelines: Selection and Employment of Consultants by World Bank Borrowers" dated May 2004, and the provisions stipulated in the Legal Agreement. The various items under different expenditure categories are described in general below. For each contract to be financed by the Loan, the different procurement methods or consultant selection methods, the need for prequalification, estimated costs, prior review requirements, and time frame are agreed between the Borrower and the Bank in the Procurement Plan. The Procurement Plan will be updated biannually or as required to reflect the actual project implementation needs and improvements in institutional capacity. Procurement of Works: Eligible investments under this category would be for: retrofitting of the key structures and lifeline facilities that serve a public function essential to the disaster response and recovery operations. The buildings include hospitals, schools, dormitories, civil defensehearch and rescue centers, and key administration centers. Lifelines are the utility services and transportation networks vital to disaster response and otherwise vital to the health and safety of the community. A limited number of building reconstructions, not to exceed the 20% of the budget allocated for the retrofitting works, may also be included. In addition to strengthening the hospital buildings to protect the emergency response capacity and the lives of the patients and staff, works contracts would be launched for securing/fixing of non-structural components such as medical equipment and infrastructure in order to avoid loss of function and secondary damage and to prevent injury during an earthquake. The procurement will be done using the Bank's Standard Bidding Documents (SBD) for all ICB and by using the Bank's sample NCB documents for ECA Region for Works and Goods. The works contracts to cost less than USD 5 million per contract may be awarded through NCB. Any ambiguity regarding predominance of the Bank's procurement rules in the case of contracts conducted in NCB procedures will be overcome by using the Bank's sample NCB documents for ECA Region for Works. The conditions for using NCB are listed below from paragraph A to K below shall be discussed at the negotiations and made part of the Loan Agreement. Based on the performance of the project coordination and implementation unit (IPCU) on the NCB contracts, the Bank will consider increasing the NCB Works threshold per contract to USD 6 million or above after one year of implementation pursuant to effectiveness of the Loan Agreement. A. Eligibility Bidding shall not be restricted to domestic bidders. No restriction shall be applied to foreign bidders who wish to submit a bid. B. Procedures 55

66 Invitations to bid shall be advertised in the Official Gazette and in at least one widely circulated national daily newspaper or in an electronic portal of free access allowing a minimum of 30 days for the preparation and submission of bids. C. Assessment of the bidder s qualifications In the procurement of goods and works, where pre-qualification is not used, the qualifications of the bidder who is recommended for award of contract shall be assessed by post-qualification, applying minimum experience, technical and financial requirements which shall be explicitly stated in the bidding documents and which shall be determined by a pasdfail method, not through use of a merit point system. D. Participation by Government-owned Enterurises Government-owned enterprises.in the Republic of Turkey shall be eligible to participate in bidding only if they can establish that they are legally and financially autonomous, operate under commercial law and are not a dependent agency of the Government. Furthermore, they will be subject to the same bid and performance security requirements as other bidders. E. Participation by Joint Ventures Participation shall be allowed from joint ventures on the condition that such joint venture partners will be jointly and severally liable under the Contract. F. Bidding Documents Procuring entities shall use the Bank s sample NCB documents for ECA Regian for Works and Goods and shall draft contract and conditions of contract acceptable to the Bank. G. Bid Evaluation a) Evaluation of bids shall be made in strict adherence to the monetarily quantifiable criteria declared in the bidding documents and a merit point system shall not be used. b) Extension of bid validity shall be allowed once only for not more than 30 days. N o further extensions should be requested without the prior approval of the Bank c) Contracts shall be awarded to qualified bidders having submitted the lowest evaluated substantially responsive bid. d) No domestic preference shall apply under National Competitive Bidding. H. Price Adjustment 56

67 Civil works contracts of long duration (e.g. more than eighteen (1 8) months) shall contain an appropriate price adjustment clause. I. Rei ection of All Bids All bids shall not be rejected and new bids solicited without the Bank s prior written concurrence. J. Contracts All contracts shall be in writing, signed and stamped by authorized signatories of the Purchaser and the Supplier and contain identical terms and conditions of contract to those included in the tender documents. K. Securities Bid Securities should not exceed 3 % (three percent) of the estimated cost of the contract; Performance Securities not more than 10 % (ten percent). No advance payments shall be made to Contractors without a suitable Advance Payment security. The wording of all such securities shall be included into the bidding documents and shall be acceptable to the Bank Procurement of Goods: Goods procured under this project would include equipment and materials needed for the eligible investments for: (i) emergency communication system; (ii) emergency management information system; (iii) upgrading of emergency response capacity in Istanbul metropolitan region and (iv) supporting the Governor s disaster management center, public awareness, neighborhood volunteers, municipalities and training of target groups. The procurement will be done using the Bank s Standard Bidding Documents (SBD) for all ICB and by using the Bank s sample NCB documents for ECA Region for Goods. The Goods manufactured within the country and readily available in the local market to cost less than USD 500,000 per contract may be awarded through NCB. Any ambiguity regarding predominance of the Bank s procurement rules in the case of contracts conducted in NCB procedures will be overcome by using the Bank s sample NCB documents for ECA Region for Goods provided that either the Loan Agreement or the side letter should address the provisions A through K stipulated above. Selection of Consultants: The Borrower will select and hire consultants for the (i) preparation of bidding documents including the detailed design drawings, technical specifications and bills of quantities and for the construction supervision of the selected buildings and life lines. In addition to this consultants will be hired for (ii) feasibility studies; (iii) public awareness campaign and training (v) risk assessment for the cultural heritage buildings, lifelines, industry and etc; and (vi) enforcement of building code. A consultant for the voluntary accreditation of engineers and inspectors will be employed on a single source basis. 57

68 Consultant services also comprise the TA to support implementation of the project, training and seminars, financial management assistance. Operational Costs: which would be financed by the Loan would be procured using the procedures acceptable to the Bank. B. Assessment of the agency s capacity to implement procurement An assessment of the capacity of the Governorate of Istanbul to implement procurement actions for the project has been carried out in February, The assessment reviewed the organizational structure for implementing the project. Based on the discussions held by the task team and the Undersecretary of Prime Minister, the Treasury, Governor of Istanbul, Director of the Turkey Emergency Management Administration (TEMAD), sector experts from the State Planning organization (SPO), and the PIU Director of the MEER Project, the project components will be implemented and coordinated by the Governorship of Istanbul through a project coordination unit (IPCU) to be established under the Special Provincial Administration (ISPA) which is chaired by the Governor of Istanbul. The ISPA through IPCU will act with responsibility for overall project management and coordination in close cooperation with the relevant line ministries and Metropolitan and District Municipalities of Istanbul. Treasury will be the Borrower and financial intermediary for the project. Treasury will allocate the funds from the Loan proceeds to the Special Provincial Administration (ISPA) of Istanbul. A draft bill authorizing the Council of Ministers to allocate the Bank s Loan proceeds to ISPA for the implementation of ISMEP project. The IPCU will be authorized to carry out project implementation on behalf of the ISPA of Istanbul. The IPCU will be staffed by a Project Director, Deputy Director(s), FMS Manager, Procurement Manager and adequate number of FMS and procurement experts, reporting, evaluation and monitoring expert, technical staff, environmental and social experts and necessary support staff as well as local and international individual consultants in contract management and supervision when and as needed. The number o f technical staff may be increased in the due course of the project if and as needed. The MEER PIU has been supporting the IPCU during the project preparation until the IPCU is fully established and functional. Some of the MEER PlU staff meeting the required qualifications may be seconded to the IPCU on voluntary basis. MEER loan proceeds will be used for the IPCU staff fees and incremental operating costs until the proceeds of ISMEP Loan is available. The line ministries will second relevant staff that will cooperate and coordinate implementation activities with the ISPA. Public officers seconded by the ministries will locate at their own premises in Istanbul but specifically work for the ISMEP project. The PHRD grant, made available for this project, has been used to support the IPCU on technical, financiallaccounting, and procurement matters. It is expected that establishment of the core IPCU through an order from the Governor of Istanbul will be completed May 10, All positions for the P CU staff would be advertised by May IO, 2005 and selected from the eligible qualified applicants by August 1,

69 The IPCU staff seconded by the MEER PIU will be also subject to selection process pursuant to the advertisement in this respect. The key issues and risks concerning procurement and management for implementation of the project have been identified and include lack of experience with the Bank-financed projects. The public servants seconded for the project implementation by ISPA, are recommended to be sent for training organized preferably by ILO at Turin /Italy, according to their needs for fbrther development of procurement knowledge and qualifications and contract management, The IPCU will be supported by consultant firms and individuals for the preparation of designs, bidding documents and supervision of works if and as necessary. Given the fact that the gaps and loopholes existing in the previous legislation which was subject to the recent CPAR conducted in 2001 were substantially removed by the new Public Procurement Law ( Code 4734 & 4735) effective from January 1, 2003 and assuming that the IPCU will have the necessary capacity, including the qualified procurement staff and supported by the MEER PIU which has highly experienced staff in Bank s procurement assisting the IPCU in the preparation of bidding documents, it is recommended that this project be placed initially in medium risk category. The risk rating will be re-evaluated after one year of loan effectiveness and adjustments made accordingly. During the project launch workshop the Bank will organize a two days training program to the IPCU to introduce the Bank s Guidelines and standard bidding documents to be used in the implementation of the project. C. Procurement Plan The Borrower, at appraisal, developed a procurement plan for project implementation which provides the basis for the procurement methods. This plan has been agreed on April 18, 2005, and is summarized in Section C. It will also be available in the Project s database and in the Bank s external website. The Procurement Plan will be updated in agreement with the Project Team bi-annually or as required to reflect the actual project implementation needs and improvements in institutional capacity. D. Frequency of Procurement Supervision Contracts not subject to Bank s prior review will be post reviewed by Bank s supervision missions and/or during regular post-reviews by PAS on sampling basis, i.e. 1 out of every 5 contracts. The frequency of procurement supervision should be every six months. E. Details of the Procurement Arrangements Involving International Competition 1. Goods, Works, and Non Consulting Services (a) List of contract packages to be procured following ICB and direct contracting: 59

70 1 2 3 Ref Contract Estimated No. (Description) cost 1 Upgrading of 32,670,000 2 Emergency Communication System Disaster Management 7,000,000 3 Information System Upgrading Emergency 13,700,000 4 Response Capacity Strengthening/ 44,360,000 5 Reconstruction of Major Hospitals Equipment and 2,580,000 Software to Support Municipalities (Group 2) Procurement P-Q Domestic Review Expected Comments Method Preference by Bank Bid- (yeslno) prior / Opening Date Post) ICB Post Q No Prior ICB Post Q No Prior ICB Post Q No Prior ICB Post Q No Prior ICB Post Q No Prior (b) All ICB contracts estimated to cost US$5 million or more for Works and estimated to cost US$ 500,000 or more for goods, and first NCB works, and NCB Goods contracts, first Shopping Contract and all direct contracting will be subject to prior review by the Bank. 60

71 ~~ 2. Consulting Services Ref No (a) List of consulting assignments with short-list of international firms. 2 Description of Assignment Design and Implementation of Public Awareness Campaign Preparation of Design for StrengtheningReconstruction of Key Facilities and Supervision of RetrofittingReconstruction Works Risk Assessment of Lifelines and Vital Infrastructure Risk Assessment of Selected Cultural Heritage Buildings Enhancing Building Code Enforcement Capacity at Selected District Municipalities 3 Estimated cost 6 10,000 14,110,000 2,450,000 QCBS Prior 2,827,000 QCBS Prior 460,000 QCBS Prior 4 Selection Method QCBS QCBS 5 Review by Bank (Prior I Post) Prior Prior 6 Expected Proposals Submission Date 7 Comments (c) Short lists composed entirely of national consultants: Short lists of consultants for services estimated to cost less than US$200,000 equivalent per contract may be composed entirely of national consultants in accordance with the provisions of paragraph: 2.7 of the Consultant Guidelines. 61

72 Annex 9: Economic and Financial Analysis TURKEY: SEISMIC RISK MITIGATION-TR Bqckground Turkey carries significant seismic risk since it lies in one of the most active earthquake and volcano regions in the world. More than 95 percent of the country s land area is vulnerable to earthquake risk. Devastating large-scale earthquakes can occur anytime where 70 percent of the country s population live and 75 percent of industrial facilities are located. Essentially Turkey is exposed to two types of natural hazards where the earthquakes account for a predominant risk level of 91 percent against the combined risk of 9 % due to floods, mudslides and landslides. After the 1999 Marmara earthquake, Turkey began establishing a modem decentralized emergency management system pattemed after FEMA in the USA. The new Agency s progress has been slow and incomplete; raising serious concem that Turkey remains unprepared for a similar catastrophic event. Although some attempts have been made, currently, the country does not have a comprehensive strategy for managing and reducing the risks of earthquakes and other natural hazards. Proper enforcement of building codes and standards is one of the critical challenges for Turkey toward reducing the vulnerability of the existing low quality building stock. On the positive side, many municipalities have taken the initiative to upgrade the local emergency response system, to conduct microzonation studies, and to initiate important planning tasks. The Istanbul municipality prepared a comprehensive master plan, modeled on international best practice that incorporates risk mitigation activities in the urban planning and development process., Within the nation s high-risk context, and in light of the investigations undertaken in the aftermath of the Marmara Earthquake, Istanbul appears to be highly vulnerable because of its seismic-prone location on the North Anatolian Fault (NAF), and its high population and commercialhdustrial densities. This is the backdrop against which the ISMEP should be judged in terms of its relevance and timing. Estimated Tally of Earthquake Devastation in Istanbul without the Project Devastation of a possible earthquake in Istanbul will have far reaching repercussions and deal a major blow on the country s economy. According to recent assessments, the probability of a major earthquake affecting Istanbul in the next 30 years is 62% +/-12%, while the likelihood of such devastation in the next decade is 32%, +/- 12%. In the absence of ISMEP, the potential earthquake damages are predicted for four earthquake scenarios developed under the JICAhnded Seismic Microzonation study. These scenarios were labeled Model A through Model D and developed according to the moment magnitude fiom 6.9 Mw to 7.7 Mw. While model A, with a moment magnitude of 7.5, is considered the most probable case, Model C with a

73 moment magnitude represents the worst case scenario. Estimated losses for Models A and C are given in the following table. Loss and Casualty Human casualties Lost lives Severely Injured Building damages Heavily +Moderately +Partly Public Buildings in High Seismic In t ensi'ty Areas Educational Health Security Governmental Water Pipeline Damage Points Gas Pipeline Damage Points Electric Cable Damage Model A a (most probable case) Model C (worst case) 73,000 87, , , ,000 59, , , , , % 48.5% 43.6% 48.0% 53.0% 53.1% 53.0% 57.2% 59.4% 69.6% 1,400 1, km 1,080 lan Cost Benefit Analysis Methodology There exist a number of methods for performing a cost benefit analysis of a disaster with widely varying data requirements and degree of sophistication. For the most part, estimation of project costs is easier and straightfonvard. These costs are borne at the beginning of the period and are subject to a greater degree of certainty. However, there are problems associated with the estimation of project benefits. First of all, one does not know in advance if and when a disaster will occur, and at which intensity it will occur. Secondly, one does know in advance how effective the overall mitigation efforts will be in avoiding the possible loses based on vulnerability assessments. Therefore, in large-scale disaster mitigation projects the costs are a sure thing while benefits, which are largely derived fiom avoided losses, are at best probabilistic. Toward measuring project benefits, the usual approach involves micro-economic methods whereby these benefits are quantified by enumerating all possible areas where such benefits could arise, individually estimating them and aggregating the results. Some mitigation projects may have a simple structure. They may focus on exerting efforts in one single year and involve well selected targets, such as constructing a flood dyke before the on-set of a possible flood. By contrast, for disaster mitigation project involving earthquakes, the setting is far more complicated, where the principal gain is saved human lives in addition to avoided property loss. Most of the conventional cost-benefit models heavily rely on the notion of assigning a monetary value to human life which commands a much greater monetary amount as opposed to property. Although quite appropriate for insurance and actuarial purposes, and intrinsically appealing, this approach provokes controversy because of disagreements whether a monetary value could be 63

74 ascribed to human life. Where exhaustive listings of project benefits and assignment of monetary values to human life spared pose practical or moral difficulties, one may adopt a macro approach, especially for large and complex mitigation projects such as ISMEP. Such a macroeconomic approach is pertinent for ISMEP, due to problems associated with the reliability and availability of micro-level data. The below analysis that follows is based on a macro model (neither attributing values to human life nor exhaustively listing all losses and damages) to judge how far the mitigation effort would go. Analytical framing is based on a simple macro model which strives to arrive at comparable results that would be obtained through detailed micro analyses. In addition to the macro approach and methods assigning monetary values to human life saved, there are other popular methods for performing a cost-benefit analysis of disaster mitigation projects. These approaches, which we will not utilize within the context of ISMEP, consist of: 0 The DALY (Disability Adjusted Life Year) method, 0 Cost effectiveness methods, and 0 Micro-economic techniques involving focused cost-benefit analyses of key project investments or components, such as retrofitting of hospitals and public schools. In narrative terms, benefits due to individual project components can be laid out as follows: Component Possible Quantifiable Direct Benefits Component A Significant savings in the O&M of emergency communications and underlying equipment. Significant opportunity for enhancing Turkey s national ability to provide immediate relief effort in case of other national disasters since equipment and people are moved to affected keas and not restricted to fixed service stations. 7 Component B Saving lives and reduce number of injuries Saving health care costs Avoided time loss for business Saving the physical structure of hospitals, schools and other public facilities and valuable equipment. Higher number of disaster victims with access to immediate medical care. Avoided chaos in the aftermath of disaster and maintenance of overall law and order. Component C 0 Offers an opportunity for enforcing the building codes, Makes much focused detailed lnents Remark There are practical difficulties in quantifying benefits There are practical difficulties in quantifying benefits Difficult to quanti&, but potentially offers sinificant economic 64

75 k Component D assessments on critical economic sectors to raise public awaieness and enhance disaster preparedness. Very important training medium for managers for business and development needs Avoided disruption of normal life routine is probably the greatest project benefit. Sustaining crucial economic activity and fiscal capacity (to collect taxes) in the commercial epicentre of Turkey, and maintaining the momentum of growth and stability in the country. Reduced claims from the national insurance fund - DASK benefits due to increased self help resulting from enhanced awareness and knowledge. Easy to quantify but has limited bearing on the overall project. Highly difficult to quantify if direct methods of measurements are used to estimate benefits. But less difficult if indirect methods (such as macro approach) are used. The analysis that follows relies on estimating the cross-cutting benefits - rather than individual component or activity benefits - that result from an interaction and interdependence of all the project components. The concept of provincial GNP is used to estimate the damage impact of the earthquake as well as the benefits that would be due to the mitigation effort resulting from avoided earthquake impact. Regional GNP-Based Analytical Model Below is a description of the analytical model using macro-economic aggregates. Elements of such macro analysis are also encountered in other Bank-funded operations for similar types of interventions (Nicaragua - Natural Disaster Vulnerability Disaster Project ). Parameter Probability of Occurrence of an Earthquake in Istanbul Economic Loss to be Suffered in Case of an Earthquake - Conservative Estimate Economic Loss to be Suffered in Symbol P EL EL Level Unit Remark Of the order of about 7.5 at Richter s Scale similar to 2 percent Marmara s (estimate provided by Kandilli Observatory) Percent Local GNP comprises 20 of local damages due to the GNP in 2004 earthquake as well as growth potential foregone plus damages to property Percent The most likely estimate 31 of local takes into account the 65

76 Case of an Earthquake - Most Likely Estimate Project Costs during Implementation Project Costs during Operational Period Capacity Developed Over Time Mitigated Losses Cash Flow c (WB) 400 C(G0VT) MILO CF 20 and gradually building to 23% at the end of project implementation. EL weighted by LMC Difference between Benefits and costs GNP in 2004 US$ Million US$ Million per year Percent US$ Million US$ Million privileged economic and social status of Istanbul, which will amplify the impact of an earthquake. This is the project cost for the 5-year project period spread over 6 calendar years. These are the minimal incremental costs estimated for the operational period of 25 years to maintain the Governorship Disaster Management Center (AYM) in Istanbul. Loss Mitigation Capacity Development will take a long time to build, and stabilize at 50% at around mid-stream in year 15. In other words the project cannot and will not mitigate all losses. This is a derived figure This is a derived figure Extrapolation of Istanbul Earthquake Disaster Losses The Marmara Earthquake of 1999 provides a basis for extrapolating the level of the economic losses to be sustained in case of a possible Istanbul earthquake. In 1999, four provinces were affected - Kocaeli, Yalova, Istanbul and Sakarya. The worst hit province was Kocaeli. It should be remembered that 1999 was not a successful year for the Turkish economy. In fact, a recession was recorded as of the first quarter in the year. Hence, not all of the economic contraction of the year registered at the end of 1999 was due to the earthquake, which occurred in August It is observed that those provinces that were affected by the disaster had a total average rate of shrinkage of 12 percent in per capita GNP and 11 percent in overall GNP. Meanwhile the rate of decline in provincial GNP for other major unaffected cities (Ankara, Adana, Izmir and Bursa), was about 6 percent in per capita and 5 percent for overall GNP. Therefore adjusted Marmara Earthquake impact was estimated to be in the order of 5 percent in per capita GNP and 6 percent in overall GNP (please see the below table). The same percentages are assumed to be applicable in the case of a possible Istanbul Earthquake for the conservative case. However, Istanbul is the commercial and financial epicentre of the Turkish economy. Because of Istanbul s privileged status in the Turkish economy, these conservative estimates were raised - to amplify the predicted impact of earthquake - in order to arrive at the most probable loss scenario. 66

77 . A decline in GNP alone is not the sole source of economic loss because the disaster would also curtail potential economic growth as well. Potential growth for any given year in Turkey is roughly 4 percent for analytical purposes, which can be doubled for the case of Istanbul. Another important damage category is due to the loss of property, which was roughly equivalent to the income loss in Marmara, as was confirmed by SPO in the aftermath of the Marmara Earthquake. Indeed, property loss in the Marmara Earthquake was estimated at about 10% of GNP. However, due to the very high concentration of industry and higher value economic assets in Istanbul, the property loss should be elevated for the case of Istanbul, possibly reaching 17% of GNP. The combined impact of the earthquake on the economy is the sum of the level of economic shrinkage, curtailed growth and property loss. These are estimated to be 20% of GNP for the conservative loss scenario, and 3 1 % of GNP for the most likely loss scenario. Source: State Institute of Statistics - Computations were made by the Mission When these parameters are applied to the case of Istanbul, it is possible to extrapolate the level of economic losses to be sustained in case of an earthquake. The latest GNP for Istanbul is not yet known as SIS has not yet released data for province-bas.ed GNPs. But, this magnitude is estimated at about US$40 billion by making computations (below table). 67

78 ~ ~ Earthquake Related Economic Loss - both in Income and Wealth (Macro Approach) Provinces (per capita) Economic Contraction due to Marmara Earthquake in the Affected Provinces (in overall GNP terms) Foregone Positive Growth Potential (% of GNP) Percent a 5% 5% Percent b 6% 6% (Percent I C 1 4% I 8% Total Earthquake Impact on GNP (Income) I Percent I d= b+c 1 10% I 14% Property Loss as a Percent of GNP lpercent e l 10% 1 17% IEstimated Economic Loss in Case of Possible Istanbul Earthquake IBillion US$ I 'f'g I Source: Mission estimates It turns out that the loss to be suffered in case of an earthquake in Istanbul is about US$ 8.14 billion using conservative estimates, and about US$ billion based on the most likely loss outcome for an earthquake of similar magnitude as that of Marmara. These figures may appear to be in stark contrast with many exaggerated figures one may come across in the press or interviews. However, even the conservative loss estimate is sufficiently severe to economically justify the proposed ISMEP at a borderline ERR of 11%. Economic Analysis A financial analysis is not pertinent in the case of ISMEP since the base data comes in income terms and encompasses the entire population as opposed to selected individuals or areas. Probability weighted annual economic loss in Istanbul due to an earthquake is expected to be around US$ 163 million using a conservative loss scenario and US$249 million based upon the most likely loss outcome. FEMA calls this concept annualized damages and losses and it does not apply to them a growth element. The same principles were adhered to in this analysis as well. Mitigation must be centered on reducing this amount of US$ 249 million per year to the highest degree possible. The project's benefits are generated to the same extent as one can reduce this potential loss. However, current loss mitigation capacity is very limited and it can only be gradually built and sustained over a period of time, which is assumed to span some 30 years. The highest mitigation level to be reached by the project itself is assumed to be around 25 percent at the end of the implementation period. However, the project is expected to attain some 50 percent of loss mitigation capacity around mid-stream during its planning horizon at the end of Year 15, at which level it will stabilize and register no hrther improvement. This means that regardless of what we do, some loses will be unavoidable. This is a realistic assumption because complete obliteration of loss can take a long time, and will be intimately related with how fast the existing building stock in Istanbul (primary source of hazard) can be replaced with earthquake-resistant ones. 68

79 It is further assumed that ISMEP will largely play a catalytic role in attracting further investment into the risk mitigation effort, and that the Government will continue investing in disaster mitigation after the project closes. Therefore, the Government will probably spend some US$ 500 million in the next 25 years to sustain the momentum initiated by ISMEP. Under the above scenarios, the estimated ERR will be 11 % for the conservative case, and 19% for the most likely case for the proposed project, with a C/B ratio of about 1.11 (conservative case) and 1.69 (most likely loss scenario). If the loss level is allowed to rise, this would only increase the ERR. For instance, using the most likely scenario assumptions, for a probability of earthquake occurrence fixed at 3 percent, rather than 2 percent, the ERR will be 29 percent (with B/C of 2.53), and for a probability of 4 percent the ERR would be 41 percent (with C/B of 3.37). This is due to the fact that at higher levels o f loss there will be more room for mitigation effort and hence generation of mitigation benefits. The computational details are found in the table below. Commentary on Loss Mitigation Capacity Loss mitigation capacity is a concept that cannot be easily quantified. The project is expected to be rather slow on impacting this critical parameter. Thus, the analysis assumes that only some 25% mitigation capacities can be attained in 5 years of project implementation. However, if this capacity is allowed to improve at an accelerated pace, which is a distinct possibility, the project ERR and C/B will certainly improve. For instance, if it takes us half the number of years to reach the assumed cap on the loss mitigation capacity o f 50%, the ERR would abruptly jump to 33% with a C/B ratio of This would be possible if we assumed a percentage pattern of 0, 10, 20, 30, 35, 40, 45 and 50 for the loss mitigation capacity over the first 8 years. It is evident that, in addition to the overall level of disaster-related loss for Istanbul, the most important parameter of the analysis is this critical capacity which ISMEP is trying to promote and enhance in an assured albeit partial manner. Caveats about the Macro Analysis The foregoing analysis is premised on the expectation that economic recovery after the incidence of a possible earthquake' in Istanbul will not take much time. This was the case for the Marmara Earthquake where ensuing recovery was speedy. This may not hold true for the case of Istanbul which in itself will amplify the economic losses and hamper the recovery as well as ongoing hazard mitigation efforts. Also, the effects of the earthquake on the poor and SMEs will be much more severe than it will be on other groups. It is the poor who live in unsafe buildings and it is the poor who cannot afford safe housing, and some SMEs may never recover the impact of an earthquake because of lost markets, as was evidenced in the case of Marmara. These are the aspects not treated in the above analysis due to the macro emphasis which conceals micro-level details. 69

80 Table of Probabilities for the Macro-Economic Model 1, 2% Occurrences Earthquake in any Given Year (*) Same as Annualized Damages and Losses I I

81 Annex 10: Safeguard Policy Issues TURKEY: SEISMIC RISK MITIGATION-TR Context and Environmental Assessment Category, Component B of the ISMEP project will support seismic retrofitting works for hospitals, schools and other criticallpriority public buildings already in existence. The use of innovative, minimally intrusive technical retrofitting solutions will be promoted. Only on a very limited scale will demolition and replacement (in the same location) be necessary for structures that do not qualify for retrofitting. Both types of interventions have environmental impacts that are minor to moderate in scale, and very localized in extent. Impacts can be readily defined, mitigated and monitored. Project activities will take place in areas which do have cultural heritage values protected under local and national laws and practices. New construction (if required) may take place in urban areas with exiting populations and uses/values which must be taken into account. Retrofitting and new construction has been successfully carried out in the Istanbul area in the recent past (mostly with Turkish funding) without significant impacts. Potential physical impacts are associated with renovation of buildings for retrofitting, in addition to replacement of some structures as needed. Emissions of particulate matteddust to the air, sediment to sewerage systems (or nonpoint source runoff), noise pollution, and proper disposal of demolition debris or wastes present in the buildings will need to be mitigated and monitored. Special precautions for retrofitting hospitals and other facilities which remain in use may be needed; for example to protect patients remaining in hospitals or students remaining in dormitories. In cases of retrofitting work on certain public buildings in Istanbul, the safeguard policy on Cultural Property may be triggered, as potentially some of the publicly used facilities, important for emergency response activities, may turn out to either have culturalhistorical value, be in very close proximity to such properties, or may be located in an overall historic area. Irreversible impacts are not anticipated given local ordinances and practices regarding cultural heritage protection. Unlike the previous MEER project, where large housing complexes were constructed, buildings (if needed) will be few in number, and generally within the current foundation area. Retrofitting of buildings is generally the approach with lowest potential impact on the environment. Replacement of structures within the existing footprint (Le. those too risky or expensive to retrofit) is also the best alternative assuming cultural property issues are sufficiently addressed. Component A does not directly pose environmental risks. Given the above factors, the overall ISMEP was rated as Category B for Environmental Assessment (OPBP 4.01) at the PCN stage, and this was confirmed as appropriate during pre-appraisal. With the possibility of project activities affecting Cultural Property, OPN (being revised as OP 4.11) was considered triggered at the PCN-stage, and this condition was also confirmed during pre-appraisal. Since ISMEP will finance numerous retrofitting activities (with limited replacement) of comparable scope, a framework Environmental Management Plan was set as the principal requirement for due diligence for both EA and Cultural Property., 71

82 Key Elements of the Environmental Management Plan Draft and final versions of the EMP were prepared prior to and following pre-appraisal, and reflecting consultations, site visits, experience with previous Bank projects, and experience with retrofitting projects carried out by Turkish authorities. The environmental protection regulatory framework was analyzed, and institutional arrangements for environmental management specified. Recent rapid changes in Turkish laws and regulations to more closely adhere to the principles of the environmental acquis of the European Union were taken into account to the extent possible. - The EMP includes a summary plan for mitigation of environmental risks and monitoring. Responsibilities of all the key parties are described including: (i) the project implementation unit who will prepare bidding documents with appropriate measures for due diligence to ensure consistent attention to the environment by bidders, (ii) contractors carrying out civil works, (iii) supervisory engineers responsible for tracking compliance with mitigation and monitoring plans, and (iv) environmental and public health officials who are responsible for protecting public interests. Parallel measure for ensuring attention to the identification, protection, mitigation and monitoring of risks to cultural property are also identified. The EMP recognizes the fact that under Turkish law, retrofitting of buildings does not trigger a formal Environmental Impact Assessment (EIA) under either Annex I or 11. In a comparable view, retrofitting does not trigger an obligatory assessment under Annex I of the Environmental Assessment directive of the European Commission (EC). New building construction might fall in Annex I1 of the Turkish law, and similarly Annex 11 of the EC directive, whereby EL4 falls to the discretion of public officials based on site specific conditions. This is compatible with the World Bank Category B rating and further supports the approach of the framework EMP prepared for ISMEP. Turkish limits for air emissions, noise, etc. were examined (and compared to Bank guidelines) and referenced as suggested limits in the EMP to be incorporated as legal and appropriate in bidding documents and monitoring plans. Given the fact that retrofitting and limited replacement of buildings represents a low to moderate risk to the environment, it is expected that inclusion and compliance of best practices (such as dust control by tarps and water spray to protect from wind damage) will be the normal approach rather than routine monitoring of emissions per se, as might be the case with higher risk activities (e.g. power stations or wastewater treatment plants). Nevertheless, special attention (e.g. tighter standards or specialized monitoring) may be placed in bidding documents to ensure, for example that: (i) patients in hospitals (or students in resident buildings) are protected from noise, vibration, dust and the loss of electricity and air conditioning if they occupy sections of buildings being retrofitted, (ii) medical wastes and radioactive materials from X-ray machines or similar devices are removed safely in advance of civil works, with medical wastes adhering to strict local ordinances, (iii) asbestos or other hazardous materials, while not expected to be problematic, are identified and safe measures taken for removal and disposal, and (iv) removal of construction debris to licensed dump sites is assured. 72