Advisory services for the Municipal Development and Lending Fund

THE BACKGROUND

Municipalities in the Palestinian Territories constitute one of the oldest forms of governance. With seventy percent of the West Bank’s population living in 107 municipalities (the entire population of Gaza lives in 25 municipalities), local governments have served as a main reference point for citizens. Not surprisingly, in recent years the Palestinian National Authority (PNA) and donors have been pushing for major reforms to accelerate the drive to self-sustained, decentralized, organized local governments. Still, no clear vision and no long-term road map for the local governance sector has yet emerged, since structural challenges make progress difficult, e.g. postponing of local elections, breaking down the territory into different areas controlled by the Israelis, discipline of tax-payment being undermined by occupation; lack of expertise in administration of municipalities, repeated damage to the infrastructure, etc.

The AFD Municipal Development Project (MDP), implemented by the Municipal Development and Lending Fund (MDLF), was created in 2004 to meet some of the mounting needs in the local government sector. With a total budget of Euros 12 million, AFD interventions in the sector mainly consisted, at least with respect to the financial resources involved, of infrastructure projects in road construction/rehabilitation and public facilities. A review of the allocation of the AFD fund under the MDP revealed that most selected LGUs participating in the AFD MDP (about 66 percent) requested road infrastructure projects. Therefore, the rationale of AFD intervention has been in line with needs expressed at local government levels, with road rehabilitation a priority for most municipalities during the period of this evaluation.

THE PROJECT

FINANCE FOR IMPACT conducted an evaluation of a project consisting in the construction and rehabilitation of public services in most vulnerable municipalities. The team analyzed transversal sector-wide questions, including needs assessment, self-sustainability of local governments, capacity building for implementing large-scale projects at municipal level, etc. The purpose of this ex-post evaluation was to formulate a reasoned opinion on the relevance, effectiveness, efficiency, impact and sustainability of Agence Francaise de Développement (AFD) Municipal Development Project 2004-2010 with respect to the context, policy and procedures of AFD’s intervention. The overall objectives of the evaluation have been threefold: (1) evaluate the French MDP for the programming period 2004-2010, including the role played by the implementing partner MDLF both at the institutional and operational levels; (2) review the transversal sector-wide questions related to municipal development, including strategic orientations, implementation priorities, operational alignments, and financing sustainability; and (3) identify lessons to be drawn as a guide to future strategic planning.

THE RESULTS

The AFD business model for the municipal development sector was highly relevant under the “Scheme of Delegation” approach (with the MDLF being the implementing partner in charge of the identifying, programming and managing of the projects). This approach provided a framework through which AFD delegated the full programming and implementation powers to MDLF rather than to officers in the AFD country office and headquarters. Although some oversight remained with AFD, in fact most projects were pre-selected by MDLF, with expertise and technical assistance being procured and used by the Fund at its discretion. Overall, the evaluation concluded that the AFD MDP project design and its institutional arrangements were coherent, within only one implementing agency, the MDLF, thereby creating an environment with reasonable institutional arrangements for planning, coordination and the management of services. The negative consequence of such an arrangement was a reduced visibility of AFD in these arrangements and its limited relationships at the local government level.

Of the projects it assessed, the evaluation concluded that the AFD MDP contributed to substantial municipal development and that, considering that it was formulated during a period of severe political turmoil at the local government level, the delivery of these outputs was satisfactory. Concerning the 58 projects carried out by the MDLF on behalf of the AFD MDP, the mission noted that around 75 kilometers of rehabilitated roads and water networks have been completed at an average of around Euros 121,000 per kilometer. Some 6,331 square meters of public facilities were constructed for an average cost of about Euros 273 per square meter. We concluded that the overall costs of intervention compared favorably with international benchmark figures. These costs were in line with the allocated budgets – indeed, there was often a surplus realized at project completion. In construction, where cost overruns are the norm, completion within the budget limits was encouraging.