Project Appraisal Document - IHDP

Document ofThe World BankFOR OFFICIAL USE ONLYReport No: LKPROJECT APPRAISAL DOCUMENTON APROPOSED CREDITIN THE AMOUNT OF SDR MILLION(US$ 32 MILLION EQUIVALENT)TO THEDEMOCRATIC SOCIALIST REPUBLIC OF SRI LANKAFOR APUTTALAM HOUSING PROJECTNOVEMBER 03, 2006This document has a restricted distribution and may be used by recipients only in theperformance of their official duties. Its contents may not otherwise be disclosed withoutWorld Bank authorization.Vice President:Country Director:Sector Manager:Task Team Leader:Praful C. PatelNaoko IshiiSonia HammamNaresha Duraiswamy

SRI LANKAPUTTALAM HOUSING PROJECTCONTENTSA STRATEGIC CONTEXT AND RATIONALE 51. Country and Sector Issues 52. Rationale for Bank involvement 63. Higher level objectives to which the project contributes 6B PROJECT DESCRIPTION 61. Lending instrument 62. Project objective and phases 63. Development objective and key indicators 74. Project Components 75. Lessons Learned and Reflected in Project Design 116. Alternatives considered and reasons for rejection 13C IMPLEMENTATION 131. Partnership Arrangements 132. Institutional and implementation arrangements 133. Monitoring and evaluation of outcomes/results 154. Sustainability 155. Critical risks and possible controversial aspects 156. Credit conditions and covenants 17D APPRAISAL SUMMARY 181. Economic and Financial Analysis 182. Technical 183. Fiduciary 184. Social 195. Environment 196. Safeguard policies 207. Policy Exceptions and Readiness 20Annex 1: Background and Project Design Framework 21Annex 2 : Major Related Projects Financed by IDA 25Annex 3: Results Framework and Monitoring 27Annex 4: Detailed Project Description 32Annex 5: Project Cost Estimates 43Page1

Annex 6: Implementation Arrangements 45Annex 7: Financial Management and Disbursement Arrangements 49Annex 8: Procurement 55Annex 9: Economic and Financial Analysis 60Annex 10: Safeguard Policy Issues 65Annex 11: Project Preparation and Supervision 72Annex 12: Documents in the Project File 74MAP(S)Country Map2

SRI LANKAPUTTALAM HOUSING PROJECTPROJECT APPRAISAL DOCUMENTSOUTH ASIASASSDDate: November 03, 2006Country Director: Naoko IshiiSector Manger/Director: Sonia HammamProject ID: P100390Lending Instrument: Sector Investment LoanTeam Leader: Naresha DuraiswamySectors: Housing construction (47%); Watersupply (47%), General public administration (6%)Themes: Access to Urban services, Conflictprevention, Pollution managementEnvironmental screening category BSafeguard screening category: S2Project Financing Data[ ] Loan [X] Credit [ ] Grant [ ] Guarantee [ ] Other:For Loans/Credits/Others:Total Bank financing (US$m.): 32.00Proposed terms: StandardFinancing Plan (US$m)Source Local Foreign TotalBORROWER/RECIPIENT 2.20 0.00 2.20INTERNATIONAL DEVELOPMENT32.00 0.00 32.00ASSOCIATIONTotal: 34.20 0.00 34.20Borrower:Democratic Socialist Republic of Sri LankaResponsible Agency:Ministry of ResettlementSri LankaEstimated disbursements (Bank FY/US$m)FY 07 08 09 10 0 0 0 0Annual 0.00 0.00 0.00 0.00Cumulative 0.00 0.00 0.00 0.00Project implementation period: Start February 1, 2007 End June 30, 2010Expected effectiveness date: March 31, 2007Expected closing date: June 30, 2010Does the project depart from the CAS in content or other significant respects?Does the project require any exceptions from Bank policies?[ ]Yes [X] No[ ]Yes [X] No3

Have these been approved by Bank management?Is approval for any policy exception sought from the Board?Does the project include any critical risks rated “substantial” or “high”?Does the project meet the Regional criteria for readiness for implementation?[ ]Yes [ ] No[ ]Yes [X] No[X]Yes [ ] No[X]Yes [ ] NoProject development objective.The PHP would help integrate the Puttalam IDPs in their preferred location of choice through housing,water, sanitation and environment mitigation. It would support the construction of 5,653 new houses toreplace the temporary thatched huts and the completion of 2,232 partly-completed houses in Puttalam. Itwould provide drinking water to 13,584 IDP families and 3,291 non-IDP families. These interventionswould help upgrade habitat and contribute to the socio-economic integration of IDPs and non-IDPs.Project description [one-sentence summary of each component]A. Housing Assistance: The component will finance the reconstruction of 7,885 houses through thetransfer of cash grants to selected eligible beneficiaries.B. Water, Sanitation and Environment Mitigation: The component would provide water to 136refugee camps, construct 9,885 latrines and mitigate the threat of flooding through improved drainageC. Capacity Building and Monitoring: The component will support a comprehensive technicalassistance program to ensure smooth implementation.D. Project Management: The component will provide project management and implementation supportfor the project.Which safeguard policies are triggered, if any?Environmental Assessment (OP/BP/GP 4.01)Natural Habitats (OP/BP 4.04)Involuntary Resettlement (OP/BP 4.12)Significant, non-standard conditions, if any, for:Board presentation: (i) Completion of the Detailed Engineering Reports for the water supply schemes thatwould be implemented in Phase 1. (ii) Regularization of Land Title for Phase 1 refugee camps.Loan/credit effectiveness: (i) Database to capture information for detailed financial and physical progressreports.Covenants applicable to project implementation:4

STRATEGIC CONTEXT AND RATIONALECountry and Sector Issues1. The twenty five year civil conflict in Sri Lanka led to a loss of life, the displacement ofpersons belonging to all ethnic groups and destruction to infrastructure. Approximately 2.5million persons lived in areas of direct military activity. Up to 700,000 left the country while613,220 individuals (160,754 families) remained internally displaced as at June, 2002 1 . 172,000internally displaced persons (IDPs) lived in refugee camps 2 that year. A cease-fire agreement wassigned in February, 2002.2. Many IDPs had returned to their places of origin since 2002. However, 68,000individuals (18,000 families) remained in refugee camps in Sri Lanka in December 2005. Therecent escalation of violence since January, 2006 led to renewed displacement withapproximately 235,000 new IDPs in Sri Lanka. The District of Puttalam in the north west of SriLanka housed most of the remaining earlier IDPs. 63,145 persons (or 15,480 families) lived in141 refugee camps in Puttalam in 2006. 41% of the Puttalam IDPs are children under the age of18 who have known no other home than Puttalam. 96% of the IDPs there (14,928 families)indicated that they intended to settle down in Puttalam and not return to the North given securityconsiderations 3 . 74.2% had in fact bought land in Puttalam demonstrating a resolve to remainthere.3. The IDPs in Puttalam were displaced in 1990. 5,653 families live in temporary thatchedhouses, 2,232 families live in partly-completed houses and 1,093 families live in permanenthouses 4 . 6,501 families, who are largely the married children of the original displaced in 1990,have no house of their own. They live with their extended families. 12,154 new houses and 2,232part-constructions are therefore required to address the housing needs of the Puttalam IDPs. Therefugee camps lack access to safe drinking water, sanitation, drainage, health care and education.These too are needed to ensure a durable solution to their predicament 16 years afterdisplacement. Of the 111 refugee camps surveyed under the Social Assessment (SA), 86 campshad listed housing as their highest priority while 13 listed it as the second highest priority.1 Figure excludes those who had been displaced in the 1980s and 1990s and had since returned to theirhomes.2 The word used in Sri Lanka is welfare center but for purposes of this document, the more recognizableterm refugee camp would be used.3 These figures were obtained from a United Nations High Commissioner for Refugees (UNHCR)supervised census of refugee camps in Puttalam in April, 2006. Most of the Puttalam IDPs are Muslim andwere expelled by the LTTE from the North East in October 1990. Depending on their place of origin, theywere compelled to leave their homes within 2 hours, 48 hours or one week. Their lack of desire to returncompares starkly with the overall number of returnees to the North East until the recent resumption ofhostilities.4 Permanent houses are defined as those with completed structure and finishing, partly-completed housesare defined as needing significant home improvement, and temporary houses are defined as thatched hutswith flimsy superstructure.5

Rationale for Bank Involvement4. The proposed US$ 34.2 million Puttalam Housing Project (PHP) fits in with theGovernment’s strategy to meet the development needs of internally displaced persons in SriLanka, to encourage their return to their homes where possible and to otherwise integrate them intheir preferred location of choice. The World Bank Group’s Country Assistance Strategy (CAS) 5links development of the conflict-affected areas to the tenuous peace in Sri Lanka. The IDPs inPuttalam are stakeholders in this already frayed peace process. Their development needs have notbeen met. The Government requested IDA in June, 2005 to focus on meeting the housing,drinking water, sanitation and environment needs of the Puttalam IDPs given the scale offinancing required. IDA has a comparative advantage given its experience in conflict-related andpost-tsunami housing reconstruction and community water supply. The PHP complements otherIDA programs targeting non-IDPs in region including health, rural roads, irrigation and water.Higher Level Objectives to which the Project Contributes5. The PHP was designed in the context of an IDA commitment to help meet thedevelopment needs of the conflict-affected population including those living outside the NorthEast. The proposed project would rebuild the lives of those IDPs who have been neglected,enhance their life stability through housing and regularized land title, provide safe drinking waterand improve sanitation. IDA’s pioneering efforts would help integrate the IDPs in Puttalam withthe surrounding non-IDP population and induce other financiers to support the initiative.PROJECT DESCRIPTIONLending Instrument6. The lending instrument is a Sector Investment Loan (SIL). This would be the mostappropriate lending instrument given the anticipated construction and investment in housing,water, sanitation and environment. The SIL would entail a standard IDA Credit of US$ 32million. The Government would provide US$ 2.2 million in counterpart funds. The duration ofthe Credit would be for four years.Project Objectives and Phases7. The PHP would help IDPs living in refugee camps in Puttalam to upgrade their habitat. Itwould entail a housing support cash grant released in installments 6 . It would provide safedrinking water and sanitation. It would help improve the environment. The PHP would beimplemented over four years in four phases. The Government would require US$ 32,617,000 tomeet the total housing needs of IDPs in Puttalam. This includes dependent families i.e. thechildren of the original IDPs who have since married. The PHP would provide US$ 16 million toreplace the temporary thatched houses and complete the partly-completed housing units. Thiswould meet 55% of the total housing needs of the Puttalam IDPs. The PHP like the IDA-financedNorth East Housing Reconstruction Program (NEHRP) would provide housing to original IDPfamilies and not to their dependents. It would provide an additional US$ 16 million for water,US$ 500,000 for sanitation and US$ 3 million for environment mitigation and internal roads. Itwould provide US$ 785,000 for technical support and US$ 1.38 million for project management.The PHP would total US$ 34.2 million of which IDA would provide US$ 32 million. The5 Report No. 25413-CE discussed at the Board on April 1, 2003.6 Please see Annex 4 for details6

Government would approach bilateral donors to bridge the financing gap once the PHPdemonstrates success.Development Objective and Key Indicators8. The PHP would help integrate the Puttalam IDPs in their preferred location of choicethrough housing, water, sanitation and environment mitigation. It would support the constructionof 5,653 new houses to replace the temporary thatched huts and the completion of 2,232 partlycompletedhouses in Puttalam 7 . The PHP would provide drinking water to 13,584 IDP familiesand 3,291 non-IDP families. It would construct 9,885 latrines for both IDPs and non-IDPs. Itwould improve drainage and facilitate the planned development of camps. These interventionswould help upgrade habitat and better integrate IDPs with the surrounding non-IDP population.9. Expected key performance indicators:Number of housing units constructed within specified time and allocated budget;Number of families provided safe drinking waterNumber of settlement plans completed.Project ComponentsComponent One: Housing Assistance (U$ 16 million):10. The PHP is intended to upgrade impoverished refugee camps. IDA funds would beapportioned across the 141 refugee camps in Puttalam in proportion to the housing caseload andthe requirement for ancillary services. The Puttalam Project Unit (PPU) ranked refugee campsusing three social criteria i.e. (i) percentage of temporary thatched houses in each camp; (ii) thepercentage of IDP households who possessed land in each camp; and (iii) percentage ofhouseholds that opted to settle in Puttalam as recorded in the United Nations High Commissionerfor Refugees (UNHCR) supervised census of IDPs living in refugee camps in Puttalam in April,2006. The socially ranked camps were then screened in terms of three environmental indicatorsi.e. proclivity to flooding, land surface and quality of environment. The ranking of refugee campswas done with the intent to phase the PHP over four years.11. A household within a refugee camp would have to meet certain criteria to be entitled tohousing assistance. (i) It must have title to land 8 . (ii) The head of the household and the majorityof household members must live in the camp (according to UNHCR Survey 2006 and SA 2006).(iii) It should not have a permanent house in Puttalam 9 and should not have received similarhousing assistance in its place of origin. (iv) It should have possessed land in the camp 10 andhave had a temporary or partly-completed house within a camp as at April 2006 (according toUNHCR Survey). Prescriptive title deeds would not be acceptable while households within aselected camp without land title would not be eligible for assistance. All households howeverwould receive water and sanitation.7 This figure will be revisited at the mid-term review at the end of the third year of the project to take into account anycost savings or increases that may have been incurred due to currency fluctuations or other factors.8 It is important to distinguish between possession of land due to commercial purchase or gift and actual title to the landwhich indicates explicit legal documentation and proves ownership.9 This category accounts for approximately 28% of the IDP population in Puttalam10 Government policy is to regularize title for those IDPs with land in refugee camps who may not have cleardocumentation unlike others in those very camps. The objective is to ensure that all households with land have legaltitle to it.7

12. IDP communities living in environmentally unsustainable camps might need to berelocated on a voluntary basis. The Government agreed to provide alternate land to those IDPswho possessed land in such camps and transfer legal title to them. An Environment ImpactAssessment would be carried out in the proposed new sites and such communities would beaccommodated in the third and fourth year of the PHP. The camp selection criteria were definedin consultation with the community. Based on the ranking, refugee camps would be identified forparticipation in each phase of the PHP. All 141 refugee camps would be covered.13. The Government would offer a cash grant of Rs 250,000 to construct a new house and Rs100,000 to complete construction of a partly-completed house. It would release the cash grant intranches to the bank account of the identified households. The release of the installments wouldbe contingent upon meeting specified construction milestones as verified by technical officers.The beneficiary would have four to five months to complete construction. This is in line with thehome owner driven construction strategy.14. The District Secretary, Puttalam would review the list of beneficiary households toensure compliance with the selection criteria at each phase of the PHP. The Puttalam SteeringCommittee (PSC) 11 in Colombo would clear the beneficiary list with UNHCR present as anobserver 12 . Excluded IDP households in refugee camps would have the opportunity to submittheir complaints to the Grievance Redressal Mechanism in Puttalam headed by the AdditionalDistrict Secretary for consideration. Should the household remain dissatisfied at his ruling, itwould have the right to appeal to a Grievance Redressal Committee in Colombo headed by theSecretary, Ministry of Resettlement. The latter committee would have the final word 13 .15. The PPU is currently undertaking a Housing Assessment Survey in each refugee camp torevalidate the enumeration of permanent, partly-completed and temporary houses in the UNHCRsupervised survey, assess the extent of construction needed for partly-completed houses andreview the extent of new title to land since the UNHCR supervised census. This would enable itto plan the roll out of the cash grants. The housing component would be phased over four yearswith 1,463 houses targeted for construction/completion in 2007, 2,201 houses targeted for 2008,2,031 houses targeted for 2009 and 2,190 houses targeted for 2010. Safe drinking water would beprovided to 136 camps and adjoining villages 14 .16. A communications campaign would explain the beneficiary selection process, the cashgrants, disbursement procedure, the legal rights of IDPs, ongoing programs for non-IDPs andissues pertaining to water conservation. UNHCR would monitor the campaign to ensuretransparency and accountability.17. The PPU would facilitate where requested the supply of construction material in bulk tomitigate the risk of price escalation, supply constraints and unsustainable resource extraction.Beneficiaries would retain the prerogative to independently procure their own materials if they11 Paragraph 37 lists the composition of the PSC.12 UNHCR would have advisory status on protection concerns at the Puttalam Steering Committee.13 The refugee camps demonstrate a remarkable degree of community organization where the IDPs had jointlypurchased their individual pieces of land in most instances. Several camps were established based on kinship ties thatexisted in the original IDP villages.14 United Nations International Children’s Education Fund (UNICEF) would provide drinking water to 5 refugeecamps.8

choose to. The District Secretariat would ensure that Government environmental guidelines areadhered to in the extraction of resources.Component Two: Water, Sanitation and Environment Mitigation (US$ 16 million)18. Background: The Puttalam district is situated on the north west coast and dry zone of SriLanka. The annual rainfall of 15 to 30 centimeters is largely limited to the months of Novemberand December. The main source of drinking water is situated in a series of deep and shallowaquifers. The quality of water in these aquifers ranges widely depending on location. Studiesindicate that ground water is often contaminated with nitrates in areas where intensive agriculturetakes place. The excessive use of groundwater for agriculture and prawn farms has led to a salineintrusion in other areas. The inappropriate design of latrines leads to the bacteriologicalcontamination of ground water in several refugee camps. The average depth of most shallowwells ranges from 5 to 10 meters although in certain places ground water can be accessed only atvery deep levels. The availability of safe drinking water is a serious concern in light of thesefactors. Several sites are located on sand dunes, marshy and flood prone areas.19. The refugee camps in Puttalam were initially anticipated to be of temporary duration.There was no investment in basic infrastructure. IDA support for drinking water, sanitation andenvironment management is intended to upgrade the refugee camps into sustainable habitat andintegrate them with the surrounding communities given that the IDPs are now likely to remainthere. The PHP would include water and sanitation in certain adjoining and vulnerable non-IDPvillages to mitigate non-IDP resentment at the transfer of resources to IDPs.20. Water: The National Water Supply and Drainage Board (NWSDB) undertook a conceptfeasibility study to map groundwater sources, report on water availability, water quality, sourceyield, suitability of various methods of excreta disposal and the cost estimates for water supplyand sanitation. It listed refugee camps that can be covered by a stand alone water supply andsanitation systems, and camps that need to be clustered for technical and cost reasons. Based onthis study, pumping sites would be strategically located within a demarcated zone and clean waterdistributed to participating refugee camps and non-IDP villages through a system of storage tanksand pipes, or pumped through tube wells. The type of scheme would depend on location andground water condition.21. The PHP would provide drinking water to 13,584 IDP families and 3,291 non-IDPhouseholds. This adds to a total of 16,875 households. The IDP recipients would include thosewith permanent housing. Non-IDP recipients would include those living in source areas, en-routeof the piped water schemes and in villages without drinking water adjacent to identified refugeecamps. This is estimated to cost US$ 12 million. It includes provision for technical assistance,project management, supervision, taxes and physical/price contingencies 15 . The NWSDB wouldprepare engineering drawings and bid documents. The PPU would invite bids.22. The supply of drinking water would be modeled on the ongoing IDA-assistedCommunity Water Supply and Sanitation Project (H. 0350) in the North West Province. The PHPwould be in conformity with the Government’s National Rural Water Supply and SanitationProgram (RWSS). See Annex 4 for more details. Stand posts will be considered the basic servicelevel; however households opting for a higher service level such as yard taps and/or house15 UNICEF support for drinking water would include refugee camps participating in the IDA-financed project andadjacent host communities.9

connections would be able to do so provide they pay the additional cost for the higher servicelevel and the source yield is adequate.23. Sanitation: The shallow sand aquifer is vulnerable to easy contamination due topermeable soils and the shallow depth of the ground water table. The aquifer would have to beprotected from contamination of sewage to ensure the sustained availability of potable qualityground water. All IDP households that receive housing support cash grants would constructappropriate latrines. The PHP would provide funds to non-recipients of housing assistance andnon-IDPs to construct latrines as well. The objective is to conserve available sources of groundwater and avoid bacteriological contamination therein due to inappropriate sewage disposal. Theconstruction of latrines would entail a cash grant of Rs 25,000. The Sanitation sub-componentwould cost US$ 500,000.24. Environment Mitigation: The Environmental Assessment (EA) of the 111 refugee campshighlighted environmental issues that were a result of flooding and lack of proper drainage. Theproposed PHP would therefore allocate funds to mitigate priority environmental issues. The poorcondition of roads and the drainage system was linked to flooding. Civil works would ensure thatroads within refugee camps do not contribute to environmental hazards such as water logging andflooding by rainfall ponding and runoff. Road works would be limited to ensure that there wouldbe a minimal collection of water on road surfaces and drainage to collect runoff in camps whereflooding is reported to be of concern. Environmental Management Plans would be prepared foreach refugee camp to recommend the camp-specific risk mitigation measures. The North WestProvincial Roads Department (NWPRD) would prepare the engineering drawings and the biddocuments. The PPU would invite bids while the four local authorities would be responsible formaintenance.Component Three: Technical Support for Implementation (US$ 785,000)25. The PHP would include technical assistance to strengthen project implementation. Itwould support the regularization of land title, a communications campaign, a continuous socialimpact assessment, mid-term environmental audit, a technical audit, a Housing AssessmentSurvey, Comprehensive Settlement Plans and Skills Training.26. Regularization of Land Title: A Land Task Force would review documentation andregularize title of those who possess land but lack adequate documentation in all 141 refugeecamps and adjoining non-IDP villages. It would accomplish this over a six month period thatstarted in November, 2006. Where possible, it would help resolve land related disputes. Theactivity would be modeled on the successful precedent of the mobile land task forces underNEHRP.27. Comprehensive Settlement Planning: 42% of Puttalam IDP families lived with otherfamilies. They were largely dependent families who tend to purchase land in the vicinity ofexisting camps. Most camps would therefore experience rapid physical expansion in the comingyears. The Settlement Plans would guide the planned development and implementation of basicbuilding regulations in each camp. The technical assistance provided under this component wouldinclude: preparation of survey/base plans for all camps, improvements of internal road anddrainage segments to mitigate environmental problems, preparation of physical developmentplans (neighborhood plans) for all camps to structure the future growth and development ofessential community services, and preparation of environmental management plans for each campto mitigate critical environmental risks amongst other activities.10

28. Communication Campaign: An information dissemination campaign outsourced to a firmwould explain the PHP, the beneficiary eligibility criteria, rights of IDPs, projects targeted at non-IDPs and best practice with regards to water conservation to ensure transparency andaccountability.29. Continuous Social Impact Assessment (CSIA): This would independently monitorcommunity perceptions, grievances and feedback on project implementation on an ongoing basis.It would use this to evaluate the social dimensions of PHP and flag any emerging reputationalrisk.30. Mid Term Environmental Audit outsourced to a firm would examine the project’scompliance with environmental guidelines and safeguards during implementation.31. Technical Audit: This would independently monitor whether construction complies withagreed technical standards. It would audit a 5% sample of beneficiaries in all refugee camps andits recommendations would feed into subsequent rounds of project supervision.32. Housing Assessment Survey: The IDP land profile has changed significantly in recentmonths due to the rapid regularization of property title. A Housing Assessment Survey wouldrevalidate household profile, the type of house and land ownership in each refugee camp, buildingupon the results of the UNHCR supervised survey, the EIA and the SA. It would determine theexact construction needs in the case of a partly-completed house. The survey would thereforehelp technical officers to certify payment to eligible households, supervise construction andfacilitate overall implementation roll out.33. Skills Training for Construction Labor: PHP would support the training of 1,000 masonsand carpenters to bridge the shortage of skilled construction labor in Puttalam. The proposedtraining courses would run for four months in each training site, and would consist of classroomtraining and supervised on-the-job training. The contractor and PPU would enter into amemorandum of understanding that these laborers be made available to the refugee camps forpart of their apprenticeship.Component Four: Project Management (US$ 1.38 million).34. The Ministry of Resettlement would manage and monitor the PHP at the center. Thedistrict administration would support implementation at the district and divisions. The PPU wouldhandle implementation on a day to day basis. An Operational Manual that sets forth guidelines,procedures and responsibilities was submitted to IDA during Appraisal. The PHP would allocatefunds to cover staff expenses, incremental operating costs that include travel, transport, fuel, food,lodging but not salaries, and the procurement of goods that includes two vehicles and motorcycles. This component would meet the cost of the grievance redressal mechanism.Lessons Learnt and Reflected in the Project Design35. The Government had commissioned five studies as part of project preparation i.e. aUNHCR supervised census of 141 refugee camps in Puttalam, a Social Assessment, anEnvironmental Assessment, a Water Concept Feasibility Study and Preliminary EngineeringReports for the water schemes in Phase 1 camps. The Social Assessment and the EnvironmentalAssessment were carried out in 111 of the 141 refugee camps accounting for 80% of the IDPpopulation. The 30 remaining camps would be covered by January 31, 2007.11

36. IDA had approved the US$ 75 million NEHRP in December, 2004 and the US$ 150million Tsunami Emergency Recovery Credit (TERC) in February, 2005. NEHRP influenced thedesign of the TERC housing component. The lessons learnt are summarized below.37. Beneficiary Selection: NEHRP lacked funds to meet the housing needs of all conflictaffectedfamilies in the North East. The scale of devastation was that large. It became necessaryto prioritize beneficiaries. Under NEHRP, villages were prioritized for selection based on theextent of housing damage, caseload of returnees, economic vulnerability and ethnic sensitivity.Individual households were then prioritized through a quantifiable vulnerability weightingsystem. Not all households with a destroyed house in the village were beneficiaries. Not alleligible households received housing assistance in NEHRP. Only the most vulnerable did. Thisled to some friction between beneficiaries and non-beneficiaries in a village. The PHP revised thecriteria to factor in this lesson. Entire refugee camps would be selected to participate in the PHP.This would help retain social cohesion. In the PHP, all eligible households would receive the cashgrants.38. The shift in beneficiary selection criteria is explained by the fact that the refugee campsdemonstrate a remarkable degree of community organization where the IDPs had collectivelypurchased land in most instances. Further, many camps were established based on the originalIDP villages in the North. The NEHRP selection criteria can not be applied in Puttalam because itwould fracture communities whose cohesion and remarkable levels of social mobilization are inpart attributed to the shared trauma of exile 16 . Like NEHRP however, only original IDPhouseholds would be included in the PHP, not their dependent families given financingconstraints. Those IDPs in Puttalam with permanent houses would not be included in the housingcomponent.39. Land Ownership: The Mobile Land Task Forces demonstrated spectacular success underNEHRP. This was to ensure that potential beneficiaries were not excluded on account ofinadequate or contested land title. The land task forces had registered 96,385 instances ofconflict-related disputes pertaining to state land in the North East as at April 30, 2006. They hadresolved 72,738 land dispute cases (loss of documentation, death of deed holder, demarcation ofproperty, inheritance disputes etc). They had issued deeds under the Land DevelopmentOrdinance to 47,415 families in the North East. A Land Task Force has similarly been establishedin Puttalam for a six month duration to regularize title to land in refugee camps. This would alsohelp resolve routine land ownership issues, encroachment on unalienated state lands anduncertainty with regards to property boundary.40. Grievance Redressal: The design of NEHRP and TERC provided for a grievanceredressal system to allow villages and individuals excluded from the project to seek redress. Thisensured a degree of accountability and transparency in the beneficiary identification process. ThePHP retains this successful mechanism that disaffected households could avail of with duemodification to account for the lack of a provincial and divisional level of implementation inPuttalam. The complaints mechanism duly recorded would act as a check against bureaucraticdiscretion in the face of established beneficiary selection criteria. It would release pent upresentment at perceived exclusion.16 It needs to be added that housing assistance under NEHRP included both conflict-affected hostcommunities and returning IDPs. The proposed PHP conversely is targeted at IDP households alone. Thisis a more cohesive group. This partly explains the difference in selection criteria.12

41. Resource Requirement Plan: The experience in NEHRP revealed that the purchase ofconstruction materials was a challenge. Price escalation was another constraint. Individualprocurement led to temporary debt and at times had negative environmental effects. There werepositive cost and environmental results when beneficiaries resorted to procurement in bulkthrough co-operative societies and village rehabilitation committees. PHP retains this optionalmechanism for bulk procurement.Alternatives Considered and Reasons for Rejection42. Turn Key Approach for Housing Construction: This centralized approach entails thehiring of a contractor to build houses on behalf of the IDP family and to hand over the completedhouse to the beneficiary. It does not involve beneficiaries in planning, implementation andmonitoring. This approach has not been cost effective in Sri Lanka given the significantintermediation costs involved. There are contractor fees and standardized uniform design to suit amass housing scheme. This explains the differential success between the international nongovernmentalorganization ( INGO)-driven and home owner-driven housing reconstructionprograms in the tsunami-affected areas. The home-owner driven housing reconstruction programhas reached close to 100% rates of completion in several areas while INGO-driven programresulted in inflated costs, incomplete construction and often inappropriate household design. PHPwould therefore adopt a decentralized, individual homeowner-driven approach to ensurebeneficiary ownership given the successes in NEHRP and TERC.IMPLEMENTATIONPartnership Arrangements43. UNHCR supervised the IDA-financed census of Refugee Camps in Puttalam both in2004 and in 2006. It worked with Government in the 2002 national census of IDPs in Sri Lankaas well. UNHCR would monitor implementation of the PHP as part of its protection mandate.The United Nations International Children’s Education Fund (UNICEF) undertook its own surveyof water resources in the Puttalam district and would finance the provision of drinking water for 5refugee camps and 2 non-IDP adjoining villages with a caseload of 2,000 families. UNICEFintends to invest in schools and health clinics as well. The UNHCR, UNICEF and IDA wouldwork together in Puttalam to integrate the IDP population in their preferred location of choice.Institutional and implementation arrangements44. The Ministry of Resettlement 17 is the line agency responsible for the PHP. The Ministryrelies upon the NWSDB and the NWPRD to design and supervise the water/sanitation andenvironment mitigation/internal road sub-components respectively. The PPU, mapped into theMinistry of Resettlement, would implement the project on a day to day basis.45. The Puttalam Steering Committee (PSC), that convenes key Government actors, would setpolicy and monitor project implementation. It would review the beneficiary identification processand clear the list of beneficiaries. The PSC would consist of the Secretary, Director-General andSenior Project Adviser, Ministry of Resettlement; the Puttalam District Secretary and the fourDivisional Secretaries; and officials of the NWSDB, the NWPRD, the Provincial Land17 This ministry was mandated (based on the Government Gazette of December 8, 2005) with the implementation ofplans and programs for the resettlement of civilians affected by the war; and resettlement of refugees.13

Commission, UNHCR and central line agencies including the Ministry of Finance. The Secretary,Ministry of Resettlement would chair the PSC. It would meet every two months.46. The PPU is located in Puttalam. It includes a Director, a Financial ManagementSpecialist/Accountant, a Social Development Specialist, an Environment Specialist, anEngineer/Procurement Officer, a Communications Officer, an Information Technology Officerand a Land Settlement Officer. Technical Officers would certify construction milestones beforeauthorizing payment and provide technical guidance to IDPs as they construct their houses. ThePPU has hired four Technical Officers and would recruit more, if required. The SocialDevelopment Specialist would address social issues that may arise on account of theidentification of beneficiary households and the complaints of households that were not selected.The Environmental Specialist would ensure compliance with environmental safeguards. AnAccounts Clerk and support staff would assist the Financial Management Specialist. A SeniorProject Adviser would be stationed in Colombo to liaise with central line agencies.47. Grievance Redressal Mechanism: All households living in temporary thatched huts or inpartly-completed houses on land that they possessed as at April, 2006 in a Puttalam refugee campwould be entitled to the cash grant. In the event that a household disagrees with its non-inclusionin the beneficiary list, it can complain in writing to the Grievance Redressal Committee inPuttalam headed by the Additional District Secretary. The grievance redressal process wouldhave two steps of appeal.48. Upon publication of the beneficiary list in the refugee camp, the Divisional Secretary, thePPU Director, the Social Development Officer and Communications Officer would convene ameeting in each concerned refugee camp. Individual households could use that forum to raisetheir grievances at being excluded. These would be recorded in writing. The Grievance RedressalCommittee in Puttalam would consist of the Additional District Secretary, the four DivisionalSecretaries and two NGO representatives. The Committee would review the complaints raisedand revise the beneficiary list if it sees fit. There would be a five week time-line between thepublic posting of identified recipients and this ruling.49. Should a household remain dissatisfied at this ruling, it could appeal to a three personGrievance Redressal Mechanism in Colombo headed by the Secretary, Ministry of Resettlement.The Committee would include the Commissioner-General, Essential Services and the DistrictSecretary of Puttalam. An UNHCR representative would be present as an observer. The decisionof this committee would be final and the appeals process ends there.50. The CSIA would provide an opportunity for those households with unresolved grievancesto record their views to a neutral outside firm bypassing the district and central administrationsfor review at the next phase.51. Funds Flow: IDA funds would be routed to the PPU. The PPU would release funds to thebank account set up in the name of the beneficiary upon certification by technical officers.Withdrawals would be made on a monthly basis from the special dollar account to reimburse theGovernment from IDA’s share of eligible expenditure reported up to that date. The PPU wouldsubmit withdrawal applications to IDA for the replenishment of special dollar account. TheMinistry of Resettlement would have overall fiduciary oversight.14

Monitoring and evaluation of outcomes/results52. The PPU would monitor impact, outputs, outcomes and finances. Output monitoringwould cover the number of houses constructed, the phased disbursement of the cash grant, thenumber of water schemes completed and the number of latrines built 18 . PPU would have severalmeans to monitor implementation. The PPU would submit quarterly technical and interim financial reports on implementationprogress. A CSIA would monitor project impact and social outcomes using participatory rural appraisalmethods. The CSIA would offer an opportunity to cross verify the PPU reports. A mid-term environmental audit would verify the PHP’s compliance with agreedenvironmental guidelines and safeguards. An independent technical audit would verify compliance with engineering standards. The PPU would submit bi-annual reports detailing implementation progress and achievementof development objectives to IDA.Sustainability53. The Puttalam IDPs were displaced from the North in October 1990. Most continue to livein temporary shelter in under-served refugee camps. The IDPs lack access to safe drinking waterand sanitation. Many refugee camps are situated in environmentally fragile locations. Relationswith the surrounding non-IDP community have not been smooth due to competition over scarceresources in an arid region. The PHP is an effort to provide permanent housing for those IDPswithout it, drinking water and sanitation to both IDPs and non-IDPs, and environmentimprovement. This would help transform refugee camps into sustainable habitat and betterintegrate IDPs and non-IDPs. Regularized land title, strengthened social capital, bettermanagement of water resources and improved IDP-non-IDP relations under the PHP wouldreinforce its long term sustainability. Needless to add, the long term sustainability of any IDPhousing program would be linked to the success of the peace process and access to follow-upfinancing.Critical risks and possible controversial aspects54. Disputes with non-IDPs: Poverty in the Puttalam district is not confined to IDPs. 31% ofthe population in the Puttalam district lived below the poverty line in 2002 in contrast to thenational average in Sri Lanka of 22.7% that year. Support for IDP housing while non-IDPs live ininadequate housing could trigger resentment. The issue is compounded with an overall scarcity ofwater with the extraction of ground water by IDPs. Competition over limited resources sharpensthe resentment. Ethnic differences between the two groups in certain instances do not help either.55. Non-IDPs would need to have a stake in the success of the project. To this effect, thePHP would finance drinking water and sanitation for needy adjoining non-IDPs. IDA prepared amacro-action plan that defined guiding principles to reduce inter-community tensions in Puttalam.The Land Task Force would address both IDPs and non-IDPs in a given village cluster. The PHPwould improve the market for local masons and carpenters. The Ministry of Housing would scaleup its modest home improvement grants to non-IDPs living in adjacent villages. UNICEF would18 Details of the monitoring indicators are provided in Annex 3.15

invest in drinking water, schools and health facilities for both IDP and non-IDPs. While non-IDPsmay not benefit from the cash grants itself, they would gain from other components of the PHP.56. The District Secretary would coordinate all IDA-financed projects in Puttalam to ensurethat IDP and non-IDP needs are reconciled in a seamless manner. The other IDA operations,almost exclusively targeted at non-IDPs, include the North East Irrigated Agriculture Project, theCommunity Water Supply and Sanitation Project, the Health Sector Development Project and theEducation Sector Wide Adjustment Program. A communication campaign would explain therange of projects targeting non-IDPs in Puttalam.57. Further, improved health, education, drinking water infrastructure and environment is toevery one’s benefit, not just IDPs. The upliftment of IDPs would serve the broader economy ofthe Puttalam district through skilled labor, local trade in tiles, cement or timber, support for localentrepreneurship and accelerated spin offs. This would remove a burden on the local economyand benefit non-IDPs in the medium term.58. Reputational Risk: The civil conflict led to a massive dislocation of people belonging toall ethnic groups. Most Muslims in the North were evicted in October 1990 and fled to Puttalamwhere they have been living in refugee camps since. IDA support for permanent housing mightpose a reputational risk in that it could be seen as acquiescing to the forced relocation of IDPsthrough the provision of houses.59. Unfortunately, there does not appear to be any development alternatives in the mediumterm. 96% of IDPs in Puttalam are keen to transform their sixteen years of temporary stay insqualid refugee camps to permanent and upgraded habitat there itself. The 2002, 2004 and 2006surveys of IDPs demonstrated that most in Puttalam were not keen to return to their originalvillages any time soon. 74.2% of IDPs had in fact bought land in Puttalam reinforcing thispreference to reside there permanently. The escalation of hostilities in the North East in 2006meant that an estimated 1,000 out of the 2,500 IDP families who had returned to their originalvillages moved back to Puttalam. The PHP is predicated on this ground reality.60. Those IDPs who do return North would still be considered for NEHRP assistance. PHPbeneficiaries however would not be entitled to housing grants in the North. The communicationscampaign financed under the PHP would educate IDPs on options available to them under thePHP and NEHRP. This would include a module on the right to return. It would explain theimplications of the receipt of the cash grant. UNHCR would monitor this initiative to help IDPsmake an informed decision whether to accept the PHP cash grant or not.61. It is important to reiterate that the PHP in itself would not impact on the legal (i) right toreturn at a future date; (ii) right to property that IDPs might have left behind in the North; (iii) theright to compensation that might be provided to victims of the conflict at a future date; and (iv)right to participate in any referendum that addresses the long term political resolution of theethnic conflict. IDA legal opinion was obtained to ensure that the PHP will not impact on therights of IDPs. The Government is committed to protect the right to return of all IDPs includingthose in Puttalam, if they so choose to at a later date. UNHCR would monitor and report anyviolation of these rights.62. Residency Rights: The IDPs were displaced to Puttalam in 1990 and the vast majorityremain in refugee camps. They lack access to services that residents in Puttalam are entitled tosince they are not registered as permanent residents and remain on the roster of the conflict-16

displaced. This denied them access to the Government’s Samurdhi welfare program, publicrecruitment, investment in education infrastructure and municipal services.63. Many IDPs are reluctant to forego their residency rights and right to vote in the North.This contrasts with their reluctance to return there any time soon and can be explained in part bythe sense of injustice meted out to them in 1990. As a result, they lack a representative within thePuttalam district who would ensure adequate levels of service delivery. The provision ofpermanent housing to IDPs would not have the intended effect of transforming IDPs to ordinarycitizens unless they have access to services like other permanent residents.64. However, where IDPs choose to register themselves is a political decision. IDA wouldonly require that the national budget include increased provision for the Puttalam district toaccommodate improved service delivery for IDPs, a budgetary provision that has not been madeto date in the allocation for the Puttalam district. This would avoid the continued reliance of bothIDPs and non-IDPs on a limited provision that was only intended for the non-IDP hostcommunity, thus exacerbating tensions.Credit Conditions and Covenants65. Water: The Government of Sri Lanka would provide to IDA a copy of the detailedengineering report of the 11 water schemes to be implemented under Phase 1 of the proposedPHP prior to the Board date.66. Land: The Government would ensure that there would be no involuntary land acquisitionfor each phase of the PHP in relation to project activities. The Government would provideevidence of legal land ownership of IDP recipients of the housing support cash grants for Phase 1of the PHP prior to Board date.67. General Implementation: The Government of Sri Lanka would implement PHP inaccordance with the Development Financing Agreement (DFA), the Operational Manual (OM),the Financial Management Manual, and the Environment and Social Assessment andManagement Framework (ESMF). The Government shall not amend or waive any provision ofthese manuals without IDA’s prior approval. The Government would maintain the PPU withadequate staff, powers, functions and resources to implement, coordinate and monitor the PHP ina manner satisfactory to IDA.68. Use of Credit Proceeds: The Government would ensure that all goods, works and servicesfinanced out of the Credit proceeds are used exclusively for the PHP and if any funds are used ina manner inconsistent with the provision of DFA, the Government shall take all necessarymeasures to refund to IDA the said amount.69. Monitoring and Evaluation: Mid-Term Review: The Government would carry out a midtermreview and furnish the reports of such a review to IDA by December 31, 2008.70. Financial Covenant: The Government would ensure that a satisfactory financialmanagement system is maintained throughout the duration of IDA support. It would submit toIDA audited annual financial statements of the project no later than June 30 of the followingfiscal year and would produce Interim Financial Reports (IFRs) and submit to IDA no later than45 days following the end of the reporting quarter.17

APPRAISAL SUMMARY71. Economic and Financial Analysis: The economic rationale of the PHP is strong and it isexpected to have significant economic payback and positive net benefits to the directbeneficiaries and adjacent communities. The detailed economic and financial analysis ispresented in Annex 9. Lessons learned from the implementation of the NEHRP indicate that anindividual beneficiary would earn a Net Present Value (NPV) incremental income stream ofUS$2,720 over 15 years (average productive life). This represents a significant rate of return froman outlay of US$2,030 (housing cash grant per beneficiary). Similarly, skills training is expectedto ensure a positive increase in the income of trainees by an average of about US$1,200 perannum or a NPV difference of US$7,395 over the course of their productive life (15 years). Theproject would generate wage income worth approximately US$8.7 million over 4 years. With thisactivity alone, about 28 percent of the total investment required for Puttalam project will beplugged back to the local economy as wage income.72. The short term fiscal impact of the PHP is neutral. Of the US$34.2 million total projectcosts, US$2.2 million is the Government’s contribution mainly in the form of payment for taxesand duties. The long term fiscal impact of the borrowing is negligible. The US$32 million IDAcredit is a concessional loan with a 10-year grace period, a maturity of 20 years, zero interest, a0.75% service charge on the outstanding amount, which translates to a grant element of 76percent. 19 The NPV of the credit disbursed in four years is US$26.5 million, and that of the totaldebt service payments over 20 years is only US$6.3 million, resulting to a total of US$20.2million grant out of the US$32 million concessional credit. The debt service payment (aboutUS$3.5 million per year on average) as a percentage of GDP is insignificant given the size andexpected nominal growth of the economy.73. Technical: The PHP is premised upon the home-owner driven construction under theIDA-financed NEHRP and TERC. The provision of cash grants would ensure beneficiaryparticipation in the construction of his/her house, facilitate increased choice in design and use ofconstruction materials, not to mention reduce cost 20 in contrast to the provision of a ready-madeturn-key unit. The minimum requirement of a house is a permanent foundation of at least 500square feet, two rooms and a toilet. Technical officers would supervise construction while atechnical audit would independently monitor compliance with engineering standards. The PPUwould help those community-based organizations that choose to procure cement, timber and tilesin bulk to overcome supply constraints and contain price escalation. An Operational Manualoutlines procedures on implementation, supervision, technical certification and the disbursementof funds. The PHP would support 34 drinking water schemes to cover 136 refugee camps andadjoining non-IDP villages. The NWSDB would be responsible for design and supervision withcivil works largely contracted out.74. Financial Management: The proposed financial management procedures are in keepingwith IDA’s fiduciary requirements as per OP/BP 10.02. A manual accounting and reportingsystem has been set up for the PHP. The PHP would follow the transaction-based disbursementmethod. The Financial Management Manual has been completed. IFRs for activities supported19 Sri Lanka is now an “IDA Gap Country”. Sri Lanka per capita GNI has reportedly been above the IDA's Operationalcut-off for two consecutive years. Therefore, according to the OP3.10 Annex D, Sri Lanka is subject to IDA creditwith 20 years (rather than regular 40 years) maturity and 10 years grace period. As such, the principal repaymentswould be at 10% per year starting year 11.20 The provision of turn-key housing inevitably leads to cost escalation due to the contractor charging for internalexpenses as witnessed in the NGO-financed housing program in Sri Lanka’s tsunami affected areas.18

under the Project would be submitted to IDA within 45 days of the end of each quarter. TheAuditor General of Sri Lanka would audit the accounts of the PHP each year. The Internal AuditDepartment of the Ministry of Resettlement would be strengthened to carry out quarterly audits ofthe PHP at the district and community levels.75. Procurement: The procurement for goods and works would be carried out in accordancewith the World Bank Guidelines: Procurement under IBRD Loans and IDA Credits dated May2004. The works consist of the home-owner driven program, extending piped water scheme tonew areas and minor environment mitigation. Consultant Services would be procured inaccordance with the World Bank Guidelines on Selection and Employment of Consultants byWorld Bank borrowers dated May 2004. The Ministry of Resettlement has prepared aprocurement plan and sample draft bidding/proposal documents for the first 18 months.76. Social: The PHP is expected to have a limited negative social impact. It may not triggerany social safeguard policies. The plan is to support on-site construction for those householdswith legitimate ownership of land in environmentally safe areas. Some instances may result involuntary relocation later in the project timeline. A consultative Social Assessment examinedlonger term social concerns, conflict potential, prospects for integration with the surrounding non-IDP host communities and gender dynamics to mitigate risks and identify opportunities for socialcohesion. The UNHCR supervised Survey updated the demographic information on IDPsincluding the type of shelter currently occupied and land title. The Government relied on thesestudies to design the PHP.77. The IDP will need to demonstrate clear title to land to receive the cash grants. This isintended to safeguard against the threat of eviction and reduce the potential for political andeconomic exploitation. The data on land ownership was updated as part of the UNHCR Surveyand a land specialist’s input in the Social Assessment. The Government agreed to firm up thedocumentation of those with unclear title.78. A Land Task Force, on the lines of that currently in operation in the North East, has beenconstituted to regularize the land deeds in environmentally cleared refugee camps. The PHPmakes provision to relocate those IDPs living in environmentally unsuitable areas. The lattergroup of IDPs would not be covered in the first two years of the PHP. The Government wouldneed to ensure that IDP recipients of the cash grants in Puttalam have access to municipalservices such as the collection of solid waste. IDA would include a covenant that the futureallocation of resources within the district includes provision for IDPs.Environment:79. Safeguard policies that pertain to an Environmental Assessment (OP 4.01) and NaturalHabitats (OP 4.04) would be triggered under the PHP. 111 of the 141 sites were subject to anEnvironmental Assessment based on information collected through a questionnaire. This wouldguide the preparation of an Environmental Management Plan to identify the potentialenvironmental impact and mitigation measures needed in each refugee camp. A detailedEnvironmental Impact Assessment would only be required if the questionnaire had identified aserious environmental issue at a given site which would need to be investigated in further detail.80. Existing local government structures would oversee the collection of solid waste,composting and recycling in the proposed housing sites. The PHP would ensure sustainablesourcing of raw material such as sand and timber to minimize environmental impact. It would19

ensure compliance with local government regulations on sanitary facilities to avoid contaminationof drinking water sources.Safeguard policies81. Social safeguards. If OP 4.12 and OD 4.11 are triggered, mitigation mechanisms wouldbe addressed as outlined in the ESMF.82. Environmental safeguards. Two environmental safeguard policies are triggered i.e.Environmental Assessment (OP 4.01) and Natural Habitats (OP 4.04). The mitigation measuresare described in the ESMF.Safeguard Policies Triggered by the Project Yes NoEnvironmental Assessment (OP/BP/GP 4.01) [x] [ ]Natural Habitats (OP/BP 4.04) [x] []Pest Management (OP 4.09) [ ] [x]Cultural Property (OPN 11.03, being revised as OP 4.11) [ ] [x]Involuntary Resettlement (OP/BP 4.12) [x] []Indigenous Peoples (OD 4.20, being revised as OP 4.10) [.] [x]Forests (OP/BP 4.36) [.] [x]Safety of Dams (OP/BP 4.37) [ ] [x]Projects in Disputed Areas (OP/BP/GP 7.60) [ ] [x]Projects on International Waterways (OP/BP/GP 7.50) [ ] [x]Policy exceptions and readiness.83. PHP complies with all IDA policies so that there are no policy exceptions requiringmanagement approval. Actions to initiate implementation commenced in September, 2006 andPHP would be ready to move towards full implementation in January, 2007. The key staff arealready in place and the Operational Manual is finalized. Technical design manuals, procurementand financial management arrangements used for PHP have been prepared; a Procurement Planfor the first 18 months of the program was completed. The operational staff is conversant with thePHP concept and implementation strategies.20

SRI LANKA: PUTTALAM HOUSING PROJECTAnnex 1: Background and Project Design FrameworkBackgroundThe District of Puttalam in north west Sri Lanka is now home to many refugees displaced fromthe North in 1990. According to the UNHCR supervised census of IDPs in Puttalam conducted inApril 2006, 63,145 persons or 15,480 families lived in 141 refugee camps. 41% of the PuttalamIDPs were children under the age of 18. 72% of the IDPs originate from Mannar; 14% come fromJaffna and 10% from Mullaitivu. The rest come from other districts in the North. The SocialAssessment carried out as part of project preparation indicated that 62% of the adult populationworked as seasonal day labor in the informal sector. About 18% of those surveyed in the UNHCRexercise reported that they had no schooling while 23% had a primary school education alone.Just 8% had completed their high school education. The IDPs are located in four divisions in thePuttalam district: Kalpitiya (55%), Puttalam (33%), Mundel (8%) and Vanathavillu (3%). 96% ofPuttalam IDPs (14,928 families) indicated that they wished to remain and integrate in Puttalam,citing security concerns as the major obstacle to return to their original homes 21 . 74% of the IDPhouseholds had in fact bought land in Puttalam demonstrating a resolve to remain there.Most refugee camps lack basic services including access to safe drinking water, toilet facilities,proper drainage and garbage disposal. The UNHCR survey indicated that only 40% of the IDPpopulation had private permanent toilets. Since the provision of basic services and ancillaryinfrastructure is key to the sustainability of permanent housing, the PHP is designed within acomprehensive settlement planning framework.Housing Conditions of IDPs: The UNHCR survey indicated that 12% of houses in the refugeecamps were permanent, 25% were partly-completed and 63% were temporary houses 22 . Of the12,154 families who require adequate housing, 6,501 live with near-relatives as dependentfamilies, 5653 families live in temporary thatched huts and 2,232 families live in partlycompletedhouses.Water and Sanitation: Puttalam has a dry climate with an annual rainfall of about 15 to 30 cms.Even though, the ground-water located in coastal aquifers and underlying Miocene limestonelocated in parts of Kalpitiya could meet the needs of the Kalpitiya peninsula residents, thecontamination of the ground-water from agricultural run-off, inappropriately designed excretadisposal in areas with a high water table, improper siting of toilets and inadequate maintenancecompromise water quality. The excessive extraction of ground-water and the consequent intrusionof sea water further contaminate the water. The demand for water from the growing populationand physical distance between water sources and the camps add to the scarcity of drinking water.The UNHCR survey revealed that 28% of the population had access to a private well or pipedsupply, while 19% had no direct access to water. The local authority provides water to refugeecamps close to Puttalam town by browsers. The situation in the Mundel and Vanathavilludivisions are not better. The main sources of water in all divisions are dug wells and hand pumps.21 UNHCR supervised survey. Most of the Puttalam IDPs are Muslim and were expelled from the North bythe LTTE in October 1990. Depending on their place of origin, they were compelled to leave their homeswithin 2 hours, 48 hours or one week. Their lack of desire to return compares starkly with the overallnumbers of returnees to the North East until the recent deterioration of the security environment.22 Permanent houses (with completed structure and finishing), semi-permanent houses (partly constructedbut need home improvements), and temporary houses (thatched houses with poor living condition).21

Drainage and Road Access: At present, most refugee camps are connected by access and internalroads. The quality of internal roads is satisfactory in the majority of camps. While some roadsegments require improvement such as shouldering and gravel topping, the main problemexperienced in most camps is poor drainage due to the absence of adequate road level drainagestructures and culverts. This results in flooding and the reverse flow of rainwater into plots andhouses. The absence of natural drains in some camps heightens the incidence of flooding.Environmental Issues: Key environmental issues include: (i) inadequate access to safe drinkingwater; ( ii) poor sanitary conditions; ( iii) water stagnation and flooding in refugee camps; ( iv)haphazard disposal of garbage; ( v) the destruction of mangroves due to land clearance in theKalpitiya area; (vi) sand mining within and near refugee camps; and (vii) exposure to pollutionfrom the waste channels of prawn farms and other commercial agricultural activities.Land: Of the 15,480 IDP families in Puttalam, 74% (11,485 families) own land in the district. Ofthis, 75% (8,587 families) possess land documents largely in the form of deeds (53% of totalIDPs). Most IDPs who owned land in the district reported that they purchased the land (53%)rather than having obtained it through gift or inheritance. Complexities might arise in verifyingthe claims of the approximately 2,898 families who own land but do not possess valid legaldocumentation to this effect.Tensions with non-IDPs: Many of the non-IDP residents in Puttalam initially viewed the migrantMuslims from the North as temporarily displaced and extended support to them. Over time, itbecame clear that the IDPs were in Puttalam for the long haul given their inability to return Northon security considerations. The positive attitudes of non-IDPs changed with time. In severalinstances, the non-IDPs are at the same level of poverty as the IDPs; consequently struggles foraccess to limited services (water, health, education) have multiplied. Many non -IDPs viewedIDPs as having encroached on the narrow resource base and receiving dry rations, which werehigher in value compared to the welfare payments received by those non-IDPs below the povertyline. IDP-non-IDP relations deteriorated in certain instances. A few refugee camps were set onfire in 1995 forcing IDPs to relocate to nearby areas.However, tensions have largely ebbed except in the instance of 13 camps out of the 111 surveyedby the Social Assessment. Competition over access to limited resources remains an issue as thedistrict does not receive a supplementary budgetary allocation for public services andinfrastructure on account of the added IDP population. The fact that 94% of IDPs are stillregistered in their places of origin in the North has had a negative impact on the allocation ofdevelopment funds to the Puttalam district. As a result, many IDP camps are under-served interms of basic community services and infrastructure.Institutional Capacity: The institutional capacity to manage a large-scale complex project is aconcern. Project implementation requires partnerships between the Ministry of Resettlement, thePuttalam District Secretariat, the NWSDB, the NWPRD, the concerned local authority andcommunity-based organizations such as the mosque committee, the women’s society and thecamp society. The PPU was recently established as the institutional mechanism to interfacebetween these different agencies.Building and Development Regulations: Local government regulations require a minimum of 10perches of land to be set aside for the construction of a house in a rural council and 6 perches ofland for the construction of a house in a municipal council. Even though, most of the plots in therefugee camps are 10 perches, implementation of the building regulation requiring a minimumdistance of 30 feet between a dug well and a non-septic toilet will pose some difficulty in certain22

camps which depend on independent dug wells. Lack of public/ community land for the provisionof essential services will pose an implementation challenge.Project Design FrameworkObjective and Strategic Framework: The PHP’s objective is to rehabilitate the IDP population ofPuttalam by providing improved housing, water, sanitation and environment management withina comprehensive settlement planning framework. This is intended to achieve sustainable habitatand improve the social and economic integration of IDP communities with non-IDP communities.Home Owner Driven Construction: The PHP’s strategy is to provide cash grants to build houses.Its operational scope is to target those IDP families living in poor housing conditions asdetermined by the UHNCR survey. The cash grants would be used to replace all temporary andcomplete all partly-completed houses through the homeowner driven strategy. Those IDPs withpermanent houses would not receive the cash grants except to build sanitation units if required.Basic community services such as drinking water, sanitation and environment management wouldcover all IDPs and select adjacent non-IDP communities.Inclusiveness: The sequencing of refugee camps for housing assistance was done on the basis of atwo stage screening process. All 141 IDP camps were ranked using social indicators thatmeasured housing vulnerability. They were then screened in terms of environmental feasibilityfor the purpose of phasing the investment. Based on this ranking, 20 camps were identified forPhase 1 of the PHP.Building on Past Projects: The design of the housing component is based upon the successfulIDA-financed NEHRP. It is premised on the homeowner-driven approach that entails the phasedrelease of cash grants upon meeting construction milestones as verified by the technical officers.The water component is based on the IDA-financed Community Water Supply and SanitationProject (CWSSP) while the environmental improvement component is based on the IDA-financedNorth East Irrigated Agriculture Project (NEIAP). IDA funds are only available to meet theconstruction needs of households currently living in temporary and partly-completed houses inrefugee camps. This meets 55% of the housing needs of the Puttalam IDPs. The funds are notsufficient to meet the needs of married children living with their parents in refugee camps.Flexible Implementation Framework: The phased implementation timeline was designed basedon the implementation capacity of the PPU. The quarterly IDA supervision and mid term reviewwould revisit the Government timeline and targets if necessary.Comprehensive Settlement Planning: Provision of basic services to the IDP community would beprovided within a comprehensive settlement-planning framework. This would synchronize theneighborhood grid, water supply, sanitation and environment management. The preparation ofphysical development plans and the formulation of implementable development regulationsrequire community consultation. Infrastructure planning and technical support would take placethrough community participation. Community mobilization would be required to acquire land forthe provision of common services in the short run. Government budgetary allocations and costrecovery would be essential to ensure service sustainability in the long run. Local communitieswould be mobilized to procure building materials in bulk if required and skilled labor.Land Rights as a Cornerstone of Housing Development: Since investment in housing is spatiallyfixed, the legal title to land is a precondition for the receipt of the cash grant. The PHP wouldvalidate a range of documentation including deeds, leases, grants, permits, notarized land23

allotment letters, land grant certificates by the provincial land commissioner, etc. Survey plansare not required under local law. Opportunity to challenge a potential beneficiary’s claim to aparticular parcel of land is inbuilt into project design through the Land Task Force and thegrievance redressal mechanism. The Land Task Force would help regularize title to land.Prescriptive rights on encroached private land are not acceptable since it compromises theproprietary rights of the original landowners.Ancillary Infrastructure: Provision of drinking water, sanitation and environmental managementis intended to ensure the sustainability of the housing project. The non-IDP villages wereincluded to better integrate IDPs and non-IDPs through shared development activity.Financial Assistance: The PHP would meet the housing needs of all original IDP householdswithout permanent housing. It would provide water, sanitation and road infrastructure to all IDPsand adjacent non-IDP villages where required. In other words, the PHP would finance theconstruction of 5,653 houses, complete 2,232 partly- completed houses, provide drinking water to16,875 IDP and non-IDP families, and construct 9,885 latrines. IDA would provide US$ 32million to support the project. The Government of Sri Lanka would provide US$ 2.2 million ascounterpart funding in the form of taxes and levies.24

SRI LANKA: PUTTALAM HOUSING PROJECTAnnex 2 Major Related Projects Financed by IDANorth East Housing Reconstruction Program:The joint donor-sponsored Comprehensive Needs Assessment for the North East in May, 2003estimated that the two decade old civil conflict had destroyed or damaged 326,000 houses. 90%of the 144,890 houses owned by IDPs were damaged. The investment required to reconstructhouses in the North East was estimated at US$ 562 million. IDA provided US$ 75 million tosupport the North East Housing Reconstruction Program (NEHRP) in response to this need. TheEuropean Commission co-financed this initiative.NEHRP was intended to reconstruct the destroyed houses of the poorest conflict-affected familiesin the North East. It entailed a cash grant to poor families to reconstruct their homes. Thetechnical assistance provided under NEHRP was designed to better meet the long term housingneeds in the North East through improved construction standards, strengthened housing financeoptions, regularized land title, trained construction workers and improved capacity. IDA fundsunder NEHRP would reconstruct 31,200 conflict affected houses.NEHRP had three components i.e. (i) Housing Assistance; ( ii) Capacity Building; and ( iii)Program Management. The Housing Assistance component consists of a cash grant of Rs 250,000or Rs 100,000 to each identified family to help rebuild or repair their damaged houses. TheCapacity Building component includes technical assistance to ensure construction standards,support to village rehabilitation committees, social and environmental safeguards, thedevelopment of housing finance and augmenting the construction workforce. The support forProgram Management finances technical expertise in the North East Housing ReconstructionUnit, the incremental operating costs and the costs incurred in supervising projectimplementation. The reconstruction of 4,670 houses under Phase 1 of NEHRP is complete. Thereconstruction of 8,800 houses under Phase 2 is proceeding smoothly despite the deterioratingsecurity environment. This was accomplished by targeting divisions where the security situationpermitted construction while deferring other divisions where the security environment was notconducive to civil works. Of the total amount of US$ 75 million, US$ 26.6 million was disbursedas at October 29, 2006. The achievement of Development Objectives (DO) and ImplementationPerformance (IP) is rated satisfactory.Tsunami Emergency Recovery Credit:The tsunami struck Sri Lanka in December 2006. 35,322 people died, 516,150 were initiallydisplaced and 98,000 homes destroyed or damaged. The total cost of relief and reconstruction wasestimated at US$ 2.2 billion. IDA restructured its portfolio and approved a new credit/grant torelease US$ 150 million of which US$ 65 million was for housing, US$ 35 million for livelihood,US$ 33 million for roads, US$ 5 million for capacity building, US$ 8 million for health and US$4 million for contingency. Of the total amount, about US$ 108.4 million had been disbursed as atOctober 29, 2006.The housing component was designed on the lines of NEHRP. The homeowner strategy isprogressing well in the South West. Of the 12,651 fully and partly-damaged houses coveredunder Phase 1 in the divisions receiving IDA assistance in the South West, the reconstruction of95% of the caseload was complete as at September 30. 62% of the reconstruction of the totalcaseload of 23,924 fully and partly-damaged houses in the divisions receiving IDA assistance inthe East was complete. The pace of implementation in the North (caseload of 7,819 fully and25

partly-damaged units) has been hindered by the security environment. The flow of constructionmaterials has been impeded by the closure of the road to the North. The achievement of DO andIP is rated satisfactory. An IDA administered trust fund channels resources of the InternationalFederation of the Red Cross to finance Phase 2 of post-tsunami housing reconstruction. Thispertains to land released for civil works by the re-demarcation of the coastal buffer zone.Second North East Irrigated Agriculture Project:IDA was a pioneer in assisting the North East with the US$ 27 million North East IrrigatedAgriculture Project (NEIAP) in 2000. NEIAP supported community-driven efforts to jump starteconomic activity by helping conflict-affected communities to re-establish at least a subsistencelevel of production and basic services. This was attempted through the rehabilitation of smallirrigation schemes and other investments in the community. NEIAP covered all eight districts ofthe North East and the border villages of Puttalam, Anuradhapura, Polonnaruwa and Moneragaladistricts. The project closed in June 2005. It lead to an increased paddy farming area of 25,764hectares benefiting 33,250 farm families; the refurbishment of 1,294 kilometers of rural roads;and the provision of safe drinking water facilities to 19,400 families amongst other achievements.The achievement of DO and the IP was rated satisfactory.Building on the success of the first project, a follow-up US$ 64.7 million NEIAP-II was launchedin January 2005 to assist another 50,000 conflict affected families in 600 villages. The projectcomponents include (i) village rehabilitation and development; (ii) rehabilitation of majorirrigation schemes; (iii) strengthening farmer organizations and agricultural support services; and(iv) capacity building and project implementation support. The first component includes therepair and improvement of rural access roads to farms and schools, and link roads to markets andtownships. It also entails the construction of drinking water facilities. US$ 5.4 million wasdisbursed as at October 29, 2006. The achievement of DO and IP is currently rated as moderatelyunsatisfactory given weak project management. The project is currently being restructured.Second Community Water Supply and Sanitation Project:The IDA-financed US$ 42 million Second Community Water Supply and Sanitation Project(CWSSP - II) supports the Government of Sri Lanka's Rural Water Supply and SanitationProgram. The project focuses on the North West, the Central and North East Provincial Councils.It is intended to increase service coverage and achieve a sustained use of water and sanitationservices in rural communities through community participation. Community groups wouldcontribute their labor (covering part of the capital costs) to implement the schemes therebyreducing the fiscal burden of service expansion on government. The project attempts todecentralize water and sanitation service provision to local and provincial governments.CWSSP-II finances a share of the capital costs for service improvement in water supply,wastewater drainage and on-site sanitation facilities. Beneficiaries are required to select anaffordable service level from a range of technical options and to manage and implementconstruction works. In addition to contributing to capital costs, they are responsible for theoperation and maintenance of water supply and sanitation systems. CWSSP-II aims to providewater supply and sanitation facilities to 900 villages benefiting around 1 million beneficiaries.The first batch covering 30 villages has been completed and the second batch covering 147villages is nearing completion benefiting a total of 35,000 households. US$ 16.9 million wasdisbursed as at October 29, 2006.26

SRI LANKA: PUTTALAM HOUSING PROJECTAnnex 3: Results Framework and MonitoringResults FrameworkPDO Outcome Indicators Use of Outcome InformationPuttalam Housing Projectwould help integrate the IDPsin Puttalam. It would provide:(i) cash grants to identifiedIDP households to construct or7,885 beneficiary householdshave a habitable home.Percent population in projectarea with access to safe andMeasure long term socioeconomicimpact of the PHP.Assess integration of IDPs intheir preferred location ofchoice.complete their houses; and (ii)provide IDPs and selectedadjacent non-IDP communitieswith access to drinking water,sanitation and environmentmanagement.functioning water supply andsanitation system at closeproximity to household.Intermediate Results Results Indicators for Each Use of Results MonitoringOne per Component ComponentComponent One:Component One:Component One:Identified beneficiaryhouseholds build/completehouses in the allocated amountof time and to specifiedtechnical standards.Component Two:34 water supply systems andsanitation schemes installed ina cost effective manner in 136IDP camps and identified non-IDP settlements.Internal roads surfaced as partof environment managementfor better drainage and floodcontrol in refugee camps.Number of houses inidentified areas constructedwithin a six month time periodand within allocated budget(Rs 250,000 or Rs 100,000).Percentage of cash grantsdisbursed within the six monthperiod and during eachdisbursement phase (i.e.purchase of material;completion of foundation,superstructure and overallcore-house).Component Two:Number and type of systeminstalled.Percentage access to safewater within 200m of thefamily home.Kilometers of roads surfaced.Kilometers of roads in goodcondition in 4 th year of PHP.Year 1-4: Low levels point tocapacity constraints and theneed to address that. Thiswould highlight the need toaddress shortfalls in materialssupply, shortage of skilled andsemi-skilled labor, or capacityconstraints to achieve thedesired target and outcome.Component Two:Year 1-4: Low percentageflags insufficient availabilityof potable water, poorplanning or institutionalcapacity constraints. This willneed to be investigated andremedied.Year 1-3: Low percentageflags institutional capacityconstraints or sidelining ofneed for environmentimprovement.27

Component Three:Adequate capacity availablefor settlement planning,technical assistance andhousing construction.Component Three:Number of settlement planscompleted.Component Three:Year 1-4: Low levels couldflag poor communityconsultation or inadequateforward planning. Thisindicator would be used tomonitor and improveinteraction with targetedcommunities.Component Four:All actors aware of roles andresponsibilities in projectimplementation and complyaccordingly.Number of land titlesregularized by the Land TaskForce (LTFs) and permanentland cadre.Number of IDPs with legalownership of land.Percentage of homeownercompliance with technicalstandards.Component Four:Timeliness of reportingincluding Interim FinancialReports and database to recordfinancial and physicalprogress data.Grievance redressal completedwithin the specified timeperiod.Year 1-4: Indicates lack ofspatial harmony between workschedules of LTFs and projectinterventions and will be usedto improve coordination andtargeting.Year 1-4. Low levels couldflag inappropriate standards,poor communication withhomeowner or inadequatefollow-up by technicalofficers.Component Four:Year 1-4: Use programmanagement system to flagimplementation bottlenecksearly on, pinpoint causes andtake necessary correctiveaction to streamlineimplementation.Year 1-4: Delays revealineffective system orunrealistic time-period toresolve grievances. Data to beused to revise system for thenext round.28

MonitoringThe PPU would monitor project output, impact, outcome and finances. The monitoring of outputswould not only cover the number of houses constructed and water schemes completed, but wouldinclude the stages of construction. This would be linked to the phased disbursement of thehousing support cash grant.The design of the PHP includes several mechanisms to monitor implementation progress: A continuous social impact assessment (CSIA) would monitor the social impact andoutcomes of the PHP using qualitative methodologies. It would interview IDPs, adjoiningnon-IDP communities, beneficiaries and NGOs to elicit their feedback on projectimplementation. An experienced firm hired for the task would undertake the exercise andreport directly to the Secretary, Ministry of Resettlement in his capacity as chair of the PSC.The CSIA findings would be cross-verified using status reports of the PPU and the ThirdParty Technical Audit.An Environmental Audit, outsourced to a firm, would assess whether implementation hadcomplied with the Environmental Management Plan and IDA safeguards, during the midtermreview of the PHP.The PPU would submit quarterly status reports on the number of cash grants disbursed, thenumber of houses at each level of construction, number of grievances per IDP camp or non-IDP village, number of grievances resolved per camp or village, compliance with technicaland engineering standards, the number of piped water connections, wells and hand pumpsprovided, and kilometers of internal roads surfaced.A Third Party Technical Audit outsourced to a firm would independently monitor housingconstruction on a sample basis to ensure that civil works comply with the PHP’s technicalguidelines and standards.Interim Financial Reports would record information by expenditure category, projectcomponent and expenditure type. It would include both financial and physical progress data.IDA would undertake intensive hands-on supervision to address implementation difficulties.A full supervision mission would take place twice a year with some staff available for morefrequent supervision if called for.The PPU would be responsible for quarterly reporting. It would design the monitoring reportstructure with relevant consultants. The reports would contain the information listed below:Beneficiaries and Refugee Camps Name of the Refugee Camp Number of households Number of temporary and partly-completed houses Percentage of women-headed householdsGrievances Number of grievances disaggregated by refugee camp Name of IDP household that submits the grievance29

Time taken for grievance procedureRulingConstruction Status of Refugee Camps Name of the refugee camp Number of households with resources on site at a particular date Number of households at window level at an identified date Number of houses at lintel level on an identified date Number of houses with completed superstructure on an identified date Number of completed houses at an identified date Delays (if any) and causes for delay Number of water supply schemes categorized by type Kilometres of internal roads upgradedReporting RequirementsThe PPU would develop a simple database by November, 2006 to facilitate project recording andreporting. The PPU would prepare Quarterly Progress Reports for the PSC and IDA. Thesereports would cover physical progress, fund utilization and financial management (commitment,disbursement) of each component, achievement of performance targets, procurement and issuespertaining to the continuous social impact assessment. It would submit the quarterly progressreports to IDA and PSC.For purposes of data collection and reporting, the PPU would work closely with the NWSDB andthe NWPRD. The PPU would monitor the Grievance Redressal Mechanism and the Land TaskForce. Each of the concerned agencies would prepare reports on their activities based on theformat agreed with the PPU. The PPU would revalidate and analyze the data for accuracy,consistency and completeness. It would submit the quarterly reports to IDA 20 days after the endof each quarter.30

Arrangements for results monitoringYear TargetsData Collection and ReportingOutcome Indicators Baseline YR1 YR2 YR3 YR4 Frequency and Data CollectionReportsInstrumentsUpgrading refugee camps into 141 refugeeAnnuallyStatus Report;sustainable habitcamps withoutCSIAhousing, drinkingwater, adequatesanitation andenvironmentmanagementResults Indicators for EachComponentComponent One:# of housing units constructed 1,0931,463 2,201 2,031 2,190 QuarterlyStatus ReportResponsibility for DataCollectionPPUCSIA firmPPU# of cash grants disbursedNoneQuarterlyStatus ReportPPUTime taken for grievances to beredressedComponent Two:Number and type of water systeminstalledPercentage access to safe waterwithin 200m of the family homeKilometers of roads surfacedKilometers of roads in goodcondition in year 4 of the projectComponent Three:Number of land related issuesresolvedComponent Four:NoneNoneNone11watersupplyschemesserving78refugeecampsYearlyQuarterlyQuarterlyQuarterlyEnd of project statusreportQuarterlyStatus Report;CSIATechnical ReportsStatus ReportStatus ReportsStatus Report;CSIAPPUCSIA firmNWSDBPPUPPUNWPRDPPUPPUProvincial Land CommissionCSIA FirmPPU% homeowner compliance withtechnical standardsQuarterly Audit Report Technical Audit31

Sri Lanka: Puttalam Housing ProjectAnnex 4: Detailed Project DescriptionThe PHP is intended to provide housing, access to drinking water, sanitation and environmentimprovement to IDPs who have chosen to make Puttalam their place of residence. It would helpintegrate them with non-IDPs there. The PHP would have four components: (i) housing; (ii)water, sanitation and environment improvement; (iii) technical assistance and capacity building;and (iv) project management. It would target all 141 refugee camps and certain adjoining non-IDP villages in the Puttalam district.The housing component entails cash grants to IDP families without a permanent house toconstruct a house on land that they own in the 141 refugee camps. This would entail thecompletion of 2,232 partly-completed houses and the construction of 5,653 houses to replace thecurrent temporary thatched houses over a four-year period. The water, sanitation and environmentimprovement component would provide such services to refugee camps without such facilitiesand to adjacent non-IDP villages that may require such assistance. Environment improvemententails internal road and drainage works to mitigate the risk of flooding. The technical assistanceand capacity building component would support the Government in the implementation of thePHP. It includes support for comprehensive settlement plans, building regulations, continuoussocial monitoring, regularization of land title, technical audit of housing construction and overallcommunication. The project management component would finance the PPU, operationalexpenditure and the grievance redressal mechanism. Please see Annex 1 for backgroundinformation on the PHP.Project componentsA. Housing Assistance (US$ 16 million)An IDP household would have to meet certain criteria to be entitled for housing assistance. (i) Itmust possess title to the land on which it proposes to build the house. (ii) The head of thehousehold and majority of the household members must live in the refugee camp in Puttalam(according to UNHCR Survey 2006 and SA 2006). (iii) It should not have a permanent house inplace of displacement and should not have received similar housing assistance in the place oforigin. (iv) It should possess land in the camp or have had a temporary or partly-completed housewithin a camp as at April 2006 (according to UNHCR Survey). Prescriptive title deeds would notbe acceptable and households within a selected camp without land title would not be eligible forassistance. All IDP households however would receive water and sanitation.Eligible households would be entitled to one of two cash grants i.e. a grant of Rs.250,000 to helpconstruct a permanent house or a grant of Rs.100,000 to complete a partly-built house. TheUNHCR census would be considered the baseline to determine eligible families for housingassistance. A Housing Assessment Survey is currently underway to verify the number of familiesthat had regularized their title to land that they possessed as at April 2006. The latter surveywould be used to roll out implementation. It would help validate which eligible households in anidentified refugee camp would be entitled to the full or partial cash grant.The PPU would transfer the cash grant to the joint 23 bank account of the beneficiary household infour installments to construct a permanent house or two installments to complete a partly-23 i.e. in the name of both husband and wife, except for single-headed households.32

completed house. Disbursement would be contingent upon meeting pre-specified constructionmilestones. The Interim Financial Reports would measure disbursement progress.During appraisal of refugee camps selected for Phase 1 of the PHP, it was noted that the numberof temporary houses had grown by 16% when compared to the estimate provided in the UNHCRsurvey. The IDPs had been encouraged to put up new thatched huts on the eve of the housingproject in order to be entitled to the cash grant. It was agreed therefore to use the UNHCR Surveyconducted in April 2006 as the baseline to determine eligibility for housing assistance.Sequencing of Refugee Camps for Implementation:The phasing of refugee camps for housing support was done on the basis of a two stage screeningprocess. Relying upon UNHCR data, all 141 IDP camps were socially ranked using threeindicators i.e. (i) percentage of temporary houses in a camp; (ii) percentage of families possessingland in a camp; and (iii) percentage of families in a camp who opted to settle in Puttalam. Theseindicators were assigned scores of 75, 15 and 10 respectively in keeping with communityperceptions as to their relative weight. The socially ranked camps were then screened in terms ofthree environmental indicators i.e. (a) flooding, (b) land surface and (c) quality of environment.25 camps were thus identified for Phase 1 of the PHP. Based on the availability of social andenvironmental profiles, 20 camps were appraised and would constitute the first set of refugeecamps for implementation. Five of the twenty camps would be taken up for funding in the latterpart of the Phase after the EIAs and SIA’s have been completed. The beneficiary households havebeen identified for receipt of the cash grants. The beneficiary list would now be reviewed by theDistrict Secretary and the PSC. The PHP aims to cover all refugee camps for housing assistanceand the provision of water, sanitation and environment improvement. The ranking of camps wasdone with the intent to phase the PHP over the four year implementation period. The criteria weredefined after consultation with the communities.IDP households living in environmentally unsustainable camps might need to be relocated on avoluntary basis. The Government agreed to provide alternate land to such IDPs who had land asat April, 2006. An Environmental Impact Assessment would be carried out in the proposed newsites and such communities would be accommodated in the third and fourth year of the PHP.Those with a permanent house would be excluded from the housing assistance.The PPU relied on the following studies to rank refugee camps.i. The UNHCR supervised a census of refugee camps in Puttalam in April, 2006. The surveyprovided detailed information on IDPs living in refugee camps. This included the number ofrefugee camps, number of families in each camp, their level of education, vulnerability,employment status, obstacles to return, extent of land ownership and title to such land, typeof houses and other relevant socio-economic information.ii. The PHP sponsored a Social Assessment (SA) of IDPs in Puttalam which mapped the typeof housing, land ownership, possession of title, livelihood opportunity, socio-economicprofile, social capital, and the relationship between IDPs and non-IDPs. It did this throughfocus group discussions and beneficiary interviews using participatory rural appraisalmethods in 111 refugee camps.iii. The Environmental Assessment (EA) reviewed the suitability of 111 refugee camps forhousing construction. The PPU used a questionnaire - Environmental Checklist – to obtainbasic data. This was followed by an in-depth examination of environmental suitability in33

each camp. The report provided important information such as drainage conditions, solidwaste disposal, sanitation facilities and the threat of flooding. This was a deciding factor forthe sequencing of refugee camps for housing assistance.Since the PHP aims to provide a minimum quantity of potable water supply (40 lpcd) to allfamilies in the 141 refugee camps and to en-route non-IDP villages, access to water and quality ofexisting water sources were not factored in while ranking camps for implementation purposes.The Government used these reports to phase out project implementation. Since the beneficiariesof the housing support cash grants and of water, sanitation and environment improvement are notidentical, the spatial coverage of the two components may not coincide in the implementation rollout. However, the PHP would make a conscious effort to ensure that camps supported under thehousing component would receive water, sanitation and environment mitigation early on.The PHP strategy is premised on the refugee camp and not on the individual household.However, individual IDP households would still need to demonstrate ownership of land withclear legal title to be eligible. To resolve land related issues, the PHP would support theestablishment of a Land Task Force under the Chairmanship of the Puttalam District Secretary.The Task Force would endeavor to regularize public land grants, validate property documents andsettle pending private land deals and title.The PPU would identify refugee camps for subsequent phases of the project in consultation withthe Puttalam District Secretariat. The PSC in Colombo would review and approve each phase.The PPU would publicize the criteria for the selection of refugee camps in each phase, theidentification of beneficiaries, details on the cash grant scheme and disbursement procedure. Thecommunication campaign, to be monitored by UNHCR, would ensure transparency,accountability and allow IDPs to avail of the grievance redressal mechanism.Housing Assessment SurveySince 25% of the housing caseload falls under the partly-completed category, it was necessary toverify the precise physical improvement required. This was done through a Housing AssessmentSurvey conducted by the PPU. While a permanent housing unit was defined in keeping with thecore housing concept used by the Government for the conflict and tsunami housing programs, anyunit not falling within the minimum physical specification of a permanent house and definition ofa temporary thatched house was considered a partly-completed unit. The Housing AssessmentSurvey determined the extent of physical improvement required for the partly-completed housesbe it a permanent roof, additional room (s), toilet, permanent flooring/plastering, etc. Houses withpoor foundation that require reconstruction were categorized as a temporary unit. The HousingAssessment Survey provided a template for project implementation with basic information suchas name and identification number of the beneficiary, bank account, type of land ownership, typeof house and type of physical construction required in the case of partly-completed houses. Itwould be the baseline document in each beneficiary file.Project ImplementationPhysical Construction Requirement A permanent housing unit is defined as one with:A minimum plinth area of 500 square ft,Two safe (closed) rooms,Kitchen (internal or external),34

Veranda,Permanent roof,Permanent floor/internal plastering, andIndependent toilet.Due to the high cost of construction, the cash grant may not be adequate to complete the house asper the above specification. Under the homeowner driven housing framework, beneficiaries arelikely to complete the house using their own labor and savings over time once the foundation,roof and basic structure are complete. Hence a completed house for the purpose of technicalcertification would be defined as a unit with 500 square ft foundation, one safe room, permanentroof, kitchen and a safe toilet instead.For those vulnerable households that may find it difficult to construct their homes withoutsupport, the PPU and the camp/mosque committee would provide assistance to organize labor,construction material and technical support.Table 1: Cash Grant Payment StructurePayment/ InstallmentCash Grant forTemporary Houses(Rs. 250,000)Amountin Rs.Physical ProgressInstallment 1 50,000 Mobilization advance; sitepreparation, materials on site andearthwork for foundation withminimum plinth area of 500 squarefeetInstallment 2 60,000 Completion of walls and runninglintel with door and window framesInstallment 3 80,000 Completion of super structure andpermanent roofInstallment 4 60,000 Completion of permanent floor,internal plastering, window and doorslashes/construction of toiletCash Grant forPartly- CompletedHouses(Rs. 100,000)Amountin Rs.Payment TriggersConstruction of a PermanentHouseCertification by Technical OfficerCertification by Technical OfficerCertification by Technical OfficerCertification by Technical OfficerPhysical Progress Completion of Partly-Completed House(Home improvements identifiedby the housing assessmentsurvey)Installment 1 50,000 Mobilization advance, materials on Certification by Technical Officersite, work beginsInstallment 2 50,000 Completion of civil work Certification by Technical OfficerTechnical Issues in Project ImplementationStructured Physical Development: The need for the planned development of camps is critical inthe context of rapid population growth. Most camps would experience a rapid physical expansionin the years ahead given that most dependent families comprising 42% of the total caseload preferto purchase lands in the vicinity of existing camps. Further, 41% of the IDP population arechildren under the age of 18. Most of the camps lack basic community services such as schools,health centers, play grounds and land for locating utilities. The planned development of the campswith land set aside for ancillary infrastructure warrants additional land allocation either throughland assembly, plot adjustment, purchase of new land by the communities or land acquisition by35

the government. The settlement plans would provide the guidelines for the planned developmentof refugee camps.Environment and Housing Construction: Environmental conditions such as sandy soil and lack ofdrainage impact on the technical aspects of construction. These include flood prone areas,flattened/settled sandy areas, unsettled sand dune areas and saline/marshy lands affected by theintrusion of seawater. The technical requirement for construction would be different in eachtopographical and soil condition. It is important that the PHP specify the technical guidelines forimplementation purposes. The plot level land filling, and firm and ringed foundation withadequate plinth height would mitigate some of these risks. Land leveling and development ofwind barriers in the form of fences and vegetation would reduce the risk of moving sand/ soilerosion that threaten the foundation along the coastal belt.The high cost of environmentally appropriate construction might impede the timely completion ofnew houses. The PPU would define the structural guidelines and technical specifications ofconstruction for technical officers. It would train local masons on improved construction practicesunder the technical assistance component.Resource Management: Puttalam district has easy access to a variety of building materials such ascoconut timber, gravel, sand, cement, tiles and skilled labor. The local community is confident asto the availability of masons/carpenters, and their ability to contribute in cash and kind. Campleaders and mosque committees would help mobilize communities to build all housesconcurrently.Technical Supervision: The PPU has mobilized core technical officers for supervision. Additionaltechnical staff would be mobilized either through the National Housing Development Authorityor direct recruitment. Implementation of operational procedures, physical progress audits andcertification, third party technical audit and interim financial reports that track disbursementlinked to physical progress etc would support transparency and efficiency in technical supervisionand project management.Phased Implementation Process:The PPU would implement the PHP in a phased manner over four years. The PHP would startslowly for the first year and increase the annual target in succeeding years. Houses would bephased with an initial target of 1463 units in the first year (1,310 new houses and 153 partlycompletedhouses), 2,201 units in the second year (i.e. 1,790 new houses and 411 partlycompletedhouses), 2,031 units in the third year (1,444 new houses and 587 partly-completedunits), and 2,190 units (1,109 new houses and 1,081 partly-completed units) in fourth year.Implementation would be based on a rolling plan to ensure continuity in the pace of housingconstruction. When the PHP completes 50% of the target in any particular phase, the PPU wouldinitiate the next phase to ensure momentum. 24 Budgetary provision would be made in a flexiblemanner to allow the roll over of annual targets.B. Water, Sanitation and Environment MitigationThis includes two sub-components, i.e. water supply/sanitation and drainage/internal roads. Thelay out plan for the two sub-components will be determined through community consultations (asdescribed below).24 Note that this will have implications for disbursement and funds flow for the special account.36

Water and Sanitation (US$ 12.5 million)Background: Puttalam is a coastal district situated in the north-western dry zone of Sri Lanka. Ithas a flat topography and comprises two regions, namely the Kalpitiya peninsula and thePuttalam mainland. The major use of land in both regions is for agriculture with fishing andprawn farming constituting prominent economic activities in the lagoon and coastal strip. Thearea has a dry climate with an annual rainfall of about 15 to 30 cms. This is largely receivedbetween November and January. There are no perennial rivers in the district. Water resources inthe area pose a challenge in terms of its extraction for household, agricultural and commercialuse.People depend entirely on groundwater reserves as the source of freshwater in Kalpitiya. Theseexist in both shallow coastal aquifers and underlying deep Miocene limestone. Kalpitiya has awell developed shallow aquifer which is easier to access, amply available and cheaper to exploitand hence represents the most important source of water. However, the rapid changes in land usepattern in the peninsula with intensive cultivation and prawn farming has undermined the futurepotential of such groundwater resources. High use of fertilizer along with the continuousapplication of water on largely sandy soils in the agricultural fields overlying the freshwateraquifers poses a risk of nitrate build-up in the groundwater. Studies indicate that nitrateconcentration in many of the irrigation dug wells has exceeded the WHO recommended limit.The people, especially those living in refugee camps close to cultivated areas, face a health risk ofconsuming nitrate contaminated water. There is no other water source available. In addition, thelowering of the water table in certain areas due to over-extraction for irrigation and aquaculturepurposes leads to salinity intrusion within the miocene limestone aquifer. This limits theavailability of water for future development.Except in the town which receives water from the Mee Oya basin, water is obtained from dugwells and hand pumps in the Puttalam mainland. In addition to the scarcity of water, salinitylimits the use of available water sources in the mainland in areas close to the lagoon. WhilePuttalam has a high water table, freshwater is available in certain areas only at very deep levelsmaking it hard to extract. IDPs face severe hardship to obtain potable water for which they haveto either travel far or await bowser supplies of treated water from the NWSDB. These suppliesare often inadequate.A source of groundwater contamination is the improper disposal of human excreta. Highpopulation density in the refugee camps and the shallow water table in most parts of the area giverise to cross contamination. This leads to bacterial pollution of the groundwater. Theinappropriate design of excreta disposal arrangements, improper siting of toilets and inadequatemaintenance in refugee camps are contributory factors. Moreover, many toilets and dug-wells inthe vicinity become unusable during the wet season.It is important that an adequate water source with acceptable water quality and proper sanitaryfacilities is provided to all refugee camps considering the potential health risk posed by the waterand sanitation situation. The objective is to identify cost effective and environmentallysustainable alternative sources and options of groundwater development despite limitations in thearea.NWSDB undertook a concept feasibility study to map groundwater sources, water quality,availability, safe yield and suitability of various methods of excreta disposal using existing37

information. The field investigation report 25 to identify areas with potable groundwater resourcesfor the supply of water to refugee camps in Kalpitiya pinpointed potential areas with good qualityand quantity groundwater. This was used to identify the sub-projects especially in Kalpitiya. Theexperience of the NWSDB in Puttalam from its implementation of the Asian Development Bank(ADB) financed 3rd Water Supply and Sanitation Project was factored in the study.As mentioned, indiscriminate extraction of groundwater would irreparably damage the aquifer bysaline intrusion. Utmost caution is therefore needed to develop an extraction plan. On one hand,the resources are to be conserved for sustained availability while on the other they are to beprotected from contamination and saline intrusion. Shallow tube wells, protected dug wells, wellswith horizontal laterals and infiltration gallery are the most appropriate intake source. The drawdown during pumping will have to be maintained at a very small value to avoid up-coning ofsaline water from below.As agreed at appraisal, the per capita per day supply of 40 liters would be used for all refugeecamps in rural areas. The maximum haul of water to the dwelling of any user would not exceed200 meters. For refugee camps located within the urban limits, standards followed for theconcerned urban areas shall be followed. There may be a couple of refugee camps where thepoint source may be appropriate. But this can not be confirmed without a detailed study of theimpact of excreta disposal.A water-borne sewerage system is required to reduce the risk of pollution of groundwater to aminimum. Examples include shallow sewerage, small bore sewer with appropriate treatment anddispersal system (like stabilization pond, constructed wetland, land application). Due to thescattered nature of development and the lack of skills for operation and maintenance of suchsystems, these will be used where no onsite solution is feasible. As regards the onsite solution abuilt-up pit could provide partial answer to a high seasonal water table, where the soil depth of atleast 2 meters could be provided between the pit floor and the water table 26 .Description of subcomponent and Cost estimatesWater Supply. The PHP categorized (i) refugee camps that can be covered by stand alone watersupply and sanitation systems and (ii) camps that need to be clustered for technical and costreasons. The PHP would provide water and sanitation to 136 refugee camps and select non-IDPvillages. UNICEF would cover 5 refugee camps. Where services would be provided throughconnecting pipelines, existing permanent houses which would otherwise not be entitled forhousing assistance would be brought under the local water and sanitation sub-projects. Thepopulation living in the vicinity of the water source (off-camp source) and villages en route to thetransmission pipe would be included under the PHP where necessary to ensure wider communityparticipation in sustainable water supply.Of the total of 36 sub-projects for water supply, 12 would be confined to one refugee camp each.Each of the remaining 24 sub-projects would cover more than one refugee camp depending uponproximity, water availability, cost economy/efficiency and operational feasibility.25 Identification of areas with potable groundwater resources for water supply to the proposed resettlements fordisplaced communities in the Kalpitiya area of Puttalam district; Field Investigation Report; Ground WaterInvestigation Section, National Water Supply and Drainage Board, and Department of Geology, University ofPeradeniya, July 2006.26 The other option is the dry compost latrine. Obviously latrine of this type cannot be introduced without an enormoussupporting effort in communication, education and evaluation to ensure that they are being properly used.38

UNICEF would help instill piped water supply to five refugee camps in the Puttalam and Mundaldivisions, and rain water harvesting in two camps in the Kalpitiya division. NWSDB hascommenced work in these camps. These are expected to be commissioned by July 2007.The thrust of the IDA-financed program would therefore be 34 drinking water sub-projects thatwould cover 136 welfare centers and adjoining non-IDP villages on a cluster basis. On the basisof preliminary estimate of cost (August 2006 prices) for each type of sub-project and the averageinvestment cost per family, the aggregate base cost of water supply schemes worked out to be Rs.822 million:SRI LANKA: PUTTALAM HOUSING PROJECTWater Supply Subcomponent: Cost Estimate (August 2006 Prices)Type of Sub-Project Number Welfare Centers Additional Total Average Estimatedof Number Families Families Families cost/family Base costSub-Project (Percent) (Rs. '000) (Rs Million)I. Each scheme to cover one Welfare Center1(a) Dug well based scheme 2 2 63 5 66 48 31(b) Tube well based scheme 4 4 313 5 329 45 151(c) Well water needing treatment 0 0 0 5 - 55 -1(d) By expansion of exisitng scheme (Rural) 1 1 49 5 51 20 11(e) By augmentation of exisitng scheme (Rural) 0 0 0 5 - 30 -1(f) By augmentation of exisitng scheme (Urban) 1 1 22 5 23 50 11(g) Source not identified at appraisal 2 2 76 5 80 70 6Total 10 10 523 5 549 47 26II. Each scheme to cover a cluster of Welfare Centers2(a) Dug well based scheme 5 40 4,238 25 5,298 45 2382(b) Tube well based scheme 8 41 3,941 25 4,926 42 2072(c) Well water needing treatment 2 16 1,095 25 1,369 55 752(d) By expansion of exisitng scheme (Rural) 1 2 83 25 104 20 22(e) By augmentation of exisitng scheme (Rural) 1 2 111 25 139 30 42(f) By augmentation of exisitng scheme (Urban) 4 18 1,848 25 2,310 60 1392(g) Source not identified at appraisal 3 7 1,745 25 2,181 60 131Total 24 126 13,061 25 16,326 49 796Grand Total 34 136 13,584 24 16,875 49 822Assumptions#1: Non-IDP families that are to be catered to in the host GND, source GND (where the source is located in another GND) and familiesresiding enroute the transmission pipeline is taken under column "Additional Families".Sanitation. The PHP would finance excreta disposal arrangements if required for all drinkingwater beneficiaries. In the design of the sanitation subcomponent, consideration was given tosanitary protection of the shallow sand aquifer especially in Kalpitiya by discouraging theconstruction of pit latrines. The housing support cash grant includes assistance for theconstruction of latrine. Beneficiaries would be encouraged to use a system out of therecommended ones i.e. built-up pit, dry compost latrine. All those IDP families who receivehousing assistance would construct an environmentally appropriate latrine. In order to ensure thesustained availability of potable quality groundwater in the Kalpitiya peninsula, the aquifer willhave to be protected from sewage contamination. The PHP would finance the construction of anadditional 2,000 sanitation units for non-recipients of housing assistance. Rs. 50 million has beenset aside for this purpose. In total, the PHP would construct 9,885 latrines.Operation and MaintenanceConsistent with the National Policy for Rural Water Supply and Sanitation, the provision of waterand sanitation would be community-based. It would be operated and maintained by thecommunity. Exceptions would be considered on technical and operational sustainabilityconsiderations if:The water source is located away from the village/division;39

One source serves multiple communities; andComplex water/sewage treatment process which the community may not be able tooperate and maintain efficiently.Environment Mitigation, Drainage and Internal Roads (US$ 3.5 million)The participatory needs assessment carried out as part of the SA of 111 refugee camps revealedthat drainage and internal roads were not a high stated priority in several camps. The refugeecamp residents did not view roads, drainage and associated environmental problems as pressingsocial needs. The SA concluded that 62 percent of the access or internal roads were in goodcondition while 32 percent were in ‘fair’ condition. The need for better roads and drainage wasranked only 8 th and 10 th respectively among the top 16 issues raised by IDP communities.However, the environmental assessment of the 111 camps presented a different picture. Ithighlighted environmental issues that were a result of flooding and lack of proper drainage. Theproposed PHP would therefore allocate funds for the mitigation of priority environmental issues.The EA recommended that poor drainage/flooding be addressed as an environmental mitigationmeasure. The poor condition of roads and the drainage system was linked to flooding. Civilworks would ensure that roads within refugee camps do not contribute to environmental hazardssuch as water logging and flooding by rainfall ponding and runoff. Road works would be limitedto ensure that there would be a minimal collection of water on road surfaces and drainage tocollect runoff in camps where flooding is reported to be of concern.Site-specific Environmental Management Plans (EMPs) along with Survey Plans and the PhysicalLayout Plans/Neighborhood Plans of each camp would determine the existing condition ofinternal roads and needed mitigation measures of road and drainage system-related environmentalhazards. Upon completion of these plans for each phase of the PHP, the North West ProvinceRoad Department (NWPRD) would review the site survey to prioritize the roads identified forimprovement. NWPRD would be contracted to prepare the design and implementation plans forthe roads and drainage improvement. The PPU would contract out the actual work which mayinclude community contracting depending on the nature of work. Given the high unemploymentin refugee camps and surrounding non-IDP communities, community contracting isrecommended to channel funds to the rural poor and create a sense of ownership.C. Capacity Building and Monitoring (US$ 785,000)This will include:Housing Assessment SurveyComprehensive Settlement PlansLand Task ForceContinuous Social Impact AssessmentTechnical AuditCommunications CampaignSkills TrainingEnvironmental Audit40

Housing Assessment Survey: Please see description in page 34.Comprehensive Settlement Plans: As described in page 35, the PPU would prepare settlementplans for all environmentally sustainable refugee camps. This would include: (a) preparation ofsurvey/base plans for all refugee camps, (b) improvement of internal road and drainage segmentsto mitigate environmental problems, (c) preparation of physical lay out plans (neighborhoodplans) for all camps to structure their future growth and development, (d) preparation ofenvironmental management plans for camps to mitigate critical environmental risks, (e)preparation of technical specifications for building houses such as plinth level, type of foundationand other critical technical specifications to ensure stability of the building, and (f) preparation ofmanagement action plans for service integration with the refugee camps and non-IDPcommunities within the GN Divisions.Land Task Force: Land ownership is not a serious issue in most instances. IDP land ownershiphas shown a significant increase over the past few months. While the UNHCR supervised surveyin April, 2006 recorded that 55.5% of the IDP families (i.e. 8,587 families) had legal title to theirland, the proportion with title to land has increased since then. In addition to common landdocumentation such as Deeds, Permits, Grants, and Lease, documents such as Promissory Notesfrom the Land Commissioners in the case of government lands and Notarized Allotment Lettersfrom the Lawyers supporting the registration of private lands were found. The Land Task Force(LTF) established by the District Administration will examine the legality of these documents andwhere possible regularize title to land.Non-contestable title to land is a pre-condition for housing assistance. The families in the campsselected for Phase 1 either reside on private land or on Land Reform Commission (LRC) land. Incamps on privately-owned land, families bought such land on a collective basis and distributed itamongst themselves. They consequently have title. Government needs to ensure that these arenon-contestable deeds. The Government would need to legally transfer title to land in thoseinstances of IDPs living on LRC land.The Ministry of Resettlement had taken action to address land issues through the creation of aLTF consisting of the District Secretary, the Commissioner of the Secretariat for NorthernDisplaced Muslims, a Surveyor ( District Secretariat, Puttalam), a Land Officer, a Land Utilityand Planning Officer and the relevant Divisional Secretariat. Furthermore, the NEHRP LTF wasto provide training to the Puttalam LTF. The scope of the LTF is the refugee camps and adjoiningnon-IDP villages.Continuous Social Impact Assessment: Please see page 29 for a description of this activity.Communication Campaign: A vigorous communication and social marketing strategy isnecessary to manage reputational risks, facilitate streamlined implementation and ensure thatproject objectives are met. While IDPs had a broad understanding about the PHP, they were lessclear about the beneficiary selection criteria and project components. The government proposed acommunications campaign to explain beneficiary eligibility, the homeowner-driven strategy, thehousing support cash grant, the disbursement method, the grievance redressal mechanism andbest practice with regards to water and sanitation. IDA suggests that government undertake threeadditional campaigns, each planned separately and led by a third-party to enable IDPs to betterunderstand the PHP and make an informed decision.The first thrust of the campaign would explain the implications of accepting housing assistance inPuttalam in the context of the right to return, right to future compensation, if any, for forced41

displacement and local residency/voting rights. The second activity would inform non-IDPcommunities of the rationale for assisting IDPs (seen in the context of emergency and conflicthousing) and explain the range of projects targeting non-IDPs. It would highlight the benefits ofthe PHP to the non-IDP communities in terms of an integrated approach to water and sanitation.The communication campaigns would cover IDP and non-IDP communities and civil servants.The third activity pertains to water and sanitation. A well designed communication campaignwould educate people in health, hygiene, water conservation and preservation, rain watercollection/harvesting and appropriate sanitation technology.Technical Audit: The PHP would finance an independent third party audit to ensure thatconstruction complies with minimum technical standards. The consultants would audit a 5%sample of beneficiaries. The exercise would be carried out during construction and would auditconstruction materials used, adherence to technical guidelines, the pace of construction and thequality of supervision. The technical audit would also act as a mechanism to implementmidcourse corrective measures to improve the quality and operational effectiveness of the PHP.Its reports would be submitted to the PSC and the PPU.Protection of water sources: A study of environmental protection of water sources in Puttalamdistrict would be commissioned to identify policy and institutional arrangements for protection ofwater sources.Environment Audit: Please see page 29 for description of this activity.Skills Training: PHP would support the training of 1,000 masons and carpenters to bridge theshortage of skilled construction labor in Puttalam. The proposed training courses would run forfour months in each training site, and would consist of classroom training and supervised on-thejobtraining. The contractor and PPU would enter into a memorandum of understanding (MoU)that these laborers be made available to the refugee camps for part of their apprenticeship.D. Project Management (US$ 1.38 million)The PPU would coordinate, administer and implement the PHP. It consists of a Director, aFinancial Management Specialist, a Social Development Specialist, an Engineer, anEnvironmental Specialist, a Water Specialist, a Communication/IEC Specialist and TechnicalOfficers. IDA would allocate funds to the PPU to cover staff costs, incremental operating costsand goods. Funds would be available for goods, consultancies, and administrative allowances(travel, transport, fuel, food, lodging but not the salaries of civil servants). The component wouldmeet the cost of the grievance redressal mechanism. The incremental operating costs categorywould reimburse expenses incurred by the NWSDB and the NWPRD to date.42

Project Costs by ComponentsA. HousingConstruction-CashGrantB. AncillaryInfrastructure andEnvironmentalMitigation (I+II)B.I. EnvironmentalMitigation/InternalRoadsForeignExchangeFinancingLocalFinancingExcl.TaxesBase CostsTotalBaseCostsDutiesandTaxesAnnex 5: Project Costs (in US$)TotalBaseCosts Inc.TaxesPhysicalContingenciesContingenciesPriceContingenciesProjectPreparationFacilityAllocationTotal CostsTotal ProjectCosts incl.ContingenciesAs %ofTotalCostsIDAFinancing16,043,627 16,043,627 16,043,627 16,043,627 0.47 16,043,627 1.0012,008,824 12,008,824 1,726,324 13,735,147 875,294 1,326,584 15,937,025 0.47 14,210,7022,650,000 2,650,000 397,500 3,047,500 150,000 314,094 3,511,594 0.10 3,114,094FinancingIDAas %ofTotalCounterpartFundsincludingTaxesB.I (a) Capital Cost 2,500,000 2,500,000 375,000 2,875,000 150,000 314,094 3,339,094 2,964,094 0.87 375,000B.I (b) Studies,Design, & SupervisionB.II. Water Supply andSanitationB.II (a) Water-CapitalCostB.II (b) Water-Studies,Design, & SupervisionB.II (c) SanitationCash GrantC. Technical Support forImplementationC.I. Technical Studiesand PlanningC.II. Training andCapacity BuildingD. Project ManagementSupportD.I. Cost of PuttalamProject Unit (PPU)D.II. IncrementalOperating CostsD.III. Equipment-Computer, Furniture,Vehicles150,000 150,000 22,500 172,500 172,500 150,000 0.85 22,5009,358,824 9,358,824 1,328,824 10,687,647 725,294 1,012,490 12,425,432 0.36 11,096,6088,058,824 8,058,824 1,208,824 9,267,647 725,294 1,012,490 11,005,432 9,796,608 0.88 1,208,824800,000 800,000 120,000 920,000 920,000 800,000 0.85 120,000500,000 500,000 500,000 500,000 500,000 1.00 0640,000 640,000 75,000 715,000 70,000 785,000 0.02 710,000500,000 500,000 75,000 575,000 70,000 645,000 570,000 0.87 75,000140,000 140,000 140,000 140,000 140,000 1.001,100,000 1,100,000 112,500 1,212,500 132,466 30,000 1,374,966 0.04 1,035,671450,000 450,000 67,500 517,500 56,537 30,000 604,037 536,537 0.87 67,500350,000 350,000 350,000 38,238 388,238 161,443 0.42 226,795300,000 300,000 45,000 345,000 37,691 382,691 337,691 0.87 45,000TOTAL 29,792,451 29,792,451 1,913,824 31,706,275 875,294 1,459,050 100,000 34,140,618 1.00 32,000,000 0.94 2,140,618% of Total 0.87 0.87 0.06 0.93 0.03 0.04 0.003 1.00 0.94 0.0643

Costs by Expenditure Categories (In US$)Base CostsContingencies Total Costs FinancingProject Costs by CategoryForeignExchangeFinancingLocalFinancingExcl. TaxesTotal BaseCostDutiesandTaxesTotal BaseCosts Inc.TaxesPhysicalContingenciesPriceContingenciesProjectPreparationFacilityTotal ProjectCosts incl.ContingenciesAs %ofTotalCostsIDAFinancingIDAas %ofTotalCounterpartFundsincludingTaxes1. Cash Grants for Housingand Sanitation 16,543,627 16,543,627 16,543,627 16,543,627 0.48 16,543,627 1.002. Goods - CapitalExpenditures 300,000 300,000 45,000 345,000 37,691 382,691 0.01 337,691 0.88 45,0003. Services 1,900,000 1,900,000 285,000 2,185,000 56,537 100,000 2,341,537 0.07 2,056,537 0.88 285,0004. Works 10,558,824 10,558,824 1,583,824 12,142,647 875,294 1,326,584 14,344,525 0.42 12,760,702 0.89 1,583,8245. Training 140,000 140,000 140,000 140,000 0.00 140,000 1.006. Incremental OperatingCosts 350,000 350,000 350,000 38,238 388,238 0.01 161,443 0.42 226,795TOTAL 29,792,451 29,792,451 1,913,824 31,706,275 875,294 1,459,050 100,000 34,140,618 32,000,000 2,140,618% of Total 0.00 0.87 0.87 0.06 0.93 0.03 0.04 0.00 1.00 0.94 0.0644

SRI LANKA – PUTTALAM HOUSING PROJECTAnnex 6: Implementation ArrangementsThe District Secretary is the chief administrative officer of a district in Sri Lanka. A district isdivided into a number of administrative divisions each headed by a Divisional Secretary. ADivision in turn is divided into village clusters, each of which is headed by a villageheadman/woman ( Grama Niladhari-GN). A GN is responsible for delivery of several publicservices to the communities living in his area of jurisdiction called the GN division.The PHP is mapped to the Ministry of Resettlement. This ministry was mandated by theGovernment Gazette of December 8, 2005 with the implementation of programs for theresettlement of civilians affected by the war and provision of essential services for displacedpeople. This is the line agency responsible for project implementation.The Puttalam Steering Committee (PSC) would set policy, monitor project administration andreview beneficiary selection. The Secretary, Ministry of Resettlement would chair the PSC. ThePSC would consist of officials of the Ministry of Resettlement, the District Secretary of Puttalam,the four relevant Divisional Secretaries, officials of the NWSDB and the NWPRD, the ProvincialLand Commission, the United Nations High Commissioner for Refugees and relevant central lineagencies. The PSC would meet every two months.The Puttalam Project Unit (PPU) in the Ministry of Resettlement would implement the project ona day to day basis. The PPU is located in Puttalam while a Senior Project Adviser is stationed inColombo to coordinate operations at the center. The Ministry of Finance and Planning approved21 posts for the PPU. A Director, a Financial Management Specialist/Accountant, a SocialDevelopment Specialist and an Environmental Specialist have been appointed. The PPU hasidentified an Engineer/Procurement Officer, an Information Technology Specialist, a LandSettlement Officer and support staff to complete its cadre. It has recruited four Technical Officersto work with the engineer. The PPU would work with the NWSDB and the NWPRD on thedesign and supervision of the water/sanitation and environmental mitigation/internal road subcomponentsrespectively. It would contract out construction works to in the water subcomponentto private bidders. It would outsource the Communication Campaign, the CSIA, the TechnicalAudit, preparation of Settlement Plans and Environmental Management Plans to localconsultants. However, it would monitor these activities. The PPU prepared an OperationalManual with a detailed implementation plan. The PPU would liaise with NEHRP to ensure thatIDPs who receive housing grant in Puttalam do not receive a second housing grant in Mannar andJaffna in case they opt to return at a later stage.The Technical Officers would certify technical quality as construction proceeds to authorize therelease of the next installment. The Social Development Specialist would address social concernsthat may emerge in the identification of beneficiaries, the possible need to relocate camps onenvironmental grounds and any complaints. He would work closely with camp leaders, mosqueelders and the District Secretariat. The Environmental Specialist would be responsible for overallenvironmental supervision and compliance with IDA environmental safeguards. Participation ofDistrict Environment Officers in environment monitoring would be encouraged to build long termregional capacity.Responsibilities and Functions of the PPU: The PPU would: (i) select beneficiaries; (ii) supervisecivil works and technical certification of construction; (iii) be responsible for fund flow andfinancial management, and (iv) record and report project activities on a regular basis.

Manage and Monitor the Selection ProcessRank refugee camps using social and environment criteria;Undertake the Housing Assessment Survey in refugee camps to revalidate the number ofpermanent, partly-completed and temporary thatched houses for purposes of the cash grantallocation. It would detail the extent of additions needed for a party-completed house;Outsource the communications campaign for each phase of the PHP. Ensure that the PuttalamIDPs are aware of the project procedure and their rights;Publicize the eligibility criteria and beneficiary list;Explain beneficiary selection in public fora;Ensure compliance with national environmental regulations;Technical monitoring. This includes the preparation of relevant documentation for the PSCand IDA; andSupport the grievance redressal process.Physical ConstructionPrepare a material resource plan for each construction cycle to identify material requirementfor a refugee camp;Facilitate bulk procurement of materials for beneficiaries;Monitor civil works using technical officers; andProvide technical guidance and quality control to the homeowner.Fund Flow and Financial ManagementDisburse cash grants to beneficiary bank accounts;Maintain project accounts and ensure utilization of funds for project purposes;Manage the flow of funds;Ensure internal and external audits of PHP accounts;Prepare Interim Financial Reports to comply with IDA reporting requirement; andDevelop computer-based forms and reports to measure and monitor physical progress andfinancial performance.The District Secretariat would review the identification of beneficiaries and non-IDP villages toensure equity and conformity with PHP guidelines. It would be the initial point of contact toprocess complaints relating to non-inclusion in the PHP. It would release technical officers,where necessary, to supervise and certify construction milestones. It would play a significant rolein convening the Land Task Force.A Land Task Force would regularize the legal documentation to land of those who possessed landas at April, 2006 but lacked clear title to such land. It would review and if appropriate regularizeencroachment on unalienated state land and property boundary uncertainty.Water and SanitationThe PPU would invite bids and award contracts. The NWSDB would assist it to implement thewater supply and sanitation component of the PHP under a contract agreement. The scope of theNWSDB services would briefly entail, among other things, the following:46

Preliminary engineering design of water supply and sewerage schemes;Detailed engineering design of water supply and sewerage schemes including relatedscheme specific social and environmental management plans, bills of quantity, technicalspecifications and construction drawings;Proposals for direct contracting for drilling and development of tube wells, externalelectrification and road reinstatement;Bidding documents for water supply and sewerage schemes;Project management support for water supply and sewerage/sanitation schemes. Thiswould entail, among other things, selection of Partner Organization, capacity buildingsupport to Partner Organization and CBOs, preparation of design and constructionguidelines for the sanitation subcomponent, preparation of project management reportsand progress reports;Supervision of contracts for construction, and commissioning of water supply andsewerage schemes;Preparation of standard designs with all necessary documentation for latrines suitable forimplementation in the project area; andAssistance to PPU in implementation and supervision of sanitation units.The beneficiaries would construct the sanitation units themselves. However, the PPU would signoff the specific design which the beneficiary is supposed to construct, and provide constructiondrawings, technical specification, material consumption statement and bills of quantity. The PPUwould supervise construction and ensure compliance with specifications.The implementation of sub-projects for water supply would be taken-up in 2 phases.Phase-1 will consist of 10 sub-projects, targeting primarily to the 20 welfare centers wherehousing construction will be taken-up in the first year. Because of clustering several centerstogether into one sub-project, these 10 sub-projects will actually benefit 77 welfare centers.Implementation of the Phase-1 water supply program will be taken-up soon after the BoardApproval and be completed in a period of about 18 months.Phase-2 will constitute the remaining 24 sub-projects to cover 59 welfare centers andimplementation of these will be taken-up in year 2 and will be completed in a period of about 18months (i.e. 30 months from Approval).The implementation of sanitation schemes will depend upon the response from the non-housingbeneficiaries (IDP or non-IDP) and may take time to build-up demand. However, it is expectedthat a program of constructing an additional 2,000 sanitation units will also be completed in aperiod of 3 years.Grievance Redressal MechanismAll IDP households without permanent houses living on land that they own as at April, 2006 in arefugee camp in Puttalam would be entitled to the cash grant. In the instance that an individualhousehold disagrees with its non-inclusion in the list of beneficiaries, it can complain in writingto the Grievances Redressal Committee headed by the Additional District Secretary, Puttalam.The grievance redressal process would have two steps of appeal:Once the list of beneficiary households is published, the Divisional Secretary, the PPU Director,the Social Development Officer and the Communication Campaign consultant would convene a47

meeting at the refugee camp with the camp committee. The complaints would be submitted inwriting and recorded within a two week period. These records should be computerized andincluded in PPU quarterly reporting. This communication campaign consultant should make thisarrangement known to all refugee camps at the initial communication with the IDPs. TheGrievance Redressal Committee would consist of the Additional District Secretariat, fourDivisional Secretaries and two representatives of NGOs with a presence in Puttalam. The SocialDevelopment Officer would sit in as an observer. The committee would review the complaintsraised. Changes to the list would be introduced if the committee sees fit. There would be a sixweek time-line between the public posting of identified recipients and the ruling of the GrievanceRedressal Committee.Should an individual household concerned remain dissatisfied at being excluded, it could appealto a three person Grievance Redressal Mechanism in Colombo headed by the Secretary, Ministryof Resettlement. The Committee would include the Commissioner-General, Essential Servicesand the District Secretary of Puttalam. A UNHCR representative would be present as an observer.This committee would review the facts once again and have the final word.The CSIA would provide an opportunity for those households with unresolved grievances torecord their views to a neutral outside consultancy firm bypassing the district and centraladministration for possible consideration at the next phase of construction.48

Executive SummaryPUTTALAM HOUSING PROJECTAnnex 7: Financial Management Assessment ReportThe Ministry of Resettlement would have primary responsibility for financial management. ThePPU an autonomous unit under the Ministry would carry out all project-related financialmanagement activities and would ensure that the financial management arrangements areimplemented to the satisfaction of the Ministry and IDA through the duration of the PHP.The overall Financial Management arrangements of the PHP would be satisfactory once thespecified weaknesses are addressed. The manual systems established by the PPU would provide,with reasonable assurance, accurate and timely information on the financial operations of theproject. The PHP accounting procedures would be governed by the government regulations andthe project Financial Management Manual. The PHP would be subject to a continuous internalaudit by independent government internal auditors. The Auditor General’s Department or an auditfirm nominated by the Auditor General and acceptable to IDA would carry out the year-endexternal audit.A Special Dollar Account (S DA) would be set up and maintained at the Central Bank of SriLanka which would make payments requested by the PPU. The replenishment of the SDA wouldbe done according to the transaction-based disbursement procedure.Country IssuesThe Country Financial Accountability Assessment (CFAA) for Sri Lanka published in June 2003,highlighted gaps and weaknesses in the institutional framework for the financial management ofpublic resources. The assessment covered a range of processes including financial managementand reporting practices at the three levels of government, the public audit and the parliamentarycontrol of public funds.One weakness identified in the CFAA was that the Project Financial Management framework wasnot designed to encourage a performance-oriented culture. The framework lacked mechanisms tomonitor outputs and outcomes of government expenditure. The budget process was input-focusedand relied upon rigid economic classifications of expenditure. The Financial Regulations did notfocus on controls that promote accountability for performance. The present governmentaccounting system ‘CIGAS’ relied on the economic classification of expenditure used forbudgeting but did not go down to lower levels of classification.To instill a performance-based culture in the project, project management is encouraged tomonitor financial progress against physical progress, always ensuring that the funds are spent onintended purpose, economically and efficiently. Due to the weakness identified in the governmentaccounting system ‘CIGAS’, the PHP would use a manual system with a chart of accountsdesigned to capture all types of information supplemented by a simple database to maintaindetailed information required for project management.49

INHERENT RISKCountry LevelQuality of FMProfessionStandard ofFinancialreportingStandard ofAuditingRisk AssessmentH S M LxxxxRisk Mitigating MeasuresWhilst the public sector does have an accounting instituteit does not offer a public sector accountancy qualificationby conducting structured professional examinations andcontinuous professional development. The projectaccountant selected by the PPU has extensive publicsector related relevant work experience in accounting anda Masters in Business Administration.The PHP would fund any technical assistance required bythe internal auditors.The staff of the Auditor General’s office providestraining under the IDA-financed Economic ReformsTechnical Assistance (ERTA) project and the proposedModernization of the Public Sector project.Project LevelxCONTROL RISKBudgetxAccountingxInternal controlsxFunds Flow x Certification measures are in place to verify that adequatephysical progress is made before releasing payment.Financial reportingxInternal and External xauditingThe Internal Audit Department of the Ministry is newlyset up. The PHP would fund technical assistance (e.g.expertise from the market) that may be required to carryout a continuous internal audit of the project, if the needarises.Overall FM Risk ofthe ProjectStrengthsxThe CFAA had highlighted the capacity constraints of theAuditor General’s Department. The staff of the AuditorGeneral’s Department was provided with training underthe ERTA and further training would be provided underthe proposed IDA-financed Modernization of PublicSector Project.- The PPU accountant has the advantage of learning from NEHRP which has similarFinancial Management arrangements in place and benefiting from their experience.- The PHP is less complex and has a straight forward fund flow structure. The PPU hasdirect control over all payments, minimizing the possibility of a leakage of funds.- The PHP would finance an information dissemination campaign to increase transparencyand improve understanding of the project.50

SignificantWeaknesses1. The PHP hasnot recruitedsupport staff forthe financedivision of thePPU. This leads toa lack ofsegregation ofduties.2. Newly formedInternal AuditDepartment doesnot have aqualifiedaccountantheading the unit.Database forcapturing therequired financialand relatedphysical progressreports forpurposes ofgenerating projectmanagementreportsAction Responsible Person Completion Date Conditionsin LegalAgreementRecruit adequate ProjectBy Negotiations insupport staff. Director/Accountant November.Recruit anexperienced andqualified person tohead the InternalAudit Department.Secretary, Ministry ofResettlement.Project DirectorWithin 3 monthsfrom thecommencement ofimplementation.By NegotiationsDatedcovenant inthe LegalAgreementto have theinternal auditarrangementsin place forthe PHP.Please see Annex 6 for implementation arrangements.BudgetingBudgetary allocations for the PHP would come under the overall budget of the Ministry ofResettlement. The PHP would receive its budget allocations from counterpart funds, reimbursableforeign aid and direct foreign aid. Whilst the budgetary provisions are under the Ministry, allproject related funds would be directly released by the Treasury to the PPU bypassing theMinistry. The PPU would submit monthly expenditure reports to the Ministry.Funds FlowIDA funds would be deposited in the SDA. The Government would advance its own funds to thePPU against the budgetary provisions available under reimbursable foreign aid. Upondisbursement of the funds, PPU would submit a withdrawal application to the Central Bank viathe Department of Treasury Operations on a monthly basis to reimburse the Treasury with theIDA portion of the expenditure using the proceeds in the SDA. The PPU would submit monthlyapplications to IDA to replenish the SDA.51

For large payments, PPU has the option of requesting a direct payment to the supplier by: (a)Central Bank using the proceeds in the SDA; (b) IDA against the Credit. The allocations underdirect foreign aid would be utilized for this mode of payment.Housing construction component: Funds will flow directly from the PPU to the beneficiary bankaccounts. Payments will be made on the physical certification reports prepared by the technicalofficers and endorsement by the Project Engineers. Adequate technical officers have beenrecruited to avoid delays in the payment certification process. The PPU is carrying out a HousingAssessment Survey in refugee camps to revalidate permanent, partly-completed and temporaryhouses and plan the roll out of the cash grants accordingly. The housing component would bephased over four years with an identified number of houses targeted each year.Water Supply, Sanitation and Environment Mitigation: The PPU will directly pay the contractors.National Water Supply and Drainage Board (NWSDB) and the North West Provincial RoadDepartment will be given an imprest to cover the costs of supervision of the water/sanitation andinternal road components respectively Payment will be made on the physical certification reportsprepared by the technical officers and endorsed by the engineers.Disbursement ArrangementsPPU would follow the traditional transaction based disbursement method with an option to shiftto report based disbursements. However PPU would start preparing Interim Financial Reportsfrom the inception of the project. The authorized allocation of the special dollar account would beUS$ 3,000,000. IDA would require withdrawals from the credit account to be made on thestatements of expenditure for: (a) goods costing less than US$ 250,000 equivalent per contact; (b)civil works costing less than US$ 500,000 equivalent per contract; (c) services of individualconsultants costing less than US$ 50,000 equivalent per contract; (d) services of consulting firmsunder contracts costing less than US$ 100,000 per contract; (e) all training; and (f) all incrementaloperating costs.StaffingPPU has recruited a project accountant, an officer from the Sri Lanka Accountancy Service withrelated work experience in the public sector. The PPU is in the process of recruiting financesupport staff. All staff would be on board by negotiations.Accounting Policies and ProceduresThe PPU will follow the cash basis of accounting. The PPU will adopt the accounting policieslaid out in the Financial and Administrative Regulations of the Government of Sri Lanka andproject specific procedures laid out in the Financial Management Manual. In addition the PPUwill be guided by the Circulars issued by the Ministry of Finance and the Ministry ofResettlement. The weakness in the Government systems identified in the CFAA and themitigation measures that will be adopted by the PHP were described above.Information SystemThe PPU will initially maintain a manual accounting system. Its chart of accounts will facilitateinformation generation by expenditure category, project component and expenditure type. Inaddition, for detailed financial information required for project management and to fulfill IDA’squarterly reporting requirements, both financial and physical progress data will be maintained in a52

simple database with query facilities. The basic design of the database will be finalized by projectnegotiations.Internal Control and Internal AuditThe Financial Management Manual would provide a comprehensive internal control frameworkto guide project activities, transactions and decisions. The Manual sets out processes, approvals,signoffs and thresholds to guide overall project administration. In the event of an unfamiliarprocedure, the Project Accountant would seek clarification from the Ministry and/or the Treasury.The PPU will be subjected to continuous internal audit by the newly formed Internal AuditDepartment (IAD) of the Ministry of Resettlement. The IAD will report to the Secretary Ministryof Resettlement. The IAD currently consists of experienced audit examiners. The Ministry plansto recruit a qualified accountant with relevant experience in Government regulations to head theunit. The PHP will fund the technical assistance required to build sufficient capacity in the IAD ifthe need arises during implementation. The internal audit will not be confined to the PPUsrecords in the case of housing assistance but would also track technical certification,reimbursement amounts, timing and the flow of funds up to beneficiary bank accounts. A Termsof Reference (ToR) would be agreed with the IAD of the Ministry before the commencement ofaudit activities.The Ministry of Resettlement will play an active role in closely monitoring the implementation ofthe audit recommendations to ensure that the internal audit function is effective.External AuditThe Auditor General of Sri Lanka (AG) will audit the PHP accounts each year following relevantGovernment guidelines for foreign-funded projects. Hence no special ToRs would be required forthe PHP. The AG is the supreme audit institution of Sri Lanka and has been accepted by IDA forauditing projects financed by it.The following audit reports will be monitored in ARCSImplementing Agency Audit Report/Opinion AuditorPPU Project Annual Financial Auditor GeneralStatementsReporting and MonitoringPPU will use Interim Financial Reports (IFRs) to report to IDA on a quarterly basis. The IFRformats have been discussed and agreed with the Government of Sri Lanka at appraisal.PPU, under the leadership of the Project Accountant, will be held accountable to ensure anappropriate internal control framework and diligent use of project finances.ConditionalityThe legal agreement would stipulate that the Internal Audit arrangements be in place. This wouldbe a dated covenant three months from the commencement of project activities.53

Supervision planThe PHP has a modest Financial Management risk rating. Consistent with the risk based approachto supervision; substantial portion of the supervision will consist of desk reviews of internal andexternal audit reports and the quarterly reports supplemented by a continuous dialogue with theproject staff, especially in the initial years. As and when required, other Financial Managementsupervision tools and resources such as SOE reviews, site visits and joint missions withprocurement will be used in an effort to continuously monitor the adequacy of FinancialManagement systems.54

Annex 8: ProcurementSri Lanka: Puttalam Housing ProjectProcurement Responsibility, Capacity and Risk MitigationIDA undertook an assessment of the PPU’s capacity to implement procurement actions for PHP ,the summary of which is provided below:Exposure to IDA Procurement Procedures:The PPU has little experience in implementing IDA-financed projects. However, the ProjectDirector and some other staff have been involved in public procurement. The PPU has identifieda procurement officer/engineer for immediate recruitment. To mitigate the risk of handlingprocurement under the PHP, the procurement officer/engineer and selected project staff would beprovided training on IDA’s procurement guidelines and best practice in-country and in regionaltraining centers. As an interim measure, the PPU has obtained the services of an Engineer who isthe procurement specialist of NEHRP. This officer has sufficient experience in IDA-financedprocurement and had prepared sample bidding documents and the procurement plan for the PHP.Existing System of Decision on Procurement Matters:The decision-making process regarding the PHP would be Guided by the Authority Levelsindicated in Procurement Guidelines 2006 (PG) published by the National Procurement Agency(NPA) and any other subsequent circular.The delegation of authority to decide on procurement would be:Contracts up to Rs. 100 m (US$ 1.0 m equivalent) by the Project Procurement Committee(PPC). At present, all the proposed contracts under the PHP are within this limit.Contracts between Rs. 100 m (US$ 1.0 m equivalent) and Rs. 250 m (US$ 2.5 m) by theMinistry Procurement Committee.Actions to Improve the PPU’s Procurement Capacity:PHP would nominate relevant staff to participate in training programs conducted by the NPA andwhere required in a Regional Training Program in IDA-financed Procurement conducted byASCI, Hyderabd.The Government and IDA have agreed on improved procedure for procurement followingNational Competitive Bidding (NCB). These are incl uded in the Procurement Guidelinespublished by NPA.Procurement Procedures and MethodsProcurement for the proposed PHP would be carried out in accordance with the Guidelines:Procurement Under IBRD Loans and IDA Credits dated May 2004; Guidelines: Selection andEmployment of Consultants by World Bank Borrowers dated May 2004, and the provisionsstipulated in the Development Financing Agreement. The description of items under differentexpenditure categories are described below. The Government and IDA would agree upon theprocurement method, the consultant selection method, the need for prequalification, estimated55

cost, the requirements for prior review and the time frame for each contract to be financed underthe PHP. This would be described in the procurement plan.All consulting services estimated to cost US$ 200,000 or more would be advertised in the UNDBon line and Market of Development Gateway. Due to the small value of procurement involved, nocivil works or goods contracts would be awarded under ICB procedure. Therefore, for all civilworks, goods and services, the Standard Bidding Documents approved by the NationalProcurement Agency (NPA) with the prior approval of IDA shall be used. For the selection ofconsultancy firms, NGOs and individual consultants, IDA’s Standard Request for Proposals or amodified version with the prior agreement of IDA would be used.Thresholds for Procurement Methods and Prior Review 1ExpenditureCategory Contract Value Threshold (US$) Procurement Method1. Works 30,000 and above per contract NCB2. Goods 250,000 and above per contractBelow 250,000Below 50,000ICBNCBShopping1,000 and below for proprietary items, Direct Contractingsoftware, seeds, plants, books,periodicals, etc.3. Grants for Housing Assistance and AllDirect by the beneficiarySanitation4. Services 200,000 and above per contract QCBS [in specific cases,method of procurement canbe other than QCBS, whichwill be mentioned in theprocurement plan]Procurement of Works:The PHP would entail civil works that include the (i) construction of 5,653 houses to replace thecurrent temporary thatched huts and complete 2,232 partly-completed houses in the 141 refugeecamps, (ii) water supply/sanitation and (iii) environment mitigation/internal roads. The identifiedfamilies would qualify for one of two types of cash grants i.e. a grant of Rs 250,000 to helpconstruct a permanent house or a grant of Rs. 100,000 to complete a partly-built house. TheGovernment would pay the cash grants in installments based on physical progress in civil works.The end beneficiary would be fully responsible for all procurement action of the grant.The civil works for water supply estimated at US$ 11.3 million would include construction of 34water supply schemes for 136 welfare centers. The PPU would contract out construction works toprivate bidders on a competitive basis.The civil works under sanitation would include construction of latrines. It would entail a cashgrant of Rs 25,000 for the construction of latrines. This is estimated to cost US$ 575,000 for thosewho are not recipients of housing assistance. The housing support cash grant includes provisionfor latrines. The end beneficiary would be fully responsible for procurement.56

The civil works under environmental mitigation includes construction of minor road network andassociated drainage canals estimated at US$ 3.3 million. These works would be contracted oncompetitive bidding under small contracts and to extent possible by direct contracting to CBOs.Procurement of Goods:Goods procured under PHP would include office equipment such as vehicles, motorcycles,photocopiers, office furniture and equipment such as computers, printers, UPS, communicationequipment and software for the PPU.Selection of Consultants:Consultancies for the program include:Housing Assessment SurveySettlement PlansTechnical Assistance for Water and SanitationTechnical Assistance for design and supervision of internal road network and drainageContinuous Social Impact AssessmentThird Party Technical AuditCommunications CampaignSkills TrainingThe design of the water supply scheme includes provision of drinking water for all houseswithout such access within the Grama Niladhari Division where IDP camps are located. TheNWSDB, which carried out the feasibility studies, would undertake the design and supervision.No other agency in Sri Lanka has the expertise and experience to undertake this task in as costeffectiveand tested manner as the NWSDB. NWPRD would be contracted to prepare the designand implementation plans for the roads and drainage improvement. The reinstatement of roadsafter excavating for water connection would be done by the respective local authority underincremental operating costs. The Ceylon Electricity Board (CEB) would carry out the electricalcabling for water pumps under incremental operating costsThe sanitation units would be constructed by the beneficiaries themselves and the PHP wouldfinance Rs 25,000 per unit upon certification of completion of satisfactory construction.The water supply schemes would involve the development of source, the construction of watertreatment plants, storage of disinfectants, disinfection arrangements, storage reservoirs, pumpingstations, office space, transmission and distribution pipelines, power transmission, allied worksand road reinstatement. The NWSDB would be the direct contract agency for drilling anddevelopment of tube wells; the CEB for the external electrification including laying cable,installation of transformers/sub-stations and other allied works; and the NWPRD for road surfacereinstatement. All other items would be procured through competitive bidding by the PPU and allworks other than those mentioned above pertaining to a scheme would be packaged under onecontract. Further, depending upon the estimated cost of a bid package, more than one schemewould be taken under one package.The shortlist of consultants for services estimated to cost less than US$ 500,000 equivalent percontract may be composed entirely of national consultants in accordance with the provisions ofParagraph 2.7 of the Consultant Guidelines.57

Method of Procurement for Works and Goods:The proposed method for procurement contracts would be one of the following i.e.:International Competitive Bidding [ICB]National Competitive Bidding [NCB]ShoppingDirect ContractingCommunity participation in procurementMethods for Selection of Consultants:The selection of consultants would be made on the basis of following methods depending onappropriateness in each case:Quality and Cost Based Selection [QCBS]Quality Based Selection [QBS]Selection under a Fixed Budget [FBS]Least Cost Selection [LCS]Selection Based on Consultants Qualifications [CQS]Single Source Selection [SSS]Selection of Individual Consultant as per Section V of the GuidelinesAssessment of the Borrower’s Readiness to Implement the PHPA detailed procurement plan for the first eighteen months of the PHP for all components exceptthe housing assistance component has been prepared. The procurement plan would be updatedeach year or as required to reflect the actual implementation needs and improvement ininstitutional capacity. There would be no procurement plan for the housing assistance componentgiven the nature of the assistance therein. An implementation plan would be prepared instead.Disbursement ProfileDisbursement is expected to be low for the first year. It is anticipated to be 10% since the initialyear would consist largely of capacity building, orientation, feasibility studies, design works etc.Disbursement would pick up at year 2 at about 25% increasing to 35% in year 3 and tapering offto 30% in year 4.IDA Review of Procurement Decisions.The proposed procurement plan for the first 18 months has been submitted. IDA would reviewannual implementation plans for works and procurement plans. The contracts that are identifiedfor prior review would be subjected to review as per provisions set forth in paragraph 2 and 3 ofAppendix 1 of the IDA Guidelines and IDA Consultancy Guidelines. Despite the low limitsstipulated for prior review of contracts, very few contracts are expected to come under theprovisions of prior review. This appears reasonable considering the nature of the procurementinvolved. The contracts below the prior review threshold for Works, Goods and Consultancycontracts would be subject to post-review as per the procedures set forth in Paragraph 5 ofAppendix 1 of the IDA Guidelines and IDA Consultancy Guidelines. IDA staff would conductpost review during the supervision missions and outside mission timelines as well.58

Procurement InformationProcurement information would be collected and recorded as followsUpdated Procurement Plan and comprehensive semiannual reports by indicating (i)revised cost estimates of individual contracts and the total project; and (ii) revised timingof the procurement actions including advertising, bidding, contract award; andCompletion time for individual prior review contracts and completion reports by theBorrower within 3 months of the Credit closing date.Overall Procurement Risk Assessment:The overall programmatic risk for procurement is Medium.Frequency of procurement supervision missions proposed: Once every six months (includesspecial procurement supervision for post-review/audits)59

Annex 9: Economic and Financial AnalysisSri Lanka – Puttalam Housing ProjectThe IDPs in Puttalam live in refugee camps that lack basic infrastructure be it safe water, toilets,drainage and garbage disposal. The UNHCR census of April 2006 revealed that only 8,978 IDPfamilies out of the 15,480 families have some kind of shelter. 5,653 live in temporary thatchedhuts while 2,232 live in partly-built houses. A Social Assessment of 111 camps early this yearcategorized 42 percent of IDP families as “destitute poor” and 41 percent as “poor”, all of whomlived in temporary thatched huts. 27 Only 17 percent of the IDP families had managed to constructpartly-built or permanent houses.The PHP would provide permanent houses to 7,885 families. The psychological and social impactof providing a home to restore the dignity and security of these IDPs is immeasurable. The PHPwould help improve living conditions.IDPs would be provided with safe drinking water and improved sanitation. This is a MillenniumDevelopment Goal. It would strengthen public health, reduce pollution of the aquifers and saveresources on cleaning contaminated water sources. The PHP would help mitigate environmentalissues such as inadequate drainage and flooding. To the extent that flooding is caused by poorinternal roads, the PHP would support their rehabilitation in the affected camps.Skills training in carpentry and masonry would generate spin-off effects on employment andwage income in an area where over 17 percent of the population is unemployed and 62 percentengaged in seasonal day labor that can work only 10 to 15 days per month. 28It is difficult to assess the impact of the PHP using an ex-ante financial cost-benefit analysis asthe benefits do not lend themselves to quantifiable financial returns. Nevertheless, an effort hasbeen made to capture, to the extent possible, the economic and social benefits of the project usingmeaningful proxies. A Monitoring and Evaluation system, with measurable indicators, would bein place to measure and evaluate the benefit and impact of the project components ex-post.Economic and Equity ConsiderationsThe rehabilitation of the conflict-affected population and reviving their livelihood are keyelements of the Government’s strategy to restore peace.The IDPs consider housing as a key priority. The demand for housing is inelastic. Whilebeneficiaries cannot afford to pay in nominal terms, they would make every effort to maintain andimprove it in the long run. This would ensure the sustainability of PHP. The government wouldprovide a private good where the private sector is reluctant to enter. The public sector can spreadthe cost of this investment and is therefore better positioned to invest in the welfare for itsmarginalized citizens.Housing Assistance: One lesson learned from NEHRP is that the home-owner driven approachmotivates families, mobilizes the community, boosts the morale of the affected people and bringsout hidden abilities and skills.27 Destitute poor ranked as those that head of household is unemployed, has no other source of income, and depends ongovernment dry rations. They either have no house or live in temporary thatched houses. Poor are those who haveseasonal income from day labor and live in temporary houses.28 Social Assessment (SA) report of July 2006 prepared by a consultant as part of the preparation activities.60

Several NEHRP beneficiaries invested in income generating activities, expanded their business,engaged in agriculture or worked longer hours once their habitat had been taken care of. Informaldiscussions during field visits revealed that these had increased household income by an addedRs.2,500 per month (Rs.30,000 per annum; approximately US$300). 29 Using this assumption, anaverage household is expected to earn a Net Present Value (NPV) incremental income stream ofUS$2,720 over 15 years (average productive life) at a discount rate of 14 percent. 30 Thisrepresents a high rate of return from an outlay of US$2,030 (housing cash grant per beneficiary).The Table below summarizes these results.Cost Benefit Analysis for Housing AssistanceAverage incrementalincome per worker(US$)$441 (an increment ofRs.2,500 over thecurrent monthly incomeof Rs. 2,500 per month).Discountrate14% $2,72017% $2,36620% $2,087NPV of theincome streamover 15 years(US$)Cost perhouseholdunit (US$)$2,030CommentsThis is based on conservativeassumption - increment ofRs.2,500 per month - benefitsoutweighs cost for eachhousehold. Even at a high 20%discount rate benefits stilloutweigh cost.$618 (an increment ofRs.3,500 over thecurrent monthly incomeof Rs. 2,500 per month).14% $3,80617% $3,31120% $2,921$2,030Sensitivity Analysis – In thisscenario, with a higherincremental income the NPV ofthe income stream isconsiderably higher. Given theresumption of economicactivity, this is a more likelycase.The NEHRP experience indicates that the cost of labor is 30 to 40 percent of the totalconstruction cost of the housing units. The owner-driven approach, skills training, reliance onmasons and carpenters from the adjoining community, community participation and bulkprocurement of construction material can significantly reduce the cost of construction andimprove the purchasing power of the beneficiary grants. 31 This is expected to apply to the PHP aswell.Training of Construction Workers: The NEHRP evidence illustrated that skilled constructionworkers are in high demand and can earn a minimum of Rs.1,200 per day. This rate is about 40%higher than that of an unskilled laborer who earns about Rs.800 per day. Skills training wouldensure an increase in income (incremental income level) by an average of about US$1,200 perannum or a NPV difference of US$7,395 over the course of their productive life (15 years). This29 Based on field visits and discussions with homeowners during the supervision of NEHRP, the beneficiaries withincome level of Rs.2,500 per month were likely to start other income generating activities (home gardening, poultryfarming, cattle raising, using one room in their house for small shops, etc.) or attending skills training programs. Withthese activities, they expect to increase their monthly income level by Rs.2,500 or more.30 Based on the assumption of an average inflation rate of 14% per annum and an exchange rate devaluation of 8percent per year over 15 year period. LIBOR of 6% on average was used as foreign inflation.31 Rs.250,000 for temporary houses and Rs.100,000 for partly completed houses.61

calculation is based on a conservative assumption that inflation would approximate 14 percentover the next 15 years and a discount rate of 14 percent. It was calculated by deriving thedifference in a worker’s productive life earnings with and without training - that is the differencebetween the earnings of a skilled versus unskilled laborer. 32 The sum would far exceed thetraining cost of about US$150 per individual funded from the PHP.The total economic benefit of training 1,000 workers is calculated at US$1,200,000 per annumwhich is significantly higher than the total training costs of US$140,000 over the life of the PHP.This would increase the laborer’s disposable income and savings. This would boost overalleconomic activity.This is a significant gain in an area where unemployment is high. The PHP would generate awage income of approximately US$8.7 million over 4 years. 33 With this activity alone about 28percent of the total investment of the PHP would be plugged back to the local economy as wageincome. This would have a positive and multiplier impact.Cost Benefit Analysis for Training of Skilled WorkersEstimated averageannual wage forunskilled workers overproductive life of 15years (US$)$2,400 $3,600Estimated average annualwage for skilled workersover productive life of 15years (US$)Discountrate (%)14% 7,40017% 6,400NPV of thedifference inpay (US$)Cost of 3 monthstraining per worker(US$)$150-$200Ancillary Infrastructure and Environmental Mitigation: The IDPs have suffered from a lackof basic infrastructure, poor environment and inadequate sanitation for close to two decades. Lessthan half the camps have access to safe drinking water. The table 4 below summarizes the level ofaccess to basic infrastructure services.Accessibility of Basic Infrastructure ServicesSurvey of 111 Refugee CampsInfrastructure ServicesLevel of Access (% of Camps)Good Fair PoorHousing 0 15 85Access to drinking water 44 32 29Drainage facilities 34 34 32Garbage disposal 13 46 41Sanitation and Toilets 15 41 44Roads 62 32 6Economic Benefits of Environmental Mitigation and Internal Roads: Support for theenvironment is in keeping with the Millennium Development Goals. While 7,885 IDPs would32 Conservative assumption is that each labor works 4 days a week and 17 days per month on average.33 With the assumption that 1,000 workers are trained and work on the 4 year PHP.62

enefit from the housing support cash grant, the entire IDP population (close to 64,000 in 15,480families) would benefit from improved environment, sanitation and access to safe water. 34The poor condition of certain internal roads and inadequate drainage lead to water stagnation,mosquitoes and water borne diseases. The PHP would help ensure that the internal roads nolonger contribute to environmental hazards.Economic Benefits of Access to Safe Water: The proposed project would benefit 13,600 familiesin 136 refugee camps and over 3,300 adjoining non-IDP families. The average cost of providingsafe water would be Rs. 49,000 per person, approximately US$ 486 equivalent. The economicbenefits of the PHP far exceed the costs. Quantifying these benefits is not easy. The short andlong term benefits of providing safe water and sanitation to the community as a whole can besummarized as follows. Conservation of water sources. With distribution through piped reticulation (exceptwhere point sources offer no risk of sewage contamination of the water source) and rainwater harvesting, the PHP would eliminate water contamination that occurs due tocloseness of water sources to waste and latrine; and improves water resources andsupply through the conservation of safe and quality water. Treatment of contaminated water. With treatment of hard and contaminated water, theproject would increase safe drinking water sources. Improved access to safe water. Increased safe water source and better distributiontechniques would provide wider access to safe water not only to IDPs but to nearbynon-IDP communities. Less environmental pollution. Elimination of contamination in the aquifers wouldresult in positive environmental externalities. Health benefits are enormous. There would be positive externalities to public health.Financial AnalysisFiscal Impact of the Puttalam Housing Project: The Government would contribute US$ 2.2million of the approximately US$34.2 million project. This would mainly be in the form of taxesand duties. The short term fiscal impact of the PHP is therefore neutral. US$16.0 million (47%)would consist of housing support cash grants. This is a private good, the maintenance of whichwill not lead to a future fiscal burden on the Government. Another US$16.0 million is allocated toimprove the environment and provide safe water and sanitation. These are the only componentsthat may need future investment by the Government. However, it is expected that with collectionof water fees, the investment and maintenance costs would partly be covered. This investmentand its associated costs may well be compensated by reduced government expenditure on health,cleaning contaminated water and wells and providing water daily through bowsers.The Capacity Building and Program Support components of US$2.2 million (6% of the totalcredit) would strengthen government capacity to implement the PHP. These two componentshave no future fiscal impact. In total, over 53% of the credit would directly benefit the localeconomy without any future budgetary impact.Long-term Fiscal Impact of Borrowing from IDA: The US$32 million IDA credit is aconcessional loan with a 10-year grace period, a maturity of 20 years, zero interest, and a 0.75%34 The UNICEF would provide safe water and improved sanitation to 5 refugee camps covering about 1,080 families.IDA Puttalam Housing Project will cover the rest of 136 camps.63

service charge on the outstanding amount. 35 With four years of disbursement of the credit (20%,30%, 30%, and 20%) for the IDA term, discounting at “conservative” 14 percent, the grantelement of IDA credit is 76%. The Net Present Value of the credit disbursed in four years isUS$26.5 million, and that of the total debt service payment over 20 years is only US$6.3 million.This results in a total of US$20.2 million grant out of the US$32 million concessional credit.Again with a very conservative assumption that GDP will grow by 10% in nominal terms perannum, the debt service payment (about US$3.5 million per year on average) as a percentage ofGDP is insignificant. With cost of funds (discount rate of 17%), the comparable figures for NPVof the credit and debt service payment will even be at a more favorable terms with the grantelement higher.Long Term Fiscal ImpactIDA Credit, with special Service chargeterms (10grace/20maturity)(US$ million)$32 million 0.75 on creditoutstanding$32 million 0.75 on creditoutstandingDisbursementperiodDiscount rateGrant Element of theIDA Credit4 years 14% $20.2 millionor 76%4 years 17% $20.9 millionor 82%35 Sri Lanka is now an “IDA Gap Country”. Sri Lanka per capita GNI has reportedly been above the IDA'sOperational cut-off for two consecutive years. Therefore, according to the OP3.10 Annex D, Sri Lanka is subject toIDA credit with 20 years (rather than regular 40 years) maturity and 10 years grace period. As such, the principalrepayments would be at 10% per year starting year 11.64

Environment:Annex 10: Safeguard Policy IssuesPuttalam Housing ProjectThe PHP is not expected to have a critical or irreversible environmental impact. However, thephysical environment of the refugee camps does pose a challenge. This needs to be addressedduring project implementation. The refugee camps were established on sites based upon theimmediate availability of vacant land and access to livelihood; the suitability of the land for longtermhabitation was not factored in. Some refugee camps were located on ill suited land. The PHPwill identify existing and anticipated environmental risks in each refugee camp selected andaddress them through appropriate mitigatory measures during housing construction.Water stagnation and flooding have been noted in a number of refugee camps largely in thePuttalam mainland. These sites are located in low-lying areas and drainage paths with poorinfiltration capacity. These may not be the most desirable locations for human habitation. Landfilling and proper drainage systems are needed to tranform such flood prone sites into morehabitable places. The seepage of salt water to the surface is a serious issue in areas close toPuttalam lagoon, Karambai and north of the town. Improvement to land drainage in these sitesmay require substantive effort and investment and will have to be determined based upon aneconomic and environmental feasibility. Relocation may be a more viable option in certain caseswhere mitigation is not economically and/or environmentally feasible.Solid waste disposal poses an environmental challenge. This is a problem in all refugee camps asthere is no proper system for the collection and disposal of garbage. Other risks include thedestruction of mangroves by IDPs for land reclamation, sand mining within settlements andexposure to pollution from waste outlets of prawn farms. These issues will be addressed under theproject to ensure sustainable habitat.The PHP aims to construct or complete 7,885 houses for the IDPs in Puttalam. It would providewater to 136 of the 141 refugee camps and select adjoining non-IDP villages. The project wouldrequire significant quantities of building material such as sand, bricks, tiles, timber, metal etcwhich would add to the current demand for the same by the on-going conflict-related and posttsunamireconstruction in the country. It is anticipated that pressure on natural resources such assand, timber clay and rocks would escalate. The PHP would ensure that all building materials areextracted from authorized sources operating with the necessary approvals to ensure that rawmaterial harvesting would not reach unsustainable levels.Policy and Regulatory FrameworkSri Lanka has a comprehensive environmental regulatory framework that provides an adequatebasis for the identification & mitigation of environmental risks that arise out of developmentactivities. Since the PHP is situated in the North Western Province, provisions of the NorthWestern Provincial Environmental Act (NWPEA) are applicable for the mitigation ofenvironmental risks of the project. According to the NWPEA, activities that fall into a prescribedcategory will need a comprehensive environmental screening and planning process (EIA or IEE).Housing construction is not a prescribed category defined under the act and hence will not requireIEA/IEE. However, if the development of new sites is triggered due to relocation, an IEE/EIAwill be required depending on the type and extent of land, proximity to sensitive areas etc. TheNorth Western Provincial Environmental Authority, which administers the NWPEA, isresponsible for controlling pollution from shrimp farms through the issuance of environmentallicenses.65

The felling of trees in forest reserves is prohibited under the Forest Ordinance. Tree felling fortimber is allowed only in designated areas under licensed approval from the Forest Departmentand the Divisional Secretary of the area. The Geological Surveys and Mines Bureau (GSMB)regulates the mining of sand and clay. Sand mining can only take place in designated areas. Hereagain a license has to be obtained from the GSMB. Offshore coral mining is banned under theCoast Conservation Act.All building plans need to be submitted to the local authority for approval provided they conformto a specified building code under the Local Authority Ordinance. This code has detailedspecifications for housing and septic tank design as well as precautionary measures for theprevention of ground water pollution from septic tanks. Provisions under these ordinances legallybind the local authorities to manage all refuse generated in their area of jurisdiction.Mangroves are a gazetted forest type under the provisions of the Forest Ordinance. Responsibilityfor managing mangrove areas comes under the Forest Department which has declared mangrovemanagement areas in the country. This includes sites in the Puttalam lagoon. In addition, theCoastal Zone Management Plan implemented by the Coast Conservation Department recognizesmangroves as an important coastal eco-system to be conserved and managed and collaborateswith the Forest Department on mangrove management efforts.The Rural Water Supply and Sanitation Policy (RWSSP) is an important policy instrument withsignificant implications on the development of the water and sanitation component of theproposed project. The RWSSP governs the institutional and operational framework within whichrural water supply and sanitation should be addressed. The policy emphasizes water supply andsanitation to be demand-driven and people centered with effective facilitation from provincial andlocal authorities. The RWSSP builds upon community water supply and sanitation interventionsand is implemented effectively. A few details on the application of the RWSSP are given inAnnex 4 on Water Supply and Sanitation.In terms of IDA directives, Operational Directive on Environmental Assessments (OP 4.01) andNatural Habitats (OP 4.04) will be applicable. Accordingly all sites that will be identified underthe PHP will be subjected to environmental screening and risk mitigation through a site specificEnvironmental Management Plan (EMP). Mitigation measures recommend in the EMP will beimplemented as part of PHP.Environmental Risk MitigationThe application of environmental safeguards will be considered under three different housingconstruction and resettlement scenarios; (i) housing construction on the present site of the refugeecamp (the vast majority of cases) (ii) housing construction on the land adjacent to the existing site(iii) relocation to a completely new site. In order to assess the environmental impact ofresettlement and the suitability of each site for human habitation, all sites proposed fordevelopment will be subjected to an independent environmental analysis, the level of which willdepend on the scenario applicable for each IDP settlement considered under the project.The GOSL prepared a detailed environmental questionnaire (EQ) to identify on -siteenvironmental issues. A basic environmental profile of the sites have been established based onthis and an assessment of the suitability of local conditions for long-term residence would bemade as part of the EMP process. A site-specific determination would be made with regard to thenecessity for a more detailed environmental analysis based on the recommendations of the EQ.66

For scenarios (i) and (ii) administering the EQ with the subsequent preparation of a site-specificEMP would suffice in most cases unless there is justification for further investigation through anEIA or a feasibility study. For scenario (iii) in-depth analysis and a comprehensive EMP wouldbe likely if relocation is going to be in or adjacent to an environmentally sensitive area. Detailedguidelines covering the above will be included in the Environment and Social ManagementFramework (ESMF).The GOSL has finalized the site selection for the construction of permanent houses for thePuttalam IDPs for the first year of the project. The list was reviewed by IDA. Social andEnvironmental assessments have been completed in 111 out of the 141 refugee camps byconsultants hired by the GOSL. This accounts for 80% of the IDP population. Based on this, theenvironmental issues described in the preceding sections were identified. Based on the twostudies, (a) GOSL would complete the identification of the remaining sites for permanentresidency based on social, environmental and land issues and (b) environmental and social issuesin a given IDP cluster would be understood in totality in a given geographic context to better planmitigatory measures. However, the EQ will also be administered to relocation sites identifiedsubsequently and if needed supplemented with an EIA. Government would assess the remaining30 IDP camps in Puttalam by January 31, 2007.Social DevelopmentThe PHP is expected to have a positive social impact through the provision of housing, water,sanitation and environment improvement for IDPs who have made Puttalam their permanentresidence of choice. Improved living conditions would permit IDPs to enhance theirsocioeconomic status and better integrate in Puttalam. This would strengthen social capital ascommunities plan and undertake construction.There is the risk however of increased social tensions between the IDPs and the earlier residentsof Puttalam who may be as poor and under-serviced. The Social Assessment covered conflictissues between IDP and non-IDPs, identified the causes and recommended actions. In order tomitigate these risks, the PHP includes support to non-IDP communities within GN divisions,where refugee camps are located, in terms of water provision. Further, a Continuous SocialImpact Assessment (CSIA) would be commissioned for the duration of the PHP to ensure thatsocial and conflict issues are promptly addressed.Social Concerns: Several concerns were identified through (i) the Social Assessment carried outin 111 IDP camps; (ii) the UNHCR supervi sed Survey of Puttalam IDPs that enumeratedsocioeconomic conditions, land ownership, types of housing, and attitudes towards permanentsettlement vis-à-vis return; (iii) IDA field visits to the area over the past year; and (iv)consultations with various government institutions over the past months, notably with theMinistry of Resettlement, Ministry of Nation Building and Development, Ministry of Housing,the District Secretariat of Puttalam, and the Muslim Peace Secretariat. The following issues standout:The Right to Return: The UNHCR supervised Survey indicates that 96% of IDPs inrefugee camps revealed a preference to permanently reside in Puttalam given theuncertain security situation in the North. However, the receipt of the cash grant in no waydetracts from the IDPs right to return to his or her place of origin at a later date.67

The Right to Compensation: The potential beneficiaries would not forego the right toclaim compensation for losses and the rights to property in their place of origin by merereceipt of the cash grants.Residency and Political Rights: According to the UNHCR survey, almost 95% ofregistered voters among IDPs are still registered in their place of origin and not inPuttalam. They access IDP dry rations and not the regular Government welfare packagefor the poor in a given locality. The Samurdhi relief package for poor non-IDPs isreportedly lower than the dry rations received by IDPs. It is the prerogative of the IDPbeneficiaries alone to decide whether (i) they be de -registered as IDPs and becomeregular residents of Puttalam with equal access to social services and welfare benefitswithout any restrictions due to their displaced status; and (ii) they be added to the voterregistration list in Puttalam and no longer be registered as voters in their place of origin.The PHP is not linked to this domestic political issue. It is only intended to ensureimproved service delivery and enhanced habitat. IDA would therefore press Governmentto increase it budget allocation for the Puttalam district to factor in the IDP populationresident there.The surveys and consultations of the IDP camps and the surrounding non-IDP communityrevealed considerable anxiety and confusion with regards to government policy on such issues.There are significant concerns among non-IDPs that the government may assist the IDPs farabove the level of assistance received by the poor permanent residents of Puttalam. Theseconcerns may exacerbate tensions between IDPs and local residents in certain areas due tocompetition over scarce resources. The consultations with the government reveal diverse viewsacross ministries on such issues. The present situation is thus one of some anxiety in Puttalamwhich adds to tensions in an already politically volatile situation. A communications campaignwould be needed for Government to explain what the PHP would and would not do, whileoutlining the legal rights of the IDPs.Selection Criteria for IDP Households: All 141 refugee camps would be included in the PHP.There is a high level of social cohesion displayed in refugee camps as reflected in the effort tocollectively buy land for permanent housing in most camps. The PHP endeavors to maintain thecohesion of communities through a camp wide approach. This issue has been factored in theeligibility criteria. A household within a refugee camp would have to meet certain criteria to beentitled for housing assistance. It must have land title. The head of the household and the majorityof household members must live in the camp in Puttalam. It should not have a permanent house inPuttalam and should not have received similar housing assistance in its place of origin. It shouldhave possessed land in the camp or have had a temporary or partly-completed house within acamp as at April, 2006. All households however would receive water and sanitation.Camps were ranked on the basis of (i) percentage of temporary houses; (ii) percentage of familiespossessing land in the camps; and, (iii) percentage of IDP families who opted fo r permanentsettlement in Puttalam (all according to UNHCR Survey April, 2006). After the social ranking,the sites were subject to environment screening to determine sequencing and implementation rollout with the easier camps identified for implementation up-front.IDP-non-IDP Relations: Non-IDPs are defined as those residing within one kilometer of therefugee camp and/or those with whom the IDPs have repeated interactions. Non-IDPcommunities in the vicinity of the camps are not a homogenous social group. Some are well offwhile others are not. Some had permanent houses. Others did not. Some shared ethnic andmarriage links with the IDPs. Others belonged to different ethnic groups.68

The local residents in Puttalam initially viewed the IDPs as temporary inhabitants and providedthem considerable support. It then became clear that the IDPs were no longer in Puttalam on atemporary basis since it was not possible to return to the North given the security environment.IDPs over time purchased land in and outside the camps. Subsequently, the positive attitudes ofthe host non-IDPs underwent changes. There were incidents where refugee camps were set on firein 1995. The entry of IDPs into the local labor market tended to depress wages. The schools wereover crowded with IDP children. The IDPs tended to be better organized politically than non-IDPs. However, relations have since improved through shared economic activity except in a fewinstances as outlined in the Social Assessment.The Social Assessment however raised concerns that assistance for IDPs may increase resentmentand lead to conflict. One way of addressing these latent tensions is to ensure that the employmentopportunities generated by the PHP be shared with local residents. Laborers, contractors, andsourcing material required by the project should, to the extent possible, be drawn from the localeconomy. Thus the construction of houses will have a multiplier effect in the form of increasedemployment and economic activity throughout the district. In addition to income generationactivities, the PHP can reinforce a sense of community by different groups working together.The PHP has allocated considerable resources for water and sanitation for non-IDPs within GNdivisions where the refugee camps are located. This would more directly contribute towardspreventing resentment between IDPs and non-IDPs. It does not take too much by way ofinvestment to augment the scope of the water scheme targeted at a cluster of refugee camps toinclude adjoining non-IDP villages. The Land Task Force would service both IDPs and adjacentnon-IDPs. Meanwhile, the Ministry of Housing has agreed to provide modest home improvementgrants to select non-IDPs living adjacent to refugee camps while UNICEF intends to invest inhealth and education for both IDPs and non-IDPs. The Communication Campaign would alsohighlight the range of IDA-financed interventions currently targeted at non-IDPs in Puttalam.Further, IDA prepared a macro-action plan that defined guiding principles to reduce and preventinter-community tensions in Puttalam.Communication Campaign: The PHP would be the first voluntary resettlement project for SriLanka’s conflict displaced. It would thus set a precedent for the future resettlement of displacedpersons in the country. The general public in Puttalam needs to be informed about key issues ofconcern listed above, the beneficiary identification criteria, the home owner strategy, size of thehousing support cash grant, the grievance redressal mechanism and benefits to non-IDPs. This isto ensure transparency and accountability. The communication campaign would be outsourced toa third party and have wide coverage among IDPs and non-IDPs. This will contribute tominimizing anxieties that may otherwise cause increased inter-community tensions. Please seeAnnex 4 for more details.Social Safeguards Framework: The Social Assessment identified potential risks, long term socialconcerns and local integration. These included issues of inter-community tensions, genderequity, complexities in land ownership and tenure, community absorptive capacity and socialcapital. In order to mitigate these risks, the PPU prepared an ESMF and incorporated the relevantIDA Operational Directives and Operational Policies. The Framework will provide guidance onthe approach to be taken during project implementation in case of minor land acquisition and themitigation measures to be put in place. It will serve as a template to undertake specific socialaudits, monitoring and evaluation, and a continuous social impact assessment.69

Camp Social Profile (CSP): The Social Assessment collated CSPs for 111 camps which accountsfor 80% of the IDP population in Puttalam. The CSP served the following purposes: (i) establishbaseline conditions to follow-up on social and project impact assessments; (ii) identify socialdevelopment and conflict issues related to the non-IDP community; (iii) provide adequate dataand information to mobilize development agencies to assist other social infrastructure needs suchas solid waste disposal, micro-credit etc. in the locality; and (iv) identify additional supportrequired at the camp level to guarantee effective implementation.Community level information on basic infrastructure, services, resources including land use andwater sources, livelihood/economic activities, poverty and vulnerability, institutions, gender andethnic distribution, and key development needs are included in the CSP. The data gatheredthrough the Housing Assessment Survey will be annexed to the CSP. Data from the UNHCRsupervised survey in turn includes demographic characteristics of beneficiary families, incomeand livelihood activities, housing condition, land ownership and other vulnerability conditions etcupdated in April 2006. This complements the CSP providing extensive baseline data for futuredevelopment and monitoring purposes.Continuous Social Impact Assessment: The CSIA will record community perceptions andgrievances on the identification of IDP households, resentment between IDP and non-IDPcommunities, and the mobilization of resources. Please see Annex 3 for more information.Social Safeguard Issues: Overall, the PHP is expected to have limited negative social impact.None of the PHP components include activities that trigger a drastic change with adverse socialconsequences. The housing assistance will provide support for the construction or upgrading ofalready existing temporary or partly-completed houses of those IDP families with uncontestableland title. This is a socially feasible program targeted at poor IDP families who were forciblydisplaced and have since lived in temporary shelters in their preferred location of choice for 16years.While the PHP does not involve any land acquisition in the housing component per se, it isexpected that the provision of water supply and the environmental mitigation plans may involvesmall scale land acquisition. The extent and nature of the land acquisition will not be clear untilthe detailed planning of the water supply and environmental mitigation plans are availablefollowing which an assessment of the required land acquisition will take place. This would detailthe acquisition process for government land and private lands, and the consultations andcompensation measures/processes to be followed in case of private lands.IDA Operational Directives: There will be no involuntary settlement under the PHP. The projectprovides for voluntary resettlement of IDPs in instances where the refugee camps may beenvironmentally unsuitable. The IDPs would need to document uncontested landownership andwould be informed through a communication campaign about the implications of opting for acash grant for permanent housing in Puttalam. An Environmental and Social SafeguardsFramework has been prepared. This includes guidelines to prepare a Resettlement Action Plan(RAP) if needed at a future date, tools to screen activities for their social impact and themethodology to address the Operational Policy on Involuntary Resettlement - OP 4.12 if the needarises.Social Impact and Mitigation: The IDP household will need to demonstrate clear title to land toreceive the housing support cash grant. This is intended to safeguard against the threat of evictionand reduce the potential for political and economic exploitation. The Ministry of Resettlement has70

established a Land Task Force to help regularize issues relating to land title in relation to thePHP. This was set up on the lines of that currently in operation in the North East to expedite theissuance of land deeds.According to the UNHCR supervised Survey (2006), 74% of IDPs in the refugee camps own landin Puttalam and 55% possess legal documentation to support that. According to the Survey, 72%of those with landownership informed that they had purchased the land – in some cases, theybought the land on which the refugee camp is located where all IDP families of the camp possesstitle deeds; others collectively bought land outside the refugee camp. 3% of those with landownership revealed that they had received the land through donation. Among those who possessdocumentary evidence of landownership, an overwhelming 97% had outright deeds, whereas only1.5% held permits and 1% grants or 0.5% leases.Many IDPs have possessed title deeds for several years (since 1998 or even earlier) but lack themeans to build permanent houses. The process of securing title is still on-going in a number ofcamps – both in terms of buying lands privately, trying to obtain state land/LRC land andobtaining title deeds issued free of cost. The local mosque committee was the prime organizer inthe collective action taken in the majority of cases. Most IDP camps comprise people from thesame place of origin. Where this is not the case, families from the same place of origin gettogether to collectively purchase the land. This is witnessed for example in the IDPs from theMullaitivu district jointly buying 600 acres of land for habitat purposes though living in differentcamps at present.In certain cases, IDPs may be eligible to apply for Prescriptive Land Title as they haveencroached uncontested on private land for more than 10 years. However, this will trigger IDA’soperational policy on land acquisition and will not be included under this credit. The deed ofprescriptive title in Sri Lanka stipulates that person/family occupying a private land withoutinterruption for 10 years can claim ownership and after 20 years can automatically have absoluteownership. These claims however can be legally contested by the original owner.71

Annex 11: Project Preparation and SupervisionSRI LANKA: PUTTALAM HOUSING PROJECTPlannedActualPCN review November 2, 2005 November 2, 2005Initial PID to PIC April 12, 2006 July 17, 2006Initial ISDS to PIC April 12, 2006 July 26, 2006Appraisal September 12, 2006 September 18, 2006Negotiations November 29, 2006Board/RVP approval February 20, 2007Planned date of effectiveness April 1, 2007Planned date of mid-term review December 10, 2008Planned closing date June 30, 2010Key institutions responsible for preparation of the project:Puttalam Project UnitMinistry of ResettlementNational Water Supply and Drainage BoardNorth West Province Road DepartmentIDA staff and consultants who worked on the project included:Name Title UnitNaresha Duraiswamy Task Team Leader SACSLShideh Hadian Operations Officer SASSDShyamal SarkarSenior Water and SanitationSASSDSpecialistSumith Pilapitiya Lead Environment Specialist SASSDAsta OlesenSenior Social DevelopmentSASSDSpecialistSara Gonzalez Flavell Senior Counsel LEGMSShonali SardesaiConflict SpecialistSoraya GogaSenior Urban DevelopmentSASSDSpecialistSamantha Wijesundera Procurement Specialist SARPSJiwanka Wickremasinghe Financial ManagementSARFMSpecialistEashwary Ramachandran Operations Analyst SASSDNina Kataja Junior Professional Officer SACSLNarayanan EdadanSenior Housing ConsultantNadeera RajapakseEnvironment ConsultantJayantha de MelProcurement ConsultantLilian MacArthur Program Assistant SASSDKishani Fernando Team Assistant SACSL72

IDA funds expended to date on project preparation:1. IDA resources: US$Estimated Approval and Supervision costs:1. Remaining costs to approval:2. Estimated annual supervision cost: US$ 75,00073

Annex 12: Documents in the Project FileSri Lanka: Puttalam Housing Project UNHCR supervised Survey of Welfare Centers 36 in Puttalam – 2004 UNHCR supervised Survey of Welfare Centers in Puttalam – 2006 National Survey of IDPs - 2003 Social Assessment Environmental Assessment Social Profiles for 111 Refugee Camps Environment Profiles for 111 Refugee Camps Environmental and Social Management Framework. Housing Assessment Survey Project Concept Note Minutes of the Quality Enhancement Review Meeting Integrated Safeguards Data Sheet36 Refugee Camp74