Document of The World Bank

FOR OFFICIAL USE ONLY

Report No: 87044-LC

INTERNATIONAL DEVELOPMENT ASSOCIATION

PROJECT APPRAISAL DOCUMENT

ON

PROPOSED CREDITS

IN THE AMOUNT OF SDR 26.6 MILLION (US$ 41 MILLION EQUIVALENT)

INCLUDING US$ 17 MILLION EQUIVALENT IN CRISIS RESPONSE WINDOW RESOURCES

AND PROPOSED CO-FINANCING FROM THE

STRATEGIC CLIMATE FUND IN A GRANT IN THE AMOUNT OF US$ 12 MILLION AND

A LOAN IN THE AMOUNT OF US$ 15 MILLION

TO

SAINT LUCIA

FOR A

DISASTER VULNERABILITY REDUCTION PROJECT

May 8, 2014

Caribbean Country Management Unit Sustainable Development Department Latin America and the Caribbean Region This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.

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CURRENCY EQUIVALENTS

(Exchange Rate Effective March 31, 2014)

Currency Unit = XCD XCD 0.37 = US$1

US$0.64878 = SDR 1

FISCAL YEAR January 1 – December 31

ABBREVIATIONS AND ACRONYMS

CAFF Climate Adaptation Financing Facility CARICOM Caribbean Community CCRIF Caribbean Catastrophe Risk Insurance Facility CIF Climate Investment Fund CRW Crisis Response Window DMP II Second Disaster Management Project DRM Disaster Risk Management DVRP Disaster Vulnerability Reduction Project EA Environmental Assessment EIA Environmental Impact Assessment EMF Environmental Management Framework ERDMP Emergency Recovery Disaster Management Project FM Financial Management GDP Gross Domestic Product GIS Geographic Information System GoSL Government of Saint Lucia HTERP Hurricane Tomas Emergency Recovery Project IA Implementing Agencies IBRD International Bank for Reconstruction and Development ICB International Competitive Bidding IDA International Development Association IFR Interim Financial Report LCS Least Cost Selection LoC Line of Credit M&E Monitoring and Evaluation MIPS&T Ministry of Infrastructure, Port Services, and Transport MoE Ministry of Education, Human Resource Development and Labour MoF Ministry of Finance, Economic Affairs, Planning and Social Security MoH Ministry of Health, Wellness, Human Services and Gender Relations MoPP Ministry of Physical Planning, Housing and Urban Renewal MoSDEST Ministry of Public Service, Sustainable Development, Energy, Science and Technology NCB National Competitive Bidding NDU National Development Unit

ii

NEMO National Emergency Management Organization OECS Organization of Eastern Caribbean States OM Operations Manual OP Operational Policy ORAF Operational Risk Assessment Framework PPA Project Preparation Advance PCC Project Coordination Committee PCU Project Coordination Unit PDO Project Development Objective PPCR Pilot Program for Climate Resilience RAP Resettlement Action Plan RDVRP Regional Disaster Vulnerability Reduction Program RPF Resettlement Policy Framework RPS Regional Partnership Strategy SCF Strategic Climate Fund SDED Sustainable Development and Environment Department SLASPA Saint Lucia Air and Sea Ports Authority SLDB Saint Lucia Development Bank SPCR Strategic Program for Climate Resilience ToR Terms of Reference WASCO Water and Sewerage Company WRMA Water Resources Management Agency

Regional Vice President: Jorge Familiar Country Director: Sophie Sirtaine

Sector Director: Ede Jorge Ijjasz-Vasquez Sector Manager: Anna Wellenstein

Task Team Leader: Tiguist Fisseha

iii

SAINT LUCIA Disaster Vulnerability Reduction Project

TABLE OF CONTENTS

Page

I. STRATEGIC CONTEXT .................................................................................................1 A. Country Context .......................................................................................................... 1

B. Situation of Urgent Need of Assistance or Capacity Constraints ............................... 2

C. Sectoral and Institutional Context ............................................................................... 2

D. Higher-Level Objectives to Which the Project Contributes ....................................... 4

II. PROJECT DEVELOPMENT OBJECTIVES ................................................................5 A. PDO............................................................................................................................. 5

B. Project Beneficiaries ................................................................................................... 5

C. PDO Level Results Indicators ..................................................................................... 5

III. PROJECT DESCRIPTION ..............................................................................................6 A. Project Components .................................................................................................... 6

B. Project Financing ........................................................................................................ 9

C. Lessons Learned and Reflected in the Project Design ................................................ 9

IV. IMPLEMENTATION .....................................................................................................11 A. Institutional and Implementation Arrangements ...................................................... 11

B. Results Monitoring and Evaluation .......................................................................... 12

C. Sustainability............................................................................................................. 12

V. KEY RISKS AND MITIGATION MEASURES ..........................................................13 A. Risk Ratings .............................................................................................................. 13

B. Overall Risk Rating Explanation .............................................................................. 13

VI. APPRAISAL SUMMARY ..............................................................................................14 A. Economic Analysis ................................................................................................... 14

B. Technical ................................................................................................................... 14

C. Financial Management .............................................................................................. 14

D. Procurement .............................................................................................................. 15

E. Social (including safeguards) .................................................................................... 15

iv

F. Environment (including safeguards) ......................................................................... 15

Annex 1: Results Framework and Monitoring .........................................................................17

Annex 2: Detailed Project Description .......................................................................................23

Annex 3: Implementation Arrangements ..................................................................................36

Annex 4: Operational Risk Assessment Framework (ORAF) .................................................49

Annex 5: Implementation Support Plan ....................................................................................54

Annex 6: OP/BP 10 Financial Intermediary Financing ...........................................................57

Annex 7. Economic Analysis ......................................................................................................64

Annex 8. Map of Saint Lucia ......................................................................................................74 Table 1: Project Cost and Financing (in US$ million) ................................................................... 9 Table 2: Summary of Risks and Risk Ratings .............................................................................. 13 Table 3: Cost-Benefit Analysis for Four Subprojects……………………………………………14 Table 4. Summary of Damage and Loss by Sector ($ million) .................................................... 24 Table 5: Examples of potential Investments under the CAFF ...................................................... 29 Table 6: Alignment of Project Activities with Regional IDA Eligibility Criteria ........................ 34 Table 7: Procurement methods thresholds and prior review thresholds ....................................... 43 Table 8: Skills Mix Required ........................................................................................................ 56 Table 9: Skills Focus and Timing ................................................................................................. 56 Table 10: Partners ......................................................................................................................... 56 Table 11: SLDB Balance Sheet - Key Figures ............................................................................. 62 Table 12: SLDB Financial Soundness Indicators ......................................................................... 62 Table 13: SLDB Liquidity Analysis (as of March 31, 2009) ....................................................... 63 Table 14: Institutional Development Plan for SLDB ................................................................... 63 Table 15: Selected Sample Project Activities for the Economic Analysis ................................... 65 Table 16: Number of Vehicles Crossing the Choc Bridge per day ............................................... 66 Table 17: Number of Vehicles Crossing the National Highway per day ..................................... 67 Table 18: Costs of the Subprojects on Sample ............................................................................. 68 Table 19: Damage costs for Choc Bridge Fuel and Time costs ................................................... 69 Table 20: Economic Results ........................................................................................................ 71 Table 21: Results of the Sensitivity Analysis ............................................................................... 71 Table 22: Probability Distribution selected for each variable ...................................................... 72 Table 23: Financial and Economic Risk Assessment .................................................................. 72 Figure 1: CAFF Flow of Funds ..................................................................................................... 59 Figure 2: SLDB Organizational chart ........................................................................................... 61 Figure 3: SLDB Loan Portfolio Concentration by Sector (as of May 31, 2012) .......................... 63 Box 1: Saint Lucia Advances towards greater Climate Resilience………………………………23

v

.

PAD DATA SHEET

Saint Lucia Disaster Vulnerability Reduction Project (P127226)

PROJECT APPRAISAL DOCUMENT .

LATIN AMERICA AND CARIBBEAN

LCSDU

Report No.: 87044-LC .

Basic Information Project ID EA Category Team Leader

P127226 B - Partial Assessment Tiguist Fisseha

Lending Instrument Fragile and/or Capacity Constraints [ X ]

Investment Project Financing - Natural or man-made disaster

Financial Intermediaries [ X ]

Series of Projects [ X ]

Project Implementation Start Date Project Implementation End Date

30-Sep-2014 01-Oct-2019

Expected Effectiveness Date Expected Closing Date

30-Sep-2014 01-Apr-2020

Joint IFC

No

Sector Manager Sector Director Country Director Regional Vice President

Anna Wellenstein Ede Jorge Ijjasz-Vasquez Sophie Sirtaine Jorge Familiar .

Borrower: Saint Lucia

Responsible Agency: Ministry of Finance

Contact: Ms. Tracy Polius Title: Permanent Secretary

Telephone No.: 7584682413 Email: tpolius@gosl.gov.lc .

mailto:tpolius@gosl.gov.lc

vi

Safeguards Deferral (from Decision Review Decision Note) Will the review of Safeguards be deferred? [ ] Yes [ X ] No

Project Financing Data(in USD Million)

[ ] Loan [ X ] Grant [ ] Guarantee

[ X ] Credit [ ] IDA Grant [ ] Other

Total Project Cost: 68.00 Total Bank Financing: 41.00

Financing Gap: 0.00 .

Financing Source Amount

BORROWER/RECIPIENT 0.00

International Bank for Reconstruction and Development

0.00

International Development Association (IDA) 24.00

Crisis Response Window IDA Credit 17.00

Strategic Climate Fund Grant 12.00

Strategic Climate Fund Loan 15.00

Total 68.00 .

Expected Disbursements (in USD Million)

Fiscal Year

2015 2016 2017 2018 2019 2020 0000 0000 0000

Annual 1.50 6.50 15.00 16.00 19.00 10.00 0.00 0.00 0.00

Cumulative

1.50 8.00 23.00 39.00 58.00 68.00 0.00 0.00 0.00

.

Proposed Development Objective(s)

The Project Development Objective (PDO) is to reduce vulnerability to natural hazards and climate change impacts in Saint Lucia. .

Components

Component Name Cost (USD Millions)

Risk Reduction and Adaptation Measures 49.00

Technical Assistance for Improved Assessment and Application of Disaster and Climate Risk Information in Decision-Making

10.00

Climate Adaptation Financing Facility 5.00

vii

Contingent Emergency Response 1.00

Project Management and Implementation Support 3.00 .

Institutional Data

Sector Board

Urban Development .

Sectors / Climate Change

Sector (Maximum 5 and total % must equal 100)

Major Sector Sector % Adaptation Co-benefits %

Mitigation Co-benefits %

Public Administration, Law, and Justice

Public administration- Water, sanitation and flood protection

20 100

Health and other social services Other social services 5 100

Transportation Rural and Inter-Urban Roads and Highways

25 100

Water, sanitation and flood protection Flood protection 50 100

Total 100

I certify that there is no Adaptation and Mitigation Climate Change Co-benefits information applicable to this project. .

Themes

Theme (Maximum 5 and total % must equal 100)

Major theme Theme %

Social protection and risk management Natural disaster management 50

Environment and natural resources management

Climate change 50

Total 100 .

Compliance

Policy

Does the project depart from the CAS in content or in other significant respects?

Yes [ ] No [ X ]

.

Does the project require any waivers of Bank policies? Yes [ ] No [ X ]

Have these been approved by Bank management? Yes [ ] No [ ]

viii

Is approval for any policy waiver sought from the Board? Yes [ ] No [ X ]

Does the project meet the Regional criteria for readiness for implementation? Yes [ X ] No [ ] .

Safeguard Policies Triggered by the Project Yes No

Environmental Assessment OP/BP 4.01 X

Natural Habitats OP/BP 4.04 X

Forests OP/BP 4.36 X

Pest Management OP 4.09 X

Physical Cultural Resources OP/BP 4.11 X

Indigenous Peoples OP/BP 4.10 X

Involuntary Resettlement OP/BP 4.12 X

Safety of Dams OP/BP 4.37 X

Projects on International Waterways OP/BP 7.50 X

Projects in Disputed Areas OP/BP 7.60 X .

Legal Covenants

Name Recurrent Due Date Frequency

Description of Covenant

. Conditions

Name Type

Operations Manual (Financing Agreement, Article V, 5.01, b) Effectiveness

Description of Condition

GoSL to prepare and adopt an Operations Manual for components 1, 2, and 5 in form and substance satisfactory to the World Bank.

Name Type

Project Coordination Committee (Financing Agreement, Article V, 5.01, c) Effectiveness

Description of Condition

GoSL to establish a Project Coordination Committee with mandate, composition, functions and resources satisfactory to the Association.

Name Type

Legal Agreements (Financing Agreement, Article V, 5.01, a); (Loan Effectiveness

ix

Agreement, Article V, 5.01, a); (Grant Agreement, Article V, 5.01);

Description of Condition

GoSL to execute the four Legal Agreements: IDA Financing Agreement, PPCR Grant Agreement, SCF Loan Agreement, Project Agreement.

Name Type

Subsidiary Agreement for Component 3 - Climate Adaptation Financing Facility (CAFF) (Loan Agreement, Article V, 5.01, b)

Effectiveness

Description of Condition

The Subsidiary Agreement has been executed on behalf of the GoSL and the Saint Lucia Development Bank (SLDB).

Name Type

Component 3 – CAFF (Loan Agreement, Schedule 2, Section IV.B.1 (b)) Disbursement

Description of Condition

No withdrawal shall be made under Component 3 unless and until (i) SLDB has prepared and adopted the CAFF Manual, in form and substance satisfactory to the World Bank; and (ii) implemented the institutional development plan for the CAFF, in a manner acceptable to the World Bank.

Name Type

Operations Manual for Contingent Component (Component 4) (Financing Agreement, Schedule 2, Section IV.B.1 (b))

Disbursement

Description of Condition

GoSL to prepare and adopt Contingent Component-specific Operations Manual and defined Action Plan of Activities, in form and substance satisfactory to the World Bank

Team Composition

Bank Staff

Name Title Specialization Unit

Tiguist Fisseha Disaster Risk Management Specialist

Team Lead LCSDU

Niels B. Holm-Nielsen Lead Disaster Risk Management Specialist

Disaster Risk Management

LCSDU

Victor Manuel Ordonez Conde

Senior Finance Officer Finance CTRLN

Patricia M. Acevedo Program Assistant Program Assistant LCSDU

Manju Ghumman Program Assistant Program Assistant LEGLE

Ana F. Daza Language Program Assistant

Language Program Assistant

LCSDU

x

Plamen Stoyanov Kirov Senior Procurement Specialist

Procurement LCSPT

Edith Ruguru Mwenda Senior Counsel Lawyer LEGAM

M. Yaa Pokua Afriyie Oppong

Senior Social Development Specialist

Social Development LCSSO

David I Senior Financial Management Specialist

Senior Financial Management Specialist

LCSFM

Leyla V. Castillo Financial Sector Specialist

Financial Sector Specialist

FFIMS

Christopher J. Chung E T Consultant Operations Analyst LCSDU

Melanie Simone Kappes E T Consultant Disaster Risk Assessment

LCSDU

Bishwa Raj Pandey E T Consultant Spatial Data management

LCSDU

Daniel E. Thirion Consultant Civil Engineer LCSDU

Emily Francoise Bove Consultant Gender and M&E LCSDU

Michael J. Darr Consultant Environment LCSEN

Beatriz Pozueta Mayo Consultant Coastal Engineer LCSDU

Margaret Patricia Henley Barrett

Consultant Operations Analyst LCSDU

Luz Maria Gonzalez Consultant Economist LCSDU

Gerald E. Meier Consultant Hydromet Specialist LCSDU

Sophie Bettencourt Peer Reviewer Lead Operations Officer GFDRR

Emilia Battaglini Peer Reviewer Sr Environmental Specialist

LCSEN

Pierre Bonneau Peer Reviewer Sr Infrastructure Specialist

LCSTR

Fabio Pittaluga Peer Reviewer Sr Social Development Specialist

LCSSO

Kanta K. Rigaud Reviewer Lead Environmental Specialist

CCGPT

Andrej Popovic Reviewer Sr Financial Sector Specialist

FFIMS

xi

Non Bank Staff

Name Title Office Phone City

.

Locations

Country First Administrative Division

Location Planned Actual Comments

Saint Lucia Greater Castries City of Castries and South Castries

X

Saint Lucia Anse-La-Raye Anse-La-Raye X

Saint Lucia Canaries Canaries X

Saint Lucia Dennery Dennery X

Saint Lucia Soufriere Soufriere X

Saint Lucia Vieux-Fort Vieux-Fort X

1

I. STRATEGIC CONTEXT

A. Country Context

1. With a gross national income per capita of US$10,3001, Saint Lucia is an upper-middle-income small island state, with an estimated population of 174,000 (2010). After growing 4.5 percent annually on average during 2003–2006, economic activity slowed sharply in recent years as Saint Lucia was hit by multiple exogenous shocks: Hurricane Dean in August 2007, an earthquake in November 2007, the global food and energy price hikes in 2007–2008, and severe droughts in 2009 and 2010. Between 2008 and 2009, economic growth fell from 5.8 percent to -1.3 percent, largely resulting from the 2008 global financial crisis. The construction, manufacturing and agriculture sectors were significantly affected, along with the tourism sector, which accounts for 65 percent of GDP and represents the main source of foreign exchange earnings and the second largest employer after the public sector2. Saint Lucia’s economy continues to contract with an estimated negative growth rate of 2.3 percent in 20133 driven by a decline in private investment and construction activity. 2. Despite relatively strong social indicators — the 2013 United Nations Development Program Human Development Index ranked Saint Lucia as 88th of 187 countries — poverty and inequality remain high in Saint Lucia. According to the latest Country Poverty Assessment (2005/6), 28.8 percent of the population lives below the locally defined poverty line (an increase from 25.1 percent in 1995), while 6 percent of the population is indigent4 and 40.3 percent is estimated to consume at a level under the vulnerability line.5 In addition, approximately 20.5 percent of the population is unemployed (2010), an increase of 11 percent since 2005. In 2006, the Gini coefficient of Saint Lucia was 0.42, with sharp regional differences evident in poverty rates. Recent disaster trends also demonstrated that areas with the highest rates of poverty also tend to suffer the most from flooding and landslides. 3. While Saint Lucia aims to improve its citizens’ social conditions through investments in infrastructure, economic diversification and employment generation, its population, economy and national assets remain highly exposed to natural catastrophic risk, which jeopardizes efforts at ending extreme poverty and boosting shared prosperity. Over the years, disasters stemming from weather-related natural hazards, such as winds, floods, landslides and droughts, have increasingly impacted livelihoods, destroyed infrastructure, and disrupted provision of essential services. This has necessitated committing a growing share of the national budget for recovery and reconstruction efforts, thereby imposing large costs on the country’s fragile economy and setting back hard won development gains.6

1 Estimated 2012 GNI per capita, PPP (current international $). World Development Indicators, The World Bank, 2014 2 CIA 2013 3 Page 27, Saint Lucia Budget Statement, 2014. 4 Indigence is defined as “persons whose daily average consumption is too low to guarantee adequate nutrition to maintain good bodily health” (Saint Lucia CPA 2005/6, p. xvi). 5 A vulnerability line is defined as 125% of the poverty line; it measures the number of persons who are susceptible to becoming poor due to an unanticipated event such as a natural catastrophe or other economic shock. 6 In recent years, a range of adverse natural events has impacted Saint Lucia. Since Hurricane Allen in1980, Saint Lucia has been affected by at least six hurricanes and tropical storms, three of which occurred between 2002-2007; eight major landslides, which have resulted in the destruction of homes, dislocation of communities and significant loss of biodiversity; as well as a series of earthquakes in 1990 and in 2007, which includes a magnitude 7.3 earthquake.

2

B. Situation of Urgent Need of Assistance or Capacity Constraints

4. On December 24, 2013, a low-level trough passed over Saint Lucia producing extraordinarily intense rainfall at a time well outside of the hurricane season. Over a three-hour period, the island received an average of 224 millimeters of rain. A rainfall of this magnitude within such a short period is estimated to be a 1-in-100 year event in Saint Lucia. The GoSL formally requested financial and technical assistance from the World Bank on January 7, 2014. A rapid Damage and Needs Assessment was subsequently carried out with the GoSL from January 21 – 31, 2014, which estimated a combined physical damage and economic losses of approximately US$99.8 million (8.3 percent of GDP), with impacts largely concentrated in areas with poverty rates higher than the national average (Anse-la-Raye, Canaries, Marc-Bexon, Vieux Fort and Soufriere). A summary of the damage and losses is presented in Table 4 of Annex 2. Given the magnitude of the disaster, the GoSL requires significant support to “build back better” and to enhance the country's overall resilience to disasters. In view of this, US$17 million is sought from the IDA Crisis Response Window (CRW) to support the country’s reconstruction and recovery needs under the Project7. Given the urgency to respond to the disaster, the Project is processed invoking the Special Considerations of OP 10.00, paragraph 11.

C. Sectoral and Institutional Context 5. Climate-related hazards are a significant threat to economic and social development in Saint Lucia. Accordingly, Saint Lucia has undertaken a number of initiatives to reduce the potential impacts of adverse natural events and climate change in order to protect development gains. 6. Disaster Risk Management (DRM). Saint Lucia has made considerable efforts to improve national DRM capacity by: (i) strengthening risk monitoring and early warning systems; (ii) enhancing emergency preparedness and planning; and (iii) increasing public awareness and capacity of public officials. With support from the World Bank, Saint Lucia has implemented disaster response and emergency rehabilitation programs, starting in 1998, including the Emergency Recovery and Disaster Management Program (ERDMP – P070430), which supported physical and institutional efforts for disaster recovery and emergency preparedness8 and the Second Disaster Management Project (DMP II - P086469). This was a follow-up to the ERDMP which included structural and nonstructural risk reduction measures, such as retrofits of public facilities, construction of coastal protection works, an emergency operation center and community-level risk reduction interventions and capacity building activities. 7. From a policy perspective, Saint Lucia has advanced significantly by introducing the National Hazard Mitigation Policy (2003), establishing the National Emergency Management Organization (NEMO) (2006), and enacting the National Disaster Management Plan (2007) to better guide assessment, prevention and post-disaster response activities. Together, these policies represent a shift from a reactionary to a more proactive and comprehensive DRM framework. 7 A Note presented to the WB Board on March 20 2014 informed the Executive Directors of Management’s intention to allocate an indicative amount of US$17 million to support Saint Lucia’s reconstruction following the 24-25 December 2013 Floods. 8 The ERDMP, an IBRD/IDA blend project, was designed as part of an Adaptable Program Loan that included 5 stand-alone projects in five member countries of the Organization of Eastern Caribbean States (OECS). The Saint Lucia PAD Report No is 18655 - Loan 44190 SLU/Credit 31510 SLU.

3

Part of this framework includes the use of financial instruments to safeguard against fiscal shocks associated with disaster. In 2007, Saint Lucia, along with 16 other Caribbean Community (CARICOM) countries, established the Caribbean Catastrophe Risk Insurance Facility (CCRIF) – the world’s first regional catastrophe risk pooling mechanism which allows countries to pool their hurricane and earthquake risk and collectively approach the international reinsurance market to purchase coverage at better terms. Payouts are immediate and better enable governments to continue public and social service delivery in the wake of a disaster.9 8. Climate Change Adaptation. Integral to its work on DRM, Saint Lucia has undertaken a number of climate change-related initiatives at the national and community levels over the last two decades10. In recent years, Saint Lucia (along with five other Caribbean countries) has participated in the regional Pilot Program for Climate Resilience (PPCR) for the Caribbean, one of the targeted programs of the Climate Investment Funds (CIF). As a participant, Saint Lucia developed its national Strategic Program for Climate Resilience (SPCR),11 a five year strategy to build the country’s resilience to climate change impacts, through the following priority areas: (i) human welfare and livelihood protection; (ii) integrated natural resource protection, conservation, and management to promote sustainable development; (iii) building of resilience through business development, innovation, and productivity enhancement; (iv) capacity building and institutional strengthening; and (v) reduction of risk to climate-related disasters. 9. Notwithstanding Saint Lucia’s progress achieved in nationwide disaster vulnerability reduction and climate change adaptation over the past two decades, the island still faces challenges in adequately and comprehensively managing natural hazard risk. This is particularly the case in the context of a changing climatic environment that threatens to reverse hard won development gains as well as poverty reduction efforts. 10. Despite the evident risks posed by catastrophe events, Saint Lucia lacks a comprehensive DRM framework for planning and investment decision-making. Development decisions often do not take into account disaster risks and expected climate change impacts. Such deficiencies largely derive from a lack of sufficient information on hazards, risks, and climate change impacts as well as limited capacity and weak data sharing among agencies (at both national and regional levels). Additionally, present hydro-meteorological forecasting and emergency management capacities limit the country’s preparedness in the face of adverse natural events. Furthermore, underdeveloped and dilapidated infrastructure challenges disaster vulnerability reduction efforts. Critical public infrastructure such as roads, bridges and water supply systems as well as health and education facilities remain vulnerable to climate change related impacts, including flooding and landslides. Oftentimes, designs and construction were carried out without due consideration to disaster hazard and risk, and maintenance has been deferred over multiple years. Beyond its physical vulnerability and need for an improved understanding of risks, Saint Lucia is also 9 The CCRIF utilizes parametric insurance which is not meant to cover actual damages incurred, but meant to offer immediate liquidity in a disaster’s aftermath. For Saint Lucia, the Facility paid roughly US$1 million within two weeks of the November 2007 earthquake and US$3.2 million following Hurricane Tomas in 2010. 10 The initiatives include ratification of the UN Framework Convention on Climate Change (UNFCCC) in 1993, appointment of a National Climate Change Committee in1998, and adopting a comprehensive climate adaptation framework, and subsequent development of the National Climate Change Policy and Plan in 2002. 11 The Saint Lucia SPCR was developed under the leadership of the GoSL through a highly consultative process and endorsed by the PPCR sub-committee on June 29, 2011. See the CIF website for more details on the SPCR: https://www.climateinvestmentfunds.org/cifnet/?q=country/saint-lucia

https://www.climateinvestmentfunds.org/cifnet/?q=country/saint-lucia

4

fiscally threatened by natural catastrophes, given the significant recovery and reconstruction costs associated with such events. Lack of access to immediate capital for post-disaster recovery and reconstruction represents a major challenge. The fiscal impacts of disasters have thus resulted in unsustainable budgetary deficits and dependence on unreliable funding streams.

D. Higher-Level Objectives to Which the Project Contributes

11. Links to the Regional Partnership Strategy. The Project is consistent with the World Bank Group’s Regional Partnership Strategy (RPS) for the Organization of Eastern Caribbean States (OECS) 2010–2014 (Report No. 53762-LAC) discussed by the Executive Directors on June 8, 2010, which identifies natural catastrophes as a key challenge facing the sub-region and includes as a core objective the building of resilience to adverse natural events and climate change.12 In line with this objective, the Project includes activities that reduce risk and increase resilience through civil works, capacity building and institutional development activities. The Project would also contribute to the RPS goal of strengthening the country’s fiscal sustainability by including a contingent component meant to help the GoSL withstand the macroeconomic shocks and budget volatility commonly faced in the aftermaths of a disaster. 12. The Project is also fully aligned with the upcoming World Bank Group RPS for the OECS (2015-2019), currently under preparation. The RPS aims to address poverty and shared prosperity through a dual focus of (i) supporting inclusive sustainable growth and (ii) strengthening resilience. The Project would mainly contribute to the latter goal through risk reduction and adaptation measures, such as infrastructure retrofits and capacity building. 13. Ending Extreme Poverty and Promoting Shared Prosperity. The Project would contribute to the Bank’s dual objectives of ending extreme poverty and promoting shared prosperity. Investments will help reduce both physical and socio-economic vulnerabilities of businesses and households to climate-related disasters. Planned activities such as road rehabilitation and safe bridge construction would ensure continued access to markets, schools and hospitals in the aftermaths of an adverse natural event. In addition, provision of concessional climate adaptation loans to businesses and households will not only reduce physical disaster vulnerability, but also aim to promote climate resilient livelihoods, contribute to the socio-economic well-being of the most vulnerable, and advance greater agency across gender lines. 14. Reducing Vulnerability to Climate Change. The Project directly addresses the Saint Lucia SPCR goals, as a direct application of the SPCR program and its aim to achieve transformative impact by improving national resilience to adverse natural events and longer-term impacts resulting from climate change. The Project also responds to directives established in the 2002 National Climate Change Policy and Plan, which guides a national process of addressing the short, medium and long term effects of climate change across various sectors.

12 Historical data indicates that the sub regional probability of a hurricane in any given year is approximately 18 percent, and it is widely acknowledged that natural adverse events like hurricanes can cause major economic damage, resulting in significant public expenditures.

5

II. PROJECT DEVELOPMENT OBJECTIVES

A. PDO

15. The proposed Project Development Objective (PDO) is to reduce vulnerability to natural hazards and climate change impacts in Saint Lucia.

B. Project Beneficiaries

16. Generally, the proposed Project would benefit the country’s 174,000 inhabitants by reducing the risk of failure of key infrastructure, improving the overall national understanding of risk for informed decision-making, and increasing national capacity to quickly rehabilitate damaged public infrastructure following an adverse natural event. 17. Direct Beneficiaries: Individuals, including women and vulnerable groups, living in project intervention areas13 or using public infrastructure with a reduced risk of failure from natural catastrophe will directly benefit from the proposed Project. Specifically, users of rehabilitated roads and bridges, as well as communities benefiting from riverbank protection, slope stabilization and structurally-sound health and education facilities and emergency shelters would benefit. The bulk of investments are targeted in areas where some of the highest levels of disaster vulnerability and poverty overlap, including Anse-la-Raye, Soufriere and Vieux Fort. The Project would also directly benefit households and businesses accessing concessional loans through the Climate Adaptation Financing Facility (CAFF), which aims to integrate climate resilience into assets and livelihoods. Particular attention would be paid to ensuring that CAFF finance is used to promote greater resilience across socio-economic and gendered lines. 18. Indirect Beneficiaries: Other OECS countries would indirectly benefit from the proposed Project as Saint Lucia would continue to participate in ongoing regional collaboration efforts under the Regional Disaster Vulnerability Reduction Project (RDVRP - P117871) and the Regional Caribbean PPCR. By advancing national open data infrastructure and cross-regional knowledge and information sharing, the proposed Project would facilitate increased regional collaboration on understanding risk and developing risk reduction solutions. Investments in flood defense infrastructure adjacent to the international airport would have positive spillover effects to other Caribbean island nations as continued operations would ensure aid, supplies and assistance can be both received or deployed in the immediate aftermaths of extreme hydro-meteorological events. Additionally, these investments would also enable continued regional connectivity, which is critical for intra-regional tourism, a mainstay of Eastern Caribbean economies14.

C. PDO Level Results Indicators

19. The achievement of the PDO would be measured using the following key indicators: a) Number of direct Project beneficiaries (male/female)15;

13 These areas include the districts of Dennery, Soufriere, Anse-la-Raye, Choiseul, Vieux Fort and greater Castries. 14 Tourists traveling from the US and Europe to Saint Vincent and the Grenadines or Dominica are often required to connect through either Saint Lucia or Grenada (given these two countries are the only islands of the four meeting international standards to receive commercial air jets). 15 Aligned with PPCR Core Indicator 5: Numbers of people supported by the PPCR to cope with effects of climate change

6

b) Number of days of interrupted traffic due to landslips, flooding and other climate-related events in project areas;

c) Number of schools/health centers/emergency shelters with reduced vulnerability to landslips, flooding and other climate-related events;

d) Climate risk analysis reflected in transport and drainage infrastructure design16.

III. PROJECT DESCRIPTION

20. The Project aims to reduce urgent disaster vulnerability and increase long-term climate resilience in Saint Lucia by addressing the multi-faceted risks associated with hydro-meteorological events. The Project would also finance emergency reconstruction activities in light of the December 2013 floods. Forming the second phase of a regional series of projects under the RDVP, the project aims to contribute to strengthening DRM in four OECS countries and support investments and capacity building activities that foster disaster resilience across the Eastern Caribbean region. 21. The IDA credits would finance vulnerability reduction and post-disaster reconstruction activities, while the CIF/PPCR resources would be used to effect transformational change to establish long-term climate resilience. Innovative approaches would be piloted to realize such change and draw lessons learned for future replicability within Saint Lucia and internationally. 22. World Bank Value Added. The World Bank offers extensive experience and expertise in supporting the design and implementation of disaster risk reduction and climate resilience programs in Saint Lucia, other OECS countries and globally. Lessons learned from implementing previous multi-sectoral DRM projects have informed the Project design. In addition, the Bank’s convening power, ability to leverage donor partnerships, and mobilize additional funds to support scaled up vulnerability reduction and climate resilience activities in Saint Lucia further highlights the value of World Bank involvement.

A. Project Components

23. The Project is comprised of the following components (see Annexes 2 and 3 for details): 24. Component 1– Risk Reduction and Adaptation Measures (US$49 million). This component would support structural and non-structural flood and landslide risk reduction interventions and climate adaptation measures to improve Saint Lucia’s resilience against current and future climatic shocks. Additionally, the component would finance the reconstruction of critical infrastructure damaged during the December 2013 flooding, using the ‘build back better’ approach. Activities would also address other potential risks (e.g. seismic) and would ensure that financed works are generally disaster resilient. Sub-projects may include the following: (i) reinforcement of flood control infrastructure; (ii) climate resilient rehabilitation of road sections, including drainage improvements, slope stabilization works and retrofit of select bridges; (iii) retrofits and climate resilient rehabilitation of priority emergency shelters; (iv) climate-resilient

16 Aligned with PPCR Core Indicator 2: Evidence of strengthened government capacity and coordination mechanism to mainstream climate resilience

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rehabilitation of water supply infrastructure; (v) retrofit and rehabilitation of existing schools and health centers; and, (vi) preliminary assessments and technical studies required to implement such works. Additionally, relevant national plans, policies and strategies to support risk reduction and climate resilience efforts would be developed, including, inter alia: an integrated watershed management plan for flood mitigation, a rainwater harvesting pilot program, and a climate change public awareness and education strategy.

25. Importantly, technical assistance is embedded within sub-activities and include: (i) development of operational and maintenance plans (including a bridge maintenance plan); (ii) risk assessments to support engineering design options and final detailed design solutions, and (ii) integrated hazard and climate analyses to inform project designs. 26. Component 2– Technical Assistance for Improved Assessment and Application of Disaster and Climate Risk Information in Decision-Making (US$10 million). This component would support capacity building for open systems and platforms to create, share, analyze and use disaster risk and climate change data and information for improved decision making and engineering design for risk reduction and climate change adaptation. Specifically, the component would finance, inter alia: (i) the creation of a high resolution digital topographic and bathymetric model for Saint Lucia; (ii) sea level rise modelling and coastal flood and erosion risk mapping; (iii) design and deployment of meteorological, hydrological, and sea level rise monitoring networks to provide high resolution hydrologic data; (vi) deployment of an environmental health surveillance system; and (v) technical assistance and regional capacity building and training workshops to promote safe and uniform building standards and harmonize geospatial data standards across the Eastern Caribbean. 27. Data collected under this component would be used to inform investments under Component 1 (when suitable) as well as to identify and prioritize future risk reduction and adaptation investments. Data outputs would also inform the development of appropriate land use plans and provide a basis for more future flood and landslide risk management schemes. 28. Component 3– Climate Adaptation Financing Facility (CAFF)(US$5.0 million). This component is designed to establish a pilot financing mechanism meant to promote increased climate resilience under a climate adaptation financing facility (Climate Adaptation Financing Facility or CAFF), including the provision of retail loans (Sub-loans) to eligible households and private firms or businesses , to finance climate adaptation investments to build resilience of assets and livelihoods, intended to reduce risks associated with catastrophic hydro-meteorological shocks.

29. Saint Lucia Development Bank (SLDB) 17 would serve as retail bank and would on-lend to final beneficiaries – with a concerted aim of building an affordable and self-sustaining loan portfolio in climate adaptation. Based upon the initial success of the component and local demand for climate adaptation loans, consideration will be given to include other commercial

17 SLDB’s eligibility as participating financial institution was determined based on comprehensive institutional assessment and due diligence that was conducted during preparation. While the participation of private commercial banks was also considered, at the time of the assessment, there was either no commercial interest for providing loans to conduct risk reduction measures or banks were not financially fit to carry out this business.

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banks as participating retail banks. A standalone CAFF OM would be generated. SLDB would receive systematic support to address identified gaps in its current operation and risk management structure and practices (as outlined under an institutional development plan), while additional technical assistance would be provided on an as needed basis. A detailed description of the component and associated institutional development plan are included in Annex 6.

30. Component 4– Contingent Emergency Response (US$1.0 million). This provisional component would support carrying out of emergency recovery and reconstruction subprojects under an agreed action plan of activities, which is designed as a mechanism to implement the Recipient’s response to an Emergency. The component would allow rapid re-categorization and reallocation of project financing from other projects to partially cover emergency response and recovery costs associated with a natural catastrophe. The component would only be triggered in the event of a natural disaster, either national or localized in scope. The triggering of the component is contingent upon (i) either a Declaration of a Natural Disaster or activation of the National Emergency Management Plan in accordance with the laws of Saint Lucia, particularly the Disaster Management Act (2006) or the Emergency Powers Disaster Act (CAP 14.07); and (ii) a formal request to the Bank to activate the component in accordance with the component-specific OM or an agreed action plan that would form part of the OM - which would detail the fiduciary, safeguards and any other necessary implementation arrangements. This component could also be used to channel additional disaster response funds, should they become available. 31. Component 5– Project Management and Implementation Support (US$3.0 million). Activities under this component would support strengthening the institutional capacity for Project management and implementation, including: (a) staffing the National Development Unit (NDU) and Project Coordination Unit (PCU); (b) building the technical capacity of said NDU, PCU and the SDED within the MoSDEST; (c) training of NDU, PCU and SDED staff, and strengthening the respective capacity for management, supervision, monitoring and evaluation of specific Project activities; and (d) carrying out technical and Project audits, all through the provision of technical advisory services, training, operating costs and acquisition of goods. Incremental operating costs incurred by implementing agencies would also be covered as well as those required for outside consultancies to prepare and supervise specific activities.

B. Project Financing

Lending Instrument 32. The lending instrument was an Adaptable Program Loan (APL) in the Parent Project (P117871) and is being implemented in the Organization of Eastern Caribbean States (OECS). However, the term APL has been retired and subsequent Projects in the series fall under the new Investment Project Financing (IPF) guidelines. Projects in Saint Vincent and the Grenadines and Grenada form IPF1, and an Additional Financing for this project was approved by the Board on May 9 2014. Saint Lucia and Dominica comprise IPF2 and IPF3, respectively. The Dominica Disaster Vulnerability Reduction Project (P129992) was approved by the Board on May 1 2014. The implementation period for the Project in Saint Lucia will be five years.

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Project Cost and Financing

33. The Project would be financed by US$41 million equivalent in IDA Credits (US$19 million in National IDA, US$5 million in Regional IDA and US$17 million from IDA CRW), with co-financing from the CIF in the amount of a US$12 million SCF Grant, and a US$15 million SCF Loan. Table 1 summarizes project cost and financing by component.

Table 1: Project Cost and Financing (in US$ million) Project Components Project

cost IDA

Financing IDA CRW Financing

CIF Financing Grant

CIF Financing Loan

Component 1: Risk Reduction and Adaptation Measures

49.0 19.7 14.2 5.1 10.0

Component 2: Technical Assistance for Improved Assessment and Application of Disaster and Climate Risk Information in Decision-Making

10.0 3.3 1.2 5.5 0.0

Component 3: Climate Adaptation Financing Facility

5.0 0.0 0.0 0.0 5.0

Component 4: Contingent Emergency Response

1.0 1.0 0.0 0.0 0.0

Component 5: Project Management and Implementation Support

3.0 0.0 1.6 1.4 0.0

Total 68.0 24.0 17.0 12.0 15.0 34. Regional IDA resources have been secured as the Project is fully aligned with Regional IDA objectives as summarized below and detailed in Table 6 of Annex 2:

• Involve three or more countries: The Project is the second of a three part series of disaster vulnerability reduction projects in three other Eastern Caribbean countries: Dominica, Grenada and Saint Vincent and the Grenadines;

• Benefits, either economic or social, spill over country boundaries: Flood defense investments at the international airport will better ensure regional connectivity, which is critical for regional disaster resilience, not only for emergency response purposes but also for continued intra-regional tourism connectivity, a mainstay of Eastern Caribbean economies. Additionally, data management activities under Component 2 will be aligned with parallel activities in Dominica, Grenada and Saint Vincent and the Grenadines;

• Clear evidence of country or regional ownership: The Project is being prepared as part of the country’s participation in the Regional Pilot Program for Climate Resilience (PPCR);

• Provide a platform for a high level of policy harmonization between countries: The capacity building element integrated into civil works investments will not only help ensure proper design, management and maintenance of financed infrastructure, but will be carried out through regional activities meant to mainstream safe and uniform building standards across seven OECS countries.

C. Lessons Learned and Reflected in the Project Design

35. Project design takes into account lessons learned from the Saint Lucia and OECS DRM

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portfolios, the Bank’s global experience with DRM and other multi-sector operations, ongoing regional and global PPCR programs as well as well as the IDA 16 Mid-Term Review. 36. Significant preparatory work during project preparation can result in implementation benefits by the time of project effectiveness: Experience from implementing multi-sectoral projects – including those financed by regional IDA finance and phase 1 of the RDVRP – has shown the benefit of dedicating substantial time during preparation towards: (i) drawing consensus amongst implementing agencies (IAs) regarding project activities and coordination; (ii) building local fiduciary and M&E capacities; and (iii) providing the PCU with as-needed training/technical assistance. The Saint Lucia Hurricane Tomas Emergency Recovery Project (HTERP-P125205) and the ongoing RDVRPs in SVG and Grenada further demonstrated the importance of project readiness by the time of effectiveness. A Project Preparation Advance (PPA) was secured to begin early preparation of designs and studies of works, while early cost-estimating can help reduce the risk of overruns and/or budget shortfalls. All planned civil works have included budget contingencies for potential increases in project scope. 37. Climate-resilient retrofitting entails comprehensive interventions and should be accounted for in the initial design of works. Experience from DMP II has shown that climate-resilient retrofitting entails a broader set of activities beyond simply installing a hurricane-proof roof and windows, for example; other items to consider could include drainage infrastructure, slope stabilization and water storage systems. Such consideration is critical in the early design phase as broader interventions pose budget and time implications. The Project therefore includes technical trainings to develop this multi-faceted awareness and to introduce climate-resilient retrofitting standards in project design, costing and associated bill of quantities. Doing so reduces risks of inadequate designs, implementation delays and budget shortfalls.

38. Effective DRM entails systematic behavioral change. The Implementation Completion Report for DMP II highlights the importance of establishing a culture of prevention, while noting disaster risk reduction requires behavior change spawning from education, awareness raising and empirical learning from implementing actual works. Such change entails accounting for disaster risk when designing projects. Saint Lucia lacks sufficient capacity to fully interpret hazard and risk information, and integrate it into territorial and project planning.18 Components 2 and 5 therefore include hazard and risk data collection activities and corresponding technical assistance to increase local capacity on the interpretation and use of such information.

39. Investing in infrastructure maintenance is cost-effective DRM. A damage assessment carried out in Saint Lucia post-Hurricane Tomas (November 2010) concluded that Bank-financed risk reduction investments adequately served their purpose when faced with a 1-in-500 year rainfall event.19 While the retrofitting, rehabilitation, and new construction of works in themselves proved effective, regular maintenance over the past decade is what ensured the resilience of such investments. Component 1 therefore requires individualized maintenance plans

18 Experience drawn from the Central American Probabilistic Risk Assessment (P101639) demonstrate that accessing relevant, accurate and sufficient amounts of data represents significant limiting factors when aiming to successfully integrate risk assessment into project design and decision-making. 19 See World Bank, Saint Lucia Hurricane Tomas Rapid Damage Assessment (2010).

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are generated for each retrofitting, rehabilitation and mitigation work. Both national and regional maintenance capacity building programs are also included. 40. Meeting a government’s immediate liquidity needs is critical in ensuring timely post-disaster response. Most governments in the region experience difficulty quickly raising emergency funds in the three to four months following a catastrophe. Resources are often sourced from other line ministry budgets, thereby setting back development programs. While parametric insurance payouts have been critical in a disaster’s immediate aftermaths (e.g. CCRIF), such payments may not suffice. The Project includes an emergency contingency component to finance response and recovery needs.

IV. IMPLEMENTATION A. Institutional and Implementation Arrangements

41. The MoF would be the primary GoSL counterpart and serve as the overarching institution responsible for project execution. The MoF is experienced in executing Bank-financed projects and coordinating various line ministries – a critical ability given the Project’s cross-sectoral nature and broad range of stakeholders involved in implementation. The existing Project Coordination Unit (PCU) within the MoF will be responsible for day-to-day project management, coordinate project implementation and serve as the intermediary between the Bank and IAs. The PCU will further be responsible for fiduciary and safeguards compliance reporting to the Bank on safeguards, financial management, procurement, audit and disbursement aspects and on overall project progress, with inputs from the IAs. 42. The IAs would be responsible for the preparation of technical specifications, bills of quantities and terms of reference relating to their respective activities. Generally, the MIPS&T would be the technical IA responsible for coordinating and managing all civil works activities. The MoSDEST would be the technical IA responsible for ensuring project activities remain aligned with the SPCR goals. As the country’s focal point on climate change issues, the MoSDEST would also be responsible for reporting on PPCR activities within the Project, with inputs from the IAs, and on the overall Program. SLDB would be the intermediating financial institution that would administer the sub-loans under the CAFF/Component 3. 43. To foster communication and coordination between the IAs and key government stakeholders, the MoF would convene a Project Coordination Committee (PCC). The National Development Unit (NDU) within MoF will serve as Secretariat for the PCC, which would be responsible for ensuring that the Project is in line with national development priorities. 44. For the implementation of regional capacity building and knowledge sharing activities related to mainstreaming safe and uniform construction standards and climate resilience engineering, the respective agencies responsible for public works and the Chief Technical Officers Association for the OECS would be responsible. For regional activities related to geo-spatial data management and sharing and harmonization of data standards across the Eastern Caribbean, the Project would engage, relevant regional agencies, which would work in partnership with the respective Physical Planning units of the participating OECS islands.

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B. Results Monitoring and Evaluation 45. The results framework, presented in Annex 1, has been developed in coordination with GoSL. Indicators have also been reviewed vis-à-vis the PPCR core indicators to ensure alignment and facilitate reporting of results at program level. The Project would finance M&E expertise from the start of implementation, to collect baseline data and targets for the indicators related to component 3 that are still to be determined, as well as validate the qualitative and quantitative baselines and targets proposed for the Project’s monitoring indicators within the results framework20. 46. The NDU, which is the entity responsible for M&E for all public programs at the national level, would be responsible for overall M&E of the Project, consolidating all progress reports generated by the IAs. The PCU will report to the World Bank on a quarterly basis on progress achieved, and annually on project performance indicators, based on the NDU’s monitoring reports. For PPCR-specific activities, the Climate Change Coordinator within MoSDEST would monitor and report according to the CIF M&E guidelines. 47. For Component 3, SLDB would submit semi-annual reports to evaluate progress achieved against select indicators as well as semiannual financial management reports. SLDB’s financial performance would be monitored through independent auditors’ reports and separate management letters confirming adherence to prudential norms.

C. Sustainability

48. Physical Sustainability: The structural investments will be designed to be more resilient to physical conditions and the impacts of adverse natural events and climate change than they are currently, which will assure improved physical sustainability of the infrastructure. The quality of work (including reinforcement of flood control infrastructure, rehabilitation of roads, bridge expansion, slope stabilization and retrofits of health and school facilities) will be assured through the use of international best practices for engineering designs, construction supervision and technical audits. In addition, designs will account for demographic, topographic, hydrologic, seismic, and land use/cover changes. Appropriate maintenance plans for investments would also be prepared through project-financed technical assistance to better ensure continued and effective use. A maintenance strategy will also be developed and detail an appropriate maintenance management system (with corresponding funding streams detailed). 49. Financial Sustainability: Global experience has shown that investments in prevention are more cost-effective than ex-poste reconstruction and/or retroactive interventions meant to achieve climate resilience. Following these lessons, the Project will proactively invest in interventions meant to demonstrate long-term financial benefits – especially in the event of a catastrophe – as well as build capacity within the GoSL to account for disaster vulnerability reduction and climate resilience in public investment decision-making processes. So, the physical investments being made will reduce the annual contingent liability posed by disasters,

20 The baseline and target values for the indicators related to the sub-loans will be defined following the completion of the CAFF demand analysis, and prior to the effectiveness of the Project.

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and therefore reduce the fiscal burden on government accounts. For Component 3, to prevent market distortions and to ensure that the sub-borrowers gain appropriate returns from investments made under the Project, SLDB would follow its pricing policy according to its cost of capital and associated risks within the particular type of projects to be financed.

50. Institutional Sustainability: A key project outcome would be improved capacity of line ministries to account for disaster and climate risk in public investments, infrastructure maintenance and general long-term planning. Of particular emphasis is analytical and technical support to MIPS&T to enhance its approach to flood control and slope stabilization – from a retroactive process of ad hoc rehabilitations to a data-driven decision making approach that enables strategic long-term planning, operations and maintenance.

V. KEY RISKS AND MITIGATION MEASURES

51. Potential risks to achieving objectives, along with corresponding mitigation measures, are detailed in Annex 4: Operational Risk Assessment Framework (ORAF). The ORAF will be used to monitor and reassess risks and review mitigation measures during project implementation.

A. Risk Ratings

52. Risk ratings are summarized in Table 2.

Table 2: Summary of Risks and Risk Ratings Risk Category Rating

Stakeholder Risk Low

Implementing Agency Risk

- Capacity Substantial

- Governance Low

Project Risk

- Design Substantial

- Social and Environmental Moderate

- Program and Donor Low - Delivery Monitoring and Sustainability Moderate

Others Substantial

Overall Implementation Risk Substantial

B. Overall Risk Rating Explanation

53. The GoSL has demonstrated clear commitment to the Project, with significant preparatory work carried out under the ongoing HTERP and with the use of the PPA. The current administration, elected in November 2011 for a five-year term, has endorsed the Project. 54. Overall Implementation Risk remains Substantial as a result of the multi-sectoral nature

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of the Project, the relatively large project size21, novelty and complexity of the credit line component (Component 3) and the low capacity of the financial intermediary institution SLDB, which lacks experience with Bank policies and procedures. To address the risk related to the project size, including project and contract management capacity, the Project would finance additional staff and training of existing personnel. A Project Coordination Committee (PCC) will be established to ensure coordination mechanisms across national and regional agencies. To strengthen SLDB’s capacity to serve as a financial intermediary and manage the line of credit (LoC), an institutional development plan has been agreed upon with SLDB. The Project would closely monitor implementation of the proposed measures to ensure that SLDB's capacity and governance mechanisms are strengthened to effectively administer the sub-loans.

VI. APPRAISAL SUMMARY

A. Economic Analysis

55. An economic analysis was conducted with a focus on select works under Component 1 and demonstrated the project to be economically viable, with net benefits of US$9.4 million and rate of economic returns of 21 percent. Table 3 below summarizes analysis results by subproject. The full economic analysis can be found in Annex 7.

Table 3. Cost-Benefit Analysis for Four Subprojects

Subproject Present Value of Flows (Thousand US$)

Costs Benefit Net Benefit Internal Rate of Return Choc Bridge 1,589 7,051 5,462 23.8% Marchand Riverbank 1,639 2,788 1,149 19.1% Community Centers 503 588 85 13.0% National Highway 2,034 4,699 2,665 21.5%

Total Sample 5,764 15,125 9,361 21%

B. Technical

56. Proposed works and institutional strengthening activities have been evaluated to ensure consistency with the short and long-term objectives of the Project. Specific activities have been included based on a no-regrets approach and on GoSL identified priorities. During project preparation, all proposed activities were reviewed for technical merit, and a detailed assessment was conducted with each respective ministry or agency to refine the proposed activity. In all cases, clear relationships between proposed activities and the project objective were identified, and supporting engineering and safeguard activities have been accounted for in the proposed budget. While activities have been evaluated based upon climate-related disaster risks, seismic risk will also be accounted for in the design and evaluation of financed works.

C. Financial Management

57. The Bank has conducted a financial management (FM) capacity assessment which

21 This operation is the largest Bank-financed operation in Saint Lucia.

15

concluded that the PCU, which has considerable experience implementing Bank-financed projects, has adequate capacity to be responsible for the Project’s overall FM, including ensuring project funds are used for the purpose intended by the various IAs. For component 3, a separate FM capacity assessment of SLDB was carried out, and concluded that SLDB had adequate checks and balances, staffing and accounting systems in place to carry out FM responsibilities for the CAFF sub-loans.

D. Procurement

58. The PCU within the MoF will be responsible for the procurement under the Project. The Bank conducted an assessment of the PCU’s procurement capacity, which was found to be adequate to manage the procurement of the Project, including preparation of bidding documents, inviting bids, evaluation of bids/proposals and contract awards, in collaboration and with inputs from the IAs. In the case of Component 3, procurement would be carried out in accordance with well-established local private sector procurement methods or commercial practices, acceptable to the Bank. Procurement arrangements for Component 3 would be elaborated in the CAFF OM. 59. Procurement Plan: For each contract financed under the Project, the various procurement or consultant selection methods, the estimated costs, prior/post review requirements, and time frame have been agreed upon between the GoSL and the Bank in the initial Procurement Plan dated April 15, 2014. The Procurement Plan would be updated at least annually or as required to reflect the actual project implementation needs and improvements in institutional capacity.

E. Social (including safeguards)

60. The project Social Assessment confirmed that beneficiaries welcome the project and anticipated positive social impacts. Perceived impacts include a greater sense of safety and security as a result of improved infrastructure and facilities as well as increased community participation as a result of renovated community centers. A beneficiary feedback mechanism would be devised at project start, which would be implemented throughout the project lifespan. A Grievance Redress Mechanism, as articulated in the Resettlement Policy Framework (RPF), will be used to address potential concerns of project beneficiaries. 61. The Involuntary Resettlement Safeguard Policy (OP/BP 4.12) is triggered as planned works (e.g. road rehabilitation, drainage systems) could lead to public acquisition of land and subsequently impact beneficiary assets or access to assets. As such, an RPF has been developed, disclosed in country and on the World Bank's external website, and was publically consulted in Saint Lucia.

F. Environment (including safeguards)

62. The Project has been classified as Category B in accordance with World Bank Environmental Assessments Policy (OP/BP 4.01), as proposed activities under Component 1 primarily involve rehabilitation works and anticipated potential environmental impacts are considered short-term, not significant, and readily preventable or manageable with standard measures. With regards to Component 3, the relevant policies and procedures of SLDB were

16

reviewed and agreement was reached whereby any sub-projects of Category A nature and those potentially involving land acquisition would be excluded under the CAFF. 63. The GoSL has prepared a project-level Environmental Assessment (EA) combined with an Environmental Management Framework (EMF) – both of which have been disclosed in-country and on the World Bank's external website and publicly consulted. Safeguards policies for Natural Habitats (OP/BP 4.04) and Physical Cultural Resources (OP/BP 4.11) have been triggered as a precaution to ensure the development and inclusion of clear screening criteria related to natural habitats and physical cultural resources. (See Annex 3 for detail).

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Annex 1: Results Framework and Monitoring .

Country: Saint Lucia

Project Name: Saint Lucia Disaster Vulnerability Reduction Project (P127226) .

Results Framework .

Project Development Objectives .

PDO Statement

The Project Development Objective (PDO) is to reduce vulnerability to natural hazards and climate change impacts in Saint Lucia.

These results are at Project Level .

Project Development Objective Indicators

Cumulative Target Values Data Source/ Responsibility for

Indicator Name Core Unit of Measure

Baseline YR1 YR2 YR3 YR4 End Target Frequency Methodology

Data Collection

Direct project beneficiaries

Number 0.00 0.00 2000 10000 40000 169000 Semi-Annual

Semi-annual Project Progress Reports

PCU, SDED

Female beneficiaries

Percentage Sub-Type Supplemental

0.00 0.00 51 51 51 51 Semi-Annual

Semi-annual Project Progress Reports

PCU, SDED

18

Number of days of interrupted traffic due to landslips, flooding and other climate-related events in project areas

Number 20.00 20 15 15 10 5 Semi-Annual

Semi-annual Project Progress Reports; MIPS&T Supervision Reports

PCU; MIPS&T

Number of schools/ health centers and emergency shelters with reduced vulnerability to landslips, flooding and other climate-related events as a result of project interventions

Number 0.00 0 2 5 8 8 Semi-annual

Semi-annual progress report; MIPS&T supervision reports

MIPS&T, Ministries of Education, Health and Social Transformation; PCU

Climate risk analysis reflected in transport and drainage infrastructure design

Yes/No No No No Yes Yes Yes Semi-annual

Semi-Annual Project Progress Reports

PCU, MIPS&T, WASCO

.

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Intermediate Results Indicators

Cumulative Target Values Data Source/

Responsibility for

Indicator Name Core Unit of Measure Baseline YR1 YR2 YR3 YR4 End Target Frequency

Methodology Data Collection

Roads rehabilitated, Non-rural

Kilometers 0.00 0 0 0.2 0.35 0.5 Semi-annual

Semi-annual Project Progress Reports; MIPS&T Supervision Reports

PCU; MIPS&T

Storm drains constructed under the project

Meter(m) 0.00 TBD TBD TBD TBD TBD Semi-annual

Semi-annual Project Progress Reports; MIPS&T Supervision Reports

PCU; MIPS&T

Number of official policies, strategies, studies produced by public sector workers which reference climate change-related DRM studies,

Number

0.00 0.00 2.00 2.00 3.00 4.00 Semi-Annual

Semi-annual Project Progress Reports;

PCU; MIPS&T; SDED, MoPP

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technical assessments, standards and guidelines generated from the Project

Number of Government ministries/agencies connected to a spatial data sharing platform

Number 0.00 3.00 4.00 6.00 6.00 8.00 Semi-annual

Semi-annual Project Progress Reports

PCU; MoPP; ICT

Number of Government officials trained in spatial data management and data analysis under the Project

Number 0.00 10.00 20.00 40.00 50.00 50.00 Semi-annual

Semi-annual Project Progress Reports Inventory report of instrumentation/software installed

PCU; Ministry of Physical Planning

Meteorological and hydrological, monitoring networks installed and active

Yes/No No No No No Yes Yes Semi -annually

Semi-annual Project Progress Reports

PCU; Met Services, SDED, and WRMA

LiDAR mapping of the entire

Yes/No No No No Yes Yes Yes Semi-annually

Semi-annual Project

PCU; Ministry of Physical

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country completed

Progress Reports

Planning

CAFF portfolio is fully disbursed in the form of climate adaptation loans

Percentage 0.00 0.00 30 70 90 100 Semi-annually

Semi-annual Project Progress Reports; SLDB report

PCU, SLDB, SDED

Number of active and fully repaid adaptation loan accounts

Number 0.00 0.00 TBD TBD TBD TBD Semi-annually

Semi-annual Project Progress Reports; SLDB report

PCU; SLDB, SDED

Total number of approved borrowers

Number Sub-Type Breakdown

0.00 0.00 TBD TBD TBD TBD Semi-annually

Semi-annual Project Progress Reports; SLDB report

PCU; SLDB, SDED

Female borrowers

Percentage Sub-Type Supplemental

0.00 0.00 51 51 51 51 Semi-annually

Semi-annual Project Progress Reports; SLDB report

PCU; SLDB, SDED

Average volume of adaptation loans

US Dollar Amount

0.00 TBD TBD TBD TBD TBD Semi-annually

Semi-annual Project Progress Reports; SLDB reports

PCU, SLDB, SDED

Operations Manual for this Yes/No No No Yes Yes Yes Yes

Semi-annually

Semi-annual Project

PCU; Ministry of Finance;

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component prepared to facilitate disbursement in the event of an emergency

Progress Reports

NEMO

Time taken to disburse funds in the event of an eligible emergency

Weeks 4.00 4.00 4.00 4.00 4.00 4.00 In the event of an emergency

PCU; Ministry of Finance

.

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Annex 2: Detailed Project Description SAINT LUCIA: Disaster Vulnerability Reduction Project

BACKGROUND

1. The Project aims to support the country’s ongoing efforts to move forward towards a more climate resilient future (Refer to Box 1). In the last 2 decades, disasters have had devastating social and economic impacts, which are driving the Government’s interest to build resilience to climate-related risks. As global climate change continues to increase the frequency and intensity of climactic events, many of Saint Lucia’s most vulnerable – particularly the rural poor and agriculturalists – are expected to be impacted disproportionately.22 Tropical Storm Debbie in 1994 and the Tropical Wave in 1996, for example, resulted in cumulative damages of US$93.1 million to property and infrastructure across the island. Hurricane Tomas in 2010 affected major sectors of the economy and diminished growth, with the total impact estimated at US$336 million or roughly 34 percent of Saint Lucia’s GDP.23 Most recently, the passage of a low-level trough in December 2013 resulted in combined damage and losses of US$99.8 million, equivalent to 8.3 percent of the island’s GDP24. (A summary of damage and loss by sector is detailed in Table 4 below.) In addition to devastating large-scale disasters, small-scale flooding is endemic in low-lying areas and coastal villages already suffering from socio-economic vulnerabilities.

Box 1: Saint Lucia Advances towards greater Climate Resilience Saint Lucia is fully cognizant of its imminent climate change related threats, and has subsequently undertaken a number of initiatives at the national and community levels over the last two decades. In 1993, Saint Lucia ratified the UN Framework Convention on Climate Change (UNFCCC). The Cabinet-appointed National Climate Change Committee has been functioning since 1998, comprises key governmental and nongovernmental organizations, and aims to support the mainstreaming of climate change considerations into relevant national policies, strategies, and plans. Importantly, Saint Lucia was among three countries in the region to adopt a comprehensive adaptation framework, which led to the piloting of a three-phased adaptation program funded by the Global Environment Facility, from 1998 to 2007. An important outcome of this engagement was the development of the National Climate Change Policy and Plan, adopted by the Cabinet in 2002. Additionally, Saint Lucia (along with five other Caribbean countries) was invited to participate in the regional Pilot Program for Climate Resilience (PPCR) for the Caribbean, one of the targeted programs of

22 While the agriculture sector represents 3.9% of GDP (World Bank, 2012), it nevertheless employs roughly 11% of Saint Lucia’s workforce. (Saint Lucia Statistical Digest, 2011). As a result of the recent Christmas Trough in 2013, the agriculture sector incurred an estimated US$ 12.5 million in damages and losses – equivalent to approximately 1% of GDP. (Saint Lucia Damage and Loss Assessment, Working Draft, January 2014) 23 ECLAC/UNDP, Saint Lucia: Macro Socio-Economic and Environmental Assessment Report: Towards Resilience Following the Passage of Hurricane Tomas, December 2010. 24 According to the WB-GoSL joint rapid damage and loss assessment conducted in January 2014, overall damage was estimated at approximately US$ 80 million while losses were assessed at an additional US$ 19.85 million. The impact of the disaster event was concentrated in geographical areas with the highest levels of poverty, including Anse-La-Raye and Soufriere with 44.9 percent and 42.4 percent of the population living in poverty, compared to the national average of 28.8 percent (SLU CPA, 2005/6). Significant damages were also experienced in Vieux Fort, which retains one of the highest levels of extreme poverty (4.8 percent), compared to the national average of 1.6 percent (SLU CPA, 2005/6).

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the Climate Investment Funds (CIF). As a participant, Saint Lucia developed its national Strategic Program for Climate Resilience (SPCR),25 a five year strategy to build the country’s resilience to climate change impacts, through the following priority areas: (i) human welfare and livelihood protection; (ii) integrated natural resource protection, conservation, and management to promote sustainable development; (iii) building of resilience through business development, innovation, and productivity enhancement; (iv) capacity building and institutional strengthening; and (v) reduction of risk to climate-related disasters.

2. Developed under a comprehensive, multi-sector framework, the Project would finance urgent structural disaster risk reduction and adaptation interventions in different sectors, as identified and prioritized by the Government. The Project would also support the country’s reconstruction and recovery efforts in responding to the December 2013 disaster. In addition, significant technical assistance, institutional strengthening and capacity building efforts would complement investments in physical infrastructure. The Project would also integrate an emergency recovery and rehabilitation mechanism component, Contingent Emergency Response, that would complement existing post-disaster financing options, and would help manage this residual risk. This mechanism could be triggered in the event of an adverse natural event, following a declaration of national emergency.

Table 4. Summary of Damage and Loss by Sector ($ million) Sectors Damage US$

(Millions) Loss US$ (Millions)

Total US$ (Millions)

% Total Loss & Damage

Productive Agriculture $9.21 $3.71 $12.92 12.9% Tourism $0.0 $2.11 $2.11 2.1% Commerce $0.4 NE $0.42 0.4% Infrastructure Water and Sanitation $2.30 $4.10 $6.40 6.4% Transportation $68.80 $3.10 $71.90 72.3% Electricity Not Evaluated (NE) NE NE NE Telecommunication $0.12 $0.41 $0.53 0.5% Social Housing $2.15 $2.05 $4.20 3.8% Education $0.80 $0.19 $0.99 1.0% Health $0.24 $0.13 $0.37 0.4% Total $80.03 $19.85 $99.88 100%

3. The Project will follow a “no-regrets” approach where investments are chosen based on a high risk of structural failure during a 10-year event (Category 1 hurricane, or M7.0 earthquake) in the case of buildings and bridges, or where annual flooding occurs in the case of flood management and urban drainage.

25 The Saint Lucia SPCR was developed under the leadership of the GoSL through a highly consultative process and endorsed by the PPCR sub-committee on June 29, 2011. See the CIF website for more details on the SPCR: https://www.climateinvestmentfunds.org/cifnet/?q=country/saint-lucia

https://www.climateinvestmentfunds.org/cifnet/?q=country/saint-lucia

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PROJECT COMPONENTS

4. The PDO will be achieved through the following five mutually reinforcing components: COMPONENT 1: Risk Reduction and Adaptation Measures (US$49 million: US$19.7 million IDA; US$5.1 million SCF Grant; US$10.0 million SCF Loan; US$14.2 million CRW). 5. This component would be designed to implement urgent risk reduction and climate adaptation investments that have been identified and prioritized by the GoSL. Subprojects would include the following: Subcomponent 1.1 – Rehabilitation of Marchand Riverbank Protection (US$2.6 million):

6. The Marchand River flows through a highly urbanized area in Castries. Investments would involve critical reinforcement to the existing structures, approximately 700 meters of riverbank stabilization, and 300 meters of new riverbank construction to withstand future floods. The current construction of some of the walls along the riverbanks is not continuous, with no protection or reinforcement. The works along the riverbanks would be done in a continuous manner, to prevent the occurrence of scouring in the sections of the river where isolated walls have been built, and ensure the overall stability of the structures. General lack of maintenance is noticeable on the current structure, with much vegetation growth on the walls, and sedimentation occurring along the riverbeds. A maintenance plan would be subsequently developed to ensure the stability and sustainability of the rehabilitated structure.

Sub-Component 1.2 – Flood Mitigation works at the Hewanorra International Airport (US$5 million). 7. The floods of December 2013 demonstrated the disaster vulnerability of Hewanorra International Airport (UVF), which suffered from breaches of adjacent levees. Subsequent flooding shutdown the airport for close to 42 hours spanning from December 24 evening to December 26 afternoon. Regional connectivity is critical in ensuring regional disaster resilience, not only for a country receiving emergency aid and assistance, but also for other countries in need. Investments in flood defense infrastructure adjacent to UVF will therefore have positive spillover effects to other Caribbean island nations as continued operations will ensure aid, supplies and assistance can be both received or deployed in the immediate aftermaths of extreme hydro-meteorological events. In addition, as tourists traveling from the US and Europe to SVG or Dominica are often required to connect through either Grenada or Saint Lucia (given these two countries are the only islands of the four meeting international standards to receive commercial air jets). Thus, safeguarding the UVF runway is critical to regional economic activity, especially in the aftermath of a natural hazard event. Sub-Component 1.3 – Road and Bridge Rehabilitation through Slope Stabilization and Drainage Improvement (US$25.85 million):

8. Unstable, high-risk road stretches would be made safe, particularly through slope stabilization (such as replacing existing retaining walls with new structures) and drainage

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improvement works. In particular, interventions would focus on highly vulnerable segments of road along the national highway, which would be stabilized against landslides where road embankments were cut o