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The project is prioritized in the government's Strategic Program for Climate Resilience (2010) under the Pilot Program for Climate Resilience, and will demonstrate new approaches for integrating climate resilience into urban development in coastal pourashavas (with a population of 15,000 to 60,000). The government's Sixth Five-Year Plan, 2011 2015 targets assistance to vulnerable coastal populations requiring investments in climate-resilient infrastructure and urban planning. The project is consistent with the Bangladesh country partnership strategy, which targets assistance to vulnerable coastal areas in adapting to the risks of climate change, and is consistent with the ADB Urban Operational Plan to promote climate-change-resilient cities.

Climate change is a critical development issue for Bangladesh. The country's low-lying coastal zone (consisting of 19 districts with an estimated population of 38.1 million, of which 8.6 million is urban) is highly vulnerable to cyclones, storm surges, sea level rise, and salinity intrusion. A 1.5 C increase in temperature and 4% increase in precipitation (the median projections for Bangladesh from general circulation models) would potentially result in sea levels in the Bay of Bengal rising by 27 centimeters or more by 2050. Warmer temperatures would result in more frequent and intense cyclones and storm surges, damaging roads and bridges and rendering existing drainage, water supply, and sanitation systems ineffective, as well as threatening public health and safety. The central and southwestern regions of the country are particularly vulnerable. Cyclone Sidr in 2007 (a Category 5 storm with wind speed of 260 kilometers per hour) resulted in economic losses of $1.7 billion (2.6% of gross domestic product). The poor and women are disproportionately affected and have the lowest capacity to cope with losses. There is a high demand for climate-resilient infrastructure and disaster preparedness to improve the wellbeing of residents and reduce migration to larger cities.

Coastal towns suffer from large infrastructure deficits and natural resource constraints that exacerbate sensitivity to climate change. A shortage of drains and severe siltation and solid waste build up result in severe flooding and extended water logging (lasting up to 7 days during monsoon rains). Water supply suffers from (i) low access to piped water, (ii) salinity contamination of shallow and middle aquifers, and (iii) unsustainable groundwater extraction. Feasibility study surveys found that residents without piped water supplies who rely on community pond sand filter systems pay as much as 2 4 times more for water of inferior quality compared to similar towns with piped supplies. There is a high willingness to pay (up to 50%more) for improved services. While there is generally high coverage of household sanitation (up to 94% of households have toilets), there is no septage management or treatment systems, resulting in polluted waterways and a high incidence of waterborne diseases, with large outbreaks occurring after disasters. Emergency access roads are in poor condition, and most cyclone shelters are structurally unsafe as a result of extensive exposure to cyclones and poor maintenance. There is an acute need for new, higher-capacity multi-use cyclone shelters located in core urban areas accessible to poorer populations. It is critical that new investments are designed that consider climate change to manage the long-term costs of natural disasters and ensure investments deliver intended benefits.

The high vulnerability of coastal towns is also linked to poor governance and low adaptive capacity. Urban planning is in its infancy and development controls are only now emerging. Many pourashavas lack established mechanisms for public participation, particularly in the allocation of municipal budgets. Low tax collection efficiency (on average 57% in coastal towns) reflects outdated financial management practices, including limited computerization of accounts and billing systems, and irregular tax assessments. There is an urgent need to strengthen institutional capacity, public awareness, and knowledge management to complement physical investments as part of an integrated approach for building climate change resilience.