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TA 7228-KGZ: Issyk Kul Sustainable Development Project Final Report Volume 1 – CLIP
CURRENCY EQUIVALENT
(As of 1 August 2009)
Currency Unit – Som Som 1.00 = $0.0233 $1.00 = Som 43.00
ABBREVIATIONS
GIS : Geographical Information Systems BOD Biological Oxygen Demand IKOA Issyk Kul Oblast Administration JWMS : Joint Waste Management Strategy LFG : Landfill Gas lcd : Liter per capita per day MCS : Multi-cluster Survey MLD : Megalitre per day MSL : Mean Sea Level MSW : Municipal Solid Waste O&M : Operation and Maintenance PPE : Personal Protective Equipment PPP : Public Private Partnerships PPTA : Project Preparatory Technical Assistance PSA : Poverty and Social Assessment RCV : Refuse Collection vehicle RDF : Refuse Derived Fuel SEMP : Strategic Environmental Management Plan STP : Sewage Treatment Plant SWM : Solid Waste Management TOC : Total Organic Carbon TSS : Total Suspended Solids UFW : Unaccounted for water UNDP : United Nations Development Program UNEP : United Nations Environment Program UNICEF : United Nations Children’s Fund Vodokanal : Water and Sewerage Management Organization WBI : Water Borne Illnesses WTP : Water Treatment Plant
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CONTENTS
I. INTRODUCTION 7 A. Overview 7 B. Project Impact and Outcome 7 C. Scope of the Report 8 D. Report Structure 9
II. GROWTH MANAGEMENT 10 A. Overview 10 B. Economy and Employment 10 C. Growth Corridors, Densification and Realty 12 D. Land Use Planning and Development Plans 13 E. Institutions, Management and Capacity 14 F. Legal & Regulatory Framework 17 1. General Framework 17 2. Planning and Land-Use Legislation 18 3. Water and Wastewater Standards 19 4. Waste Management Legislation 19 G. Growth Trends and Projection 20
III. COMPONENT RATIONALE - NEED AND DEMAND 22 A. Socio Economic Profile 22 1. Introduction 22 2. Socio-Economic Context 22 3. Household Profile 23 4. Access to Services 26 B. Approach to Subproject Selection 27 1. City Priorities 27 2. Community Priorities 27 C. Project Component Selection 29 1. Objectives 29 2. Selection Methodology 29 3. Project Components 29
IV. URBAN INFRASTRUCTURE DEVELOPMENT 31 A. Overview 31 B. Water Supply 31 1. Service Delivery 31 2. Service Adequacy 35 3. Subcomponent Rationale and Design Criteria 35 4. Subcomponent Identification and Costing 35 5. Safeguard Compliance 38 C. Sewerage and Sanitation 38 1. Service Delivery 38 2. Service Adequacy and Strategy for Sanitation 45 3. Subcomponent Rationale and Design Criteria 46
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4. Subcomponent Identification and Costing 48 5. Safeguard Compliance 50 D. Solid Waste Management 51 1. Service Delivery 51 2. Service Adequacy 56 3. Subcomponent Rationale and Design Criteria 56 4. Subcomponent Identification and Costing 57 5. Safeguard Compliance 60 E. Costs Summary 60
V. SOCIAL DEVELOPMENT 62 A. Overview 62 B. Poverty and Vulnerability 62 1. Project Links to National Poverty Reduction Strategy 62 2. Poverty in Kyrgyz Republic 62 C. Household Socio-Economic Survey 63 1. Outline and Methodology for Survey 63 2. General Data on Households 64 3. Households and Water Supply 65 4. Households and Sanitation 66 5. Households and Solid Waste Management 66 6. Willingness to Pay 67 D. Gender Assessment 67 1. Gender Characteristics of Project Area 68 2. Women and Health Issues 68 3. Gender Action Plan 69 E. Social Action and Poverty Alleviation Plan 69 1. Community Upgrading 70 2. Health Awareness and Education 71
VI. SERVICE DELIVERY IMPROVEMENT 72 A. Institutions, Management and Capacity 72 1. Organizations and Entities 72 2. Organization Structure of the City 73 B. Legal & Regulatory Framework 75 C. Institutional Development and Capacity Building 77 D. Service Delivery Options 82
VII. FINANCIAL SUSTAINABILITY 84 A. Overview 84 B. City and Utility Finances 84 1. City Finances 85 2. Vodokanal Finances 87 3. Communal Utility Finances – Solid Waste Services (Tazalyk) 89 4. Integrated City and Utility Finances 90 C. Cost Estimates and Financing Plan 92 D. Investment Sustainability 94 1. Basic Assumptions for Projections 94 2. Subcomponent Sustainability 97 E. Financial Improvement Action Plan 102
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VIII. ECONOMIC VIABILITY 105 A. Overview 105 B. Approach and Methodology to Economic Analysis 105 1. Economic Rationale 106 2. Selection Approach 107 3. Subproject Alternatives. 107 4. Economic Cost-Benefit Analysis 108 C. Water Supply and Sewerage 109 1. Sector Review and Demand Analysis 109 2. Subcomponent Beneficiaries 110 3. Valuing Economic Benefits 111 4. Cost-Benefit Analysis 112 D. Solid Waste Management 114 1. Sector Review and Demand Analysis 114 2. Subcomponent Beneficiaries 115 3. Valuing Economic Benefits 115 4. Cost-Benefit Analysis 116 E. Conclusion 117
IX. IMPLEMENTATION SCHEDULE AND PROCUREMENT 118 A. Project Management and Implementation Overview 118 B. Execution and Coordination 118 1. Steering Committee 118 2. Executing Agency 118 3. Project Management Office 119 4. Project Implementation Office 119 5. City Administrations 119 6. Disbursement Arrangements 120 C. Implementation Schedule 120 D. Procurement of Goods and Works 120 E. Anticorruption 121 F. Accounts, Audits, and Reports 121 G. Continued Public Participation 122 H. Operation and Maintenance 122 I. Project Performance Monitoring and Review 122 1. Annual Operation Plans and Financial Review 122 2. Project Performance Monitoring System 123 3. Annual and Midterm Review 123
X. PROJECT RISKS AND ASSURANCES 124 A. Risks 124 1. Overall Project 124 B. Subproject Risks 125 1. Water Supply 125 2. Wastewater 125 3. Solid Waste 125 C. Mitigation Measures 126
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TABLES
Table II 1: Largest Economic Sectors (million Som), 2003 12 Table II 2: Employment by Group, 2003 13 Table II 3: Household Expenditure, 2003 13 Table II 4: Karakol Local Government Structure 16 Table II 5: Karakol Utility Service Organizations 17 Table II 6: Issyk Kul Oblast Administrative Bodies 18 Table II 7: Population Projection 22 Table II 8: Seasonal Population Projection 22 Table IV 1: Karakol Water Production Sources 34 Table IV 2: Karakol Reservoirs 34 Table IV 3: Water Demand Projections 38 Table IV 4: Water Supply Sub-project Cost 39 Table IV 5: Existing Sewers in Karakol 40 Table IV 6: Existing Sewers in Main Urban Area requiring Reconstruction 41 Table IV 7: Units Comprising Existing STP 42 Table IV 8: Proposals for Expansion of Sewerage System 46 Table IV 9: Final Effluent Standards 48 Table IV 10: Waste Composition Summary 52 Table IV 11: SWM Service Indicators 54 Table IV 12: Projected Solid Waste Generation 56 Table IV 13: Sub-Projects, Phasing in Karakol 57 Table IV 14: Costs Associated with Sub-Projects in Karakol 58 Table IV 15: Karakol Infrastructure Improvement Component Cost 59 Table V 1: Poverty Rates in Project Area 61 Table V 2: Distribution of Survey Sample 61 Table V 3: Comparison of Poverty Incidence 62 Table V 4: Estimated Number and Distribution of Beneficiaries 62 Table V 5: Range of Monthly Income of Households 63 Table V 6: Methods of Disposal by Waste Stream in Balykchy 65 Table V 7: Trips and Time Collecting Water 66 Table V 8: Estimated Cost of Community Upgrading 69 Table VI 1: Proposed Key Entities and Designated Roles 77 Table VI 2: Hierarchical Structure and Roles of Entities 79 Table VII 1: Operating Account 85 Table VII 2: Income Account 86 Table VII 3: Expenditure Account 87 Table VII 4: Capital Account 87 Table VII 5: Vodokanal Operating Accounts 88 Table VII 6: Vodokanal Balance Sheets (2008) 88
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Table VII 7: Solid Waste Services Operating Accounts 90 Table VII 8: Solid Waste Services Balance Sheets 90 Table VII 9: Integrated City and Utility Income and Expenditure Account 91 Table VII 10: Subproject Capital Cost 92 Table VII 11: Subproject Financing Plan 93 Table VII 12: Weighted Average Cost of Capital 93 Table VII-13: Tariff Increase Rates and VGF Needs for Water and Sewerage 98 Table VII-14: Tariff Increase Rates and VGF Needs for Solid Waste 98 Table VII-15: FIRR and Sensitivity Analysis for Water and Sewerage 99 Table VII-16: FIRR and Sensitivity Analysis for Solid Waste 99 Table VII-17: Summary Integrated Cash Flow Projections 102 Table VII-18: Financial Improvement Action Plan for LSG Karakol 104 Table VIII 1: Benefit-Cost Ratio Analysis for Water and Sewerage 113 Table VIII 2: EIRR and Sensitivity Analysis for Water and Sewerage 114 Table VIII 3: Benefit-Cost Ratio Analysis for Solid Waste 116 Table VIII 4: EIRR and Sensitivity Analysis for Solid Waste 116
FIGURES
Figure IV-1: Existing Water Distribution System...... 37 Figure IV-2: Existing Sewerage System...... 43 Figure IV-3: Sewage Treatment Plant Location Plan...... 44 Figure IV-4: Sewage Treatment Plant Layout...... 45 Figure IV-4: Landfill Site Location Plan...... 55 Figure IV-6: Existing Landfill Site...... 56 Figure IV-7: Issyk Kul Joint Waste Management Strategy...... 58 Figure VII-1: Operating Ratio ‘Without‘ and ‘With-Project’ for Water and Sewerage...... 101 Figure VII-2: Operating Ratio ‘With-Project’ for Solid Waste...... 101
APPENDICES
Appendix 1 : Site Photos Appendix 2 : Project Implementation Schedule
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I. INTRODUCTION
A. Overview
1. The Issyk Kul Sustainable Development Project aims to address the environmental and institutional issues associated with development of the Issyk Kul region and Biosphere Reserve. The vision is to create a sound business environment for investment, facilitating development of the region whilst protecting the environment and enhancing tourism potential.
2. Issyk-Kul (warm lake in Kyrgyz) is the world’s second largest saline lake, a Ramsar site of globally significant biodiversity and a UNESCO designated Biosphere Reserve. The lake forms a significant part of the Issyk-Kul Oblast area, and contributes to the economic growth by providing tourism opportunities. Attracting approximately 1 million tourists annually, equivalent to 70% of the country’s annual tourist intake, the lake is a major economic driver in the region.
3. Increasing tourism has resulted in the construction of numerous resorts that now sprawl around the lake's northern shores. However, existing water supply and sanitation infrastructure, including solid waste management, is poorly maintained due to shortage of resources. It is unable to serve the high number of visiting tourists, which exceeds the resident population by a factor of four during the 3-4 month tourist season. Excessive pressure on the existing infrastructure could potentially be responsible for pollution.
4. The Kyrgyz Republic Country Development Strategy (CDS: 2009-11) emphasizes environmental sustainability and the need for protecting Issyk-Kul with the Issyk Kul Sustainable Development Project (IKSDP) conforming with the CDS' strategic investment project for the Issyk-Kul region. In February 2009, the "Concept of Sustainable Development of the Ecological and Economic System of Issyk-Kul (the Issyk-Kul Development Concept)" was passed through a Presidential Decree. Subsequently, the Government passed a resolution in May 2009 that prioritizes implementation of the IKSDP.
B. Project Impact and Outcome
5. The IKSDP will address the following:
(i) Water use efficiency, water supply and water resource management; (ii) Improvements in infrastructure networks, specifically sanitation systems and sewage disposal; (iii) Strategic environmental management; (iv) Waste management practices; and (v) Institution building and capacity development, improvements in financial management
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6. The project will (i) redress immediate infrastructure and service deficiencies to meet basic service delivery norms; (ii) act as a medium through which policy reforms are effectively executed; and (iii) provide maximum demonstration effect for replication in other cities in Kyrgyzstan.
7. City Level Investment Plans (CLIPs) have been prepared for the three main towns of Balykchy, Cholpon Ata and Karakol. The objective of the CLIPs is to facilitate economic growth through the period leading to Financial Year 2035 and bring about urban development through equitable distribution of urban basic services to the citizens that are environmentally sound and operationally sustainable. Key elements each CLIP comprise:
• Identifying infrastructure gaps and deficiencies in the three towns and translating the same into sub-projects through a process of prioritization; • Developing options that reflect priorities of the cities; • Structuring sub-projects based on the municipal fiscal status in order to sustain investments; • Formulating a project implementation plan comprising an implementation schedule and defined roles of interest groups; and • Recommending an institutional mechanism to ensure sustained municipal service delivery.
8. It is intended that ADB-led investment and policy dialogue in the region will improve the infrastructure and quality of urban services, foster tourist growth and preserve the lake's environment. IKSDP is expected to increase economic growth potentials in the Issyk-Kul oblast and improve environmental preservation of the Issyk-Kul Basin. The outcome of the Project is intended to be improved urban basic services in the cities of Balykchy, Cholpon-Ata and Karakol, with subsequent improved quality of life for resident and tourist population in the Issyk- Kul Basin.
C. Scope of the Report
9. The Final Report is presented in eight volumes. Volume 1, the City-level Infrastructure Plan (CLIP) identifies the strategy for growth management, urban infrastructure improvement, civic infrastructure, institutional strengthening and financial sustainability; it also contains background information, data analysis, a financial model and focus group discussions supporting the CLIP development. Volume 21 presents the environmental impacts associated with the proposed project, Volume 3, Institutional Plan, presents a review of the regulatory regime in Issyk Kul together with proposals for capacity building and organizational improvements. Volume 4 presents the financial plan for the project, Volume 5 presents the Strategic Environmental Management Plan (SEMP) for the Issyk Kul Biosphere, Volume 6 presents the various stakeholder consultation documents and findings, Volume 7 presents the design criteria for each aspect of the project, and Volume 8 presents the results of the social surveys and consultations.
1 Volume 2 was prepared independently by a separate team of consultants.
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D. Report Structure 10. This document is the CLIP for Karakol and forms a part of Volume 1 of the Final Report. It is laid out as below:
I. Section 1, Introduction. Provides details on the Investment Program, goals and objectives, outputs and the scope of the report.
II. Section 2, Growth Management. Addresses city’s growth and urban development issues faced by the city leading through to 2035 such as planning, land use and institutional management.
III. Section 3, Component Rationale – Need and Demand. Addresses the socio- economic profile of the city and presents the approach taken to selection of projects and their components.
IV. Section 4, Urban Infrastructure Development. This section addresses infrastructure requirements in water supply, sewerage and sanitation, and solid waste management.
V. Section 5, Social Development. This section addresses urban poverty alleviation issues focusing on community infrastructure services and livelihood promotion, and other civic infrastructure requirement comprising medical and health systems.
VI. Section 6, Service Delivery Improvement. Describes institutional strengthening issues – financial management (budgeting, accounting and auditing), management information system, and e-governance – and Investment Program implementation arrangements to oversee long-term organizational development.
VII. Financial Sustainability. This section provides the financial and operating plan (FOP) derived for ensuring long-term financial sustainability of Investment Program and identifies taxation and tariff reforms for ensuring adequate levels of resource mobilization.
VIII. Economic Viability. This section presents the economic analysis of sub- project components and establishes the economic viability of the same.
IX. Implementation Schedule and Procurement. This section presents the implementation schedule for the project.
X. Section 10, Project Risks and Mitigation. This section addresses the risks which may affect implementation of the sub-projects and measures to be taken in order to mitigate such risks.
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II. GROWTH MANAGEMENT
A. Overview
11. Karakol is the largest city in the Issyk Kul Oblast2 and has favorable climatic conditions which encouraged the development of an agro-industrial base to the local economy. The city was originally developed as an outpost of the Soviet military in 1869 and has since seen influxes of migrants from surrounding countries including Russia, Uzbekistan and China. The main urban area of the city is located approximately 12km away from the shores of Lake Issyk Kul, and has a population of 67,200 people including the small town of Pristan, an administrative part of Karakol located adjacent to lake Issyk Kul. The population varies seasonally as tourists visit the region during the summer and winter, mainly for use of Lake Issyk Kul, the nearby health spas, trips into the adjacent eco-regions, and winter sports. A large new ski development is currently being constructed close to Karakol and this is expected to attract an increasing number of tourists in coming years. Karakol is the administrative centre of the Issyk Kul Oblast.
12. Karakol lies at 42’29N and 78’24E, at an elevation of 1690m to 1850m above mean sea level (MSL), at the base of the Teskey Alatoo Mountains. Despite being located relatively far to the east, the city is well connected being situated near roads running to the north and south of Lake Issyk towards Cholpon Ata, Balykchy, and ultimately Bishkek. Karakol is also one of the few cities in the region to have an airport.
13. In 2001, the first local elections were held in accordance with the Kyrgyz Republic’s Strategy for Decentralization to 2010, which aims to improve local self governance. The Karakol administration, has subsequently gained direct local ownership and control of much of the local infrastructure, including water supply network and sanitation. A number of community based organizations are also now actively involved in local policy issues, and inward investment or partnerships with private organizations are being actively encouraged. The developed areas of Karakol cover an area of approximately 4,800 ha and agricultural land covers an area of 2,633 ha. Population density is indicated to be relatively low at 12.9 people per hectare.
14. The Issyk Kul Biosphere Reserve attracts approximately one million tourists annually, which includes up to 70% of the country’s annual tourist intake. Many of these tourists visit, Karakol, Cholpon Ata or Balykchy. There is a strong need for improved water supply, sewerage, solid waste management and roads, as the capacity of the current infrastructure is greatly reduced due to age, lack of resources and poor maintenance. The seasonal swelling of population numbers also puts a severe strain on the existing infrastructure, increasing the risk of environmental pollution. In addition, if the declared strategy of increasing visitor numbers is to be realized over coming years, satisfaction rates must be improved.
B. Economy and Employment
15. Despite reasonably good road and air connections, Karakol is reportedly less industrialized than Balykchy, one of the other major cities in the Oblast, principally due to the
2 An oblast is an administrative district, typical of many countries that were within the former Soviet Union.
11 TA 7228-KGZ: Issyk Kul Sustainable Development Project Final Report Volume 1 – CLIP lack of rail connections. Much of the former industrial base collapsed following independence in 1991. Most hard hit was the part of the local economy which provided for the numerous Soviet military personnel in the area. A former Soviet torpedo testing base was of particular significance, and was located on the outskirts of Karakol, on the shores of Lake Issyk Kul.
16. Table II-1 presents the active economic sectors in Karakol with industry reportedly dominant at 75% of total monetary output. Many of the industrial facilities are focused on food related production. There are reportedly 22 industrial companies in Karakol, eight construction, six transport, 982 small enterprises, five communication and communal entities, and four farms3.
Table II-1: Largest Economic Sectors (million Som), 2003
Sector 2000 2001 2002 2003 Percent (%) Industrial goods 212.9 453.8 666.2 772 75 Agricultural goods 123.8 115.7 77.8 78.3 7.6 (2002 prices) Construction 46.8 26.4 21.6 17.2 1.7 Services 109.9 128.2 149.7 162.1 15.7 Total 493.4 724.1 915.3 1029.6 100
17. Most of the current infrastructure was initially constructed during the Soviet Era but has been poorly maintained through lack of investment and has undergone a long period of decline. Following independence in 1991, a large proportion of the Kyrgyz population, who were of Russian decent, returned to their motherland. This in turn meant that the number of people available to work decreased, as did the number of immediate local consumers, causing a period of economic contraction across Kyrgyzstan, Karakol included. However, the economy has experienced strong economic growth since 2001.
18. The 2003 City Plan suggests that approximately 18,500 people are in full-time employment although the actual total workforce is approximately 34,700 people including the unemployed and students.
3 Karakol City Plan, 2003
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Table II-2: Employment by Group, 2003
Population by Groups of Employment Estimated no. of People Children between 1and 6 6830 School children between 6 and 16 13036 Students 9078 Students of Special Schools and Professional Lyceums 1460 State employees 676 Engaged in education 2875 Engaged in healthcare 1668 Engaged in industry 2406 Engaged in construction 497 Engaged in services 10378 Pensioners 7706 Unemployed 902 Source: Karakol City Plan (2003).
19. As can be seen in Table II-3, it has been reported that over 60% of household expenditure is on food whilst approximately 4% goes towards municipal service fees such as water supply and waste collection. Unfortunately little recent data is available for comparison.
Table II-3: Household Expenditure, 2003
Item Percent (%) Food 61.3 Non-food stuff 30.1 Everyday consumer goods, medicines, detergents 4.3 Social-municipal service fees 4.3 Source: Karakol City Plan (2003).
C. Growth Corridors, Densification and Realty
20. After a period of contraction following independence during the 1990’s, Karakol’s population started to increase after the year 2000. The city maintains the original grid formation as designed and built during the Soviet era and generally stretches from north to south along the river Karakol. The refurbished airport is located at the eastern boundary of the city. Many of the properties in the city also date from the Soviet era and are in a poor state in need of repair.
21. Population Density. Karakol covers an area of 4,805 ha and has a relatively low population density of 12.9 people per hectare. This may present issues when attempting to determine the feasibility of any new infrastructure project although the actual pattern of density
13 TA 7228-KGZ: Issyk Kul Sustainable Development Project Final Report Volume 1 – CLIP varies widely across the city due to the presence of large industrial units and high rise residential apartments. Reported figures suggest that there are approximately 7,165 apartments across the city. There are reportedly 10,100 houses in Karakol and 813 houses in Pristan registered with the city administration4. The lack of definitive information or good census data makes it difficult to estimate the actual number of properties of each type.
22. Floating Population. The area surrounding Karakol is a significant attraction, and numerous tourists either stay in the city or pass through during the summer months. It has been estimated that the population of Karakol increases by up to 20 to 25% during the peak tourist season, which puts an increasing strain on the ageing infrastructure.
D. Land Use Planning and Development Plans
23. Land resources management in Issyk-Kul is performed by:
• KR Government; • Oblast Administration; • Rayon Administration; • City of Karakol; • Town Councils (e.g. Cholpon Ata); • Village Councils (aiyl okmotu); • Territorial departments of Gosregister; • Territorial departments of the Ministry of Agriculture, Water Resources and Processing Industries; • Territorial Departments of the State Agency on Environmental Protection and Forestry; and • Territorial Departments of the State Agency for Architecture and Construction Management.
24. Pursuant to the regulation on state control over land use and protection (KR Decree #612, December 20 1996) the authorized control and supervision bodies are: Gosregister and its local offices, SAEPF and its local offices, and the Ministry of Health and its offices of the Sanitary and Epidemiological Service. Gosregister and SAEPF enforce the state-promoted land use policy for all categories of land, while SAEPF is also authorized to manage integrated environmental protection and the rational use of natural resources, including land.
25. The Karakol Department of Architecture and Construction Management is responsible for approval and issuing permits for designs and construction in the city of Karakol. A general plan for the development of the city was prepared by the “Kyrgyzgiprostroy” Planning Institute in 1985 and this has been used as the basis for the current development strategy.
26. A number of areas in the city centre were observed to be industrial in nature, much of which is now redundant following the collapse of the Soviet Union and associated manufacturing base. The majority of the city appears to be residential in nature, typically
4 Karakol City Plan, 2003.
14 TA 7228-KGZ: Issyk Kul Sustainable Development Project Final Report Volume 1 – CLIP comprising apartment blocks or suburban housing estates. There is also a large market in the city centre.
27. Regulation No. 57 of the Kyrgyz Republic issued in 2004 sets the following timeframes for the granting of approvals for construction or development work:
• Capital construction – 30 days; • Individual house – 30 – 45 days; • Remodeling or refurbishment – 12 days; and • For capital construction and investment projects – 63 days.
28. The Karakol-Aksuu Territorial Department of Land Use Organization and Real Estate Property Rights Registration is responsible for registration of real estate property rights. The Department has two sections: one for land use organization and another for the registration of real estate property rights. The systematic registration of real estate property rights in Karakol is reported to be complete.
29. The Kyrgyz Republic’s Country Development Strategy (CDS) 2009-2011 describes environmental sustainability as a key issue and mentions that there is a need to protect the valuable Issyk-Kul lake. Four strategic pillars have been identified including:
• Strengthening of economic potential; • Governance Efficiency; • Socially orientated Development; and • Environmental safety.
30. One of the main objectives of the CDS and regional development policy is ‘to create incentives for introduction of tools of strategic planning’ and to increase efficiency in public expenditure. The CDS also describes ‘environmental safety as the basis of sustainable development’. Specific tasks which are mentioned include the development and implementation of a policy on solid waste management, including medical waste. The development of a household waste management system is called for in 2009-2011.
E. Institutions, Management and Capacity
31. Karakol is located within the Ak-Su Rayon, and therefore administers the entire Rayon as well as its own affairs. Karakol is also the capital of the Issyk Kul Oblast and the city administration lies directly under the Issyk Kul Oblast administration. The Kenesh is responsible for the management of the city and comprises 25 Deputies, one of which is the elected Chairperson or Mayor. Within the Kenesh, there are six permanent commissions manned by the remaining Deputies:
• The Permanent Commission for Legality, Order, Human Rights Protection and Foreign Relations - 4 Deputies. • The Permanent Commission for Economy, Budget, Municipal Property, Industry and Trade - 5 Deputies.
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• The Permanent Commission for Municipal Services and Energy - 3 Deputies. • The Permanent Commission for Education, Healthcare and Social Issues - 4 Deputies. • The Permanent Commission for Culture, Sports, Youth Issues and Public Organizations - 3 Deputies. • The Permanent Commission for Land Issues - 4 Deputies.
32. Table IV-4 below presents the various Departments involved in the administration of the City. The Municipal Property Management Department responsible for urban development in terms of city planning and utilization of assets. The majority of Government departments claim to be underfunded and/or loss making on an annual basis, often having to raise prices to make up the previous year’s shortfall. Agreements and legislation are also not enforced as they should be, and planning authorities may lack the power to take action. There are also eight District Managers across the city, with offices in each district, providing a direct interaction with the local community.
Table II-4: Karakol Local Government Structure
No. Of Organization Employees Mayor’s Office 19 Municipal Property Management Department 9 Culture and Rest Center 60 City Architect’s Office 12 City Committee for Tourist, Sports and Youth Policy 2 City Department for Social Protection 28 City branch of the Social Fund 25 City Department for Education 1,189 Issyk Kul oblast United Hospital 1,001 Employment Center 7 State Registry 34 Karakol City Department of Internal Affairs (Police) 112 Karakol City Prosecutor’s Office 11 Karakol City Court 14
33. Karakol also has a number of Utility Services Organizations as shown in Table IV-5 below. The “Cleaning and Greening Department” (Tazalyk) are responsible for the collection of solid waste across the city and transport to the landfill located near the city boundary. Vodokanal is responsible for maintenance and operation of all water supply and sewerage connections, and all infrastructure related thereto.
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Table II-5: Karakol Utility Service Organizations
Organization No. Of Employees Karakol-Zelenstroy 30 "Tazalyk" communal enterprise 70 Teplocommunenergo communal enterprise 195 "Jyluuluk" communal enterprise 176 Vodokanal 158
34. Since the Biosphere Reserve was established, strategic planning has started to become more prominent and a number of international agencies and organizations have provided external assistance with development strategies. For example, USAid previously assisted with the development of the Strategy for Decentralization. However, there is still much work to accomplish as city and regional planning appears to remain fragmented, with no single body at city, rayon or Oblast level clearly tasked with this responsibility or indeed with the capability of performing that function. The planning laws themselves have caused confusion and conflict between different Government departments. The development of the Biosphere-wide Strategic Environmental Management Plan (SEMP) will also fill an important gap, providing guidance on the management and protection of the Issyk Kul Biosphere.
35. Oblast Institutions. As Karakol is also the home of the Institutions administering the functions of the Oblast, there are numerous bodies residing in the city which have a much wider remit than the city Kenesh. These are shown in Table II-6 below.
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Table II-6: Issyk Kul Oblast Administrative Bodies
No. Oblast Department or Body 1 Department for Capital Construction 2 Issyk Kul production-exploitation united household-communal enterprise 3 Oblast Department highway #4 4 The Karakol branch of the National Air Company "Kyrgyzstan Aba Joldoru" 5 Vostokelectro JSC 6 Issyk Kul High-voltage Power Network Company 7 Issyk Kul oblast branch of Kyrgyztelecom JSC 8 Issyk Kul branch of Kyrgyzpochtasy 9 Oblast Center of Standardization and Metrology 10 State Department for Architecture and Construction Management 11 Oblast Department of Bus Depots and Bus Stations 12 Issyk Kul Oblast Department of Transport Inspectorate 13 Issyk Kul Main Auto Enterprise 14 Issyk Kul Oblast Department of Architecture and Construction Management 15 Regional Branch of Cooperative Association 16 Oblast Financial Department 17 Issyk Kul Oblast Regional Department of Treasury 18 Issyk Kul Oblast Customs 19 Issyk Kul Fund for State Property and Attraction of Direct Foreign Investments 20 Issyk Kul Oblast Statistics Committee 21 Issyk Kul Oblast Department of Anti-Monopoly Policy 22 Issyk Kul Regional Department of Securities Market 23 Issyk Kul Oblast Tax Inspectorate 24 Issyk Kul Department of Fiscal Police 25 Issyk Kul Oblast Department of Social Fund 26 Issyk Kul Oblast Department of Social Protection 27 Issyk Kul Oblast Department of Employment 28 Issyk Kul Oblast Department of Archives and Documents 29 Issyk Kul Oblast Center of Tourism, Sports and Youth Policy 30 Oblast Directorate for Development of Culture and Arts 31 Oblast Institute of Upgrading Teachers Skills 32 Issyk Kul Oblast Department of Education
F. Legal & Regulatory Framework
1. General Framework 36. Following the collapse of the Soviet Union, the subsequent political and socioeconomic transformations required a change in the regulatory framework, in order to establish national legislation, to create a decentralized administration, to provide funding for strategic programs and to ensure more effective enforcement.
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37. The hierarchy of statutory acts is determined by the Law “On normative legal acts of the Kyrgyz Republic” of July, 1, 1996 (amended) which comprises the following legal hierarchy5,:
• The Constitution of the Kyrgyz Republic has the highest legal status; • Constitutional laws of the Kyrgyz Republic; • Resolutions and Laws of the Kyrgyz Republic; • Decrees of the President of the Kyrgyz Republic; • Resolutions of the government of the Kyrgyz Republic; • Acts and Orders of ministries, state committees, and administrative departments of the Kyrgyz Republic; • Decisions of local state administrations and bodies of local self-government.
38. Under the Constitution, The Parliament (Jogorku Kenesh) of Kyrgyzstan is the legislative body of the state which sets the regulatory framework. Bills are introduced in Jogorku Kenesh and are submitted to appropriate committee. If the criteria for supporting the Bill are met, the law is accepted and goes to the President of the Kyrgyz Republic for approval, comment and signing. Instruments used under the legislative structure include Codes, which are implemented by Laws and Regulations.
2. Planning and Land-Use Legislation
39. Legislation relating to planning and land use appears to be in place, although its robustness is not clear. The body with responsibility for planning of new developments or buildings is the State Department for Architecture and Construction Management, which is represented by a local department of the same name. A key legislative instrument in planning is the Regulation “On Order for Issuing Permits for Project Designs, Construction and Real Estate Modification and Order for Commissioning Completed Building the Kyrgyz Republic” 2008.
40. Under this Regulation, the local Department for Architecture and Construction Management is passed relevant planning applications and performs compliance checks in line with the requirements set by urban planning documentation. Following approval, the application is further considered by the Sanitary and Epidemiology Authority, Fire Authority, and Environmental Authority. The application is also forwarded to utilities companies by State Construction Department for technical approval with regards to the installation of utilities such as sewerage and water supply. Evidence to show how this approach works in practice is not clear, particularly because not all cities have relevant, up to day city land use plans.
41. Further relevant legislation to land use planning includes the Land Code, 1999 (amended). The Land Code covers land use categorization and Article 85 establishes specially protected natural territories, one of which is the Issyk Kul Biosphere Territory. Key Articles and Chapters in this law are as follows:
• Article 3 sets out the basic principles on which land legislation shall be based; • Article 4 states that land may be the state, communal, private or other forms of ownership and defines state lands and communal ownership;
5 http://nyulawglobal.org/globalex/kyrgyz1.htm
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• Article 9 states that transactions with rights to a land plot shall be subject to state registration; • Other Articles concern the administration of land, allocation of land and land use rights, transfer of land use rights, use of land for exploration works, etc.; • Chapter 15 makes provisions for specially protected areas such as nature parks; • Chapter 21 provides for the registration of land, the monitoring of land and the assessment of its quality, and land survey.
42. With specific regard to the Issyk Kul lake, the Law on Sustainable Development of Ecological-Economic System Issyk Kul, 2004, has some influence over planning issues, through prescribing precise limitations for economic development, such as setting boundaries for construction near the shoreline, and limited recreational activities etc.
3. Water and Wastewater Standards
43. The Water Code (2005) of the Kyrgyz Republic is a basic statement of principles regarding water use, including rights and duties of water users, and also identifies the bodies responsible for water resource management. The purpose of the Code was to clarify water legislation and responsibilities. However, the Code reportedly contradicts other laws6.
44. A number of laws and regulations developed before 1992 are reportedly still in use and creates confusion between departments due to the number of byelaws and lack of standardized instructions for tasks such as data reporting. It has also been reported that there are a number of administrative conflicts between Departments, businesses and water users. The Government has the right to set water tariffs in line with the law “On Establishment of Tariffs for watering Services, 1999”. Drinking water has to meet drinking water standards known as GOST 2874- 82.
4. Waste Management Legislation
45. Waste Management legislation generally appears to be based on that which was implemented under the Soviet Union and currently there is a ‘lack of detailed regulation on municipal waste’7. The Waste Authorities have limited understanding of the laws that govern their work and staff met during this PPTA were not able to confirm the laws which influence waste production disposal and treatment.
46. The principal legislative instrument governing waste management is Law No. 89 of 2001 ‘Production and Consumer Wastes. This law aims to protect human health as well as the environment protection through promoting recycling, waste prevention and the sustainable development which meets both economical and ecological standards. In addition, this law gives
6 Recommendations for Management of the Issyk Kul Lake Basin and Integrated Management Plan for Sustainable Development of the Chon Aksu Watershed, EuropeAId Report No. 122149 7Sustainable consumption and production in South East Europe and Eastern Europe, Caucasus and Central Asia - Joint UNEP-EEA report on the opportunities and lessons learned. EEA Report No 3/2007.
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47. In 2005, the Government adopted a special programme for implementing Law No.89, covering the period 2005–2011. The main purpose of the programme is to:
• To develop and implement measures which reduce waste arisings; • To increasing the rate of recycling; • To reduce the environmental impacts of landfills through providing improved disposal routes; and • To reduce the cost of pollution remediation through rehabilitation of closed landfill sites.
48. The success of this programme is currently unclear as little information is available about its progress and in particular data collection regarding waste production and recycling is sparse. Further legislative instruments which related to waste management include:
• Code of the Kyrgyz Republic ‘On the administrative responsibility’, 1998, No. 114: This code states that waste can only be deposited in designated places, such as landfills, and only by the municipal services (Tazalyk). In addition, the Tazalyks must restore the natural environment when waste disposal is completed. • Policy on Procedures for Regulation of Waste Management, 1999 No. 3. This policy begins to identify legal roles and responsibilities for the Tazalyks. It includes measures related to the role of the Tazalyks in providing appropriate containers for waste, although it is not clear if this is for all householders, business or only in public areas. In addition the law specifies that the Tazalyks, stating that they must collect waste in a way which reduces the impact on the environment (according to ecological norms).
G. Growth Trends and Projection
49. The last census (2007) enumerated 67,700 people in the city. The population varies seasonally, peaking in the summer months due to the number of tourists visiting for the numerous attractions in the Issyk Kul area such as the lake itself, health spas, and the mountainous eco-regions adjacent to Karakol. No known historic information is available relating to population growth rates or numbers.
50. It is expected that population trends in Karakol have been similar to other cities in the Oblast since 1990. This typically represents a negative annual growth rate between 1991 and 1999 can be explained by the exodus of Russians following the collapse of the Soviet Union, and by the outward migration of local people as the industrial base collapsed resulting in high unemployment rates. The population growth rate generally began increasing once again from approximately 1999. In 2008 the growth rate for Kyrgyzstan as a whole was 1.38% and then 1.396% in 2009.
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51. As there is no official current population estimate, the last census figure has been used as a basis to predict the future population. It can be seen in Table II-7 that by 2035 the population may reach 87.49 thousand people under a moderate growth scenario.
Table II-7: Projection of Base Population
Growth Scenario 2010 2015 2020 2025 2030 2035 Low 67,640 69,860 72,160 74,540 76,990 79,530 Medium 67,890 71,420 75,140 79,050 83,160 87,490 High 68,200 73,440 79,070 85,140 91,680 98,710
52. In addition to the base population, there is expected to be a seasonal increase over the summer months of June, July, August, September and October as tourists visit the Issyk Kul Biosphere. Considering the numbers of hotels and rooms available for occupation in Karakol, and information provided by Vodokanal and the Mayor’s office, the seasonal population increase is likely to be a modest maximum of 20% during the month of September. Any infrastructure would have to be designed with capacity to cope with the maximum possible population and loads.
Table II-8: Projection of Seasonal Population
Growth Scenario 2010 2015 2020 2025 2030 2035 Low 67,640 69,860 72,160 74,540 76,990 79,530 Max pop incl tourists 81,168 83,832 86,592 89,448 92,388 95,436 Medium 67,890 71,420 75,140 79,050 83,160 87,490 Max pop incl tourists 81,468 85,704 90,168 94,860 99,792 104,988 High 68,200 73,440 79,070 85,140 91,680 98,710 Max pop incl tourists 81,840 88,128 94,884 102,168 110,016 118,452
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III. COMPONENT RATIONALE - NEED AND DEMAND
A. Socio Economic Profile
1. Introduction
53. The overall design of the proposed Project reflects the need for social, poverty and gender considerations to be incorporated into the rationale for improving selected infrastructure in the three Project cities, as well as into the training and capacity building initiatives proposed by the Project.
54. A Poverty and Social Assessment (PSA), Summary Social and Poverty Reduction Strategy (SPRSS), and Summary Gender Action Plan (SGAP) have been prepared for the overall Project. The PSA is based on primary (survey and consultations) and secondary research and has been integrated with the other studies being undertaken during the PPTA. The SGAP is based on the gender assessment contained in the PSA, the analysis on the gender assessment has drawn heavily on the household survey and the results of the women’s focus discussion groups (FGDs) undertaken during the PPTA. The social aspects of the project have been discussed in greater detail in Section V.
2. Socio-Economic Context
55. Economy. The Issyk-Kul Oblast spreads over 43,100 sq. km with approximately 430,000 persons (around 8% of total Kyrgyz Republic population). Its gross regional product (GRP) grew from $358 million in 2005 to $540 million in 2007; the spike in growth resulting from gold mining. Being agrarian in nature, the oblast produces and exports cereals, apples, pears, potatoes, livestock and dairy products. The oblast mines gold at the Kumtor gold deposit, one of the 10 largest gold deposits in the world. Capital investments in the oblast have risen from $39 million (2005) to $145 million (2007) but largely limited to the mining industry (with additional deposit finds in the recent past). Urban infrastructure investments were mainly through donor agencies with negligible investments made by the oblast or central governments.
56. Tourism. Tourism constitutes about 10% of the oblast's GRP. Three major urban centers: Karakol (67,500 people), Balykchy (42,000 people) and Cholpon-Ata (12,000) around Issyk-Kul cater to domestic and international tourists. The tourist population tends to increase substantially during summer (June through August). The tourist inflow is mainly to the city of Cholpon-Ata but Balykchy and Karakol experience some tourist inflows. Karakol experiences a large tourist influx during winter due to nearby ski resorts. The Master Plan (prepared through JICA funding) for the region focuses on the lake's northern, eastern, and southern region. Government support for tourism promotion and resort development has meant increasing pressure on urban services and the lake's environment
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3. Household Profile
57. Household surveys and consultations were undertaken in the three cities that make up the Project Area in order to prepare a profile of the beneficiaries of the Project. Households were selected randomly, within the catchment areas of the proposed subproject interventions and a total of 284 households were surveyed in Karakol.
58. Overall some 59% of households are headed by men and 41% are headed by women. Just under two-thirds (61%) of population in Karakol are Kyrgyz and a fifth is Russian. Karakol is the city on the Project Area with the largest proportion of other ethnic groups (15%) which includes a number of different groups including Ukrainian, Kazakh and Uzbek.
59. It is considered likely that households will benefit directly from an improved infrastructure and better health, whilst the population would also indirectly benefit from improved economic growth and an increased household income.
a. Employment
60. Some 27% of heads of household engaged regularly in waged work are in the trade, sales or small business sector, followed by 17% being engaged in government administration or public service. Tourism only accounts for 2% of economically active heads of household, the smallest proportion in the Project Area. Daily or casual labor accounts for the economic activity of 16% of heads of household, and engagement in the education of health sector accounts for 9%. The construction industry employs 5% of working heads of household. Largely due the Project Area’s urban nature, the primary sector, being agriculture and/or forestry, accounts for a small proportion of economically active heads of household (4%).
61. It is expected that the Project will create direct short-term employment during the Project construction phase and long-term employment opportunities during the operation phase (maintenance). A target of 30% short-term employment opportunities will be filled by the poor and women during the construction phase. Since unemployment and redundancies within the informal sector (those most likely to be employed on the Project) are the major causes of poverty in the Project Area, the poor will benefit disproportionately from this job creation.
b. Income and Expenditure
62. A large proportion of households (89%) stated they either earn or receive a regular cash income. Average per capita incomes across the Project Area, are 2.3 times the value of the poverty line, however nearly of fifth of households are classified as poor based on per capita monthly incomes.
63. In 2008, around 39% of Issyk-Kul population lived in poverty8 and 8% in extreme poverty. The poor account for 19% of the beneficiary population, with the extremely poor making up 9%. Within the Project Area the poverty incidence in the cities ranges from 2.6% in Cholpon- Ata, to 10.4% in Karakol and to 31.9% in Balykchy. The social analysis concluded that the poor
8 The Kyrgyz Republic's National Statistics Commission establishes the poverty line at $22/person/month.
24 TA 7228-KGZ: Issyk Kul Sustainable Development Project Final Report Volume 1 – CLIP mostly live in areas without regular water supplies, sewage and solid waste collection services. They often suffer from serious water supply shortages, poor water quality, sewage pollution, and poor urban environmental sanitation.
64. Some 87% of female headed households and 91% of male headed households receive regular cash income. A higher proportion of male heads of household (70%) and males in the household (59%) than female heads of household (59%) and females in the household (49%) receive regular wages.
65. The overall average monthly water bill is 77 som, some 7% of household receive bills of up to 20 som, 46% of households have monthly bills of between 21 and 50 som, 26% of households pay between 51 and 100 som per month and 22% of households pay more than 100 som per month.
66. Based on the PPTA survey data it can be seen that households in the Project Area pay an average of 683 som per year (57 som per month) on various water treatment methods. A third of households pay up to 50 som per month to treat water, 31% pay between 51 and 100 som per month, 24% spend between 101 and 200 som on monthly water treatment while 14% of households pay more than 200 som per month. Households in the lowest income quintile on average pay nearly three times more (90 som per month) than households in the highest income quintile (35 som per month) for water treatment.
67. Local economic growth, and therefore household income, will likely be boosted by an improved infrastructure, attraction of more tourists, better health of the local population, and an improved quality of life. It is also expected that many of the poorest households within the project area would benefit significantly.
c. Land and Housing
68. Three-quarters of households live in a house and 23% live in an apartment. Some 88% of households own the dwelling they live in. Most dwelling units are substantial, made of permanent materials such as solid wooden floor (87%), brick or concrete walls (68%) and a roof made of “other” material (51%), including tile.
69. All households in Karakol are connected to national grid electricity, and 89% (highest in the Project Area) have connections to a hot water supply. All households included in the survey stated they were connected to a municipal supply (no non-connected households were captured in the survey). Overall 85% of households stated they had received a free or subsidized connection to the municipal supply.
d. Social Capital
70. In terms of size, 46% of households in Karakol are made up of four or five people, and 23% are three person households. Some 5% of households are single person, and 11% are two person households. About 7% of households overall are made up of seven or more people, the largest proportion in the Project Area.
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71. Female headed households are generally smaller than male headed households. Single person households are more often headed by women (11% compared with 2%), and 34% of female headed households are made up of two or three people (compared with 28% of male headed households). The total number of sick days due to water-borne illness (WBI) is typically higher for women than men, and women and girl children are primarily responsible for collection of household water, household garbage disposal, and care for the sick and elderly.
72. Various measures are proposed to empower local people, especially women and people from the poorer households, and include them in the decision making process. The project will improve the local skill base through training and involvement in the implementation of the scheme.
e. Health
73. Only 29% of households drink tap water without first treating it through boiling, filtering or sterilizing (smallest proportion in the Project Area). 26% of households in the highest income quintile stated they did not receive sufficient water for basic needs. A third of all households stated they supplemented the municipal supply, on a regular basis, with water from other sources.
74. In addition to improving services in terms of the quantity/availability (and consistency) of water, municipal water supplies also require improvement in respect of quality. Only 39% of households, (44% of households in the lowest income quintile and 40% of households in the highest income quintile), stated they would drink the water without some form of treatment first, and some 82% of households stated that members of their household had suffered WBI in the past five years. .
75. Nearly 96% of the Kyrgyz population lives in households that use sanitary-hygienic facilities. 67% of the population use pit latrines with slabs, whereas 27% use water-flushing toilets. About 4% of the population does not have access to improved sanitary facilities and there is generally a need for improvement in sanitation.9 In the event of illness, the expense involved in consulting a doctor and buying treatment for various illnesses is high, in poor and low income households sick women will often forgo consultations and treatment for the sake of other household expenses.
76. Implementation of the Project will likely reduce morbidity and mortality rates from water-, vector- and air- borne diseases and contribute to savings in associated medical costs and loss of healthy working days. The Project will create the following health benefits; (i) prevention of higher incidence of WBI arising from contaminated or insufficient water; (ii) prevention of associated increase in medical expenses; and (iii) prevention of associated increase in time lost from work, thereby leading to a loss of income.
9 NSC/UNICEF; op cit
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f. Education
77. Few heads of household are either not educated at all (2%), or have only received a primary (grades 1 to 5) education (1%), while nearly a third has completed grades 6 through 11, and 62% of household heads have received a tertiary level education (including vocational training, business or teachers college).
78. Health education and awareness will be a major support factor in realizing the health benefits of improved water and sanitation infrastructure delivered by the Project. In each of the FGDs participants stated that awareness raising needs to be integrated with physical infrastructure improvements, and that the Project should provide training about sanitation and health/environmental problems and links between health and contaminated water. The survey analysis showed very high rates of WBIs in the Project Area.
g. Summary of Social Benefits
79. Overall, the improved health of the population and better quality of life will increase the capability of people and promote local economic development. The improved water quality and urban environment will promote sustainable economic development and accelerate tourism development where the poor and women are particularly likely to find opportunities as they make up a large proportion of small service operators and vendors.
4. Access to Services
80. Water Supply. Vodokanal estimates that of the approximate 67,700 people in the city, drinking water is supplied to 41,800 people and 276 organizations, through a distribution system of approximately 176 km total length. A piped supply is officially available to about 60% of the population although plans of the existing water supply network suggest the actual numbers to be greater. The Vodokanal supplies water for industries, organizations, educational institutions, hotels and municipal properties. The water distribution system provides a continuous supply to consumers.
81. A Swiss funded project to improve the quality of the water supply and state of the network has been running for the last five years and is currently ongoing. The project reportedly lacks money to complete all of its component aspects.
82. Sanitation. About a third of the current population of the town has the benefit of connection to the piped sewerage system which extends over a total length of 71.4km. The areas served are predominantly the central and north-east sectors. A trunk sewer runs from the southern extremity of the urban area and outfalls to the STP to the north of the town. The number of properties or dwelling units connected is 6,324 and the associated population is reported by the Vodokanal to number some 13,200 (i.e. fractionally over 2 per dwelling). However, because water tariffs are levied on a per capita basis this number must be considered with considerable caution. Family units mostly comprise between four and five people. If an average of 4.5 is adopted then the population served by the sewerage system becomes 28,458.
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These people mostly live in multi-storey apartment blocks but also included in this population are those living in the nearby village area of Pristan.
83. Solid Waste Disposal. Karakol’s waste disposal site is located 8.5km from the city and approximately 4km from the lake. Agreements are in place to collect waste from 11,500 households, in which 26,000 people are registered. This represents 38 % of the 67,000 population. Although the Tazalyk requires proof of how many people live in each house from which waste is collected, the Tazalyk doubts as to whether these figures reflect the reality of the population from which waste is collected. Considering the estimated waste arisings per capita, is it likely that the waste is collected from the majority of the population either directly from their houses, from public containers or via fly-tipping hotspots. .
B. Approach to Subproject Selection
1. City Priorities
84. The Karakol administration first aims to establish a sound infrastructure on which to base its development plans and the Concept of Sustainable Development for Eco-economic System (for) Issyk Kul until 2020 has also prioritized solutions to the increasing levels of pollution in Issyk Kul. The focus is now on more integrated planning, sustainable resource use, and the replacement of much of the existing aging infrastructure beginning with the water supply system, sewerage network, and improving methods of solid waste management.
85. Funds have not been adequate for proper operation and maintenance of the local infrastructure. In addition, funds have not been available for improvements or expansion of the current services. Both Vodokanal and the Cleaning and Greening Departments have been losing money on an annual basis for some time, partly because of the tariff structures utilized.
2. Community Priorities
86. A Social Survey was also completed as part of the PPTA with the results contained in Volume 8.
87. Workshops and focus group discussions were held during the preliminary investigations and subproject selection phase in order to allow representatives from the local administration and other community services to contribute to the process. The results below are from a mixed sex focus group and a women’s group, with participants from a range of ages. The most frequently voiced concerns were:
• Low standard of living. Poorer families are unable to afford power (electricity) and are also unable to pay their bills for municipal services such as water supply and also payment for sundries for children’s schooling is difficult. • Employment Opportunities – participants noted that employment is limited and means that incomes remain low. Both educated and non-educated members of the focus group stated that finding paid work is difficult.
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• Social Issues. Social problems such as domestic violence and alcohol abuse are apparent and participants are concerned that children raised in this environment will suffer. • Access to clean drinking water – problems highlighted include visibly dirty water in the drinking water system, a lack of water filtration and poor quality pipe networks. In addition, not everyone in the city is able to afford water from Vodokanal, which means drinking water access is limited and people use drinking water for irrigation, which is wasteful. • Waste disposal – there is a lack of provision for waste collection, and in areas without waste containers, random fly-tipping is a problem. School children are used to clean the streets at times, but this should be stopped. • Sanitation and Hygiene. Poor standards of hygiene especially in food preparation cause problems for children in particular. Toilets are poor quality and children are not always able to wash their hands after using the toilet, particularly because the water supply to schools is erratic. • Road and Heating Network. The roads are in a poor state and are repaired however the repairs lead to a lower quality environment because the waste from the repairs is not removed. In addition the heating network is poor and inadequate in winter. It can also be unaffordable to some.
88. The solutions which the participants consider would contribute towards solving some of the problems they identified are as follows:
• Water Supply. Continuation of the Swiss project which involves water treatment plant construction. In addition a separate irrigation water system would mean less pressure on drinking water resources • Increasing public social services provision. This should include the provision of lower cost heating and support organizations to help excluded groups such as people with disabilities. • Economic Development through Waste Recycling. Developing industries and economies around waste recycling will help to increase incomes and reduce the waste problem in the city. • Sanitation. Building public toilets will help to improve the sanitation and the environment in the city. • Dry Cleaning. The participants would like to see dry-cleaners open in the city as one of their priorities, which is necessary for cleaning winter clothes.
89. The participants considered that the project would bring a number of benefits to them. However, delays in the Swiss water treatment facility has made them wary of expecting too much. The reorganizing and improved maintenance of the drinking water network is perceived as being a major benefit.
90. The participants strongly suggested that a significant risk to the project is that the money will not be spent correctly i.e. will not go to the intended project works. The participants also identified that a program to raise awareness is essential to the success of the project; particularly to show people how to care for the new infrastructure they are given.
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C. Project Component Selection
1. Objectives
91. The principle objectives of the project selection are the provision of sound reliable infrastructure which will reduce the scale of adverse human impacts on the environment, and provide a sound basis for the sustainable development of the city and region. Despite Karakol’s industrial past, tourism (both summer and winter) and eco-tourism are reportedly one of the most rapidly growing sectors, and any project should help improve the city’s potential for economic growth. The proposed projects must also address the needs identified in the Kyrgyz Republic’s Country Development Strategy, principally:
• Basic urban infrastructure and services management; • Institutional issues associated with basic urban services; • Strategic environmental management; • Improvements in financial management to facilitate efficient service delivery.
2. Selection Methodology
92. The proposed projects were identified through assessment of a number of factors, including:
• Consultations with city officials and the local community; • Consultations with the service providers themselves, e.g. Vodokanal, and discussing the needs which they have personally identified such as replacement of mains and lack of funding; • Visual assessments of sites and facilities where possible; • Assessment of basic city data and indicators such as the coverage of networks and population density. The projects must aim to benefit as many people as possible rather than a select group; and • Compliance with Kyrgyz Government strategic planning documents.
3. Project Components
93. The components selected for implementation by IKSDP in Karakol can be summarized as:
• Infrastructure Improvements: o Water Supply. Completion of projects proposed by the Swiss but not finished due to lack of funding. This includes the rehabilitation of the existing pre-sedimentation basin which will serve the new water treatment plant, the review of the design of the new water treatment plant to determine if clarification is required prior to filtration, and the extension
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of the distribution system to the area of new development on the periphery of the city. o Sewerage and Sanitation. Replacement of the existing wastewater treatment plant; replacement of sections of the existing sewer network where necessary, expansion of the network into the west of the city, repair of existing manholes and replacement of damaged or missing ladders, step-irons and manhole covers; rehabilitation and re-equipping of the pumping stations; and provision of equipment for the sustainable operation and maintenance of the wastewater system. • Solid Waste Management. Improved management of landfill sites, development of recycling strategies, procurement of equipment, raising awareness, and training. • Financial Management. Development of new methods of financial management to ensure continued investment and development of services. • Institutional Development. Institutional strengthening providing the basis for strategic, integrated planning enabling the principles of sustainable development. • Community Upgrading. Improvement and provision of sanitation facilities in public buildings, schools, hospitals and markets. This may also include septic tanks for locations or areas where connection to the main network is not feasible.
94. The Project will be divided into three phases depending on the availability of funding. Phase 1 will focus on the community upgrade projects, rehabilitation and replacement of existing aging infrastructure and facilities, and the development institutional capacity for management of the networks.
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IV. URBAN INFRASTRUCTURE DEVELOPMENT
A. Overview
95. Each of the subproject components relating to water supply, sewerage and sanitation, and strategic waste management have been considered separately below. For each component the current method and standard of delivery are discussed, followed by the rationale for the subproject choice and design criteria. The subcomponents of each subproject have then been identified and the associated costs estimated. Safeguards including environmental aspects and resettlement have also been considered for each subproject. Photos of sites are presented in Appendix 1. Design Criteria for each aspect and the results of all survey works and investigations are presented in Volume 7 of the Final Report.
B. Water Supply
1. Service Delivery
96. Water Production. Karakol’s water supply is obtained from the rivers Kashka Suu and Karakolka. Wellfields are located at Zapadnaya, Kustarnaya, Park and Airport. Table IV-1 presents the various sources of Karakol’s water supply and the production capacity of each, as reported by Vodokanal.
97. The water sample taken from Zapadnya borehole shows the presence of nitrate in a concentration of 26 mg/l and nitrite in a trace concentration which indicates pollution by surface infiltration as oxides of nitrogen would not normally be present in water abstracted from a deep aquifer. The concentration of nitrate in surface water, where it could be expected from runoff, is 2 mg/l. The Pristan borehole shows a negligible concentration which would suggest that nitrate is derived from agricultural activity or pollution from sanitation. The concentration of nitrate is less than half the permissible concentration and so is not injurious to health.
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Table IV-1: Karakol Water Production Sources
No. Source Details No of Wells Well Depth Production Capacity 1 Aashka Suu surface water N/A N/A 13,132 to 18,144 m3/day 2 Karakol surface water N/A N/A 18,144 m3/day
Zapadnaya abstraction wells - 3 3 10 220 to 300 250 m Constructed in 1986
Airport abstraction wells - Constructed 3 4 3 102 to 110 2,000 m reservoir in 1968 5 Voskhod abstraction wells 2 Unknown 2 x 250 m3 reservoirs 1 x 500 m3 and 2 x 6 Kustarnaya re-pumping stations 1 110 3 1,000 m reservoirs 7 Parkovaya re-pumping stations N/A N/A 1,000 reservoir Source: Vodokanal
98. Distribution. There is a single welded steel transmission main from the thermal power station to the Hippodrome tank 500mm diameter and 1700m long. There are also two welded steel transmission mains from the Hippodrome tank to the park reservoir, 500mm diameter and 1805m long; and 500mm diameter and 2230m long. There is a single welded steel transmission main from the Park reservoir to Handicraft 250mm diameter and 1500m long.
99. The distribution system of Karakol comprises cast iron pipes of diameter 100mm to 300mm and steel pipes of diameter 50mm to 300mm. The total length of the distribution mains is 100.7 km. There are 497 valves on the distribution system with diameters of 50mm to 300mm installed in manholes, in most cases the covers are missing, and 136 fire hydrants, of which only 14 are in working order. It has been reported that the spigot and socket joints of the cast iron pipes leak.
100. Vodokanal reported that the new residential districts, near the brick plant, and between Fuchik, Tretyakevich and Namys street have no drinking water pipe network. Water is carried to these areas by water tanker.
101. Storage. Reservoirs provide regulating capacity and for emergency storage of water. The capacities and conditions of the existing reservoirs are shown in Table IV-2 below. Each reservoir has an overflow and a washout. The flow from the reservoir is controlled by an outlet valve installed in a manhole.
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Table IV-2: Karakol Reservoirs
Location Capacity (m3) Status Hippodrome 2,000 Not functioning Park 2 x 1,000 In use Western 2 x 500 In use Airport 2,000 In use New Park - Not functioning Source: Vodokanal
102. Treatment. Treatment of surface water is by filters constructed more than 45 years ago which were designed to operate as upward flow filters, but are now operated as downward flow filters. The filters are badly constructed and maintained and provide little improvement to the water quality. A solution of calcium hypochlorite is added to the raw water at the intake with the active chlorine dose reportedly 1 mg/l. This will have no disinfection effect on turbid water.
103. Non-Revenue Water. Vodokanal charges users of its network based on the number of people in each home, therefore it is considered likely that the actual number of users is under- reported to reduce payments. Only 7 revenue meters are installed for large consumers, and no meters are installed on residential premises. The lack of metering and flow monitoring suggests that that revenue is lost due to leakage, under-reporting people in households, and users who utilize public standpipes without paying. There are also reported to be 485 industrial connections, the vast majority of which are unmetered.
104. Connections. Karakol Vodokanal provides water to approximately 41,800 people through 14,682 connections. The Vodokanal supplies water for industries, organizations, educational institutions, pre-elementary schools, hotels and for municipal purposes. The water distribution system provides a continuous supply to consumers.
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2. Service Adequacy
105. There is no effective treatment of water supplied to Karakol. The system is pressurized, and water is supplied mainly by gravity from the surface water source, supplemented by pumping from boreholes and for transfer of water within some areas of the city.
106. The water supply system in Karakol suffers principally from the following deficiencies:
(i) Shortage of water production; (ii) There are few production meters and no domestic consumer meters. (iii) Some pumping plant is old and in poor condition, causing higher operating costs. (iv) There is no effective treatment of either surface or ground water. (v) There is likely to be a high rate of leakage from consumer service connections. (vi) Service reservoirs are not secure against contamination of the water.
3. Subcomponent Rationale and Design Criteria
107. The distribution system of the city is relatively well designed although now in poor condition due to lack of maintenance. The Vodokanal has identified areas where rehabilitation is required and these will be reviewed within the sub-projects which have been identified for implementation in IKSDP. The subprojects which the Swiss did not have the funds to follow up and complete are also considered within this CLIP.
108. The water supply improvements aim at improving supply levels to the citizens based the following: immediate rehabilitation of the system to address system deficiencies, long-term program of leak detection and rectification; improving the quality and quantity of water supplied to consumers through source augmentation, improvements to water treatment facilities and real time monitoring of the distribution system; providing connections to all houses with metering; providing 135 lcd (net supply) water to the population in a phased manner; reducing unaccounted for water (UFW) to 20 percent of total supply; reducing the operating and maintenance costs of the water supply system by minimizing the use of energy, improved efficiency and monitoring of water flows; and reducing interruptions to the supply by water demand management.
4. Subcomponent Identification and Costing
109. The preliminary assessment of the engineering sub-projects identified for implementation under this study include:
• The preparation of a full inventory of the water supply system.
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• Logging of all the boreholes to measure verticality and diameter, and CCTV inspections to show the condition of linings and screens. Test pumping to prove the capacity of wells. • Replacement of manhole covers to protect underground apparatus and to prevent the ingress of pollution into reservoirs. • The construction of facilities for the disinfection of groundwater. The groundwater should be retained in a contact tank for 30 minutes after disinfection and then pass to a storage reservoir of capacity equivalent to at least 6 hour’s production from which it will gravitate into supply. Where possible boreholes should be combined into one wellfield with a common facility for control and treatment. • Examination of the structural condition of reservoirs. • The installation of meters on individual wells and on transmission mains and at reservoir sites. • Repair of standposts to prevent wastage of water and to provide drainage. • A study of non-revenue water to determine the rate of loss and to identify an area for a pilot study for the installation of revenue meters on all connections to houses and apartments as well as for all bulk consumers and for the location and repair of leaks. An important component of the study would be the training and equipping of specialist Vodokanal leakage control teams. • The preparation of contracts and the execution of the rehabilitation and extension works identified in the more detailed studies proposed above. • The provision of maintenance and service plant for Vodokanals
110. A demand survey has not been undertaken in Karakol and few accurate figures exist due to the almost complete absence of water meters. A water consumption figure of 125 lpd has been estimated based on other cities and towns of similar socio-economic condition and size. A small increase in per capita consumption over the next 10 years is included. It is assumed that the UFW will reduce to 20 percent by the end of the Investment Program period through implementation of a UFW reduction program.
111. There is no data available on industrial, commercial and industrial consumption and so an additional 15% of the domestic consumption has been included in the projected demand set out in Table IV-3. The green and pleasant appearance of Karakol is a particular feature of the city and so domestic consumption for garden irrigation is included in the demand prediction.
112. Production capacity is 20MLD from the new surface water treatment plant now under construction, augmented by an estimated 6.0MLD from groundwater. This production capacity is adequate for at least 20 years.
113. Based on population projections indicated in the section on growth management and demand projections, water supply needs have been estimated for the city until 2035.
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Table IV-3: Water Demand Projections
Item 2010 2015 2020 2025 2030 2035 Population (inc. Tourists) 81,450 85,700 90,150 94,850 99,800 105,000 Net Supply (lcd) 125 138 152 152 152 152 Losses 40% 20% 20% 20% 20% 20% Gross Supply (lcd) 302 257 279 279 279 279 Design demand (MLD) 24.6 22.1 25.2 26.5 27.9 29.3 Available prod. (MLD) 26.5 26.5 26.5 26.5 26.5 26.5 Deficit 0.0 0.0 0.0 0.0 1.4 2.8 Source: Vodokanal, data analysis.
114. A Strategic Environmental Management Plan (SEMP) is currently in development as part of this project and will provide guidance on the development of a more integrated resource conservation and management strategy. Measures should be adopted which achieve a sustainable and long-term solution to water supply issues, for as much of the population as is feasible.
115. The primary focus will be on reducing losses and optimizing the existing system so that further supply needs are minimized. Recommendations have been made for both policy reforms as well as physical system improvement, in order to achieve a sustainable long-term solution for meeting the water supply needs. Water supply sub-projects for Karakol will be implemented during two of the three phases of the Issyk-Kul Sustainable Development Project:
(i) Phase 1: The preparation of an inventory and condition survey of the water supply system; preparation of a network model; rehabilitation and UFW reduction, installation of domestic water meters in pilot area; (ii) Phase 2: No sub-projects; (iii) Phase 3: Rehabilitation and extension of the water supply system.
116. Table IV-4 presents sub-project cost estimates of the further improvement of the water supply system. Detailed estimates are provided in Volume 4 (Financial Plan).
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Table IV-4: Water Supply Sub-project Cost
5. Safeguard Compliance
117. Environment. Boreholes in Karakol are located at reservoir sites which are secure and under the control of the Karakol Vodokanal. There is space available at the sites for new chlorination facilities so there should be no need to acquire new land. Rehabilitation of the pre- sedimentation tank will also be conducted on government-owned land, at the new water treatment works in the city.
118. Rehabilitating and extending the water distribution network will involve installing new pipes and valves in trenches in the verge of roads in the city or, if necessary, in the carriageways. Environmental impacts, other than the local inconvenience during construction, will be minimal.
119. Resettlement. Construction of the water-supply network should not affect business activity as roads and shoulders are wide and free of encroachment. To maintain access, to businesses construction contracts should include a clause requiring contractors to provide wooden walkways across trenches at intervals. There are no people living or working on the other sites of construction activity, so there will be no resettlement impacts.
C. Sewerage and Sanitation
1. Service Delivery
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120. Sewerage system. About a third of the current population of the town has the benefit of connection to the piped sewerage system. The areas served are predominantly the central and north east sectors. A trunk sewer runs from the southern extremity of the urban area and outfalls to the STP to the north of the town. The number of properties or dwelling units connected is 6324 and the associated population is reported by the Vodokanal to number some 13,200 (i.e. fractionally over 2 per dwelling). However, because water tariffs are levied on a per capita basis this number must be considered with considerable caution. Family units mostly comprise between 4 and 5 people. If an average of 4.5 is adopted then the population served by the sewerage system becomes 28,458. These people mostly live in multi-storey apartment blocks but also included in this population are those living in the nearby village area of Pristan.
121. The total length of sewers is 71.4 km and the pipe diameters range from 100mm up to 700mm. The list of sewer lengths by diameter is summarized in Table IV-5. The condition of pipes is reported by the Vodokanal to be generally poor and many lengths require clearing or reconstructing, as listed in Table IV-5. Many manholes are in a poor condition and have lost their covers and internal ladders for scrap value. The performance of sewers is affected by ingress of tree roots and by the accumulation of garbage through the open manholes.
Table IV-5: Existing Sewers in Karakol
Diameter (mm) Length (m) 100 9640 150 2700 200 20690 250 3710 300 8170 350 12250 400 3090 500 2650 700 8500 Total 71,400
122. In addition to the town’s gravity sewerage system there is a pumped system serving the village areas of Pristan. The urban area of Pristan has a sewerage system comprising 10kms of 200mm diameter pipe, plus 28kms of 300mm diameter and four pumping stations, two of which are at end points of the system and two are intermediate booster pumping stations. Each of the four pumping stations has a wet well of 40m3 except for the first which has a well capacity of 130m3. The rising mains total approximately 14.5kms, some of which are reported10 as being in poor condition. The pumps sets and switchgear are old and their condition has been adversely affected by power interruptions and voltage fluctuations. This is a major factor in shortening the life of many pump and motor units.
10 Condition discussed in May 2009 with operations manager at Pristan.
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Table IV-6: Existing Sewers in Main Urban Area requiring Reconstruction
No. Location Diameter (mm) Length (m) 1 Regional hospital – Telman Street 300 50 2 Takypova – ring road to L Marx St. 300 270 3 Hydro station on Fuchik to substn. 150, 200, 300 1500 4 Maternity hospital. Jantosheva to Michurina Street 300 100 Shopping Centre, Kumtor, - Kommunisticheskaya to 5 150 100 alybakova 6 Gagarin Street from Tumanova to Ladyrova 300 100 7 Gagarin Street from Kutmanalieva to Tumanova 300 100 8 Bus station to ring road 300 180 9 Military base on Parkovaya Street 200 200 10 Kojonkozova Street to Przhevalsk 500 2000 11 Toktogul to Kommunistichesk 400 100 12 Toktogul to Tynystanova to Krupskaja 300 200 13 From Kadyrake to STP 500, 700 2000 Total 6960
123. The sewerage system is operated by the Vodokanal. The facilities available to the Vodokanal are of a modest standard and they lack modern equipment for operation and maintenance of the networks and appurtenances.
124. Treatment. The existing wastewater treatment works is located north west of the town, towards, but not near, lake Issyk Kul. The site covers an area of approximately 13 hectares and is spread along the southern slopes of a local river valley. In consequence there is little or no problems over gravity feed from one stage to another.
125. The existing wastewater treatment works was completed in 1980 and has a design capacity of 22,000 m3 per day, which is sufficient for an equivalent population of about 110,000. However, the influent in 2009 is estimated by Vodokanal at between 7 – 8,000 m3/day. The estimated present contributing population of 28,500, each discharging, say, 220 liters per day, would generate a flow of 6,270m3/day. Add to this significant wastage and some infiltration flows and the 7 - 8,000m3/day may be achieved. By observation, the raw sewage appears fresh and without septicity.
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Table IV-7: Units Comprising Existing STP
Unit No. Description 1 1 Inlet chamber / channel 2 1 Screening chamber 3 2 Grit separation cyclones 4 2 Grit drying / storage 5 1 Flow division/splitter chamber 6 3 Primary settling tanks 7 2 Aeration tanks 8 1 Compressor House 9 4 Final settling tanks 10 1 Chlorination building 11 10 Sludge drying beds 12 1 Tertiary settling tank 13 2 Sludge digesters 14 4 Maturation ponds 15 1 Laboratory and Office
126. The STP is in a poor state of repair. Two of the three primary tanks are non-functioning as are two of the four final settling tanks. Similarly, the aeration system is non-operational. There exists a laboratory facility but the equipment is antiquated and limited in scope making the analysis of samples extremely difficult and unreliable. Whilst good records of sewage and effluent characteristics are maintained, their values may be suspect.
127. Effluent. The effluent is discharged from the final tanks along a channel where chlorine solution is added randomly and the flow is received into a holding pond of unknown capacity. There is some evidence of eutrophication associated with this pond and there is foaming in the discharge pipe. From this pond flow is conveyed by pipe under the Karakol River to discharge into a further large lagoon, operated by the Department of Irrigation, where 5 small streams also discharge. Water is pumped to irrigation of agricultural lands during the period March to November. The Karakol river flows within training walls as it passes the STP and there is no evidence of interconnection. Similarly there is no outlet or connection between the holding lagoon and lake Issyk Kul.
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2. Service Adequacy and Strategy for Sanitation
128. It has been estimated that only a third of the population currently have a sewer connection whilst the remaining 70% rely on pit latrines which generally appear to be in a poor condition.
129. The Vodokanal operates with old and inadequate maintenance equipment and is also poorly funded, making it difficult, if not impossible, to replace old and broken equipment or purchase additional items. By ingenuity and skillful repairs the system is kept running but very much on a reactive maintenance basis. The STP does not have the benefit of an analytical laboratory and hence the strength of sewage is unknown. However, by observation, the raw sewage appears fresh, without trace of septicity, although appearing relatively weak. In addition there is no flow measurement other than a record of the kWhr consumed in pumping raw sewage to the STP.
130. In the wider context of urban sanitation, there must be recognition of the various options for providing for the disposal of human excreta and liquid wastes. Pit latrines, individual or collective cess pits and septic tanks all have their application and the introduction of a water borne sewerage system should only be considered where large volumes of wastewater are generated in specific locations (for example, factories, large institutional buildings and schools) or where the density of habitation is above 200 persons per hectare. Therefore, initially, sewerage planning shall adopt a strategy of focusing on assets to serve major water users (large factories, hospitals, schools, administrative buildings), then other large residential buildings such as groups of apartment blocks and finally the more isolated multi residential and smaller industrial or commercial establishment. Opportunity will, of course, be taken to connect all properties along the primary network created by the strategic approach.
131. The strategy for non-sewered sanitation will focus initially on the provision of hygienic sanitary facilities at schools and hospitals which will rely on cess pit or septic tank, as appropriate. The next priority will be collective sanitary facilities, serving housing blocks or administrative buildings and finally on individual dwellings. The investment program for sanitation will therefore be focused on least cost solutions to provide maximum benefit to the population whilst affording maximum protection against pollution of the environment. The twin approach will improve and develop
(i) wastewater collection and treatment through a sewered system and (ii) collective and individual sanitation facilities.
132. Where there does not currently exist a piped sewerage system then Ventilated Improved Pit (VIP) latrines offer an odorless and minimal fly and mosquito nuisance option. VIP latrines are a hygienic and low-cost form of sanitation and their use should be promoted throughout the population. For those cases of multi-storey occupation, institutional buildings and properties operated by budget organizations, cess pits or septic tanks are best used; the choice depending upon prevailing local conditions. However, it should be recognized that regular maintenance and the appropriate means and frequency of emptying the installations must be available. This will necessitate investment not only in sufficient tanker capacity but also in the means of safe disposal of liquid and solid wastes. Tanker operation may be undertaken by private enterprise
46 TA 7228-KGZ: Issyk Kul Sustainable Development Project Final Report Volume 1 – CLIP and/or by the Vodokanal. Disposal facilities must be available and these are best provided by purpose emptying bays at the inlet to the STP.
133. The strategy for improving and expanding the coverage of sewer connections and for wastewater treatment will dictate the priorities and phasing of works. Paramount to this phasing will be the availability of funding of both capital works and the operation and maintenance of the system. Failure to identify and secure sufficient funding for effective operation will render the capital expenditure a depreciating asset and non-sustainable. The recommended strategy will be a prioritization on the rehabilitation into good working order of existing sewerage assets. The order of priority is as follows:
(i) pumping (pressure) mains; (ii) pumping stations and their associated electrical and mechanical equipment; (iii) outfall trunk sewers; (iv) main and secondary sewers; (v) connections to large industrial water users; (vi) connections to institutional buildings, schools, hospitals, public facilities and markets; (vii) tertiary sewers; (viii) connections to administrative buildings, apartment blocks and small industries; and (ix) connections to other (e.g. houses).
134. The prioritization of rehabilitating wastewater treatment will depend upon the location of discharge and environmental impact of treated wastewaters, the quantities and strength of raw sewage for treatment and the degree of treatment afforded by existing facilities. Priority should be given to preliminary treatment – screening and grit removal – followed by at least primary sedimentation. Secondary biological treatment and the effective treatment and disposal of sludge will be a lower priority but will need to respond to the agreed and approved standards for the discharge to the environment of final effluents and the minimization of environmental impact of sludge disposal.
135. The realization of expected health benefits from a water and sanitation project will depend heavily upon a successful program of hygiene education. This will require preparation of media campaigns on health and water/sanitation related issues; training in hygiene education and orientation of Ministry of Health staff, school teachers, community leaders and NGOs; and provision of equipment and educational materials.
3. Subcomponent Rationale and Design Criteria
136. Network Expansion. The Mayor’s office, together with Vodokanal, has prepared a scheme for the expansion of the existing sewerage system and has also identified locations where reconstruction of existing sewers and pumping mains are necessary to overcome existing operational problems. The basis for this expansion is to increase the coverage of the population
47 TA 7228-KGZ: Issyk Kul Sustainable Development Project Final Report Volume 1 – CLIP connected to a piped sewerage system by an additional 8,670, occupying 2562 dwelling units. This will require a total of about 10.55kms of sewer as itemized in Table IV-8. The thrust of these proposals is to provide sewers to the western areas of the town, currently not sewered, draining by gravity to a new trunk sewer and thence to the outfall sewer.
Table IV-8: Proposals for Expansion of Sewerage System
No. Diameter Length (m) 1 300 2950 2 400 3300 3 500 4300 Total 10,550
137. Whilst the target is for, possibly, 2560 additional buildings/dwellings to be connected to the sewerage system, practice suggests that only 90% of this target will ever occur – the remaining 10% declining to connect, particularly where there is a financial cost for doing so. Institutional and commercial establishments will generally welcome a direct sewer connection. However, individual dwellings are typically small, single storey units on generous plot sizes in low density areas. Even presupposing that the owners are willing to extend their houses to incorporate a toilet and bathroom facility, the cost of individual house connections will be significant. There will be a need to protect the new flush system from icing during winter periods. An initial assumption for wastewater generation is 126 lcd for apartments, based on the supposition that all potable water supplies will be metered and that tariff levels will be sufficient to ensure sustainability of operation.
138. Manholes. Because of the very poor state of manholes on the existing sewerage system, it is estimated by the Vodokanal that 550 of the total of 900 manholes should be reconstructed. All manholes are identified as requiring internal ladders and there are 880 missing covers to be replaced.
139. Pumping stations. The existing four pumping stations at Pristan are in need of structural repairs and the replacement of all pumping equipment which is more than 30 years old. It has been noted during inspection that they are not currently protected by debris screens and these should be installed at the peripheral stations as a minimum. Therefore the necessary equipment will comprise automatic screening gear, pump-sets, electrical switchgear and controls and a centralized standby generation facility. This is particularly necessary because two of the end- point pumping stations are located adjacent to lake Issyk Kul. In addition some of the rising mains are in poor condition and should be replaced.
140. Sewage Treatment Plant. The existing diffused air biological wastewater treatment plant is non-operational and is in a structurally distressed condition. Apart from its excessive capacity and associated running costs, it would be totally uneconomic to attempt any form of rehabilitation. It should be demolished and a correctly sized replacement plant constructed. The proposed plant will comprise inlet screening, grit separation, oxidation ditch biological treatment, final settling and returned activated sludge pumping. Sludge treatment will initially be based on the existing drying beds but sludge thickening and dewatering tanks will be introduced. The oxidation ditches will have a volume of 5500 m3 and a land footprint of 20 m by 93 m. The two circular final settling tanks will be 17.6 m in diameter.
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141. Operation and Maintenance. Poor maintenance can lead to unnecessary investment in rehabilitation or new facilities. Infrastructure systems which are not maintained will deteriorate faster, shortening their life, wasting scarce investment funds and precluding effective cost recovery. In order to maximize the impact of capital investments proposed under the Project it is proposed that maintenance equipment, laboratory testing and both appropriate staffing skills and training in operational management are provided through the Project.
142. Design Criteria. The design criteria for the sewerage and wastewater treatment plant are given in Volume 7 of the PPTA Final Report.
4. Subcomponent Identification and Costing
143. As the population density of Karakol is relatively low, proposed expansion of the sewerage scheme must be cost-effective and sustainable. The strategy proposed for urban public sanitation should be followed with due consideration given to unsewered solutions in the less densely populated areas. For those areas where sewerage sanitation is cost-effective, the sub-projects identified for inclusion in the Investment Program are:
i) Sewer Network. Approximately 7km of sewerage pipes have been identified by Vodokanal as requiring reconstruction. The scheme for an expanded sewerage system comprises 3kms of 300mm diameter sewer pipe, 3.3km of 400mm dia., and 4.3kms of 500mm dia. There is also a need for the replacement of certain lengths of rising main from the pumping stations at Pristan and these also need to be investigated further. In addition, many of the existing manholes in Karakol are in a poor state of repair: many require reconstruction, covers are needed and access ladders or step-irons should be fitted. The replacement covers should not be iron (since they will only be removed again) but may be manufactured from concrete or plastic. In order to ensure initial operation of the whole wastewater system, it is proposed to include 1320 property connections within the project works.
ii) Pumping Stations. The four existing pumping stations serving Pristan are in need of structural repair and full re-equipping. The latter will comprise screening equipment, pump-sets, electrical switchgear and controls, and standby generation.
iii) Sewage Treatment Plant. In accordance with proposed design criteria, the maximum dry weather flow for treatment is anticipated as 7,000 m3/day. The design standard for the final effluent should target the values given in Table IV-6 below although this standard is aimed at effluents to be discharged directly to open natural waters. In the case where blind retention is provided and subsequent re-use for irrigation etc, then a lesser standard may be adopted. The reasoning behind these suggested permissible values is given in Volume 7 and, whilst it is recognized that Issyk Kul is an area of great environmental importance, the direct impact on the lake of the sewage treatment plants at Balykchy, Cholpon Ata and Karakol is quite limited.
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Careful operation of the proposed STPs and subsequent use of effluents for irrigation will provide minimal environmental impact but contribute to improving the economy of the farming sector.
Table IV-9: Final Effluent Standards
Parameter Limiting value1 For Irrigation Use
BOD5 0 10 mg/l 0 25 mg/l COD 0 50 mg/l 0 125 mg/l SS 0 20mg/l 0 50mg/l TN 0 15 mg/l 0 25 mg/l
NH3-N 0 5mg/l 0 15mg/l TP 0 2 mg/l 0 10 mg/l Coliform 0 105 /l 0 104 /l 1 For discharge to open natural waters
144. The proposed sewage treatment plant will be based on a biological extended aeration process. The preliminary treatment will comprise mechanically raked screens and grit separation with a penstocked isolated bypass channel. The secondary process will comprise a carrousel-type oxidation ditch with a total capacity of 5500m3 providing an average retention of 18.86 hours, propeller units incorporating air bubble injectors fed from a compressor, and two final settling tanks of 17.6 m diameter. Activated sludge will be returned to the oxidation ditch from the final tanks via twin low-lift screw pumps and surplus sludge will be weired-off to dewatering tanks and natural air-drying facilities. Buildings at the STP will include a security gatehouse, a compressor house, maintenance equipment storage and workshop, and an office and laboratory. The site will include access road, parking areas and peripheral landscape screening.
145. Final effluent will pass through an existing balancing tank before discharge to the existing holding lake operated by the Department of Irrigation. Screenings and grit will be transported to the landfill site for disposal. Sludge will be dried and retained for eventual use as agricultural fertilizer.
146. A second development phase is proposed for the future and will comprise a duplication of the phase 1 process units. Certain common elements of this total STP will be constructed in the initial phase to facilitate the continued operation of the STP during the expansion work.
147. Costings. The estimated costs of the project works under wastewater is given in the following Tables.
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Table IV-10: Sewerage System – Estimated Costs
5. Safeguard Compliance
148. Environment. All construction work related to wastewater treatment will be conducted within the boundaries of existing facilities so there will be no need to acquire additional land. All affected land is owned by the state and currently used by the appropriate government agency, via documented agreements. As the land is already in use, the significance of any adverse environmental impacts are likely to be minimal, being confined to construction activities and the transport of materials. Construction work on sewers and manholes will be located within the boundaries of existing streets but will cause disruption to traffic and pedestrian flows and to property access. However careful design and detailed construction planning will minimize impacts. Limiting the lengths of open trenching will help to reduce disruption and improve public safety.
149. Resettlement. Reconstruction or construction of the sewerage network should not affect business activity as roads and shoulders are wide so customers should not be impeded, and the right of way is not encroached by hawkers, shop-fronts, etc, so there will be no loss of income or assets. To maintain customer access, construction contracts should include a clause requiring contractors to provide fenced walkways across trenches at intervals.
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D. Solid Waste Management
1. Service Delivery
150. Karakol reportedly deposits approximately 40,000 m3 waste11 per year although there are wide variations in the actual estimates provided by Kyrgyz Authorities. The Association of Cities of Kyrgyzstan states that 70,000m3 of waste is collected per year and the UNEP’s Regional Environmental Action Plan for Central Asia states that 47,000m3 is collected annually. For the purposes of this PPTA, the UNEP data are used.
151. Waste collection. No clear separation is made between household and commercial waste and no segregation of different types of waste takes place. Agreements are in place to collect waste from 11,500 households, in which 26,000 people are registered. This represents 36% of the 71,500 population. Although the Tazalyk requires proof of how many people live in each house from which waste is collected, the Tazalyk doubts as to whether these figures reflect the reality of the population from which waste is collected. These data imply that over 60% of the population’s waste is buried on private land or left uncollected by the authority. However site visits to the city suggests this is not the case. Is it likely that the waste is collected from the majority of the population either directly from their houses, from public containers or via fly-tipping hotspots.
152. The city is divided into 14 sections for the purposes of waste collection. Each section has a pre-determined day on which the Refuse Collection Vehicles (RCVs) collect waste. The containers are left by the side of the road on the specified day and are returned empty by the collection staff. Waste is collected weekly on average for householders in Karakol city and twice per week from Pristan. Due to space constraints, apartments have scheduled waste collections three times per week.
153. The Authority owns a number of containers (0.7 m3). The containers are placed in businesses, for a fee and also a number are placed on the street for public use and emptied regularly. The containers can be lifted directly by some of the modern RCVs in the Tazalyk’s fleet.
154. The Tazalyk does not want or need additional transfer stations for bulking waste because:
• The distances from collection zones to the landfill are relatively short; • Housing areas are not narrow and do not require particularly small vehicles; and • A transfer station would encourage fly-tipping around it without constant security.
155. Waste Transportation. The landfill is relatively close to the city and is approximately half-way between Karakol and Pristan. On average, the journey timing to the landfill and tipping a full load from both Karakol and Pristan is approximately 45 to 50 minutes.
11 Note that the Association of Cities of Kyrgyzstan website (http://www.citykr.kg/en/balikchi.php) states that 70,000m3 waste is collected per year; the Regional Environmental Action Plan for Central Asia (http://www.rrcap.unep.org/centralasia/) states that 47,000m3 is collected annually.
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156. The Authority has a fleet of eight vehicles for waste collection, which includes two modern RCVs and six open back vehicles which are over 30 years old. Two of the older trucks are large and used for fly-tipping collections. The Authority has a covered maintenance yard where the fleet is repaired; breakdowns are frequent for the older vehicles. The landfill operator reportedly receives between 10 to 30 trucks of waste per day; including the waste deposited by private companies.
157. Waste Disposal. Karakol landfill is located approximately 8.5 km to the north-west of the city and covers approximately 7 ha. The South the site is bounded by the road from Karakol. The river passes from the North to the North West of the site. The East and West are bordered by scrubland which leads to arable land. The arable land to the East is heavily irrigated. The valley North of the current tipping area is ear-marked as the spare void space and will be the next tipping location. The site operator confirmed that the valley currently used for disposal of waste was originally 40m deep and currently contains around 15m of waste.
158. There are no buildings on site for staff use. Near the site, there is an old railway carriage in which a family live; the head of household works on the landfill. There is no access to water on site for staff therefore staff have no washing facilities and no place to change clothes or shower before leaving the site. In addition, employees are not given Personal Protective Equipment (PPE) and are not supplied with even basic PPE such as gloves or masks. This is a particularly high risk due to the prevalence of cement bonded asbestos found on the site.
159. The landfill site has two old bulldozers, one of which is said to work but was not working on any of the three site visits. They bulldozers date from the 1950s, which means spare parts are difficult to find and therefore are machined by hand. A bulldozer from elsewhere within the ‘Cleaning & Greening’ fleet is used for landfill work when necessary.
160. The landfill has been used for approximately 9 months and is rented from a local village. The PPTA estimates that the landfill site has the capacity for approximately two years of waste deposits, assuming the current void is filled and raised to a 1:5 gradient slope. However this will need to be confirmed by a geotechnical engineer. The waste authority has an agreement with the land owner to tip in two further void spaces, which will extend the landfill life in excess of four further years, however payment for this has not yet been completed. The land will continue to be rented for at least a further 49 years according to the Tazalyk and Mayor’s office.
161. Before the tipping area was used, it was lined with clay which was taken from the immediate location. According to the site visit and landfill operator, the geology comprises clay (2-3m) overlying sand.
162. Karakol has a number of closed landfill sites, the most significant of which are, in terms of size (1) Opposite the current site (2) Boru-Bash Area site, 1.5 ha, 3m deep, open for 8 months in 2008, surrounded by agricultural land (3) Jyrgalang site, near Jyrgalang river, on the road to Bishkek 11km from the city. This site was used from 2003 to 2006 and is approximately 0.8ha. The sites are largely covered with clay or topsoil. In particular, Jyrgalang site was deliberately covered in a capping layer in order to prevent scavengers collecting waste metal. All sites are naturally populated by vegetation, meaning that it is not clear where the waste fill ends and natural soil begins.
163. None of the sites are near any populated areas and data made available to the PPTA team do not suggest any significant environmental or human health impacts arising from the closed sites, however data are limited. The only concern the Waste Authority has is over the
53 TA 7228-KGZ: Issyk Kul Sustainable Development Project Final Report Volume 1 – CLIP appearance of the smallest site (1) which requires additional capping and is close to a stream and pond.
164. Waste Composition. A waste composition survey was undertaken in order to understand the key components of the waste stream with a view to potential recycling and waste treatment. A summary of the results is provided in Table IV-10 below.
Table IV-10: Waste Composition Summary
Summary of Waste Composition Analysis Karakol Source of Waste Suburban Area Sample of Waste Segregated Kg 3274 Weight of Large Waste Items Kg 742 Weight of Fines (under 4cm grid) Kg 1386 Recyclables % 8 Organic % 21 Soil & stones % 39 Recyclables (glass paper, hard plastic, metal) Kg 251 Organic Kg 694 Soil & stones Kg 1268 Source: Analysis
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2. Service Adequacy
165. As mentioned, agreements are in place to collect waste from 36% of residents and some businesses. However, in practice this proportion is no doubt larger as many residents use publicly available bins or dump waste illegally (fly-tipping) which is then removed by the Authority. The Authority generally cleans up the majority of fly-tipped waste which adds to its landfill deposits although receives no income for this service from the residents. This waste contains building rubble, construction materials and asbestos as well as general household waste.
166. Karakol is generally clean with relatively small amounts of waste in the streets and surrounding area. However, dust bins are generally inadequate in certain key locations, such as the hospital, and the vehicles used to collect the waste are typically uncovered during transport. Very little of the waste collected is compacted.
Table IV-11: SWM Service Indicators
Indicator Unit Performance Remarks Waste collection performance % 95% Over 90% is acceptable Daily per capita waste generated kg 1.5 Composition (of total waste) Domestic waste % 75% Commercial waste % 25% Organic % 21% Dry Recyclables (paper, metal etc) % 8% Inert (soil & stones & rubble) % 39% Other landfill waste % 32% No formal Waste Authority Recycling Performance % 0% recycling service Source: Analysis.
3. Subcomponent Rationale and Design Criteria
167. It is recommended that the waste management interventions which are instigated during project implementation all take place under the umbrella of a Joint Waste Management Strategy (JWMS) for the Oblast. This should help to develop sustainable waste management practices and engender support at an institutional and community level. This fits with the on-going UNDP Project regarding waste management in Kyrgyzstan (Capacity Building for Waste Management), which has developed a waste strategy for the country. This will be published in late 2009 and identifies a need for recycling, current recycling capacities and the requirement for private sector involvement in waste management in the Kyrgyz Republic
168. The JWMS would be a joint approach to collection of recyclables and any future procurement of waste treatment services for the cities of Balykchy, Cholpon-Ata, and Karakol. A joint working approach will offer support, shared learning and importantly economies of scale for
57 TA 7228-KGZ: Issyk Kul Sustainable Development Project Final Report Volume 1 – CLIP the improvement of recycling markets. Concurrently, improved landfill management practices will reduce the risk of negative impacts on the environment and human health from waste disposal.
169. The JWMS will develop an effective waste collection system in the city; encouraging waste segregation at source; conducting public awareness campaigns; ensuring regular collection and safe transportation of waste; developing safe solid waste processing and disposal facilities, and developing appropriate waste reprocessing facilities where possible (preferably on public private partnership mode) to reduce the amount of waste to be landfilled. Key aspects of the waste management strategy are outlined in Figure IV-7.
Figure IV-7: Issyk Kul Waste Joint Waste Management Strategy
Site Specific Landfill Management Plans
Balykchy Cholpon Ata Karakol
City Collaboration
Issyk Kul Joint Waste Management Strategy Recycling Public-Private Pilots Partnerships
Hazardous Waste Awareness Management Raising
Best Practice Procurement of Exchange Equipment Staff Training Procurement of Recyclables Market Engineering Development Services
4. Subcomponent Identification and Costing
170. Projected solid waste generation. Solid waste generation in Karakol is likely to increase from the present 100 tons/day to 155 tons/day by the year 2035 Table IV-12). This projection is based on the assumption that per capita solid waste generation will increase as GDP (Gross Domestic Product) increases because the two are usually linked in economically developing
58 TA 7228-KGZ: Issyk Kul Sustainable Development Project Final Report Volume 1 – CLIP nations12; GDP is predicted to increase at a rate of 6 percent in 2010 then 4% from 2015 onwards. However in relation to waste generation, a conservative percentage of 4% in 2010 then 4% thereafter is applied. This conservative figure reflects the already relatively high per capita waste generation (approaching that of a developed country13) and the high proportion of soil and stones from garden sweepings, which is not expected to increase with GDP.
Table IV-12: Projected Solid Waste Generation
Population plus Waste Per Capita** Total Waste Generation Year tourists for 3 months* Kg/Day Tons/Day 2010 71,343 1.5 107 2015 74,829 1.6 117 2020 78,918 1.6 126 2025 83,235 1.6 135 2030 87,230 1.7 144 2035 91,863 1.7 155 * 1/4 of Maximum tourist numbers ** Following the predicted MEF GDP percentage increases. per capita Kg based on UNEP data and analysis Source: Analysis.
171. Proposed Solid Waste Management System. A comprehensive solid waste management system from primary collection to final processing and safe disposal will be developed for Karakol as shown in Table IV-13. All solid waste management sub-projects will be started in Phase 1 of project implementation.
12 European Topic Centre on Resources & Waste Management (2006) Waste Generation Fact Sheet 13 2kg/capita waste generation in high income country. PAC (2008) Planning for Solid Waste Management
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Table IV-13: Sub-Projects, Phasing in Karakol
Year of Project Purpose Phase 1 Improve the daily management of the site through 1 (i) Landfill Infrastructure updated plant and infrastructure. Collaboration between cities and consultation of (ii) Waste Strategy for stakeholders. All Recycling Improve the current situation; enforcement for waste offences is weak, legal mechanisms to make people pay (iii) Institutional Strengthening. for waste management e.g. through local taxes are not All used, and there is no enforcement of penalties for those who transgress. Provision of machinery to allow operators to undertake 1 (landfill required tasks such as waste compaction and application machinery) (iv) Landfill Machinery of daily cover, which reduces leachate and windblown 2 litter. (baler & forklift) Improve understanding of landfill gas and leachate which (v) Site Investigation and may arise from the landfill sites and pose a risk to the 1 Environmental Monitoring environment and human health. Improve formal management of the site through. (vi) Landfill Plan & Operations 1&2 Manual Improve the amenity value of the site, eliminate conflict (vii) Landfill Engineering for around encroachment onto the cemetery. 1&2 Rehabilitation Provide a new, engineered site for waste deposits, within (viii) Engineering a New the landfill boundary. 1 Tipping Area Identification of potential PPP opportunities or industries (ix) Market Development. which may be able to support the separation of 2 recyclables. Identification of the barriers to segregation of waste at (x) Recycling & Composting source though development of pilots. 2&3 Pilots. Improve and extend the service throughout the city which (xi) Waste Collection. is currently limited to certain areas due to budget 3-5 constraints. Improving the current a low level of awareness around (xii) Public Awareness Raising waste management in order to gain support and input for All & Education waste management decisions.
172. A single project is proposed for Phase 2:
Improving the Tazalyk office which was damaged by fire several years ago, in Karakol city. This includes: (xiii) Tazalyk Office • Provision of office furniture; Phase 2 Refurbishment • Refurbishing the building, which is considered to be structurally sound.
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Table IV-14: Costs for Solid Waste Management
5. Safeguard Compliance
173. Environment. All construction work related to the landfill will be conducted within the boundaries of existing facility so there will be no need to acquire additional land. In addition, any adverse environmental impacts which result from the works proposed for the site are likely to be relatively small.
174. Resettlement. The resettlement impacts are limited to the landfill site staff, which collect recyclables from the waste trucks. This supplements their salary at around 50 som per day. The landfill staff do not permit external rag-pickers to enter the site. They do not use PPE and are subject to the inherent health risks associated with uncontrolled landfill sites. When the project is implemented, these people will be offered training, and better working conditions in terms of accommodation and washing facilities etc.
E. Costs Summary
175. The costs associated with the proposed project are summarized in Table IV-15.
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Table IV-15: Karakol Infrastructure Improvement Component Cost
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V. SOCIAL DEVELOPMENT
A. Overview
176. A Poverty and Social Assessment (PSA), Summary Social and Poverty Reduction Strategy (SPRSS), and Summary Gender Action Plan (SGAP) for the overall Project have been prepared. The PSA is based on primary (survey and consultations) and secondary research and has been integrated with the other studies being undertaken during the PPTA. The overall design of the proposed Project reflects the need for social, poverty and gender considerations to be incorporated into the rationale for improving selected infrastructure in the three Project cities, as well as into the training and capacity building initiatives proposed by the Project.
177. The SGAP is based on the gender assessment contained in the PSA, the analysis on the gender assessment has drawn heavily on the household survey and the results of the women’s focus discussion groups (FGDs) undertaken during the PPTA. All the data related to the social aspects of the project are presented in Volume 8 and records of stakeholder consultations are presented in Volume 6.
B. Poverty and Vulnerability
1. Project Links to National Poverty Reduction Strategy
178. The National Poverty Reduction Strategy (NPRS) is now embedded within the Comprehensive Development Framework, the principal goal of which is to reduce poverty in the Kyrgyz Republic by half by 2010. One of the main objectives of the CDF and regional development policy is ‘to create incentives for introduction of tools of strategic planning’ and to increase efficiency in public expenditure.
2. Poverty in Kyrgyz Republic
179. Based on the most current estimates, there are 1.8 million poor in the Kyrgyz Republic, accounting for 35% of the total population. The extremely poor account for 7% of the population. This shows a reduction in poverty compared with the 2005 rate of 43% and 11% for those living in extreme poverty. The incidence of poverty is higher in rural areas (51%) compared to urban areas (30%). The majority (25%) of the poor live in rural areas. Extreme poverty is twice as high in rural areas than in urban areas: 14% of rural residents live in extreme poverty compared to 7% of the urban population.
180. Data obtained from the Ministry of Labor and Social Development and city administrations during PPTA meetings and discussions, shows that there are in the order of 19,000 poor families in Issyk-Kul rendering a 2009 poverty rate for the Oblast of 17%. The highest poverty rate is in Balykchy (32%) and the lowest incidence is in Cholpon-Ata (3%).
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Table V-1: Poverty Rates in Project Area
Incidence by poverty lines (%) Total no. of Total poor % families % of very % of poor Location poor as % of below poor families families families GMCL families (< 963 som) (200 som) (< 640 som) Balykchy 3,395 31.9 6.2 11.2 14.5 Karakol city 2,015 10.7 1.1 5.2 4.4 Cholpon-Ata town 72 2.6 1.5 0.5 0.7 Subtotal Issyk-Kul rayon 1,795 8.3 2.9 2.9 2.4 Total - Issyk-Kul Oblast 19,342 17.2 4.7 6.2 6.3
Source: Ministry of Labor and Social Development (January 2009)
C. Household Socio-Economic Survey
1. Outline and Methodology for Survey
181. In order to prepare a profile of the beneficiaries of the Project, in addition to consultations, a household survey was undertaken in the three cities that make up the Project Area. Households were selected randomly, within the catchment areas of the proposed subproject interventions, as shown in Table V-2.
Table V-2: Distribution of Survey Sample
City No. of surveys Balykchy 178 Cholpon-Ata 55 Karakol 284 Total 517
Source: PPTA Household Survey (June 2009)
182. The questionnaire included a number of sections and obtained a range of data on the following:
• Household head and total household; • Livelihoods and income; • Water supply, sanitation and solid waste; • Access to community infrastructure and services;
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• Perceptions about the Project; and • Health status.
183. The proportion of poor and non-poor used in this Poverty Social Assessment (PSA) was determined by identifying the households, on a per capita basis, with monthly incomes that fell below the lower poverty line of 640 som and the upper poverty line of 963 som.
Table V-3: Comparison of Poverty Incidence
PPTA household Official data City survey Very Poor Poor Very Poor Poor Total poor Balykchy 7.3 14.6 11.2 14.5 31.9 Cholpon-Ata 7.3 18.2 0.5 0.7 2.6 Karakol 10.2 21.1 5.1 4.2 10.4 Total 8.9 18.6 6.2 6.3 14.9
Source: PPTA Household Survey and Official Data 2009
184. Table V-4 shows the expected number of beneficiaries by city and by Project component. The figures are not cumulative because some people may benefit from more than one intervention.
Table V-4: Estimated Number and Distribution of Beneficiaries
No. of beneficiaries Project component Balykchy Cholpon-Ata Karakol Total Water supply 28,000 5,650 20,000 53,650 Water distribution 12,750 12,750 Sewerage 17,500 29,620 47,120 Sewage treatment plant 28,500 44,740 73,240 Solid waste management 42,000 12,750 67,500 122,250 Community upgrading 10,225 4,650 9,225 24,100 Poor beneficiaries14 16,660 452 7,979 25,092
Source: PPTA Estimates and Official Data 2009
2. General Data on Households
14 Obtained by adding the number of beneficiaries of community upgrading and number of beneficiaries of solid waste management initiatives (maximum number of beneficiaries under the Project) and using the official poverty rate for each city.
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185. A summary of general data on beneficiary households in Karakol has been presented below for context. Detailed statistics are presented in Volume 8.
• Overall some 59% of households are headed by men and 41% are headed by women. Just under two-thirds (61%) of population in Karakol are Kyrgyz and a fifth is Russian. 46% of households in Karakol are made up of four or five people, and 23% are three person households. Three-quarters of households live in a house and 23% live in an apartment. 88% of households overall own the dwelling they live in. • Nearly a third of people in households have completed grades 6 through 11, and 62% of household heads have received a tertiary level education. • 27% of heads of household engaged regularly in waged work are in the trade, sales or small business sector and 17% being engaged in government administration or public service. Tourism only accounts for 2% of economically active heads of household, the smallest proportion in the Project Area. Daily or casual labor accounts for 16% of economic activity. The construction industry employs 5% of working heads of household. • All households in Karakol are connected to national grid electricity, and 89% (highest in the Project Area) have connections to a hot water supply. Some 84% of households have access to solid waste collection service, but less than a quarter (21%) has safe sanitation facilities. • A large proportion of households (89%) stated they either earn or receive a regular cash income. Table V-5 shows average and range of total household (all income sources combined) and per capita monthly incomes
Table V-5: Range of Monthly Income of Households
Income per month (som) Parameter Total h’hold Per capita Average 8,725 2,246 Minimum 600 178 Maximum 124,000 20,000
Source: PPTA Household Survey (June 2009)
3. Households and Water Supply
186. A summary of general data on household’s water supply has been presented below.
• All households included in the survey stated they were connected to a municipal supply. 85% of households stated they had received a free or subsidized connection to the municipal supply • The overall average monthly water bill is 77 som, some 7% of household receive bills of up to 20 som, 46% of households have monthly bills of between 21 and 50 som,
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26% of households pay between 51 and 100 som per month and 22% of households pay more than 100 som per month. • 29% of households drink the tap water without first treating it through boiling, filtering or sterilizing. • Three-quarters of households in Karakol receive sufficient water for their domestic needs. 46% of households stated the water supplied was also sufficient for gardening and other purposes. A third of all households stated they supplemented the municipal supply, on a regular basis, with water from other sources. 9% of households must travel more than 2.5 km to a water source. • 39% of households, (44% of households in the lowest income quintile and 40% of households in the highest income quintile), stated they would drink the water without some form of treatment. 82% of households stated that members of their household had suffered water-borne illness (WBI) in the past five years. The majority of households (57%) boil water in order to treat it.
4. Households and Sanitation
187. A summary of general data on household’s sanitation has been presented below.
• 67% of the population use pit latrines with slabs, whereas 27% use water-flushing toilets. About 4% of the population do not have access to improved sanitary facilities.15 • Nearly all households in the survey (99%) stated they owned the toilet they used, and did not share the toilet with other households. Nearly three-quarters (76%) of Karakol households use pit latrines and 23% use flush/pour type toilets. A small proportion of households (3%) stated that unavailability of water as the main reason for not connecting their toilet to septic tank.
5. Households and Solid Waste Management
188. A summary of general data on Solid Waste Management has been presented below.
• 87% of households stated that a municipal collection service was available in their area. 9% of households do not pay to get waste collected. A third of households pay up to 20 som per month for waste collection, 45% pay between 21 and 50 som, 8.5% pay between 51 and 101 som for monthly waste collection, and a small proportion (3%) pay more than 101 som per month. • As shown in Table V-6, half of households (52%) stated that waste plastic bottles/packaging were collected by the municipality while 37% burn this waste and 7% said they would take this waste to the landfill or nearest communal waste container themselves. Over half of households (58%) burn their waste paper and
15 NSC/UNICEF; op cit
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card while nearly two-thirds of households (64%) burn food and garden waste. All poor households stated they sold household waste for recycling.
Table V-6: Methods of Disposal by Waste Stream in Balykchy
Disposal method (%)
Waste stream Other waste waste Sell to others others Burning Burning Landfill/ own land land own Dumping Collected Collected container Burying on
Plastic bottles & packaging 51.8 37.0 1.8 1.8 7.0 0.4 0.4 Paper & card 37.0 58.1 0.7 0.7 3.2 Soil & stones 28.5 3.9 14.8 7.4 13.7 0.4 0.4 Food & garden waste 9.5 64.4 0.7 0.4 1.8 0.7
Source: PPTA Household Survey (June 2009)
6. Willingness to Pay
189. Households were asked if they were required to contribute to the construction of community infrastructure, in the order of 10% of households stated they did; 9% contributed to construction of roads, 10% to schools, 7% to water supply, and 3% contributed to construction of sanitation facilities. A larger proportion of households in Karakol contribute to the maintenance of community infrastructure; the largest proportion of households contribute to maintenance of water supply (58%) and schools (47%), just over a third (34%) contribute to maintenance of roads, 16% contribute to upkeep of sanitation facilities, and a small proportion (2%) contribute to maintenance of the health centers or clinics.
190. About a third of households consider that it is reasonable for Government to ask for contributions to construction and/or maintenance of public infrastructure, the smallest proportion being in Karakol (28%). In Karakol the highest WTP is for improved water supply (48% of households) and improved solid waste collection services (43% of households), followed by 35% of households being WTP for improved sanitation facilities. Roads and schools rank next with 27% and 24% of households respectively.
191. Some 62% of households in Karakol stated they would connect to a public sewer if there was one near their house. Some 56% of poor households stated they would also connect. A third of all households, and 44% of poor households, stated they would not pay for the connection.
D. Gender Assessment
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1. Gender Characteristics of Project Area
192. A summary of gender characteristics is provided below.
• Female headed households are generally smaller than male headed households. Single person households are more often headed by women (11% compared with 2%), and 34% of female headed households are made up of two or three people (compared with 28% of male headed households). • A higher proportion of females (2.4%) than males (1%) have no education, but there are a larger proportion of females (67%) with tertiary qualifications than males (56%). • Some 87% of female headed households and 91% of male headed households receive regular cash income. There are significantly more females (16%) than males (5%) engaged in the education and health sectors, and a larger proportion of males (23%) than females (14%) employed by Government or in the public service. Twice as many women (63%) than men (31%) work in unpaid activities for between four and nine hours per day. • Three-quarters of trips for water collection are made by both males and females, and 16% of males and 8% of females make water collection trips on their own. In summer 11% of females compared with 7% of males make between 11 and 20 trips per week to collect water, and in winter 20% of females compared with 8% of males make 21 trips or more per week (see Table V-7). • There are four times as many female headed households of two to three people living poverty than male headed households, and twice as many poor female headed households of seven or eight people.
Table V-7: Trips and Time Collecting Water
Gender No. of trips per week (%) No. of hours per day (%) Season of HH 1.5 to 1 to 5 6 to 10 11 to 20 21+ < 1 > 2.5 member 2.5 Male 80.4 11.5 7.4 0.7 55.7 0.0 44.3 Summer Female 81.3 7.3 10.7 0.7 31.8 14.4 53.8 Total 80.9 9.4 9.1 0.7 41.2 8.7 50.1 Male 32.6 33.3 26.5 7.5 19.8 9.9 70.3 Winter Female 42.5 12.2 25.6 19.7 27.3 18.7 53.9 Total 37.3 23.3 26.1 13.3 23.2 13.9 62.9
Source: PPTA Household Surveys (June 2009)
2. Women and Health Issues
193. A summary of women and health issues is presented below.
• Domestic violence and child abuse were touched on in some FGDs. Some women are the victims of abuse not only by their husbands but also by his family and
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relatives, this not only has an impact on the women but on their children as well. • It was mentioned by younger and older women alike that providing for their family’s needs (shoes and clothes for children, school expenses and medical visits) is a continual stress and strain for women, especially those in poor or low income households. • The expense involved in consulting a doctor and buying treatment for various illnesses is high, in poor and low income households sick women will often forgo consultations and treatment for the sake of other household expenses. • Data provided in the PSA’s health impact assessment shows that overall 54% of all cases of WBI are experienced by females. A significantly higher proportion of females (22%) compared with males (13%) are afflicted with worms. The incidence of other WBIs is similar.
3. Gender Action Plan
194. Most of the Project benefits will be equally shared between men and women, but some benefits, such as reduced incidence of WBIs, reduced medical expenses, and reduced burden of collection of additional water to augment insufficient municipal supplies to the household – will be significant for women. There are also schemes under the Project that are exclusively for women, including training, gender empowerment, or aimed at improvement if understanding the different needs of women in infrastructure provision and access through the capacity building program.
195. The community based environmental and hygiene awareness program that is at the core of the GAP will directly address women’s needs and health risks. The awareness training will link with the upgrading of water supply and sanitation facilities in 26 schools and the provision of communal septic tanks in 14 communities.
196. Based on costs provided by the Women’s Federation and NGOs delivering similar training in the Issyk-Kul oblast, the estimate for the training and health/hygiene promotion program is in the order of US$120,000 ($40,000 per Project city), to be developed as specific modules and training focusing on health and environmental issues of women delivered through the overall Project’s IEC. This cost will be reviewed during Project design, and a TOR for a suitable agency to implement the training will be developed. Details of the Training and Awareness Raising Programme are presented in Volume 8.
E. Social Action and Poverty Alleviation Plan
197. The SAPAP prepared for the Project includes the implementation of the STIs and HIV/AIDS A&P program (as discussed above), and integration of needs of the poor and vulnerable in terms of awareness raising and training on health and hygiene issues, as well as capacity building requirements for implementing agencies with overall Project components such as the information, education and communication (IEC) and the enterprise resource management components.
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198. Overall, the poverty analysis concludes that the poor are mostly living in the areas without running water supplies, wastewater and solid waste collection and treatment services. They often suffer from serious water supply shortages, poor water quality, wastewater pollution, and poor urban environmental sanitation. They have less capacity to cope with the pollution and degraded environments and in turn suffer from increased exposure and risks to surface and ground water and air pollution, which further add to their poverty situation. Through the provision of clean and stable water supply and wastewater management, solid waste management, and integrated environmental health and hygiene components in the Project cities, the Project will improve the living environment and health status of the urban residents.
199. As described in the PSA, the aspects and characteristics of both poverty and vulnerability in the Project Area are closely interlinked and cannot be viewed in isolation, both stem from simple inadequacies such as:
• Inability to access services; • Inadequate services and resources; • Lack of ‘handholding’ and mentoring support until the beneficiary is out of not only poverty but period of vulnerability in which economic shocks are too difficult to withstand and the beneficiary returns to poverty; • Not acknowledging the near poor and transient poor as integral part of poverty eradication programs; • Lack of mechanism or institutional set-up at middle and grass root level to take the program to greater heights; and • Lack of converging services of NGOs and civil society organizations.
200. The Project therefore aims to support the municipal authorities and Vodokanals to set aright the deficiencies. The following components of the Project will be supported as the SAPAP of the Project.
• Community upgrading; • Health and environmental awareness raising through the Project’s IEC and specific module delivered through the Project’s GAP; and • Capacity building and institutional strengthening.
1. Community Upgrading
201. The community upgrading subcomponent will benefit 30,875 persons and will include: (i) water and sanitation facilities in schools; (ii) community water and sanitation facilities for a group of households in distant areas; and (iii) public conveniences in market/commercial areas, hospitals and clinics, and public institutions. Selection of the beneficiary institutions will be made by the district managers within the city administration based on demand and approved by the city councils, as shown in Table V-8, the cost estimate included in the overall Project costs is US$3.05 million.
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Table V-8: Estimated Cost of Community Upgrading
Source: PPTA Project Cost Estimates (July 2009)
2. Health Awareness and Education
202. Health education and awareness raising will be major ancillary measures in realizing the health benefits of improved water and sanitation infrastructure delivered by the Project. In each of the FGDs participants stated that awareness raising needs to be integrated with physical infrastructure improvements, and that the Project should provide training about sanitation and health/environmental problems and links between health and contaminated water. The survey analysis showed very high rates of WBIs in the Project Area.
203. Community awareness of the Project will be promoted through the IEC campaign, including an understanding of its long-term benefits. This will increase support from the Project beneficiaries and stimulate demand for better urban infrastructure and services. Beneficiaries will also be made aware of issues such as water rates, user charges, and solid waste management fees. In addition, beneficiaries will be informed about how to prevent environmental health-related hazards and their responsibilities for reducing and avoiding inefficient use of water. Hygiene and sanitation education will form a key component of the IEC campaign and is the main component of the Project’s GAP.
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VI. SERVICE DELIVERY IMPROVEMENT
A. Institutions, Management and Capacity
204. Within the Kyrgyz Republic, governance has four tiers: (i) the state – central government; (ii) local state administration, (iii) local government (covering cities and Rayons), and (iv) community-based organizations. The primary function of the state in service delivery is in setting policy, defining standards, providing guidelines for tariffs, and planning/mobilizing large-scale investment financing. Local state administrations are responsible for managing state property and implementating national programs. Local governments manage the actual delivery of public services. The community-based organizations help to define priority needs and mobilize partial funding and labor for small-scale investments and social infrastructure projects.
205. Full details of the Institutions and their organization are provided in Volume 3, Institutional Plan. A summary of those Organizations relevant to the city of Karakol are provided below.
1. Organizations and Entities
206. A number of organizations have responsibilities relevant to Karakol. These include:
(i) State Agency for Architecture and Construction Management. (ii) Community Development and Investment Agency (ARIS). (iii) State Agency for Environmental Protection and Forestry (SAEPF). The SAEPF is the key state body responsible for environmental policy development and implementation. It has two departments which are responsible for environmental management in Issyk-Kul: a) Department of Environmental Protection. b) Director General of Biosphere Reserve Issyk Kul. (iv) State Ecological Expertise. At an early stage of planning, intended projects likely to have an impact on the environment must be submitted to the State Ecological Expertise to be appraised for their environmental impact16. (v) Water Supply and Sanitation. a) Ministry of Agriculture, Water Economy and Processing Industries. Rural water supply and sanitation systems are the responsibility of the Ministry of Water Economy, Agriculture and Processing Industries.
16 Typical of construction works related to this Project that will require approval by the SEE are: construction of water and wastewater facilities including pipes and sewers; construction of roads, recreational and tourism facilities and industrial and household (solid) wastes processing, conservation and utilization works.
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b) Vodokanal. As above but focused on urban areas only. a. Ministry of Health. (vi) Land use and Protection. The agencies authorized17 to manage land use and protection are: (i) Gosregister18; (ii) SAEPF and (iii) the Ministry of Health and its offices of the Sanitary and Epidemiological Service. (vii) Water Resource Management. Water resources management is by: a) Ministry of Agriculture, Water Resources and Processing Industries; b) Ministry for Emergencies; c) Ministry of Health, Dept. of Sanitary and Epidemiological Control; d) State Agency for Environmental Protection and Forestry; e) State Agency of Geology and Mineral Resources; f) National Water Council; g) State Water Administration, and local state administrations (viii) Environmental Monitoring and Natural Resource Management. The following organizations have a role in monitoring the environment and management of natural resources. a) Ministry of Health, Department of Sanitary and Epidemiological Control. b) Ministry of Emergencies, Department of Hydrometeorology. c) State Agency on Geology and Mineral Resources (regional laboratories). d) State Agency on Environment Protection and Forestry, Department of Environment Monitoring.
2. Organization Structure of the City
207. General Administration. The oblast administration oversees the functioning of the local governments in the region through the rayons and cities. The city administrations of Balykchy and Karakol report directly to the oblast while that of Cholpon-Ata reports to the Issyk-Kul rayon. Within Karakol, a system of district management was established in 2008. There are eight district managers, whose primary function is to meet residents in their areas and to discuss with them local municipality issues. The managers report to the Mayor.
17 Decree No: 612, dated December 20 1996 18 Kyrgyz State Agency on Registration of Rights to Land and Real Estate
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Figure VI-1: Structure of Public Administration in Kyrgyzstan
208. The basic services within the cities are delivered through wholly owned local government utilities. Water supply and sanitation/sewerage is managed by the Vodokanals and solid waste management by the Tazalyk, which also oversees street lighting and maintenance of parks and playgrounds. Urban roads are managed by the city public works department.
209. The City of Karakol is managed by a Mayor and council consisting of 25 deputies. There are six Permanent Commissions and nine Agencies which are representative offices of state functions, as well as four city departments. Specific services are the responsibility of five organizations, for horticulture, solid waste, water, wastewater and heating.
210. Planning. Within each city administration there is also an Architecture and Construction Management Department, representing locally the State Department of Architecture and Construction Management. The Karakol department has responsibility not only for Karakol but
75 TA 7228-KGZ: Issyk Kul Sustainable Development Project Final Report Volume 1 – CLIP also for the oblast and, in this latter role, it supervises activities in the Architecture and Construction Departments in Balykchy and in Cholpon-Ata and reports to the oblast Governor. The office in Karakol has a complement of twelve staff.
211. Water and Waste Water. The Vodokanal is a self-supporting municipal enterprise that manages and operates the water supply and wastewater collection and treatment facilities. The assets remain within the ownership of the relevant municipality. The Vodokanals are legal entities with an independent budget19 and can enter into contracts for the procurement of services and works.
212. The Vodokanal staff structure includes a Director supported by a Chief Engineer, Chief Accountant and Head of Personnel. The major responsibility lies with the Chief Engineer who would be responsible for the O&M of the facilities, laboratories and any capital works. Customer services and operations are not recognized as distinct, separate directorates. The Vodokanal is under the general management of the Mayor and council. The Director is appointed by the State Union of Enterprises and Organizations of Housing and Communal Services, to whom he reports.
213. Solid Waste. Solid waste service provision is by a municipal agency, whose responsibilities include solid waste collection, landfill management, street cleaning, park maintenance and the management of trees and vegetation on public open spaces including streets. Karakol’s solid waste service provision comprises 84 employees, of which 25 are employed in solid waste management.
B. Legal & Regulatory Framework
214. Article 34 of the Constitution of the Republic states: “Citizens of the Kyrgyz Republic have the right to a natural environment favorable toward life and health, and for indemnification of damages caused to health or property by actions in the field of environmental management”.
215. Environment. There are over 100 normative and legal acts regarding the environment, the most important of which are presented in Volume 3. The Department of Environmental Protection of SAEPF receives its mandate through the Environmental Law, which sets forth environmental safety procedures to ensure that all development projects and plans comply with ecological and public health standards. These procedures are regulated by Law on Environment Protection No.53, dated 16.06.1999 (with amendments in 2002, 2003, 2004 and 2005), which defines the state policy and regulates legal relationships on natural resources and environmental protection (Article 16). In particular, it prohibits financing and implementing projects without the approval of the State Ecological Expertise. Legal relationships are also regulated by Law on State Ecological Expertise No.54 (June 16, 1999) with amendments in 2003 (No.102) and in 2007 (No.21).
216. Biosphere. Article 85 of the Land Code establishes specially protected natural territories. In accordance with the law “On Biosphere Territories in the Kyrgyz Republic” the biosphere territory is subdivided into zones based on scientific studies. A detailed description of the biosphere zone and the Biosphere Directorate’s responsibilities is given in Volume 2 (EIA). The Biosphere Reserve Directorate in Issyk-Kul has the mandate to manage and support
19 Refer to the Financial Management Plan for discussion on the financial management and tariff setting procedures.
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217. Water and Waste Water. The legal framework for water and sanitation is as follows:
(i) The Drinking Water Law, 1999, and its amendments; (ii) The Consumer Protection Law; (iii) The Commercial Property Ownership Law; (iv) The Rules for Providing Public Utilities for the Population (Decree 783, dated 11 December 2001), and (v) Regulations on Pricing Procedures for Economic Goods (Works and Services), Decree 445, dated 17 July 2003.
218. Article 5 of the Drinking Water Law assigns many responsibilities to local government, including those to provide drinking water of sufficient quantity and quality and to develop and approve programs for drinking water supply systems. In addition, the Article requires local governments to manage sanitary zones, the effective use of water resources, and to plan, finance and support drinking water provision.
219. Solid Waste. Law No. 89 of 2001 ‘About the Production Wastes’ delineates the principles of state policy concerning waste management, including its collection and disposal.
220. Other laws pertaining to this subject are:
(i) No. 53/1999: Environmental Protection (ii) No. 54/1999: Ecological Expertise (iii) No. 60/2001: Sanitation and Epidemiology (iv) No. 5/2002: Local Government and Local State Administrations (v) No. 67/2004: Technical Regulations (vi) Code No. 114/1998: Administrative Responsibilities (the disposal of polluting substances and placing of waste without permits) (vii) Criminal Code No.67/1997 (the disposal of dangerous substances and wastes)
20 The activities and responsibilities of the Biosphere Territory Issyk-Kul are mandated by: (i) The Law on Biosphere Territories in the Kyrgyz Republic, dated June 9, 1999; (ii) The Law on Specially Protected Areas, dated May 28, 1994; (iii) GoKR Decree No.623 on Biosphere Territory Issyk-Kul, dated September 25, 1998; (iv) GoKR Decree No.40 on Regulation of Biosphere Territory Issyk-Kul, dated January 24, 2000; (v) Order of Ministry of Environmental Protection, dated 8 September 2000: ‘About Administration of Issyk-Kul Biosphere Territory’, and (vi) Regulation on the Issyk-Kul Biosphere General Directorate, approved by the State Agency on Environmental Protection and Forestry on February 28, 2008.
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C. Institutional Development and Capacity Building
221. Legislation is complex and numerous. The legal basis for the use of natural resources and environmental protection is found in some one hundred pieces of legislation; seventy of which are concerned with Issyk-Kul. The enactments are not coordinated. In particular, their hierarchy is not clear and in some cases they are contradictory.
222. Zoning of the Issyk-Kul Biosphere Reserve boundary is also imprecise, with inadequate mapping.
223. The “National Strategy for Further Decentralization and Local Self-Government Development in the Kyrgyz Republic” (2002) aimed to develop effective systems of local self- government by 2010. However, the quality of human resources available to the local governments is inadequate to provide efficient and effective governance. The major issues identified within the Strategy for resolution are:
(i) Incomplete legal framework e.g. for the decentralization of state administration, creation of local management structures, economic and financial decentralization, and the creation of a municipal civil service system; (ii) Slow implementation of decentralization and insufficient support of local government bodies; (iii) Ineffective devices of financial-economic regulation; (iv) Weak professional capacity of municipal civil servants and the lack of an effective manpower policy, system for in-service enhancement of qualifications, and social protection system; (v) Limited scale of social mobilization and development of human potential; (vi) Inadequate citizen participation, and (vii) Lack of partnership and interaction of state administration with bodies of local self-governance, NGOs, and the private sector. 224. As discussed, the various entities required within the institutional structure already exist. The issues are those of: (i) capacity and (ii) clarity of responsibilities to avoid duplication and misunderstanding. The issue to be addressed is not, therefore, one of identifying new entities but of recommending which of the existing can best perform the required roles.
225. The required national coordinating role is to be filled by the Government proposed National Steering Committee for Issyk-Kul whose function will be to oversee development in the area and to inter-alia determine developmental areas and prospective partnerships with donor agencies; establish legislative and regulatory frameworks and take final decisions on project proposals and implementation by consolidating decisions of concerned Ministries and local authorities.
226. The remaining key entities are to be contained within the following two functional pillars that should remain totally separate. The key entities and there proposed roles are presented in Table VI-1 below.
(i) Regulation and Monitoring; and (ii) Service Delivery.
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Table VI-1: Proposed Key Entities and Designated Roles
Functional Task Designated Entity Pillar 1. Ensure the suitability of construction works to ensure no adverse environmental or other State Ecological Expertise; effects Oblast Department of Architecture and 2. Urban planning controls and building permits Construction Management 3. Monitoring drinking water quality supplied from the public water systems and from private sources Ministry of Health 4. Ensure the suitability of materials to be used that will come into contact with drinking water;
5. Monitoring water quality within the Lake Issyk-Kul and other water courses, including Directorate General of Biosphere Regulation and issuing permits for, and monitoring the quality of wastewater discharged from wastewater Reserve Issyk-Kul Monitoring treatment plants and from sewer overflows etc; all of which are assumed to flow into the Dept. of Environmental Protection Lake
6. Monitoring quality of raw water for treatment plants Ministry of Health Dept. of Architecture and Construction 7. Checking the construction, operation and maintenance of private septic tanks and hence Management any overflow of effluent groundwater; Dept. of Environmental Protection 8. Monitoring solid waste deposits and landfill sites; Dept. of Environmental Protection
9. Monitoring levels of service provision City Planning Dept.
10. Setting tariffs and other charges City Council (Kenesh) Service Oblast/City Departments of Architecture 11. Urban planning Delivery and Construction Management 12. Building advice and on-site building inspections for compliance with building regulations City Department of Architecture and
etc Construction Management
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Functional Task Designated Entity Pillar 13. Municipal services such as street cleaning and lighting, roads maintenance City authorities/City Cleaning Services Planning and construction: Oblast 14. Services associated with tourism Department of Architecture and Construction Management
Operational (e.g. car parks): Directorate General of Biosphere Reserve Issyk-Kul, possibly outsourced. 15. Procurement of major public construction projects, including for the water sector and for Oblast Department of Architecture and
roads outside the city boundaries Construction Management
16. Public water and wastewater service Vodokanal
17. Solid waste collection and disposal City Cleaning Services
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Table VI-2: Hierarchical Structure and Roles of Entities
Level Body Responsibilities Specific tasks National Steering To oversee development in the To determine developmental areas and prospective partnerships with donor Committee Lake Issyk-Kul area agencies; establish legislative and regulatory frameworks and take final decisions on project proposals and implementation by consolidating decisions of concerned Ministries and local authorities. State Department of Planning and construction Report on Issyk-Kul planning matters to the National Steering Committee. Architecture and National Construction Management State Agency for Environmental policy development Provide an environmental input to the National Steering Committee including Environmental and its implementation matters concerning the Directorate General of Biosphere Reserve, Issyk-Kul. Protection and Forestry National Regulators – Regulation Regulation of the service providers in particular for water quality, Ministry of Health, environment, monitor performance and tariffs. Ministry of Finance etc Policy implementation Implementing environmental policy within the Issyk-Kul Biosphere Reserve. Reporting to State Agency for Reporting of environmental issues and performance concerning Issyk-Kul Environmental Protection and Recommending environmental strategy and policy changes Forestry Responding to questions from the State Agency concerning environmental Department of issues associated with the Lake. Environmental Environmental Monitoring Monitoring water quality within Lake Issyk-Kul and other water Protection bodies/courses, including issuing permits for, and monitoring the quality of, wastewater discharged from treatment plants and from sewer overflows etc. Regional Directorate General of Check the construction, operation and maintenance of on-site facilities. Biosphere Reserve Issyk-Kul Advice Provide specialist skills to the State Ecological Expertise on matters concerning the Biosphere Reserve. Advise the Oblast Department of Architecture and Construction Management on environmental matters. Awareness campaigns Prepare environmental awareness & education literature and conduct awareness programs. Operational Manage the SAEPF laboratories in the Lake Issyk-Kul area. Manage the Lake Issyk-Kul recreational facilities.
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Level Body Responsibilities Specific tasks Policy implementation Implementing Government development policy within the Issyk-Kul Oblast Department of Biosphere Reserve. Architecture and Reporting to State Department of Planning issues concerning Issyk-Kul. Construction Architecture and Construction Recommend planning strategy and policy changes. Management Management Respond to questions from the State Agency concerning planning and development issues associated with the Lake. Planning Prepare & update Development and Water Master Plans. Advise potential developers and others on major development issues. Capital works Procure major public capital schemes including for roads and water sector. Liaison & support to local Agree with local government, planning and building works proposals as government. consistent with Master Plans. Planning and development support to local service providers. Awareness campaigns Prepare planning awareness & education literature and delivery of awareness programs. City Department of Advice Providing a service to builders e.g. reviewing architectural and engineering Architecture and documents; issuing building permits; providing information concerning city Construction planning and architectural control; certifying materials and providing training Management in city planning and architectural control. Monitoring City planning and architecture e.g. approving building designs; preparing land use proposals; preparing planning maps and monitoring land use in conformance with the city land use plan and coordinating urban development, including infrastructure Local City Authorities General Normal services provided by the municipalities
Awareness Organization and coordinating of awareness and education campaigns Vodokanals and Operation of facilities as service Day to day management Cleaning Ser provider Income and billing (Vodokanals) Vices O&M of service assets Monitoring Collection of relevant performance data Providing feed-back on effectiveness
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227. As shown within Table VI-2, the following are suggested as the primary and secondary entities. The roles of each entity are described in greater detail in Volume 3.
(i) Primary Entities: a. Directorate General of Biosphere Reserve Issyk-Kul. b. Department of Environmental Protection c. Oblast Department of Architecture and Construction Management. (ii) Secondary Entities a. City Authorities. b. Ministry of Health. c. Vodokanals and Cleaning Services. d. Ministry of Finance. e. Community Development and Investment Agency.
228. Karakol does not have a capacity for holistic urban planning, but as in the case of the oblast, the remit for planning does exist (at least in name) in the scope of services of the city Departments for Architecture and Construction Management.
229. A community planning capacity should be developed at the district level by strengthening the existing system of community outreach in Karakol, enabling a more pro-active function of community management.
230. There is at present a need for a laboratory to monitor and analyze samples from throughout the oblast. This new laboratory could be under the management of the Directorate General of Biosphere Reserve Issyk-Kul or the DoEP. The current proposal is to locate the laboratory in Cholpon-Ata because of its central location and the need to closely monitor the tourist zone. The laboratory would replace the one currently located in Karakol, as that facility is not capable of performing the range of analyses which is required for effective environmental management. It would be reduced in function to a branch facility.
D. Service Delivery Options
231. Within the proposed project framework, the following services are to be provided:
(i) Urban planning; (ii) Building advice; (iii) Municipal services such as street cleaning and lighting, roads maintenance; (iv) Services associated with tourism; (v) Procurement of major public construction projects; (vi) Maintenance of public highways;
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(vii) Public water and wastewater service, and (viii) Solid waste collection and disposal
232. Water and Waste Water. The Issyk-Kul Strategic Development Plan will focus on improving the cities’ and Vodokanals’ ability to deliver services by:
(i) Addressing financial management practices in both entities; (ii) Undertaking a conditional assessment of the existing water and sewerage system and creating an asset database, plotting the asset database on city base maps developed from satellite imagery of the three cities; and (iii) Establishing a twinning program with a water and sewerage utility from a developed ADB member country to focus on Vodokanal human resource management, capacity development of the Vodokanals to reduce non-revenue water and to, and manage water and treated effluent quality.
233. Community Development. It is proposed that a community development strategy is implemented to complement the country development strategy. Citizens must participate by submitting initiatives to, and interacting with, the agents of strategy implementation, and by monitoring its efficiency and effectiveness. This concept would be supported through empowerment for participation in community development in the cities.
234. Public Awareness. One of the major reasons for unsatisfactory environmental conditions, especially in the rural areas, has been poor water and sanitation provision, due largely the lack of customer desire to be connected. This is partly due to the cost of the service but also to the ignorance of people concerning public health and hygiene. Although there is a clear association between poor water and sanitation services, and health, people are unaware about the health problems that can arise from drinking their own apparent safe water. A public awareness campaign would be required to increase the benefits of the project.
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VII. FINANCIAL SUSTAINABILITY
A. Overview
235. The financial sustainability of infrastructure investments is determined from Karakol City’s capability to sustain investments, including the proposed water supply, sewerage and solid waste infrastructure improvements under the Issyk-Kul Sustainable Development Project. The financial sustainability analysis is based on sufficiency of City funds to cover costs appurtenant to investments, including operating and maintenance (O&M) costs, asset replacement and debt servicing. Detailed financial breakdowns are presented in Volume 4.
236. Karakol City operating accounts and subsequent subproject cash flow analyses recognize City policy directives established by Karakol Kenesh in addressing infrastructure investment and sustainability. The analyses focus on property taxation, utility tariffs and service charges as revenue sources, and additionally, transfers and grants when required. The CLIP reflects the current practice of applying property taxation and utility tariffs and service charges to pay for capital and operating expenditures, thus the focus on net cash flows arising from taxation and tariff reforms.
237. Subproject viability is assessed following the ADB Handbook for Economic Analysis of Water Supply Projects (1999), and the Financial Management and Analysis of Projects (2005). The financial analysis assesses subproject ability to meet future costs including capital expenditure, operation and maintenance (O&M) cost, and when appropriate, debt servicing and depreciation or re-investment margins.
238. The review of City and Vodokanal and Tazalyk finances indicates the need to establish a basis for a financial improvement action plan (FIAP), a ‘reform’ operational plan to ensure the proposed subproject is self-sufficient in the medium- and long-term, thus contributing to create an environment of overall sustainability for the City. FIAP outlines specific arrangements that include immediate implementation of tariff reforms and transitional funding of identified viability gaps especially during construction period and the initial years immediately after construction.
B. City and Utility Finances
239. In the following analysis, City and utility operations are examined separately. This is done by segregating utility income and expenditure from those of other City general public services and enterprises. This exercise attempts to identify where operational strengths (reflected in cash surplus) and weaknesses (reflected in cash deficits) lie, in terms of which operational unit or facility (City general services, Vodokanal or Tazalyk services), as well as put a value to the sufficiency or insufficiency of City funds for subproject and other investment endeavors. The financial operations are then combined to provide an integrated analysis of future requirements. For purposes of the analysis, ‘utility’ would refer specifically to the water enterprise operated by ‘Vodokanal’, and the ‘Cleaning and Greening Services’ unit under the Municipal Communal Services Department (MCSD), known as ‘Tazalyk’.
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240. City and utility financial accounts are as contained in the updated accounting21 and budget22 laws of the Kyrgyz Republic. These documents prescribe funds sourcing and applications and categorization of revenue and expenditure accounts. The historical analysis provides a description of the accounts and follows their movement over the last five years to help understand City and utility financial condition.
1. City Finances
241. Operating account consists of recurring income and expenditure items and are essentially financial transactions relating to daily operations. Accruals to City funds are applied to designated regular city functions and services. Income account comprises (i) own-tax revenues, (ii) non-tax revenues, (iii) central transfers, and (iv) sale of city assets. Expenditure account comprises (i) operating and maintenance expenses on urban services, including public enterprises, and (ii) debt servicing. Table VII-1 summarizes City financial status over the period 2004-08. The detailed abstract is given in Volume 4 (Financial Plan).
Table VII-1: Operating Account ($ million) Particulars 2004 2005 2006 2007 2008 Income 1.135 1.428 1.833 2.425 2.882 Expenditure 1.092 1.312 1.741 2.116 2.531 Surplus (Deficit) 0.043 0.115 0.092 0.309 0.352 Source: Karakol City Accounting and Treasury Department
242. The past five years saw City earning a surplus only in successive years 2006 and 2007. In 2006, the general decrease from 2005 in all expenditure items led to a surplus of about $0.03 million. In 2007, the operational surplus is mainly attributable to an increase in local special budget at nearly four times the annual average, and in income taxes by about 3 times over the previous year as a result of the application of new tax laws. Over the five-year period, overall performance of the City averaged an annual surplus at $0.18 million, with annual surplus registering its highest at $0.35 million in 2008.
243. Income account. The compounded average growth rate (CAGR) of revenue income during the assessment period is at 26%. On average annually, the biggest contributor to income account is own-tax revenue, comprising about 47% of total. This is followed by central transfers at 44% and non-tax revenues at 8%. Assets sale (e.g., agricultural plots, potential mountain resort and beachfront areas, and industrial plant sites) to local and foreign investors and private individuals to augment City income makes up 1%. Income account for the period is given in Table VII-2. The detailed abstract on income accounts is given in Volume 4, Appendix 1.
244. Own-tax revenues consist of income taxes, averaging 10% of total income over five years, land and property taxes at 8%, and local taxes at 28%. Local taxes make up 59% of total own-tax revenues. CAGR for this account is at 24% over five years.
21 Law of the Kyrgyz Republic on Accounting, dated 15 July 2009, enacted on 22 April 2009, by Jogorku Kenesh No. 216. 22 Law of Kyrgyz Republic on National Budget for the Year 2009, and Projections for 2010-11, dated 22 January 2009.
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245. Non-tax revenues comprise income from operation of City enterprises (excluding revenues from Vodokanal and Tazalyk operations) and other properties. [Note: For purposes of the analysis, revenues from vodokanal and tazalyk operations are excluded from this account, but are reflected under their corresponding account headings]. Under this account, earnings peaked in 2005 to $0.24 million at 1.5 times the five-year average of $0.16 million. In 2005, the income account comprised 16% of the total, however, in 2006 earnings declined pulling down contribution to total at only 5%.
246. Central transfers are a steady source of income to the City at about 50% of total. CAGR for central transfers is at 33%. From 2004-08 transfers increased annually and the rate of increase was sufficient to cover the cash needs during the period despite increases in maintenance and miscellaneous expenditures.
247. Sale of assets started in 2007 and continued on to 2008, earning for the City about $0.10 million during the period. Assets sale was steady at $0.05 for both years. In the financial projections, this account is not being considered as a regular income source in the near future.
Table VII-2: Income Account ($ million)
Particulars 2004 2005 2006 2007 2008 Own Tax Revenues 0.536 0.643 0.931 1.143 1.261 Income Taxes 0.086 0.100 0.194 0.290 0.341 Land and Property Taxes 0.097 0.098 0.148 0.214 0.266 Local Taxes 0.352 0.445 0.590 0.639 0.654 Non-Tax Sources (e.g. Water charges, SWM charges) 0.152 0.235 0.090 0.143 0.179 Central Transfers 0.447 0.541 0.811 1.089 1.391 Sales of Municipal Assets 0.000 0.009 0.000 0.050 0.050 Total - Income 1.135 1.428 1.833 2.425 2.882 Source: Karakol City Accounting and Treasury Department
248. Expenditure account. Expenditure account consists of staff salaries, including social funds, at 51% of total, O&M costs at 19%, power and electricity expense at 4%, and miscellaneous expense at 26%. Year-on-year growth averages 24%, while CAGR is calculated at 23% annually. The biggest increase registers at 33%, from 2005 to 2006. Expenditure account for the past five years is shown in Table VII-3. Details are provided in Volume 4, Appendix 2.
a. Staff costs comprise salaries and allowances, pensions and gratuities and provident fund contributions of elected and appointed staff, including revenue collectors. Staff costs doubled from $0.64 million in 2004 to $1.27 million in 2008. CAGR is estimated at 19% annually.
b. O&M costs include transport repair and maintenance, telecommunication, heating and water utility expenses. O&M averages $0.89 over the period, constituting 19% of the total. From 2004 to 2008, O&M cost rose by 315%. CAGR is at 43% annually.
c. Electricity expense at 4% of total shows a steady decline over the past five years registering a CAGR at 0.84%.
d. Miscellaneous costs include travel expense, miscellaneous purchases, food, special means and others. This account grew 173% from $0.28 million in 2004 to $0.76 million by 2008, with CAGR calculated at 29% annually.
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Table VII-3: Expenditure Account ($ million)
Particulars 2004 2005 2006 2007 2008 Staff Costs (Salary, Pension, Benefits) 0.643 0.770 0.720 1.058 1.274 O&M Expenditure (e.g. Repairs and Maintenance, Communications 0.104 0.109 0.637 0.389 0.432 Debt Servicing - - - - - Electricity 0.067 0.075 0.074 0.069 0.064 Miscellaneous 0.278 0.358 0.311 0.600 0.760 Total - Expenditure 1.092 1.312 1.741 2.116 2.531 Source: Karakol City Accounting and Treasury Department
249. Capital account includes expenditures on construction and repair of infrastructure systems and purchase of plant, equipment and machinery. Under this account, spending is highest in improvements in water supply at 36% of total over the period. Roads follow at 35% of total. Improvements in solid waste service facilities are at 28. No capital spending is reported in sewerage in the past five years. Spending on capital expenditure increased substantially from 2004 to 2008. CAGR is calculated at 170% annually, with the highest spending in 2008 at $0.04 million. All major capital expenditures (based on City budget request of prior year) are financed out of available central transfers. As actual budget releases usually fall short of the requests, some public works end up either re-scheduled or partially implemented until more funds are appropriated. The annual capital account for the period is shown in Table VII-4.
Table VII-4: Capital Account ($ million) Particulars 2004 2005 2006 2007 2008 Water 0.001 0.007 0.013 0.015 - Solid Waste - - 0.006 0.014 0.007 Sewerage - - - - - Roads - - - - 0.035 Others (e.g. Street Lighting, Heating) - - - - - Total Capital Expenditure 0.001 0.007 0.020 0.029 0.042 Source: Karakol City Accounting and Treasury Department
2. Vodokanal Finances
250. Karakol Vodokanal operates as a city public enterprise and is responsible for asset creation and O&M of the water supply and sewerage systems in Karakol City. The Vodokanal accounts provide an indication of enterprise efforts at recovering the costs of providing safe water supply and environmentally-compliant sewerage and sanitation services to the urban population. Table VII-5 presents the annual operating account of the Vodokanal. Details are provided in Volume 4, Appendix 3.
251. Income account of the Vodokanal constitutes actual collection of tariff revenues at 97% of total and other income from interest on delayed tariff payments at 3%. CAGR for total income is calculated at 20% over the assessment period, with substantial annual increases taking place between 2004 and 2007. The Vodokanal saw a big decline in income in 2008. Despite the relatively high average increases in the past, enterprise operations remain unsatisfactory with
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252. Expenditures consist of salaries and wages at 56% of total over the period, power cost at 11%, equipment maintenance and repair expenses including spares at 16%, depreciation at 2%, and miscellaneous expenses at 14%. CAGR for total operating expenditure is at 6% annually, with minimal steady increases over the years reflecting efficient cost management. But insufficient charges for operations continually result on operational losses during the assessment period.
Table VII-5: Vodokanal Operating Accounts ($ million)
Particulars 2004 2005 2006 2007 2008 Income 1. Tariff Collected from Residential Customers 0.081 0.073 0.094 0.081 0.114 2. Tariff Collected from Commercial Customers 0.082 0.064 0.083 0.079 0.000 3. Budget Transfers 0.097 0.061 0.060 0.058 0.000 4. Other Income (e.g. Interest Received, Connection Fees) 0.023 0.005 0.002 0.003 0.000 Total Income 0.282 0.203 0.240 0.221 0.114
Expenditures 1. Staff Costs (Salary, Pension, Benefits) 0.142 0.155 0.182 0.189 0.186 2. Operations and Maintenance 0.011 0.010 0.010 0.011 0.010 3. Consumables 0.037 0.031 0.040 0.046 0.041 4. Electricity 0.047 0.033 0.039 0.033 0.019 5. Depreciation 0.002 0.009 0.007 0.017 0.000 6. Miscellaneous 0.032 0.034 0.032 0.032 0.080 Total Expenditure 0.270 0.272 0.310 0.327 0.337
Total Surplus (Deficit) 0.012 (0.069) (0.070) (0.107) (0.223) Source: Karakol City Accounting and Treasury Department
253. Tariff revenues are the major source of enterprise income. Tariff design is established at State level as provided in the Law on Anti-Monopoly. Although the Law prescribes actual cost- based tariff design, calculation remains arbitrary as it is not based on actual usage but on norms, as water meter, or an equivalent accurate measuring device, is not presently installed in the service connection. In Karakol, the last tariff increase was reportedly in 2007.
254. Vodokanal constantly maintained an operating ratio at more than unity since 2007, ranging between 1.29 in 2006 and 2.95 in 2008, and averaging 1.43 over the period. This indicates a huge gap between the costs of water produced and sold by the system.
255. Assessment of Vodokanal financial position shows despite low tariffs charged for their services, Vodokanal continue to experience poor collection as reflected in their relatively high accounts receivable at 60% of total assets (and 94% of total current assets). Table VII-6 presents Vodokanal balance sheets for the year covering 2008.
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Table VII-6: Vodokanal Balance Sheets (2008) ($ million)
Assets Amount Equity & Liabilities Amount Fixed Assets 0.161 Capital 0.167 Work In Process 0.011 Retained Earnings - 0.000 Total Fixed Assets 0.172 Total Equity 0.167 Cash 0.000 Long-term Debt - Accounts Receivable 0.284 Accounts Payable 0.109 Inventories 0.018 Other Current Liabilities 0.139 Other Current Assets - Taxes Payable 0.059 Total Current Assets 0.302 Total Current Liabilities 0.307 Total Assets 0.474 Total Equity & Liabilities 0.474 Source: Karakol City Accounting and Treasury Department
3. Communal Utility Finances – Solid Waste Services (Tazalyk)
256. Solid waste collection and disposal services form part of Tazalyk unit functions under the City Municipal Communal Services Department. Evaluation of Tazalyk financial operations gives an indication of their efforts to recover the costs of providing solid waste management services. Table VII-7 presents Tazalyk income and expenditure accounts. Details are provided in Volume 4, Appendix 4.
257. Income of Tazalyk comprises actual collection of tariff revenues at 30% of total over the assessment period, other income (from interest on receivables), and other income from transfers at 70%. CAGR for the income account is calculated at 6% annually, with a no substantial increases from 2006 to 2008. Budget transfers are steady at about $0.10 million annually. With CAGR for tariff revenues at 6% annually against CAGR for total expenditure at 36%, enterprise operations still manages an annual average surplus of $0.06 million. SWM tariffs are State approved and based on actual cost accounting. Full cost accounting is still to be practiced at the Tazalyk unit, whose financial reporting functions remain under direct control and supervision of and combined with the MCSD.
258. Throughout the period, with transfers included, Tazalyk constantly maintains an operating ratio at less than unity improving from 0.51 in 2004 to 0.84 in 2008, and averaging 0.62 over the period. Excluding transfers, operating ratio ranges between 1.84 and 2.27, averaging 2.27. The latter condition indicates financial insufficiency when transfers are out of the equation.
259. Expenditures consist of salaries and wages at 52% of total over the assessment period, maintenance, spares and fuel costs at 47%, and utilities expense at 1%. CAGR for total operating expenditure is at 36% annually, averaging $0.09 million. Total expenditures increased by 85% in the period 2006-08, with salaries rising by 127%. A steady provision of transfer funds and improving tariff collections sufficed for the expenditure increase.
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Table VII-7: Solid Waste Services Operating Accounts ($ million)
Particulars 2004 2005 2006 2007 2008 Income 1. Tariff Collected from Customers - - 0.036 0.043 0.054 2. Tariff Collected from Commercial Customers - - - - - 3. Tariff Collected from Other Customers - - - - - 4. Connection Fees - - - - - 5. Budget Transfers - - 0.094 0.122 0.092 6. Other Income (e.g. Interest Received) - - - - - Total Income - 0.130 0.165 0.145
Expenditures 1. Staff Costs (Salary, Pension, Benefits) - - 0.029 0.047 0.066 2. Operations and Maintenance - - 0.036 0.038 0.054 3. Consumables - - - - - 4. Electricity - - 0.001 0.001 0.001 5. Utilities - - 0.000 0.000 0.000 6. Depreciation - - - - - 7. Other Expenses - - 0.000 0.000 0.000 8. Debt Servicing - - - - - Total Expenditure - 0.066 0.086 0.122
Total Surplus (Deficit) - - 0.063 0.079 0.024 Total Surplus (Deficit) without Transfers - - (0.030) (0.043) (0.068) Source: Karakol City Accounting and Treasury Department
260. Table VII-8 presents the Tazalyk fiscal position in 2008. Assessment of the balance sheet shows efficient management of receivables with retained earnings staying positive at fiscal end. Current ratio is at a low 0.50. Inventories comprising 89% of current assets could be relatively high but sufficiently covered under payables and other liabilities.
Table VII-8: Solid Waste Services Balance Sheets ($ million)
Assets Amount Equity & Liabilities Amount Fixed Assets 0.071 Capital 0.083 Work In Process - Retained Earnings 0.049- Total Fixed Assets 0.071 Total Equity 0.033 Cash 0.000 Long-term Debt - Accounts Receivable 0.004 Accounts Payable 0.023 Inventories 0.031 Other Current Liabilities 0.047 Other Current Assets - Taxes Payable 0.003 Total Current Assets 0.035 Total Current Liabilities 0.073 Total Assets 0.106 Total Equity & Liabilities 0.106 Source: Karakol City Accounting and Treasury Department
4. Integrated City and Utility Finances
261. The integrated finances show operational income increasing by 122% from 2004 to 2008, and CAGR registering at 22% annually. Expenditures show a 119% increase, with CAGR also at 22% annually. Income averages $2.24 million annually against expenditures at $2.12 million, resulting in a surplus equivalent to $0.12 million over the period.
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262. The analysis indicates that combined operations of City and utilities and enterprises enable City to maintain financial sufficiency during the assessment period. However, without central transfer funds, total deficits amounting to about $0.73 million is reflected.
263. Operating ratio for integrated operation is below unity for the integrated operations throughout the period. For pure City operation, operating ratio is likewise acceptable. Utilities performed unsatisfactorily from 2005 to 2008. The poor performance during the four years is due to both Vodokanal and Tazalyk inefficiencies. Table VII-9 presents the integrated analysis for the period.
Table VII-9: Integrated City and Utility Income and Expenditure Account ($ million)
Particulars 2004 2005 2006 2007 2008 Income Own Tax Revenues 0.536 0.643 0.931 1.143 1.261 Income Taxes 0.086 0.100 0.194 0.290 0.341 Land and Property Taxes 0.097 0.098 0.148 0.214 0.266 Local Taxes 0.352 0.445 0.590 0.639 0.654 Non-Tax Sources (e.g. Water charges, SWM charges) 0.434 0.438 0.460 0.528 0.439 Local Non-tax Revenue 0.152 0.235 0.090 0.143 0.179 Utilities Revenue 0.282 0.203 0.369 0.385 0.259 Water and Sanitation tariff & other 0.282 0.203 0.240 0.221 0.114 Solid Waste tariff & other - - 0.130 0.165 0.145 Central Transfers 0.447 0.541 0.811 1.089 1.391 Sales of Municipal Assets 0.000 0.009 0.000 0.050 0.050 Total - Income 1.417 1.631 2.202 2.810 3.141 Expenditures Staff Costs (Salary, Pension, Benefits) 0.643 0.770 0.720 1.058 1.274 O&M Expenditure (e.g. Repairs and Maintenance, Communication 0.104 0.109 0.637 0.389 0.432 Debt Servicing - other - - - - - Electricity 0.067 0.075 0.074 0.069 0.064 Miscellaneous 0.278 0.358 0.311 0.600 0.760 Utilities Expenses 0.270 0.272 0.376 0.413 0.458 WSS service - opex 0.270 0.272 0.310 0.327 0.337 WSS service - debt service - - - - - SWM service - opex - - 0.066 0.086 0.122 SWM service - debt service - - - - - Total - Expenditure 1.362 1.585 2.117 2.529 2.989
Surplus (Deficit) before VGF 0.055 0.046 0.085 0.281 0.152 Add: Subproject VGF - - - - - Water and Sanitation Solid Waste
Net Surplus (Deficit) 0.055 0.046 0.085 0.281 0.152 Transfers & Subsidies (ABS values) /1 Transfer Required - - - - - Cumulative Transfer Required - - - - - Cumulative Subproject VGF - - - - - Transfer Required After VGF - - - - - Cumulative Transfer Required After VGF - - - - - Subproject Contribution To LSG Operation 0.012 (0.069) (0.007) (0.028) (0.199) Cumulative Subproject Contribution To LSG Operation 0.012 (0.057) (0.064) (0.092) (0.291) Operating Ratio /2 LSG 0.962 0.919 0.950 0.873 0.878 Subproject 0.958 1.341 1.018 1.072 1.767 Integrated LSG & Utilities 0.961 0.972 0.961 0.900 0.951 VGF = viability gap fund; ABS = absolute value 1/ All negatives will be interpreted in ABS. 2/ Excludes debt servicing.
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C. Cost Estimates and Financing Plan
264. In order for City to overcome the deficits arising from utilities operations, which at the end of 2008 is valued at $0.14 million, and which is foreseen to grow in the succeeding years without appropriate interventions, LGS can either (i) seek grant or transfer provisions from central or oblast resources for Vodokanal and other City insufficiencies, (ii) consider tariff reforms not only in failing operational units, but in all public enterprises and self-managed service utilities based on ‘user pays principle’, (iii) raise existing or introduce new taxes, (iv) consider further assets sale, and/or (v) undertake to implement identified potential revenue sources as public enterprises and utilities. This last alternative is the subject of the succeeding analysis which involves (i) estimating the cost of investing in immediate improvements, in terms of capex and opex, of the two more basic utility services which City is currently administering, the City Vodokanal and Tazalyk, (ii) estimating the cost of financing, in terms of covering debt service requirements, (iii) estimating the cost to potential service users, in terms of service selling price or tariff, and ensuring tariff affordability and support by these users as .main guideline to sustainable operations.
265. Capital cost estimates. The subproject capital investment has three major components: (i) physical infrastructure, consisting of civil works, materials and equipment, and corresponding taxes; (ii) institutional development and capacity building; and (iii) project assistance facility (PAF), including incremental administration, design engineering and construction supervision.
266. Subproject Karakol requires an investment of $17.54 million including contingencies. About 57% is allocated to infrastructure development, 50.6% to water supply and sewerage, and 6.6% to solid waste management. Subproject soft components, which include institutional strengthening and project management is estimated at $2.29 million or 13% of total. Financing charges, mainly interest during construction (IDC), and taxes comprise $1.93 million or 11% of total. The total landed cost for the subproject is summarized in Table VII-10. Details are provided in Volume 4, Appendices 5 and 6 for waster supply and sewerage and for solid waste components, respectively.
Table VII-10: Subproject Capital Cost ($ million)
Particulars 2010 2011 2012 2013 2014 2015 2016 2017 % Total Total Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Civil Works 46.7% 8.191 1.229 2.048 2.048 2.048 0.819 - - - Water Supply 2.6% 0.450 0.068 0.113 0.113 0.113 0.045 - - - Sewerage 40.1% 7.030 1.055 1.758 1.758 1.758 0.703 - - - Solid Waste 3.8% 0.664 0.100 0.166 0.166 0.166 0.066 - - - Buildings & Structures 0.3% 0.047 0.007 0.012 0.012 0.012 0.005 - - - Water Supply & Sewerage ------Solid Waste 0.3% 0.047 0.007 0.012 0.012 0.012 0.005 - - - Land Acquisition and Resttlement ------Community Upgrading 2.8% 0.489 0.073 0.122 0.122 0.122 0.049 - - - Equipment & Materials 7.8% 1.362 0.204 0.341 0.341 0.341 0.136 - - - Water Supply & Sewerage 5.2% 0.912 0.137 0.228 0.228 0.228 0.091 - - - Solid Waste 2.6% 0.450 0.067 0.112 0.112 0.112 0.045 - - - Infrastructure Cost 57.2% 10.042 1.506 2.510 2.510 2.510 1.004 - - - Institutional Dev & Capacity Building 2.5% 0.446 0.134 0.223 0.089 - - - - - Project Assistance Facility 10.5% 1.844 0.277 0.461 0.461 0.461 0.184 - - - Base Cost 70.3% 12.332 1.917 3.195 3.061 2.971 1.189 - - - Physical Contingency 4.6% 0.800 0.125 0.208 0.198 0.192 0.077 - - - Price Contingency 14.1% 2.478 0.163 0.463 0.635 0.811 0.406 - - - Total Contingencies 18.7% 3.278 0.288 0.671 0.833 1.003 0.483 - - - Interest During Construction 2.6% 0.452 0.010 0.028 0.047 0.066 0.074 0.075 0.076 0.076 Taxes 8.4% 1.480 0.230 0.383 0.367 0.357 0.143 - - - Total Landed Cost 100.0% 17.542 2.445 4.277 4.308 4.396 1.888 0.075 0.076 0.076 Source: Consultant estimates.
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267. Financing plan. The investment will be financed through a mix of ADB loan, estimated at $7.71 million (including financing charges), or 44% of total capital investment and GoKR contribution at $6.33 million or 36% of total, including taxes and duties and other charges, and GoKR other borrowings at $3.5 million or 20% of total. Equipment and materials required for the subproject are duty-exempt, as with other projects financed by Government..
268. The inclusion of IDC is a test case in the analysis which proposes tariffs based on full cost recovery including depreciation (for asset replacement) and loan charges.
269. The subproject disbursement period covers eight years, five for actual construction. Institutional development and PAF activities are at the front-end of funds disbursement. The summary financing plan is shown in Table VII-11. Details are provided in Volume 4, Appendices 7 and 8 for water supply and sewerage and for solid waste components, respectively.
Table VII-11: Subproject Financing Plan ($ million)
Particulars % Total Total 2010 2011 2012 2013 2014 2015 2016 2017 Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Amount to be financed: Investment In Project 97% 17.089 2.435 4.249 4.261 4.331 1.814 - - - IDC 3% 0.452 0.010 0.028 0.047 0.066 0.074 0.075 0.076 0.076 Total Capital Investment 100% 17.542 2.445 4.277 4.308 4.396 1.888 0.075 0.076 0.076 ------Financed by: ------ADB 44% 7.718 1.037 1.828 1.859 1.915 0.852 0.075 0.076 0.076 Disbursement 41% 7.266 1.026 1.799 1.812 1.850 0.778 - - - IDC 3% 0.452 0.010 0.028 0.047 0.066 0.074 0.075 0.076 0.076 Government 20% 3.499 0.407 0.797 0.881 0.974 0.440 - - - Equity Contribution 12% 2.019 0.177 0.413 0.513 0.618 0.297 - - - City Equity Contribution ------Charges, Taxes, Other 8% 1.480 0.230 0.383 0.367 0.357 0.143 - - - Grant 36% 6.325 1.001 1.653 1.568 1.507 0.596 - - - Total financed 100% 17.542 2.445 4.277 4.308 4.396 1.888 0.075 0.076 0.076 Source: Consultant estimates.
270. Weighted Average Cost of Capital. The WACC is calculated in real terms and used as the hurdle rate for FIRR to measure subproject viability. Funding sources23 are the ADB loan loan at 44% of total capital investment, GoKR equity contribution at 36%, and GoKR loan from other sources at 20%.. Inflation is estimated at 2.5% for foreign cost and 8% annual average for local costs. The rates are computed on after-tax basis resulting in the WACC in real terms estimated at 3.15%. The WACC calculation is given in Table VII-12. Details are provided in
23 Based on overall Project financing arrangement calculated as follows: Total GoKR GoKR GoKR Landed Loan Grant Loan Particulars Cost from ADB from ADB Borrowed Amount 37.469 16.483 13.533 7.452 Weighting 44% 36% 20% Nominal Cost 1.5% 1.5% 25.0% Tax Rate 0.0% 0.0% 0.0% Tax-Adjusted Nominal Cost 1.5% 1.5% 25.0% Inflation Rate 2.5% 2.5% 7.9% Real Cost -1.0% -1.0% 15.8% Weighted Component of WACC 3.15%
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Volume 4, Appendices 9 and 10 for water supply and sewerage and for solid waste components, respectively.
Table VII-12: Weighted Average Cost of Capital ($ million)
Total GoKR GoKR GoKR Landed Loan Grant Loan Particulars Cost from ADB from ADB Borrowed Amount 17.542 7.718 6.325 3.499 Weighting 44% 36% 20% Nominal Cost 1.5% 1.5% 25.0% Tax Rate Tax-Adjusted Nominal Cost 1.5% 1.5% 25.0% Inflation Rate 2.5% 2.5% 8.0% Real Cost -0.98% -0.98% 15.79% Weighted Component of WACC 3.15%
D. Investment Sustainability
271. The analysis is conducted on a without- and with-project basis by estimating incremental costs and revenues over a 25-year period. The main financial viability parameters analyzed are: (i) the financial internal rate of return (FIRR), which will be greater than the weighted average cost of capital (WACC), with the financial net present value (FNPV) as proxy; (ii) the operating ratio, which will be less than or equal to unity when Project becomes fully operational; and (iii) tariff affordability, normally acceptable at maximum 5% of average household income.
272. The analysis looks closely at operating ratio as a main indicator of sustainability, where O&M, depreciation and interest expenses are measured against tariff revenues. A ratio at less than unity reflects cost recovery, thus a certain level of sustainability; and, at greater than unity, the lack thereof, thus the need to increase tariffs or obtain viability gap funds (VGF).
1. Basic Assumptions for Projections
273. In assessing the finances of the City, cash flow streams based on regular revenue and expenditure accounts are applied. For purposes of the CLIP analysis, under City-level finance assessment, the Tazalyk and Vodokanal streams have been excluded to reflect surpluses and deficits explicit to the other City services, so that available surpluses may be applied to support subproject sustainability needs, like debt coverage, whereas deficits may define the level of subsidies or external transfers or grants required to maintain existing or ‘without-project’ service levels. In determining the financial viability at subproject-level assessment, the financial internal rate of return (FIRR) and the financial net present value (FNPV) are used. FIRR calculates the level of operational viability in relation to the WACC, which is determined for the project at 3.15%, so that if the resulting FIRR exceeds the WACC, the subproject is deemed viable. In the integrated cash flow analysis that combines City-level and subproject-level under ‘with-project’ condition, the impact of full cost recovery, which includes debt servicing of subproject loans, is
95 TA 7228-KGZ: Issyk Kul Sustainable Development Project Final Report Volume 1 – CLIP assessed. Operating ratios are calculated and likewise taken as a measure of financial sustainability.
274. City Finance assumptions. The assumptions for forecasting operating revenue consist:
i. Own-tax revenue comprises income tax, land and property tax, and local taxes. 1. Income taxes are forecast based on observed trends during the past five years (2004-08) and escalated as follows: income tax collected by employers and those from patent holders, by real GDP growth multiplied by labor cost growth; and income tax from entrepreneurs, multiplied by nominal GDP growth. Income tax collected by tax inspection, not forecasted. 2. Land and property tax is based on past trends and escalated as follows: for non-agricultural land, by inflation rate; for vehicles, by step change in 2009 using city projection, then multiplied by inflation and by population growth rate; for immovable property, assume moratorium in 2009, then using city projections in 2010-12, then by inflation and by population growth rate; and residential tax, by inflation rate. 3. Local taxes are calculated based on past trends and escalated as follows: for sales and payable services, step decrease due to reduction in this tax, then multiply by city projections until 2012, and by nominal GDP rate; for resort tax, and hunting and fishing tax, discontinued and not forecasted; for other local taxes, including advertising tax, solid waste tax and unified tax, total actual in 2008 is used and escalated by nominal GDP growth rate. ii. Non-tax sources are based on average of past trends and escalated as follows: for special resources, by inflation multiplied by population growth rate; for Ministry of Justice fees (note: no particular basis of past trend as growth is random), by nominal GDP growth; and for other non-tax sources including land rent, administrative penalties, tax inspection fees, State fees, and premises rent, by inflation rate. iii. Central transfers are calculated from past trends and escalated as follows: for teachers salaries, equal to total education staff costs, multiplied by labor cost growth rate and by population growth rate; for other central transfers, including levelling grants, meals, meals for kindergarten, school repair, electricity arrears, coal for heating, and resources given to mayor’s office, by inflation rate and by population growth; and for other central transfers, including salary increases for health care, social support, culture department, mayor’s office, local government, military, and archive organizations, equal to municipal staff salary multiplied bylabor cost growth rate. iv. Sale of assets is not forecast in the analysis as future income source.
275. City Expenditure assumptions. The expenditures include educational staff salaries and social fund, O&M cost, electricity, and miscellaneous expenses.
i. Staff costs are based on past trends and escalated as follows: for educational staff salary and social fund, by labor cost growth rate multiplied by population growth rate; and other municipal staff salary and social fund, by labor cost growth.
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ii. O&M costs are based on past trends and escalated as follows: for transportation and for heating, by energy cost inflation; for water and for telecommunications, by inflation rate. iii. Electricity cost is based on trends and escalated by energy cost inflation. iv. Miscellaneous expense is based on average of past trends and escalated as follows: for travel expense, by energy cost inflation; for purchases, by inflation rate; for other expenses, by inflation rate; for food , by population growth rate times inflation rate; and for special means, by population growth rate times inflation rate.
276. Subproject assumptions. The key assumptions used are: (i) investment cost at base June 2009 prices; (ii) physical contingencies at 5-10% of Civil Works (CW), Institutional Development (ID), Project Assistance Facility (PAF) and Taxes (T); (iii) local inflation at 4.71% in 2010 and 5% in 2011 and onward; (iv) foreign inflation at 2.5% annually; (v) O&M costs covering salaries, chemicals, power, repair and maintenance and bad debts allowance based on historical operations and on design technology used; (vi) asset useful life assumed at 10 years for equipment, particularly service connection meters, and 50 years for civil works; (vii) historical population growth rates; and (viii) foreign exchange at $1:Som 43 (inversely, Som1:$0.023).
277. The ‘floating population’ of tourists and regular transients have been accounted, and estimated at between 20 and 30% on top of base populations in Karakol City. The periodic population growth rates reported by the National Statistics Commission have been adjusted to reflect the situation.
278. Revenues are projected from domestic and non-domestic demand for component services and tariffs programmed to increase every 2 years. As the basis for calculating existing tariffs is difficult to verify, the required initial increase at subproject completion by 2015 (Year 5), which would be substantial, has been determined based on user affordability and targeted cost recovery levels, including: (i) Level I, O&M cost coverage; (ii) Level II, O&M cost plus depreciation coverage; and (iii) Level III, O&M cost plus depreciation and debt interest coverage. Where tariffs are deemed to exceed maximum affordability, tariff subsidies were considered to keep tariffs within consumer acceptability.
279. Water supply and wastewater demand. The analysis on water supply and sewerage is based on the design demand of about 80 liters per capita per day (lpcd) ‘without project’ for domestic connection increasing to 125 lpcd when system becomes fully operational ‘with project’ by 2015. Non-domestic demand is 20.5% of domestic. Sewage generation is at 70% of total water demand, as an assumed average applied in projects of similar scope in the region.
280. The demand forecast assumes all water from existing alternative sources, i.e., bottled, collected from point source, pumped, etc., will be replaced from subproject water supply. This has featured as non-incremental water in the economic analysis. System improvements with- project will curb unaccounted-for-water from current of about 25%, to 20% upon project completion by 2015 (Year 5). The improvement in water recovery will make billable water available to the system, thereby contributing to the cost recovery perspective. This has featured as incremental water, as a source of benefits in the economic analysis. Water demand and wastewater volumes are given in Volume 4, Appendix 11.
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281. Solid waste generation. Domestic waste generation comprises residential and apartment waste. Based on Tazalyk reports, for the former, per capita generation is estimated at 1.2 cubic meters per year; and for the latter, 1.7 cubic meters per year. Non-domestic waste, including those of budget organizations, is at 40 cubic meters per year. This is estimated based on an average non-domestic entity staffed with at least 20 persons. These averages are based on Tazalyk estimates on the assumption that all generated waste finally end up being collected and disposed of into the landfill. The forecast for solid waste generation, is presented in Volume 4, Appendix 12.
282. Water supply and sewerage O&M costs. Component O&M costs include (i) staff salaries and wages, including social fund, (ii) power and fuel, (iii) chemical treatment, (iv) maintenance and spares, and (v) miscellaneous and general administration. These costs are subject to inflation in the projected pro-forma financial statements. In cash flow analysis for FIRR calculation, the costs are at constant prices. Volume 4, Appendix 13 shows O&M costs for water and sewerage at constant prices.
283. Solid waste management O&M costs. Component O&M costs for subproject SWM comprise (i) staff salaries and wages, and social fund, (ii) fuel, (iii) maintenance, repair and spares, and (iv) miscellaneous and general administration. For purposes of projected pro-forma financial analysis, these costs are inflated. In the FIRR cash flow analysis, the costs are at constant prices. O&M costs for SWM component are presented in Volume 4, Appendix 14.
2. Subcomponent Sustainability 284. Subproject cost recovery analysis. Tariff is established by dividing all cash requirements plus margins by the combined volume of water sold, and sewage and solid waste generated. It is projected that collection rate would improve as services improve. In the analysis, actual collection rate of about 60-80% for the subproject is expected to reach 90% by 2015 (Year 5). The analysis determines the level of tariffs required to satisfy the defined cost recovery options. Where tariffs are insufficient to attain full cost recovery, the required shortfall has been assessed in the form of VGF.
285. Subproject current tariffs. Current water tariffs differentiate between domestic and non- domestic use. All existing tariffs are volumetric and structured to prevent wastage. However, metering is very limited at less than 3% generally in Karakol. Where metering is available, wear and disrepair have rendered the equipment unreliable. Under the subproject capital investment program, full metering is recommended. House and apartment connections for water supply are presently charged on average $0.03 per cubic meter in Karakol. Non-domestic connections are charged about ten times at $0.30 per cubic meter. For sewerage services, domestic averages $0.03 per cubic meter; non-domestic is at $0.27. Existing domestic tariffs for solid waste services averages $1.18 per cubic meter, with non-domestic service users charged 1.4 times more, averaging $167.
286. Subproject projected tariff basis and forecast. In the financial projections, where costs are given in nominal terms, the tariffs are projected to increase bi-annually to cope with cost inflation. In the FIRR cash flows, the tariffs are taken in real terms. The projected increases will start after subproject construction to allow time for service users to assimilate to the proposed tariff reforms that would include full metering for water consumption. For solid waste services, full costs of waste collection and disposal will remain the basis for cost recovery tariffs, however, higher tariff collection rate will be targeted and will form part of the financial management reforms. It is proposed to include tariff restructuring as part of financial reforms that will re-
98 TA 7228-KGZ: Issyk Kul Sustainable Development Project Final Report Volume 1 – CLIP examine existing norms and their bases to ensure more realistic design approaches for future projects in water, sewerage and solid waste sectors.
287. Subproject affordability analysis. Affordability analysis was undertaken to check the level of water expenditure against average household income. Volume 4, Appendices 15 and 16 present the affordability levels for water and sewerage and for solid waste tariffs, respectively, every five years from Year 1 (2011) to Year 25 (2035). The number of persons at an average 4.0 per household and the unit consumption at 90 lpcd in 2009 are based on field survey and actual operational reports. The average household incomes are based on social surveys conducted in the subproject towns during Project preparation and adjusted to price inflation.
288. From the analysis, tariff increases for the subproject required to satisfy viability parameters are within consumer affordability. However, the VGF will need to be considered during the initial years of operation to fully recover costs, including asset replacements. Tables VII-15 and 16, for water and sewerage and for solid waste, respectively, indicate that the proposed monthly charge for the City is far lower than generally accepted limit of 5% of the household income. Politically, exponential increases are unacceptable and it is proposed that the VGF will provide the initial buffer to meet required operating ratios before financial reforms and progressive tariff increases reduce dependence on VGF.
289. Break-even analysis was undertaken for the subproject. To cover O&M cost, tariffs are set to increase biennially at rates given in Tables VII-13 and VII-14. Also indicated is the cumulative VGF required under each scenario to ensure operations are sustainable within acceptable tariff rises. The accumulative VGF was determined over 2010-15 and 2016-29 before the Government plans an exit strategy from the VGF support. Project support through the enterprise resource management component should support financial management reforms to improve Vodokanal and city's ability to meet O&M costs, at the minimum.
Table VII-13: Tariff Increase Rates and VGF Needs for Water and Sewerage
Tariff Incr VGF Needs Tariff Incr VGF Needs Level Cost Recovery 2010-15 2010-15 Level Cost Recovery 2016-29 2016-29 I O&M cost 20% 2.675 I O&M cost 53% 7.340 II O&M + Depreciation 20% 3.890 II O&M + Depreciation 49% 9.697 III O&M cost + Deprn + Debt 20% 3.891 III O&M cost + Deprn + Debt 49% 10.308 VGF = viability gap fund VGF = viability gap fund
Table VII-14: Tariff Increase Rates and VGF Needs for Solid Waste
Tariff Incr VGF Needs Tariff Incr VGF Needs Level Cost Recovery 2010-15 2010-15 Level Cost Recovery 2016-29 2016-29 I O&M cost 20% 0.830 I O&M cost 75% 1.383 II O&M + Depreciation 20% 1.052 II O&M + Depreciation 71% 1.707 III O&M cost + Deprn + Debt 20% 1.052 III O&M cost + Deprn + Debt 71% 1.825 VGF = viability gap fund VGF = viability gap fund
290. For example, to achieve break-even in water and sewerage by covering only O&M, the Government would provide a $2.68 million VGF in 2010-15 and $7.34 million in 2016-29. This would be in addition to the average biennial tariff rise of 20% in 2010-15 and 53% in 2016-29.
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291. Subproject financial viability approach. The subproject is considered viable if the resulting FIRR is greater than the WACC, and cost recovery tariffs are within consumer affordability. Additionally, operating ratio will need to be maintained lower than ‘unity’ throughout the subproject life to ensure sustainability. Initial spreadsheet iterations reveal that without proposed improvements, subproject operations will not be sustainable as O&M expenses exceed tariff revenues. To satisfy all viability and sustainability parameters, tariffs will need to be progressively increased, especially during the initial years after subproject completion. Spreadsheet iterations were run to determine the operating ratio in the with-project situation. The subproject financial analysis is reflected in pro-forma financial statements (income statements, funds flow statements and balance sheets) presented in Volume 4, Appendices 17, 18 and 19 for Vodokanal operations, and Appendices 20, 21 and 22 for Tazalyk.
292. Subproject financial viability and sensitivity analysis. Subproject Karakol is found to be financially viable with base case FIRR for both water supply and sewerage at 5.9%, and for solid waste management at 4.9% exceeding the WACC.
293. Sensitivity tests for water and sewerage were performed to determine the effects of (i) a 20% increase in investment cost; (ii) a 20% increase in O&M cost; (iii) a 20% decrease in revenue; and (iv) a one-year delay in project, on subproject viability. For solid waste, the same cases were explored at lower parameters: (i) a 10% increase in investment cost, (ii) 10% increase in O&M cost, (iii) 10% lower revenue, and (iv) 1-year delay in project. Tables VII-15 and 16 indicate the results with subprojects highly sensitive to some stress conditions, which should be avoided during actual subproject implementation. Volume 4, Appendices 23, and 24 provide the detailed calculations.
Table VII-15: FIRR and Sensitivity Analysis for Water and Sewerage
Particulars FIRR FNPV, $ mill Base Case 5.9% 3.948 Capital Cost plus 20% 4.4% 1.945 O&M Cost plus 20% 4.6% 2.059 Revenue less 20% 2.6% (0.734) 1-year Delay in Benefit 4.4% 1.838 Switching Value - Capital Cost 35.7% 0.394 Switching Value - Revenue 16.6% 0.169 At WACC, Capital Cost change 39.6% (0.019) WACC = weighted average cost of capital; FIRR = financial internal rate of return; FNPV = financial net present value
Table VII-16: FIRR and Sensitivity Analysis for Solid Waste
Particulars FIRR FNPV, $ mill Base Case 4.9% 0.776 Capital Cost plus 20% 3.8% 0.297 O&M Cost plus 20% 3.7% 0.232 Revenue less 20% 2.1% (0.402) 1-year Delay in Benefit 3.5% 0.170 Switching Value - Capital Cost 30.7% 0.324 Switching Value - Revenue 12.8% 0.132 At WACC, Capital Cost change 31.4% 0.025 WACC = weighted average cost of capital; FIRR = financial internal rate of return; FNPV = financial net present value
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294. Operating ratios are likewise at acceptable levels in ‘with-project’ scenario for both sub- components as reflected in Figures VII-1 and VII-2. For the water and sewerage subcomponent, operating ratio remains above unity under ‘without-project’ scenario. With-project, operating ratio is maintained at unity during project construction period (2011-15) until 2016 with operational deficits during the period covered by substantial VGF. Ratios improve after 2017 through combined tariff increase and minimal VGF to attain full cost recovery.
295. Operating ratio for solid waste subcomponent follows the trend in water and sewerage under ‘without-project’ scenario. Substantial VGF is necessary until 2020 to keep operating ratio at unity. Additional VGF is required to reduce operating ratio to below unity after this period.
Figure VII-1: Operating Ratio ‘Without‘ and ‘With-Project’ for Water and Sewerage
5.00
4.00
3.00
2.00 Operating Ratio Operating
1.00
- 2009 2011 2013 2015 2017 2019 2021 2023 2025 2027 2029 2031 2033
KARAKOL With KARAKOL Without
Figure VII-2: Operating Ratio ‘Without‘ and ‘With-Project’ for Solid Waste
3.00
2.00
Operating Ratio Operating 1.00
- 2009 2011 2013 2015 2017 2019 2021 2023 2025 2027 2029 2031 2033
KARAKOL With KARAKOL Without
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296. Subproject viability analysis conclusions. Subproject Vodokanal and Tazalyk are financially viable on the following conditions: (i) tariff increases are required at least every two years and should be based on cost recovery and consumer affordability principles; and (ii) the Government should make available a VGF to ensure service sustainability. These conditions are incorporated in the financial improvement action plan (FIAP). These reform plans and related issues have been discussed and agreed with the executing agency with the aim of achieving financial sustainability of the overall investment. Issues pertaining to VGF transfer, the manner of implementation, and funds sourcing, are specifically relevant. Income affordability is a major factor in rationalizing tariffs, and thus household income base would need to be reviewed periodically. Sensitivity analysis indicates that subcomponent FIRRs are stressed under various conditions implying a need for efficient subproject implementation and rapidly achieving physical and financial targets.
297. Integrated projected sustainability analysis. To test overall sustainability for combined City and subproject operations, City and subproject projected cash flows are integrated. The integrated cash flow analysis incorporates the revenue and expenditure assumptions used in City and subproject projections, including transfer and VGF infusions from external sources (presumably Central/Republican and/or Oblast budgets). The analysis provides a glimpse of mid- to long-term sustainability using ‘integrated’ operating ratio as indicator. Table VII-17 presents the integrated cash flow projections reflecting the year when operating ratio falls below unity for City (in 2020), for subproject (in 2025), and for combined operations (in 2025). The integrated operation results in operating ratio falling below unity earlier in 2025 as a result of undertaking subproject improvements and funds infusion via VGF for subproject, and for combined operations.
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Table VII-17: Summary Integrated Cash Flow Projections
Particulars 2009 2010 2015 2020 2025 2030 2035 Income Own Tax Revenues 1.151 1.418 2.017 3.091 4.825 7.656 12.324 Income Taxes 0.454 0.499 0.815 1.400 2.410 4.156 7.175 Land and Property Taxes 0.326 0.533 0.670 0.863 1.113 1.437 1.858 Local Taxes 0.372 0.387 0.532 0.828 1.302 2.062 3.291 Non-Tax Sources (e.g. Water charges, SWM charges) 0.505 0.562 1.079 1.677 5.215 16.497 17.460 Local Non-tax Revenue 0.220 0.241 0.326 0.425 0.555 0.725 0.947 Subproject Revenue 0.284 0.321 0.753 1.252 4.660 15.772 16.513 Water and Sanitation tariff & other 0.247 0.258 0.675 1.092 3.824 12.101 12.670 Solid Waste tariff & other 0.037 0.062 0.078 0.160 0.835 3.671 3.844 Central Transfers 1.133 1.231 1.720 2.360 3.240 4.450 6.114 Sales of Municipal Assets ------Total - Income 2.789 3.211 4.815 7.129 13.280 28.603 35.898 Expenditures Staff Costs (Salary, Pension, Benefits) 1.454 1.603 2.256 3.065 4.167 5.669 7.717 O&M Expenditure (e.g. Repairs and Maintenance, Communicatio 0.493 0.543 0.764 1.039 1.415 1.929 2.632 Debt Servicing - other ------Electricity 0.074 0.081 0.116 0.161 0.222 0.306 0.423 Miscellaneous 0.856 0.931 1.224 1.554 1.974 2.508 3.189 Subproject Expenses 0.364 0.698 1.542 2.927 3.800 4.960 6.499 WSS service - opex 0.224 0.539 1.282 2.168 2.912 3.901 5.214 WSS service - debt service - - - 0.314 0.314 0.314 0.314 SWM service - opex 0.140 0.159 0.260 0.374 0.503 0.673 0.900 SWM service - debt service - - - 0.072 0.072 0.072 0.072 Total - Expenditure 3.240 3.856 5.903 8.746 11.578 15.372 20.458
Surplus (Deficit) before VGF (0.451) (0.645) (1.087) (1.617) 1.702 13.230 15.440 Add: Subproject VGF - 0.378 1.077 1.685 - - - Water and Sanitation - 0.281 0.850 1.407 - - - Solid Waste - 0.097 0.227 0.278 - - -
Net Surplus (Deficit) (0.451) (0.268) (0.010) 0.068 1.702 13.230 15.440 Transfers & Subsidies (ABS values) /1 Transfer Required Before VGF (0.451) (0.645) (1.087) (1.617) - - - Cumulative Transfer Required Before VGF (0.451) (1.097) (5.936) (13.310) (16.479) (16.479) (16.479) Cumulative Subproject VGF - 0.378 4.943 12.391 17.076 17.076 17.076 Transfer Required After VGF (0.451) (0.268) (0.010) - - - - Cumulative Transfer Required After VGF (0.451) (0.719) (0.992) (1.121) (1.121) (1.121) (1.121) Subproject Contribution To City Operation (0.377) (0.790) (1.675) 0.859 10.811 10.015 Cumulative Subproject Contribution To City Operation (0.377) (3.505) (10.335) (14.218) 16.946 68.788 Operating Ratio /2 City 1.148 1.093 1.073 0.990 0.902 0.811 0.720 Subproject 1.280 2.177 2.049 2.338 0.816 0.315 0.394 Integrated City & Subproject 1.162 1.201 1.226 1.227 0.872 0.537 0.570 VGF = viability gap fund; ABS = absolute value 1/ All negatives will be interpreted in ABS. 2/ Excludes debt servicing.
E. Financial Improvement Action Plan
298. The FIAP lays out the planned fiscal status of Karakol City over the CLIP period (2010- 35), taking cognizance of Phase I of subproject multi-year investments, subproject funds sources and applications, and performance of City income accounts. FIAP aims to enable the City decide priorities in terms of resources, services and management aspects in the mid- and longer-term.
299. FIAP outlines the tariff schedule, subsidy needs and connection targets by which the communities and other stakeholders would be guided toward service systems sustainability. With target served population foreseen to reach 84,300 by 2023, and over 94,500 by 2035, following the proposed tariff schedule will ensure subproject sustainability which constitutes a substantial source of available funds to Karakol City. By 2025, just over 10 years into full operation, the WSS and SWM systems will have been contributing almost $0.86 million to City operations. By 2035, this will have grown to an annual input of $10.02 million, or cumulatively,
103 TA 7228-KGZ: Issyk Kul Sustainable Development Project Final Report Volume 1 – CLIP over $68.8 million. To attain this level of future self-sufficiency, City will require financial assistance in the periods during and immediately after subproject construction works, from 2010 to 15. The assistance will be in the form of viability gap financing (VGF).
300. VGF in the subproject financial analysis is the assessed amount needed to ensure operational sustainability for the newly improved and/or installed WSS and SWM infrastructure systems throughout the project period. FIAP shows VGF needs at three cost recovery levels: (i) Level I – coverage of direct O&M costs, (ii) Level II – coverage of O&M and depreciation costs, and (iii) Level III – full coverage of O&M, depreciation and subproject loan interest. To cover Level I needs for both WSS and SWM systems operations, VGF required in the period 2010-24 amounts to $12.23 million. To cover Level II, $4.12 million in additional funds is needed, to total $16.35 million. To cover Level III, an additional $0.73 million is required, to total $17.08 million.
301. Other support systems and measures for consideration by Karakol City and as outlined in the FIAP, include:
i. Tariff increases as scheduled. Tariff adjustments are based on measured volumes for water supply. Introduction of full metering program that would tap all service users. Public standposts will likewise be provided with measuring device, and pricing mechanism that will not disadvantage the poor users of the service will be instituted; ii. Production flow meters will be installed in all Vodokanal supply sources that will warrant accurate measurement of future supply requirements and current and future water losses and potential revenue from such; iii. Based on results of solid waste characterization, average per capita waste volumes and densities will be re-calibrated to upgrade current system applying ‘normative’ values in estimating generated volumes entering cost calculations and for more accurate and appropriate basis for determining user charges; iv. VGF will be sourced from Central/Republican or Oblast budgets for transfers or grants upon approval of City Kenesh and in agreement with MOF and with concurrence of the MOEDT. Other transfers required to maintain sustainability of City finances will be sourced from fiscal resources as currently provided by law.
302. The proposed FIAP for the City is presented in Table VII-18.
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Table VII-18: Financial Improvement Action Plan for Karakol City
Particulars 2009-14 2015-16 2017-18 2019-20 2021-22 Remarks
A. Water Supply Average Tariff, $/m3 Domestic 0.03 0.03 0.04 0.05 0.06 To ease burden on service users, tariff increases are set bi-annually. The initial increase will Non-domestic 0.30 0.37 0.44 0.53 0.63 come after subproject completion. The transition period allows the service provider to Increase in tariff 0% 20% 20% 20% 20% undertake sufficient preparation and training for major service delivery improvement. Capacity building in financial, commercial and marketing practices will be undertaken, and design and operations manuals will be updated to upgrade technical staff capability. Full service metering will be introduced to guard against wastage, and to improve revenue generation grounded on actual usage. The initial years after subproject completion will present a learning-curve to justify re-development of existing normative values with sound basis for future development planning activities in the sector. The proposed tariffs are within consumer affordability.
Service coverage (population) 86.0% 90% 90% 90% 90% By 2035, population will have grown to 200,000 in the 3 cities, including a 'floating population' of regular tourists and transients at (a conservative estimate of) about 25-30% of total. Target coverage is at 90%, or 180,000 during the same period. Subproject service facilities will be designed to suit their needs. Tourist population is based on exisiting studies undertaken in the Issyk-Kul region, extrapolated to project estimates for the 3 subproject cities. This 'floating population' is nonetheless considered a most significant issue in terms of project design. Karakol target served population comprise over 46% of total.
Served population 73,400 78,300 80,000 81,700 83,400 Tourism numbers will need further investigation by the GOK Tourism Agency. The PPTA applied conservative growth estimates and so project benefits arising from the proposed project remains likewise, conservative. Karakol is next to Cholpon-Ata as the more popular destination in the region.
Service connections, Total 18,771 20,015 20,455 20,894 21,334 Service connections, New 1,244 440 439 440
Water metering program 100% 100% 100% 100% The introduction of bulk production and individual service connection metering is seen as both a step towards resource wastage prevention, and identification of externalities, particularly in the case of Karakol drinking water supply as a shared resource for irrigation purposes, and more generally in most other municipalities and cities, for garden water. 'Drinking water' resource depletion looms as an issue in all cases and the metering program puts an economic price to the commodity where currently it is given little economic value.
Water loss 25.4% 20% 20% 20% 20% Rehabilitation of existing facilities will come with system O&M that targets to reduce water loss/unaccounted-for-water reduction to 20% after subproject completion. Recovered water from both technical and non-technical water loss will be a source of revenue to the vodokanal. There are existing policies within the vodokanal that penalizes tampering of service lines and meters.
Viability Gap Funding, $ million, Total O&M cost O&M + O&M + Opex subsidy will come in form of VGF. During construction, when no benefits arise from Deprn Deprn + subproject, VGF covers cash discrepancy from operations. After construction, VGF enables Interest continuous provision of uninterrupted service at improved levels, until such time when self- 10.014 13.587 14.199 sufficient operations are attained. VGF will ultimately be recovered and repaid to 'contributor' upon cash availability through the defined series of tariff increases [proposed herein, above]. Maximum requirement for VGF amounts to $14.2 M. Recovery can be arranged for one-time payment to contributor on cash availability from operations.
B. Sewerage Average Tariff, $/m3 Domestic 0.03 0.03 0.04 0.05 0.06 Non-domestic 0.30 0.37 0.44 0.53 0.63 Increase in tariff 0% 20% 20% 20% 20%
Service coverage (population) 31% 20% 50% 90% 90% Service population will reach 94,500 by 2035. Sewerage facilities will be designed to provide services to the growing needs of the population, including regular tourists and transients at maximum and peak periods. Generally, wastewater is estimated at an average of 70% of water demand, based on studies within the region.
Served population 26,250 52,200 66,650 81,700 83,420
Viability Gap Funding [Refer to Water Supply component. VGF is incorporated in Water Supply component.]
C. Solid Waste Management Average Tariff, $/m3 Domestic Residence 1.18 1.42 1.70 2.73 4.36 Current practice of tariff determination is based on actual opex of solid waste operations (i.e., Domestic Apartment 1.18 1.42 1.70 2.73 4.36 waste collection and disposal services) and calculated in terms of estimated per capita waste Non-domestic 1.67 2.01 2.41 3.86 6.17 generation that leads to final disposal at the landfill. Full cost accounting that segregates Increase in tariff 0% 20% 20% 60% 60% existing solid waste operations from the rest of the 'cleaning and greening' activities patented to the communal services department of the city administration is the guiding principle in tariff setting. There is further need to upgrade the system of full cost accounting, to ensure no overlaps in costing the operations and pricing the service.
Service coverage (population) 50% 80% 80% 80% 80% As with WSS systems, the proposed SWM system facilities have taken into consideration the 'floating population' in systems design. Served population, Total 29,660 30,330 31,000 31,660 32,330
Viability Gap Funding, $ million O&M cost O&M + O&M + Maximum VGF is at $ 2.88 M. Recovery can be arranged for one-time payment on condition Deprn Deprn + the proposed tariff schedule is adhered to, and which is expected to yield sufficient cash to pay Interest up 'contributor' when cash is available from operations. 2.213 2.759 2.877
D. City Finance Sustainability Operating Ratio 2020 2025 City LSG 0.99 0.90 Operating ratio for City improves to less than 'unity' starting 2020; maintained all throughout. Subproject (stand-alone) 2.34 0.82 For Subprojects, operating ratio reaches below unity by 2025. When integrated, ratios reach Integrated City & Subproject 1.23 0.87 sustainable levels starting 2025. Cumulative Transfer/Subsidy Needs, $ million 2010 2015 2020 2025 2035 City LSG 4.85 5.94 13.31 16.48 16.48 Subsidy needs will have been completed by 2025 for City and for Subproject; and by 2020 for Subproject (stand-alone) 3.87 4.94 12.39 17.08 17.08 combined City and Subproject operations. Integrated City & Subproject 0.98 0.99 1.12 1.12 1.12
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VIII. ECONOMIC VIABILITY
A. Overview
303. The overall objective of undertaking this subproject is to improve water supply and sanitation services, including sewerage and solid waste management in Karakol City. The following analysis assesses the economic sustainability of the subproject improvements under Phase I Development. Technical and cost analyses of Phase I Development point to system rehabilitation and acquisition of rudimentary vehicles and equipment as most favorable immediate improvements approach.
304. The main objective of the economic viability analysis of the Subproject Karakol is to determine various aspects of economic feasibility including evaluation of rational use of resources and the expected benefits. The following aspects of the proposed subproject have been considered:
i. Proposed subproject investment plan consistency with national sector policies and within the overall infrastructure development plan for the Issyk-Kul region; ii. Proposed subproject strategies consistency with ADB strategies in environmental and social protection in the urban development areas; iii. Review of proposed subproject investments in terms of life-cycle cost, phased development and implementation schedules, and determination of economic costs; iv. Evaluation of potential economic benefits; and v. Overall economic benefit-cost analysis in terms of viability indicators as economic internal rate of return (EIRR), economic net present value (ENPV) and benefit-cost ratio (BCR).
B. Approach and Methodology to Economic Analysis
305. The economic analysis follows Asian Development Bank (ADB) guidelines on economic viability of the undertaking including the Guidelines for the Economic Analysis of Projects and Handbook for the Economic Analysis of Water Supply Projects. The analysis describes the economic rationale and target beneficiaries and undertakes an economic viability analysis of Subproject Karakol. Based on sector review, demand analysis, subproject beneficiary assessment, the economic benefit-cost and sensitivity analyses were carried out.
306. The economic analysis for base case situation is undertaken for both the ‘without‘ and ‘with-project’ conditions by quantifying the incremental economic costs and benefits over a 25- year period (2010-35). A sensitivity analysis is conducted to determine the effects of certain adverse conditions on system capital investment and operation and maintenance (O&M) cost, revenue generation and overall subproject viability. The analysis uses the domestic price numeraire, as benefits are non-tradable in nature. The economic cost analysis is undertaken at constant mid-2009 price level and all transfers excluded from the cost equation.
307. Subproject physical interventions are categorized into two main subcomponents: (i) water supply and sewerage, and (ii) solid waste management due to difference in approaches to
106 TA 7228-KGZ: Issyk Kul Sustainable Development Project Final Report Volume 1 – CLIP benefits measurement. Both components are revenue-earning and benefits evaluation takes this characteristic into consideration. For water supply and sewerage, quantifiable benefits relate to resource cost savings from incremental and non-incremental water and health cost savings. For the solid waste component, the main quantifiable benefit arises from time cost savings. Unarguably, other benefits ultimately result from the proposed infrastructure improvements, e.g., increased property values, increased tourism benefits, avoided additional medical expense from uncontrolled exposure to a variety of water-borne diseases, unclean living environment as rat-infestation, uncontrolled and illegal waste-picking activities at dumpsites and at the landfill, etc., but more extensive investigation and data-gathering is required. CLIP information is subject to continuous verification and updating for future reference during actual project implementation.
1. Economic Rationale
308. The Project economic rationale is based on:
i. Improving urban services and lake's environment. Urban services in City Balykchy have deteriorated since the collapse of the Soviet Union. Lack of capital investments for infrastructure improvement and insufficient revenues to meet operating expenditures have affected the quality of service. Consequently, due to poor access to sanitation and solid waste treatment and disposal, surface water run-offs and contaminated ground water have impacted the lake's environment. Project interventions will help rectify the situation and improve the quality of infrastructure and minimize any future contamination of the lake. ii. Fostering tourism growth. Improving the lake's environment and quality of services in Balykchy City will foster tourism income growth. Tourists visiting Issyk- Kul account for 70% of the country's tourists at approximately 1 million visiting the region from June to August (translated as four times the resident population in Project cities). Dilapidated urban infrastructure is under excess pressure during the short period and tourist perception and continued patronization of the region is contingent on efficient urban services. Improvements through the Project will ensure a growth in tourists, increased gross regional product, and accrued benefits to the Oblast and country. iii. Improving local government and service utility performance. To sustain efficient services, the Project will improve the institutional effectiveness of City and service utilities (Vodokanals and Tazalyk). Through the enterprise resource management component, the Project will: (a) improve the financial management practices in the cities, Vodokanals and Tazalyks, and create a culture of generating revenue surpluses to reinvest into capital assets or leverage it for debt; (b) create a database on water and sewerage asset and condition to help Vodokanals identify infrastructure improvements in the long-term based on a well developed asset management and maintenance system; and (iii) build Vodokanal staff capacity to efficiently manage services through the twinning program.
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iv. Enabling public-private partnerships. Current arrangements between Karakol and service utilities24 are loosely based on service agreements that require improvement on performance standards. The Project will improve service quality by concluding performance-based service contracts between Karakol City and service utilities.
2. Selection Approach
309. The country development strategy (CDS: 2009-11) emphasizes environmental sustainability and the need for protecting Issyk-Kul with the Project featuring under the CDS' strategic investment project for the Issyk-Kul region. Subproject Karakol was selected based on: (i) consistency with demand based on community willingness to participate and contribute; (ii) the least cost approach of meeting effective demand in terms of location, scale, scope and appropriate technology based on prudent engineering decisions; and (iii) that economic benefits are to likely exceed economic costs. Balykchy was prioritized together with Cholpon-Ata and Karakol due to the growing tourism industry that can easily be threatened with water- and sanitation-related health and environmental problems, which Project interventions will help mitigate.
3. Subproject Alternatives. 310. The subproject will: (i) improve urban infrastructure, including sewerage and sanitation; solid waste management; water supply; and community upgrading; and (ii) improve service delivery through better enterprise resource management. Component choice was based on the following decisions:
i. Replacing sewer lines and rehabilitating pumping stations. The subproject will replace ageing sewer networks, replace sewage pumps and rehabilitate pumping stations (over 25 years old). The above option was the least cost as continuing to use the existing system will result in: (a) ground water contamination through sewage infiltration from system leaks; and (b) high electricity charges due to poorly functioning sewage pumps. ii. Expanding the sewer network and providing on-site sanitation systems. The subproject will expand the sewer network in Karakol to increase access to approximately 50,000 persons. It will also ensure access to on-site sanitation (septic tanks) facilities to approximately 25,000 persons. The above least cost options were based on sufficient flushing velocity to discharge sewage – sewer network expansion is to areas that are densely populated to generate sewage and on-site sanitation are to areas that are sparsely populated with insufficient flushing velocities. Not providing the focused options would have increased the incidence of water borne diseases. iii. Constructing sanitary landfills and closing existing dumpsites. The subproject will ensure that indiscriminate waste dumping is discontinued and new sanitary
24 The Vodokanals and Tazalyks are quasi-private entities as their relationship with the cities are based on service agreements and payments based on city council approved business plans.
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landfills are constructed. An alternative option of treating waste was to compost it or adopt waste-to-energy (W2E) technologies. Sanitary landfills was a preferred option as the organic portion of waste generated was approximately 10% making composting unviable and 70% of the waste was inert material making W2E processing unviable. The sanitary landfills are located at existing dumpsites on state-owned land thereby negating any cost on land acquisition. iv. Providing vehicles, tools and equipment. Poor system operation and maintenance will be overcome through adequate supply of appropriate vehicles, tools and equipment. Without the provision, new systems constructed will enter into a state of disrepair within a short period. v. Piloting district water metering, replacing water transmission mains and rehabilitating water boreholes. The subcomponent will: (i) install water meters in pilot zones in 3 cities and monitor water supply and identify system leaks to develop a leak rectification program; (ii) replace a 2km long water transmission main and conserve water; and (iii) rehabilitate water boreholes by providing disinfection measures and improve the quality of water. The identified options will ensure savings in operational expenditure resulting from water losses, resource saving in terms of conserving treated water transmission, and improved health conditions through disinfection of ground water supplies. vi. Enterprise resource management. The subcomponents identified were based on meeting the Project's economic rationale on improving local government and service utility performance.
4. Economic Cost-Benefit Analysis
311. Based on the economic rationale, selection criteria, project alternatives, beneficiary assessment and valuation of economic costs and benefits, the subproject economic analysis is carried out. The proposed subcomponent program is compared with the ‘without-project’ situation using discounted cash flow technique and applying the economic opportunity cost of capital (EOCC) as hurdle rate at 12%, based on similarly-scoped projects in the region. The analysis is based on domestic price levels and discounted starting base year 2009-10.
312. The economic capital and O&M costs are converted from financial cost estimates based on the following:
i. Price contingency and import duties and taxes are excluded because these represent transfer payments; ii. Physical contingencies are included as these represent real consumption of resources; iii. Shadow wage rate factor (SWRF) converts unskilled labor at 70% the market wage rate, as unemployment and/or under-employment is a trait in the region’s economy, and to allow for an opportunity cost of unskilled labor lower than its wage rate; iv. Wage rate for skilled labor represents the opportunity cost of labor as skilled labor is in demand in the region, and
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v. All costs are valued at domestic price numeraire for easier comparison with benefits measurement factors. Shadow exchange rate factor (SERF) is therefore at 1.00, and standard conversion factor (SCF) is also at 1.00. 313. Sensitivity analysis is conducted to test the robustness of the economic results under adverse economic conditions. The test parameters and assumptions analyzed are (i) capital cost overrun at 10%, (ii) increase in O&M costs by 10%, (iii) decrease in benefits by 10%, and (iv) one-year delay in project benefits. The corresponding switching values on capital cost and benefits are also determined to measure the change in a variable or combination of variables to reduce EIRR to the hurdle rate or EOCC. The switching value is the reciprocal of the EIRR and calculates the extent of change in a variable that would leave project decision unchanged.
C. Water Supply and Sewerage
314. In the following viability analysis, water supply and sewerage are combined as a single subcomponent on assumption that the volume of wastewater produced directly derives from water demand.
1. Sector Review and Demand Analysis
315. Water supply. Apart from highly-deteriorated service facilities, the sector mainly suffers from inefficiencies arising from high unaccounted-for-water and inappropriately-designed tariffs, among others. Presently, Vodokanal system has very limited service meters (at less than 0.5% installed) to measure water consumption; instead, government-issued standard data established under the former Soviet Union (FSU) are still used as basis. These data have not been updated since Independence. Pricing policy, which is guided by State, apply the data to calculate tariffs. Tariffs are subject to approval by City Kenesh on concurrence by City Anti-monopoly Committee, State representative to regulate pricing and tariffs. It is in this setting that Vodokanal (likewise, Tazalyk and other communal utilities) operates, and unless tariffs are set rightly to raise sufficient revenue to support development efforts, there is less or no opportunity to see change in the sector. The social survey reveals high customer willingness-to-pay in return for quality service. This reflects a positive first step from user side. It will do well for Karakol to agree the proposed tariff reforms contained in the FIAP as the immediate next step.
316. Prior to and without the project, households in the subproject cities are seen to rely on alternative supplies collected from point source, bottled water, groundwater pumped from household boreholes, and from public standpipes. With the project, piped water will replace alternative supplies. Without the project, connected households consume 80 liters per capita per day (lpcd) and unconnected households consume about 60 lpcd ‘without project’. With the project, demand will rise to 125 lpcd for both groups, the latter increasing more even as public Vodokanal service improves in quantity and quality. The supply situation is projected to rise with population growth and increase annually to reach a design target population of 90% on project completion.
317. UFW is currently at 40% (as reported by Vodokanal). UFW is projected to decline to 20% by project completion in 2015 as leaky pipe network is replaced and/or rehabilitated. In conjunction with physical repair, training and institutional development are seen to improve
110 TA 7228-KGZ: Issyk Kul Sustainable Development Project Final Report Volume 1 – CLIP system management that will bring recovered water through O&M program back into the system as revenue water. All UFW are reportedly due to technical loss, i.e., leakages, flushing water, etc. There are no claims on non-technical water loss, i.e., from illegal tapping, pilferage, etc., from Vodokanal. Based on demand analysis, without the project, water consumption deficit is placed at over 0.04 million cubic meters annually. This increases to 1.27 million annually by 2035. Volume 4, Appendix 11 in provides the projected annual water and sewerage demand.
318. Sewerage and sanitation. The existing sewerage system in Karakol is grossly inadequate and needs major improvement. Without rehabilitation and extension works, the current level of service will continue and is seen to decline in the near future, effectively hastening degradation in sanitation and general environmental conditions in the city. Presently, areas covered by the failing system affect the surroundings with their untreated outfalls as no treatment facility exists for sewage. Connections mainly serve apartment buildings and budget offices that have access to network lines. The rest of the population depend on individual systems (i.e., septic tanks, etc.) or drain illegally to the sewers. Based on the socioeconomic survey of the areas, most of the uncovered households and non-domestic types indicate their preference for new connections, when available, as it would be avoided cost on their part not having to spend for maintenance of their own system.
319. As the population density is relatively low along existing sewer lines, and sparser in most unserved areas, it is not warranted to fully network the defined urban service area, which practically covers the whole city. However, technical assessment recommends phased development that rises with population growth and density. This subproject analysis covers investments under Phase I Development that will upgrade service and operations leading to a sustainable future. The proposed Phase I Development includes (i) construction of a modular type sewage treatment plant, expandable to optimum capacity at each phase, (ii) trunk mains that make up the city sewerage network, and (iii) secondary and tertiary networks linking the trunk sewer mains to the existing network.
320. Projected wastewater volume is estimated at 70% of projected water usage. Non- domestic wastewater amounts to about 20% of total volume. Current production is at 1.27 million cubic meters annually and almost tripling to 3.49 million by 2035.
2. Subcomponent Beneficiaries
321. For water supply, beneficiaries comprise households presently connected to the existing system and those availing of new connections. New connectors include households previously obtaining water from standposts and other sources, and those that previously cut connections for reasons including dissatisfaction with old system service.
322. For sewerage service, project beneficiaries will include households presently connected to the existing sewerage systems who will gain from system rehabilitation, and households getting new connections through proposed sewer lines. All customer types will gain from improved environmental sanitation conditions that a properly functioning sewerage system provides.
323. From Table VIII-1, the water component is targeting to increase population served to 77,400 or 90% of city population by 2015, when construction is completed and system facilities are fully operational. Total beneficiaries by design horizon in 2035 would reach 94,500, 90% of
111 TA 7228-KGZ: Issyk Kul Sustainable Development Project Final Report Volume 1 – CLIP total. At 4 persons per household, total service connections would number 21,400 by 2015, and by 2035, 23,500. Households that opt not to avail of individual connection can still rely on public Vodokanal standposts which would then offer better quality service, with site facilities also less crowded resulting in less waiting time. Household connections include individual or private residences and apartment units. Non-domestic connections, projected at about 20% of domestic users will total about 720 by 2015, reaching 880 by design year, and include institutional and government or budget organizations. The system coverage for sewerage will increase to benefit about 50% population from the current 30% once system is fully operational by 2015.
3. Valuing Economic Benefits
324. Water supply valuation of economic benefits comprises (i) expanding existing supplies, (ii) health benefits through avoided medical costs to treat water-related illness, and (iii) resource cost savings.
i. Expanding supply of existing water. In supplying the existing volume of piped water more efficiently, measured in terms of the average cost of supply ‘with’ and ‘without’ the project scenarios, the following two major components were considered: 1. Non-incremental Water Supply. This component considers the increase in water sold from the public system due to the Project but resulting in no effect on total water consumption for the following reasons: (a) the non-incremental water supply replaces water purchased/consumed from alternative sources (bottled water sources in case of the Project); and (b) the non-incremental water supply due to the reduction in non-technical loss due to the proposed Project. Only non- incremental benefits from consumer shift from bottled water was considered.25 There are no benefits assumed from non-technical loss, e.g., pilferage, meter tampering and illegal connections, as these occurrences are atypical in the subproject cities. The benefit is evaluated by using the supply cost of replaced water sources. 2. Incremental Water Supply. This component has a positive effect on the total consumption due to the proposed Project. Incremental water in the analysis comprises water arising from: (a) additional system demand from (previously) non-connected population; and (b) additional supply from system improvements geared to recover non-revenue water or system loss. The latter will induce higher demand from existing and newly connected population given the lower price of Project water relative to alternative supplies. This component of benefit is evaluated by using the supply price to be decided by the city periodically and based on affordability. ii. Health benefits. Health benefits from improved water quality and supply is subsumed under the health benefits for sewerage as it's assumed that improvements in both systems will reduce WBI.
25 The volume of bottled water use relative to total water consumption in households is small but expenditure-wise the cost to the household is high. In the 3 cities, a liter of bottled water is at $0.40-0.50. In comparison, a cubic meter of system water ranges between $0.03-0.11. Bottled water cost through the system is derived using existing tariffs.
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iii. Resource cost savings. Other benefits include resource cost savings arising from: (i) overcoming time lost in collecting water from alternative sources; (ii) overcoming storage or container acquisition and maintenance costs; and (iii) reducing water treatment costs (for example, boiling, filtering, etc.).
325. Sewerage and sanitation economic benefits include: (i) cost of savings for residential and non-residential sewage generators, which are no longer required to operate ‘on-site disposal systems’; and (ii) health benefits through avoided household medical cost26 and avoided income loss by wage-earners absenting from work due to water borne illness (WBI). The former was not considered directly as the new customers currently use pit latrines that do not entail any O&M costs. Health benefits were calculated using morbidity rates obtained from the Ministry of Health and the National Statistics Committee, and from interviews with city epidemiological centers. Data from the National Statistics Commission on incidences of illnesses for population was also used.
326. Sewerage and sanitation benefits result in improved environmental and living conditions and public health, achieved through removal of sewage and stagnant water in and around living areas and prevention of the same from seeping into drains, waterways, and especially broken water supply pipelines.
327. Other sewerage benefits not quantified in the analysis due to absence or lack of information include, among others, (i) increase in property values, (ii) avoided flooding damage and time costs, (iii) avoided cost of acquiring and maintaining own sewage disposal facility on- site, (iv) avoided time cost of disposing on-site, and (v) to a smaller degree in the coverage areas in Karakol, avoided private and public cost of mosquito control.
4. Cost-Benefit Analysis
328. The economic benefit-cost ratio (BCR) is utilized in the analysis to assess whether project benefits outweigh costs thus making the proposed subproject economically feasible. The annual cost streams were set against the annual benefit streams and discounted using the EOCC at 12%. The resulting present value of benefits is divided by the present value of costs and if the resulting ratio is greater than or equal to 1.0, the subproject is deemed acceptable. Table VIII-1 summarizes the results of the analysis, and indicates that BCR is at 1.34 for the water supply and sewerage subcomponent. Appendix 25 in Volume 4 presents the calculation of economic benefits for water and sewerage subcomponent, while Volume 4, Appendix 26 shows the detailed capital and O&M costs conversion from financial to economic costs.
26 Medical treatment expense averages Som 1,500 per year (about $35).
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Table VIII-1: Benefit-Cost Ratio Analysis for Water and Sewerage ($ million)
Economic Particulars Value Present Value of Benefits Non-incremental 10.76 Alternative source (bottled water, etc.) /1 10.76 Non-technical Water Loss /2 - Incremental /3 3.18 Additional demand from previously non-connected population 0.31 Additional supply from recovered NRW 2.88 Health 0.49 Avoided lost wages due to illness /4 0.24 Avoided cost of medical treatment /5 0.25 Resource savings 2.78 Time saved from collecting water /6 1.15 Cost saved from purchase of storage reservoir /7 0.86 Cost saved from water treatment and storage maintenance /8 0.78 Total Benefits 17.22 Present Value of Costs Capital Investment + Replacements 6.65 O&M 6.23 Total Costs 12.88 Benefit-Cost Ratio 1.34 NRW = non-revenue water; SP = supply price; NTL = non-technical water loss, AIEC = average incremental economic cost. 1/ Population using bottled water x SP. SP is calculated at $0.42/m3 for Balykchy, $0.38/m3 for Cholpon-Ata and $0.11/m3 for Karakol. 2/ NTL is atypical in the 3 cities, thus valued at 'zero'. 3/ Priced at the average of the existing tariff and the 'with-project' tariff (or the AIEC of water). For Balykchy, $0.45/m3; Cholpon-ata, $0.44/m3; Karakol, $0.29/m3 of incremental water 4/ Economically active population x Morbidity rate x Minimum daily wage rate x Days indisposed. (From survey). 5/ Economically active population x Morbidity rate x Medical treatment cost. (From survey). 6/ Annual Average time daily collecting water from source converted to 8-hour work-day x Minimum hourly wage rate. (From survey). 7/ Financing cost of storage reservoir (Som 1,000-1,500) + 20% of cost for maintenance. 8/ 20% of storage cost for treatment + 20% of storage cost and treatment for maintenance.
329. The economic internal rate of return and discounted net cash flows are determined by comparing benefits streams with the cost streams. Following ADB guidelines, the EOCC is set at 12% and the results show base case EIRR exceeding the EOCC. The EIRR for water and sewerage at base case scenario is 28.3%. The EIRR for water and sewerage is tested for sensitivity. Table VIII-2 indicates that EIRR are robust even under adverse economic conditions, ranging between 14.9% and 23%. The analysis reveals that the subproject can absorb cost overruns of as much as 69% and still remain feasible. The subproject is more sensitive to decrease in benefits and a one-year delay in project implementation, thus care must be taken to prevent these conditions. Appendix 27 in Volume 4 provides the EIRR calculations and the sensitivity analysis.
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Table VIII-2: EIRR and Sensitivity Analysis for Water and Sewerage Particulars EIRR ENPV, $ mill Base Case 28.3% 4.338 Capital Cost plus 20% 20.5% 3.008 O&M Cost plus 20% 23.0% 3.093 Benefits less 20% 14.9% 0.895 1-year Delay in Benefit 17.6% 2.351 Switching Value - Capital Cost 41.6% 0.652 Switching Value - Revenue 24.3% 0.252 At EOCC, Capital Cost change 69.3% (0.272) EOCC = economic opportunity cost of capital; EIRR = economic internal rate of return; ENPV = economic net present value
D. Solid Waste Management
1. Sector Review and Demand Analysis
330. Presently, the total solid waste generation is estimated at 49,000 cubic meters annually, with less than half collected from the total residents. This is more or less confirmed during the social survey conducted in the service area which reports approximately 84% households stating municipal collection service was unavailable on a daily basis and increased collection frequency was a stated requirement. The existing solid waste management system involves mainly waste collection and disposal activities. The function is undertaken by the ‘Cleaning and Greening’ Unit of the Municipal Communal Services Department, known commonly as Tazalyk. The same unit manages street-sweeping, street-lighting, beautification, parks upkeep, and other such activities that ensure clean and safe environment for the City constituents. Tazalyk has three dedicated vehicles for collection and disposal services, and a few more are shared with other City service utilities. Tazalyk deems no urgent need for transfer stations as pathways to city housing areas are wide enough to accommodate available vehicles, and distances to the landfill are relatively short.
331. Although collected waste material volumes are relatively low, the actual amounts increase as many residents use publicly available waste bins or illegally dump their waste, which is then collected by Tazalyk. Most of this waste is generally removed by the Tazalyk into the landfill and adds to the deposits there but that Tazalyk receives no income from the service. Nonetheless, Tazalyk earns revenue from tariffs collected directly from served households (both private residences and apartments) and organizations. Like in other municipal utilities, tariffs are subject to review by the City Kenesh, concurrence by the City Anti-Monopoly Committee, and when cleared, approval and enactment. At the current level of service, assessment of Karakol Tazalyk finances reveal the unit charging appropriately devised user charges based on actual cost accounting. The past five years saw Tazalyk netting surpluses, contributing about $0.06 million (including transfers/grants) to City operating funds. Improving Tazalyk service capacity under the Project is seen to further increase unit contribution to overall City operations.
332. Karakol is assessed to be generally clean with small waste deposits in the streets and immediate surroundings. However, dustbins are inadequate as are collection vehicles and compactors. No recycling services are provided. Under the project, these will be treated part of
115 TA 7228-KGZ: Issyk Kul Sustainable Development Project Final Report Volume 1 – CLIP the more immediate improvements to be implemented to enable Tazalyk to provide better service and maintain sustainable operations.
333. From about 50 tons annually in 2009, collected volumes will increase to 60 tons by project completion in 2015. This amount rises 70 tons annually by 2035. The derivation of the projected annual solid waste volumes is given in Volume 4, Appendix 12.
2. Subcomponent Beneficiaries
334. Project beneficiaries will comprise households which will gain from improved environmental sanitation, living conditions and amenities that a properly functioning solid waste collection and disposal system will provide. Those households who currently spend time disposing of their solid waste will receive additional benefits from primary waste collection. About 80% of project households will be covered by the improved waste management system.
335. Based on information given in Volume 4, Appendix 12, service beneficiaries will increase from current 18,000 (equivalent to over 7,000 residences or building structures) to 19,500 (or 8,000 structures) by project completion. The subcomponent proposes to cover 80% of residents, and their properties, collecting and disposing all waste in a sanitary and scientifically- efficient manner to upgrade City environmental conditions and to minimize public health costs. Target beneficiaries served is about 37,000 residents by 2035 (equivalent to 9,500 building properties).
3. Valuing Economic Benefits
336. Valuation of economic benefits for solid waste management is based on economic value of savings in waste disposal time, increased property values and health benefits27. The assumptions for the time resource cost savings are derived from the socioeconomic survey. Although a generally valid benefit, increase in property values is not considered in the analysis due to unavailable reliable information on property prices as tax assessment and mapping are still a recently-started process in the regions. Health benefits are likewise not included in the current analysis due to lack of strong links with and difficulty in segregating reported illnesses caused by deficiencies in available solid waste services under the existing environment.
337. The benefit is calculated on the assumption that a household spends at least an hour daily, with at least two members interchangeably taking out garbage twice daily from the house to the dustbin area located approximately 150 meters of each house. The cost saved from the activity is derived by valuing the time utilized for the activity, and this value is estimated as equal to the minimum wage rate and shadow-priced at SWRF.
27 Includes: (i) avoided medical cost to treat diseases mostly from rat infestation; and (ii) avoided cost due to absence from work of wage-earners.
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4. Cost-Benefit Analysis
338. The BCR is utilized to check if project benefits outweigh costs thus making the proposed subproject economically viable. The main economic costs comprise capital and O&M costs. The main economic benefit uses resource cost savings approach. The annual streams of cost and benefit are discounted using 12% as economic hurdle rate. The resulting present value of benefits is divided by the present value of costs and if the resulting ratio is greater than or equal to 1.0, the subproject is deemed acceptable. Table VIII-3 summarizes the results of the analysis, which finds the subproject to be viable with BCR at 1.14. Appendix 28 in Volume 4 shows the derivation of benefits for solid waste subcomponent, while Appendix 29 presents the valuation of economic costs.
Table VIII-3: Benefit-Cost Ratio Analysis for Solid Waste ($ million)
Economic Particulars Value Present Value of Benefits Time Savings for Disposal /1 3.24 Health /2 - Total Benefits 3.24 Present Value of Costs Capital Investment + Replacements 1.69 O&M 1.16 Total Costs 2.86 Benefit-Cost Ratio 1.14 1/ Annual Average time daily disposing waste to appointed waste collection areas, converted to 8-hour work-day x Minimum hourly wage rate (From survey). 2/ Not quantified.
339. Table VIII-4 shows EIRR for base case condition at 17.4%, exceeding 12% EOCC. ENPV is calculated at $0.39 million. Tested under stress conditions, the subproject may perform below par. Caution must be taken to avoid or prevent cost overruns and O&M cost changes beyond 10% of base case costs. The subproject is most sensitive to delay in project implementation. The EIRR and sensitivity analyses for solid waste subcomponent is given in Volume 4, Appendix 30.
Table VIII-4: EIRR and Sensitivity Analysis for Solid Waste Particulars EIRR ENPV, $ mill Base Case 17.4% 0.388 Capital Cost plus 10% 14.7% 0.219 O&M Cost plus 10% 15.7% 0.272 Benefits less 10% 12.8% 0.064 1-year Delay in Benefit 12.2% 0.016 Switching Value - Capital Cost 19.8% 0.229 Switching Value - Benefit 11.8% 0.120 At EOCC, Capital Cost change 49.3% (0.447) EOCC = economic opportunity cost of capital; EIRR = economic internal rate of return; ENPV = economic net present value
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E. Conclusion
Subproject Karakol is economically viable with EIRR at base case of 17.4% and ENPV positive at $0.39 million. The sensitivity analysis demonstrates results could be unstable under adverse economic conditions like cost overruns, decreased benefits and project implementation delays. The economic BCR is 1.14, which is close to marginal but still acceptable.
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IX. IMPLEMENTATION SCHEDULE AND PROCUREMENT
A. Project Management and Implementation Overview
340. The Project will be managed and administered through a combination of i) a central-level steering committee, ii) the Ministry of Finance (executing agency – EA), iii) a project management office (PMO) at the central-level within the EA, and iv) the Issyk-Kul Oblast Administration (the implementing agency – IA) within which a Project Implementing Office (PIO) will carry out day to day affairs.
341. A representative of the Prime Minister's Office will serve as the steering committee's Chairperson. A full-time project director (PD) will head the PMO and will be responsible for overall Project management and administration, and will report directly to the executing agency. A full-time project manager (PM) will head the PIO and will be responsible for Project implementation, monitoring and supervision.
B. Execution and Coordination
1. Steering Committee
342. To ensure close coordination of the proposed Project with National strategies, development plans, ongoing and future nationally and internationally funded projects and to ensure smooth interface between all involved Ministries, a project steering committee (PSC) will be constituted under the leadership of a representative of the Prime Minister’s office. The PSC will oversee progress on the Action Plan under the President’s Decree related to the “Concept of Sustainable Development of the Eco-economic System Issyk Kul (the Issyk Kul Development Concept) and will be primarily responsible for guiding development in the Issyk Kul basin. The PSC will thus be responsible for (i) setting policy guidelines for improving project implementation, (ii) coordinating at policy level with other departments of government, (iii) reviewing and approving annual implementation plans, (iv) monitoring the progress of project implementation, and (v) coordinating procurement activities and awarding of contacts. The PSC membership will be finalized on loan and grant effectiveness.
2. Executing Agency
343. The EA will be responsible for Project management and administration. The EA will hold monthly meetings with the PMO and submit progress reports to the PSC for decision making where required. It will ensure that Project component technical and ecological expertise is sought before awarding contracts and/or commencement of construction works. The EA will obtain ADB approvals for Project component finance, ensure Project compliance with Project covenants, coordinate with ADB on matters related to disbursements, and submit project documents, including audit reports, to ADB on time. The EA will play an active role in monitoring the Project’s Enterprise Resource Management component. Specifically related to
119 TA 7228-KGZ: Issyk Kul Sustainable Development Project Final Report Volume 1 – CLIP the procurement process, the EA will monitor and review bid process and coordinate with ADB on all approvals.
3. Project Management Office
344. The central-level PMO will be established at the executing agency. The PMO will be led by a full-time project director who will be responsible for overall Project management and administration. The project director will be supported by a fiduciary unit comprising a procurement expert, financial manager, a domestic project performance monitoring specialist and office support. The PMO will: i) oversee Project accounting and auditing; ii) secure technical expertise and environmental expertise for all goods and civil works prior to bidding; iii) carry out PPMS surveys; iv) ensure city administrations comply with project covenants; v) invite bids, evaluate them and prepare bid evaluation reports for EA and, subsequently, for ADB’s approval; vi) award contracts; and vii) prepare quarterly progress reports.
4. Project Implementation Office
345. An oblast-level PIO, led by a full time project manager, will be established for overall project monitoring and supervision, and will report directly both to the project director and to the governor, Issyk Kul Oblast. The project manager will be assisted by international water and sanitation, environmental safeguards, and solid waste management experts; domestic social/gender development specialist; an accountant; an office manager, information technology specialist and other support staff.
346. The PIO will: i) manage detailed surveys, investigations and engineering designs for all components; ii) update the environmental impact assessment (EIA) and the environmental management and monitoring plan (EMMP); iii) administer contracts (with support from Vodokanals and Tazalyks at the city-level and ensure quality control; iv) evaluate work done by contractors and certify payments; and v) conduct public awareness campaigns and participation programs.
347. Under the Enterprise Resource Management component, the PIO will: i) oversee development of city maps based on satellite imagery; ii) oversee mapping of urban infrastructure assets on city maps; iii) roll out the MIS and accounting software in the three cities; and iv) finalize draft contracts for performance-based service contracts.
5. City Administrations
348. The city-level Vodokanal and Tazalyk organizations will provide logistical support to the project development during the detailed design phase. The city administration will ensure that each organization has a suitable and adequate staffing establishment to operate efficiently and effectively both the existing facilities and those provided under the Project. It will also ensure that the Vodokanal and Tazalyk participate in training in the operation and maintenance of plant and equipment provided under the contract and, in particular, with the technology associated
120 TA 7228-KGZ: Issyk Kul Sustainable Development Project Final Report Volume 1 – CLIP with the oxidation ditch wastewater treatment process. Similarly suitable staff will be engaged to operate the laboratories provided under the Project.
349. Tariffs and charges respectively for water / wastewater and for solid waste management will be set at sustainable levels, thus ensuring that each service remains self-financing.
350. The implementation structure and specific roles and responsibilities are summarized in Section VI of this report.
6. Disbursement Arrangements
351. Loan and grant proceeds will be disbursed in accordance with ADB’s Loan Disbursement Handbook (2007, as amended from time to time). An imprest account will be established by the EA separately for the loan and grant component with a commercial bank acceptable to ADB, to expedite project implementation through timely releases. The EA is conversant with financial management of project funds as established through the financial management agreement. The amount to be deposited into each imprest account will not exceed 10% of the respective loan or grant, or the estimated expenditure to be funded through each imprest account for the next 6 months, whichever is lower. The imprest accounts will be established, managed, and liquidated in accordance with ADB’s Loan Disbursement Handbook and detailed arrangements agreed to by the Government and ADB.15 ADB’s statement-of expenditure procedure may be used to reimburse eligible expenditure and to liquidate advances made into the imprest accounts. Any individual payments to be liquidated or reimbursed will not exceed the equivalent of $100,000.
C. Implementation Schedule
352. The Project will be implemented over four and a half years and is expected to commence in early 2010 and be completed by end of 2014. It will be necessary to conclude all land acquisition and resettlement activities before the letting of construction contracts such that there will be no possibility of delays to the contractors gaining full access to the sites. In pursuance of this and in order to ensure rapid progress, Kyrgyzstan Government has agreed to a time-bound implementation schedule with critical milestones. With the preparatory design stage work now commencing and a large proportion of the works being simple civil engineering, the implementation schedule is considered to be realistic. The project implementation schedule is in Appendix 2.
D. Procurement of Goods and Works
353. Procurement of goods and services financed by the ADB grant and loan will be undertaken in accordance with ADB’s latest Guidelines for Procurement (2007, as amended to date). Civil works contracts valued over $1.0 million and contracts for goods and related services above $500,000 will be undertaken through international competitive bidding procedures including prequalification. Civil works contracts valued at $1.0 million or less will be carried out under local competitive bidding procedures acceptable to ADB. Contracts for goods
121 TA 7228-KGZ: Issyk Kul Sustainable Development Project Final Report Volume 1 – CLIP and services valued at or under $1.0 million will be procured following international shopping procedures except for supply contracts with a value of less than $100,000 equivalent, which may be procured by direct purchase.
E. Anticorruption
354. During Project processing, ADB’s anti-corruption policy was explained to Kyrgyz central and local government officials. Attention was drawn to the sections on fraud and corruption in ADB’s Guidelines for Procurement, particularly the need for bidders, suppliers, and contractors to observe the highest standards of ethics for the procurement and execution of ADB-financed contracts, and the sanctions if fraud and corruption are discovered. The anti-corruption provisions in ADB’s Guidelines on the Use of Consultants were discussed. The project management consulting services include assistance that will strengthen the implementation arrangements, including internal auditing procedures. The international project management consultants will assist in strengthening the procedures for the selection and engagement of domestic consultants, increase transparency, and provide for equal opportunity competition. The consultants will help to (i) strengthen the financial management system of the local governments and concerned agencies, (ii) conduct training to promote full and consistent adherence to international accounting standards and auditing procedures, and (iii) drafting procurement and bidding documents to strengthen the ability to detect fraud and corruption.
F. Accounts, Audits, and Reports
355. The Government will ensure records and accounts adequate to identify the goods and services financed from the loan proceeds will be maintained. The PIOs will maintain separate project accounts, in coordination with the PMO, which will prepare the project accounts and related financial statements, including imprest account and records of the statement of expenditures. Project accounts and financial statements will be audited annually in accordance with sound auditing standards by independent auditors acceptable to ADB. Certified copies of such audited accounts and financial statements will be submitted to ADB within nine months after the close of each fiscal year. All such reports and statements will be submitted in English. The Government has agreed to finance the costs related to the annual auditing from the loan proceeds. PMO and the PIOs were informed of ADB’s policy on submission of audited financial statements and the strict penalties for non-compliance. The PMO and ADB may review and audit these records on a random basis.
356. The PIOs, in coordination with the PMO, will prepare quarterly reports on the implementation of project-funded activities. The reports will be in a format acceptable to ADB and will indicate, among other things, progress made against established targets, problems encountered during the quarter, steps taken and steps proposed to resolve the problems, compliance with loan covenants, and project activities to be undertaken during the next quarter. A Project completion report will be prepared within three months of Project completion. All reports will be submitted in English.
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G. Continued Public Participation
357. The EA will continue public involvement throughout the construction and operation phases of the Project. Periodically, public concerns will be solicited and opinions consulted on the impacts of the Project and effectiveness of the mitigation measures taken. Public will also be involved in Project monitoring and evaluation through participatory appraisal approach.
358. The focus of the public participation will be on the affected people, particularly the vulnerable groups. The participation will be conducted through public hearings, neighborhood and community meetings, public opinion questionnaire surveys, organized tours and visits of the public to project sites/facilities, information workshops and public and stakeholder interviews. In addition, all construction sites will be requested to erect bill boards, on which the names, telephone number and other contact information of management personnel will be shown. This would allow the public to timely voice any concerns they may have about the construction activities.
359. As part of the public participation process, information release will continue. The independent environmental monitoring reports, as well as any follow up actions in responding to the reports, will be released to public accessible places such as libraries and community meeting rooms. The public and affected people will be noticed for community meetings and public hearings in advance. The public will have the full access to the information about project construction and operation activities. For example, the directly affected public will be informed ahead of time if night-time construction is to take place to ensure appropriate mitigation measures be taken to address their concerns from those particular activities.
H. Operation and Maintenance
360. The works constructed and equipped under the subprojects will be transferred to the operational responsibility of the participating city; namely for (i) potable water supply systems, and ii) sewerage systems, including wastewater treatment plants and pumping stations and all associated equipment, the assets will all be transferred to the city Vodokanal and (iii) solid waste collection, disposal and management, the assets will be transferred to the city Tazalyk. The EA must ensure that each participating city has effective operation and maintenance arrangements, through its Vodokanal and Tazalyk, for the sustainability of the assets provided under the Project and annual budget allowances must be made for achieving this.
I. Project Performance Monitoring and Review
1. Annual Operation Plans and Financial Review
361. To facilitate project implementation, the EA will prepare by 30 June 2010, and thereafter, by 31 December of each year an operation plan for the next fiscal year. The plan will include (i) proposed budgetary allocations for subproject works, and specifically, the allocation of sufficient counterpart funds from the central government and other sources for timely project implementation; (ii) status of policy actions; and (iii) financing plan for the project activities for
123 TA 7228-KGZ: Issyk Kul Sustainable Development Project Final Report Volume 1 – CLIP the succeeding year. The plan will confirm that the Government has allocated an adequate budget for financing project implementation and recurrent costs.
2. Project Performance Monitoring System
362. The PIOs will implement a project performance monitoring system (PPMS) to evaluate the delivery of the planned facilities and the project benefits accrued. The PIO, with the assistance of the Management Information consultants, will develop comprehensive PPMS procedures and plans in accordance with ADB’s handbook within three months after loan effectiveness. The PIOs, with guidance from the Project Management consultants, will carry out PPMS activities, including the establishment of benchmarks, collection of information, monitoring of benefits, and evaluation of social impact. Data collection will be carried out prior to the start of the physical implementation of the Project and in conjunction with community participation. It will then continue on a regular basis during project implementation until three months after project completion. The results will be incorporated into the project progress and completion reports.
3. Annual and Midterm Review
363. ADB and the Government will jointly undertake annual project reviews to assess progress, identify constraints, and agree on strategies for resolving such constraints. More than one review per year is expected for the first year. In addition, ADB and the Government will carry out a comprehensive midterm review in the second year of project implementation (2012/2013). The Government will ensure that the midterm review is informed of any policy or implementation changes affecting the local governments and the urban infrastructure sector, and if necessary, recommend changes in design and implementation. The midterm review will (i) review the scope, design, and implementation arrangements of the Project; (ii) identify changes needed since the time of project appraisal; (iii) assess implementation performance against project indicators; (iv) review and establish compliance with loan covenants; and (v) identify problems and constraints and, if necessary, recommend changes in the design or implementation arrangements.
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X. PROJECT RISKS AND ASSURANCES
A. Risks
1. Overall Project
364. The following risks could affect the timely implementation, the economic viability, and reduce the available benefits of the Project. The design of the Project will, as far as possible, address and mitigate these points.
365. Potential risks associated with the Project include:
(i) Lack of suitably qualified personnel to staff the PMO and PIO, resulting in poor implementation of infrastructure improvement works; (ii) Slow start-up activities (e.g., in recruiting consultants and setting up the PMO and PIO); (iii) Ineffective information, education and communication (IEC) campaign resulting in poor awareness generation and lack of community support to the Project; (iv) Lack of commitment by city administrations to undertake or implement reforms in urban and financial management, and inability to implement the financial improvement action plan; (v) Insufficient skills of Vodokanal and Tazalyk staff to adequately manage service delivery; (vi) Inability of Government staff to implement the EMMP; (vii) Lack of viability gap fund (VGF) to sustain urban services. (viii) Lack of improvement in hygiene and sanitation habits and an ineffective IEC campaign are major risks that will affect the Project impact. (ix) Amendments and changes to the various city Masterplans, particularly in respect of the new city areas, will result in delays to the Project, alterations in the project scope, reduction in investor confidence and possible adverse effects on economic returns from Project works. (x) Failure to attract any or sufficient bidders for contracts and/or receive bona fida tenders. (xi) Population numbers (including tourists) may deviate significantly from those currently predicted resulting in changes to demand, wastewater flows, waste production, and project scope.
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B. Subproject Risks
1. Water Supply
(i) Per capita domestic water demand and industrial, institutional and commercial water demands may deviate significantly from those currently predicted resulting in changes to water demand. This is especially true if the introduction of domestic and bulk consumer water meters does not occur as rapidly as currently proposed and so measurements of water usage do not occur. Wastage of water may also increase if meters are not fitted as planned. (ii) The UFW reduction programme may not be as successful as predicted and so water losses will be higher than estimated. (iii) The raw water quality may differ in future from the data available now and additional treatment processes may be required and asset surveys may find that the condition of the water supply systems differ from that reported now and additional rehabilitation may be required.
2. Wastewater
(i) Householders may not elect to have their properties connected to the sewerage system thus reducing the anticipated level of wastewater for treatment. (ii) Water demand and usage may be different from that predicted resulting in a variation to quantities of wastewater for treatment. The results of analyses of raw sewage samples may also be misleading and that, once water wastage is under control, the crude sewage will be stronger. In addition, the availability of adequate hydraulic capacity within the trunk sewers and wastewater treatment plant to receive flows arising from the Project areas will be essential. Any delay in the phased implementation of these works, external to the Project, will have repercussions on Project effectiveness. (iii) The end use of final effluents is proposed as feed irrigation flow. However, if the Department of Irrigation fails to effectively operate the irrigation pumping station then effluent flows will accumulate and overflow to streams and rivers and thence to lake Issyk Kul. It is also possible that the limiting quality standard for irrigation water may change and require a higher standard of treated effluent from the STP.
3. Solid Waste
(i) If site investigations reveal that existing landfill site is currently causing significant pollution because of the proximity to the water table, additional remedial works may be required, although this is anticipated to be a low risk given the existing conditions. The Waste Authority is required to satisfactorily remediate the current waste disposal area which is outside the boundary. If the department fails to do this, the current site will continue to cause a nuisance to the neighboring cemetery.
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(ii) The possibility may exist that markets for recyclables are too poor to support significant increases in materials and it will not be economically beneficial for the Waste Authority to separately collect recyclable materials; (iii) The ability of the Waste Authority to understand and adhere to modern landfill operational procedures over the long term is essential to the success of the Project.
C. Mitigation Measures
366. Early establishment of the PMO and PIO, and commencement of surveys for engineering designs and IEC campaign to generate community awareness will mitigate start-up delays. The Prime Minister's Office has direct control over the Project's objectives and will monitor activities improving the urban management and financial performance of cities. Appointing the Ministry of Finance (MoF) as the executing agency cements commitment for viability gap funding as a key line item in the national budget as MoF prepares and disburses funds under the medium-term budgetary framework (MTBF).
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APPENDIX 1 SITE IMAGES
Appendix 1 - Karakol Water Supply
Karakol Existing River Karakol WTP Site
Karakol Reservoir at New River Karakol WTP Site
Karakol Abandoned Reservoir Site
Waste Water
General Views
Wastewater Treatment Plant – Process Units
Sludge Holding Tanks Pumping Sets
Waste Management
Karakol Landfill Location
Karakol Landfill
Karakol Existing Landfill Equipment and Family Accommodation (outside site boundary)
Karakol Landfill Waste Delivery
Karakol Closed Landfill Opposite Existing Site
Karakol Closed Landfill Near Pristan (no defined boundary or map)
Karakol Waste Composition Analysis
Karakol Hospital Waste Storage Area
APPENDIX 2 IMPLEMENTATION SCHEDULE