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Investments in Urban Water Supply 1999 – 2014

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Investments in Urban Water Supply 1999 – 2014 68608 Public Disclosure Authorized Lao People’s Democratic Republic Water Supply and Sanitation Sector Review Public Disclosure Authorized Final dated December 15, 2010 Public Disclosure Authorized Public Disclosure Authorized Sustainable Development Department East Asia and Pacific Region This volume is a product of the staff of the World Bank. The findings, interpretations, and conclusions expressed herein do not necessarily reflect the views of the Board of Executive Directors of the World Bank or the governments they represent. CURRENCY EQUIVALENTS (Exchange Rate Effective September 13, 2010) Currency Unit = Lao Kip (LAK) LAK 1,000 = US$0.122 LAK 8,196.7 = US$1 FISCAL YEAR October 1 – September 30 ACRONYMS AND ABBREVIATIONS ADB Asian Development Bank NPNL Nampapa Nakhon Luang AFD Agence Française de NPSEs Nam Papa State Enterprises Developpement NRW Non revenue water BOT Build-Operate-Transfer NSEDP National Socio-Economic DHO District Health Office Development Plan DHUP Department of Housing and NT Nam Theun Urban Planning NUSDSIP National Urban Sector DPWT Department of Public Works Development Strategy and and Transportation Investment Plan GDP Gross Domestic Product O&M Operation and Maintenance GFS Gravity Fed System OBA Output-Based Aid GRET Group of Research and ODA Official Development Technological Exchange Assistance HH Households PM Decree Prime Minister Decree IMT Implementation and PPP Public-Private Partnership Maintenance Team PRF Poverty Reduction Fund IWG Infrastructure Working Group SNV Netherlands Development JICA Japan International Organization Cooperation Agency UDAAs Urban Development JMP Joint Monitoring Programme Administration Authorities JV Joint Venture UDD Urban Development Lao PDR Lao People’s Democratic Division Republic UNICEF United Nations Children's LDC Least Developed Country Fund lcd Liters per Capita per Day WASA Water Supply Authority MDGs Millennium Development WASH Water, Sanitation, and Goals Hygiene MIREP Mini-Réseaux d’Eau Potable WASRO Water Supply Regulatory Programme (Small Scale Water Office Supply) WHO World Health Organization MoH Ministry of Health WREA Water Resource and MPWT Ministry of Public Works and Environment Administration Transportation WSD Water Supply Division Nam Saat National Center for WSP Water and Sanitation Environmental Health and Program NGO Non Government WSRC Water Supply Regulatory Organization Committee NORAD Norwegian Agency for WSS Water Supply and Sanitation Development Cooperation 1 ACKNOWLEDGEMENT This report was prepared by Ms. Mariles R. Navarro and Mr. Alexandre Bui (Consultants) with assistance from Mr. Klas Ringskog (Consultant). Ms. Julia Fraser was the Task Team Leader for the study to which Messrs./Mmes. Sudipto Sarkar, Sombath Southivong (WB), Joseph Gadek, Viengsamay Vongkhamsao (WSP), Lulu Baclagan, and Xuan-Dung (IFC) also contributed. Ms. Chutima Lowattanakarn helped format the report. The study team gratefully acknowledges financial support from AusAID and the support of the Government of Lao PDR, including the Ministry of Public Works and Transport, Department of Housing and Urban Planning, Water Supply Division and Ministry of Health and Nam Saat. 2 LAO PEOPLE’S DEMOCRATIC REPUBLIC Water Supply and Sanitation Sector Review TABLE OF CONTENTS EXECUTIVE SUMMARY ....................................................................................................... 5 COUNTRY CONTEXT............................................................................................................. 8 LAWS AND REGULATION, AND STRATEGIES ................................................................ 8 1.1 Main Laws and Regulations .................................................................................... 8 1.2 Water Supply Sector Policy and Strategy .............................................................. 10 1.3 Current WSS Models in Practice in the Lao PDR ................................................. 16 SECTOR PERFORMANCE .................................................................................................... 18 2.1 Access .................................................................................................................... 18 2.2 Quality of services ................................................................................................. 20 2.3 Tariffs .................................................................................................................... 21 2.4 Affordability .......................................................................................................... 23 INVESTMENT PRIORITIES AND FINANCING ................................................................. 23 KEY ISSUES AND RECOMMENDATIONS ........................................................................ 27 Annex 1: Map on Status of Water Supply Systems in Urban Centers ..................................... 32 Annex 2: Water Sector Organizational Chart .......................................................................... 33 Annex 3: Linkage between central and local government institutions in the provision of water supply services ........................................................................................................ 34 Annex 4: Percentage of households with access to safe water source, dry season, 2003 – 2008 ................................................................................................................................. 35 Annex 5: Percentage households with access to improved sanitation, 2003 - 2008................ 36 Annex 6: Service Coverage by NPSE, 2008 ............................................................................ 37 Annex 7: NRW estimates by NPSE, 2008 ............................................................................... 38 Annex 8: Financial performance data by NPSE, 2006 - 2008 ................................................. 39 Annex 9: Water tariffs by province (2008), kip/m3 (LAK 1000=US$0.122) .......................... 40 Annex 10: Expectations and Achievements of the 2008 – 2010 Tariff Review ...................... 41 Annex 11: Urban Wastewater Investment Plan, 2009-2020 (Draft) ........................................ 42 Annex 12: Urban Wastewater Investment Plan, Proposed Funding Sources .......................... 43 Annex 13a: Aggregate sector specific cost estimates of meeting MDGs ................................ 43 Annex 13b: Aggregate ministry/authority specific cost estimates of meeting MDGs ............ 44 Annex 14: Review of Current WSS Services Delivery Models in the Lao PDR .................... 45 Annex 15: Goals for Urban Water Supply Sector Road Map……………………………… 59 REFERENCES ........................................................................................................................ 61 3 LIST OF TABLES, FIGURES AND BOXES Table 1: Urban Centers by Population Size ............................................................................. 10 Table 2: UN Coverage Estimates of MDGs for Water and Sanitation .................................... 18 Table 3: Access to Household Connections and Improved Drinking Water Sources ............. 19 Table 4: Sanitation Coverage (%) ............................................................................................ 19 Table 5: Urban Water Supply Targets – Coverage & Population Served (2004 – 2020) ........ 24 Table 6: Sector Investment Plan for Urban Water Supply Projects (2005 – 2020) ................. 24 Table 7: Summary of Key Issues, Recommended Policy Actions and Intended Outcomes ... 27 Figure 1: Investments in Urban Water Supply 1999 – 2014 ................................................... 13 Figure 2: Investments in Urban Water Supply by Source of Financing (1999 – 2014) .......... 13 Figure 3: Capital Expenditure for Rural Water Supply & Sanitation, 2000 – 2009 (in US$ million) ..................................................................................................................................... 14 Figure 4: Capital Expenditure for Rural Water Supply & Sanitation, 2000 – 2009 (in %) ..... 15 Box 1: The MIREP Programme ............................................................................................... 14 4 EXECUTIVE SUMMARY (i) The Lao PDR targets under the Millennium Development Goals (MDGs) are to provide 69% of the total population with access to an improved drinking water source and 63% with access to improved sanitation by 2015, using the 1995 service level estimates as the basis. According to the 2010 WHO-UNICEF Joint Monitoring Programme (JMP), the urban sector is on track to meet the MDG targets since access to improved water supply had reached 72% and access to improved sanitation had risen to 86% in the year 2008. However, the sector risks not meeting the rural MDG targets since access to improved water supply was 51%, and access to improved sanitation trailed at 38% in the year 2008. Although the MDG targets refer to the total population, the discrepancy between the urban and rural sectors is cause for concern in a country where 70% of the population resides in rural areas. (ii) According to the World Bank’s Poverty and Environment Report (2009), the cost to the country of inadequate water and sanitation services is estimated to have been at least 5.6% of GDP in 2006 and possibly as high as 10% of GDP if all costs related to the detrimental effects of child malnutrition are included. About 30 percent of child mortality under the age of five has been attributed to inadequate water supply,
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