Document of The World Bank
Report No: ICR2095 Public Disclosure Authorized
IMPLEMENTATION COMPLETION AND RESULTS REPORT (IDA-37460 IDA-H0340 TF-50943)
ON A
CREDIT
IN THE AMOUNT OF SDR 12.4 MILLION (US$ 16.9 MILLION EQUIVALENT)
Public Disclosure Authorized AND ON A
GRANT
IN THE AMOUNT OF SDR 2.3 MILLION
(US$3.1 MILLION EQUIVALENT)
TO THE
KINGDOM OF CAMBODIA Public Disclosure Authorized FOR A
PROVINCIAL AND PERI-URBAN WATER AND SANITATION PROJECT
February 29, 2012
Sustainable Development Department Southeast Asia Country Department
Public Disclosure Authorized East Asia and Pacific Region
CURRENCY EQUIVALENTS
(Exchange Rate Effective June 30, 2011)
Currency Unit = Riel (KHR) KHR1.00 = US$0.000253 US$ 1.00 = KHR 3,959
FISCAL YEAR January 1 – December 31
ABBREVIATIONS AND ACRONYMS
ADB Asian Development Bank CAS Country Assistance Strategy CC Coordinating Committee (of the Borrower) for Water Supply and Sanitation CfD Center for Development CNDWQS Cambodian National Drinking Water Quality Standards CWG Clean Water Group DBL Design-Build-Lease D&D Decentralization & Deconcentration DFA Development Financing Agreement EA Environmental Assessment EMP Environment Mitigation Plan FMR Financial Management Report GGF Good Governance Framework IDA International Development Agency INT Department of Institutional Integrity (of the Bank) IPA Independent Procurement Agent ISR Implementation Status Report JICA Japanese International Cooperation Agency JSDF Japan Social Development Fund KPI Key Performance Indicator MDGs Millennium Development Goals M&E Monitoring and Evaluation MEF Ministry of Economy and Finance MIME Ministry of Industry, Mines and Energy NGO Non-Governmental Organization OBA Output-Based Aid O&M Operations & Maintenance PAD Project Appraisal Document PDO Project Development Objective PSP Private Sector Participation PWO Private Water Operators PPWSA Phnom Penh Water Supply Authority QAG Quality Assurance Group (of the Bank) QALP Quality Assessment of Lending Portfolio RGC Royal Government of Cambodia SOP Standard Operating Procedures TA Technical Assistance TTL Task Team Leader
WASH Water, Sanitation, and Hygiene WATSAN Water and Sanitation WBI World Bank Institute WHO World Health Organization WSS Water Supply and Sanitation WTC Willing to Connect
Vice President: Ms. Pamela Cox, EAPVP Country Director: Ms. Annette Dixon, EACTF Sector Manager: Mr. N. Vijay Jagannathan, EASIN Acting Sustainable Development Leader: Ms. Julia M. Fraser, EASTS Project Team Leader: Mr. Lixin Gu, EASIN ICR Team Leader: Mr. Lixin Gu, EASIN
KINGDOM OF CAMBODIA Provincial and Peri-Urban Water and Sanitation Project
CONTENTS
Data Sheet A. Basic Information B. Key Dates C. Ratings Summary D. Sector and Theme Codes E. Bank Staff F. Results Framework Analysis G. Ratings of Project Performance in ISRs H. Restructuring I. Disbursement Graph
1. Project Context, Development Objectives and Design ...... 1 2. Key Factors Affecting Implementation and Outcomes ...... 5 3. Assessment of Outcomes ...... 10 4. Assessment of Risk to Development Outcome ...... 15 5. Assessment of Bank and Borrower Performance ...... 16 6. Lessons Learned ...... 19 7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners ...... 20 Annex 1. Project Costs and Financing ...... 21 Annex 2. Outputs by Component ...... 22 Annex 3. Economic and Financial Analysis ...... 24 Annex 4. Bank Lending and Implementation Support/Supervision Processes ...... 29 Annex 5. Beneficiary Survey Results ...... 31 Annex 6. Stakeholder Workshop Report and Results ...... 32 Annex 7. Summary of Borrower's ICR and/or Comments on Draft ICR ...... 35 Annex 8. Comments of Cofinanciers and Other Partners/Stakeholders ...... 44 Annex 9. List of Supporting Documents………………………………………………………45 Annex 10. PPWSA’s Operations Projections…………………………………………………46 Annex 11: Details of the 11 DBL/OBA Water Supply Facilities……………………………..48 Annex 12. PPWSA Water Quality Standards…………………………………………………50 Annex 13. Pictures from the project
Map IBRD 39143 ...... 57
A. Basic Information Provincial and Peri- Country: Cambodia Project Name: Urban Water and Sanitation Project IDA-37460,IDA- Project ID: P073311 L/C/TF Number(s): H0340,TF-50943 ICR Date: 2/29/2012 ICR Type: Core ICR KINGDOM OF Lending Instrument: SIL Borrower: CAMBODIA Original Total XDR 14.70M Disbursed Amount: XDR 11.48M Commitment: Revised Amount: XDR 13.58M Environmental Category: B Implementing Agencies: Ministry of Industry, Mines and Energy (MIME); Phnom Penh Water Supply Authority (PPWSA) and Center for Development (CfD) Cofinanciers and Other External Partners:
B. Key Dates Revised / Actual Process Date Process Original Date Date(s) Concept Review: 06/21/2001 Effectiveness: 11/16/2003 11/16/2003 Appraisal: 02/21/2002 Restructuring(s): 04/14/2010 Approval: 04/22/2003 Mid-term Review: Closing: 06/30/2008 06/30/2011
C. Ratings Summary C.1 Performance Rating by ICR Outcomes: Moderately Satisfactory Risk to Development Outcome: Substantial Bank Performance: Moderately Satisfactory Borrower Performance: Moderately Satisfactory
C.2 Detailed Ratings of Bank and Borrower Performance (by ICR) Bank Ratings Borrower Ratings Quality at Entry: Satisfactory Government: Moderately Satisfactory Moderately Implementing Moderately Satisfactory Quality of Supervision: Unsatisfactory Agency/Agencies: Overall Bank Moderately Satisfactory Overall Borrower Moderately Satisfactory Performance: Performance:
i C.3 Quality at Entry and Implementation Performance Indicators Implementation QAG Assessments Indicators Rating Performance (if any) Potential Problem Project Quality at Entry Yes None at any time (Yes/No): (QEA): Problem Project at any Quality of Yes None time (Yes/No): Supervision (QSA): DO rating before Satisfactory Closing/Inactive status:
D. Sector and Theme Codes Original Actual Sector Code (as % of total Bank financing) Central government administration 15 14.5 Sanitation 5 4.5 Water supply 80 81
Theme Code (as % of total Bank financing) Other human development 17 10 Participation and civic engagement 17 5 Pollution management and environmental health 33 10 Urban services and housing for the poor 33 75
E. Bank Staff Positions At ICR At Approval Vice President: Pamela Cox Jemal-ud-din Kassum Country Director: Annette Dixon Ian Porter Country Manager Qimiao Fan Sector Manager: N. Vijay Jagannathan Keshav Varma Acting Sustainable Julia Fraser Development Leader Project Team Leader: Lixin Gu N. Vijay Jagannathan ICR Team Leader: Lixin Gu ICR Primary Authors: Sati Achath, JoAnne Nickerson
ii
F. Results Framework Analysis
Project Development Objectives (from Project Appraisal Document)
The original PDO was to assist the Kingdom of Cambodia to move forward in fulfilling the Millennium Development Goals1 (MDGs) in water supply and sanitation by 2015.
Revised Project Development Objectives (as approved by original approving authority)
Objective was not revised
(a) PDO Indicator(s)
Original Target Formally Actual Value Values (from Revised Achieved at Indicator Baseline Value approval Target Completion or documents) Values Target Years Resolution of conflicts between districts/customers and operators without Indicator 1 : resorting to contract cancellations in a majority of private sector participation contracts. Two conflicts arose and were Value resolved between quantitative or 0 Not available the CWGs and the Qualitative) operators without resorting to contract cancellations. Date achieved 28-Feb-2002 30-June-2008 30-June-2011 Comments This indicator was included because experience in other countries had (incl. % demonstrated significant risks when conflicts arose and were not resolved, achievement) resulting in contract cancellation and under-achievement of the PDO. Indicator 2 : Operators own equity invested in the lease and OBA contracts Value quantitative or 0 $750,000 US$1.06 million Qualitative) Date achieved 28-Feb-2002 30-June-2008 30-June-2011 Achieved. Nine Design-Build-Lease (DBL) and two Output-Based Aid (OBA) water supply facilities were built in four project provinces. With private Comments operators’ equity for the 11 subprojects, the volume of private financing for (incl. % water supply reached $1.06 million, thereby exceeding the target of $0.75 achievement) million. The equity contribution from private providers was based on the 10% equity requirement for the DBL investments plus the upfront investments for the OBA projects. Indicator 3 : Percentage/Number of households with improved in-house sanitation facilities Value 0 30% 7,147 7,147 sanitation
1 MDG targets were the following: (i) Target 7.10: Increasing the proportion of rural population with access to safe water source from 24% in 1998 to 50% in 2015; and (ii) Target 7.12: Increasing the proportion of rural population with access to improved sanitation from 8.6% in 1996 to 30% in 2015.
iii quantitative or sanitation facilities Qualitative) facilities
Date achieved 28-Feb-2002 30-June-2011 30-June-2011 Comments Achieved. This indicator was originally a percentage but was changed to an (incl. % output following M&E difficulties after 2006. achievement) Original Target Formally Actual Value Values (from Revised Achieved at Indicator Baseline Value approval Target Completion or documents) Values Target Years Average no. of consumers satisfied with service performance after systems are Indicator 4 : operational. Water quality 92% Value (Excellent 46%; quantitative or 80% Good 46%) Qualitative)
Date achieved 28-Feb-2002 30-Jun-2008 30-Jun-2011 Comments (incl. % Achieved. See Section 3.6 achievement) Phnom Penh Water Supply Authority (PPWSA) maintains a Working Ratio of Indicator 5 : less than 0.50 during project implementation Value quantitative or 0.26 <0.50 0.39 Qualitative) Date achieved 30-Jun-2008 30-Jun-2011 Comments (incl. % Achieved in 2008 and maintained ever since achievement) PPWSA maintains a debt service ratio greater than 1.3 during project Indicator 6 : implementation Value quantitative or 0 >1.3 3.18 Qualitative) Date achieved 30-Jun-2008 30-Jun-2011 Comments (incl. % Achieved achievement)
iv
Indicator 7 : Consumers in approximately 20 participating towns are provided with sanitation (New Indicator services, while consumers in 16 towns/communities in participating provinces after project and peri-urban areas of Phnom Penh are provided with clean and sustainable restructuring) water supply.
Sanitation: 20 Sanitation: 20 Value towns towns quantitative or 0 N/A Qualitative) Water Supply: Water Supply: 16 16 towns towns Date achieved 30-Jun-2011 30-Jun-2011 Comments (incl. % Achieved achievement)
(b) Intermediate Outcome Indicator(s)
Original Target Formally Actual Value Values (from Revised Achieved at Indicator Baseline Value approval Target Completion or documents) Values Target Years Communities with services managed through OBA, lease and management Indicator 1 : contracts Value 20 OBA/DBL 11 OBA/DBL 11 OBA/DBL quantitative or 0 facilities. facilities. facilities. Qualitative) Date achieved 28-Feb-2002 30-June-2008 30-June-2011 30-June-2011 Comments Achieved. Original target in the PAD was 20 communities. In 2006, 18 systems (incl. % were procured, but misprocurment was declared in 7 of them. The remaining 9 achievement) DBLs and 2 OBAs were completed and are operational. At least 60% of households in service area receive improved water supply Indicator 2 : services Value quantitative or 0 15,200 households 11670 households Qualitative) Date achieved 28-Feb-2002 30-June-2008 30-June-2011 Comments (incl. % Partially Achieved. See Section 3.2 achievement) Indicator 3 : People benefit from 20 clean water groups (CWG) representing 149 villages in (New Indicator 20 towns through improved capacity in undertaking their role and responsibility after after as social intermediaries, through which contractual disputes are mediated and project resolved. restructuring) CWGs: 20 People benefited Value Villages: 149 from 20 CWGs quantitative or NA Towns: 20 representing 149 Qualitative) villages in 20 towns Date achieved 30-Jun-2011 30-Jun-2011 Comments Achieved
v (incl. % achievement) Indicator 4 : A fully functional financial management system in MIME and PPWSA PMO.
To set up a To set up a fully fully A fully functional Value functional financial functional financial quantitative or 0 management financial management system Qualitative) system in PPWSA management was in place in PMO system in PPWSA PMO PPWSA PMO Date achieved 30-Jun-2008 30-Jun-2011 30-Jun-2011 Comments (incl. % Achieved achievement)
G. Ratings of Project Performance in ISRs
Actual Date ISR No. DO IP Disbursements Archived (USD millions) 1 06/05/2003 Satisfactory Satisfactory 0.00 2 11/25/2003 Satisfactory Satisfactory 0.00 3 05/18/2004 Satisfactory Satisfactory 0.79 4 12/17/2004 Satisfactory Satisfactory 0.98 5 06/14/2005 Satisfactory Satisfactory 1.52 6 06/20/2005 Satisfactory Satisfactory 1.52 7 02/17/2006 Satisfactory Moderately Satisfactory 4.50 Moderately 8 06/29/2006 Satisfactory 5.47 Unsatisfactory Moderately Moderately 9 06/28/2007 7.58 Unsatisfactory Unsatisfactory 10 06/27/2008 Moderately Satisfactory Moderately Satisfactory 10.99 11 04/30/2009 Moderately Satisfactory Moderately Satisfactory 11.93 12 05/18/2010 Moderately Satisfactory Moderately Satisfactory 11.94 13 06/16/2011 Satisfactory Satisfactory 15.71
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H. Restructuring (if any)
ISR Ratings at Amount Board Restructuring Disbursed at Restructuring Reason for Restructuring & Approved Restructuring Date(s) Key Changes Made PDO Change DO IP in USD millions March 29, See Section 1.7 MS MS 10.99 2010
I. Disbursement Profile
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1. Project Context, Development Objectives and Design
1.1 Context at Appraisal
At appraisal in 2003, Cambodia was still suffering from the fall-out of 30 years of social disruption, genocide and international isolation. Despite several years of relative peace, poverty remained extreme with per capita income at $276 per annum, and 36% of the population living below the poverty line. The national physical infrastructure lay in ruins. Donors had begun basic rehabilitation and sectoral institutional rebuilding at the national level. However, lack of access to basic services, such as clean water and sanitation was revealed in Cambodia’s very low human development indicators and coverage rates under the Millennium Development Goals (MDG) for those sectors.
Inadequate coverage of safe water and sanitation. In Phnom Penh, the Phnom Penh Water Supply Authority (PPWSA) was the utility in charge of public provision of water. With investments from various donors, including the IDA-financed Urban Water Supply Project (Cr. 3041-KH), PPWSA was able to increase coverage and expand services to the urban poor. Unfortunately the success of PPWSA could not be replicated in provincial water utilities. There, coverage was very low, financing minimal, and institutional capacity practically nonexistent, resulting in water service coverage rates of only 15%. At this level of coverage, people resorted to self-provisioning, and in many cases, they entered long-term arrangements with service vendors on payment of service fees. As for sanitation, open defecation was commonly practiced. Those who could afford it constructed pit latrines and septic tanks for their houses.
Private provision of water. Over the decade preceding appraisal, with the return of peace, refugees returned and towns and peri-urban communities grew rapidly. Private entrepreneurs saw unfulfilled demand for water and started investing in piped water supply infrastructure to serve the expanding market. Many operators invested significant sums of money, but pumped poorly or untreated water into communities. In the absence of an adequate regulatory framework, low quality and inequitably distributed service resulted, and the poor were unable to afford market- based tariffs.
As outlined in its sector policy framework, the Royal Government of Cambodia (RGC) stated its mission in the water supply and sanitation sector as one of ensuring that all residents have access to efficient, equitable and sustainable water and sanitation services. However, financing the necessary infrastructure to fulfill that mission was a daunting challenge, as government resources were meager and available donor cofinancing was woefully inadequate. Therefore, RGC decided to redefine its role from that of public service provider to one of facilitator and regulator of autonomous water utilities in the public and private sectors, in order to tap all available financing resources. RGC sought a project to operationalize its sector policy framework that would (a) provide communities with options for choosing the level of water and sanitation service they wanted and were willing to pay for; (b) institutionalize consumer voice in decision-making (setting tariffs and service levels, overseeing private operators) through the creation of community-based Clean Water Groups (CWGs); and (c) create incentives for sustainable service provision through Cambodia’s private sector water enterprises. The project would also help mitigate the anti-poor bias of existing tariff policies and develop appropriate sanitation policy for provincial towns to reduce fecal contamination and associated health hazards.
Rationale for Bank assistance: The Country Assistance Strategy (CAS), discussed by the Board in February 2000, had four key thrusts: (a) supporting good governance, through measures in the Governance Action Plan, including decentralization of political authority and de-concentration of
1 administrative responsibilities; (b) building physical infrastructure; (c) rebuilding human capital; and (d) facilitating private sector development. The project supported all four thrusts.
1.2 Original Project Development Objectives (PDO) and Key Indicators
The objective was to assist the Kingdom of Cambodia to move forward in fulfilling the Millenium Development Goals (MDGs) in water supply and sanitation by 2015. The key indicators given in the PAD were:
At least 15 additional communities with Output-based Aid (OBA), lease and management contracts by the end of project; At least 60% of households in the service area receive improved water supply services after completion of subprojects; At least 30% of households have improved excreta disposal arrangements after completion of subprojects; Majority of contractual disputes with operators mediated and resolved by Clean Water Groups (CWGs); and Volume of private financing for water supply infrastructure equals or exceeds $0.75 million.
1.3 Revised PDO (as approved by original approving authority) and Key Indicators, and reasons/justification
The PDO was not revised, but the key indicators were modified in the 2010 restructuring. Details are in Section 1.7.
1.4 Main Beneficiaries
At appraisal, primary beneficiaries were estimated at about 100,000 mainly low-income residents of provincial towns and peri-urban areas of Phnom Penh through improved water supply services and improved excreta disposal arrangements. Secondary beneficiaries included PPWSA, which would benefit from (a) expanded water supply infrastructure in peri-urban areas of Phnom Penh, and (b) institutional capacity building in the construction of elevated tanks. Another secondary beneficiary were the CWGs, who would benefit from institutional capacity building to enable them to target the needs of vulnerable groups; promote greater participation and transparency in planning and decision making at grassroots level; create a sense of community ownership and responsibility of infrastructure; and enhance their organizational capacity to maintain oversight of the system operators. The Ministry of Industry, Mines and Energy (MIME), also stood to benefit from technical assistance (TA) in project management, procurement, financial management and monitoring and evaluation. Finally, the Cambodian private water operators (PWOs) would benefit as the project aimed at facilitating a robust track record of successful deals. After the 2010 restructuring, an additional secondary beneficiary was the NGO, Center for Development (CfD), who gained experience in procurement and construction of latrines. The final number of primary beneficiaries is estimated at about 133,350 for improved water supply and 43,500 for improved sanitation.
2 1.5 Original Components
As shown in the Development Financing Agreement (DFA), the project had two components.
Part A: Provincial Water Supply and Sanitation (implemented by MIME, total cost: $16.5 million). This programmatic component would finance the costs of civil works for improving water supply systems in participating provincial towns and districts, and consisted of three sub- components:
Part A.1 was to finance civil works and equipment in water supply infrastructure and piloted two approaches: (a) Output-based Aid (OBA), and (b) preparation of feasibility studies, preliminary design, and Design-Build and Lease contracts (DBL).The constructed systems would be primarily operated and managed, as far as practicable, through lease and management contracts with PWOs (US$12.5 million).
Part A.2 was to finance on-site sanitation facilities at the household level, including the collection, treatment and disposal of wastewater flows due to augmented water supply. These improvements would use a community-driven process, supported by capacity building in CWGs who would disseminate knowledge on hygiene education and the importance of safe disposal of human waste to communities, once the corresponding water supply facilities were improved (US$1.0 million).
Part A.3 supported MIME by providing TA for institutional capacity building in procurement, auditing and accounting; construction management and supervision; preparation of additional water supply facilities; and the provision of office equipment and vehicles (US$3.0 million).
Part B: Peri-Urban Water Supply (implemented by PPWSA, total cost: $6.70 million), comprised two sub-components:
Part B.1 would finance new investments in civil works and goods to expand water supply in the Municipality of Phnom Penh. Five peri-urban communities (Svay Pak, Samraong Kraom, Trapeang Krasam, Dangkao and Cheung Aek) were to be provided with water supply services with pipeline extensions from PPWSA’s distribution network. Part B.1 also continued the pilot program of making house connections in low-income communities, a program started under the Cambodia Urban Water Supply Project (US$6.4 million).
Part B.2 supported project management through the provision of TA for supervision of construction works under Part B.1 (US$0.3 million).
1.6 Revised Components
Under the 2010 restructuring, Parts A.1 and A.3 were curtailed due to misprocurements and their undisbursed balances were used to scale up Parts A.2 and Part B. Details are in Section 1.7.
1.7 Other Significant Changes
Project Restructuring. From July 2004 to September 2005, the Bank undertook a fiduciary review of its Cambodia portfolio. Eventually the Bank’s Department of Institutional Integrity (INT) conducted further investigations which uncovered evidence of corrupt, collusive and fraudulent practices in seven Bank-assisted projects including this one. On June 6, 2006 the Bank issued a letter declaring misprocurement on seven ongoing contracts (three DBL and four OBA contracts, all with the same operator) under Part A.1, and issued a partial suspension of Parts A.1 and A.3 of the project. A partial refund of disbursed funds was requested, including SDR 49,534.94 from the Credit and SDR 16,297.60 from the IDA Grant.
3 After the declaration of misprocurement, MIME decided not to pursue any further procurement under Parts A.1 and A.3. RGC then proposed that the remaining funds in Parts A.1 and A.3 be reallocated to Part A.2 to scale up the provincial sanitation services to poor households and to Part B to expand water supply connections to the poor in the peri-urban areas of Phnom Penh in order to continue making progress toward the MDGs. The Bank agreed with the proposed restructuring, which was finally approved by the Executive Directors on a no-objection basis on April 14, 2010. Under the restructuring:
the Provincial Water Supply Component (Parts A.1 and A.3 implemented by MIME) was closed and the undisbursed balance of SDR 5.18 million was reallocated. SDR 0.29 million was transferred to Part A.2 to scale up the sanitation component to build 6,072 additional toilets. SDR 4.89 million was reallocated to Part B to expand water supply services to another 8,436 poor households through additional pipes and connections in the Greater Phnom Penh area;
the wording of the PDO in the DFA was amended to exactly match the one in the PAD;2
MIME relinquished its role as an implementing agency, but did retain project coordination and oversight activities. Part A.2 was implemented by CfD and Part B by PPWSA; and
the KPI were changed as shown below. The first indicator was reduced to 11 additional communities as that was the number of successfully awarded contracts to-date without misprocurement. The second indicator was changed from a percentage to a simple output target because the denominator was not available.
Outcome /Impact Indicators, PAD Outcome/Impact Indicators, Restructuring Paper
At least 15 additional communities with At least 11 additional communities have services OBA, lease and management contracts by the managed through OBA, lease and management end of project contracts by the end of project in the project provinces and total 708 km pipelines. At least 60% of households in service area 11 communities in project provinces and 15,200 receive improved water supply services households in peri-urban areas of Greater Phnom Penh with connections to improved water supply services and other infrastructure facilities. Majority of contractual disputes mediated People benefit from 20 CWG representing 149 villages in and resolved by CWGs 20 towns through improved capacity in undertaking their role and responsibility as social intermediaries, through which contractual disputes are mediated and resolved. Adverse environmental impacts due to Total 7,147 sanitation facilities constructed and installed wastewater and sanitation problems absent in in 20 communities to benefit 42,974 people in total. project towns (These had the effect of mitigating adverse environmental impacts.) Project FM System fully operational in A fully functional financial management system in MIME and PPWSA PMOS. PPWSA PMO.
Project Schedule. The closing date of the project was extended twice. It was extended the first time for two years, from June 30, 2008 to June 30, 2010, so that PPWSA could complete the expansion of its distribution networks and the construction of an elevated water tank near Ta
2 The DFA stated the PDO as: "The objective of the Project is to assist the Borrower to achieve its Millennium Development Goals through implementation of its Socio-economic Development Plans with respect to public potable water supply and sanitation". 4 Khamo, and to make full use of the remaining balance of Part A, which was to be transferred to PPWSA and the CfD, once the restructuring was completed. The closing date was extended a second time to June 30, 2011 to enable completion of all the new activities added under the restructuring.
Good Governance Frameworks. As part of the restructuring, Good Governance Frameworks (GGFs) were prepared and agreed with PPWSA and CfD in December 2009. Their main features consisted of actions to mitigate risks related to eight elements which included: procurement; financial management; disclosure; civil society role; a complaints and remedies mechanism; a code of ethical conduct for staff; sanctions; and various project specific issues.
2. Key Factors Affecting Implementation and Outcomes
2.1 Project Preparation, Design and Quality at Entry
Preparation. As part of project preparation, the sectoral background was studied, the main sector issues were analyzed in depth, and RGC’s strategies to deal with water and sanitation issues were considered. The project was the product of several years of consistent engagement in the water sector with RGC through its Coordination Committee. The approval of the water supply policy framework in 2000, and excellent performance of PPWSA under the first project (and in partnership with other donors) illustrated borrower commitment to the sector. Project preparation was carried out with a grant of US$540,000 from the Japanese Social Development Fund (JSDF) to prepare feasibility studies and preliminary designs for approximately 18 water supply and sewerage infrastructure subprojects.
Project design was innovative for Cambodia where private sector provision of water supply was to be used by the Bank for the first time. However the design had only two components and two main implementing agencies, both with prior Bank experience, so it was not overly complex. Originally the project design included a municipal sanitation component for Phnom Penh because it was feared that increased water supply could augment sanitation problems. However, the Bank rightly decided to drop that component to maintain primary focus on ensuring access to water, especially for poor households.
The Bank incorporated lessons learned from other operations in the sector and region. One lesson was on developing partnerships between the public and private sector. The Bank designed the project to capitalize on the vibrant private sector presence in water supply provisioning using two approaches, the Design-Build-Lease (DBL) scheme, and the Output-based aid (OBA) scheme. Under the DBL schemes, it was thought that the contractors would be more careful with the design and construction if they were also responsible for maintaining the system. (At the time, this contracting arrangement was being successfully demonstrated in the Philippines.) For the OBA contracts, it was thought that they could decrease the reliance on government funding because the private sector would finance the trunk lines and the primary and secondary networks, leaving IDA funds to finance the actual connections, and OBA operators would not pay lease fees to RGC. Both systems had mechanisms to lead to sustainability.
Another lesson was the importance of community-driven development. Project preparation incorporated the beneficiary participation by establishing the CWGs who were empowered to speak on behalf of their communities. A second JSDF Grant (TF50943) of US$773,900 for Capacity Building and Basic Service Provisioning to Water Groups was obtained in early 2003 to assist the CWGs. Community participation was also used when preparing the Environmental Assessments (EA) and the EA sections of the Operational Manual.
Safeguard preparation was done to a high standard especially for a category “B”. Twenty-four good quality EAs with environmental management plans were drawn up for different size
5 projects (above and below 2000 connections). An Indigenous Peoples’ Framework as well as a Policy Framework on Involuntary Resettlement and Compensation for Land and Other Assets were also prepared to satisfactory standards and disclosed.
Risks assessment. The main risk assessment in Section F of the PAD identified the risk of political interference in bidding and during the operational phase as “moderate”, but the risk of potential corruption related to procurement was not identified. However, the procurement risk assessment in Annex 6A of the PAD appropriately assigned a “high” rating and proposed special procurement missions, post-reviews and audits to help mitigate the risk. This risk was borne out during implementation, when it became a major factor in the decision to curtail Part A.
Quality at Entry shortcomings. First, the project design did not include TA operations to train prospective private operators in Bank procurement procedures and to assist them with preparation of responsive technical and financial bids. At appraisal, it was thought that the Mekong Private Sector Development Facility would help train bidders, but no special arrangements were made to provide access to that training. A more carefully targeted TA might have enhanced private sector response, and possibly reduced the temptation for collusion, particularly on preparation of financial bids, an onerous task for nascent private operators. Second, the PDO was over-stated for this small a project to move the country forward in meeting its MDGs in the water sector and sanitation. A simpler formulation might have been “to improve access to water supply and sanitation in the project areas”. Also the PDO in the PAD and the DFA should have been identical. Third, some of the KPI were not well linked to the actual PDO and social indicators were missing. For example, the KPI on resolution of conflicts was not clearly linked to fulfilling the MDGs in water. Fourth, a water consumption survey which was done during project preparation stage was too optimistic in its assumption on the water consumption rate. As water consumption has deep financial implications, conducting such a survey could have avoided the possibility of over estimating consumption. Finally, some of the community consultations were conducted too early in project preparation, and a fair number of poor households in the participating provinces were missed and could not benefit from the project. On the whole, however, the project’s innovative design was well targeted to the country’s needs and RGC’s objectives for the sector, and these shortcomings did not diminish the project’s ability to provide access to water and sanitation, as witnessed by the substantially larger number of final beneficiaries compared to the appraisal estimate. Therefore, this evaluation agrees with the 2008 assessment of the Quality Assurance Group (QAG) that quality at entry was satisfactory.
2.2 Implementation
Role of the CWGs in implementation. The CWGs played a pivotal role in project implementation. At a time when political patronage was the norm, when community-based organizations were virtually nonexistent, and when community participation was constrained by skepticism and the challenges of daily survival, the volunteer members of the CWGs rose to the occasion, breaking down barriers and helping communities express demand for improved water supply services. In particular:
(a) In areas where CWGs were formed prior to finalizing network designs, poor households (or more of them) were included compared to those sites where CWGs were absent during preparation; (b) The selection of CWG representatives through election, resulted in a pool of enthusiastic, committed individuals who were (and continue to be) willing to work without compensation. These individuals found fulfillment in helping their communities access safe water, and became empowered through their exposure to new knowledge and experiences; and (c) The baseline surveys and maps initially prepared by CfD and updated by CWGs and other community representatives were used to monitor progress on service coverage, including those of poor households, and on the health-related conditions of the communities. These
6 surveys and maps promoted transparency of information as they were prepared and updated with community involvement.
At project’s end, many CWGs had budgets and work programs, and some CWG members had been promoted to community councilor positions. The CWGs clearly played a key role in the project’s success and their use should be considered in any future water project in Cambodia.
Role of CfD. A local NGO, CfD, was hired to facilitate the process of forming and training CWGs as community intermediaries in each identified service area. CfD played an important role in helping the CWGs realize their potential through raising awareness about the importance of clean water and proper hygiene, which were instrumental in creating and maintaining demand for those services in provincial areas. After the restructuring, CfD was designated as an implementing agency and oversaw the installation and construction of latrines.
Timing of demand surveys. The DBL project preparation and implementation process did not sufficiently include the poor families in the project areas. The initial water demand surveys to identify those households willing to connect (WTC) were conducted about two years prior to project start-up, before the communities in general, and the poor families in particular, had any real awareness of the benefits of safe water supply. The consequence was that in DBL project areas, many poor families did not appear on the WTC list, and as a result did not qualify for a free connection under the terms of the DBL contract. When these families became aware of the benefits of safe water and wanted to connect to the system, the operator was entitled to charge a connection fee (around $45) and receive a deposit ($50-$100), neither of which was affordable to poor households. For these reasons, some eligible households could not benefit from the project.
Challenges for small-scale water supply systems. During implementation, the PWOs faced several challenges, both financial and physical: (a) the upfront connection fee (US$45-60/per connection) and the additional meter connection fee (US$0.25/per meter for houses over 20 meters from the main pipe) were reported as serious obstacles to service expansion; (b) the relatively small number of connections, low household water consumption rates and high operating costs due to rising prices of fuel (for diesel generators) and chemicals, as well as labor costs and their inability to raise tariffs, made it difficult for PWOs to achieve financial viability. (However, in the absence of data on the financial situations of PWOs, the extent to which these factors affected their financial position is unknown.) Geological challenges included unproductive boreholes and water resource stress which made it difficult for some PWOs to access reliable water sources and maintain good water pressure and expand service coverage.
Impact of suspension. Shortly after misprocurement was declared in June 2006, the Bank downgraded the project to Moderately Unsatisfactory where it remained until June 27, 2008. The project's suspension was lifted on January 30, 2007 after RGC took all measures under the anti- corruption plan, including the engagement of a Procurement Compliance Auditor, use of the services of an independent procurement agent (IPA) except under Part A.2 and Part B of the Project, and adoption of the GGF. The Bank also insisted that overdue financial audit reports be submitted before management would consider a requested two year extension of the closing date, needed to complete a number of pending activities. After these incidents, MIME, no longer an implementing agency, appeared to lose interest in day-to-day oversight of the project and did not fully meet its monitoring and evaluation role, leading to lack of information on the implementation of the DBL/OBA component.
Lack of progress on water regulatory law. Another unfortunate outcome of the suspension related to Part A was that progress stalled on the draft Water Supply and Sanitation Regulatory Law, which was covenanted to be submitted to the National Assembly for approval by December 31, 2003. The draft law had been discussed with representatives of the Bank, Asian Development Bank and civil society and was finalized in English on November 12, 2004. However delays ensued and MIME and the Ministry of Economy and Finance (MEF) did not move forward with 7 submission to the National Assembly. After the June 2006 suspension, RGC seemed to become extremely cautious about private sector involvement as defined in the draft law, and the DFA covenant was never met.
Bank performance in supervision. After lifting the suspension in January 2007, implementation progress was very slow until after the April 2010 restructuring. According to the Quality Assessment of Lending Portfolio (QALP) carried out in October 2008 by QAG, the lack of progress was due to the strained relationship between the Bank and RGC resulting from the INT investigation and the high turnover of Task Team Leaders (TTL), with three TTLs between the suspension and Credit Closing. Supervision was inconsistent, inadequate and under-budgeted for a problem project. The restructuring took too long to complete, and this was partially responsible for the three extra years required to complete the project. (Details are provided in Section 5.1(b).)
2.3 Monitoring and Evaluation (M&E) Design, Implementation and Utilization
Design. Most of the project’s five core KPI were clearly defined with four of the five having specific targets, although no baselines were available. However, as this was a pro-poor project, social indicators (i.e. increase in water connection coverage) would have been desirable. One KPI, “majority of contractual disputes with operators mediated and resolved by CWG” was not well defined, as it was not clear what constituted a “dispute” or what “resolved” really meant. (The genesis of this KPI lay in the fact that many private sector water supply contracts were canceled in other countries such as the Philippines and Argentina, and those cancelations led to under-achievement of the PDO.) Regarding the two financial performance covenants for PPWSA, it was not entirely appropriate to include these as there was no TA to help PPWSA with meeting those covenants. Generally the three implementing agencies -- PPWSA, MIME, and CfD -- had adequate methods for collecting data related to their individual indicators.
Implementation. All three implementing agencies had adequate arrangements for providing timely monitoring and progress reports. They regularly collected data according to the indicators developed during preparation and those redesigned in the restructuring. MIME collected and analyzed data appropriately until its implementation responsibilities were curtailed in 2006. Project data were closely monitored and reported. Actual figures were compared with target values for the purposes of making implementation adjustments.
Utilization. Appropriate data collected by the implementing agencies from monthly and quarterly reports of indicators was evaluated and used for decision-making on certain activities. For example, PPWSA used its data to develop a new pool of water connections and to track progress on reducing Non Revenue Water (NRW). Likewise, CfD used the data collected from the pilot program financed under the JSDF Grant to identify additional households eligible for sanitation facilities after that component was scaled up in the restructuring.
2.4 Safeguard and Fiduciary Compliance
Safeguards. As mentioned above, the project had available a “Policy Framework on Involuntary Resettlement and Compensation for Land and Other Assets” as well as an “Ethnic Minorities Development Strategy and Indigenous Peoples Framework” but neither came into play during implementation as the project was not implemented in sensitive areas and did not require resettlement. Land acquisition for well construction and treatment plants under Part A of the project was minimal because one of the subproject selection criteria was readily available land for infrastructure. The necessary land acquisition involved very small plots (in several cases 3m x 4m). Land was acquired by (a) private to public contribution (gift) to the project, (b) public to public transfer (school land given over to water infrastructure), or (c) commune chief transfer to provincial level MIME. The necessary public consultations were carried out and land transfers were officially documented. As far as implementation of the EA goes, Bank environmental 8 supervision was fair during the years before the suspension, and very weak thereafter, as pointed out in the QALP assessment. However, due to the close proximity of PPWSA’s works and the very small nature of the DBL/OBA works, any environmental impact was likely inconsequential and temporary.
Fiduciary. The project experienced major fiduciary issues with misprocurement being declared on seven contracts as stated in Section 1.7. Another procurement issue arose in the final year of the project when CfD undertook procurement of toilet construction materials. A number of deviations in the bid evaluation process arose and one bidder registered a complaint. Eventually the procurement process was canceled and the procurement was re-bid successfully by the IPA.
In addition, the audit reports for MIME for November 16, 2003 to December 31, 2006 and for January 1, 2007 to June 30, 2008 were not received until August 2008. Part of the reason the first extension and the restructuring were held up was because these audit reports were overdue.
2.5 Post-completion Operation/Next Phase
PPWSA is a state-owned, autonomous utility which is financially and institutionally strong, and is considered a model water utility in the region. As shown in the three key performance indicators below, its performance improved significantly between 2003 and 2011, and it is in a stable position to carry out operation and maintenance (O&M) and serve its debt.
Key Operating and Financial Performance Indicators\Year 2003 2004 2005 2006 2007 2008 2009 2010 2011 Water Losses 5.85 17.11 14.1 9.17 7.38 6.24 6.19 5.94 5.85 (NRW, %) Operating Ratio 0.26 0.27 0.29 0.34 0.36 0.39 0.36 0.37 0.40 Debt/Equity Ratio 0.22 0.29 0.30 0.30 0.29 0.33 0.37 0.37 0.40 (time) Source: PPWSA
PPWSA’s efficiency improvements are mainly due to its success in reducing Non Revenue Water (NRW). The pipes and water connections financed under the project have allowed PPWSA to reduce its NRW to 6%, which further improved its financial strength. In addition, PPWSA continues to make regular investments to control NRW using in-house financing. It has a system where consumers can report on leaks and illegal connections, and it has an efficient system of responding to complaints as well as incentive mechanisms for staff. Also, the company monitors growth in the number of consumers and consumption. It is possible that, with the steady growth in consumption, economies of scale and continuous improvement in operational efficiency, a tariff increase does not have to be a priority at this stage to maintain financial viability. PPWSA keeps detailed performance indicators and will continue to use these to monitor and improve its performance. (See Annex 10 for these indicators and PPWSA’s financial projections.)
DBL/OBA facilities. All 11 facilities are currently sending water samples to MIME every quarter, for verification that their water quality is meeting Cambodian National Water Quality Standards as agreed during project implementation (see Annex 12). After MIME performs its verification, it issues a certificate of compliance to the facility. If a problem arises, MIME expects the water utility to correct the problem and report on how the problem was addressed in the next quarterly report. (Compliance is not universally shared with the CWGs but should be to build and maintain trust.) Performance of the PWOs will be monitored against the service standards defined in section 4.6 of their lease agreements which include professional engineering, accounting, and consulting standards; sound management, commercial, technical and engineering practices; and appropriate technology and safe and effective equipment and methods. MIME will continue to be responsible for contract administration and regulation until a bill on establishing a water regulator is passed into
9 law. Expansion of the small water facilities is somewhat unlikely given low tariffs and rising costs as discussed above.
CfD has gained ample experience in community water supply and sanitation through its work with the CWGs. CfD organized several wrap-up workshops involving CWGs and Coordinating Committee members and mobilized an exit strategy, which consisted of training and workshops to households for proper maintenance of sanitation facilities constructed under the project. It mobilized funds to facilitate its exit strategy plans for integrated community development. CfD has added value to CWG’s social intermediary role by introducing income-generating community development activities and measures to improve quality of life.
Sanitation facilities. Individual households are responsible for maintaining their toilets. Through the project CfD provided training on proper latrine maintenance as well as simple owner’s manuals. In addition, many households built superstructure for the toilets with their own financing. No environmental problems have arisen or are envisioned.
Follow-on project. No follow-on project is under preparation, but the Bank has been conducting a sector study on Cambodia’s water and sanitation sector, focusing on urban water supply, urban sanitation, and rural water supply and sanitation, to advise RGC on options for the direction and reform of the sector. MIME, Ministry of Public Works, MEF, Ministry of Rural Development, PPWSA, provincial water supply authorities, PWOs and other development partners have participated in this comprehensive review.
Future impact evaluation. An impact evaluation should be conducted by June 2013 (two years after closing) in order to assess the sustainability of the project’s achievements, particularly those of the DBL/OBA component, in view of the current lack of data and a regulatory framework.
3. Assessment of Outcomes
3.1 Relevance of Objectives, Design and Implementation
The PDO remains highly relevant to Cambodia’s economic and social development and appropriate to the country’s current needs in water and sanitation sectors. Cambodia’s health indicators in terms of access to clean water and sanitation remain among the lowest in East Asia and on par with those seen in Sub-Saharan Africa. RGC’s objective for the sector is still to increase access to clean water and sanitation in order to improve its health-related statistics.
Due to ongoing relationship issues, the Bank and Cambodia do not have an up-to-date CAS, but the project remained consistent with last CAS discussed by the Board in April 2005. In particular, the PDO was fully consistent with CAS Pillar II on supporting a strategy and investments needed to attain the Cambodia MDGs by supporting poverty reduction and by supporting under-funded sectors, notably the water and sanitation sector. The CAS showed a proposed Second Provincial and Peri-Urban Water and Sanitation Project foreseen for 2008 with an IDA allocation of US$15 million, and preparation of that project had indeed begun with strong demand for the DBL/OBA component from the provinces.
3.2 Achievement of Project Development Objectives
Overall rating: Moderately Satisfactory
The PDO of helping the borrower move toward fulfilling the MDGs in the water sector was very broad for such a small project, and the project’s exact contribution in percentage terms cannot be pinpointed. However, Cambodia has made good progress between appraisal and completion, and
10 this project contributed to that success if only modestly. The baseline and latest known estimates are provided below:
Indicator Baseline MDG # Additional people 2015 progress as with access as a Targets of 2008* result of project Proportion of rural 24% 56% As of 2008: 107,310 50% population with access (1998) As of 2011: 133,350 to safe water sources Proportion of rural 8.6% 18% As of 2008: 5,375 30% population with access (1996) As of 2011: 40,000 to improved sanitation (plus additional 3,500 from neighboring villages) *Latest available figure from WHO-UNICEF Joint Monitoring Programme for the MDGs
Water Related Achievements. The project as a whole provided approximately 26,670 households, or about 133,350 people, with access to safe water supply. This figure exceeds the appraisal estimate of 100,000 beneficiaries, although implementation took three years longer than expected. Details by component follow.
Part A – MIME component. Although 18 subprojects were bid and works had begun, only nine DBL and two OBA water supply schemes were completed, thereby meeting the target of the restructured project. These schemes are operating and are serving approximately 15,000 households, or 75,000 people (56% of the project total).
According to a consumer satisfaction survey carried out in May 2011, approximately 86% of consumers found the water supply service at least acceptable, which compares well with the target of 80%. Although no statistics are available, it was reported that tap water generally complies with Cambodian National Water Standards as verified by MIME. Tap water is used for nearly all household purposes, and in some cases, for livestock maintenance. The cost of using tap water (1,500 to 3,000 Riel/m3) is widely accepted (although not in every case) and thought to be reasonable, based on the interviews with commune leaders, village heads, clean water group representatives and villagers.
CWGs in 20 service areas in 149 villages improved their capacity in undertaking their role and responsibilities as social intermediaries among their communities and local authorities and PWOs, thereby preventing major conflicts that could have resulted in terminated contracts with the PWOs.
Part B – PPWSA component. The project financed 629 km of pipelines, of which 299 km were done before March 2010 and 300 km after that date, plus one elevated water tank to aid water distribution and 11,670 house connections.. This infrastructure expanded PPWSA’s service coverage and provided access to water to 11,670 poor households, or 58,350 people (44% of the total), in peri-urban areas of Phnom Penh. The target of the restructured project was 15,200 households, but this target could not be fully achieved. The shortfall was due to the fact that the average subsidy of $50 per household fixed at appraisal, had to be increased by PPWSA to an average of $83 per household in 2010 due to rising prices for inputs such as pipes, meters, etc., necessary to make house connections. However the total envelope for poor household assistance was not increased, so the project lost its ability to reach the last 3,530 households.
Based on data provided, the water quality supplied by PPWSA meets or exceeds the water quality standards of the World Health Organization (WHO). (See Annex 12) 11
Sanitation Related Achievements. Per the target of the restructured project, the project provided a total of 7,147 households with improved latrines. Early in implementation, CfD helped build 1,075 toilets under the JSDF Grant. Based on this pilot experience, CfD was brought into the project during the restructuring to be responsible for implementing the scaled-up sanitation component (Part A.2). After the restructuring, an additional 6,072 toilets with septic systems were built. Thus a total of 7,147 sanitation facilities in 20 communities are now benefitting about 40,000 people in the project provinces. Further, about 3500 neighboring people also use these new facilities, bring the number of sanitation beneficiaries to approximately 43,500. No adverse impact on the environment is foreseen because the owners have owner’s manuals and have shown commitment to cleaning and maintaining these toilets properly.
3.3 Efficiency
Rating: Moderately Satisfactory As shown in the economic analysis in Annex 3, the project has a cost-benefit ratio of 1.02 and an internal economic rate of return at 12.7 percent. The Project’s rate of return and the cost-benefit ratio for the project are relatively low. The project suffered significant delays between the suspension in 2006 and the restructuring in 2010. These delays resulted in opportunity costs from not realizing the intended benefits and opportunity costs of fixed investments expended. The cash flows, the benefit flows in particular, considered in this analysis, accounts for such delays in realization of benefits. Such accounting for delays penalizes the delayed benefits through discounting.
In order to compute the health and other indirect benefits, since field level data specific to the project were not available, the ICR used the results from the study on economic impacts of improved sanitation and water supplies conducted by the Water and Sanitation Group in the East Asia Region (results summarized in Table 4 of Annex 3) as parameters to estimate the benefits. The benefits from capacity development activities implemented and training programs have not been quantified in monetary terms and included in the computation of project benefits and rate of returns. Other possible benefits that are not included in this analysis are benefits in the tourism sector, in the form of increased revenues from tourism, as a result of the improvements in sanitation and improved water supplies; value of improved environmental quality from improved sanitation services through improved toilets. The ICR calculation does not account for the above benefits due to lack of data on the above benefits and time constraints. However, accounting for such benefits would further improve returns from the project.
In order to ensure long-run sustainability of the investment in water sector, tariff rates must be set at sustainable levels. The review found that PPWSA is financially sustainable, which will enable it to carry out regular O&M. It also has SOP and the Community Participation Program for O&M of all facilities procured under its own and externally financed projects. Sustainability of the DBL/OBA assets would depend on their financial viability, proper government regulation, and continuous community education.
The economic analysis provided in the PAD covered only a few subprojects in the water sector and did not consider health benefits and other indirect benefits. Further, the PAD did not provide an economic analysis of the expected costs and benefits of the sanitation component. Hence, the ICR was unable to compare final results with PAD estimates.
Financial performance. The operating and the financial performance indicators for Part B of the project are presented in Table 2 in Annex 3. Table 2 shows that there has been steady improvement in operational efficiency of the water supply component. The total quantity of water sold increased from 40 million m3 in 2003 to 94 million m3 in 2010 and the NRW fell from 17.11% in 2003 to 5.85% in 2010, a significant increase in technical efficiency. The debt-equity
12 ratio shows that equity provides a majority of the financing although the ratio has been increasing over the years. The debt-equity ratio remained below one, which means that equity is higher than the debt. The operating ratio (ratio of operating expenses to net sales expressed as a percentage) is less than 40% which implies that the utility has been operating somewhat efficiently. However, it may be noted that it has been increasing since 2003. The total assets, water sold, operating revenues and net income are showing an increasing trend during the period 2003-2010. The tariff levels were also at an acceptable level as demonstrated by the beneficiary analysis.
3.4 Justification of Overall Outcome Rating
Rating: Moderately Satisfactory. The PDO remained highly relevant throughout the project period. Achievement of the PDO is moderately satisfactory and efficiency is moderately satisfactory.
3.5 Overarching Themes, Other Outcomes and Impacts
Poverty Impacts, Gender Aspects, and Social Development
Poverty Impacts and Gender Aspects. The project design included low-cost measures for increasing water supply and household sanitation coverage. The IDA Grant was targeted at making connection charges affordable or free. Poor households were given water connections at subsidized rates, and the payment for connection fees could be paid in installments.
Further, the revolving fund for extending house connections to the poor was successfully used in combination with the IDA Grant. The project financed house connections in PPWSA’s peri-urban areas for pre-identified families living below the poverty line. (See Annex 10 showing the use of the revolving fund to finance connections to poor households.)
As revealed during conversations with the CWGs during the technical audit conducted in late 2010, by receiving regular water supply, poor households can now utilize the time they used to spend fetching water for more productive activities. Women are now able to work more hours outside the home to augment their incomes, and more children are able to attend school for longer periods. Further, by providing family latrines, women and girls have greater privacy.
Social Development. Also confirmed during CWG conversations was that the project’s investments and CWG training improved the hygiene habits and overall health of the rural poor who reported making fewer clinic visits thanks to decreased incidence of water-borne diseases. (No data from local clinics was available, however). The CWGs also provided a mechanism to resolve conflicts between communities and PWOs, although no conflict arose that would have led to cancellation of a contract.
(b) Institutional Change/Strengthening The project resulted in a substantial institutional development impact:
The project created momentum for private sector participation in providing water supply. One indicator of increased activity is the growth of licenses. In 2004, RGC had issued only 24 licenses to PWOs; however by 2011 the number of licenses issued had increased to 122 – a 408% increase.
CWGs have become the vectors through which: (a) clean water and improved sanitation concepts were introduced to peri-urban households with the purpose of initiating behavior change; (b) designated households were able to construct their own sanitation facilities with materials provided through CfD; and (c) local communities now play a role in planning, implementing and managing their clean water supply and sanitation facilities.
13 CWG and CC members benefited from Cfd-led workshops on carrying out their primary roles and responsibilities more effectively and efficiently, conflict management in the water and sanitation sector and gender mainstreaming.
About 6,600 participants (41% female), benefited from workshops on: (a) roles and responsibilities of CWGs; (b) elements of the GGF and how poor household benefit from them; (c) toilet construction techniques and maintenance; (d) conflict management/resolution and networking, advocacy, and lobbying; (e) national drinking water quality standards (including consumer rights training as per the terms and conditions of the signed contracts); and (f) gender mainstreaming.
(c) Other Unintended Outcomes and Impacts (positive or negative)
Private utility companies are keeping minimal water quality records for their own operational use (two or three parameters using a portable testing kit). All operators appear to be complying with the requirement to submit water samples to MIME for comprehensive quality testing on a quarterly basis. This mechanism was introduced through the project and it is now applied nation-wide.
As mentioned above, CfD’s capacity in latrine procurement and construction was strengthened through the project.
With their improved capacity, 78 CWG members have become commune councilors and some have become village leaders. Commune councils now have plans and budgets for sanitation support to the areas where water supply was expanded.
People from villages adjacent to beneficiary villages, who did not benefit from the project, have constructed sanitation facilities similar to those promoted under the project, using their own funds.
In addition to household connections, one PWO made connections to nearly two dozen institutional clients, including three medical facilities (two health centers and one referral hospital), four schools, four wats (Buddhist temples), three police stations, two fisheries offices, one irrigation office, one veterinarian, and one NGO. These will help the PWO maintain financial viability.
3.6 Summary of Findings of Beneficiary Survey and/or Stakeholder Workshops
CWG members, with support from project staff, undertook a consumer satisfaction survey in 13 towns who received clean water services. They interviewed 1,874 household representatives. Care was taken to ensure an even gender balance and a broad geographical distribution. The survey revealed the following:
Survey item Excellent Good Poor Comments Water quality 46.1% 45.7% 8.2% Some complained about the smell of chlorine, but they recognize that is an indicator of water quality safety Availability of 49% 35.7% 15.3% Consumers complained of not having 24/7 piped water supply Water pressure 53 31% 16% Consumers were not happy that water pressure was too low to obtain water above the main floor PWO/consumer 49.8% 36.4% 13.8% Some CWGs reported never seeing a PWO relationship representative. Data on water quality was not shared. 14 As shown above, satisfaction on water quality was about 92%; on availability of piped water was 85%; on water pressure was 84%; and on PWO/consumer relationship was 86%.
4. Assessment of Risk to Development Outcome
Rating: Substantial RGC's Current Water Policy. The latest government policy statement is the National Water Supply and Sanitation Policy Framework approved in 2003 by the Council of Ministers. A national strategy based on the approved policy framework was prepared in 2004 as well as a MIME Action Plan for 2010. The proposed Water Regulatory Law and the Law on Concessions have not yet been approved. A strong regulatory law is important for building public confidence in public utilities and private sector operators, and plays a key role in providing a credible, competent, transparent and impartial mechanism to equitably guard the interests of all stakeholders. Without a clear policy framework, backed by a regulatory law, the risk to the country’s ability to expand access to clean water through private sector participation, is high.
Private Sector Involvement in Water Supply. The sustainability of the DBL/OBA assets depends much on their financial viability. With water consumption lower than forecast, prices rising for fuel and chemicals as well as for labor, and tariff levels not very elastic, the PWOs may already be facing financial viability challenges. Some PWOs are family-owned enterprises which may not be able to absorb economic shocks, and further difficulties could force them to suspend their enterprises, thus jeopardizing the continued delivery of clean water to provincial households. Maintaining demand for clean water at affordable prices will be important to their sustainability, and the role of the CWGs in educating communities about the benefits of clean water and in expressing communities’ desire for clean water to PWOs will be very important. A few PWOs are part of larger construction enterprises whose overall financial footing may be more solid and able to absorb the possible lackluster performance of the water branch. With the regulatory law still in abeyance, the risk of continued private sector involvement is rated high.
CWGs. The sustainability of CWGs is at moderate risk without the assistance of CfD whose contract has been completed. MIME does not fully support the concept of CWGs, whom they see as duplicating the role of the commune councils. Another risk is that of political change following upcoming elections. Commune council support for CWGs could diminish after commune/sangkat elections scheduled for mid-2012, when a change in the composition of political parties could occur, to the detriment of the CWGs. The fact that the CWGs have a plan and budget already in hand would solidify their position going into the elections season.
Forecast For Water Demand. Originally 27 DBL/OBAs were foreseen for this project and 24 EAs were prepared. By the time preparation of the follow-on project started in 2006, MIME had already received 140 expressions of demand from the provincial, district and commune levels in 107 areas. If this level of demand is still present, it would seem that the demand for clean water at affordable prices is high, and the risk of demand for the project’s output dropping is negligible.
PPWSA is a well managed, financially sustainable enterprise, capable of maintaining its assets on a regular basis. It has SOP and a Community Participation Program for O&M of its facilities. Water demand in Phnom Penh is relatively stable between apartment dwellers and peri-urban households, and water bill collections are very high and timely. With no history of political interference and with its financial situation being strong, the risk of PPWSA collapsing is negligible.
Sanitation Achievements. Construction of self-financed super-structures by provincial households shows that the latrines are a valued asset, and are therefore likely to be maintained. The risk of returning to open defecation is negligible due to the training that households received from CfD. Furthermore, demand for the project latrines is evident by the number of neighboring 15 people using project-financed latrines and the number of people “borrowing” the project design to construct their own latrines. As these sanitary systems are small, environmental damage is unlikely to occur.
5. Assessment of Bank and Borrower Performance
5.1 Bank Performance
(a) Bank Performance in Ensuring Quality at Entry
Rating: Satisfactory. As described in Section 2.1 above, the Bank designed an innovative project that corresponded well to the country situation and was not too complex for the implementing agencies. The Bank incorporated lessons learned from global and regional experience in designing the private sector participation component. The safeguards documents were thoroughly prepared, but there were some shortcomings in the timing of participation and other areas as already discussed. Project preparation was carried out with a sufficient number of specialists who provided the necessary skill mix to address sectoral concerns. The Bank provided adequate resources in terms of staff weeks and budgets to ensure good quality work.
This review agrees in large part with QAG’s findings on quality at entry that were expressed as follows: (a) The strength of the project was in the more stable interventions including TA, involvement of the private sector, and incredible participation of the affected communities and NGOs; (b) the PDO was relevant and supported under the CAS. Adequate sector work was done, leading to the strategy of moving out of Phnom Penh toward the provinces; and (c) the project followed all Bank procurement guidelines and when problems occurred, the process was in place to manage them. As far as QAG’s assertion that sanitation in the urban area should have been addressed, the Bank made an explicit decision made to drop that component, in order to keep the project focused on improving access to clean water services.
(b) Quality of Supervision
Rating: Moderately Unsatisfactory. The Bank’s performance was satisfactory from Board through 2006. The Bank switched TTLs after Board, but the new TTL had been the team engineer during preparation, so team continuity was assured. The Bank met with PWOs who had won DBL/OBA contracts to help them address their technical concerns. The task team also met regularly with PPWSA to help resolve technical issues and to make sure their performance indicators were on track. The team paid close attention to MIME’s progress on drafting the regulatory law. The Bank hired a community development specialist to supervise the JSDF grant financing CfD activities to make sure the CWGs were formed quickly and trained to perform their duties. Bank supervision of procurement and financial management aspects was adequate although supervision of environmental safeguards could have been better. Upon the suspension of disbursements following the misprocurement, the Bank drew up an anti-corruption action plan for lifting the suspension. It also ensured that the key elements of that action plan would be sustained through the rest of the project by incorporating them into the DFA as amendments.
After the suspension was lifted in January 2007, the Bank’s performance declined. The original team engineer was re-assigned, and three successive TTLs assumed leadership of the project, two of whom did not possess the necessary profile to complete the restructuring agreed in principle with MIME in 2006. The result was the project languished: PPWSA could not access its share of undisbursed funds to expand connections and CfD could not continue building additional latrines. (The lack of progress in disbursement between 2008 and 2010 shown in the datasheet bear witness to that slow-down.) QAG recommended in its October 2008 assessment that the project
16 be restructured immediately, and the Country Management Unit commented likewise in the Implementation Status Report (ISR) of 2009. In the end, the restructuring was completed only in April 2010, resulting in valuable implementation time being lost.
During these intermediate years, the Bank extended the closing date of the project by two years. After the extension, the PDO rating was upgraded to moderately satisfactory prematurely, as key performance indicators had not changed. Supervision, particularly on the ground, was inadequate and ISRs were filed only once a year instead of twice, and lacked specificity and analysis. When the closing date was extended by two years in June 2008, and also at the time of project restructuring, the Bank should have adjusted the formula for the provision of subsidies under Part B for taking into account price escalations.
In late 2009, the third post-suspension TTL was appointed and Bank supervision improved to satisfactory. This team succeeded in completing the restructuring, monitored implementation progress and resolved issues in a timely manner. This team carried out a technical and operational review of the 11 DBL/OBA contracts and suggested the consumer satisfaction survey to gauge PWO performance, an important step given MIME’s lack of reporting on performance indicators. Unfortunately by this time, it was too late to revive progress on the regulatory law.
In the absence of a follow-on project and new CAS, the Bank can be credited with conducting sector work to lay the foundation for eventual re-engagement in the sector.
(c) Justification of Rating for Overall Bank Performance
Rating: Moderately satisfactory Quality at entry is deemed satisfactory although with several shortcomings, but quality of supervision is rated moderately unsatisfactory. As the project still managed to achieve moderately satisfactory results, the overall rating is justified.
5.2 Borrower Performance
(a) Government Performance
Rating: Moderately Satisfactory Note: For the purpose of this section, MIME is considered part of Government performance.
RGC’s performance during preparation was satisfactory. As mentioned in Section 2.1, during preparation, RGC showed its commitment to the objectives of the sector and the project through several successive years of quality engagement with the CC. The approval of the water supply policy framework in 2000, the fast-tracking of regulatory legislation, and RGC’s hands-off policy toward PPWSA under the first project illustrated the borrower’s commitment and leadership.
RGC’s performance during implementation was moderately unsatisfactory. Early on, MIME adequately prepared the technical and financial analyses of initial batch of towns vying for private sector water supply bids, and had awarded 18 contracts. MIME systematically provided the Bank with monthly implementation status reports; bi-monthly progress reports; quarterly environmental monitoring reports; and financial management reports (FMR), although it was late in providing audit reports. Until 2006, MIME’s reporting system was adequate to monitor and evaluate project activities on an on-going basis, in accordance with the KPI. However, the Bank’s fiduciary investigation uncovered evidence of corrupt, collusive and fraudulent practices in Part A of the project, resulting in the misprocurement and suspension. RGC met the Bank’s conditions to lift the suspension within about seven months. As mentioned in Section 2.1, the government implemented a number of measures to minimize the potential for future corruption, including the engagement of a Procurement Compliance Auditor, use of the services of an
17 independent procurement agent (IPA) except under Part A.2 and Part B of the Project, and adoption of the GGF. To MIME’s credit, they completed the seven contracts that were declared as misprocured, so that those towns would have access to clean water. This shows MIME’s commitment to expanding access to water.
After the misprocurement, MIME was less likely to heed the Bank’s requests for progress reporting and it became difficult for the Bank to follow progress of the DBL/OBA water schemes. Finally, the draft Water Supply and Sanitation Regulation Law was never submitted for approval by the National Assembly.
(b) Implementing Agency or Agencies Performance
Rating: Satisfactory PPWSA is a professionally run company that has achieved excellent results and is a credible partner. PPWSA support for the peri-urban water supply component was strong. PPWSA had an adequate financial management system with a well-staffed finance unit, and a good accounting and reporting system. Its financial management performance was satisfactory and its overall project management was highly satisfactory.
PPWSA staff had sound procurement knowledge and extensive experience with procurement procedures of various external development partners and RGC’s Procurement Manual for Externally Financed Projects. PPWSA also had a dedicated procurement unit which carried out procurement of goods and works smoothly and efficiently. It had its own established procedures for complaints handling. Also PPWSA displayed dedication to serving the needs of the poor. For example, in line with its policy of “Clean Water for the Poor”, PPWSA set up three categories of installment payments: 10 months, 15 months, and 20 months which can be chosen by the poor, based on what they could afford. There is also a discount of 20% of connection fees for the poor who live in suburban communities. In addition, PPWSA has applied a subsidy policy for the poorest since May 2005: 30%, 50%, 70% and 100% of the total connections fee based on real poverty rates.
PPWSA’s performance in implementing its GGF was satisfactory on all elements, including procurement and financial management, disclosure, civil society role, complaints and remedies mechanism, and code of ethical conduct and sanctions.
CfD performed its originally designated activities satisfactorily. It carried out extensive outreach activities in the project communities. It provided project orientation training to its staff for community facilitators, organized a series of training workshops to Commune/Sangkat council members, CWG members, village leaders and various stakeholders. With CfD assistance, CWG members reviewed and updated 149 target village maps of 34 communes/Sangkats and 20 towns in four provinces. Five in-house training workshops were held for CWG and CC members in the 20 towns to enable them to undertake their primary roles and responsibilities more effectively and efficiently.
After the restructuring, CfD became responsible for procurement and construction of latrines, responsibilities for which it was less well suited. It initially undertook the procurement of toilet construction materials itself, but at the bid evaluation stage, the Bank identified a number of deviations from the procurement procedures, supported by a complaint from a bidder. Following this incident the procurement process was canceled and the package was re-bid by the IPA. This caused implementation delays of several months for both the delivery of the construction materials and thus installation of household latrines. CfD’s performance in supervising the contractors’ provision of latrines varied among the provinces. CfD’s financial management, monitoring and evaluation, and implementation of its GGF are considered satisfactory. Even though CfD was weak in procurement and construction supervision, its overall performance is considered satisfactory. 18
(c) Justification of Rating for Overall Borrower Performance
Rating: Moderately Satisfactory Government’s performance was moderately satisfactory; PPWSA’s and CfD’s performances were satisfactory. The project outcome was moderately satisfactory. In light of these ratings, the overall Borrower performance is rated moderately satisfactory.
6. Lessons Learned
1. NGO role in community empowerment. As a local Cambodian NGO, CfD which worked for other donors as well, was effective in empowering communities to become actors in local development projects. CfD’s approach of awareness-raising, social mobilization, and increasing access to improved facilities can be considered a model for replication, especially for projects where demand needs to be triggered at the grassroots level. At the same time, it should be recognized that an NGO’s weak capacity and lack of familiarity with Bank procedures are challenges for an NGO to implement Bank-financed projects, and mitigation measures should be included.
2. Importance of CWGs. As social mobilization agents, CWGs provided clear benefits to their communities, including the PWOs, with little or no reward in return. Rather than relying solely on official local leaders at the village and commune levels, the CWG served as an effective, valued-added community representative for the success of local development activities.
3. Water consumption survey. It is important to conduct a water consumption survey during project preparation stage in order to get a clear estimate of the water consumption rate. As water consumption has deep financial implications, conducting such a survey could avoid the possibility of over estimating or underestimating consumption, thereby minimizing any potential financial loss for the utility company.
4. Service Delivery Using the Private Sector. On the whole, the private sector participation component was proceeding well until it was curtailed in 2006 due to misprocurement of seven contracts, all with the same PWO. Demand for water supply using the DBL/OBA system was evident during preparation of the follow-on project. Assuming demand for clean water at appropriate prices is still present in the provinces and assuming the Cambodian private sector in water supply still has adequate capacity and interest, this model is worth pursuing, subject to certain calibrations being made. This would include approval an appropriate water regulatory law and installation of an independent water regulator able to protect all interested parties.
5. TA Component for Building Capacity of Private Sector. Given the innovative private sector participation component for Cambodia, the project should have included a specific TA component to train prospective bidders on Bank procurement procedures, and on how to prepare responsive technical and financial bids, instead of leaving this task to the Mekong Private Sector Development Facility, which was not formally a part of the project. Such training may have stimulated private sector response even more.
7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners
(a) Borrower/implementing agencies
(b) Cofinanciers
19 (c) Other partners and stakeholders
(e.g. NGOs/private sector/civil society)
20 Annex 1. Project Costs and Financing
(a) Project Cost by Component (in USD Million equivalent) Actual/Latest Appraisal Estimate Percentage of Components Estimate (USD (USD millions) Appraisal millions) Part A: Provincial Water Supply and Sanitation (the MIME Component) Water Supply 12.50 4.32 34.54% Sanitation 1.00 0.85 85.12% Institutional Capacity Building 0.15 0.01 7.18% Project Management Consultant 2.90 2.32 80.04% Incremental Costs 0.12 0.40 335.15% Part B: Peri-Urban Water Supply (PPWSA Component) Water Supply 6.10 10.46 171.48% Domestic Connections 0.30 1.27 423.33% Institutional Capacity Building 0.30 - - Total 23.37 19.63 83.99%
Total Baseline Cost 23.37 19.63 83.99% Physical Contingencies 0.00 Price Contingencies 0.00 Total Project Costs 23.37 19.63 83.99% Project Preparation Fund 0.00 Front-end fee IBRD 0.00 Total Financing Required 23.37 19.63 83.99%
(b) Financing Appraisal Actual/Latest Type of Estimate Estimate Percentage of Source of Funds Cofinancing (USD (USD Appraisal millions) millions)
Borrower 1.87 1.46 78.07%
Local Communities 0.25 0.52 208% International Development 20.00 17.65 88.24% Association (IDA) Foreign Private Commercial Sources 1.25 - - (unidentified) Total 23.37 19.63 83.99%
Note: In addition, there was also JSDF Grant of US$773,900 for Capacity Building and Basic Service Provisioning to Water Groups.
21 Annex 2. Outputs by Component
Part A
MIME
The PAD identified the following expected outputs from the project: (i) Undertaking construction of water supply infrastructure and connecting to low-income households in about 20 communities in the Project Provinces; (ii) Improving sanitation conditions in low-income households, selected schools, hospitals and public markets through the construction and installation of sanitation facilities in about 20 communities in the Project Provinces; and (iii) Supporting project management in-the carrying out of Part A of the Project, through the provision of technical assistance for procurement, auditing and accounting activities; construction management and supervision; preparation for additional water supply facilities; and the provision of office equipment and vehicles.
Actual Outputs:
At the end of project implementation in June 2008: Component A1: 9 DBL and 2 OBA water supply systems in four provinces were completed and operating.(If including Peam Chi Kang, which passed the commissioning test before the credit cancellation, 12 subprojects were completed, passed the commissioning tests, and became operational); Component A2: Due to discontinuation of Part A in 2006, the second phase of constructing 6,072 improved sanitation facilities was not carried out; Component A3: institutional capacity building for MIME staff, equipment and software purchases, and project financial audits; hiring the services of a project management consultant; and incremental costs for supervising and monitoring were carried out, although there were no formal capacity development trainings provided by the PMC to PMO personnel.
CfD
6,072 (100 per cent) phase 2 toilets with septic systems were completed, with an additional 33,493 people now having access to improved sanitation. A total of 7,147 sanitation facilities in 20 communities now benefit 39,511 people in the Project provinces; an additional 3,465 neighboring people also use these new facilities which are particularly important to young girls. During phase 2, 6,602 (2,658 female) participants benefited from seven training workshops: i) CWG role and responsibilities (refresher); ii) Good governance framework, complaint mechanism, and procurement manual; iii) Toilet construction techniques (including material specifications; iv) Conflict management/resolution and networking, advocacy, and lobbying; v) National drinking water quality standards (including consumer rights training as per the terms and conditions of the signed contracts; vi) Gender mainstreaming in the WASH sector; and vii) Toilet material specification monitoring; The public information dissemination component produced and distributed to the 20 service areas 15,000 illustrated three-ply flyers, 850 illustrated all-weather small posters, and 10,000 large acrylic posters with illustrations and text. Two DVD videos, one a cartoon and the other a documentary, and a radio spot were produced. Two national television channels, CTN & KTV, broadcast one of the
22 video productions and the radio spot was broadcast by stations in the concerned provinces. Community screenings of the video productions were organized for a) students and teachers in 79 schools for 33,732 participants and b) populations at large in 149 community institutions (including Buddhist Pagodas and Muslim Mosques) for 84,272 participants. For data on the participants, see Annexes 8.1. and 8.2. Five exit (strategy) workshops were organized in the last month of phase 2 with 101 CWG and CC representatives from the 20 service areas participating.
Part B
PPWSA
The PAD identified the following expected outputs from the project: (i) Expanding water supply infrastructure and connecting to low-income households in about five communities in the peri- urban areas of Phnom Penh municipality; and (ii) Supporting project management through the provision of technical assistance for construction supervision of works under Part B.1 of the Project. Actual Outputs:
Before restructuring, length of pipeline installed: 299 km (end 2010); number of PHHs receiving water connections: 6,462 (end 2010); and one elevated water tank. After restructuring, length of pipeline installed: 330 km (Semester 1 2011); number of PHHs receiving water connections: 5,208 (Jan to end of Jun 2011) (Semester 1 2011); Total length of pipelines installed: 629 km; total number of elevated water tower: one; and total number of PHHs receiving water connections: 11,670.
23 Annex 3. Economic and Financial Analysis
1. Financial performance
The Part A of the project was to improve sanitation conditions in low-income households, selected schools, hospitals and public markets and to support project management. Since this component was to provide sanitation facilities we have not attempted a financial analysis for this component.
The operating and the financial performance indicators for the (Part B) PPWSA component of the project are presented in Table 1. There has been a steady improvement in operational efficiency of the water supply component. The total quantity of water sold increased from 40 million m3 in 2003 to 94 million m3 in 2010 and the Non-Revenue Water (Unaccounted for Water-UFW) fell from 17.11 in 2003 to 5.85 in 2010, a significant increase in technical efficiency. The debt-equity ratio shows that equity provides majority of the financing although the ratio has been increasing over the years. The debt-equity ratio remained below one, which means that equity is higher than the debt. The operating ratio (ratio of operating expenses to net sales expressed as a percentage) is less than 40 percent which implies that the utility has been operating somewhat efficiently. However, it may be noted that it has been increasing since 2003.
Table 1: Operating and the financial performance indicators for the Part B PPWSA component Operating & Financial Indicators 2003 2004 2005 2006 2007 2008 2009 2010 Water Sold (000m3) 40,081 48,859 56,168 65,407 74,449 80,105 84,754 94,197
Average Tariff (Riels) 953.56 976.79 978.03 990.49 1,000.29 1,002.46 994,05 1,000.59
Water Losses (UFW) 17.11 14.1 9.17 7.38 6.24 6.19 5.94 5.85
Service Connections 15,745 16,744 13,458 12,908 10,888 16,117 12,921 11,835
Operating Ratio 26.1 27.2 29.9 34.4 36.1 39.0 36.9 37.1
Operating Revenues (Riels M) 49,445 56,962 67,743 78,664 89,910 101,455 105,600 120,053
Net Income (Riels M) 7,609 9,211 12,654 15,817 22,404 24,436 26,934 32,286
Total Assets (Riels M) 499,206 510,888 532,081 558,812 604,309 65,510 688,071 745,224
Debt/Equity Ratio (time) 0.29 0.30 0.30 0.29 0.33 0.37 0.37 0.40
The total assets, water sold, operating revenues and net income are showing an increasing trend during the period 2003-2010. The tariff levels were also at an acceptable level as demonstrated by the beneficiary analysis. However, it may be noted that the number of service connections reached the highest level in 2008 but has declined since then.
The projections financial and operating ratios for the PPWSA component from 2011 through 2020 with the project are presented in Annex 10. The financial performance ratios and indicators show sustainability of the project. The net incomes, total assets, operating ratios and the measures of operating efficiency show an increasing trend over the period considered.
24
2. Economic analysis
2.1. Methodology and assumptions
The methodology followed incremental benefits approach, analyzing the benefits with and with- out the project. The incremental benefits with the project are assumed to be the benefits from the project.
The benefits from investment in sanitation include health benefits, water sector benefits, benefits in the tourism and other welfare benefits. The health benefits include improved health status, treatment costs and productive time losses avoided and premature death averted. The benefits to water supplies include improved water quality and water-borne diseases averted. The other welfare benefits include improved environmental quality, time losses for access to toilets, land use and quality. There have been detailed studies on benefits of improved sanitation and water supplies in developing countries. This literature has reviewed and assessed the health benefits, water sector benefits, value addition in the tourism sector and other welfare benefits. The World Bank’s water and sanitation group has estimated the above benefits of improved sanitation in Southeast Asia including Cambodia. We have used the results of the above study to estimate the project benefits. The parameters estimates used to compute the benefits from improved sanitation and water supplies are presented in Table 2 below. The parameter estimates and the data on the number of beneficiaries and extent of coverage were used to estimate aggregate project benefits.
Table 2: Financial and economic losses averted from access to improved water and sanitation services in Cambodia Impact Losses averted ($ per capita per year) Financial losses Economic losses Health 1.0 13.6 Water 10.6 10.8 Other welfare 2.8 Tourism 5.3 Total 11.6 32.4 Source: Economic Impacts of Sanitation in Southeast Asia-A four country study. Research Report 46351, Water and Sanitation Program, World Bank 2008
The benefits of the water sector component include incremental value of water sold, savings in cost of water to the consumer, health costs and medical expenses averted from clean water supplied, savings in value of productive time lost from water borne diseases, value of time saved in water collection and savings in costs of boiling untreated water. The incremental values of water sold that accrue to the water utility were estimated from the projections in financial performance of the PPSWSA and from the data in project files.
Assumptions:
In order to estimate the costs and benefits streams the following assumptions were made:
a. Benefits and costs are projected over a period of 20 years, corresponding to the expected life of 20 years for investments in water and sanitation.
b. The opportunity cost of capital is assumed to be 12 percent and the cash flows are discounted at this rate.
25 c. The operation and maintenance expenses are a fixed proportion of the total project investment.
d. Following WHO research findings, it is assumed that incidence of infectious water borne diseases with the project scenario is half its occurrence without the project.
e. The benefits from capacity building and training programs are positive and significant but has not been evaluated and included in computation of benefits.
2.2 Project delays
There have been significant delays in project implementation, for up to two years in the middle of the project, due mainly to strained relationships and the consequent suspension and restructuring of the project. The delays resulted in opportunity costs from not realizing the intended benefits and opportunity costs of fixed investments expended. The cash flows, the benefit flows in particular, considered in this analysis accounts for such delays in realization of benefits. The opportunity costs of fixed investment and the delayed benefits due to delays in project implementation were captured through discounting of the cash flows.
3. Cash-flows and Economic Rates of Return
The discounted costs and benefits for the different components of the project are presented below in Table 3.
Table 3: Discounted costs and benefits from the project (US $) Discounted cost Discounted benefits Year Water supply component Sanitation Total Project PPWSA MIME MIME benefits 1 669,643 - - - -
2 3,507,653 345,313 417,188 243,495 1,005,995
3 3,131,833 419,438 559,858 409,236 1,388,531
4 889,725 380,853 493,518 599,124 1,473,495
5 - 345,722 440,641 534,932 1,321,295
6 2,053,510 298,548 393,429 477,618 1,169,595
7 3,141,713 388,263 510,422 483,336 1,382,021
8 805,879 527,558 589,548 518,630 1,635,736
9 719,535 471,034 528,546 463,062 1,462,642
10 642,442 420,566 471,916 413,448 1,305,930
11 573,609 375,505 421,066 369,150 1,165,722
12 512,151 335,272 375,952 329,598 1,040,823 13 457,277 299,350 335,671 294,284 26 929,306
14 408,283 267,277 299,707 262,754 829,738
15 364,539 238,640 267,504 234,602 740,746
16 325,481 213,072 238,843 209,466 661,380
17 290,608 190,243 213,252 187,023 590,518
18 259,471 169,859 190,404 166,985 527,248
19 231,671 151,660 170,004 149,094 470,757
20 206,849 135,411 151,789 133,119 420,319 Total 19,191,872 5,973,584 7,069,258 6,478,956 19,521,798
The analysis shows that the project has a Benefit cost ratio of 1.02 and Internal Economic rate of 12.5 percent.
The above return from the project is a respectable rate of return for a water supply and sanitation project. Further, the suspension of the project in the middle of implementation has also affected realization of the benefits in time and hence had opportunity costs. The above estimates of the return from the project at completion are in line with the anticipated rates of return at project development as presented in the Project Appraisal Document (PAD). It may be noted that the estimates of return presented here do not account for the capacity development programs implemented as part of the project and information dissemination programs as outlined in section 4.1. Accounting for the above benefits will further improve the benefits from the project.
The rates of return and the benefit: cost analysis presented in the PAD are for the 12 sub-projects considering the economic benefits such as direct use benefits, consumer surplus and cost savings. Those rates of returns do not include the health benefits and other indirect benefits. Further, the PAD does not present an economic analysis of the sanitation component or for the whole project. Hence we have not attempted a comparison of the ex-ante rates of return presented in the PAD with the results presented in this section.
4. Conclusions
It may be noted that the rate of return and the Benefit: Cost ratio for the project is relatively low. The delays in project implementation and the consequent opportunity costs of delayed benefits and fixed investments might have affected the rates of return. Further, the benefits from capacity development activities implemented and from the training programs have not been quantified in monetary terms and included in the computation of project benefits and rate of returns. Other possible benefits that are not included in this analysis are benefits in the tourism sector. Accounting for such benefits would further improve the rates of returns from the project.
The financial projections for the PPWSA component show the long-term sustainability of the water supply components. In order to ensure long-run sustainability the tariff rates have to be set at sustainable levels. The review found that PPWSA is financially sustainable, which will enable it to take care of O&M activities on a regular basis. It also has SOP and the Community Participation Program for O&M of all facilities procured under its own and externally financed projects. Sustainability of the DBL/OBA assets would depend on their financial viability, proper government regulation and continuous community education
27
28 Annex 4. Bank Lending and Implementation Support/Supervision Processes
(a) Task Team members Names Title Lending Vijay Jagannathan Task Team Leader Luiz Claudio Tavares Project Engineer Aldo Baietti Financial Specialist Santanu Lahiri Project Engineer R.I. Gapalkrishnam Procurement Specialist P. Illangovan Environmental Specialist Mei Wang Legal Counsel Mariles Navarro Economist Declan Oleary Community Participation Specialist Preethi Wijeratne FM Specialist Minerva Espinosa-Apurada Program Assistant Pramod Agrawal Resettlement Specialist
Supervision/ICR Names Title Unit Lixin Gu Sr. Infrastructure Specialist (TTL) EASIN Aldo Baietti Lead Infrastructure Specialist EASIN Mario Alejandro Suardi Senior Infrastructure Specialist GPOBA Veasna Bun Senior Infrastructure Specialist EASTS Kannathee Danaisawat Financial Management Specialist EAPFM Jan Drozdz Sr Water & Sanitation Spec. AFTUW R. I. Gopalkrishnan Consultant FFSFI Seida Heng Financial Management Specialist EAPFM Karen Jonesy Jacob Consultant EASIN Mariles Navarro Consultant EASIN John Richardson Consultant EACTF John Smithson Consultant EASCS Sreng Sok Procurement Specialist EAPPR Ahsan Ali Sr. Procurement Specialist EAPPR Latharo Lor Procurement Specialist EAPPR Luiz Claudio Martins Tavares Lead Water and Sanitation Spec AFTUW Manida Unkulvasapaul Consultant EASVS China Chunn Team Assistant EACSF Sandra Walston Team Assistant EASIN
29 (b) Staff Time and Cost Staff Time and Cost (Bank Budget Only) Stage of Project Cycle USD Thousands (including No. of staff weeks travel and consultant costs) Lending FY01 4 27.89 FY02 23 122.39 FY03 34 202.85 FY04 0.00 FY05 0.00 FY06 0.00 FY07 0.00 FY08 0.00
Total: 61 353.13 Supervision/ICR FY01 0.00 FY02 0.00 FY03 0.00 FY04 5 50.06 FY05 14 57.26 FY06 25 108.21 FY07 27 65.95 FY08 18 71.54 FY09 16.25 55.7 FY10 16.4 91.0 FY11 14.27 75.8
Total: 135.92 575.52
30 Annex 5. Beneficiary Survey Results
See Section 3.6
31 Annex 6. Stakeholder Workshop Report and Results
(i) Training and Orientation at the Community Level: In July 2010, 6 CFs and 12 ACFs that were deployed to be based in the 20 towns in the 4 provinces, organized a series of training workshops and orientations at the community level, and provided direct messages on the project framework and key activities to 90 commune/Sangkat council members, 81 CWG members, 147 village leaders and 63 stakeholders namely schoolteachers, local influential elders, TLOs and directors of local health centers. At the end of the training, participants were able to answer questions correctly related to (i) the main project objectives, (ii) the project’s partnership and its complementary approach, (iii) the importance of replacing the CWG members that had resigned, (iv) the roles and responsibilities of the CWGs, (v) why the poor household lists needed to be updated and reviewed using direct feasibility studies, and (vi) the roles and responsibilities of CCs/SCs in the project. They expressed strong commitment in playing active roles in project implementation, and they were happy with information that was provided.
(ii) Conducting training on the Good Governance Framework (GGF) and Complaint Mechanism. In the first quarter of the project period, CfD and project management staff provided training and capacity building on the GGF and the complaint mechanism to CCs/SCs and CWGs in 6 training events over the 20 towns. A total of 172 people participated in the events, of which 66 were females. The main aim of training was to build the capacity of CC/SC members and members of CWGs in terms of the Good Governance Framework, Complaint Mechanism and Procurement Processes within the SOP/PM, which were to be applied in the project, and to inform the participants that they had key roles in the procurement process. In session 1, the participants were split into small group discussion, each group consisting of 5-11 people and one project’s facilitator. Participants went through the GGF and Complaint Mechanism that had been previously translated into Khmer. In session 2, participants were invited to the plenary session where the trainers provided training and explanation, and in session 3 there was an open question and answer session where aspects that were still unclear to attendees were clarified.
(iii) Strengthening CWG & CC Roles and Responsibilities. Five in-house training workshops were held for CWG and CC members in the 20 towns to enable them to undertake their primary roles and responsibilities in a more effective and efficient ways. All the training was focused around WASH.
13 training workshops were held on conflict management in the Water and Sanitation (WATSAN) sector, which involved the participation of 155 key actors of whom 55 were female. The training content included (1) the causes of conflict; (b) how to understand and analyze conflict; (c) how to manage and resolve the conflict and (d) listening and negotiation skills. In their feedback, participants thanked the project for providing such important training, and expressed that the training has enabled them to not only manage conflict surrounding WATSAN related issues but also for other issues too.
5 training workshops were held on Gender mainstreaming in the Water and Sanitation (WATSAN) sector which covered to 34 communes, 20 towns and involved participation of 107 key actors of whom 44 were females. The training content included (i) the general concept of gender; (b) roles of gender; (c) gender needs and (d) gender in WASH sector. In their feedback, participants thanked the project for providing such important training, and expressed that the training has enabled them to strengthen and promote their roles and function into WATSAN and but also on other related for other issues in communities too.
5 training workshops were held on National Drinking Water Quality Standards (NDWQTS) and Term of Conditions (TC) which cover to 34 communes, 20 towns and involved to the participation of 111 key actors of whom 44 are females. The training
32 content included (i) general concept of NWQS & TC; (b) key words & terms of NWQTS & TC; (c) CWG and CC roles and responsibilities in WASH sector in communities and (d) roles and responsibilities of operator water supply in community. In their feedback, participants thanked the project for providing such important training, and expressed that the training has enabled them to strengthen and promote their roles and function into (NWQTS & TC) and cooperation among CWG, CC and Operator in community.
Project staff organized 20 refresher training events on roles and responsibilities of CWG, in the 20 towns which was participated by 151 key actors, including 83 females. Participants were asked to reflect and brainstorm about what their roles, responsibilities and functions are. Opinions from groups were expressed in the plenary session and project staff gave their thoughts and added extra explanations and descriptions.
In conjunction with the above training, 151 CWG members were also trained on how to conduct participatory Consumers’ Satisfaction Surveys. A simple survey form was created in the training events using the ideas of the participants and the methodology for randomly selecting the interviewees was defined. A role-play activity was carried out to confirm whether the CWG members were able to put what they had learnt into practice, which generally they were able to do so. At the end of the training, the schedule for the field survey was prepared and agreed-upon.
(iv) Implementation of Exit Strategy of CWG/CC. CfD management organized 5 provincial workshops (1 in SVR, 1 in PVG, 1 in KCM and 2 in BMC) with a total participant of 101 people representing 20 town CWGs and 34 CC. The workshop covered four topics: (i) Reflection on the role and responsibility of CWG; (ii) Assessment of CWG institutional capacity against their role and responsibility; (iii) Capacity assessment of individual CWG members; and (iv) Participatory define and develop exist strategy June 2011 to June 2013
The Results of the Workshops: i) Reflection on the role and responsibility of CWG: The participants came up with the below summary:
Role: CWG is an intermediary group that will keep linking between local community, CC and outsiders specially water operator, DIME and MIME. Mediation for improvement and increase of access to WASH.
Responsibility: mobilize people participations and protect consumers’ rights, but also encourage people to respect their obligations
Function: Assisting and reporting to the respective commune council, and reporting to donors as well as local government.
Performance Procedure: Monthly meeting, and public meeting with respective CC ii) Assessment of CWG institutional capacity against their role and responsibility: Participants responded that the below listed activities are what they can do confidently by themselves: Undertake local coordination and meeting with local stakeholders, as well as collect health data from health centers; Organize village level meeting and education, this includes small group meetings and household education; Solving problems that are related to WASH in the locality Moderate local screenings and provide popular education at school Data gathering related to WASH
33 Provide training to village on toilet construction technique and conduct technical monitoring Mobilize people to connect to the water system Disseminate water quality to communities If together with CC, they can organize and meet with upper structure More confident in performance role and responsibility and have more social competent iii) Capacity assessment of individual CWG members
In general, individual capacity of CWG members have improved from 20 score (assessed in June 2010) to 92 score (assessed in early June 2011).
34 Annex 7. Summary of Borrower's ICR and/or Comments on Draft ICR
KINGDOM OF CAMBODIA PROVINCIAL AND PERI-URBAN WATER AND SANITATION PROJECT (PPUWSP, 2003-2011) DRAFT BORROWER’S EVALUATION REPORT (August 2011)
Introduction
(a) Strategic context: The lack of access to clean water and sanitation has been a major public health issue in post-conflict Cambodia. The Kingdom of Cambodia has one the highest infant mortality and morbidity rates in the world caused by water-borne diseases. Outside Phnom Penh, treated water supply coverage has been limited. In a country that is 82 per cent rural, nearly 40 per cent of the rural population in 2008 did not have access to safe drinking water and only 19 per cent had access to toilets. In the same year, only 33.7 per cent of Cambodia’s population of 13.4 million had access to improved sanitation, an increase from 14.4 per cent in 1998.
Using a 1990 baseline, the Royal Government of Cambodia’s Millennium Development Goals (No. 7, Targets 10 and 12) are to halve by 2015 the proportion of people without sustainable access to safe drinking water and improved sanitation, goals that are likely to be achieved for water, but not sanitation. The RGC’s National Strategic Development Plan (NSDP) is committed to providing all citizens with clean and safe water and sanitation.
The RGC’s policy of decentralization and deconcentration (D&D) reforms implemented by the National Committee for Sub-National Democratic Development (NCSNDD) in the Ministry of Interior, building on earlier initiatives, provided an enabling institutional context for local authority and end user community group involvement in the WATSAN sector.
(b) Objectives: The purpose of the Provincial and Peri-Urban Water and Sanitation Project (PPUWSP – hereafter “Project”) was to assist the RGC in attaining its MDGs in water supply and sanitation by 2015. Its main objective was to integrate business and community interests in the provision of clean water and improved sanitation services. A secondary objective was to jump start the process by connecting clean water and provision of sanitation facilities to low income households in four provinces. Another objective was to extend the reach of piped water for low income households in peri-urban areas of Phnom Penh. (c ) Design: The Project design aimed at building a partnership between the government, private sector, and community-based user groups in the provision of clean water and improved sanitation in 20 service areas in the selected provinces (Kampong Cham, Prey Veng, Svay Rieng, and Banteay Meanchey), ensuring the inclusion of poor households through an IDA subsidy. The rationale for the design was that end user consumers and private water operators could be provided incentives to participate as partners in development of the WATSAN sector.
The Project’s implementing agencies were the Ministry of Industry, Mines and Energy (MIME), whose Department of Potable Water Supply is responsible for the regulation and provision of safe water in the provinces; the Phnom Penh Water Supply Authority (PPWSA), a public enterprise under nominal MIME oversight providing clean water for the greater Phnom Penh area; and the Center for Development (CfD), a national community empowerment NGO responsible for the community mobilization component. The MIME component closed June 2008 and in a Project restructuring approved by the WB March 2010, PPWSA and CfD implemented a Project extension through June 30, 2011.
MINISTRY OF INDUSTRY, MINES AND ENERGY (2003-2008) Outcome/Achievements Water supply systems for 25 subprojects or towns were planned for implementation under Design-Build-Lease (DBL) contracts and an additional 9 were planned for implementation under Output-Based-Aid (OBA), also called Design-Build-Operate (DBO) contracts, in 35 eight provinces; Of the 34 total, 30 towns were included in the May 2006 procurement plan. Only 18 subprojects (12 DBLs and 6 OBAs) were awarded to contractors. 12 subprojects were cancelled by MIME, and Bank credits were subsequently cancelled for 7 other subprojects (3 DBL and 4 OBA) for a total of 11 (9 DBL and 2 OBAs) in four provinces. (One OBA town, Peam Chi Kang, was completed prior to its credit cancellation). Under the restructured Project approved by the Bank in 2010, credits originally allocated to the cancelled subprojects were reallocated to Part B of the PPWSA and Part A2 was reallocated to the Center for Development (CfD) for completion.
Project outputs At the end of project implementation in June 2008: Component A1: 9 DBL and 2 OBA water supply systems in four provinces were completed and operating. (If including Peam Chi Kang, which passed the commissioning test before the credit cancellation, 12 subprojects were completed, passed the commissioning tests, and became operational); Component A2: Due to discontinuation of Part A in 2006, the second phase of constructing 6,072 improved sanitation facilities was not carried out; Component A3: institutional capacity building for MIME staff, equipment and software purchases, and project financial audits; hiring the services of a project management consultant; and incremental costs for supervising and monitoring were carried out, although there were no formal capacity development trainings provided by the PMC to PMO personnel.
Achievement of KPIs (project development objectives) during Project period: At least 15 additional communities with water supply systems through OBA, lease and management contracts: the 11 (or 12, if including Peam Chi Kang) completed sub- projects were not enough to satisfy the 15 communities targeted for completion by the end of the project period; At least 60 per cent of households in service areas receive improved water supply services after completion of subprojects: nearly satisfied at 59 per cent, though with a wide disparity between the 3 ODA subprojects (20 per cent) and 9 DBL subprojects (79 per cent). ODA contracts provided initial connections to only poor households, with contractors reimbursed only after connections were verified by PMC; At least 30 per cent of poor households have improved sanitation facilities: partially completed; the pilot phase providing 1,075 sanitation facilities was implemented by Center for Development (CfD) under a Japan Social Development Fund grant; the 6,072 sanitation facilities for phase two by MIME was not implemented due to its discontinuation of Part A; the total number of 7,147 toilets when including the restructured phase, when completed for a total of, would provide a 31.9 per cent average coverage of poor households in the 20 service areas; A majority of contractual disputes with operators mediated and resolved by Clean Water Groups (CWGs): Conflicts between customers and operators in the 11 service areas were resolved without resorting to contract cancellation; The volume of private financing for water supply infrastructure equals or exceeds $0.75 million: this objective was surpassed, with operators’ equity for the 11 subprojects exceeding $1.05 million; for DBL subprojects, the RGC share was 90 percent of the actual cost, the contractors’ equity 10 per cent; for OBA subprojects, the RGC share was the IDA subsidy for providing service connections to poor households. An average of 80 per cent is satisfied with service performance after systems are operational: No surveys were conducted prior to June 2008 to determine the level of consumer satisfaction in the operating water supply systems. After Project restructuring, the CWGs with CfD backstopping conducted four (quarterly) consumer satisfaction surveys. The 3rd quarter survey completed in May 2011 of 1,874 (randomly selected?) 36 interviewees in 13 towns with water supply systems (including Pheam Chi Kang and Suong) covered questions about water quality, pressure, 24-hour availability, and customer relations. The indicated composite results: Very Good: 49.43 per cent; Acceptable: 37.25 per cent; and Poor: 13.33 per cent. For more details, see Annex
Factors Affecting Implementation. Overall, project implementation of funded subprojects proceeded satisfactorily though at a much slower pace due to: contractor’s limited financial resources, especially for OBA subprojects, with the simultaneous awarding of two or more contracts; contractor’s limited manpower resources; remoteness and accessibility problems of some subproject locations; timing of contract awards; land issues affecting some water treatment plant locations; contractor’s limited design capabilities; and delay of payments to contractors’ invoices.
Since Project restructuring: PWO reluctance to invest to improve existing infrastructure due in part to weaker than projected revenues with steady tariff structure, but also, for DBL plants in particular (which received 90 per cent of construction costs in credit) a tendency to wait for the government or Bank to solve problems; Public-private sector partnership and communication; Low disposable village income levels; Availability of alternative water sources a key constraint in decision to connect.
Transition arrangements. MIME’s Department of Potable Water Supply continues oversight and compliance functions, including water testing, with the 11 Project PWOs; PWOs adequately equipped to provide service in spite of some ownership management issues. Risks for sustainability. Since Project restructuring: While connections for clean water in the 11 service areas increased in three years by 27 per cent, from 11,600 in mid-2008 to 14,685 in mid-2011, consumer consumption has been lower than anticipated by a factor of approximately one-half, impacting profitability. Five of the 11 towns experienced declines in the number of connections and may be in need of management restructuring (see Annex 2. for details on the current status of the PWOs); Water quality assurance procedures difficult to enforce due to limited MIME capacity at district and line department levels.
Bank Performance. Quality at entry and of supervision, averaging two supervisory missions per year, was rated as satisfactory. The Bank showed flexibility in administering the Project.
Borrower’s performance. The overall Borrower’s performance was rated satisfactory.
MEF’s role was rated satisfactory, although at times it took longer than anticipated to process document approvals.
PMO-MIME performance was rated satisfactory in terms of commitment and dedication, especially in terms of raising awareness of policy issues and building a participatory framework for involvement of major stakeholders. The PMO failed however to take adequate advantage of the consultant’s (PCU’s) capacity building possibilities in areas of
37 project design, supervision, and monitoring. When combined with the problem of maintaining sustained and full-time personnel, it led to shortcomings in construction supervision functions.
PMU-MIME performance was rated fair to satisfactory. Project management unit personnel at the provincial level helped resolve issues, including and especially land issues, in working with the contractors and consultant, but inadequate technical skills impaired their effectiveness in the supervision process.
Since Project restructuring: MIME’s overall coordinating role with the Project was limited. It provided assistance to CfD’s public information productions; As part of its water quality control function, MIME at least every quarter collected water samples provided by the PWOs for testing in Phnom Penh, and while test results were not routinely shared with CCs and CWGs, a number of PWOs posted results on their bulletin boards. There were no noteworthy water quality or safety problems reported, although CWGs reported some end user skepticism and complaints relating to taste (chlorination), coloring, and residues. Overall consumer satisfaction levels have been high according to surveys conducted by CWGs with CfD (see annex 3.).
Lessons Learned. The new DBL and OBA approaches used in implementation contracts attracted both local and foreign investors, although most of the latter chose not to proceed after noting the relatively small scope and scale of the investment ventures.
For OBA subprojects: Land for water treatment plants must be acquired before subprojects are begun and the potential for finding adequate water supplies needs to be confirmed before bids are tendered; Environment safeguards need to be integrated into the design and planning stages; Regular consultations with communities needed to coordinate construction, minimize disruptions, and address concerns.
For DBL subprojects: The period between project preparation and implementation needs to shortened, primarily by ensuring that land is available for WTP site construction; Better control needed of land use around well sites, especially in areas the water supply source is an unconfined acquifer; Better community understanding of groundwater problems would be useful in preparation and implementation of future projects. In general, strengthening community participation during project preparation will avoid misunderstandings especially with land issues; PWOs have learned the significance of including elevated storage tanks in the water system design. Such tanks minimize the generator’s operating time and energy cost and allow for 24-hour operation.
After Project restructuring: The demand-driven public-private partnership approaches (DBL and OBA) to piped water supply in the provinces have been partially successful as models. The number of total connections in the 11 towns increased 27 percent from mid-2008 (11,600) to mid-2011 (14,685), with five of the 11 PWOs experiencing declines in connections (see Annex 2.); Consumer satisfaction with the water quality and services has been relatively high (see Annex 3.); The security of an adequate cash flow for PWOs has not been assured given a low tariff 38 structure (MIME regulated tariffs are determined by what consumers are willing to pay); substantially lower than projected household water consumption; and higher than projected fuel costs. Because tariff increases may further decrease both water consumption and the rate of new connections, maintaining sustained or generating new private sector interest in these approaches may prove challenging at least for the short term.
PHNOM PENH WATER SUPPLY AUTHORITY (PPWSA) Outcome/Achievements Achieved Project total of 89 per cent ?of water supply infrastructure/pipeline objective/KPI; Achieved Project total of 77 percent of PHH connections objective/KPI.
Project outputs Before restructuring, length of pipeline installed: 299 km (end 2010); number of PHHs receiving water connections: 6,462 (end 2010); After restructuring, length of pipeline installed: 330 km (Semester 1 2011); number of PHHs receiving water connections: 5,208 (Jan to end of Jun 2011) (Semester 1 2011); Total length of pipelines installed: 629 km; total number of PHHs receiving water connections: 11,670. See Annex 1. for this and other PPWSA provided Project data.
Factors Affecting Implementation. Internal quality of the organization biggest factor to success. Leadership and organizational culture have created positive institutional cooperation between the special authority and donor community; Less than adequate timeframes for implementation during both original and restructured phases, especially with regard to poor household connections; Project task team leaders played effective facilitation and cooperation roles with EA/IA to overcome the difficulties and issues during the project life cycles, including project formulation, implementation, and completion.
Transition arrangement Financially sustainable, which leverages appropriate O&M of the authority; Standard Operating Procedure (SOP) and the Community Participation Program for O&M of all facilities procured under its own and externally financed projects. Risks for sustainability. Inflationary pressures. While tariffs have remained constant since 2001, fuel costs for electricity constitute 52 percent of operations budget compared to 40 per cent five years ago; Water quality and water levels of Tonle Sap River less consistent from year to year; Leadership turnovers; Unpredictability of MoWRAM water pricing policies.
Bank Performance. Effective and efficient, bank has provided management tools for problem solving. Rated satisfactory.
Borrower’s performance Ongoing need to improve efficiency (e.g., water loss) and profitability, ambitious goals not always easy to achieve. Rated satisfactory. Lessons Learned. Effectiveness of RGC policy; Possible to provide water for all. Project development objectives achieved by assuring provision of clean water at affordable prices to everyone in greater Phnom Penh;
39 Close cooperation between the development lender and borrower achievable. Good management of bidding process attainable.
CENTER FOR DEVELOPMENT (CFD) Outcome/Achievements Implementation of the sanitation component was satisfactorily met in phase 1. The larger logistical challenges (including procurement) occurring in phase 2 led to late starts and delays in the delivery of construction materials especially in some Kampong Cham service areas. Although the deliveries were completed, 24 per cent of the sanitation facilities were still under construction by the beneficiaries after the end of the Project period, whereas all constructions were completed in August 2011. See Annex 4.1 Progress to June 27 and 4.2. Progress to August 15. Annex 5 details the population served by new potable water system and Annex 6 details the population served by new household sanitation facilities.
The public information dissemination component exceeded the number of people targeted to receive direct education and awareness of good WASH practices leading to behavior change. Local health clinics in Project areas reported dramatic drops (> 70 per cent) in admissions due water borne disease cases.
Clean water groups (CWGs) in 20 service areas representing 149 villages benefited in a satisfactory manner through improved capacity in undertaking their role and responsibility as social intermediaries between PHH beneficiaries, whom they represented and local authorities, private suppliers and (where applicable) private water operators. With variations the general level of volunteer CWG representatives in terms of commitment, competence, confidence, and follow through representations was moderately high.
Project outputs As of August 15, 2011, 6,072 (100 per cent) phase 2 toilets with septic systems were completed, with an additional 33,493 people now having access to improved sanitation. A total of 7,147 sanitation facilities in 20 communities now benefit 39,511 people in the Project provinces; an additional 3,465 neighboring people also use these new facilities which are particularly important to young girls.
During phase 2, 6,602 (2,658 female) participants benefited from seven training workshops: i) CWG role and responsibilities (refresher); ii) Good governance framework, complaint mechanism, and procurement manual; iii) Toilet construction techniques (including material specifications; iv) Conflict management/resolution and networking, advocacy, and lobbying; v) National drinking water quality standards (including consumer rights training as per the terms and conditions of the signed contracts; vi) Gender mainstreaming in the WASH sector; and vii) Toilet material specification monitoring;
The public information dissemination component produced and distributed to the 20 service areas 15,000 illustrated three-ply flyers, 850 illustrated all-weather small posters, and 10,000 large acrylic posters with illustrations and text. Two DVD videos, one a cartoon and the other a documentary, and a radio spot were produced. Two national television channels, CTN & KTV, broadcast one of the video productions and the radio spot was broadcast by stations in the concerned provinces. Community screenings of the video productions were organized for a) students and teachers in 79 schools for 33,732 participants and b) populations at large in 149 community institutions (including Buddhist Pagodas and Muslim Mosques) for 84,272 participants. For data on the participants, see Annexes 8.1. and 8.2.
Five exit (strategy) workshops were organized in the last month of phase 2 with 101 CWG and CC representatives from the 20 service areas participating.
40 Factors Affecting Implementation Restructured project period short relative to scale of objectives and KPIs; The reimbursement method applied to a local non-profit NGO difficult when project running at full speed: during time between request and receipt of reimbursement, lacked upfront cash to continue implementing. Cumbersome procurement guidelines.
Transition arrangement Organized five wrap-up workshops involving CWG and CC members to prepare exit strategy plan. CfD committed to seeking funds to facilitate exit strategy plans for integrated community development. Existing CWG mechanism viable to continue WATSAN and other activities including with other organizations. Risks for sustainability. CWGs risk loss or dilution of commune council support after commune/sangkat elections scheduled to be held in mid-2012; Implementation of exit strategies limited without NGO facilitation and donor support.
Bank Performance. Satisfactory communication with WB TTL and WB local staff who helped facilitate project management and implementation, although procurement assistant under restructured project occasionally incurred problems receiving clear and timely advice from the WB national procurement specialist. Geographical remoteness of TTL occasionally limited opportunities to deal with the issues requiring immediate input. Slow restructuring approval process caused loss of project momentum and uncertainty among target groups in service areas.
Borrower’s performance 2003-2007 and restructured project achievements rated satisfactory by independent evaluation team. With incurred delays, especially during restructured project period, KPIs satisfactorily achieved. Lessons Learned. Local Cambodian NGO able to play proactive role in coordinating and cooperating with MIME and MEF; Better communication and coordination with national and local stakeholders helps project implementation and on-time achievement; CWGs, working on voluntary basis, able to function as social intermediaries supporting their respective commune councils in accordance with article 27 of the Commune/Sangkat Administration Law of RGC. They are a link between communities and other project stakeholders including local water operators and provide relevant information and education as agents of behavior change among end users; CWGs are able to play a participatory role consistent with the RGC’s NSDP and rectangular strategy including[?] decentralization and deconcentration (D&D); Bank flexibility as problems arise helps project management and timely achievement of objectives.
SUMMARY FINDINGS AND RECOMMENDATIONS
41 The RCG agreed in this Project to test two demand-based approaches for public-private partnerships involving community participation in the provision of clean water and sanitation services in the provinces. Both approaches were based on the premise that water tariffs are what end users have agreed to and were willing to pay. Design-Build-Lease (DBL) contracts, adapted from a model developed in the Philippines, were awarded to 9 of the 11 Project PWOs. They were based on a community driven credit model that provided financing for households willing to connect on the same terms (15 years) as the IDA credit awarded to PWOs as a loan lease for up to 90 percent of their water treatment plant construction costs. This made the impact on households of repaying the connection cost on the monthly water bills minimal. It was also developed on the basis of a 20 per cent potential return to PWOs after the lease fee payment. The Output-Based Aid (ODA) approach, an incentive subsidy model, provided no upfront IDA financing for construction costs but subsidized connections from the IDA grant to all pre- identified poor and vulnerable households, reimbursing PWOs for completed connections. The subsidized connections were seen as jump starting the water supply system. As the amount of financing available to PWOs in OBA contracts was substantially lower than with DBL contracts, it was seen as substantially reducing the fiscal burden of the RGC to be the sole or main source of financing water supply investment. Five of the 9 DBL systems experienced declines in the number of households connected comparing mid-2008 to mid-2011, with only Neak Leoung achieving substantial growth. The two OBA systems saw dramatic increases in the number of connections in the same period, increasing by more than three-fold from 1,142 connections of poor & vulnerable households only to a total of 3,465. Although after mid-2008 the two OBA PWOs, Pa’av and Mesar Chrey, opened their water supply systems to any household wishing to connect, a significant part of the increase was due to USAID subsidies of new connections during a 6-month period in the second half of 2010. In Mesar Chrey, whose connections increased from 751 to 2,185, a total of 1,200 of the 2,185, or some 45 per cent, were due to the USAID subsidies. Apart from households, PWO total connections include from a half dozen to nearly two dozen institutional clients. The largest, Neak Leoung, had 23 institutional clients including 3 medical facilities (2 health centers and one referral hospital), 4 schools, 4 wats (Buddhist temples), 3 police stations, 2 fisheries offices, 1 irrigation office, 1 veterinarian, and 1 NGO. The evaluation team met with PWO managers at the respective water treatment plants, not with the owners. Without referring to specific figures, the managers, with the exception of Neak Leoung, roughly estimated the owners’ profit margins as ranging from small to at or under the break-even point.
Factors Affecting Implementation. Approval processes for both phases slowed project implementation between government agencies/implementing partners and Bank procurement and reimbursement requirement and contingency-related issues, including limited field monitoring system of Bank country office; Limited design and technical capacities of government staff and PWOs, affecting construction of water treatment plants in particular; Although bidding documents were completed in April 2003, the bidding process for PWOs did not take place until May 2006;
Transition arrangement N/A for PPWSA; MIME, playing facilitating role, maintains oversight and compliance functions vis-à-vis PWOs; CfD adding value to CWG’s WASH role as social intermediaries by seeking to introduce income-generating community development activities and moral/security measures to improve quality of life. (Safe delivery of rural water and sanitation services is regarded by the RGC and donor community to be central to more general task of poverty alleviation.).
42 Risks for sustainability Inflationary pressures, especially in fuel costs, for PPWSA and PWOs; Diminished CC support for CWGs as CC memberships turn over following elections; Limited incentives for PWOs to upgrade, expand, or even adequately maintain water treatment plants; Bank and Borrower’s performance Bank performed satisfactorily during both phases, including and especially in its facilitating role during supervisory missions. Approval delays were a constraint (see (a) above), including the two-year time lag between phase 1 and the restructured project, possibly encumbered by the high turnover of Bank TTLs during that period; Borrower performed satisfactorily given constraints of approval processes, bidding procedures, and limited technical capacity in the provincial clean water component;
Improved coordination and communication between government agencies/implementing partners expedites approval processes; While not reducing requirements for transparency and accountability, streamlined Bank procurement and, in particular, reimbursement procedures will result in more timely and efficient project implementation; Require benchmarks for private contractors with penalties when benchmarks are not met;
Recommendations In the context of the public-private sector partnership piloted by PPUWSP, organize a day of stock-taking and discussion of revenue, investment, O&M, and other problems faced by PWOs. This could include discussion and sharing of practical remedial measures for under-performing PWOs, including contingency liquidation procedures; Adopt realistic practical measures to strengthen the RCG’s regulatory environment in WATSAN sector in general and MIME’s water quality control procedures, tariff policy, and PWO service requirements in particular; Give CWGs a statutory function as autonomous subcommittees of CCs representing end users in the WASH sector; A detailed assessment of the DBL and ODA approaches, viewed in the context of a wider RGC WATSAN sector policy review to determine the feasibility of piped water supply for rural Cambodia. Piped water supply may not be a technologically or, based on this initial evaluation of the PPUWSP experience, financially viable option outside the provincial capitals and large towns like Neak Leoung. Replicating the successful public enterprise model of the Phnom Penh Water Supply Authority, a state-owned, MIME overseen enterprise statutorily possessing financial and operational autonomy, has a number of arguments in its favor. Given MRD’s responsibility for un-piped and (non-commercial community-based piped) water in the provinces, its ideal modus operandi would involve consulting with end users in the preparation of existing or new decentralized technical options and costs.
43
Annex 8. Comments of Cofinanciers and Other Partners/Stakeholders
N/A
44 Annex 9. List of Supporting Documents
Project Implementation Plan
Project Appraisal Document for Cambodia Provincial and Per-urban Water Supply and Sanitation Project (PPUWSP) March 31, 2003 (Report No: 25658-KH)
Aide Memoires, Back-to-Office Reports, and Implementation Status Reports.
Project Progress Reports.
Borrower's Evaluation Report dated September 2011
*including electronic files
45 ANNEX 10: PPWSA FINANCIAL PROJECTION
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 PROJECTION PARAMETERS Currency: Riels Prices/Costs: Current Exchange Rate: 4100 Cost Escalation Rates: 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% Cost Escalation Factor 1.03 1.03 1.06 1.09 1.13 1.16 1.19 1.23 1.27 1.30 OPERATING RESULTS Operating Revenues 103,466 107,623 133,432 141,167 150,314 159,387 168,040 175,340 182,171 186,924 Operating Expenses 46,331 50,513 61,118 65,420 70,752 76,976 82,430 88,332 94,357 99,873 Net Income 30,235 27,655 29,181 26,567 32,385 26,669 33,384 38,003 41,935 44,547 Cash from Operations 59,854 61,637 73,500 77,274 85,376 84,536 89,025 91,936 94,171 95,097
Operating Ratio 40.31% 43.32% 43.82% 44.36% 43.78% 46.23% 46.49% 47.29% 48.23% 49.32%
Total Assets 753,750 839,736 981,412 1,060,164 1,136,647 1,067,638 1,068,640 1,074,297 1,083,831 1,095,805 Working Capital 83,411 7,478 6,998 100,637 15,216 46,422 88,884 128,618 172,325 218,684 Working Capital (Days 648 53 41 554 77 217 388 524 657 788 OPERATING EFFICIENCY Service Connections 215,500 227,500 237,500 246,500 254,500 264,500 273,500 281,500 288,500 294,500 Average Tariff (Riels) 1,004 1,009 1,014 1,019 1,024 1,029 1,035 1,040 1,045 1,051 Percent Growth in Conn 5.5% 5.3% 4.2% 3.7% 3.1% 3.8% 3.3% 2.8% 2.4% 2.0% Water Sold (in 000 of m 103,094 106,700 131,623 138,550 146,779 154,846 162,416 168,599 174,261 177,879 Water Losses 5.85% 5.70% 5.55% 5.40% 5.25% 5.10% 4.95% 4.80% 4.65% 4.50% Utilization Capacity (Sh (10,375) (18,179) 17,592 10,491 2,038 41,233 33,525 27,300 21,640 18,139
FINANCIAL PERFORMANCE RATIOS Acc. Receivable (Days 45 45 45 45 45 45 45 45 45 45 Current Ratio 2.01 0.79 0.73 2.24 0.71 1.16 1.65 2.11 2.60 4.25 Debt/Equity Ratio 0.22 0.31 0.40 0.32 0.24 0.20 0.15 0.11 0.07 0.05 Debt Service Coverage 2.38 2.06 2.19 1.89 2.71 1.59 2.08 2.26 2.44 2.60 Self Financing Ratio 0.33 0.19 0.33 0.50 0.3 14.9 5.4 5.7 5.9 Return on Revenues 29.2% 25.7% 21.9% 18.8% 21.5% 16.7% 19.9% 21.7% 23.0% 23.8% Return on Assets 4.8% 3.5% 3.2% 2.9% 3.0% 2.8% 3.6% 4.3% 4.9% 5.4% Return on Equity 5.3% 4.7% 4.5% 3.5% 4.0% 3.2% 3.8% 4.2% 4.4% 4.5%
INVESTMENT PRO 124,127 209,537 156,238 102,601 209,229 - 3,802 19,133 19,707 20,298 Investment Project 106,775 204,915 154,595 96,535 202,607 - 3,802 11,525 11,870 12,226 Investment by PPWSA 17,351 4,622 1,642 6,067 6,623 - - 7,609 7,837 8,072 Capitalized Interest ------
FINANCING PLAN 124,127 209,537 156,238 102,601 209,229 - 3,802 19,133 19,707 20,298 Grants (Japan + AFD) - - 27,413 76,875 25,625 - - - - - ADB ------JICA 13,916 46,054 57,567 ------
AFD 12,411 16,958 3,879 76,875 25,625 - - - - - Outstanding Loans ------PPWSA Contribution 97,800 146,526 67,379 (51,149) 157,979 - 3,802 19,133 19,707 20,298
Growth in Connections for Poor Households (1997‐2010)
46
47
Annex 11: Details of the 11 DBL/OBA Water Supply Facilities
Project Name Number of Water source and Tariff (Riel/m3) Comments: and Contract households treatment process Water supply capacity Record keeping, quality of type served (m3/hour) maintenance, etc Service time (hours/day)
Neak Leoung 3767 3 boreholes 1560: No pumping records or WQ DBL Aeration (Fe and Mn records on site. removal), pre 140m3/h Operator tests residual Cl. chlorination, pre 16h/d and lime using portable kit lime, settlement, Almost 100% coverage of every 2/3 days. filtration. hh in project area. Average maintenance Pumping to elevated standard. tower.
Kandieng Reay 473 Boreholes Originally 1810, now 2100: No standby chlorinator. DBL Pre chlorination, Average maintenance package Fe/Mn standard. removal, pumping to 2 units with each 10m3/h elevated tank. units 8h/d
Kampong Chak 310 Boreholes Original tariff was 1850, this No standby chlorinator. DBL Pre chlorination, was raised to 2100. The Average maintenance package Fe/Mn Operator requested to raise standard. removal, pumping to tariff to 3000, but MIME elevated tank. denied it:
2 units with each 10m3/h 4h/d
Mesar Chrey 3243 5 boreholes (only 3 2000: Average maintenance and Sopheas in use) standard. OBA Pre chlorination, and 45m3/h lime, aeration, 6h/day settlement, filtration, pumping to elevated tank.
Ph’av 1000 2 boreholes 2010: Average maintenance OBA Chlorination only standard. usually, (if pH correction is required occasionally, kit is brought in. No aeration.
Phnom Touch 1500 Chlorination and pH 2000: WTW is temporarily and Phnom correction. connected to main electric Thom 70m3/h supply while standby genset DBL 4h/d repaired. Average maintenance standard. 48
Thmor Pourk 1300 5 boreholes Originally 1900, now 2500: Access road should be DBL (3m3/bh/h) improved. Power from main Pre chlorination, design capacity is 45m3/h electric supply (same aeration, settlement, but resource limits pumping operator). Water resource filtration, pumping to to 15m3/h study indicated yield at elevated tank. 16 h/d 45m3/h. 2* dry years may be limiting yield. Average maintenance standard.
Beung Trakoun 400 3 boreholes Originally 2500, now 3000: The contractor did not DBL Alum, lime, provide an elevated tank filtration, (budget reason). Pressure is chlorination. No design capacity is 25m3/h stabilised using a pressure elevated tower. but resource limits pumping vessel during pumping. to 12m3/h Because pumping is not 16 h/d continuous, an elevated tank should be provided. Operating procedure needs to be regularised. Average maintenance standard.
Phsar Chub 1300 3 boreholes Originally 1500, now 2000: The operator provided from DBL Chlorination, (pH own investment the elevated correction as design capacity is 34m3/h. tank and a smaller generator necessary), elevated Current production is to reduce operating costs. storage. 34m3/h Average maintenance 6-8h/d standard.
Srah Chik 888 4 boreholes 2000: No standby chlorinator. DBL Chlorination and Average maintenance package Fe and Mn 25m3/h removal. Pumping to 8h/d in wet season and12h elevated tank. in dry season.
Paoy Char 1007 4 boreholes 2000. (The operator wanted No standby chlorinator. DBL Chlorination and to increase the tariff, but Average maintenance package Fe and Mn MIME denied it). standard. removal. Pumping to elevated tank. , 30m3/h 5h/d in wet season and 7h in dry season.
49 Annex 12: PPWSA Water Quality: Cambodian National Drinking Water Quality Standard
No Parameter Unit CNDWQS Result 2008 Result 2009 Result 2010
1 Taste Acceptable Acceptable Acceptable Acceptable 2 Odor Acceptable Acceptable Acceptable Acceptable
3 Color TCU 5 0.91 1.97 1.25 4 Turbidity NTU 5 0.44 0.87 0.69 5 Residiual Chlorine mg/l 0.2-0.5 0.93 0.87 0.83 6 pH 6.5-8.5 7.41 7.93 7.89 7 Total Dissolved Solids mg/l 800 74 69 86 8 Arsenic mg/l 0.05 <0.001 <0.001 0.002 9 Iron mg/l 0.30 0.01 0.01 0.01 10 Manganese mg/l 0.10 0.016 0.018 0.003 11 Nitrate mg/l 50 0.18 3.58 6.11 12 Chloride mg/l 250 14.9 14.8 23.5 13 Sulfate mg/l 250 17.25 17 19.4 14 Ammonia mg/l 1.5 0.000 0.02 0.042 15 Hardness mg/l 300 58 53 68 16 Aluminum mg/l 0.2 0.17 0.082 0.038 17 Barium mg/l 0.70 0.031 0.037 0.032 18 Cadmium mg/l 0.003 <0.001 <0.001 0.0001 19 Chromium mg/l 0.05 <0.001 0.00 0.01 20 Cyanide mg/l 0.07 <0.02 0.00 0.0001 21 Fluoride mg/l 1.5 0.08 0.09 0.11 22 Lead mg/l 0.01 0.0001 <0.0001 0.0001 23 Mercury mg/l 0.001 <0.0001 <0.0001 0.0001 24 Nickel mg/l 0.02 <0.001 <0.001 0.001 25 Nitrite mg/l 3 0.007 0.010 0.013 26 Selenium mg/l 0.01 0.01 <0.001 0.001 27 Sodium mg/l 200 5.8 7.9 10.7 28 Hydrogen sulfide mg/l 0.05 0.003 0.002 0.002 29 Zinc mg/l 3 0.117 0.02 0.05 30 Copper mg/l 1 <0.01 0.01 0.02
31 E. coli CFU/100ml 0000
32 Total coliforms CFU/100ml 0000 Organic suhstituents and pesticides ( Tested every three years )
33 Polychloriated bipheny μg/l 0.5 <0.5 <0.5 <0.5 34 Benzene μg/l 10 <0.5 <0.5 <0.5 35 Trihalomethanes μg/l 250 59.8 24.7 31 36 2,4-D μg/l 30 <0.1 <0.1 <0.1 37 Aldrin and Dieldrin μg/l 0.3 <0.01 <0.01 <0.01 38 Carbofuran μg/l 10 <0.1 <0.1 <0.1 39 Chlordane μg/l 0.2 <0.1 <0.1 <0.1 40 DDT μg/l 20 <0.1 <0.1 <0.1 41 Dichlorvos μg/l 1 <0.1 <0.1 <0.1 42 Dimethoate μg/l 6 <0.1 <0.1 <0.1 43 Endosulfan μg/l 30 <0.1 <0.1 <0.1 44 Endrin μg/l 0.6 <0.1 <0.1 <0.1 45 Glyphosate μg/l 10 <0.1 <0.1 Not tested 46 Heptachlor μg/l 0.3 <0.03 <0.03 <0.03 47 Hexachlorobenzene μg/l 1 <0.1 <0.5 Not tested 48 Methyl parathion μg/l 0.3 <0.1 <0.1 <0.1 49 Mevinphos μg/l 5 <05 Not tested Not tested 50 Monocrotophos μg/l 1 <0.1 <0.1 <0.1 51 Paraquat μg/l 30 Not tested <0.1 <0.1 52 Parathion μg/l 10 <0.1 <0.1 <0.1 ' 53 Permethrin μg/l 20 Not tested <0.1 <0.1
50 Annex 13: Pictures from the Project
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