Strengthening the Water Supply Sector Program (Financed by the Japan Special Fund)

Technical Assistance Consultant’s Report

Project Number: TA No. 4585-KAZ November 2005

Kazakhstan: Strengthening the Water Supply Sector Program (Financed by the Japan Special Fund)

Prepared by Arthur McIntosh

For Ministry of Agriculture Committee for Water Resources

This consultant’s report does not necessarily reflect the views of ADB or the Government concerned, and ADB and the Government cannot be held liable for its contents. (For project preparatory technical assistance: All the views expressed herein may not be incorporated into the proposed project’s design.

RESPECT FOR WATER IS RESPECT FOR LIFE

“WATER! You have no taste, no colour, no odour. You cannot be described.

One can be delighted in You without even perceiving what You are.

You are not just essential for life, You are the life yourself.

You are the greatest treasure in the world, but the most vulnerable.

You, so clean in the interior of the Earth…You do not stand any impurities,

You do not stand anything alien.

You are the divinity that can be so easily frightened away.

But you give us everlasting common happiness.”

from a French Poet Antuan de Sent- Ekzupery

Those who make decisions about the funding and development of water supplies should ponder on the above. The spiritual dimension of water (which has been recognized in civilizations for thousands of years) makes it unique among all other services provided by governments for their people. An investment in water is an investment in life.

Rate of Exchange (November 2, 2005)

Currency unit = Tenge (T) Tenge 1.00 = $0.00747 $1.00 = T 133.77

Abbreviations and Acronyms

ADB – Asian Development Bank ARNM – Agency for Regulation of Natural Monopolies BTS – Block Tariff Structure CSSEC – Committee for State Sanitary and Epidemiological Control CWR – Committee for Water Resources HDPE – High Density Polyethylene Km3 – cubic kilometers M3 – cubic meter NKO – North-Kazakhstan Oblast NRW – Non-Revenue Water O&M – Operation and Maintenance OSME – Oblast State Municipal Enterprise PSP – Private Sector Participation PWSP – Potable Water Supply Program TA – Technical Assistance UNDP – United Nations Development Program

IMPLEMENTING THE WATER SUPPLY PROGRAM

IN RURAL SETTLEMENTS

TABLE OF CONTENTS

EXECUTIVE SUMMARY ...... 6 PART I THE TECHNICAL ASSISTANCE...... 11 1.2 OBJECTIVES...... 11 1.3 ORIGINAL SCOPE OF WORK ...... 11 1.4 REVISED SCOPE OF WORK ...... 11 1.5 PROJECT TEAM ...... 12 1.6 PROJECT ACTIVITIES ...... 12 1.7 ACKNOWLEDGEMENTS ...... 13 PART II SITUATION OVERVIEW ...... 14 2.1 GEOGRAPHY ...... 14 2.2 CLIMATE...... 14 2.3 WATER RESOURCES FOR WATER SUPPLY ...... 14 2.4 THE PAST...... 20 2.5 THE PRESENT ...... 22 2.6 THE POSITIVES...... 28 PART III THE WATER SUPPLY SECTOR PROGRAM 2002-2010 ...... 29 3.1 THE MILLENNIUM DEVELOPMENT GOALS...... 29 3.2 THE INITIAL WATER SUPPLY PROGRAM...... 29 3.3 COMMENTS FROM THE ROUND TABLE DISCUSSIONS...... 32 3.4 THE SECOND STAGE WATER SUPPLY PROGRAM 2006-2010 ...... 34 3.5 USE OF THE REPUBLICAN BUDGET FOR LOCAL WATER SUPPLY SYSTEMS ...... 39 3.6 USE OF THE OBLAST BUDGETS FOR THE WATER PROGRAM...... 39 3.7 RULES FOR CONSIDERING BUDGET INVESTMENT PROJECTS ...... 40 PART IV IMPLEMENTING THE PROGRAM ...... 41 4.1 INSTITUTIONAL FRAMEWORK ...... 41 4.2 PUBLIC AWARENESS AND THE INVOLVEMENT OF CIVIL SOCIETY ...... 42 4.3 SERVICE LEVELS AND SELECTION CRITERIA ...... 44 4.4 APPROPRIATE TECHNOLOGY ...... 45 4.5 FINANCING ...... 48 4.6 PROCUREMENT...... 48 4.7 HUMAN RESOURCES & DEVELOPING PEOPLE...... 50 4.8 TIME IS OF THE ESSENCE ...... 51 4.9 OPERATION AND MAINTENANCE...... 51 4.10 TARIFFS AND SUBSIDIES ...... 52 4.11 PRIVATE SECTOR PARTICIPATION (PSP) ...... 60 4.12 REGULATION ...... 61 4.13 SANITATION ...... 63 PART V MAKING THE PROGRAM SUSTAINABLE ...... 64 5.1 LEGISLATION ...... 64 5.2 INSTITUTIONAL FRAMEWORK FOR RURAL WATER SUPPLIES ...... 65 5.3 ANALYSIS OF INSTITUTIONAL FRAMEWORK ...... 65 5.4 DRAFT POLICY FOR IMPLEMENTING THE PROGRAM...... 66 5.5 MONITORING THE PROGRAM...... 67

PART VI AN URBAN CAMEO ...... 69 6.1 INSTITUTIONAL AND LEGAL FRAMEWORK FOR VODOKANALS...... 69 6.2 WATER LOSSES AND METERING ...... 69 6.3 TARIFFS, SUBSIDIES AND DEVELOPMENT FINANCING ...... 70 6.4 BENCHMARKING OF WATER UTILITIES ...... 74 PART VII STAKEHOLDER WORKSHOP...... 76 7.1 AGENDA ...... 76 7.2 LIST OF PARTICIPANTS ...... 78 7.3 PRESENTATIONS OF TA TEAM ...... 81 7.4 MINUTES OF WORKSHOP ...... 92 7.5 WORKSHOP PARTICIPANTS’ RESPONSE CARDS...... 102 PART VIII RECOMMENDATIONS ...... 107 8.1 INSTITUTIONAL FRAMEWORK ...... 107 8.2 FUNDING ...... 107 8.3 TIME IS OF THE ESSENCE ...... 107 8.4 OPERATION AND MAINTENANCE...... 107 8.5 PUBLIC AWARENESS...... 107 8.6 URBAN WATER METERING & TARIFFS...... 107 8.7 DEVELOPING HUMAN BEINGS ...... 108 8.8 PROGRAM POLICY AND MONITORING ...... 108 8.9 APPROPRIATE TECHNOLOGY ...... 108 8.10 CHAMPION OF THE CAUSE ...... 108 8.11 RESEARCH ON SUBSIDIES...... 108 PART IX ACTION PLAN ...... 109 REFERENCES...... 111

“Once upon a time…...there was 24-hour piped water in rural areas”

...and there will be again under the Water Program

EXECUTIVE SUMMARY

RESPECT FOR WATER IS RESPECT FOR LIFE

1. THE TECHNICAL ASSISTANCE The original terms of reference for the technical assistance was about developing the Water Program. However since most of this had been completed by Government prior to the start of the technical assistance, the revised terms of reference was to concentrate on “How to Implement the Water Program in rural areas”. 2. INSTITUTIONAL RESPONSIBILITY The Program has started in rural areas but there are major problems. There is not enough oblast funding, implementation is very slow, construction standards are low, there is almost no distribution pipework in rural areas and few operation and maintenance organizations. Rehabilitation or replacement of most of the piped water supplies in rural areas is not a “business as usual” task. It requires a massive team of dedicated water supply professionals working over a period of 10 years. That’s CWR with 300 professionals (50 permanent staff and 250 contract staff) dedicated to implementing the Water Program. Reorganization should be done in a structured manner using proven methods which are available from water agencies in other countries. 3. FUNDING The latest estimate of a requirement of the equivalent of $145 per person for every person in this country to give everyone sustainable piped water supplies is quite reasonable considering the job to be done and comparing with development costs in other countries. But funding must be linked to institutional responsibility for implementing the Water Program in a timely manner. It is not possible to have two leaders or two managers. CWR must take the lead and the whole of the Water Program should be implemented under the republican budget. At same time steps can be taken to increase tariffs and reduce subsidies, thereby reducing the total funding requirements. The funding must cover all aspects of the initial O&M including equipment, housing and vehicles. CWR must be responsible for ensuring adequate O&M arrangements are established wherever monies are spent on the Water Program. 4. URBAN WATER METERING & TARIFFS In urban areas, there are high water losses, water use is not fully metered and tariffs are only sufficient to cover operations, not even urgently needed maintenance, let alone development costs. There is no state responsibility for Vodokanals. If you can’t measure you can’t manage. One hundred percent metering of consumers is required for water accountability and equitability. Tariffs should be much higher and based on affordability criteria to allow at least partial funding of development from tariffs. Block tariffs should be introduced to protect the low income user and penalize excessive consumption. CWR should formulate policy for Government endorsement and benchmark the performance of urban water supply entities. 5. TIME OF THE ESSENCE Feasibility studies are required for water supply improvements in 4000 rural settlements. The construction season is only six months in every year due to climate. There are delays each year between budget approval and allocation of funds. The deterioration of existing water supply infrastructure is taking place faster than the rehabilitation, let alone new water supplies can be affected. Procurement in large contracts takes a very long time. Time is of the essence. Water

supply feasibility studies should be carried out for each oblast not settlement. New procurement methods such as negotiated contracts with pre-qualified consultants, suppliers and contractors are needed. This is another job for a much expanded CWR including monitoring the quality of construction. 6. INSTITUTIONAL FRAMEWORK FOR O&M There are farming and industrial enterprises in rural settlements that by default provide the people with water although they would rather not be in that business. There are many settlements waiting to get piped water supplies (including distribution) but for which there is no O&M organization to maintain a new system. The best operating arrangement seems to be that of the Oblast State Municipal Enterprise (OSME) in Taldykorgan (Almaty Oblast) which has water units in rayon centres and assists settlements (unofficially) with the procedural and technical side of investments. If an OSME also had responsibility for the water supplies of rural settlements it would provide the best service to the people. In the meantime, under the republican budget there should be established in each oblast capital a Rural Water Supply Operation and Maintenance Unit to be responsible for water supply operation and maintenance arrangements for and in all rural settlements. 7. PUBLIC AWARENESS There is little knowledge of the Water Program in rural areas. Nor are decision making officials fully aware of the situation. The recent UNDP survey showed 36% of people in rural areas connected to piped water but the official figure was 54%. Government (CWR) must formulate policy (not legislation) and clearly articulate it through the media. The Water Program video and website will help. In this land of water scarcity, there is a need for much greater respect for water, from the highest government official (in all sectors), right down to infants in rural areas. The spiritual dimensions of water need to be revived. 8. SANITATION & HEALTH Lack of water or long stoppage in its supply have resulted in extremely low sanitary-hygienic and epidemiological level of the living standard in rural areas. The level of access of rural population to good quality drinking water has greatly decreased and continues to do so. All available wells and public dugwells for decentralized water supply are ownerless. In 2004 on average in the whole republic the percentage of inappropriate drinking water samples by chemical indices was 7.7%, but some oblasts eg. Kyzylorda had 70%. Another 7.6 % on average for the republic did not meet microbiological standards including as high as 41% in Akmola oblast. In Pavlodar oblast 43% of settlements use water that does not meet national standards. The Project team concluded that the Committee for Sanitary and Epidemiological Control of the Ministry of Health is doing a fine job monitoring the situation and sanitation should remain their responsibility. Piped water in the home must come before any improvements in rural sanitation can be envisaged. 9. DEVELOP HUMAN BEINGS There is a massive lack of water supply sector professionals. Of 34 staff in CWR only 7 have a background in water economy. Salaries are low so good professionals go to the oil & gas sector or overseas. CWR must be responsible for rebuilding the sector with adequate, qualified and well paid professionals. Real and sustainable development is not building pipelines…it is developing people who can build pipelines. 10. PROGRAM POLICY & MONITORING

The CWR needs to formulate policy regarding all aspects of the Water Program, get it endorsed by Government, then ensure it is advertised to the people. Likewise the Program itself needs to be monitored and the results made public at least on an annual basis. 11. APPROPRIATE TECHNOLOGY Examples of appropriate technology include the use of membrane technology for treatment of mineralized groundwater and pipeline repair and replacement equipment recently introduced in Almaty. The latter could be very useful in converting replacement of pipelines into rehabilitation of pipelines. The need is enormous. But CWR needs to facilitate flexible and transparent direct procurement procedures to take advantage of these technologies. 12. FURTHER RESEARCH In addition to the actions identified above the following research is recommended in order to justify the continued use of subsidies: • Study of all group pipelines from technical, social, economic, financial and environmental perspectives • Study of membrane technology applications for water treatment in rural settlements of Kazakhstan • Benchmarking of the Vodokanal water utility performances

13. CHAMPION OF THE CAUSE Every great endeavour needs a champion of the cause if it is to succeed. The Water Program needs a champion of the cause. In the Philippines it was President Ramos who championed the privatization of the Manila water supply. In Cambodia, it was a patriot Mr. Ek Sonn Chan who championed the building up of the Phnom Penh Water Supply. The champion should be someone highly respected by the people. The champion should inspire the people with respect for water … which is respect for life. 14. THE BOTTOM LINE Without a greatly expanded and independent water agency (CWR) it would be unwise to try to implement the Water Program. The results to date and the findings of this technical assistance support this conclusion. 15. SUMMARY FINDINGS FROM STAKEHOLDER WORKSHOP

[These combine the Minutes of the Workshop with the information given in the Workshop Participant Response Cards]

• CWR should lead the Water Program as the single coordinating body, with raised status and expanded staff. The Program itself shall be the State “Drinking Water Program”. CWR should formulate a single policy for the water sector. There should be clear methodology and criteria for selection of water supply projects. It should be responsible for design through to maintenance. CWR should produce quarterly reports on the implementation of the Water Program including the evaluation of all investment projects and monitoring of the overall status of people served with piped water. It should monitor the quality of construction. It should organize cooperation with all republican ministries, agencies and local executive bodies. • Republican Budget alone should fund the Water Program including works in the rayon centres as well as settlements. Increased funding is needed. It should cover feasibility and design. [Mr Atshabarov said he agreed with the TA findings that there can only be one

administrator of the Water Program. Either it will be given to local authorities with funding from local budgets or it will be under CWR with funding from the republican budget]. • O&M arrangements should be created and legalized at rayon level with own water supply staff and equipment for maintaining rural water supplies and all funded by the republican budget. Selling of water through wholesale buyers significantly increases its cost. • Legislation is needed to set up a state authorized body for water supply and sanitation. This must include the urban water supply and sanitation. The fundamental and priority issues are (i) authorized body, (ii) staff and (iii) determining the Program implementation indices. • It is inexpedient to develop feasibility studies for every settlement when rehabilitating or reconstructing water supplies. For new facilities maybe. The client of the design should determine the necessity for a feasibility study. The purpose of the feasibility study should be examined. Designs should be agreed with all concerned state bodies. • Budgets should be based on completing all water supplies for a settlement including all of the necessary distribution. When forming the list of facilities it is necessary to consider completion of earlier started facilities. • Actual costs may reflect increases in cost of equipment and materials during project processing. But project processing must be speeded up. A highly regulated technical and procedural frame limits the scope of response and the time required to improve the water situation in rural areas. • Local authorities shall execute the Water Program with republican budget. • Introduce changes in law “On State Procurements” . Procurement of works from single source negotiated bid shall be allowed. • Prepare a more detailed and specific action plan for implementing the Water Program with the time frame stated for each activity. • Wherever possible use local water sources. Maybe separate drinking water from other water. Desalination facilities are designed to provide only 10 litres per capita per day so they don’t solve the problems of water for domestic needs. • Contractors should interact with design institutes over the introduction of new equipment and materials. Morally and technically we are lagging behind world levels. It is required to introduce new economically efficient technologies. A pipe manufacturer set up a new plant for making HDPE pipe for the Water Program but he complained of production falling due to other manufacturers entering the market without adhering to the standards. There is new equipment now in Almaty oblast for repairing and replacing pipes in-situ and this is needed for all oblasts. • A design institute noted the main problems were lack of qualified personnel, low understanding of the importance of the Water Program, lack of operators, low budget provided for detailed design, blind adherence to lowest bid for award without consideration of technical and personnel qualifications, and delays caused by lack of appreciation of climate and season. • Under the Water Program specific attention needs to be given to urban water supply and sanitation. Tariffs need to be increased to affordability levels and have transparent subsidies. Full metering of urban water supplies is needed for proper management, but it can start with metering all apartment blocks and later move to individual metering.

• According to ARNM the main directions for improving the tariff policy are to raise the performance efficiency, cut the costs of production and raise the attractiveness of the enterprises for investment. • The idea of pursuing one pilot project in each oblast to demonstrate how fast the Water Program can be implemented needs to be fulfilled. • There are high expenses to be incurred in registering for use of natural resources. This is burdensome on tariffs. There is also need to make changes in the Tax Code with regard to income tax when Vodokanals take over rehabilitated schemes. Once again the only source of revenue to pay this tax is tariffs. • One of the main constraints to economic growth (in Akmola Oblast) is the lack of water resources. In most places the water quality does not meet the State standards. One of the issues is that small settlements up to 500 people cannot afford to pay for disinfection of water and high power costs. Republican budget subsidies should be considered for purchase of chemicals and departmental laboratories at the rayon level. • The website on the Water Program is needed to raise awareness and cooperation. • These TA recommendations should be really applied.

PART I THE TECHNICAL ASSISTANCE

1.1 Background In January 2002, the Government of Kazakhstan developed the Potable Water Sector Program 2002-2010 (PWSP). Later, in July 2004, the Government requested the Asian Development Bank (ADB) to provide a small-scale technical assistance to upgrade and strengthen the PWSP. This Technical Assistance [TA No. 4585-KAZ] was approved by ADB on 29 April, 2005 for Strengthening the Water Supply Sector Program in an amount of $150,000. The Executing Agency (EA) is the Committee for Water Resources (CWR) located in the Ministry of Agriculture.

1.2 Objectives The main objective of the technical assistance was to prepare an updated prioritized program for water supply and sanitation services covering the need for potable water of the entire population of the country. However, by the time the consultants were mobilized in July, 2005, the Government had already determined the amount of funding for the Program, where it will be allocated and on what it will be spent. Accordingly, CWR asked the project team to concentrate its attention on how the Program could be implemented in rural areas.

1.3 Original Scope of Work The original scope of work as described in the approved technical assistance paper was: (i) review of the scope of the ongoing potable water programs and other national and sector programs with a WSS component; (ii) review of the existing databases relating to potable water sector, including recent demographic data, information on the condition of the existing WSS facilities, information on sources of potable water supply, health records and economic indicators and employment patterns; (iii) assessment of the needs for WSS services and if necessary, preparation of a revised per capita water demand and minimum standards for public sanitation facilities; (iv) preparation of an updated estimate of the capital investment required for implementation of the upgraded PWSP program; (v) in consultation with the Ministry of Economy and Budget Planning (MOEBP) and CWR formulation of strategies for combining public, private and external sector financing, including possible cost recovery scenarios; (vi) preparation of a phased program and action plan for the implementation of the expanded PWSP based on an updated estimate of investment requirements of each individual oblast and (vii)presentation of the revised phased PWSP reflecting the requirements of each individual oblast at the stakeholder workshop.

1.4 Revised Scope of Work The actual scope of works, which reflected the new objective of advising on how to implement the Program was:

(i) review the effectiveness of the current Program in bringing piped water to the rural population and recommend on how this can be improved including aspects of funding and institutional responsibilities,

(ii) examine ways and means to ensure the Program is implemented in a timely manner including revisions to project approval procedures, the reorganization of CWR with sufficient resources and revisions to procurement procedures. (iii) create public awareness about the Program, including the making of a 20 minute video film, the creation of a website and interacting with the media. (iv) examine existing operation and maintenance and institutional arrangements in rural water supplies and recommend on improvements. (v) review tariffs and subsidies in the water supply sector and provide recommendations for improvements based on experience from other countries. (vi) review private sector participation and regulation in the water supply sector. (vii) discuss new and appropriate technologies (viii) discuss sanitation in rural areas (ix) prepare policy recommendations (x) prepare a monitoring program (xi) convene a stakeholder consultation (xii) prepare an action plan for implementation of the Program

1.5 Project Team The Project Team commenced mobilization on 18 July, 2005 and was fully mobilized with all seven personnel by 25 July, 2005. The TA is scheduled for completion on 18 November, 2005 a total duration of 4 months. The members of the team are:

(i) Arthur McIntosh International Water Supply Specialist - Team Leader (ii) Lilianna Malyy Water Supply Engineer - Deputy Team Leader (iv) Meruyert Kenshimova Financial Specialist/Economist (v) Raushan Taigulova Research Assistant (vi) Tatyana Timanova Administrative Assistant/Translator (vii) Sergei Yourchinskiy Driver / Interpreter.

1.6 Project Activities

The project activities included the following:

(i) Review of Reports (See Summary of References) (ii) Research of Newspapers (iii) Interviews with Agencies in Astana • Committee for Water Resources • Ministry of Economy and Budget Planning • Committee for State Sanitary and Epidemiological Control of Ministry of Healthcare of the Republic of Kazakhstan • Agency for Regulation of Natural Monopolies • Association of Vodokanals • Astana Su (iv) Field Visits • North Kazakhstan Oblast [Petropavloske] • Karagandar Oblast [Irtysh-Karagandar] • Akmola Oblast • Almaty Oblast • Aktobe (Conference on Vodokanals)

(v) Production of Video about Water Program (vi) Establishment of Website (vii) Stakeholder Consultation

1.7 Acknowledgements The Project Team wish to particularly thank Tatiana Simonova, Project Implementation Officer, ADB for her guidance, Mr N.B. Atshabarov Deputy Chairman CWR for his direction and encouragement and Mr A. K. Kenshimov Deputy Chairman CWR for his advice and information. Special thanks go to Valery Kim, Director Almaty Oblast Municipal Enterprise who personally showed the Project team around for two days of field visits and extended great hospitality. Mr Valery N. Petreshev, Director RSE Astana and Mr Sermagambet Kutushev, Director RSE Esil, were also very helpful in arranging field visits for the Project Team. Mr Valeriy Syundyukov, President of the Kazakhstan Water Supply and Sewerage Utilities Association assisted by sharing his views as well as those of other Vodokanal Directors on urban water supply reforms.

PART II SITUATION OVERVIEW

2.1 Geography The Republic of Kazakhstan has approximately 15 million people and is 2.72 million square kilometres in size, making it the ninth largest country in the world. It is situated in Central Asia and is bordered by the Russian Federation, People’s Republic of China, Republic of Uzbekistan, Kyrgyz Republic and Turkmenistan. The highest point is 6995 m above sea level and the lowest point 132 m below sea level. A large part of the country (58%) comprises deserts and semi deserts and another 10% comprises mountains.

2.2 Climate 2.2.1 The climate of Kazakhstan is characterized by long cold winters, short hot summers, variable temperatures and high aridity. The average temperature in January varies from -18 degrees centigrade in the north to -3 degrees centigrade in the south. Average temperature in July caries from 19 degrees centigrade in the north to 29 degrees centigrade in the south. The main consequence of the long cold winters is that the construction season in the north is shortened to just six months. Another consequence of the severity of the winter temperatures is that pipelines for water supply must be insulated and laid very deep (up to 3 meters below the surface) to avoid the water freezing in the winter. 2.2.2 Precipitation as rain is low as compared with other countries, averaging around 300mm annually and only in the foothills and mountains (400mm to 1600mm) is it significantly higher. Not only is rainfall scarce, but it tends to fall in a short period of time in the summer months and in the south during early spring. The consequence is that water supplies in Kazakhstan sourced from surface waters are somewhat limited.

2.3 Water Resources for Water Supply 2.3.1 General Review of Groundwater Groundwater in Kazakhstan is assessed by quantities of forecast resources and explored operational reserves. The total quantity of forecast resources for the republic is 64.27 cubic kilometres (km) per year of which the degree of mineralization less than 1g/liter is 40.44 cubic km. per year, between 1-3 g/liter is 16.40 cubic km./ year and 3-10 g/liter 7.43 cubic km. per year. Forecast resources are distributed very inequitably throughout Kazakhstan as a result of different climatic, hydrogeological and hydrological conditions. The main resources of fresh groundwater (60% of total reserves) are concentrated in the Almaty, Zhambyl and South Kazakhstan oblasts. While the oblasts with least fresh groundwater are Atyrau, North Kazakhstan, Mangistau, Kostanay and Akmola. The amount of explored operational reserves with mineralization less than 1g/liter is 12.68 cubic km. per year of which 5.43 cubic km. per year are in Almaty oblast and 1.95 cubic km. per year in East Kazakhstan oblast. See Map 1 for the general distribution of groundwater in Kazakhstan by river basins and Map 2 showing the distribution of groundwater by oblasts.

Map 1 General distribution of groundwater in Kazakhstan

Source: Data of the Committee for Geology and Natural Resources Use of the Ministry of Energy and Mineral Resources of RK

Map 2 Distribution of groundwater by oblasts

Source: Data of the Committee for Geology and Natural Resources Use of the Ministry of Energy and Mineral Resources of RK

2.3.2 General Review of Surface Water On average the total surface water resources of Kazakhstan are 100.5 cubic km. per year of which only 56.5 cubic km. per year are formed on the territory of the republic. The remaining quantity comes from adjoining states (Peoples Republic of China, Uzbekistan, Kyrgyzstan and Russia). Due to climate peculiarities about 90% of the river water flows in the spring. Distribution of water resources over the territory is highly unequal and the quantity varies greatly by years and seasons. All this causes instability and irregularity in water availability of regions. It is impossible to use fully the available surface water resources due to (i) obligatory releases of water for environmental purposes, (ii) transport and power consumption purposes, (iii) losses due to evaporation and infiltration in reservoirs and (iv) losses due to rapid run-off in spring. Thus the available usage for domestic purposes is only 46.0 cubic km. per year. See Map 3 which shows the eight major river basins of Kazakhstan and the availability of surface water resources in low-water years. 2.3.3 General Review of Water Quality 2.3.3.1 In 2004 in the republic there were revealed over 700 potential sources of groundwater pollution and of them 241 are connected with the hydrogeochemical condition of groundwater. The greatest quantity of pollution sources were found in Almaty, Karaganda and East Kazakhstan oblasts. Most groundwater pollution places (137) are characterized by increase of mineralization, hardness, sulfates and chlorides. Some 75 places are characterized by nitrous compounds in groundwater. Pollution is noted for oil products (49 places), heavy metals (59 places), phenols (41 places and organic compounds 28 places. By degree of hazard for the health of people pollutants are classified as abnormally dangerous and these include substances such as mercury, beryllium and tetrachloride carbon; highly dangerous including copper, cadmium, aluminium, silicon, cobalt, barium, arsenic, benzol, vinyl chloride, bismuth, cyanide and nitrites; dangerous including nitrate, ammonia, iron, manganese, nickel, chromium, zinc, methane, vanadium, phosphates, acetone, phenyl chloride and nitrobenzene; and moderately dangerous including chlorides, sulphates, phenol, oil products, pesticides, toluene, bromine, boron and fluorine. By such standards there were 127 sites which were dangerous, 63 moderately dangerous, 48 highly dangerous and 3 abnormally dangerous. Deterioration of groundwater quality is noted in 70 settlements on 113 deposits and 43 groundwater intakes for drinking water supply as shown in Table 2-1. 2.3.3.2 In 2004 on average in the whole republic the percentage of inappropriate drinking water samples by chemical indices were 7.7%. These were particularly high in Kyzylorda oblast (69.8% of samples), in Akmola oblast (20.5% of samples) and Karaganda oblast (12.1% of samples). In 2004 samples not meeting the standards for microbiological indices were 7.6% on average for the whole republic, including 18.9% in Kyzylorda oblast, 41% in Almaty oblast, and 38.3 % in Astana. Out of 2528 samples from open water bodies used as centralized water supply sources 269 did not meet the standards. In Kyzylorda oblast 69.8%, and in Akmola oblast 16% of samples did not meet the standards. The quality of drinking water in Pavlodar oblast is the most unsatisfactory of all oblasts. Some 221 settlements (43%) use water that does not meet national standards, and incidence of intestinal infection is 2.5 times the national average.

Map 3 Availability of Surface Water Resources in Low Water Years

Source: Data of the Committee for Water Resources of the Ministry of Aagriculture of RK

Table 2-1 Description of pollution of water intakes and groundwater deposits for domestic and drinking purposes

No of polluted No of water intakes and deposits by degree of pollution Degree of pollution Moderately Abnormally Oblasts Water Dangerous Deposits dangerous dangerous intakes Water Water Water Deposits Deposits Deposits intakes intakes intakes Akmola 10 6 6 4 3 1 1 1 Aktyubinsk 7 4 5 4 1 1 Almaty 9 1 7 2 1 Atyrau 1 1 EKO 12 5 4 5 7 1 Zhambyl 7 7 WKO 6 1 3 1 2 1 Karaganda 17 13 8 7 2 1 7 5 Kostanay 28 25 3 Kyzylorda 6 5 6 5 Mangistau Pavlodar 7 7 7 7 NKO SKO 3 1 2 1 1 Total for RK 113 43 80 33 21 3 12 7

Sources: Data of the Committee for State Sanitary and Epidemiological Control

2.4 The Past 2.4.1 The history of the development of water pipelines for the provision of the rural population with piped water is given in Table 2-2 and access to drinking water in rural areas in 1970 – 2010 is shown in Figure 2-1. The significant features are first the steady growth of population served by piped water from 11% of the rural population in 1970 up to about 56.3% of the rural population in 1996. A characteristic of this period was the water tower in each settlement that enabled 24 hour piped supply. Also public bathhouses became a feature of rural settlements.

Table 2-2 Construction of water pipelines and provision of rural population with piped water

(cumulative sum indices) Indices 1970 1975 1980 1985 1990 1996 2004

1. Main group water pipelines, thous, km 1.61 6.9 9.3 13.750 16.2 17.1

2. Local water pipelines and inter- 2.57 12.2 14.8 21.340 26.37 29.57 14.82 settlement distribution networks, thous, km

3. Reconstruction of main group - - - 508.8 1998.6 2420.0 pipelines, km

4. Served settlements (considering those 862 1288 2184 3081 3645 3911 2072 connected to the city vodokanals)

including those served by group pipelines 358 620 906 1165 1301 1328 (No)

5. Population supplied with water from 11 22 36 43.7 52.1 56.3 36.1 water pipelines (in % of the total population)

Source: Data of “Kazgiprovodkhoz” Institute

Figure 2-1

Trends of access of population to drinking water

90,0

80,0 77,2

70,0 69,9

63,0 60,0 56,3 54,0 52,1 50,0 46,7 43,7 40,0 39,7 % of access 36,0 36,1 30,0

22,0 20,0

10,0 11,0

0,0 1970 1975 1980 1985 1990 1996 2004 2006 2007 2008 2009 2010 2011 Estimated levels

Source: Data of “Kazgiprovodkhoz” Institute

2.4.2 In the rayons with limited water resources or prevalence of mineralized water (West Kazakhstan, North Kazakhstan, Kostanay, Akmola, Atyrau, and Kyzylorda oblasts), there were constructed 79 group water pipelines of 50 to 2000 km in length that served hundreds of settlements. The total length of group pipelines reached 17.1 thousand kilometres and they supplied 1276 settlements with water. Unique by their parameters and having no analogue in the world, these pipelines were operated for 20-30 years. In 2.6 thousand settlements there were local water pipelines with a total length of 29.5 thousand kilometres. On the whole for the republic close to 60% of the rural population had access to good drinking water and in some rayons and oblasts this percentage was in the range of 70-95 %. 2.4.3 With transition of Kazakhstan to another economic system the construction and reconstruction of water supply systems sharply reduced and in some years ceased. By means of the state budget (as it was earlier) it was no longer possible to maintain such a complex system. Due to increasing natural deterioration of water supply systems and structures and due to lack of investment in the years 1991-2000 to maintain the operational condition of the systems, most of the water supply systems stopped functioning. This can be confirmed by the figures for North Kazakhstan oblast that before was the leader in the length of group pipelines and settlements served. From 1991 to 2004 the length of working group pipelines reduced from 5682 km to 2958 km. In the same period the number of settlements served reduced from 497 to 163.

2.5 The Present

2.5.1 General According to the data of the Agency of the Republic of Kazakhstan on Statistics the number of the rural population living in 7440 settlements with the population of 100 and less up to 5000 people in the whole republic was 6.43 million. About 60% of the people live in settlements with more than a thousand people which makes it much easier to solve the issues of water supply and reduce the cost of supply. The status of water supply in rural settlements at the end of 2004, by oblast, is shown in Table 2-3. The main findings are that 36.1% of the rural population use piped water, 57.3 % use local groundwater sources, 2.0% use local surface water sources and 4.0% use tankered water. The highest numbers using tankered water are in the oblasts of Atyrau (83 settlements with 65,000 people) and South Kazakhstan (113 settlements with106,000 people). 2.5.2 Group Pipelines 2.5.2.1 In 2072 settlements water is supplied from centralized systems. In North Kazakhstan, Mangistau and Atyrau oblasts these are mainly group water pipelines due to natural factors. A small part of the population living in Kyzyloda, Kostanay, Akmola and East Kazakhstan oblasts also use group water supply systems. In areas with mineralized groundwater there were constructed about 100 local water treatment facilities. Mainly they are constructed in Pavlodar oblast. 2.5.2.2 The condition of centralized water supply systems cannot be described as satisfactory. The following are general factors for all the systems that somehow impact their operation and reduce quality and availability of water: (i) High deterioration of water supply systems and structures that have served their normal life time by 1.5 to 2.0 times. This leads to high water losses (average of 50% losses) and as a result huge unnecessary costs for power. (ii) Insufficient state investments into construction of new and reconstruction of the existing water supply systems that converted this problem from a technical into a financial and economic one. (iii) Secondary pollution of drinking water in pipes by bacteria and rust inside the pipes. (iv) Insufficient development and equipping and in most cases lack of operator of water pipelines. (v) Lack of drinking water supply sources in some areas that means reliance on group water pipelines and treatment facilities such as desalination and iron removal. (vi) Low affordability and access of the population to safe drinking water.

Table 2-3

Status of water supply in rural settlements as of the end of 2004

Use water from local sources No of Use piped water Population, groundwater surface Use tankered water Length of settlements population with No Oblasts thous. population, population, population, water (villages, No of access to drinking No of No of No of sett- people thous. thous. thous. pipelines, km auls) settlements water, thous. sett-nts sett-nts nts people people people people 1 Akmola 705 399,78 278 178,46 357 196,53 21 6,26 49 18,52 2451,0 2 Aktyubinsk 426 302,60 71 98,25 351 203,41 0 0 4 0,94 530,4 3 Almaty 811 1106,47 391 573,42 352 507,76 55 23,04 13 2,25 2820,0 4 Atyrau 195 196,12 50 68,79 61 62,01 1 0,43 83 64,89 581,9 5 EK 818 598,39 233 164,32 489 401,50 67 32,25 2 0,32 1201,9 6 Zhambyl 367 542,95 109 176,25 251 364,31 1 0,42 6 1,98 1172,4 7 WK 498 344,28 81 102,61 359 201,82 44 31,75 14 8,11 448,0 8 Karaganda 496 221,90 123 91,68 359 125,68 0 0 14 4,54 922,4 9 Kostanay 750 418,13 116 120,42 532 255,62 31 10,41 73 31,68 1611,5 10 Kyzylorda 270 245,83 118 127,83 132 115,65 11 1,70 9 0,65 633,1 11 Mangystau 44 83,91 13 30,94 23 45,61 0 0 8 7,36 42,3 12 Pavlodar 449 262,02 93 85,28 337 167,54 25 8,51 3 0,69 569,5 13 NK 740 427,56 184 129,05 551 284,00 17 6,20 23 8,31 660,3 14 SK 871 1283,57 212 372,06 492 756,66 54 48,51 113 106,35 1781,8 Total 7440 6433,51 2072 2319,36 4646 3888,08 327 169,48 414 256,59 14820,4 % of the total No 100,0 100,0 27,8 36,1 62,3 57,3 4,4 2,6 5,5 4,0

Source: Data of “Kazgiprovodkhoz” Institute within the UNDP Project “National Plan on Integrated Management of Water Resources and Water Conservation in Kazakhstan”

The Fliaga – a symbol of rural water supply Community dugwell

Well at the former standpipe Water supply is not the only problem, drainage is too

2.5.2.3 Lack of specific measures to eliminate the reasons for the existing situation often leads to the following consequences: • General impairment of the health of the population; • Outbreaks of infectious diseases related to water consumption; • Migration out of rural areas; • Increase of use of assets whose usefulness has expired.

2.5.2.4 At present only 36 group water pipelines are functioning or being reconstructed. According to the data of oblast organizations and using 25-30 years as the designed operation life, the deterioration level has reached 70%. Many settlements started using local sources of water having refused the services of group water pipelines due to high cost of water supplied and the lack of any distribution pipework. 2.5.3 Sanitary Conditions 2.5.3.1 Lack of water or long stoppage in its supply have resulted in extremely low sanitary-hygienic and epidemiological level of the living standard in rural areas. Current state of the water supply and sanitation in rural areas of the republic is mainly characterized as unsatisfactory. The level of access of the population to drinking water has greatly decreased and continues to decrease annually by 2-4%. In some oblasts and rayons it is less than 30%. In line with the Order of the Head Sanitary Doctor of the Republic of Kazakhstan No. 17 of 28.05.2004 the sanitary and epidemiological control bodies in the oblasts are to conduct monitoring of the quality of drinking piped water and non-centralized water supply sources. It was noted that the quality of drinking water from centralized water supply facilities has worsened due to the bad technical condition of the water pipelines. In Karaganda, Kyzylorda, Akmola, North Kazakhstan and a number of other oblasts, the quality of water in non-centralized sources is very poor by sanitary chemical and micro-biological indices. All available wells and public dugwells for decentralized water supply are ownerless. The most prevalent indices of low water quality are the high content of salts, iron, manganese and fluorine. 2.5.3.2 The participants of the “Round Table Discussions” held in the Mazhilis of the Parliament on April 19, 2005 stated that 54.2 % of the rural population get water from centralized water supply systems. This does not take into account the settlements where water is only provided with restricted hour supply and with different levels of service. Actually not more than 50-70 % of the people in those settlements get piped water as inter-settlement networks are not well developed. About 80% of standpipes do not work, water towers are out of operation and over 60% of the existing inter-settlement distribution networks need to be replaced. Moreover, more than half of the water pipelines do not meet sanitary norms due to lack of sanitary protection zones and necessary facilities for water treatment. Examples confirming this are a number of settlements visited by the Project Team in North Kazakhstan, Akmola, Karanganda and Almaty oblasts. 2.5.3.3 In Smirnovo the rayon centre of the Akkaiyinsky rayon, North Kazakhstan oblast, the population is 6,600. The settlement is connected to the Bulaevsky group pipeline. Inter-settlement distribution networks are almost out of function. People get water to their houses manually by buckets, carts or horse drawn transport from 6 distribution stations. Private entrepreneurs upon agreement with the people tanker water by water carriers to houses and pour it off into tanks. 2.5.3.4 In Priishimkoye settlement of Osakarovsky rayon in Karaganda oblast the water supply system is owned by the farm. Water is supplied irregularly as the system which was constructed more than 20 years ago is in very poor technical condition. Most of the

standpipes do not function or are completely dismantled. Some wells are fully flooded. The same situation is with Litvinskoye settlement in Karaganda oblast. Despite many people having house connections, water is not supplied to some streets due to the distribution system not functioning. 2.5.4 UNDP Survey 2.5.4.1 Within the UNDP Project “National Plan for Integrated Water Resources Management and Conservation in Kazakhstan” one of the goals of which is to develop a strategy to achieve the Millennium Development Goals on water supply and sanitation, there were made estimations on the access of the rural population to drinking water at present.. The Project defined the criteria to determine “access” to drinking water as follows: • Availability of centralized water supply and its 24 hour operation in the settlement;. • Compliance of the quality of water with the state standards for drinking water to maintain the health of the population; • Adequate development of inter-settlement water supply system ensuring the possibility to get water inside houses, yards or at standpipes located not more than 100 meters from a house; • Water supply not less than 30-50 litres per day per capita to satisfy drinking, household and hygienic needs.

2.5.4.2 For these purposes tankered water can be considered as a source of water supply to settlements for life support only in exceptional cases such as: • As a temporary measure for the period of construction/reconstruction of the water supply system; • For small settlements with low potential, the population of which will not be growing or is planned to be moved out in the near future; • Lack of resources for drinking water supply purposes due to natural conditions, where the functioning of the settlement is essential up to a specified time.

2.5.4.3 Table 2-4 below summarises the results of the UNDP Survey in terms of access of the rural population to drinking water by oblast.

Table 2-4 Access of Rural People to Piped Water

Rural Population Percentage of No. Oblast Name With Access to Total Rural Drinking Water Population 1 Akmola 178,460 44.6% 2 Aktyubinsk 98,250 32.5% 3. Almaty 573,420 51.8% 4 Atyrau 68,790 35.1% 5 East Kazakhstan 164,320 27.5% 6 Zhambyl 176,250 32.5% 7 West Kazakhstan 102,610 29.8% 8 Karaganda 91,680 41.3% 9 Kostanay 120,420 28.8% 10 Kyzylorda 127,830 52.0%

11 Mangystau 30,940 36.9% 12 Pavlodar 85,280 32.5% 13 North Kazakhstan 129,050 30.2% 14 South Kazakhstan 372,060 29.0% Total for the Republic 2,319,360 36.1%

Source: Data of “Kazgiprovodkhoz” Institute within the UNDP Project “National Plan on Integrated Management of Water Resources and Water Conservation in Kazakhstan”

2.5.4.4 As can be seen from the above table, on average only 36.1% of the rural population has access to drinking water from piped supplies. The low level of access can be explained by the poor technical condition of the systems and the depreciation of equipment. Thus field visits to settlements, talks to citizens as well as the UNDP Social Survey all give reason to think that the data from the Republican and Oblast agencies on piped water availability in rural areas of Kazakhstan (54.2%) are over-estimated. The more realistic figure will be that obtained from actual field investigations under the UNDP Survey. 2.5.4.5 The answers to a number of the more important questions posed in the UNDP Social Survey on Water Supply and Sanitation are given below: • 76% of people are not connected to a piped system • 78% of those not connected would like to be connected • 81% are willing to pay for connection • 91% experienced cases of water shut down • 73% said no problem with water quality • 67% had a water source within 100m and another 18% within 500m • Main source of drinking water was 43% dugwell, 32% pipeline and 14% tankers • 95% did not have a water closet in their house • Bathing is taken 36% in public bathhouse, 39% in neighbour’s bathhouse and only 25% at home, but only 6% of homes have a bath or shower inside the house.

2.5.4.6 It can be seen from this survey that there is a need to get piped water to rural people for matters of hygiene and sanitation. It can also be observed the high numbers (almost one million people) that are reliant on tankered water. Piped water supply improvements must be addressed to these people as a matter of priority. 2.5.5 Service Levels 2.5.5.1 Rural settlements contain mainly one storey houses with garden plots. In the yards there are barns for animals and rough outhouses with squatter plates and unlined pits which serve as the toilets for the people. During the period of settlements normal functioning some people made household connections using their own money and installed their own bathhouses. Household wastewater was discharged into drain pits in their yards. 2.5.5.2 Projects of new construction maintain a standard of standpipe construction whereby no-one needs to go further than 100 m to fetch water. People can make yard or household connections using their own funds. The cost of a new connection averages $50-$100.

2.6 The Positives It is important that everyone in Kazakhstan appreciate that as compared with many other developing countries there are some very good things already happening upon which to base further improvements. • First, there are few if any other countries which are undertaking such a massive nation-wide Water Supply Program- this exemplifies the nations commitment to achieving the Millennium Development Goals; • Second, there is already an excellent representation of gender among water sector professionals which would be the envy of many other countries; • Third, regulation of water supplies has been established- few other countries are so advanced; • Fourth, the Health Ministry does an excellent job of monitoring the sanitation and water related diseases; • Fifth, the service levels for rural water supply (standpipes at 200 m intervals and 24 hour supply) are one of the highest in Asia; • Sixth, there are a number of strong farming and industrial enterprises in rural settlements that provide excellent support to social infrastructure.

The challenge of course is to create more positives and then bring them all together to bear upon the implementation of the Water Program.

PART III THE WATER SUPPLY SECTOR PROGRAM 2002-2010

3.1 The Millennium Development Goals

3.1.1 As it is well known, for the last two decades, there has been world-wide concern with regard to the status of Kazakhstan’s water resources. One of the main criteria for the sustainable economic development of any country is good access to drinking water. The key point of the Agenda for the World Summit on Sustainable Development held in Johannesburg in 2002 was WATER. To reduce poverty levels in the whole world there were accepted by many countries the Millennium Development Goals. The water supply issue is present in all development goals. 3.1.2 The Government of Kazakhstan having signed the Johannesburg Declaration and Millennium Declaration assumed obligations “ To reduce by half the number of the population that have no access to clean drinking water and sanitation by 2015” [Goal 7 Task 10]. 3.1.3 Accepted by the Government of the Republic and implemented by means of all the possible resources the Water Supply Sector Program shall become a reliable warrantor for the Millennium Development Goals for water supply and sanitation to be achieved by 2015 or even earlier.

3.2 The Initial Water Supply Program 3.2.1 As a result of the critical state of drinking water supply systems in the republic and toward implementation of the Decree of the President of Kazakhstan of May 18, 1998 “On priority measures for improving the health of the citizens of the Republic of Kazakhstan” in 2002 the Government of Kazakhstan adopted the “Drinking Water” Sector Program for 2002-2010 (resolution of the Government No. 93 of 22.01.2002). 3.2.2 The main goal of the Program is to ensure sustainable drinking water supply to the population in the required quantity and good quality. The total quantity of the planned investments for the implementation of the planned activities was determined to be 115 billion tenge. Funds were to be allocated from the republican and local budgets, foreign loans and grants as well as other sources. Implementation was planned in two stages. 3.2.3 Stage I (2002-2005) included continuation of the construction of priority facilities for water supply to the population; rehabilitation and decentralization of large group water pipelines to keep them in good operation condition; making of an inventory of water supply facilities, groundwater deposits and intakes; activities to stimulate groundwater use; improvement of the quality of water consumed; creation of a functional base and new technical productions for the output of equipment, devices and component parts for the water supply sector. 3.2.4 Stage II (2006-2010) included construction and reconstruction of water supply systems and facilities for the supply of drinking water to the whole population; set up of organizations for the operation of the drinking water supply systems; and further introduction of new advanced technologies in the construction of water supply systems and treatment of water for drinking purposes.

3.2.5 In 2002 for the implementation of the Program 2320 million tenge was allocated for 36 drinking water facilities to commence 386.2 km of water pipelines to improve water supplies in 129 settlements including 18 where water treatment was installed. To rehabilitate and decentralize group water pipelines there were constructed the Bulaevsky and Ishimsky water pipelines and separate group water intakes were constructed in the North Kazakhstan oblast. There was continued construction of the Aralo-Sarybulaksky water pipelines in Kyzylorda oblast and the Nurinsky and Kokshetau industrial water pipeline in Akmola oblast. 3.2.6 In 2003 reconstruction and construction of group water pipelines continued in the regions where there was no alternative water supply source. In total there were reconstructed 527.24 km and newly constructed 340.71km of water pipelines and water supply improved in 204 settlements including 14 with water treatment facilities. 3.2.7 In 2004 there started the implementation of the State Program for Developing Rural Areas. Within this program and the “drinking Water Supply Sector Program 8468.12 million tenge was allocated from the republican budget for 106 already completed drinking water supply facilities. With use of loan and grant funds there started implementation of three water supply projects in rural settlements including ADB’s loan for improvements in the oblasts of North Kazakhstan, Akmola and South Kazakhstan. In the cities of Almaty, Atyrau, Kyzylorda, Uralsk and Karaganda oblasts there were established enterprises for the manufacturing of high density polyethylene pipes, water meters and water treatment facilities. 3.2.8 In the period 2002-2004 there was used 33.2 billion tenge of which 16.8 billion tenge came from the republican budget, 11.81 billion tenge from the local budget, 2.57 billion tenge from economic entities and 2.02 billion tenge from foreign loans and grants. In 2005 it was planned to allocate 17.7 billion tenge to the Water Program from all funding sources. As a result the total investment under Stage I will have been 51 billion tenge. See Table 3-1 which shows the funds from all sources by oblast for the Water Program in the years 2002-2005.

Table 3-1

Funds for drinking water supply facilities

Republican budget local budget Economic entities Loans and grants Total funds # Oblasts implemented plannedimplemented plannedimplemented plannedimplemented planned 2002 2003 2004 2005 2002 2003 2004 2005 2002 2003 2004 2005 2002 2003 2004 2005 2002-2004 2005 1 Akmola 340,0 298,1 491,2 415,5 55,8 98,5 182,6 286,0 - - - 32,4 - - 341,3 159,4 1807,5 893,2 2 Aktyubinsk 109,0 282,5 227,8 293,5 27,3 52,8 148,8 435,6 ------848,3 729,1 3 Almaty 0,0 140,0 400,1 255,8 227,3 326,9 367,4 298,5 ------1461,8 554,3 4 Atyrau 135,0 21,0 399,0 565,4 2674,2 1348,6 514,1 2249 - 110,0 41,8 - - - - - 5243,6 2814,4 5 EK 83,5 576,2 985,1 437,5 174,8 221,9 413,5 370,0 54,8 107,2 109,5 45,2 - - - - 2726,5 852,6 6 Zhambyl 61,5 151,2 416,8 237,5 10,5 288,6 155,1 255,7 - - - 36,5 - - - - 1083,6 529,7 7 WK 63,1 460,3 927,5 775,3 170,4 257,8 290,1 175,9 8,1 15,2 20,0 5,0 - - - - 2212,5 956,2 8 Karaganda 208,6 728,0 542,5 544,8 147,6 380,1 482,6 307,0 - - - 322,8 - - 5,8 606,7 2495,3 1174,6 9 Kostanay 187,0 323,9 360,8 452,8 88,9 75,0 143,0 129,2 - - - 36,0 - - - - 1178,5 618,0 10 Kyzylorda 282,3 784,6 1053,3 842,9 80,0 88,7 137,1 110,0 - - - - 83,1 644,1 614,2 316,4 3767,5 1269,2 11 Mangystau 0,0 0,0 126,6 88,1 0,0 271,8 126,2 377,0 - 1595,4 - 1972,5 - - - - 2120,0 2437,6 12 Pavlodar 146,0 220,6 620,5 336,8 236,6 220,2 271,4 75,2 48,8 48,9 154,4 - - - - - 1967,4 412,0 13 NK 288,0 1176,1 1085,4 1564,1 40,5 147,3 224,5 243,0 48,7 48,0 24,0 - - - 341,3 159,4 3423,8 1966,5 14 SK 416,0 841,3 831,5 897,5 34,7 103,1 509,9 849,2 56,6 49,2 25,8 30,0 - - - 147,0 2868,1 1923,7 Total for the republic 2320,0 6003,9 8468,1 7707,4 3968,6 3881,3 3966,3 6161,2 217,0 1973,9 375,5 2480,3 83,1 644,1 1302,6 1388,8 33204,5 17737,7

Total for funding sources for 2002-2004: 1. Republican budget - 16792,1 mln. tenge - 50% 2. Local budget - 11816,2 mln. tenge - 35% 3. Economic entities - 2566,4 mln. tenge - 8% 4. Foreign loans and grants - 2029,8 mln. tenge -

Source: Data of the Committee for Water Resources of the Ministry of Agriculture of RK

3.3 Comments from the Round Table Discussions 3.3.1 Round Table discussion on the “Progress of the Drinking Water Sector Program Stage I Implementation” were held in the Mazhilis of the Parliament on April 19, 2005. The meeting was arranged by the Committee for Economic Reforms and Regional Development together with the Committee for Environment and Nature Use. The participants in their speeches stated that despite the measures taken by the Government on improving the supply of the population with good drinking water the situation with the water supply had not changed much and was still unsatisfactory. 3.3.2 The following were specified as the main constraints to implementation of the Program: • Poor quality of the pre-design and detailed design documentation • Insufficient equipment of operating enterprises, with material and technical basis and very often non-availability of such as well as a lack of adequate operation of already completed facilities. • Lack of authorized state body in managing such strategic sector as water supply and sanitation • Complexity of procedural aspects when appointing contractors or suppliers of services. ie imperfection of the law on “State Procurements”. • Lack of the required normative and technical documentation on technical operation of the water supply and sanitation systems [Vodokanal comment]

3.3.3 The participants of the Round Table discussions identified possible ways to eliminate these constraints: • Use of centralized design facilities and renewal of specialized design organizations; • Timely allocation of funds for carrying out designs from the republican and local budgets; • Envisage funds in the detailed design documentation for purchase of special equipment and machinery for operation as many rural areas face water supply system maintenance problems; • Subsidize costs for water supply at the first stage of operation so as to ensure water availability to the population.

3.3.4 Lack of Distribution Works During their speeches the participants stated one of the most important issues was the lack of distribution systems and the delay in their construction and reconstruction, as well as the high cost of water. For example for Kazalinsk town there was constructed 350 km of water pipeline, however no-one is using this water due to a lack of intercity distribution networks. A major part of the Aralo-Sarybulaksky group water pipeline was commenced but most of the people in that area do not use this water as they cannot afford it. In North Kazakhstan oblast works on reconstruction of group pipelines are fulfilled in accordance with the plan. But inter-settlement distribution networks are not operated due to their poor condition. Water is sold at distribution points. All this significantly reduces the effectiveness of the Water Supply Program as the huge funds invested in the Program are not effective in providing more people with piped water.

Contractor at Kokshetau Constructing the local source supply HDPE Pipelaying of local source supply near Torgay

Drilling for Local Source Supply near Torgay Group Pipelines brought water but distribution needed

3.4 The Second Stage Water Supply Program 2006-2010

3.4.1 As described above it was planned to implement the Water Supply Program in two stages. The completion of Stage I will take place this year (2005). The total cost of the Program was estimated at 115 billion tenge and it was envisaged to use 50.7 billion tenge during Stage I including the planned funds for 2005 from all sources in the amount of 17.7 billion tenge. See Figure 3-1 below for the implemented and planned investments for the Water Program 2002-2010. Figure 3-1

Implemented and planned investments within the Water Suply Program for 2002-2010

60,00

52,25 51,15 51,81 50,00 46,95

42,48 40,00

30,00 billion tenge

20,00 20,42 18,99 19,86 19,78 17,79 17,88 17,96 18,23 17,09 16,25 14,11 14,96 12,50 10,00 10,12 9,67 9,68 9,51 9,19 8,47 7,71 6,50 6,00 6,16 3,97 3,88 3,97 3,55 4,29 2,48 2,56 2,23 1,97 1,3 1,39 2,19 2,07 0,00 0,220,08 0,64 0,38 2002 2003 2004 2005 2006 2007 2008 2009 2010 2015 Estimated levels

Total for the Republic Republican budget Local budget Economic entities Foreign loans & grants

Source: Data of the Committee for Water Resources of the Ministry of Agriculture of RK

3.4.2 The Center of the Systematic Investigations of the President’s Administration of the Republic of Kazakhstan determined the required amount of investments for the Water Supply Program implementation as 228 billion tenge. Table 3-2 shows the data on sources of all funds by oblast for the Water Program (2002-2005 actually used and 2006-2010 forecast.

Table 3-2 Funding sources by oblasts (cities, towns and rural settlements) envisaged under the Water Program 2002-2010

Funds Funding by years Funding No Oblasts envisaged thous. KZT sources thous. KZT 2002 2003 2004 2005 2006 2007 2008 2009 2010 12 3 4 5 6 7 8 9 10111213 Total for the republic: 317 306 222 6 498 700 12 503 192 14 112 520 17 789 723 52 249 760 46 952 007 51 146 299 51 811 352 42 478 892

Total by oblasts: 122 742 189 2 230 000 6 003 892 8 468 120 7 707 429 18 992 647 17 092 248 17 964 686 18 230 853 14 964 537 1 Akmola 8 593 411 340 000 298 100 491 210 415 457 1 292 936 1 177 182 1 355 768 2 310 192 912 566 2 Aktyubinsk 5 899 762 109 000 282 500 227 840 293 505 1 125 722 1 072 753 975 110 929 682 883 650 3 Almaty 13 585 989 140 000 400 120 255 753 2 433 195 1 747 470 2 982 473 3 036 423 2 590 555 4 Atyrau 6 040 357 135 000 21 000 399 000 565 433 1 316 785 1 176 730 853 980 810 889 761 540 5 East-Kazakhstan 8 062 842 83 500 576 210 985 120 437 462 1 498 326 1 403 708 1 058 103 1 012 159 1 008 254 6 Zhambyl 5 325 595 61 448 151 169 416 790 237 452 674 499 913 828 1 234 719 979 827 655 863 7 West-Kazakhstan 4 079 631 63 092 460 320 927 520 775 331 381 976 390 383 377 000 362 485 341 524 8 Karaganda 10 509 741 118 620 728 024 542 520 544 775 2 072 862 1 826 581 1 732 571 1 522 687 1 421 101 9 Kostanay 5 865 212 187 003 323 894 360 750 452 792 915 996 812 849 1 019 747 904 950 887 231 10 Kyzylorda 6 655 540 282 337 784 617 1 053 270 842 863 980 954 724 217 727 725 756 639 502 918 11 Mangystau 5 185 647 126 550 88 124 1 386 264 962 286 924 039 901 595 796 789

Republican budgetRepublican 12 Pavlodar 3 574 987 146 000 220 612 620 540 336 815 608 855 489 236 367 924 336 436 448 569 13 North-Kazakhstan 8 273 921 288 000 1 176 100 1 085 400 1 564 141 957 972 898 446 901 524 790 090 612 248 14 South-Kazakhstan 20 001 777 416 000 841 346 831 490 897 526 3 346 305 3 496 579 3 454 003 3 576 799 3 141 729 Development of River Basin Schemes 411 777 51 777 147 000 119 000 94 000

Development of Water Supply Master 410 000 70 000 110 000 230 000 Scheme for RK

Survey and investigation works 7 309 600 Inventory of deposits explored 2 956 400

Total by oblasts: 112 180 151 3968600 3881300 3966300 6161208 20423115 17883862 19859574 19783467 16252725

1Akmola 8 591 417 55 800 98 500 182 600 286 000 1 378 675 1 299 484 1 853 889 2 463 388 973 081 2 Aktyubinsk 5 982 120 27 300 52 800 148 800 435 600 1 200 372 1 143 892 1 039 774 991 332 942 250 3Almaty 14 858 371 227 300 326 900 367 400 298 500 2 594 549 1 863 351 3 180 250 3 237 777 2 762 344 4Atyrau 12 032 078 2 674 200 1 348 600 514 100 2 249 000 1 404 105 1 254 762 910 610 864 661 812 040 5 East-Kazakhstan 8 479 438 174 800 221 900 413 500 370 000 1 597 685 1 440 109 1 617 427 1 469 230 1 174 787 6 Zhambyl 5 464 327 10 500 288 600 155 100 255 707 719 229 974 429 1 316 599 1 044 805 699 358 7 West-Kazakhstan 2 970 476 170 400 257 800 290 100 175 900 507 307 416 272 402 000 386 524 364 173 8 Karaganda 11 155 228 147 600 380 100 482 600 306 999 2 903 752 1 947 710 1 847 464 1 623 663 1 515 340 9Kostanay 5 277 993 88 900 75 000 143 000 129 200 976 741 866 753 1 087 371 964 960 946 068 10 Kyzylorda 4 349 864 80 000 88 700 137 100 110 000 1 046 004 772 242 772 734 806 816 536 268 11 Mangystau 6 075 574 271 800 126 200 376 952 1 478 194 1 026 099 985 317 961 384 849 628 12 Pavlodar 4 233 721 236 600 220 200 271 400 75 150 649 711 692 288 701 784 712 116 674 472 13 North-Kazakhstan 3 178 531 40 500 147 300 224 500 243 000 508 498 458 024 461 307 442 554 652 848 14 South-Kazakhstan 19 531 013 34 700 103 100 509 900 849 200 3 458 293 3 728 447 3 683 048 3 814 257 3 350 068 Total by oblasts: 53 213 235 217 000 1 973 900 375 500 2 480 550 10 122 592 9 667 267 9 678 433 9 509 963 9 188 030

1Akmola 3938137 32560 757928 865934 829243 917520 534952 2 Aktyubinsk 2923364 659906 628855 571616 544986 518001 3Almaty 6141313 1426356 1024379 1141677 1030300 1518601 4Atyrau 3035898 110000 41800 771910 689808 500610 475350 446420 5 East-Kazakhstan 4791384 54 800 107200 109500 45182 878329 852173 913370 917371 913459 6 Zhambyl 2650549 36508 395696 535692 723801 574381 384471 7 West-Kazakhstan 1134756 8100 15200 20000 5000 223917 228845 221000 212491 200203 8 Karaganda 5631029 322800 1496161 1070754 1015645 892610 833059 9Kostanay 2697832 36000 536963 476498 597782 530488 520101 10 Kyzylorda 2162485 575042 424541 424541 443547 294814 11 Mangystau 6481917 1595400 1972500 812637 564098 541678 528521 467083 12 Pavlodar 2082940 48 800 48900 154400 356915 380586 380782 356298 356259 funds of economic entitiesand other sources Localbudget 13 North-Kazakhstan 2214489 48 700 48000 24000 447330 451030 410169 426356 358904 14 South-Kazakhstan 7327142 56600 49200 25800 30000 783502 1474074 1406519 1659744 1841703

Total by oblasts: 18 082 870 83 100 644 100 1 302 600 1 388 759 2 564 406 2 189 630 3 549 606 4 287 069 2 073 600 1 Akmola 2 804 594 341300 159364 673240 575646 618312 436732 2 Aktyubinsk 3 Almaty 1 499 035 142 692 606 670 749 673 4Atyrau 5 East-Kazakhstan 2 854 400 160 000 544 000 1 113 600 1 036 800 6 Zhambyl 7 West-Kazakhstan 8 Karaganda 1 362 143 5 800 606 670 749 673 9Kostanay

foreign loans and grants and grants loans foreign 10 Kyzylorda 1 657 775 83 100 644 100 614 200 316 375 11 Mangystau 12 Pavlodar 2 854 400 160 000 544 000 1 113 600 1 036 800 13 North-Kazakhstan 2 804 594 341 300 159 364 673 240 575 646 618 312 436732 14 South-Kazakhstan 2 245 929 146 986 468 253 575 646 618 312 436732

Note: 1. The implementation of the ADB projects (loan) in Akmola, North-Kazakhstan and South-Kazakhstan oblasts started in 2004

2. The implementation of the Technical Assistance of the Government of Japan (Grant) for Akmola and North-Kazakhstan oblasts

3. It is envisaged from 2007 to commence the implementation of ADB projects (loan) for East-Kazakhstan and Pavlodar oblasts and IDB project for Almaty oblast

Source: Data of the Committee for Water Resources of the Ministry of Agriculture of RK

3.4.3 The State Program for Developing Rural Areas adopted by the Decree of the President of the Republic of Kazakhstan No. 1149 of 10.07.2003 has significantly changed the key points in the solution of the drinking water supply issues in rural areas. There was determined the average republican level of the water availability in oblasts and separate settlements that enables to distribute funds between the oblasts more differentially. Moreover the State Program classifies rural settlements by criteria describing social and economic development. One of them is the piped water availability of the population. 3.4.4 In line with the accepted classification all settlements were combined into 4 groups with high, average and low development potential and very unfavourable conditions. It was stated that in the territory of the Republic 1062 (14.1%) rural settlements have high development potential, 5664 (75.6%) have average potential and 776 (10.3%) have low potential. State support measures will be directed at the development of the life sustaining infrastructure first in all the settlements with high or average potential of development to ensure the necessary level of income of these rural people. This factor will be taken into consideration when determining the priority in the selection of investment projects for the Water Supply Program. These settlements will have a complete complement of infrastructure including water pipelines, sewerage, gas, cultural, healthcare and educational facilities. All the above mentioned factors call for the necessity to make adjustments to the Water Supply Program. 3.4.5 On March 29, 2005 the Government of the Republic of Kazakhstan considered the issue of the progress of the Water Supply Program for 2002-2010 and instructed the corresponding ministries and oblast Hakims: • To make necessary changes and amendments to the Program considering priority investments into the less water supplied areas; • Take measures on timely and efficient use of funds allocated for provision of the population with good drinking water; • To take necessary measures on operation of the existing and newly commenced water supply facilities.

3.4.6 Then again in his speech at the opening of the Second Civil Forum held in Astana on September 12, 2005, the President of the Republic of Kazakhstan specified nine strategic trends on which the State and non-governmental sector can work efficiently. These factors included: • Solution of the issue related to good drinking water availability for the whole population in the Republic by the beginning of the second decade; • Measures to facilitate the development of the infrastructure in rural areas so as to make it similar to that in urban areas. To this end the State will continue planned activities toward implementation of the objectives and goals set by the Water Supply Program and the State Program for Developing Rural Areas. 3.4.7 The Committee for Water Resources has made the required adjustments and revised the budget of the Program considering the priority investment into less water supplied areas. It has determined that 255.3 billion tenge are needed in order to improve the situation with the water supply of the population of the republic. 3.4.8 The first draft of the new Program was reviewed by all concerned ministries and institutions as well as the oblast Hakimats. There were introduced a number of amendments, proposals and comments many of which relate to the Program’s budget including insufficiency of funds in local budgets for its proper implementation.

3.4.9 There are proposals to establish services for the proper operating of existing, rehabilitated and new water supply systems and for the proper equipping of such organizations. The necessity to fund these services has been raised. The Hakims of some oblasts mention issues of subsidizing the costs of water supplies from local water sources to the rural areas and seek assistance from the republican budget for such purposes. Following the required adjustments (for which one month only was given) the Program will be resubmitted to Government for further consideration.

3.5 Use of the Republican Budget for Local Water Supply Systems 3.5.1 In 2005 from the republican budget 7.6 billion tenge was earmarked for the Water Program. Excluding funds for the construction and reconstruction of group pipelines, 3.45 billion tenge was allocated for the construction and reconstruction of local water supply systems as per Table 3-3 below. This will benefit about 77 settlements.

Table 3-3

Construction and reconstruction of local water supply systems from the republican budget

No of investment Funds allocated (mln. tenge) # Oblasts projects (rural areas) Total including New Recon-tion New Recon-tion 1 Akmola 1 1 130.06 60.06 70.0 2 Aktyubinsk - 3 393.51 - 393.51 3 Almaty 2 2 140.47 69.0 71.47 4 Atyrau 3 - 270.79 270.79 - 5 EK 1 2 193.04 82.32 110.72 6 Zhambyl 2 2 237.45 182.45 55.0 7 WK 13 8 625.34 395.14 230.20 8 Karaganda 3 6 432.36 260.22 172.14 9 Kostanay - 1 72.79 - 72.79 10 Kyzylorda - - - - - 11 Mangystau - - - - - 12 Pavlodar 4 2 318.07 299.68 18.39 13 NK 11 - 238.81 238.81 - 14 SK 3 7 397.52 217.63 179.89 Total for the republic 43 34 3450.21 2076.10 1374.11

Source: Data of the Committee for Water Resources of the Ministry of Agriculture of RK

3.6 Use of the Oblast Budgets for the Water Program 3.6.1 The Hakims of all oblasts have prepared mid-term plans for 2006-2008 considering investment projects (settlements) and priority of their implementation. These lists include about 1600 settlements which need urgent actions on improving water supply.

3.7 Rules for Considering Budget Investment Projects 3.7.1 In view of the adoption of the “Rules for Considering Budget Investment Projects” approved by the Resolution of the Government a new procedure was established for review of investment projects at the selection stage. In accordance with these rules all projects shall be implemented in lone with the approved Feasibility Studies. This imperils the implementation of the Water Program in 2006 and 2007 as it is not feasible to develop the Feasibility Study and Detailed Design for construction within one year.

PART IV IMPLEMENTING THE PROGRAM

4.1 Institutional Framework

4.1.1 The Foundation CWR With just 34 professionals, of whom only 7 have a background in water economy, the CWR attempts to administer water resource development and management as well as water supply for the whole country. This is an impossible task. Furthermore as they attempt to do what is mandated for them, without the necessary resources, they open themselves up for more and more criticism for a job poorly done. Highly qualified and experienced persons such as the two deputy chairmen CWR are so overloaded with paperwork they are no longer in a position to stand off and see the big picture and direct the future of water in the country. This situation would be described as critical under normal circumstances. But now consider the state of the country’s water supply where massive rehabilitation is needed in rural and urban areas that has prompted a 2.5 billion dollar Water Program to be implemented by 2010. If the implementation of this Program is attempted without the necessary foundation of an independent and much expanded CWR the almost certain result will be: • About 25% of the planned Program will be implemented by 2010 • The increase in population served with piped water will be as low as 10%. • What is implemented will be of poor quality lasting perhaps 5 years. • There will be scandal of corruption and monies misused.

This situation is addressed in more detail by the ADB funded TA 4484-KAZ “Institutional Strengthening of Committee for Water Resources” which recommended increasing the staff of CWR from 34 to 70 persons and an independent State Agency for Water Resources Management. The findings of the TA will be presented in a workshop at the end of November 2005. 4.1.2 CWR and the Water Program Approximately 300 professional staff are needed to oversee the proper execution of the Water Program. See Box 4-1 for the list of tasks and the estimated numbers required. Many of these (maybe 250) may be considered as contract staff for the duration of the Water Program (realistically 10 years). Others (maybe 50) would become part of the permanent cadre of CWR. This is all about managing WATER, managing MONEY and managing PEOPLE. There is an old adage, if a job is worth doing it is worth doing well. This very much applies to the Water Program. In the eyes of the international community Kazakhstan will be highly respected if it successfully implements the Water Program.

BOX 4-1 CWR TASKS / RESOURCES REQD. FOR WATER PROGRAM

Tasks To Implement Water Program CWR Contract Total Staff Staff Staff 1 Water Resource Assessment 2 16 18 2 Feasibility Studies for Oblasts 1 14 15 3 Design of Water Supply Systems 1 14 15 4 Supervision of Construction 1 70 71 5 Monitoring of the Water Program 3 14 17 6 Formulation of Water Supply Policy 1 1 7 Pre-qualification of Contractors / Suppliers 14 14 28 8 Human Resource Development in Sector 3 14 17 9 Establish and Maintain Database 1 5 6 10 Establish and Maintain Website 1 2 3 11 Administration of Republican Funding 1 14 15 12 Formulation of Policy on Subsidies 1 1 13 Public Awareness Program 1 14 15 14 Performance Benchmarking of Vodokanals 1 14 15 15 Updating of Water Legislation 1 2 3 16 Liaison Ministry of Health (Sanitation) 1 1 17 Liaison ANRM 1 1 18 Liaison Association of Vodokanals 1 1 19 Contract Administration 6 14` 20 20 Appropriate Technology 1 3 4 21 Private Sector Participation 1 3 4 22 Sewerage and Sanitation 2 5 7 23 Water Education in Schools 1 3 4 24 O&M Organization Development 3 15 18 Total 50 250 300

4.1.3 CWR and Organization Development It is not a simple matter to restructure an organization. Fortunately others have done this before and there are blueprints that can be followed. One that could be very useful for CWR is to follow the steps outlined in a Manual “A Challenging Experience in Organization Development” which was authored by a consultant Nancy Barnes and funded by GTZ for the re-organization of the Palestine Water Authority. In the international water sector it is the most appropriate “step by step” guidebook and is just as applicable to developed as to developing countries. The Project Team has purchased this book and is arranging Russian translation.

4.2 Public Awareness and the Involvement of Civil Society 4.2.1 General It is important that the $2.5 billion Water Program translate into greatly improved water supply services in the rural areas of Kazakhstan. Lessons from around the world show that it is necessary to involve civil society (the public) in order to ensure that such development is both appropriate and sustainable. Apart from the residents of rural settlements, civil society can also be represented by NGOs, by academic entities (school principals) and by the news

media. Many rural settlements have established industries which support the community and the leaders of such industries can be involved in championing the cause of the people to get a good water supply. 4.2.2 Video The Project Team has conceived and supervised the making of a 20 minute video and some “time spots” about the Water Program for the purpose of raising awareness both at the settlement level as well as among all concerned officials. The production of the video and some allowance for broadcast time on TV channels was funded [$30,000] from the Water Cooperation Fund of the Asian Development Bank at very short notice. The video was shown at the Stakeholders Consultation for this Technical Assistance on November 10, 2005. Regular showing of the video about the Water Supply Program on national television and updating of the progress in development will help to keep the people in touch. Transparency about the selection criteria for those settlements to be included in the Program will also be needed. 4.2.3 Water Program Website It is logical that the CWR develop and maintain a website that is just about the Water Program so that all stakeholders may know what is happening. Even schools in rural areas will have access to the Internet and to this website. Below in Box 4-2 are some of the ingredients of a First Phase of the Website for 2005. The website is planned for commissioning in December, 2005..

BOX 4-2 WATER PROGRAM WEBSITE PHASE ONE [2005]

Frequently Asked Questions

GENERAL INFORMATION The Objective of the Water Program Background The Water Program to Date Existing Service Levels Fund Allocation Funding Agencies Technical Assistance Activities

RURAL SETTLEMENTS Conditions for Inclusion of Settlements List of Settlements Completed List of Settlements Under Construction List of Settlements Approved for Inclusion List of Settlements Awaiting Approval How to Apply for Inclusion in Water Program

TARIFFS & SUBSIDIES Tariffs and Subsidies in Rural Areas Tariffs and Subsidies in Urban Areas

CONTACTS FOR MORE INFORMATION

4.2.4 Media Interaction The Project Team International Consultant, interacted with the media (4 persons being invited journalists) in a semi-informal meeting at the offices of ADB to help apprise the media about the Water Program and the issues in its implementation. He also prepared a six page article about the Water Program which was published in the Water Economy Journal.

4.3 Service Levels and Selection Criteria

4.3.1 Service Levels It is the Government’s long term objective to have 24 hour piped water in all homes. That is an admirable but ideal objective. Tankering of water must be eliminated because it represents the highest price option and limits the amount of water used. Decentralized source options should also be eliminated because of great inconvenience and uncertain water quality. If water can be transported by pipe to a settlement or water treatment established in a settlement there seems little logic in not distributing that water by pipe to the people. Based on double the household consumption levels (from 3 to 6m3/month), there is a reluctance to open the door with a policy of government funding direct connections. The current policy of allowing people to connect if they pay for construction, pipe and meter allows a transition to the highest level of service where the people would pay on consumption rather than the fixed charge applying to standpipes. Below in Table 4-1 is a generic comparison of the service levels of rural water supply in Kazakhstan.

Table 4-1 Water Supply Service Levels -Rural Overview [Pop. 7 Million]

Water Supply % Water Convenience Consumption Cost Service Level Quality of Access per HH /mo. (tenge/mo.) Piped Water to 15 Good Good 6m3 150 Home Standpipe Supply 21 Fair Fair 3m3 100 Carted Home Decentralized 30 Poor Poor 3m3 zero Source Carted Water Trucked to 14 Fair Good 2m3 800 Home On-Site Dugwell 20 Fair Good 5m3 zero or Tubewell Total 100

4.3.2 Selection Criteria The Government has stated some general social and economic criteria relating to general development of rural areas in terms of high average and low potential for development. It has indicated the Water Program should concentrate on the high and average potential settlements. Nevertheless there is a need for more specific criteria to give transparency to decision making and avoid accusations of arbitrary decision making in relation to the Water Program. Below in Box 4-3 is an attempt to be objective on this exercise.

BOX 4-3 Proposed Selection Criteria for Inclusion in Water Program

Health of People Epidemic in last five years – one point Reporting of health problem – two points No health problem – three points

Water Quality of Water Received or Accessed The bacteriological or chemical quality of water is a danger to the people – one point

The water quality is below acceptable standard but not yet danger- two points The water quality is fine – three points

Service Level (Modification) Water tankered or obtained from open source - one point Water obtained from standpipe – two points Water obtained from pipe in yard or house – three points

Desire of Community to Own and Maintain Service Written offer to be involved in design, construction and O&M.--- one point No objection expressed by community to proposed improvements – two points No response from community to proposals- three points

Preparation of Designs for Water Supply Improvements Designs already approved and only funding sought…. one point Feasibility study but no design………………………two points No feasibility study………………………………….three points

Co-efficient of Importance These factors take into account many things including economic and political factors. They are real factors and should be listed for the sake of transparency.

Those settlements with the lowest point score would be most eligible for priority attention under the Water Program

4.4 Appropriate Technology

4.4.1 General On the one hand it is good to know what options there are for the use of equipment and materials for water supplies in Kazakhstan. An example of this may be package water treatment plants for the demineralization of water for drinking purposes. It may also be equipment for the insitu internal repair of pipelines. On the other hand there is no great need to go chasing new so-called appropriate technologies when conventional methods and equipment are working quite satisfactorily. An example of the latter would be the sewage treatment plant of the Vodokanal in Taldykorgan. It produces excellent wastewater quality

using essentially conventional treatment methods. It is suggested that part of the human resource development of a new and expanded CWR would include active participation in regional and international conferences and subscriptions to noted water technology journals. 4.4.2 Membrane Technology Some 100 package water treatment plants have been built (mostly in Pavlodar oblast) for demineralizing groundwater to make it fit for human use and consumption. The various techniques include reverse osmosis and electrolysis. From the field visits of the Project team there are some concerns that need to be addressed here. First, there needs to be several contractors in this business to give comparisons of cost and performance and such contractors should be pre-qualified. Second, the actual performance needs good monitoring by an independent agency working for the Ministry of Health as there were some concerns that even after treatment the water was may be still salty to the taste. Third, there are few cases where the treatment plants have been coupled to distribution pipework, probably because new distribution pipework is necessary to ensure the high cost water is not lost to leaks. Fourth, the O&M cost of this equipment often requires republican budget subsidy. It appears that 100 cubic meter per day plants may not be financially viable in terms of O&M cost, but 1000 cubic meter per day plants can be viable. Also groups of settlements served by one plant and connected by distribution pipework can also be viable. Before this “appropriate technology” can be used more extensively an independent technical, economic and social evaluation needs to be undertaken on the existing operations of the plants already installed. 4.4.3 Rehabilitation of Pipelines LLC “Firm AGROPOLIV” based in Almaty has invested about one million euros in some equipment from Germany which can be used in the repair of pipelines from the inside for diameters from 150mm upwards. It involves video inspections then robots to clean and line the internal surface of the pipeline with either cement mortar or epoxy or to repair a leak at a joint. The equipment already in the country has a 100 meter set of cables only which means from a given surface excavation it can repair 100 meters in each direction before having to shift to another surface excavation location. Another piece of equipment splits old steel pipe and drags a new HDPE pipe of slightly bigger diameter into the space provided. If effective, in cities like Almaty, this will avoid the need to dig up streets to make repairs. Considering the thousands of kilometres of group pipelines in this country which are under repair or need rehabilitation, then this equipment looks to have potential to assist in the Water Program in rural areas at this point in time. The main cost in conventional rehabilitation is the deep excavation (3meters) required to avoid freezing of water in the winter. In the greater interest of the country and the speedy implementation of the Water Program it will be necessary to approve procurement methods that are fair and transparent to allow the immediate use of such equipment. The initial cost for video inspection and a report on recommended repairs costs 300 tenge per meter of pipeline inspected. The estimated cost of repairs can be based on per meter or per joint. A comparison of the cost of replacement of the pipeline and “doing nothing” costs should always be made to put this new method in perspective.

Pipeline replacement in-situ Pipeline Inspection & Repair by Robot

Demineralization Water Treatment Plant “Appropriate Technology” if No Piped Water

4.5 Financing 4.5.1 There are several potential sources of funding for the Water Program, but to date it appears that 51% has been from the republican budget, 35% from the oblast budgets, 8% from economic enterprises and 6% from foreign loans and grants. There appears to have been a “disconnect” in funding the distribution pipework systems so that although as in Almaty oblast the oblast has provided some funds for distribution there are few cases where the whole distribution has been rehabilitated or replaced. Notwithstanding the decentralization policy of the Government, this Project Team considers that the circumstances in the country, where nearly all the water supply facilities in the country need major rehabilitation or replacement is not a “business as usual” situation and therefore funding of the whole of the Water Program through the Republican budget is recommended. Many of the troubles mentioned in the Round Table Discussions on the First Stage of the Water Program could have been avoided had for example most of the funding, right down to the distribution systems been through the Republican budget. Furthermore this approach is compatible with the Project Team’s recommendation that an independent and much expanded CWR must take the lead in implementing this Water Program. It is important to follow the old adage “keep it simple” for successful implementation of a project/program. Funding and institutional responsibility go hand in hand. This is not to say some oblast funding cannot be used – but the republican budget should ensure there is no shortage of funding. 4.5.2 In most rural areas there is no operation and maintenance organization existing, since the water transmission and distribution systems installed during the time of the Soviet Union are no longer working. It is therefore very important to provide funding for every aspect of at least the initial operation and maintenance under the funding of construction of new or rehabilitated works. This will include especially, housing for staff, buildings for equipment and repairs, excavation and ancillary equipment, equipment to replace pumps and vehicles for transport of staff and equipment. It should also fund operation expenses for the first 12 months. These fundamental requirements have been identified by many stakeholders including contractors and the CWR itself.

4.6 Procurement

4.6.1 Elsewhere in this Report under “Time is of the Essence” procurement procedures are identified as one of the aspects of this Program which have the potential to make the biggest difference in terms of time of implementation. Based on experiences of water supply projects implemented in Korea (with local government decision making) and in India (with NGO decision making) it is apparent that it is possible to bring piped water to half a million urban population in just 4 months (Korea) and one million rural population in 12 months (India) using directly negotiated contracts. On the other hand Governments and multi-lateral development funding agencies take 5-10 years (average at least 7 years) to implement water supply projects in developing countries. The difference is adherence to rules and regulations. 4.6.2 Below is a Table 4-2 which takes the Government of the Republic of Kazakhstan “Principles of Legal Control in Procurement” and compares the effectiveness of the currently adopted tendering procedures with a proposed negotiated contract approach. The latter approach is based on the need to implement a massive Water Program very quickly. In such circumstances it is best to first pre-qualify all potential suppliers and contractors in the sector according to their capacity and experience and then give them all an area based negotiated contract for work they are qualified to undertake. The negotiation of contracts

would be based on unit rates. See Box 4-4 below. Of course this is another matter in which an expanded and independent CWR can be very effective by being innovative. This is a serious attempt to analyse what would be needed in order to implement the Water Program by 2010. Yes it can be done. But decision makers must be prepared to recognize that implementing the Water Program is not a “business as usual” endeavour. Table 4-2 PROCUREMENT PROCEDURES COMPARED

PRINCIPLES OF CURRENT PROCEDURE PROPOSED LEGAL CONTROL Public tender for those pre- PROCEDURE qualified and one bid wins. Negotiated contracts with all pre-qualified tenderers. Optimal and efficient When time is a factor the current Time is of the essence in use of funds available procedures don’t encourage development. Funds will for procurement. efficient use of funds. be used more effectively. Corruption minimised with more but smaller contracts. Provision of all potential Pre-qualified suppliers can Many more contractors suppliers with equal participate in the tendering but and suppliers can opportunities to only one will get work. participate in the actual participate. construction or supply of goods. Good faith competition Competition is more apparent Competition is effected by amongst the potential under current procedures. comparing the suppliers. performance of several contractors / suppliers. Increases skilled resource base. Publicity of the state Many bureaucratic procedures More transparent procurement involved which are not widely procedure providing the procedures. understood. ground rules for negotiation (unit rates?) are given.

BOX 4-4 CRITERIA FOR NEGOTIATION OF UNIT RATE CONTRACTS (NO TENDERING)

Sample Turnkey Contract – One Rayon

• Contractor selected for negotiations on basis of most experienced in that rayon/oblast and with adequate capacity to do the job.

• Contractor ……………… agrees to investigate, design, construct and operate and maintain (for 12 months) piped water supplies to X people in Rayon ………………… in accordance with CWR normative service levels and specifications in a period of 6 months commencing on or about……………. all at a unit rate of Y tenge / capita served.

Basis of Negotiated Rate:

• Climate Factor North / Central / South • Construction Season Summer / Autumn / Winter /Spring • Use of Existing Infrastructure Major / Average / Minor • Number of Settlements and Layout in Rayon • Density and Average Population Per Settlement • Number of Distance to and type of Water Sources • Water Quality - Need for Treatment

Transparency and Competition

• Compare rates in other rayons and other oblasts publicly • Publish criteria for negotiation and results • Monthly progress reported by media.

4.7 Human Resources & Developing People

4.7.1 Against a background of trying to implement a $2 billion Water Supply Program over the next 5 years, the Government is also faced with the daunting task of a scarcity of human resources in the sector. Salaries are low for professional staff in the sector as compared with those in the oil and gas sector or with salaries which such professional staff could earn in other countries. A very significant jump in salaries is needed to encourage more professionals into this sector if the time frame for the Water Program to be implemented is to be realistic. Furthermore it is important that quality of design and construction be maintained if the Water Program improvements are to be sustainable in the long term. 4.7.2 There are very few success stories in private sector involvement in developing country water supplies. But one success story comes from one of the private sector concessions in the Manila water supply. Their success story is that they showed how to take people who had

been civil servants for 20 years and turn them into first class private sector managers at all levels. The driving force was a local company with excellent management skills, a sound 100 year track record in business and a president who lead by example. They developed people not water supply systems. When people are developed they can take care of the water supply systems. When people are developed the development is sustainable. When people are developed they have a gleam in their eye. Such was the case with Manila Water Company in Manila, Philippines. But the lesson learned is that one must develop people.

4.8 Time is of the Essence

There are five separate conditions which independently can significantly delay the implementation of the Water Supply Program. But when the effects of all five are combined it can be seen that time is of the essence. Climate in terms of the winter allowing a construction window of only 6 months in the year is a serious constraint which must be factored into all planning. The ground can freeze below a depth of two meters making digging of trenches for laying pipelines extremely difficult and costly. Deterioration in existing assets is at the rate of 3-5% per annum. So the effective progress of improvements must be measured against this factor. Annual budget is approved in January but often the funds are not allocated until April. This means that the time for tendering and approval eats into the effective construction season. Scarcity of human resources to design water supply improvements and supervise construction can limit the number of improvements that can be implemented at the same time. Procurement procedures in the Republican Government and the Oblasts are complex. If there are tenders of high contract amounts the decision to award often takes a long time. An alternative would be to make the most of all available supplier / contractor resources and negotiate contracts so they may all be working in different locations at the same time. See Section 4.6 Procurement above. For example one consultant may combine with one contractor on a negotiated contract to design and construct and even operate facilities to provide water to say 20 settlements associated with one rayon. The Project Team recommends implementation of pilots for one rayon in each of the 14 oblasts to evaluate this new approach. See Box – 4-5.

4.9 Operation and Maintenance

Many rural settlements have industries which are the mainstay of the settlement and such industries have helped to maintain water supplies (whether piped or tankered) to the people. Some of these companies are reluctant water supply providers. It makes more sense that a water enterprise for operation and maintenance of piped water facilities in rural settlements be established at the Rayon level and have local residents employed for routine work in each settlement. The current preference is for such entity to be Government controlled rather than a private sector body. Nevertheless the operational performance of such entities should be monitored by the regulating body and such information made available to the public on a regular basis. See above the comment on the funding of equipment and other facilities needed to carry out the operation and maintenance of works newly constructed or rehabilitated under the Water Program. See also Sections 5.2 and 5.3 regarding Institutional Framework for more comment on operation and maintenance arrangements.

BOX 4-5 IMPLEMENTING THE PILOT PROJECT

Activity Responsibility Duration in

For Activity Weeks

Select Rayon for Pilot Oblast 1 Rayon Feasibility & CWR 4 Select Settlements Select Contractor (PQ) Oblast/ CWR

Contractor Reconnaissance Contractor

Negotiate Contract $ / Capita CWR/Contractor 1 Advertise Selection / Contract CWR/ Oblast Contractor Mobilizes Contractor 2 Construction Period Contractor 18 Construction Supervision CWR Operation and Maintenance Contractor TOTAL 26

Notes: 1. The selection of contractor and the reconnaissance of contractor can be carried out simultaneous to the feasibility.

2. Contractor responsible for O&M for 12 months- after that CWR make permanent arrangements and fund initial O&M. 3. Contract is very simple. It just says Contractor undertakes to provide piped water to the population of these settlements in accordance with CWR standards, within XX months, on the basis of YY Tenge per capita of those served. 4. CWR monitors implementation and publishes results.

RESULT: 200,000 People Get Piped Water in 6 months.

4.10 Tariffs and Subsidies

4.10.1 Water utilities can be functioning well only if the tariffs are adequate or if government has heavily subsidized utilities. The latter option is not sustainable. While it imposes the same financial burden to people through higher taxes, it is often not transparent and therefore opens the door to corruption and inefficient operation of water utilities 4.10.2 Existing Tariffs Urban Existing urban tariffs (Figure 1) in Kazakhstan are relatively low compared to poor developing countries like Colombo (Sri Lanka), where the average annual income per capita is only $750- 1000. In Figure 1, the numbers in brackets show numbers of observations. The tariff structures of cities in different countries are compared in the “Urban Cameo” section of this report.

Figure 1. Average Tariffs in Urban Area, tenge/ cub.m.

140 129,9

120

100

60 39,6 35,8 40 28,8 30,9 24,3 20,7 24,8 23,2 16,1 18,3 18,7 17,3 20 11,2

) ) ) ) ) ) ) ) ) ) ) ) ty (4 (2 4 (3 (4 l (2 l (2 (1 l l (1 lma Ob b Ob Astana A Ob l Obl (4 Obl Obl (2 Obl r Obl la Obl u u z O a a aty ra a a m ista d rd ty n tanay Obl (5lo Akmo Aktobe OblAl (7 A st K a th Kaz Zhamby ang e g zy u W ra Kos Pavlod M a Ky So K

Source: Data of CWR and ARNM

To avoid and prevent any possible emergency cases city tariffs should be covering at least operations and maintenance costs. In countries like Korea, Sri Lanka and Thailand tariffs cover all O&M, and part of capital investment costs. In Almaty and Astana tariffs hardly cover operation costs not to mention maintenance costs. Taking into account that Kazakhstan is a water scarce country such low tariffs do not make any sense. For urban tariffs there is a great challenge to become capable to maintain water supply and sewerage systems, to provide funds for new connections keeping pace with growing population and at the same time create an incentive to preserve water resources by penalizing excessive use of water and reflect adequate user and environment protection fees. 4.10.3 Existing Tariffs Rural Ironically, rural people having much lower income, on average pay 2 times more for monthly water consumption than urban people do. Table 4-3 shows the spectrum of tariffs and water consumption in a number of settlements visited by the project team in the course of its field trips.

Table 4-3 Field Trips Notes

Tariff Structure Consumption, Oblast Settlements Service Type flat rate, charge m3/hh /month tenge/hh/month per cub.m. Khadzhi Mukan decentralized 350 - 2,25 Talapker decentralized 400 - 3,6 Barap standpipes 210 - 3,6 - 4,8 Bulandy decentralized - 125 -250 2,4 - 3,6

Akmola 500 – decentralized 1250 Makinka - 1,4 - 2 & tankered (for tankered)

Smirnovo - 125 -250 2,4 decentralized piped (house Bishkul - 123 5 - 6 connections)

North Kaz Baumanovskoe tankered - 50 4,5 - 5,9 Balpak Bhi standpipes - 27,5 n/a

Amangeldy standpipes 200 - 9,5 - 10 180

Almaty standpipes & (standpipes), Konyr house - n/a 250 connections (h.connect)

Settlements where people do not pay for water taken from public dug wells and springs (albeit tankered) are not included in the table. In general, the highest price per cubic meter is charged for tankered water. It can be shown that average per cubic meter price for tankered water in rural area is 45 times as high as the tariff in Almaty (Figure 2)

Figure 2. Average Charge for Tankered Water and Almaty Tariff Compared (tenge/cub.m.)

512,5 500,0

400,0

300,0

200,0

100,0

11,18 0,0 Tankered Water Charge Almaty Tariff

Source: Data collected during field trips and data of ARNM

However, expensive water users considerably adjust their water consumption down to their affordability level (refer to “Affordability” section for deeper discussion). So, at the average charge of 512,5 tenge per cubic meter of tankered water the average consumption goes down to 1.1 cubic meters of drinking water per household per month. This shows that there is disequilibrium or the absence of an efficient water allocation in the Kazakhstan water market. Given available water resources, water should be reallocated from low-value users (urban) to high-value users (rural). In equilibrium, the marginal valuation of water by rural and urban users must then be equalized. That’s what the economic theory suggests. In this regard, rural users have now demonstrated how high the drinking water can actually be valued in Kazakhstan. Figure 3 shows the existing rural water tariffs, estimated per 1 cubic meter, in different oblasts of the country (numbers in brackets show numbers of observations).

Figure 3. Average Tariffs in Rural Area, tenge/cub.m. 300

250 228,8

200 166,0

150 133,8 125,4

100

47,9 50,2 41,9 50 32,1 28,9 23,1 18,8

) ) ) ) ) ) 8) (4 1 0 (8 21 ( 3 (10) (12) ( (3) st ( t st la t s t a b s st (2 s la last la O la b b b Obl y blast (13 b blast O O O O Obla y O O la zakhstan a n da tan Almat rau Ka a or y istau anda st Akmo At g zyl Ko th Kazakhstanakhs (23) ang Zhambyl West Ky z M Kara Sou

North Ka

Source: Data of CWR, ARNM and from field trips

The tariffs tend to be high where the usage of tankered water is predominant (like in Akmola Oblast) and where people get water from the group pipeline systems, which prevail in North Kazakhstan, Mangistau, and West Kazakhstan Oblasts. 4.10.4 Existing Subsidies Currently, Kazakhstan government has provided enormous subsidies (30% - 97%) to the group pipelines which supply settlements in North Kazakhstan and West Kazakhstan Oblasts, to big industrialized cities like Karagandy, Aksu and Ekibastuz. In 2005 from the republican budget government has allocated $5.4 million as subsidies. (See Table 4-4). In most cases, the tariffs set by ARNM are only official figures, which are then subsidized by local municipal authorities. CWR does not possess information on the amount of subsidies provided from the local budgets.

Table 4-4 Subsidies allocated from the Republican Budget for 2005

Water Approved Subsidized Supplied, % Amount of No. Title Tariff, Tariff, thsd Subsidy Subsidy, $ tenge/m3 tenge/m3 m3/year Irtysh-Karaganda Canal: Karaganda 1 City 45 025 11,1 40% 6,7 1 494 628 2 Aksu City 2 584 9,8 30% 6,9 56 613 Ekibastuz 3 City 19 773 9,8 30% 6,9 433 219 Kokshetau Industrial Pipeline: Kokshetau 4 City 3 970 39,6 84,8% 6 994 912 Shyuchinsk 5 City 800 39,6 89,9% 4 212 409 Group Pipelines: 6 Bulaevsky 525 229,8 82,4% 40,4 742 057 7 Ishymsky 455 229,8 82,4% 40,4 643 114 8 Sergeevsky 10 229,8 82,4% 40,4 14 134 9 Sokolovsky 180 229,8 82,4% 40,4 254 419 10 Presnovsky 32 229,8 82,4% 40,4 56 538 11 Urdinsky 35 564 93% 39,5 137 001 12 Kamensky 225 243,7 86% 34,1 351 925 TOTAL 73 614 5 390 970

Source: Data of CWR

Any government is advised to avoid subsidizing water utilities if it wants to ensure their good sustainable operation. In the meantime, government can finance capital investment costs by the means of grants or soft loans, but in the long-run it is the tariff that should be financing utilities’ all financial costs. As it was mentioned in the chapter beginning, subsidies entail utilities’ inefficient operation since utilities will always be relying on government help and not taking timely and appropriate actions to save or improve their existing water supply systems. When providing subsidies, government should make sure that they are allocated to those who really need them and that they reach the targeted consumers indeed with transparency. Kazakhstan group pipelines are big water supply systems, which had not been maintained in a proper way for the last 10-15 years and hence need a lot of funds to rehabilitate the systems at a higher than their deterioration rate. So, providing subsidies in this case for the medium term can be justified. In the long term however, the government is advised to gradually reduce the amount of subsidies being provided and finally make the utilities independent… Subsidizing big industrialized cities like Karagandy and Ekibastuz does not make sense. The world experience shows that cities can totally be self-sufficient using the revenues obtained solely from tariffs and moreover, subsidize rural users in their region. That’s really a

challenging task requiring a well developed action plan encouraged with the decisive strong will. Tariffs can be raised by small increments each month up to the necessary level to cover operations, maintenance and finance capital investment costs. A utility can then start accumulating funds for capital investment and/or at the same time get a short-term loan able to repay out of tariff revenues. To finance capital costs there is also an option to issue utility or so called municipal bonds, which would be as safe as government bonds but paying higher interest. In this way, a utility can carry out a 5-6 year investment program funded by yearly tariff borne investment funds. Tariffs policy should be revised. Industrial enterprises should pay 2-2.5 times higher tariff than domestic users. In this case water utilities can earn funds for the capital investment. Presently, only in three oblasts of Kazakhstan tariffs for domestic and non-domestic users are differentiated. ARNM should change its view that differentiated water charges for domestic and non-domestic users cannot be economically justified. The industries’ monetary ceiling of affordability is much higher than that of domestic users. This implies that industries should be paying more for water consumption. The more extended discussion of the affordability issues of different water users in Kazakhstan and other countries is presented in the section below.

4.10.5 Affordability Many Asian countries’ experience shows that households can normally pay 3% of their monthly income for water without sacrificing much of their desired volume of water consumption. The natural affordability ceiling rests at 5% of monthly income, but with some downward adjustment of the volume of water consumed. As the average income rises and economy grows, tariffs should not be staying at the old level. On average, rural people in Kazakhstan already pay 80 tenge per 1 cubic meter of drinking water having reduced their consumption to average of 3 cubic meters per household per month. From the field trips it has been known that the monthly water cost for the majority of rural people does not exceed 3% of income affordability level at the average household money income of 20,000 tenge (according to data of the Agency on Statistics of RK for 2004). Makinka settlement of Akmola Oblast is the only exception where people use salty dug well water or if they can, fetch water from the neighboring settlements or Makinka small town for the cost of 20-50 tenge per 40 liter. In all settlements, water used for other than drinking purposes is fetched from various available sources (nearby rivers, small lakes and puddles, polluted dug wells, tube wells with salty water, etc.). This has made rural people to undergo a real hardship obtaining water for washing and laundering in winter time. Surely, the average income in rural area is considerably lower in comparison with urban and is mostly received in-kind in the form of grain, hay and so on. So the issue with rural now is not how to make them pay more for water but how to supply them with the adequate service level in order to provide higher consumption for about the same or lower charge for water. Since the majority of rural people work for local farming enterprises, water utilities should be prepared to accommodate the periods when people cannot be ready to pay for water due to the low harvest or low receipt for their products. The situation is different in urban areas. Urban tariffs are unrealistically low and payments for water by households hardly constitute 1% of their income. In Almaty, for example, with the tariff of 11,18 tenge/m3, consumption of no more than 10 m3 per household and the average income of $150/capita, the monthly payment for water by one household is only 0,2% of its monthly income. Accounting that current urban tariffs hardly cover utilities’ operation costs and that the annual real incomes of Kazakhstan people grow at higher than 7% rate, there should be no hesitation of government to raise the urban tariffs up to their adequate levels.

Another criterion of people’s ability to pay for water is 1/3 of a household’s total spending on gas and electricity. Figure 4 illustrates the diversity of the urban household’s current monthly payment for water on the one hand and 3% of a household’s monthly income and 1/3 of the power (electricity and gas) cost on the other.

Figure 4. Affordability Criteria: 3% of Household Income and 1/3 of Power Cost (urban)

5000

4500

4000

3500

3000

2500

2000

1500

1000

500 0

) ) 2) ) ) ) ) ) ) (4) (7 ( 4 (2 5 (4 st st (1 st a st ( st ( Astana Almaty l last (2 last a last stan (2 st (14) a bla b b b bl b la stan O O kh Obl Oblast (3) kh la O e u yl O y za o ob a b a m Kaza K a istau O Akt Almaty O Atyr h ng stana zylorda Obla Akm Z ganda Ob o y ra K K Pavlodar outh Ma West a S K

3% of HH monthly income, tenge 1/3 of Power Cost, tenge Cost of 10 cub.m. of water, tenge

Note: The hikes in 3% of average household income for Atyrau and Mangistau Oblasts are due to high wages paid in oil sector.

Source: Data of the Agency of RK on Statistics, CWR and ARNM

4.10.6 Willingness to Pay When delivering piped water to settlements, government should assess beforehand if people are willing to pay for the service being planned. People might be able to pay but refuse to actually pay for water because of other reliable sources of water. An example from an Indonesian village shows that when people were provided with piped water to their houses, no one wanted to connect because all households had their own dug wells with good quality water. So, in this case people’s willingness to pay for the service provided was down to zero, far below their affordability level and government authorities didn’t realize it. At the other extreme, there is another example coming from Male (Maldives), where people have no other option than consuming expensive treated sea water for $5 per 1 cubic meter. This is the measure of Male people’s willingness to pay, which is far above their affordability level.

In Kazakhstani settlements government is advised to examine what people’s current sources of water are, and how much they currently pay for water. There are settlements where people use only tankered water for drinking and already pay a lot because there is no other option for them to get water. In such a case one can be sure that people’s willingness to pay is high and delivering cheaper piped water will be justified. In the settlements where people use fresh spring water from the dug wells or tube wells in their yards, it is better to survey people and assess their income to be sure that the service provided will not stay unused. In other words, if there are doubts that the majority of people in a settlement will pay for water, there should be doubts as to providing to that settlement the piped water. Willingness to pay may not be an issue if people have knowledge on the importance of the continually reliable quality of drinking water for their health. Therefore, public awareness about health risks arising from untreated water needs to be increased.

4.11 Private Sector Participation (PSP)

4.11.1 After the break-up of the Soviet Union Kazakhstan was among the few former socialist countries that made bold to deprive many water utilities of the government surveillance. Besides, the Ministry of Utilities Economy responsible for urban utilities enterprises was eliminated. As a result, presently there is a significant degree of PSP both in rural and urban areas. 4.11.2 By and large, settlements’ water supply responsibility should rest on local akimats. Unfortunately, water supply in most of small settlements has not run properly or not run at all due to the lack of (or ineffective) financing and lack of well organized O&M service. 4.11.3 There is one type of PSP prevailing in rural area, whereby a farming enterprise working in the settlement (usually growing crops or rearing cattle) by default takes over the water supply operations and maintenance. In majority of cases this happens voluntarily out of benevolent attitude of private entrepreneurs towards their employees. However, there are cases when farming enterprises have been forced to maintain settlements water supply. This is not a good way out for it distorts enterprises’ economic decisions and can bring about unsustainable poor water supply service to rural people. This suggests that there shouldn’t be a pressure from the government side, rather government should think of arranging a well structured O&M service for rural water supply objects. 4.11.4 It is clear that urban water utilities represent the greater interest for private sector and government is advised to be careful in making crucial decisions. Experience from other countries show that private utilities do not perform better than government owned utilities. Bringing PSP never guarantees better service and abundant capital investment. This especially can be relevant to international companies. One should bear in mind that private sector comes for profit while for foreign company there is always an option to go away with people’s money easily breaking a vague contract it has managed to sign. Therefore, it might be more advantageous to privatize utilities to local companies with already established good reputation. 4.11.5 So, it’s better not to hurry to make extensive private sector reform but analyze current country experience with PSP to elicit things that went wrong and things that have worked well and ponder if good things should be encouraged further. For example, among privatized utilities there are many cases of repetitive bankruptcies. It would be useful to analyze the reasons for those bankruptcies. The reasons might lie in low tariffs, poor management, the form of ownership or even corruption. There are also private utilities that have been operating well like the one in Shymkent City. It also would be worth to study their way of development and speculate if that is a good strategy to follow.

4.11.6 It’s worth noting that neither private nor state water utility can function well without adequate tariffs. This then suggests that in the presence of adequate tariffs both government and private utilities can deliver very good services to people. However, both cases are feasible on important condition that government authorities keep monitoring the performance of utilities. In the case of private ownership, government should negotiate well designed contracts and secure their transparent activity to make them deliver the appropriate services to people. In the other case, authorities should foster an efficient operation of state utilities by benchmarking their performance and wise regulation of their activities to achieve the same goal mentioned above. 4.11.7 The bottom line of this discussion is that efficient water supply can be achieved either way if there is strong political will and commitment to improve the access of population to quality drinking water. Kazakhstan is advised to retain the existing status of PSP and try to improve what it possesses now. Time will suggest the right direction to go on with PSP. Avoiding potential problems on the top of existing ones is better than making a leap to unknown future.

4.12 Regulation

4.12.1 Agency for Regulation of Natural Monopolies (ARNM) The activities of 46 water utilities in Kazakhstan are regulated by the Department on Regulation and Control in the Sphere of Pipeline and Sanitation Systems of the Agency for Regulation of Natural Monopolies (ARNM), which is accountable to the Prime-Minister Office. The regulated utilities are sizeable enterprises with the annual income of over 350,000 tenge serving big cities, small towns, rayon centers and the settlements that have been supplied through the Group Pipelines. 50% of these enterprises are Limited Liability and Joint Stock Companies while the rest are the “State Utility Enterprises”. The bulk of rural water supply objects are thus regulated by rayon “Hakimats” (not by ARNM), i.e., local municipal bodies, on the basis of the same legislation. 4.12.2 Rationale for Regulation The main objective of any natural monopolies’ regulator body should be the wise pricing of the utilities’ product by timely analyzing their performance along with the consumers’ demand, country-specific economic current needs, future trends and challenges. This objective is well attained when there is one executive body to regulate the activities of all utilities. It is easier and more appropriate for one strong regulator to benchmark water utilities performance and make the results available to the public. This would foster a wise regulation, the better performance of water utilities and finally, better access of the growing population to the piped water. 4.12.3 ARNM has the starting premises to lead a skilful regulation of water utilities. At present, it conducts utilities’ annual financial and technical expertise study but unfortunately does make little use of the obtained results for regulation. So there is great room for ARNM to develop and improve the current spectrum of its activities. Regulated objects could be divided into typical groups like big city utilities, group pipelines, small town utilities, and then be benchmarked with respect to various characteristics that might include tariffs, revenue collections, operations and maintenance costs, capital expenditures, water losses, proportion of metered population, etc. The results of the comparative study could then be published in annual statistical data books, newspapers, posted on all relevant web-sites so that all students and researchers could access that information. Greater transparency in water utilities’ activities would then improve their efficiency and accountability.

4.12.4 The Purpose of Tariffs Ideally, water tariffs should be able to cover utilities’ all expenses including operations and maintenance, capital investment and development costs. So the full cost recovery should be the main purpose of the tariff if one wants to ensure sustainable good operation of water utilities. Many developing countries nowadays have been implementing the appropriate reforms to set up an efficient and adequate pricing of water. In many cases water tariffs tend to be lower and below production cost compared to energy tariffs. This has taken place because firstly, it is commonly perceived that water is the gift of nature and can easily be accessed from bare sources. Secondly, government authorities consider water supply services to be life supporting and so think that water should be provided to people for almost free. However, one should understand that hardly anyone would be happy to fetch water of a dubious quality from the distance of several kilometers. One should also understand that for water utilities water is the commodity providing them with revenue for maintaining its facilities and so making them capable to supply people with 24-hour safe water. So, any regulating body when setting tariffs should be realizing that it bears responsibility for people getting enough safe water and not getting into any disaster. 4.12.5 Criteria Used for Regulation The above discussion prompts that while setting tariffs ARNM should first consider if the tariffs are reasonable enough to cover utilities expenses and then reckon if people in a certain region can afford to pay it. People normally can afford to pay for water up to 3% of their income. In most cases that is enough to finance operations and maintenance, capital overhaul and development expenses. Taking into account that in Kazakhstan urban people hardly spend 1% of their monthly income for water, current urban tariffs may easily be lifted up by small increments without worrying much of people’s ability to pay. 4.12.6 The tariffs currently set by ARNM are calculated based on the past expenses and cover only operations costs although the formal methodology that ARNM uses envisages profit to finance capital overhaul and to provide utilities’ effective operation, accounts for water losses and provides a medium term (higher) tariff if a utility has decided to implement an investment project. Unfortunately, these provisions remain as such only on the paper partly due to the following factors that have practically hindered the tariffs from being higher: 1. The legislation itself is too complicated so that utilities are discouraged to prepare piles of documents to apply for the medium term tariff, for instance. 2. The historical cost of the fixed assets is recorded very low, which, in turn automatically lowers the profit and depreciation allowances. 3. Depreciation allowances are incorrectly accepted as means of repaying capital investment funds. Depreciation allowance is a compensation for diminishing productivity of capital equipment and should be covering maintenance costs of the wearing out equipment.

4.12.7 Rationale for Policy The above listed and other complications with setting adequate tariffs can be avoided if government develops and implements a clear policy on tariffs and utilities’ activities so that everyone knows it like children know the basic traffic rules. The policy could be stating that the tariff is the reflection of a utility’s all financial costs and that it necessarily changes when its constituents (electricity and fuel costs, salaries, etc.) change. Increases in tariffs necessarily lead to increases in related prices, but often they entail the rise in other weakly related or unrelated prices thus each time creating the atmosphere of panic

and the consequent actual rise in inflation. This is one of the reasons why currently Kazakhstan government negotiated moratorium on tariffs revision in order to lessen the inflationary effects of the salaries raised in accord with the president’s development program. As the policy on tariffs becomes known and is strictly adhered there will be lesser concerns of government and people about the overall inflation followed after the rise in tariffs.

4.13 Sanitation 4.13.1 It is normal to consider sanitation along with water. But with respect to sanitation in rural areas of Kazakhstan this view may be considered in the light of the following: 4.13.2 The Committee for Sanitary and Epidemiological Control of the Ministry of Health of the Republic of Kazakhstan is responsible for sanitation in the country. It appears to be doing a good job of monitoring and policing water supply and sanitation including bathhouses and at this point in time there seems to be no need to make any institutional reorganization to have its functions integrated with water supplies under the Committee for Water Resources. 4.13.3 In rural areas personal sanitation is mostly in the form of outdoor pit latrines not served with water. The UNDP survey concluded that 95% of rural households were in this category. The ideal form is an indoor water sealed latrine connected to a septic tank. This is not very practicable unless there is piped water into the home. Hence the first consideration must be to get piped water into the home. Piped water borne sewerage is not an option in rural settlements with only 1000 people as the self cleansing flows in the sewers are not adequate. 4.13.4 In the former Soviet Union times there were many public bathhouses. Now without adequate piped water many of these have been closed down by the Government health inspectors. The UNDP survey revealed that on average 36% of rural people still use public bathhouses for personal bathing, 39% go to their neighbour’s facility, 25% have their own outdoor facility and 6% have an indoor bathing facility. Obviously there is a need to rehabilitate public bathhouses once piped water is available.

PART V MAKING THE PROGRAM SUSTAINABLE

5.1 Legislation

5.1.1 The Water Code The Water Code of the Republic of Kazakhstan was promulgated on July 9, 2003. It addresses the following areas of concern: • Right of use of water bodies, right of ownership and other rights for water facilities • State regulation of use and protection of the water resource • Water use. • Water management • Use of water bodies and facilities • Protection of water bodies and reduction of negative water impact • Special features of legal regulation of water bodies of special state importance • Economic mechanism of water resource usage and protection… sector regulation. • Water disputes and responsibility for the violation of the water legislation • International cooperation in the area of water relations, use and protection of transboundary water resources.

5.1.2 Draft Legislation of Vodokanal Association Recognizing that the Water Code had some deficiencies regarding water supply and drainage, the Association of Vodokanals in consultation with their constituents has developed a draft Law on Water Supply and Drainage dated May 24, 2004 The main sections of this draft law are:

• State management in the field of water supply and drainage • Ensuring the supply of the population with drinking water and the quality of drinking water • Water supply and drainage systems • Right of property on water supply and drainage systems • Water supply and drainage systems protection • Legal fundamentals for organization of water supply and drainage

It appears that this draft law was rejected because there was no executive body to administer the law (the Committee for Water Resources has no status to do so).

5.1.3 Legislation versus Policy It is the opinion of the Project Team that notwithstanding its support for the above draft legislation, in general, what this Water Program needs is not a lot of legislation (which is seldom known to the people), but a clear and transparent policy about how the Water Program will be implemented. (which will be known to the people). During the implementation of this TA a remark was passed by someone in a concerned government agency that the way for Vodokanals to succeed in getting a reasonable water tariff approved was to hire a good lawyer. This illustrates the point that legislation is not perfect and there can often be found a way to circumvent it. In some developing countries the more legislation, the less it is observed.

5.2 Institutional Framework for Rural Water Supplies

5.2.1 Existing Situation Normal (Example Petropavlosk) Director of RSE “Esil Su” under Republican Budget is responsible for group pipelines and package water treatment plants for demineralization, both of which deliver water to settlements at one point only. Eg Smirnovo. Of 290 potential settlements “connected” only 163 get piped water from their system due to high price, alternative local sources and unwillingness to connect. Lack of distribution networks in settlements has restricted use of water from group pipelines. Group pipelines are highly subsidized (82% subsidy) while at the same time they exhibit 50% losses in transmission of water. “The NKO Hakimat organized utility enterprises in the rayon centres which due to poor logistic, financial and human resources basis have not introduced major change in the operation of inter-settlement distribution networks. The RSE ‘Esil Su’ suggested it was needed to have one strong oblast utility enterprise with divisions in rayons for maintenance of inter- settlement distribution networks in rural areas.” 5.2.2 Existing Situation Exceptional (Example Taldykorgan as from 2003) Director Su heads the Oblast State Municipal Enterprise and is responsible for Vodokanals as well as State Water Enterprises which have been created in rayon centres. They put pressure on Oblast Hakimat and Rayon Hakimats to fund distribution in settlements. But in general only part of each settlement is served. Eg. one pump replaced and some (not all) distribution replaced. Unofficially they look after settlements in terms of technical and administrative matters connected to water supplies. Officially O&M of water supplies in settlements is under the rayon Hakimat. 5.2.3 Existing Situation (Example Amangeldy, Koksu Rayon, Almaty Oblast) Almaty Oblast funds some development ($16 per capita) to replace 1.1 km pipeline, replace one pump and put in chlorination facility. But the tariff is too high for locals so the farming economic enterprise (headed by distinguished “heroine of social labour”) pays the difference to ensure 24 hour water supply. 5.2.4 Existing Situation (Example Local Source Torgay) Republican budget in Akmola Oblast funds local source groundwater development, near Torgay including pump and pipeline to settlement water tower, but no distribution of water. This will be operated and maintained by the rural district Hakimat. 5.2.5 Existing Situation (Example Local Source) Akmola Oblast budget funds local source groundwater development, pump and pipeline near Kokshsetau but no distribution of water. This will be operated and maintained by the rural district Hakimat. 5.2.6 Existing Situation (Example Local Source) Almaty Oblast budget funds 20%, US Government (CAREC) funds 70% and settlement people fund 10% of local groundwater source development, pump, pipeline and all distribution pipework in Konyr settlement. This will be operated and maintained by the village water cooperative

5.3 Analysis of Institutional Framework

5.3.1 The general situation regarding piped water supplies in the rural areas of Kazakhstan is NOT NORMAL. The 24 hour piped water systems that operated in most settlements in the former Soviet Union times are now almost completely gone. Massive rehabilitation and replacement of water supply facilities is required. This is not a situation that can be handled by a “business as usual” approach. 5.3.2 What is needed (at least for the next ten years) is a national organization to be totally responsible for the rebuilding and initial operation and maintenance of all small town and rural water supplies in Kazakhstan. That organization should be the Committee for Water Resources with no less than 300 professional staff dedicated to the Water Program. 5.3.3 What is needed in terms of funding is that the Republican Budget fund almost all works including distribution pipework in all villages. This is required because at the moment there is much money being spent on transmission of water to settlements but its usefulness is greatly inhibited by the lack of funds for distribution of water. There is also a need to fund initial equipment to be used in operation and maintenance. 5.3.4 As to the institutional responsibility for operation and maintenance of water supplies in the settlements, this is best established initially (for the next ten years) under an organization similar to Zhetysu OSME in Taldykorgan, but with the additional official responsibilities for water supplies in settlements. OSME works well. It has an excellent reputation on construction supervision. It has been able to get some funding for the water supply distribution networks in settlements because it is itself an oblast organization. Also unlike in other oblasts, it has established water supply units in the rayon centres, which should function as the holding centers for O&M equipment for the whole rayon. Provided that OSME receive additional funds and human resources and it is given an official mandate it might also be responsible for rural settlements in its region. This could be tried out on a pilot basis first and if successful replicated elsewhere in the country. In the meantime, and maybe on a permanent basis, it would be advisable for the republican budget to fund in each oblast capital a “Rural Water Supply O&M Unit” which would also cope with emergencies. 5.3.5 Regarding private sector participation in the operation and maintenance of water supplies in settlements there is much evidence that economic entities (farming and industrial) established in settlements are helping out with water supplies, not because they wish to do this to prevent migration away from the village. Most think that this should be done by the state authorities.

5.4 Draft Policy for Implementing the Program It is not the role of this technical assistance to elaborate on the Government policies regarding the implementation of the Water Program which need to be spelled out in a transparent manner. However within this Report there are recommendations which if supported by key decision makers could be included in the policy statement. Below are policy elements which are suggested for inclusion in a brief policy statement. CWR (expanded) should be responsible for preparing the draft policy statement, obtaining Government endorsement and advertising the policy widely. Three principles are important: recognizing “time is of the essence”, ensuring quality and equitability and specifying the investment facilities and materials.

BOX 5-1 Policy Elements

Criteria for Inclusion in Water Program External Financing Population Conditions for Seeking External Financing Distance from Source Limitations on External Financing Tankered Water Loan Conditions Health Statistics Grant Conditions Per Capita Cost Timing Conditions O&M Sustainability Private Sector Participation Accountability of Water Utilities [Describe the PSP and Investments Requirements] PSP and O&M Consumer Satisfaction PSP v Government Water Management PSP and Human Resource Development Financial Management Human Resource Management Human Resource Development Annual Report Contractors Consultants Service Levels [Describe the Standards] Government Professionals 24 Hour Supply Organization Development Standpipes International Consultants House Connections Media Education Water Quality Water Consumption Water Conservation Accountability Tariffs and Subsidies [ Discuss Objectives & W ater Losses Rationale] Demand Management Covering O&M Cost Affordability Water Resource Development W illingness to Pay Surface Water Group Pipelines Flat Rate v M etered Consumption Surface Water Local Block Tariffs Groundwater Fresh Group Pipeline Subsidies Groundwater Mineralized Water Treatment Subsidies Rainwater Harvesting

Procurement Involvement of Civil Society Principles Media Prequalification of Suppliers and Contractors NGOs Tendered Procedure Academia Negotiated Contract Procedure Industry Transparency Consumers Time is of the Essence Hakim

Sanitation Monitoring the Program Service Levels Responsibility Responsibilities Funds Water Production O&M of Water Supplies Better Service Organization Responsibility Timely Implementation Human Resources Equitable Development M aterials, Equipment and Transport Health Situation Financing and Subsidies Public Awareness Capacity Building Records and Reporting Monitoring the Policy Responsibility General Sources of Funding Resources Rationale in Source of Funding Reporting Republican Budget Oblast Budget Economic Entities External Agencies Private Sector

5.5 Monitoring the Program

There is a saying “if you cant measure ..you cant manage”. So it is necessary to measure the actual situation regarding service levels for rural water supply in order to manage this part of the sector. It is suggested that a sample of 500 settlements throughout Kazakhstan be

surveyed each year for the five years of the Water Supply Program using students during the Summer break. This would cost no more than $100,000 per year but would give a very credible base for estimating coverage with different service levels. The measurable elements would include (i) those with piped water distributed, (ii) those with piped water to the settlement, (iii) those with decentralized source and water carted home and (iv) those who receive a tankered water supply to their home. In each case the average cost and consumption volume per household would be noted. Other important aspects which should be monitored include (i) the allocation and use of funds by location for measuring equitable development as well as amount of development (ii) the proportion of funds going into different parts of development including distribution pipework, (iii) the use of funds compared with the forecast expenditures, (iv) the number and location of water related health epidemics each year, (v) the increase in total volume of water produced for drinking purposes (vi) public awareness about the Water Supply Program (vii) the average and range of tariffs in rural settlements for water supplies and (viii) the subsidies which both republican and oblast governments give for operation and maintenance of rural water supplies.

PART VI AN URBAN CAMEO

6.1 Institutional and Legal Framework for Vodokanals

6.1.1 Vodokanals are no different than smaller urban water supply entities and rural water supply entities in having to deal with the common problem of water supply infrastructure that is past its normal design life and in a state of great disrepair due to lack of funds and proper maintenance over the 1990s in particular. This is a national / republican issue and therefore the financing of capital works should initially rest with the republican budget. For this to be effected the Vodokanals need an executive body in Government. That executive body should be the much expanded CWR which would also be responsible for benchmarking the performance of the Vodokanals. CWR would also be responsible for getting the draft legislation on water supply and drainage approved. [See Section 5.1 “Legislation” above]. 6.1.2 In the long run every major urban water utility (with more than 100,000 population served) must learn to stand on its own as far as being self sufficient to run its operations and to expand its services from tariffs. This may mean leveraging loans or municipal bonds from its tariff revenues. For smaller urban water utilities there should be a contribution to capital works development from tariffs. The republican budget should only be used in a one off rehabilitation exercise lasting no more than the next 10 years. After that Oblast State Municipal Enterprises who would be responsible for all water supplies in an oblast would need to find oblast funds for continued expansion.

6.2 Water Losses and Metering

6.3.1 In very few urban areas is there 100% metering of consumption. Therefore water losses cannot be measured and water conservation cannot be expected for those not metered. In a country known for its scarcity of water resources this is unacceptable. Furthermore it encourages corruption. It may be that those on a flat rate use a lot of water but pay to unknown people to stay on that flat rate. It may be there are illegal connections but these cannot be discerned. If you can’t measure you can’t manage so metering of all urban consumption is a must. In principle, a well metered Vodokanal should help it to make a good tariff application to ANRM since there is more accurate information. It should not be up to the consumer to decide if they should be metered or not. The Vodokanal must have its own clear policy to meter all consumption. It is also more equitable for all consumers if they are all treated the same way. 6.3.2 Meters should be replaced on a regular basis to ensure accuracy of measurement. Water losses must not only be known but be addressed in terms of a plan to reduce them. This will include a consumer metering program, district metering and valving to isolate zones for analysis. Good network maps are required which describe the age and condition of the pipework and where leaks have been repaired and on what date. Pipelines which have many leaks should be considered for internal repair or replacement. The prevalence of leaks in house connections should be recorded. An amnesty can be called for illegal connections to be revealed and normalized without penalty. It can be advertised that a random 100% check on illegal connections will be conducted in various locations and those consumers found with illegal connections will not only be fined but their names will also be made public. For those consumers now on flat rate tariffs some random sample metering can verify actual

consumption .and these can be compared with average consumption for those already metered.

6.3 Tariffs, Subsidies and Development Financing

6.3.1 Purpose of Tariffs Earlier it was discussed that the main purpose of the tariff should be the cost recovery. In urban areas where people have relatively more high and stable income than in rural areas the objective of cost recovery must not be an impossible aim to achieve. One can reckon several justifications for tariffs covering all the financial costs of utilities. The main reasons can be formulated as follows: - the policy of allocating continuous subsidies instead of permitting tariffs to cover all costs creates the habit of utilities to rely on government help and thus going into an accelerating inefficiency (Soviet Union is a vivid example) - allocated subsidies often are not able to finance desired capital investment costs - subsidies are allotted from the government budget through imposition of higher taxes on people’s other activities. The result is that each period people give up the same amount of money to government, while in case of subsidization, urban people with the help of rural will be financing future poor service provision of water utilities.

6.3.2 Urban Tariffs in Kazakhstan Current urban water tariffs in Kazakhstan belong to the lowest tariffs group among the ADB member countries. For comparison, in Greater Colombo (Sri Lanka) the average annual income is around $1000, while the average water tariff is twice as much as the tariff in Almaty. As it was mentioned before, Kazakhstan current urban tariffs are able to cover only operation costs at the time when all utilities’ fixed assets are deteriorated by more than 65%. The only wise way out in this circumstance is the gradual increase of current tariffs up to citizens’ affordability level. Experience of other countries show that people can afford to pay up to 3% of their income or one third of their payment for gas and electricity. These are the criteria used in other countries for setting adequate tariffs that must cover operation, maintenance and capital costs. Please refer to Figure 4 in “Tariffs and Subsidies” Section 4.10 for the graphical comparison of people’s current payments for water and potential levels of their affordability.

Next diagram (Figure 1) shows how large is the gap between the actual revenue utilities currently earn and the potential revenue that could be earned if people paid the tariff corresponding to their 3% of income affordability level.

Figure 1. Potential and Actual Revenue from Domestic Water Services, mln tenge per year (2004)

6000 3% of Population Income

5000

4000 3% of Population Income

3000

2000 3% of Population Income 1000 658 375 312

0 Astana Almaty Shymkent

3% of Population Income Total Revenue, mln tenge

Source: Data of the Agency of RK on Statistics and Association “Kazakhstan Su Arnasy”

Both in Almaty and Astana people can pay at least 8 times more than they do currently. In Shymkent this figure is lower because of the current higher tariff and relatively lower money income. Note that by “income” it is meant monetary labour income, i.e., salaries, suggesting that overall income of people can be considerably higher.

6.3.3 Tariff Structures In most Asian countries water tariffs are structured block wise, as opposed to flat rates existing in Central Asian republics. In the block tariff structure (BTS) people pay different tariffs for different consumption ranges: they pay low tariff per cubic meter if they consume up to some specified amount, while they pay higher charge for the amount that exceeds the specified amount and so a consumer “jumps” to the next block and so on. The main advantages of the BTS are following: • BTS assists low income people who would be willing to reduce their consumption of water if they paid less than before. In that way BTS automatically sets up cross subsidization from rich to poor • BTS discourages wasteful use of water thus helping preserve a country’s existing water resources

Figure 2 compares tariff structures of cities in different Asian countries.

Figure 2. Tariff Sructures Compared $1,00 Greater Colombo $0,90 Almaty

$0,80 Astana Shymkent $0,70 Ulsan (Korea) $0,60 Singapore

$0,50

$0,40 Tariff Rate, $/m3 $0,30

$0,20

$0,10

$0,00 0 102030405060

Monthly HH Consumption, m3

Source: Data of ARNM and the Second Water Utilities Data Book in Asian and Pacific Regions, ADB Publication, 1997.

Almaty has the lowest average tariff of $0,08 per cubic meter. Among Kazakhstani city water utilities Shymkent Vodokanal, a limited liability company, has been the most successful having managed to get a medium term tariff of $0,25 (32,75 tenge) per cubic meter by delivering to ARNM all the necessary documents of their planned investment program. For more information additional characteristics of Almaty and other three foreign city utilities from the above diagram are presented in the following Table 6-1:

Table 6-1 Operational performance of foreign utilities compared with Almaty

Almaty Greater Colombo Ulsan Singapore Title (2004) (Sri Lanka, 2001) (Korea, 1997) (1997) Organizational State state enterprise state enterprise state enterprise Arrangement enterprise Population 1 230 000 2 800 000 990 626 3 000 000 Population Metered 84% > 90% 100% 100% Production,1000 262, 435 213, 525 105, 850 489, 556 m3/year Proportion 60/40 24/76 45/55 40/60 Domestic/Nondomestic 33% NRW (water losses) 35% Estimated 33% 7% Estimated Consumption, l/c/d 134 140 157 183

Monthly Water Cost, $0,32 $0,63 $1,87 $3,04 $/cap

Average Tariff $0,08 $0,15 $0,40 $0,55 Domestic, $/m3 Total Revenue, mln $ $11,4 $28,0 $28,2 $259,3 Per Capita Revenue $5,6 $4,5 $12,8 $34,6 Domestic, $/year

Total O&M Costs, mln $ $11,7 $20,1 $20,2 $155,3 Annual Capital $1,2 $45,9 $51,2 $53,5 Expenditure, mln $ 58% - own funds, Source of Capital 100% govt. 50% grant 35% - govt. loan, 100% own funds Financing grant 50% loan 7% -govt. grant

Staff 2 700 1 103 204 1 865

Source: Data of ARNM and the Second Water Utilities Data Book in Asian and Pacific Regions, ADB Publication, 1997 and the findings of questionnaire held at the Republican Meeting of Directors of Vodokanals in Aktobe city, September 2005.

BTS should be designed on the basis of population’s income distribution. If the proportion of poor is high in a city, they should be accommodated by setting a tariff on the level of production (operations) cost or lower for the first 6 cubic meters of lifeline consumption. For the next block (next 14 cubic meters) the higher charge depending on the income level of the middle class should be assigned. This rate could cover operations, maintenance and capital costs. The last block, should be charged the highest per cubic meter price to discourage wasteful use of water. If the proportion of poor is low in a city, government could provide direct subsidies to lowest income consumers and set the full tariff (covering all costs) for the first block immediately.

One should take into account however, that under BTS people will tend to understate their actual consumption thus creating additional burden of more frequent meter reading. In this case it might be convenient to decide on the width of the first block based on current urban monthly consumption pattern. Presently, there is a tendency by urban households to consume no more than 10 cubic meters per month of metered water. To consider Almaty, for instance, the proportion of people living under the subsistence minimum is 4% with the average household money income of 20 000 tenge. These people, based on affordability criteria can currently pay 20 tenge per 10 cubic meters of water consumed. So, in the first block of BTS for the first 10 cubic meters it is plausible to set a tariff almost twice as much as the current tariff. 10 cubic meters would then become an equivalent of so called Soviet times “consumption norm” for urban. Those who consume beyond “consumption norms” will then pay higher tariff for extra consumption thus contributing to utilities’ capital costs.

6.3.4 Cross-subsidies BTS represents cross-subsidization from poor to rich. There also can be cross-subsidization from non-domestic (industries, other economic entities) to domestic users, implemented by charging considerably higher tariff for industries than for domestic users. For poor cities this would help provide inexpensive water for citizens, while other cities could earn funds to finance their own and even other rural and urban utilities’ capital investment costs. By charging 1.5 times higher tariff for non-domestic users, Almaty for example could collect 30 mln tenge more each month on the top of what it collects now. For industrial cities like Atyrau, Mangistau and Karagandy potential revenue that could have been earned from non-domestic users is much higher. The tariff for non-domestic users could be about 2-4 times more compared to the domestic tariff. However, too high a tariff for industrial and other enterprises can distort their behaviour by making them drilling their own wells, avoid getting registered as an economic entity or set up illegal connections.

6.4 Benchmarking of Water Utilities

6.4.1 Urban water entities may be regulated for tariff. But tariffs should never be considered in isolation. Water, money and people are all interconnected in the operations of a water utility. For water it is necessary to measure the quality of raw water, the quality of water after treatment and the quality of water at the consumer tap .It is necessary to measure production volume each day from all sources. Consumption can be measured on a monthly basis. Domestic and non-domestic consumption should be differentiated. For money it is necessary to record the billing amount and the collection amount from consumers. It is needed to record the operation and maintenance costs including interest payments on any loans and depreciation based on a realistic valuation of assets. For people it is necessary to show the number of connections, the number of standpipes, the number of non-domestic connections. The numbers of people served by house connections, yard connections and standpipes should be recorded against the estimated total population. The proportion of the population served by 24 hour supply should be noted. The number of staff in the water utility employ can be recorded. From all this basic data collection a number of important indicators / parameters of performance can be derived. 6.4.2 Unaccounted for water is the difference between production volume and measure or estimated consumption volume. Non-revenue water (a term more accepted by the International Water Association than unaccounted for water) is the difference between the production volume and the billed volume of water. Accounts receivable is the difference between monies billed and monies collected (i.e. outstanding unpaid bills) expressed in terms

of equivalent months of total billings. Operating ratio is the total expenses divided by the total revenue (billings) over a given period of time. Average tariff is total revenue (billings) divided by total billed volume. The staff per 1000 connections is good indicator of efficiency of utility operations. Service coverage is percentage of total population with house connections or yard taps. It is useful to show on pie charts the components of water use including unaccounted for water, the components of revenue from annual water billings and the components of operation and maintenance costs including personnel and power costs. 6.4.3 Benchmarking is the comparison of all the above among the various Vodokanals and smaller urban water supply entities. They can be compared with one another and compared also with those in other countries. [See ADB’s Second Water Utilities Data Book 1997] They can also be compared with themselves for performance improvement from one year to another. This information should be made public and good journalists can not only record the information but give their own comment or interpretation on performance. The CWR, as the proposed executive body responsible for the urban water enterprises, should publish each year on the Internet and in hardcopy form the results of the benchmarking exercise.

PART VII STAKEHOLDER WORKSHOP

7.1 Agenda STAKEHOLDER WORKSHOP PROGRAM AKKU Hotel, 10 November 2005, Astana

Time 8.30 – 9.00 Registration of participants

9.00 – 9.10 Opening remarks

Mr. Nurlan B. Atshabarov, Deputy Chairman, Committee for Water Resources, Ministry of Agriculture RK 9.10 – 9.15 Welcoming remarks on behalf of the Asian Development Bank

Ms. Tatiana Simonova, Project Implementation Officer, ADB Resident Mission

9.15 – 9.45 Water Program

Ms. Lilianna Malyy, Deputy Team Leader, Technical Assistance (TA) “Strengthening Water Supply Sector Program” 9.45 – 10.15 Video Film for Promoting Public Awareness of Water Program

10.15 – 10.30 Discussion

10.30 – 11.00 COFFEE BREAK

11.00 – 11.15 Republican Finance

Mr. Sergei V. Evdokimov, Head of the Environment Protection Unit, Sector Bodies‘ Expenses Planning Department, Ministry of Economy and Budget Planning RK 11.15 – 11.30 Oblast Finance

Mr. Timur G. Khamzin, Deputy Director of the Architecture, City Planning and Construction Division, Akmola Oblast Akimat 11.30 – 12.10 Presentation of the Draft Final Report of TA “Strengthening the Water Supply Sector Program”

Mr. Arthur McIntosh, Team Leader 12.10 – 12.50 Discussion

12.50 – 13.00 Tankered Water: A Big Issue

Mr. Erkanat K. Iskakov, General Director, Agricultural Company “Aimak” 13.00 – 14.00 LUNCH

14.00 – 14.15 Ms. Anna Martynenko, Head of the Unit for Water Supply and Sanitation Systems Regulation, Agency for Regulation of Natural Monopolies RK

14.15 – 14.25 Mr. Valeriy Syundyukov, President of Association of Enterprises of Water Supply and Sanitation “Kazakhstan Su Arnasy”

14.25 – 14.45 Urban Tariffs & Subsidies

Mr. Arthur McIntosh, Team Leader, TA “Strengthening Water Supply Sector Program” 14.45 – 15.00 Discussion

15.00 – 15.10 Mr. Sermagambet K. Kutushev, Director of RSE “Esil Su”

15.10 – 15.20 Mr. Askar A. Tutubaev, Deputy Director of the Architecture, City Planning and Construction Division, Almaty Oblast Akimat

15.20 – 15.25 Mr. Abyzbai A. Adamov, Akim of Irtyshskiy Rayon, Pavlodar Oblast

15.25 – 15.30 Mr. Gennadiy I. Savinov, First Deputy Akim of Koksuyskiy Rayon, Almaty Oblast

15.30 – 15.35 Mr. Daniar J. Toktybaev, Chief Specialist, Water Supply and Sanitation Organization Unit, East Kazakhstan Oblast Akimat

15.35 – 15.40 Mr. Kasymbek T. Shaukenbaev, Akim of Inkardariinskiy Rural District, Syrdariinskiy Rayon Kyzylorda Oblast

15.40 – 15.45 Mr. Paizulla Sh. Kabdin, Akim of Nikolskiy Rural District, Bulandynskiy Rayon Akmola Oblast

15.45 – 15.50 Mr. Smagul A. Kashkibaev, Akim of Karashaldinskiy Rural District, Korgalgynskiy Rayon Akmola Oblast

15.50 – 16.20 Discussion

16.20 – 16.50 COFFEE BREAK

16.50 – 17.00 Ms. Zoya P. Litvinova, Director of Pavlodar Design Institute “CONCERN Ai-Su”

17.05 – 17.15 Mr. Adilzhan S. Khabiev, Deputy Executive Director, “Firma AGROPOLIV” Ltd.

17.15 – 17.25 Mr. Kadirkhan T. Raimbaev, Deputy Manager on Marketing and Sales, Chevron Munaigas Inc.

17.25 – 17.30 Closing remarks Mr. Nurlan B. Atshabarov, Deputy Chairman, Committee for Water Resources, Ministry of Agriculture RK 17.30 Refreshments

7.2 List of Participants

LIST OF PARTICIPANTS AKKU Hotel, November 10, 2005, Astana # NAM E POSITION ORG ANIZATIO N CITY STATE AUTHORITIES 1 Atshabarov Nurlan Bakitzhanovich Deputy Chairman Committee for W ater Resources MOA Astana Main Specialist of Unit for General Costs of the Division for Analysis & Methodology for Budget Expense Part Performance of the 2 Yakovleva Yulia Kinizbaevna Ministry of Finance of RK Astana Department for Analysis & Methodology of State Budget Performance Head of the Environment Protection Unit of the Department for Ministry of Economy and Budget 3 Evdokimov Sergei Viktorovich Astana Planning Sector Bodies Expenses Planning Center for Systematic Researches under 4 Ibraev Azamat Bolatovich Senior Expert Astana the Presidential Administration Center for Systematic Researches under 5 Ibraev Kanat Bolatbekovich Expert Astana the Presidential Administration Head of the Unit for Regulation of W ater Supply & Sanitation Systems of the Division for Regulation of Pipeline and W ater Supply Agency for Regulation of Natural 6 Martynenko Anna Vladimirovna Astana & Sanitation Systems of the Department for Regulation and Control Monopolies of RK of Pip eline and W ater Supply & Sanitation Systems Deputy Director of the Department for Architecture, Town-Planning 7 Khamzin Timur Gabdulkhaevich Akmola Oblast Akimat Kokshetau & Construction 8 Kabdin Paizulla Shaim erdenovich Rural District Hakim Nikolsky r.d., Bulandynsky rayon Akim at Akm ola oblast Karashaldinsky r.d., Korgalzhynsky 9 Kashkibaev Smagul Akhatovich Rural District Hakim Akm ola oblast rayon Akimat Head of the Unit for water resources use and protection regulation 10 Zharmukhanov Saken Khamitovich of the Department for Natural Resources and Nature Use Aktyubinsk O blast Akim at Aktobe Reg ulation Deputy Director of the Division for Architecture, Town-Planning & 11 Tutubaev Askar Almabekovich Alm aty O blast Akim at Taldykorgan Construction 12 Savinov Gennady Ivanovich First Deputy Rayon Akim Koksuisky rayon Akimat of Almaty Oblast Almaty Oblast Chief Specialist of the Unit for W ater Supply and Sanitation Ust- 13 Toktybaev Daniyar Zhagyparovich Organization of the Division of Capital Construction of the East-Kazakhstan Oblast Akimat Kamenogorsk Dep artm ent for Architecture, Town-Planning and Construction Akimat of Zharminsky rayon of East- Ust- 14 Mukiev Tleubek Sagandykovich Head of Unit for Construction Kazkahstan Oblast Kamenog orsk Deputy Director of the Department for Architecture, Town-Planning 15 Sarmanbetov Bekbolat Sarmanbetovich Zham byl O blast Akim at Taraz & Construction Bekbergenov Salimgerey Deputy Director of the Division for Architecture, Town-Planning & 16 W est-Kazakhstan Oblast Akimat Uralsk Shaphag atovich Construction Chief Specialist of the Unit for W ater Supply, Housing & Utilities 17 Iraliev Alizat Zhumabaevich Kyzylorda Oblast Akimat Kyzylorda Economy of the Dep artment for Architecture and Town-Planning Head of Unit for Housing & Utilities Econom y, Passenger Transport 18 Kalenov Bagdat Kendebaevich Kyzylorda Oblast Akimat Kyzylorda and Roads of Karmakshinskiy Rayon Akimat

Inkardarinsky Aul District of Syrdarinsky Kyzylorda 19 Shaukenbaev Kasymbek Tursynbaevich Aul District Akim Rayon, Kyzylorda Oblast Akimat Oblast Deputy Director of the Department for Architecture, Town-Planning 20 Rakhim ov Bolat Shonovich North-Kazakhstan Oblast Akimat Petropavlovsk & Construction

Acting Director of the Unit for Water Supply of the Department for 21 Usmanov Ratmir Arkadievich North-Kazakhstan Oblast Akimat Petropavlovsk Architecture, town-Planning & Construction Head of Unit of the Department for Natural Resources and Nature 22 Ibraev Kudaibergen Aitkulovich Pavlodar Oblast Akimat Pavlodar Use Regulation 23 Adamov Abyzbay Adamovich Akim Irtyshsky Rayon Akimat, Pavlodar Obalst Pavlodar Oblast

24 Kutushev Sermagambetov Kutushevich Director RSE "Esil Su" Petropavlovsk SUE "Aralo-Sarybulaksky Group Water 25 Madinov Daurenbek Zholdasovich Director Kyzylorda Pipeline" NGO Association of Enterprises on Water 26 Syundyukov Valery Vladimirovich President Supply and Sanitation "Kazakhstan Su Astana Arnasy" Association of Enterprises on Water 27 Sarsembekova Manshuk Saipidinovna Chief Manager-Coordinator Supply and Sanitation "Kazakhstan Su Astana Arnasy" PRIVATE SECTOR 28 Botenov Zhanaskar Perdebekovich Head of Production & Technical Unit JSC "Akbulak" Aktobe Chevron Munaigas Inc., Polyethylene 29 Raimbaev Kadirkhan Temirkhanovich Deputy Manager on Marketing & Sales Atyrau Pipes Production Factory 30 Strakhov Sergey Georgievich General Director LLC "CPC Plastpolimer" Petropavlovsk 31 Khabiev Adilzhan Srymovich Deputy Executive Director LLC "Agropoliv Firm" Almaty 32 Solovyev Sergey Feodorovich Director JSC "Kokshetauhydrogeology" Kokshetau 33 Iskakov Erkanat Kizatovich General Director LLC "People's Enterprise "Aimak" Akmola oblast 34 Rakhmanov Seit Sultanovich Adviser to the General Director LLC "People's Enterprise "Aimak" Akmola oblast Mukhamedzhanov Marat 35 Production Director LLC "Plast Invest" Almaty Kabdreshevich 36 Gatin Rasim Limovich Director of Branch Office in Karaganda city LLC "Plast Invest" Almaty 37 Litvinova Zoya Petrovna Director LLC "Concern Ai-Su", Design Institute Pavlodar INTERNATIONAL ORGANIZATIONS 38 Zhanat Akhmetova Country Officer World Bank in Kazakhstan Astana 39 Nobumitsu Hayamizu First Secretary Japanese Embassy Astana 40 Yoko Matsuo Attache on Economics Japanese Embassy Astana 41 Adalyat Molotova Secretary Japanese Embassy Astana

42 Zhanar Sagimbaeva Chief of the Good Governance and Sustainable Development Team UNDP Almaty Project Manager "National Integrated Water Resources Management (IWRM) 43 Alexandr Nikolayenko UNDP Almaty and Water Efficiency Plans for Kazakhstan"

44 Tatyana Simonova Project Implementation Officer ADB Kazakhstan Resident Mission Astana 45 Olga Fleshler Mission Assistant ADB Kazakhstan Resident Mission Astana 46 Olga Abdrakhmanova External Relations Specialist ADB Kazakhstan Resident Mission Astana EuroAid Project: Development of Water 47 Holger Afflerbach Project Director Astana User Association EuroAid Project: Development of Water 48 David McCleery Team Leader Astana User Association ADB PROJECT CONSULTANTS ADB TA 4484 KAZ "Institutional 49 Blinov Yuriy Vasilyevich Adviser / Water Supply & Sanitation Specialist Strengthening of the Committee for Astana Water Resources" ADB TA 4484 KAZ "Institutional 50 Zaitseva Zhanna Alekseevna Deputy Team Leader / Water Supply & Sanitation Specialist Strengthening of the Committee for Astana Water Resources" ADB TA 4484 KAZ "Institutional 51 Torubara Valery Nikolaevich Capacity Building Expert Strengthening of the Committee for Astana Water Resources" ADB TA 4484 KAZ "Institutional 52 Kasabekov Dauren Rakhimovich Financier Strengthening of the Committee for Astana Water Resources" Rural Areas Water Supply and 53 Umbetov Bolat Shakhmuratovich Project Consultant Coordinator Astana Sewerage Project” Rural Areas Water Supply and 54 Manfred W. Steidel Project Coordinator / Procurement & Design Specialist Astana Sewerage Project” Rural Areas Water Supply and 55 Bernhard Fischer Financial Specialist Astana Sewerage Project” Rural Areas Water Supply and 56 Oskarova Dina Secreta/Accountant Astana Sewerage Project” Rural Areas Water Supply and 57 Tulebaeva Gulnara Apseitovna Local Technical Consultant Astana Sewerage Project” ADB PROJECT TA 4585-KAZ: STRENGTHENING OF THE WATER SUPPLY SECTOR PROGRAM ADB TA 4585 KAZ "Strengthening Water 58 Arthur McIntosh Team Leader Astana Supply Sector Program" ADB TA 4585 KAZ "Strengthening Water 59 Malyy Lilianna Aleksandrovna Deputy Team Leader Astana Supply Sector Program" ADB TA 4585 KAZ "Strengthening Water 60 Meruert Kenshimova Financial Economist Astana Supply Sector Program" ADB TA 4585 KAZ "Strengthening Water 61 Raushan Taigulova Research Assistant Astana Supply Sector Program" ADB TA 4585 KAZ "Strengthening Water 62 Tatyana Timanova Translator/Administrative Assistant Astana Supply Sector Program"

7.3 Presentations of TA Team

Trends of access of population to drinking water

90,0

80,0 Status of Rural Water Supply 77,2 70,0 69,9

63,0 60,0 56,3 54,0 52,1 “Drinking Water Supply” Sector 50,0 46,7 43,7 40,0 39,7 Program for 2002-2010” % of access 36,0 36,1 30,0 22,0 20,0

10,0 11,0 Lilianna Malyy 0,0 1970 1975 1980 1985 1990 1996 2004 2006 2007 2008 2009 2010 2011 Estimated levels

Current Status of Water Supply of Population Current Provision of Rural People with

Use water from local sources Use piped water Use tankered water groundwater surface Piped Water (% of total population) No of Population settlements Population, #Oblast with access Population, Population, (villages, thous. people No of No of Population, No of No of to drinking thous, thous, auls) settlements settlements thous, people settlements settlements water, thous. people people people 1 Akmola 705 399,78 278 178,46 357 196,53 21 6,26 49 18,52 2 Aktyubinsk 426 302,60 71 98,25 351 203,41 0 0 4 0,94 3 Almaty 811 1106,47 391 573,42 352 507,76 55 23,04 13 2,25 4 Atyrau 195 196,12 50 68,79 61 62,01 1 0,43 83 64,89 • 54,2% - data of oblast and republican 5 EK 818 598,39 233 164,32 489 401,50 67 32,25 2 0,32 6 Zhambyl 367 542,95 109 176,25 251 364,31 1 0,42 6 1,98 agencies 7 WK 498 344,28 81 102,61 359 201,82 44 31,75 14 8,11 8 Karaganda 496 221,90 123 91,68 359 125,68 0 0 14 4,54 9 Kostanay 750 418,13 116 120,42 532 255,62 31 10,41 73 31,68 10 Kyzylorda 270 245,83 118 127,83 132 115,65 11 1,70 9 0,65 11 Mangystau 44 83,91 13 30,94 23 45,61 0 0 8 7,36 12 Pavlodar 449 262,02 93 85,28 337 167,54 25 8,51 3 0,69 13 NK 740 427,56 184 129,05 551 284,00 17 6,20 23 8,31 • 36,1% - UNDP survey results 14 SK 871 1283,57 212 372,06 492 756,66 54 48,51 113 106,35 Total 7440 6433,51 2072 2319,36 4646 3888,08 327 169,48 414 256,59 % of total No 100,0 100,0 27,8 36,1 62,3 57,3 4,4 2,6 5,5 4,0

• 31,9% - rural water supply social survey

Results of Rural Water Supply Social Results of Rural Water Supply Social Survey conducted by UNDP Survey conducted by UNDP

Main sources of drinking water : Sources of water for domestic needs : Piped water - 31,9% Yard and public dugwells – 43% Piped water – 25,8% Tankered water – 14% Individual and public wells – 63,1% Desalinated water – 0,6% Surface sources – 8,8% Bottled water – 0,4% Other – 2,3% Surface sources – 3,3%

Reasons and preconditions Reasons and preconditions for Program Revision for Program Revision

• Completion of Stage I (2002-2005), T50.97 Adoption of the State Program “Development billion invested into the implementation of Rural Areas” for 2004-2010 (Decree of the President of RK #1149 of 10.07.03)

• Necessity to review the Stage II Program Resolution of the Government of March 29, Budget. The Center for Systematic 2005. On introducing changes and Investigations of the Presidential amendments considering priority investments Administration of RK estimated that T228.1 into least water rayons

are required for the Program implementation The required investments for the implementation of the Stage II Program (2006-2010) was determined as T255,3 billion

Control of Water Program Implementation Main constraints for the Program by Mazhilis of the Parliament and Implementation “Aimak” Deputies Group • Low quality and inopportune preparation of • “Round Table” Discussions arranged by the pre-design (FS) and detailed design Committee for Economic Reform and Regional documentation Development jointly with the Committee for Ecology and Nature Use and “Aimak” Deputies Group on • Imperfection of the Law of RK “On State April 19, 2005 Procurements”, that allows small incompetent companies to work in this sector • Meeting of “Aimak” Deputies Group on September 29, 2005 • Lack of mechanism for supporting existing and new O&M Units to serve water supply systems

Main constraints for the Program Implementation

• Lack of qualified CEO and staff • Imperfection of Tariff Policy for rural water consumers • Insufficiency of funds from local budgets

• Lack of single state body to control the sector

• Lack of single policy in solving issues of rural people drinking water supply

Goal TIME IS OF THE ESSENCE

TO IMPLEMENT THE KAZAKHSTAN 24 Hour Piped Water to 70% WATER PROGRAM of Rural Population (MDG)

ADB TA 4585-KAZ by 2010 [Now 36%] Arthur C McIntosh Nov. 2005

Constraints Time of the Essence

• Financial Resources • Feasibility / Design / Tendering Process • Delays Budget Approval to Allocation • Institutional Responsibilities • MEBP / CWR Laws & Rules • Deterioration of Water Supply

• Human Resources Infrastructure at 5-7% Per Annum • Climate – Construction Season 6 Months • Water Resources / Climate • Commonality – Time Constraint • Human Resources

How Fast Can We Go? So The Water Program is Possible!

• The Story of an NGO in India • Pre-qualify consultants, suppliers, contractors One million people with piped water in rural areas for $50 million in 12 months • Negotiate unit rate contracts with all consultants, suppliers, contractors, based on people served with piped water • The Story of a Local Authority in Korea • One feasibility study per rayon 40 km of 900mm welded steel pipeline with • Let multi-settlement contracts by rayon booster pumping in 4 months. • Pilot test approach one rayon per oblast

• Reason: Time is of the Essence

CWR the Foundation CWR Main Tasks (WP)

• Raise salaries of those in water sector • Assess Water Resources

• Formulate and Advertise Policy

• Provide 250 contract & 50 permanent staff • Pre-qualify Consultants, Suppliers, Contractors for CWR to administer Water Program • Review Feasibility, Design & Contracts • Supervise Construction • Structured Organization Development • Develop Human Resources in Sector • Establish O&M Arrangements • Monitor Program Implementation • CWR Executive Body for Vodokanals?

Republican Budget O&M Arrangement

• Republican responsibility for financing all Water Program • Initially follow Oblast State Municipal • But oblasts can fund too. Enterprise Model from Taldykorgan • Rayon Centre WSS Units with Equipment • CWR source to consumer responsibility • Add Official Responsibility for WSS in Settlements. • Funds all from feasibility studies to O&M Equipment • Long Term Republican Financed Rural Water Supply O&M Unit in Oblast Capital • CWR & Republican Budget

Sanitation Appropriate Technology

• HDPE Pipe – Butt Weld Joints Properly • 95 % People Use Outdoor Facility

• Hand Washing Facility is Good • Package Water Treatment Plants

• Repair of Pipelines In-situ • Health Department Responsibility Fine

• Replacement of Pipelines In-situ • Need Piped Water in the Home to Improve Sanitation – Then A Personal Choice

Public Awareness Evaluate O&M Subsidies

• Involve Media to Monitor Program

• Group Pipelines • Show Video on National & Oblast TV

• Water Demineralization Treatment • Create / Maintain Water Program Website

• Hygiene Education in Schools / TV • Vodokanals

Champion of the Cause

• Every Great Endeavour Needs a Champion

• President Ramos of Philippines Lead Privatization of Manila Water (in just 12 months)

• Mr Ek Sonn Chan Lead Phnom Penh Water Supply, Cambodia

• Kazakhstan Needs to Identify and Appoint a Champion of the Cause to Lead the Water Program

Thank you!

Current Situation URBAN WATER TARIFFS IN KAZAKHSTAN Need Funds for O&M Costs of Water Supply and Sewerage

Need Funds for Capital Cost to Replace Old

Distribution, Towers, Pumps, Treatment Making the Most of Resources Facilities, Reservoirs

[Human, Water, Money] High Water Losses

No Body Responsible for Vodokanals

Current Tariffs ARNM Calculation of Tariffs

Cost for services including materials, power, fuel Almaty 11 Tenge/m3, Annual Revenue $ 11.2 mln salaries, repairs, depreciation

Astana 23 Tenge/m3, Annual Revenue $ 4.5 mln Costs for the period including administration

Shymkent 32 Tenge/m3, Annual Revenue* $ 2.7 mln costs, utility services, depreciation of assets related to sales service (meters) interest payments Cover Operation Costs Only! Profit incl. capital overhaul that leads to increase No Funds for Major Maintenance in fixed assets (Take capital funds from profit??) No Funds for Development Scope of services rendered * - Revenue from domestic users Less normative losses [Cannot be measured!] Gives Final Tariff ……………………………….

Sources of Development in 2002-2004, $ What’s the Problem?

Almaty Oblast Budget + Deterioration of assets is much faster than replacement with new assets. Own Funds ……………...... $2.2-3.5 mln/ Year Astana Obl.Budget ………..$ 0.9-2.2 mln/Year Population increase demands more infrastructure for delivery of water. Shymkent Oblast Budget + Risk that a water crisis could occur Own Funds ………………….$ 0.9-1.4 mln/Year at any time in a given city. Who will subsidize Almaty? No benchmarking of utility performance.

What’s The Solution? Affordability in Kazakhstan

Cities are Cash Rich Widely used Criterion:

Time for People who Live in Cities to Pay 3% of Household Income

for Their Own Services Another Criterion can also be used:

In Other Countries Tariffs Based on 1/3 of Household Power Cost (Electricity&Gas) Affordability In Kazakhstan both criteria show tariffs can be In Kazakhstan Current Tariffs only 10% of increased by a factor of 2 or higher. Affordability. New tariffs should keep pace with rising salaries So Increase Tariffs to Fund Development and other energy costs…

Affordability Criterion: Potential and Actual Revenue from Domestic Water Services, mln tenge per year (2004) Afordability Criterion: Monthly Household Water and 1/3 of Power Costs (2005)

6000 3% of Population Income 5000 600 1/3 of Pow er Cost, tenge

4000 500 1/3 of Pow er Cost, 3% of Population Income tenge 400 3000 300 2000 185 200 3% of Population Income 123 1000 658 375 365 100 0 Astana Almaty Shymkent 0 Astana Almaty 3% of Population Income Total Revenue, mln tenge Cost of w ater tenge 1/3 of Pow er Cost tenge

$1,00 Tariff Sructures Compared $0,90 Greater Block Tariffs Colombo Almaty $0,80 Many Asian countries like Sri Lanka, Korea, Astana $0,70 Shymkent Ulsan Singapore employ Block Tariff Structure (BTS) for $0,60 (Korea) Singapore Domestic Use $0,50

Basic advantages of BTS are: $0,40

- having poor subsidized by rich (high $/m3 Rate, Tariff $0,30 consumption users) $0,20 $0,10 - penalizing wasteful use of water $0,00 Tariffs for Domestic and Non-Domestic users can 0 102030405060 be differentiated Monthly HH Consumption, m3

Greater Almaty Ulsan Singapore Colombo (Sri (2004) (Korea, 1997) (1997) Lanka, 2001) Metering and Benchmarking Title Organizational state ent-se state ent-se state ent-se state ent-se Arrangement If you can’t measure you can’t manage Population 1 230 000 2 800 000 990 626 3 000 000 If you can’t measure you can’t manage

Average Tariff If you can’t measure you can’t manage Domestic, 11,18 20,10 53,06 74,10 tenge/m3 SO METER ALL CONSUMPTION

Per Capita Revenue Then benchmark utility performance by $5,6 $4,5 $12,8 $34,6 Domestic, $/year comparing performance of Vodokanals

with one another and other countries. Annual Capital $2,8 $45,9 $51,2 $53,5 Expenditure, mln $

No metering hides corruption Conclusion - Recommendations

Three elements of consumption Formulate and advertise policy (not Water Losses = 50% or 30%??? legislation) for tariffs and metering. Non-Metered Use= 30% or 50%??? Put up tariffs incrementally each month Metered Use =20% or 40%??? until they reach 3% of affordability for normative use within two years. Illegal connections? Payment for Staying Simultaneously meter all consumption on Flat Rate with No Metering? ANRM regulates implementation of policy

7.4 Minutes of Workshop

MINUTES OF THE WORKSHOP

Mr. Atshabarov – Deputy Chairman of the Committee for Water Resources Opened the Workshop with the welcoming speech to the participants. In his further speech Mr. Atshabarov noted that Stage I on the Water Program implementation is coming to the end and in 2006 Stage II will be started. In this regard it is necessary to take all measures to speed up its implementation. “This TA of ADB was quite opportune for developing the Project. A lot needs to be done to strengthen the Program. Now we will listen to the presentation of the Report, discuss recommendations, constructive proposals that shall be implemented in the future. We have here many participants today. Views of all participants are very important to the CWR. Much was done for 2002-2005 and about 4 million people got drinking water. For this period there was formed the team of designers, contractors, a team of operators is being formed, moreover, we need institutional strengthening of this sector. Work with public was much neglected. Now, thanks to this TA Team sets these main issues. Great help is expected from the Hakims of settlements, rayons, oblasts in order to know what needs to be done in each settlement so as each citizen could be provided with drinking water”. Mr. Atshabarov called all speakers to pay their attention to the difficulties encountered in the field, peculiarities so as to jointly consider them and take into account.

Ms. T. Simonova – Project Implementation Officer, Kazakhstan Resident Mission Asian Development Bank On behalf of the Asian Development Bank and Kazakhstan Resident Mission Ms. Tatyana Simonova greeted all participants of the workshop and expressed her gratitude to the CWR MOA for the opportunity to continue their cooperation in developing water resources sector and solving issues related to the implementation of the “Drinking Water” Program. Separate gratitude was expressed to Mr. Atshabarov for his active participation in the TA Project and cooperation with the TA consultants during the last 4 months and to the Government of Japan in the person of the First Secretary of the Embassy Mr. Nobumitsu Hayamizu. “Without such considerable support ADB has been receiving for almost 10 years this cooperation would not be feasible. Here we will listen to the results of the TA work. The consultants were entrusted with the development of recommendations for CWR that would enable to implement the Program efficiently and quickly. We will also see a 20-minute Video produced by the request of the CWR under financial assistance of the ADB Water Cooperation Fund. We hope this video will become the CWR’s tool and will facilitate to increase the public awareness on the objectives and scopes of the activities undertaken on the water supply of the population. We are looking forward to the constructive dialogue. In the conclusion I would like to thank everybody and to wish an interesting work”.

Mr. E. Evdokimov - Head of the Environment Protection Unit of the Department for Planning Sector Bodies Expenses of the Ministry of Economy and Budget Planning of RK Mr. Evdokimov stated that it is planned to allocate about KZT 115 billion towards the implementation of the Program. He cited the data on funding Stage I within the “Drinking Water” Program and the state Program for Developing Rural Areas by oblasts. It is envisaged in 2006 to allocate KZT 5,098 billion for the Water Program and KZT 2,187 billion for the State

Program for Developing Rural Areas. Additional KZT 3 billion will be allocated in 2006, however, for the time being some aspects need to be clarified and the list of facilities is required. Now an objective evaluation of the efficiency of use of funds allocated as well as qualitative indices are needed. The Water Program, which is being revised, now shall include: - An objective evaluation of the current status of the situation concerning the issue on provision the population with good quality drinking water; - Priority trends and efficient tools for the implementation of the objectives set; - Clear methodology and projects selection criteria for funding from the republican and local budgets. The necessity for the Program’s revision has become apparent as significant funds are allocated for its implementation.

Mr. Khamzin T. – Deputy Director of the Department for Architecture, Town- Planning and Construction of the Akmola Oblast Hakimat Mr. Khamzin noted that one of the constraints for the economic growth of the oblast is the deficit of water resources. In most settlements the quality of water does not meet the state standards. The water pipelines are deteriorated; pumping stations are derelict and disassembled. There is the oblast Program, measures are taken for its implementation. In 2006 within the ADB Project and in accordance with the signed agreement some $4.5 mln. there will be allocated for 105 rural settlements. Now the settlements are being selected, 5 rayons are examined. The local budget allocates KZT 6.6 mln. in 2006 for preparation of detailed design documentation for 7 priority settlements. In total within this project the water supply will be improved for 30 thousand people.

DISCUSSION: Mr. Syundyukov: Concerning the financing of water supply and sanitation system rehabilitation in Kokshetau, I think there are not enough funds envisaged, in my opinion we need 3-4 billion tenge. Mr. Khamzin: With this question we addressed the Government, because by the means of the Oblast budget this question cannot be solved. Mr. Syundyukov: I would like to stress that in the Water Program it is stipulated that cities and towns are funded from the local budgets. Mr. Rakhimov, Deputy Director of the Department for Architecture, Town- Planning & Construction, North Kazakhstan Oblast Akimat: I have a question about our North Kazakhstan Oblast: We have prepared 16 projects of local water pipes, now we are said that the tendency is turning towards the group water pipes. What should we do now with the results of all our work? Mr. Atshabarov: The position of the CWR is that where we have possibility and it is economically expedient to use group water pipes, better to use group water pipes. It will help to bring those group pipelines to life. But if there are alternative sources, ground waters, better to shift to the local sources of water. All the projects should meet the requirements of ADB, and the main thought here is that we need to shorten the time for the preparation of the projects, and spend more on implementation of the projects. In case the ground waters do not meet the requirements for the drinking water, there should be installed treatment plants. Ms. Simonova: The Agreement can be developed; the only thing is that the financial and economic conditions should be acceptable for ADB. Mr. Ibraev: At present we pay significant attention to the quality and adequacy of detailed designs.

Mr. Atshabarov: The CWR believes that the huge feasibility studies should be done for regions; it is reached the agreement in the Government. In many Oblasts detailed designs are getting old. Mr. Ibraev: What about the selection of the settlements according to their priority: to my mind the settlements that are in a critical sanitary-epidemiological situation by the data of the Ministry of Health should go first. Ms. Akhmetova: I should say that the World Bank has done the feasibility study and detailed designs on rehabilitation in Kokshetau, but it was not supported by the Government and did not go further. Also the World Bank offered grant resources for Ust-Kamenogorsk, but unfortunately the project did not go. Ms. Simonova: In addition to Ms. Akhmetova, I would like to say that there are two projects going in parallel: this one and another on Institutional Strengthening of the CWR, which is planned to be finished on December 8, 2005. Concerning the personnel of the CWR about 250 contractors and 50 staff, it is a personal opinion of Mr. McIntosh, which is offered for consideration to the CWR, but the final decision is after the Government. Mr. Alexandr Nikolaenko, Project Manager "National Integrated Water Resources Management (IWRM) and Water Efficiency Plans for Kazakhstan" In the framework of the IWRM Project it is planned to develop the Strategy for the Achievement of the Millennium Development Goals on the Issues of Water and Sanitation in Kazakhstan. We are finishing the work on the report and sociological survey on the access of urban and rural population to drinking water. The major parameters of the development of urban infrastructure on water supply and sanitation are accumulated in the database, as it was mentioned now by Mr. Azamat Ibraev, Senior Expert of the Center for Systematic Researches under the Presidential Administration. I also support the idea of the necessity for a single authority and executive body that will conduct and monitor the questions of water supply in the country. Mr. N.B. Atshabarov – Deputy Chairman of the CWR Concerning development of FS Mr. Atshabarov completely stands for the necessity to develop FS for large water supply facilities. FS shall be developed in line with the standards of the Construction Committee. The Ministry of Economy adopted new rules by its order. The CWR jointly with Construction Committee will address the Government to sort this issue out. When we speak about small settlements, there the water pipeline existed which now requires reconstruction – the FS is not needed. Moreover, according to the Draft Final Report there shall be one administrator of the Program. This issue needs to be considered in the form of proposals. Either it will be given to the local authorities with funding from local budgets or it will be under the CWR with funding from the republican budget. Mr. Evdokimov: The question of the staff increase of the CWR for 10-11 people is under consideration. It was made a conclusion that there is a necessity for the functional analysis of the whole activities of the CWR, when it is ready, the question will be considered. Mr. Syundyukov: Who will conduct functional analysis? It is not said in the Minutes of the Budget Committee session. Mr. McIntosh: I want to stress that all the decisions should be incorporated in the policy, which should be open to public, whereas legislation is known to very few. Ms. Simonova: Regarding the ADB projects we have visited 4 Oblasts and defined what is important for conducting the works and giving water to people in reasonable time frame. The main thing to be done to provide water to people by 2010, is reaching the highest level of co-ordination between all the participants of the Program.

Mr. Iskakov, General Director of LLC "People's Enterprise "Aimak": Baumanskoe settlement is not provided with water for the last 2 years due to the technical status of the Nurinskiy group water pipeline. Every day we tank water by 2 tractors to 17 dug-wells on the territory of the settlement, and further population takes it by houses. The financial problem – water costs us 600 tenge per cubic meter, but we can only sell it for 50 tenge per cubic meter, population cannot pay more than that. In our settlement population lives stable, does not migrate, because there is water, and jobs. People do not know about our troubles. On the example of our settlement, we cannot say that the Water Program is working. Our suggestions: 1. We offer our help in the control over the funds for the Water Program implementation. Contractors, and we see how they work, in their majority are not well equipped, not numerous, low speed of work. 2. Consider the question about reimbursement of funds for the enterprise on delivering water 3. To conduct tenders in more transparent manner, give preference to the best. 4. To provide means to the detailed designs development from the local budgets.

Ms. Martynenko, Head of the Unit for Regulation of Water Supply & Sanitation Systems of the Division for Regulation of Pipeline and Water Supply & Sanitation Systems of the Department for Regulation and Control of Pipeline and Water Supply & Sanitation Systems, Agency for Regulation of Natural Monopolies of RK For the period of implementation of the first stage of the Water Supply Program by the Agency for Regulation of Natural Monopolies of RK there has been developed and approved more than 10 normative legal acts (by-laws). The main directions for improving the tariff policy in the water supply services sector are towards the solution of the problem questions associated with the creation of the stimuli for raising the performance efficiency and cutting the costs by the subjects of natural monopolies, and with the raising of investment attractiveness of the enterprises. Today the majority of enterprises rendering services in water supply or/and sanitation sector is characterized by the low level of sustainability and is unprofitable. The worn-out assets of the enterprises are in their turn the cause for the water losses, and as a consequence deteriorating of the quality of rendered services. Along with this, one of the negative sides is the low degree of using the productive capacity due to the cut in the consumption volumes of those services. There are several methods of calculating tariffs. The main ones are: – Expense-based one; – Method of defining the norm of the profit for the regulated amount of fixed assets; – Method of setting the tariff limits for the medium term. In the heart of the expense-based tariff lies cost accounting for the production and selling of services. The given method guarantees to the natural monopolies that their regulated expenses will be reimbursed regardless of their efficiency, but does not stimulate for the investments. Today it is already conducted the shift of the natural monopolies in the water supply and sanitation sector to the calculation of tariffs with the help of the method of defining the norm of the profit for the regulated amount of used fixed assets. The first thing here that is taken into consideration is a percentage of equipped assets, and the second – interests of owners to the attraction of investments. The main objective for the tariffs limit setting is to attract long-term investments on more favorable conditions, reducing of risks associated with the unstableness of the transition economy, as well as stimulating for the reduction of production costs.

One of the main problems of the state regulation of the subjects of natural monopolies in this sector is the absence in the legislation of Kazakhstan of the norms that define the state body authorized to implement state policy in the municipal water supply and sanitation. Due to this a lot of problems are not solved, starting from the common for all the vodokanals question of the absence of the clear normative and legal base stipulating the basics of the performance organization for the enterprises in water supply and sanitation sector, and concluding the governmental development strategy for this sector. The question of the absence of the authority/executive body in the water supply sector has been raised by the Agency for many times on the different levels of the governmental management, but is not still solved for already 3 years.

Mr. Syundyukov, President of the Association of Enterprises on Water Supply and Sanitation "Kazakhstan Su Arnasy": 1. Time shows that importance of the Water Program is very high both for the health of the population and successful development of economy sectors. Based upon this, perhaps, it is required to change the status of the program itself from the sector to the state one. The approach to the governmental program will be different. 2. Why the CWR is dealing with the implementation of the program? The Committee has no legal authority to solve the municipal water supply issues. The group pipelines are only one constituent of the WP. It is necessary to make amendments to the existing legislation and empower the CWR with the competencies and functions that enable to conduct the state policy in the sphere of water supply and sanitation on the whole for the republic. Thus, to appoint the CWR as the authorized body. 3. When we asked for the assistance of ADB we supposed that this project would introduce amendments to the Water Program itself. But according to the changed TA paper it elaborated methods of efficient implementation of the Program. 4. There are discussed different figures for the Program implementation, but I think the final decision can be made only by the factual projects and feasibility studies, but in any case it will be bigger than the first variant in 115.1 billion tenge. 5. I support the speaker – the policy is needed but I think not only for the implementation of the WP also for the development of water supply systems in whole the republic. 6. I support the proposal on changing the approach for the preparation of the design documentation. Construction norms regulate the two-stage designing – development of FS and working projects, but allow one-stage one for small scopes where typical decisions are applied. I think not for all rural water supply facilities it is necessary to develop FS. The experience from the implementation of the WP showed that in bids only low-qualified organizations participate that results in weak designs that do not meet modern requirements. The bid for construction is held on their bases and later it is impossible to adjust the design so as to use modern materials, equipment, technologies that cause increase of cost. In the long run all these faults affect the consumers – people. It is suggested to recommend changes to the legislation on the state procurements – that for the design of large facilities only qualified design institutes shall be allowed that have experience and sufficiently qualified personnel. And the company that developed the FS shall without any bid carry out detailed design. 7. A very good Video was shown and the end of the video is optimistic – that objectives for provision of the population with drinking water will be achieved after the WP is implemented. On funding – the main focus of the WP is the rural water supply. What about cities? I personally worked in the Vodokanal for 20 years and I am well aware of the attitude of the executive agencies and then Hakimats towards the Vodokanals – this is just a utility, it is always bad there, and the directors need to be “pushed”. The Hakim has many concerns, which are evident – these are the roads, garbage, fronts, etc. And according to the proverb “unless it thunders the peasant won’t cross himself” – till large breakdown when the whole city

is left without water and due to this the heating is stopped, then everybody start thinking: “Why, how comes?” Pipes are underground, they are not visible. For today the urban water supply is practically not funded within the Program. I think, that Hakimats, even if they do desire, will not have enough funds in their budget even for good preparation of FS and DDD. No funding – no reconstruction and rehabilitation of the pipelines. Consequently we will not improve the situation in whole at the expense of cities. In the project it is stated that the annual depreciation is 5-7%, now the depreciation is 70% and more. We can loose urban water supply. 8. I think we need to agree with the standpoint that there shall be one operator for the Program. Either the Republic or local authorities. I think it would be better if such operator will be the CWR at the republican level. I do hope that this TA helps the CWR with adjustment of the WP. 9. In conclusion I would like to propose to broadcast the Video, which we saw today and similar films to potential contractors before carrying out bids for design and construction of water supply systems.

Question of Mr. Valeriy Syundyukov to Mr. Arthur McIntosh concerning the tariffs Mr. McIntosh said that there is no management without the proper water metering. About what metering are you talking about: about common for the blocks of apartments or individual? It is necessary to place an emphasis in the report, which is of more priority. The opinion of the Association of Vodokanals: the priority should be given to common for the whole block of apartments. By our legislation the providers of water – vodokanals should install the meters that is why common for the block of apartments one is preferable than the individual that is why we need to clear up this question.

Mr. Kutushev S. – Director of RSE ‘Esil Su” Mr. Kutushev noted the importance of the program. The reconstruction of group pipelines is going on. 290 settlements were connected to group pipelines, however, only 170 get water. Selling of water mainly through wholesale buyers that significantly increases its cost. I think that water shall be sold only by utilities enterprises with the support of oblast Hakimats. Water pipelines work at 10% capacity. Starting from April 2004 the cost of water is subsidized by the government at 82%. Annually allocated funds are enough for renewal of 2- 3% of water pipelines. The planned for 2006-2010 funds will enable to reconstruct 429.6 km, though more is required. Within the ADB Project the reconstruction and rehabilitation of pipe works in 16 settlements will be carried out. To supply good quality water it is necessary to reconstruct water treatment facilities operated for 40 years. Morally and technically we are lagging behind the world levels. It is required to introduce new economically efficient technologies.

Mr. A. Tutubaev – Deputy Director of the Division for Architecture, Town- Planning and Construction of Almaty Oblast Hakimat The speaker gave complete information on the “Drinking Water” Oblast Program, progress of its implementation. By conducting inventory of all water supply systems a clear picture of the outstanding works was made. It enabled to form the list of investment projects and determine the priority of their implementation. There were problems with the operation of water supply systems. Rayon Vodokanals were set up and equipped with required machinery and equipment by means of local budget. To operate these, the Oblast Vodokanal was established which serves as the authorized body for the branches in the field. Many problems exist with the sanitation system in Taldykorgan city for reconstruction of which the funds are required. With the help of global American Fund the water supply systems were rehabilitated

in 7 rural settlements. The funding was made as follows: 70% - Global Fund, 20% - Local budget, 10% - contributions of people. Main issues: - High expenses for registering special water use that will be burdensome to tariffs, as there are no other funds and operating organizations. He thinks that the Law on the Use of Natural Resources shall somehow reflect this issue. - Necessity to make changes to the Tax Code with regard to income tax. When taking over the rehabilitated water supply facility the Vodokanals shall transfer 30% of its cost as a tax. These costs can be covered only through tariffs, as there are no other funds. - The republican authority is required to implement a single methodology for developing projects, preparation of investment lists - Funding capital investments - Setup of operation services These are the main issues that I ask to be accepted as suggestions and take them into consideration. Mr. Adamov – Hakim of Irtyshsky rayon, Pavlodar Oblast The issue of “Drinking Water” is very topical for our rayon, which is suffering the deficit of water – drinking water supply sources. When the Belododsky group pipeline stopped functioning (1997) settlements were practically left without water. Groundwater is mostly mineralized and the wells are low-yield. It was decided to construct local desalination facilities. There are 15 of them in the rayon now. The republican budget funds the works on improvement of the status of water supply and sanitation systems in the Irtyshsk settlement, the rayon center. Big problems are encountered with the operation of the systems, lack of machinery. Desalination facilities do not solve the problem as they are designed to supply 10 liters/day/capita, no source of water for domestic needs. This problem can be solved only by the rehabilitation of the Belovodsky group pipeline. The FS is developed by means of the local budget, the DDD is under preparation. Poor situation with the water supply in Lenino settlement. DDD was developed; the cost of construction is 137 mln. tenge. The local budget has no such funds. The local budget partially subsidizes the tariff for desalination facilities. Assistance of CWR is required.

Mr. Atshabarov – Deputy Chairman of the CWR Mr. Atshabarov held a meeting with the Hakim in Pavlodar recently. CWR also supports the proposal to rehabilitate Belovodsky and Maysky group pipelines. It is required to prepare necessary materials/application and the CWR will address the Ministry of Economy on these issues. The same is with the Lenino settlement.

Savinov G.I. – First Deputy Hakim of Koksuisky rayon in Almaty oblast In 3 settlements with the help of the American Global Fund for Ecological Development the water supply system was rehabilitated. 70% - fund, 20% - local budget, 10% - population, this is the obligatory condition. We request funding from the republican budget for 12 settlements with the population to 500 people for carrying out construction based on this principle. These are not promising settlements, the local budget does not allocate funds. The problems: - Operation. By many pipelines water is supplied without any disinfection, there are no funds for the purchase of necessary facilities. - High tariffs for power - In line with the norms each water pipeline shall have chemical laboratory. It is required to allocate funds for at least one such laboratory for the rayon.

Conclusion made: every rayon shall have one special unit for operation and maintenance funded by the budget. Constraints: - lack of ready DDD. Firstly, funds of the republican budget shall be given for its preparation, and after funding sources for construction needs to be looked for.

Mr. Toktybaev - Chief Specialist of the Unit for Water Supply and Sanitation Organization of the Division of Capital Construction of the Department for Architecture, Town-Planning and Construction, East-Kazakhstan Oblast Hakimat Main issues: - Operation of completed water supply systems, there is no machinery, staff. Rent of equipment tells upon tariffs, there are no funds to purchase it. State operating enterprises are required. - Quality of DDD, outdated schemes and technologies. - Under-funding. It is necessary to allocate 600-700 mln. tenge on annual basis. - When forming the list of facilities it is needed to consider the necessity for completion of earlier started facilities. - Responsibility of the Client for the quality of DDD.

Mr. Shaukenbaev – Hakim of Inkardarinsky rural district, Syrdarynsky rayon, Kyzylorda Oblast Some problems I would like to state: 1. I would like the issue for subsidizing Aralo-Sarybulaksky and Zhidelinsky group pipelines to be solved that cannot be sorted out for significant time already. 2. The second issue relates to environmental condition of Kyzylorda oblast, as you know according to the latest investigations the level of ground water is increasing lately. Well constructed in 1973-1990, For example, new wells constructed within the Program have become salty. A separate budget within such big programs is required so as to conduct hydrogeological surveys for groundwater, their level, because the results of those investigations we use do not represent the facts any longer. Therefore, it is necessary to carry out field investigations on drinking water. 3. Technical condition of the water supply is very bad 4. This is absolutely correct to implement the Program under the governmental control 5. Following the implementation of the Program the next important issue is for the Hakimats – to prepare the population to pay for water. 6. One responsible body for the Program

Mr. Kabdin – Hakim of Karashaldinsky rural district of Korgalzhynsky rayon, Akmola Oblast Dwelt upon the issue of drinking water supply in Nikolskoye settlement with the population of 3 thousand people. The water pipeline started to operate in 1968. 16 km of outside systems (from the source to the settlement) and 20 km of inter-settlement pipe works. Capital overhaul is required but the Hakimat does not allocate funds. The local LLC cannot afford the project. People for their own money purchased the pump, and can hardly cover the cost for power for water supply. Very often people stay for long time without water. It is necessary to replace 6 km of steel pipes with new HDPE.

Mr. Kashkibaev – Hakim of Karashaldinsky rural district, Korgalzhynsky rayon in Akmola oblast Many thanks for inviting the Hakims of rural districts, as we are the first to communicate with people, we live with their pains. Therefore, I think, we have the most realistic picture of the existing situation, the most accurate. That group pipeline, Nurinsky, that

supplied water for 40-45 years, now due to expensive maintenance and depreciation cannot function for 24 hours a day, but only two hours, also the tariffs are too high for people. Construction of distribution water supply pipe works is required for which DDD shall be submitted, approximate cost of construction is 30 million, and DDD – approximately 10-15% of construction cost. In whole 3 million are required. Where to take them? They say, collect from people… And this is huge money for the households. It was correctly noted by Abyzbay Adamovich Adamov, we do not only think how to construct but how to operate this water pipeline further as well, who will be responsible for it? I work for 42 years, and I know, in every rayon even in rural districts and auls before there were teams for maintaining water pipelines. Each collective farm and state farm had 2 machine-operators who maintained the standpipes and pipe works with a tractor equipped with a pump. All these issues shall be covered on TV, as the water supply issue is the most important one.

Mr. Atshabarov – Deputy Chairman of the Committee for Water Resources As for the speeches of the Hakims of rural districts Mr. Shaukenbaev and Kashkibaev on subsidizing Aralo-Sarybulaksky, Aktyabrsky and Zhidelinsky group pipelines, the CWR has submitted the budget application to the Ministry of Economy. The application will be fulfilled next year. As for the subsidizing Abaysky and Darbazinsky group pipelines in Shymkent oblasts. The issue is being solved. For carrying out design works for capital overhaul of water supply facilities the republican budget does not allocate funds. It is necessary to have DDD available for construction and reconstruction. This shall be done from the local budget, there is an Article in the Budget Code on this. These issues need to be submitted to the oblast Maslikhats.

Ms. Z.P. Litvinova – Director of LLC "Concern Ai-Su", Design Institute The Team of the Institute was set up on the basis of the former design institute and specialists. In 2000 they won the bid for developing FS for water supply in the oblast. All these years they are working on the facilities of the Water Program in their oblast and other oblasts as well. They have required software for making designs, normative documentation, and good contacts with the Russian colleagues. Main problems occurring during the implementation of the Program: - Lack of qualified personnel that affects at the early stage during the giving out of tasks for designs, - Low understanding of the importance of the Program among people, every human being shall know the value of water, - Lack of operators, - Low cost of DDD, that is dictated by officials, especially for survey works, - Conduction of bids – the main criteria for selection shall be not the least price, but the technical decisions, proposed by the design organizations, their equipping, qualification of the personnel. - Deadlines for bids shall be timed to the winter period so that surveys and necessary investigations could be conducted at more favorable period.

Mr. A. Khabiev – Deputy Executive Director, LLC "Agropoliv Firm" The company is conducting works (Almaty) on construction and repair of water pipelines, waterworks, as well as design works. Mr. Khabiev told about available machinery for in-situ laying and replacement of pipes, video-inspection, sanitation of inner surface of pipes. Complete registration of places and types of works to be done for the inner surface of pipes is

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carried out by this equipment. The “Khabar” Video Team filmed this equipment and included in the Video on drinking water and implementation of the Program.

Mr. Raimbaev K. – Deputy Manager for Marketing and Sales, “Chevron Munaygas Inc.” Plant Mr. Raimbaev expressed his gratitude for the opportunity to participate in the workshop. He noted that when the implementation of the Water Program started the Directors of the “Chevron” Company decided to construct a plant for manufacturing HDPE. The pipes for water are produced with the diameter of 30-1200 mm, for gas sector, sewerage, drainage, and fittings. 5 lines of the plant are functioning at full capacity. The representatives of the plant go to the field to provide consultations and training during lying, welding of joints. They develop new standards to render assistance to the designers and contractors in designing and testing of pipes. He noted that last year the quantity of water supply pipes produced has decreased that resulted in appearing other manufacturers at this market that produce cheaper pipes with lower quality and low pressure. With increase of water consumption it can affect the whole water supply system. In his conclusion he noted that he supported the idea to raise the status of the CWR as the main implementer of the Program.

Mr. N.B. Atshabarov – Deputy Chairman of the CWR Closing remarks The preceding speakers spoke about new technologies. The Program shall gain new momentum, new development. As for the cost of DDD – it shall comply with the scopes executed so as to solve all technical issues. The projects shall cover complete scope of works in line with the Defects Certificates. New technologies for inspecting the inner surface of pipes shall be applied. Everywhere we should use good quality pipes, we have our own plant in Atyrau city, and we needn’t buy pipes from abroad. Mr. Atshabarov expressed his gratitude to Ms. Tatyana Simonova, the workshop participants. Before they worked only with the Oblast Hakims. Now the Hakims of rayon and rural districts were also present. This trend shall be continued. Next time contractors shall be invited as well. The experience on operation is gradually being gained. Utilities enterprises shall be set up and equipped adequately. He also thanked the Project Team for the Video that would be broadcasted on TV; this is a good measure to work with the public. The web site needs to be developed to maintain cooperation on the issues of drinking water. The issue of institutional strengthening of the CWR was raised. He thanked everybody for their participation in the workshop. Special gratitude was expressed to the Islamic Development Bank and the World Bank for the assistance and cooperation in solving such important issues for provision of the population with drinking water.

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7.5 Workshop Participants’ Response Cards

Workshop Participants Response Cards Making Suggestions on Implementation of the “Drinking Water 2002-2010” Program

Local Authorities Views Summarized

Institutional Arrangement and Responsibilities 1. One executive body, responsible for the country water supply, with subsidiaries in oblasts and rayons need to be founded. 2. The status of the Water Program need to be raised: it is the CWR who should be responsible for its implementation. Funding 3. The reconstruction of old and construction of new water supply networks should be financed from the republican budget only. The amount of allocated funds needs to be increased. 4. Feasibility studies and design estimates should be financed from the republican budget. 5. Settlements water supply should be designed in a comprehensive approach: when considering financing the reconstruction of the group pipelines, reconstruction of the distribution networks within the settlements shouldn’t be overlooked. 6. Republican budget should also allocate funds for rehabilitation of the rayon centers water supply and sewerage systems. 7. Funds should be transferred directly to local authorities. The latter then will be the main “customer” financing O&M of local municipal utilities (state enterprises, cooperatives, etc.). 8. When formulating the budget, priority attention should be given to the completion of the in-process water supply objects. 9. In rural area the production cost of water needs to be subsidized (i.e., expenses on electricity, acquiring chlorine products and maintaining laboratories) O&M Arrangement in rural area 10. On raion levels create units specializing on O&M of rural water supply systems. Funds for acquiring necessary equipment should be allocated from the republican budget since local farming enterprises to which local authorities pass newly constructed water supply objects are not able to maintain water objects. Feasibility Studies and Design Estimates 11. The need to prepare feasibility studies for the reconstruction of the existing water supply systems (valued under 50 mln tenge) should be assessed. Some oblasts already have worked out design estimates and the state expertise study. Preparing the feasibility study consumes precious time and extra money thus retarding the implementation of the Water Program. 12. “The customer” should decide whether the feasibility study is necessary. 13. Resolve the problem whereby the market prices of materials and equipment take the lead over the prices specified in design estimates. 14. There is a proposal for project designers to negotiate all necessary arrangements with state bodies – health department, fire supervision, ecology department, land allotment committee, unit on investigation and the earth’s interior use, water basin administration, etc. Procurement

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15. Make amendments to the “State Procurement Law” of the republic: introduce the possibility of using the services of one best bidder several times. Then the customer could hire the contractor without an additional co-ordination with the executive body. Monitoring and Implementing the Program 16. Foundation of one executive body responsible for water supply on the republican level would foster better coordination of activities and better supervision by means of requiring quarterly account of the work done. 17. Promote efficient planning of the funds allocated from the republican budget up to the year 2010 and make the results available for all oblasts. 18. Monitoring the quality is important. Legal entities on O&M should be created. 19. Competent specialists need to be hired. Therefore, human resources development is important.

Comments on the Workshop Holding and Organization: The overall assessment is positive with no single negative opinion. Few proposals were made: - the workshop should have lasted two days for it is difficult to discuss all necessary issues in the course of a single day - it would be useful to invite the Committee on Construction and Housing and Utilities Affairs. - more journalists from the republican mass media and TV should have been attracted since the topic is very important everywhere and for all groups of people.

Ministries and other Central Authorities Views Summarized

Institutional Arrangement and Responsibilities 1. Establish one Republican executive body to conduct unified policy in water sector. Executive branches for urban and rural water supply and sewerage objects should also be identified. Legal Framework 2. Water sector normative, normative legal and methodological basis should be improved. Monitoring and Implementing the Program 3. Analyze the implementation of the I stage of the Program to give an accurate assessment of the current state of water supply in the country, to elicit priority directions, efficient implementation mechanisms and the clear methodology of projects selection criteria. 4. Improve coordination between local authorities and republican departments in regard to the implementation of the Program. 5. Update the Program action plan and timing of the projects implementation. Improve monitoring and control of projects funding starting from feasibility study up to the equipment acquisition. 6. Foster the data exchange among the relevant departments and authorities. More films and web-sites on water supply are needed. 7. Settlements being supplied from the group pipelines should shift to local water supply sources. This would lower O&M costs and thus result in lower tariffs. 8. Performance based contracts need to be promoted.

Comments on the Workshop Holding and Organization: The workshop was evaluated excellent by all participants.

Urban Water Utilities – Vodokanals Views

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Institutional Arrangement and Responsibilities 1. Establish Agency on Water Resources of the Republic of Kazakhstan that would considerably fasten the implementation of the Program at the same time providing better quality of works. In addition, this would improve responsibility and trust from the side of both population and sector managers. Legal Framework 2. Revise the rules in state budget on investment projects: preparing feasibility study for reconstruction and repair of existing objects is the waste of financial resources. Procurement 3. Speed up and collate the realization process of tenders to facilitate their transparent conducting. Monitoring and Implementing the Program 4. Pay greater attention to urban water supply and sewerage systems. 5. Introduce new technologies with the emphasis on the in-situ laying of water pipes and promote its use in the whole country. 6. Settlements’ water supply should be passed to state communal enterprises with subsidized tariffs set.

Comments on the Workshop Holding and Organization: The overall assessment is positive without any negative comments.

Contractors’ Views

Institutional Arrangement and Responsibilities 1. CWR should be the only body coordinating country water supply and implementing the Water Program. Monitoring and Implementing the Program 2. The use of funds and the quality of construction and operation must strictly be controlled. 3. Develop an informational methodology on the Program, materials and equipment for the local level construction. 4. Water specialists need to be prepared. 5. The most modern technology and equipment should be used.

Comments on the Workshop Holding and Organization: The workshop was evaluated excellent by all participants.

NGOs Views

Institutional Arrangement and Responsibilities 1. There should be the sole Executive Body or Operator on the Republican level. 2. The status of the program needs to be the State “Drinking Water” Program. 3. Executive body in the sphere of municipal water supply must be legally defined. Funding 4. Financing from the republican budget should be expanded to the construction and projection of urban water supply systems. Feasibility Studies and Design Estimates 5. The quality of feasibility studies and design estimates being prepared need to be improved and time limits should be changed. Monitoring and Implementing the Program

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6. The development conception of the water supply systems in the whole republic should be worked out. 7. The current implementation process of the Program should be analyzed and flaws then be detected. 8. TA recommendations should indeed find its application for the Program implementation. 9. The question of peopleware must be resolved. 10. The video should be supplemented with the information on funding, people responsible for and the role of public in the Program implementation.

Comments on the Workshop Holding and Organization: - it would be better to look through the DFR earlier - it would be desirable to have higher rank officials from the ministries to participate in the workshop.

Consultants’ Views

Institutional Arrangement and Responsibilities 1. CWR needs expansion in staff and status. 2. Development of utility organizations managing, operating and maintaining water supply sector with or without active participation of water users need to be promoted. Here a flexible approach to types of businesses licensed to operate is important. 3. The Water Program should be given a status of the state Program. The existing status restrains the capacity of its implementation. Monitoring and Implementing the Program 4. Separate treatment of different uses of water is recommended. Then in areas where the treatment cost is very high, the amount needed only for drinking (5-7 l per person) can be purified. This would reduce investment costs. 5. Tariffs need to be increased, subsidized where affordability levels are below cost level, with transparency and publicity of the levels of subsidy. 6. An appreciation of the use of feasibility level planning is required including the use of economic and financial evaluation as a tool for decision making and for ascertaining levels of funding needed for O&M. 7. Tough technical and procedural regulation should be loosened to enhance the scope of response and the time required to improve the water situation in rural areas.

Comments on the Workshop Holding and Organization: The participants appreciated the quality handouts and excellent work of the facilitator.

Other – LLC View

Institutional Arrangement and Responsibilities 1. CWR should be the only state body managing country water supply starting form the project design to construction and maintenance of water supply systems. Monitoring and Implementing the Program 2. The idea of launching the pilot projects can be very effective and hence should be realized.

Comments on the Workshop Holding and Organization by a single participant in this category:

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- The issues and proposals raised on the workshop are very important and appropriate though there isn’t much confidence that they indeed will be implemented since the persons attended the workshop are unlikely to solve these issues independently.

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PART VIII RECOMMENDATIONS

8.1 Institutional Framework [Example from Korea] • There can be no Water Program without an expanded and independent CWR. At least 250 contract staff and 50 permanent staff from CWR need to be dedicated to the Water Program for at least 10 years. • Use an existing reference manual .for restructuring CWR “Challenges in Organizational Development” the story of the Palestine Water Authority.

8.2 Funding [Example from Korea] • Most of the Water Program should be funded from the Republican Budget. • Feasibility studies should be based on one for each rayon. • Funding must include for all necessary facilities and equipment to undertake operation and maintenance for the first year after rehabilitation.

8.3 Time is of the Essence [Examples from India and Korea] • All consultants, suppliers and contractors working in the water sector should be pre- qualified as to their capability level. • All consultants, suppliers and contractors should be given work in their local areas initially on the basis of negotiated unit rate contracts. • The ideal is a package of investigation, design, construction and initial operation and maintenance based on unit rate per person served with piped water.

8.4 Operation and Maintenance [Example from Almaty Oblast] • In rural areas the ideal institutional arrangement for operation and maintenance is an Oblast State Municipal Enterprise (such as the one headed by Valery Kim in Taldykorgan) with water supply units in rayon centres, but with the additional responsibility for water supply in all oblast settlements.

8.5 Public Awareness [Example from Malaysia] • The CWR must keep the public informed about the Water Program through television and an internet website dedicated to the Water Program • It is a time for all people to show respect for water ….it is unique and cannot be treated in the same way as transport and power and education and health….. it is life itself. • Hygiene education is needed through schools and TV.

8.6 Urban Water Metering & Tariffs [Examples from Sri Lanka and Philippines] • In urban areas there must be 100% metering of piped water consumption • Tariffs in urban areas should be raised to affordability thresholds (3% of household income) in order to fund capital works from tariffs. A block tariff structure should be

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considered to protect the low income consumer and penalize the excessive use consumer. • CWR should benchmark the performance of Vodokanals.

8.7 Developing Human Beings [Example from Philippines] • Concentrate on developing human beings for sustainable development. . • Raise the salary levels in the sector to attract more professionals. • CWR must be responsible for rebuilding the sector with adequate, qualified and well paid professionals.

8.8 Program Policy and Monitoring [Ref. Asian Water Supplies/ACM] • Policy related to all aspects of the Water Program should be formulated by CWR, endorsed by Government and advertised to the people. • The Water Program implementation should be monitored by CWR and the results made public from time to time.

8.9 Appropriate Technology • Government should support the use of new and appropriate technologies with special direct procurement under transparent conditions. Such a technology that is very much needed is equipment to replace or repair existing pipes in-situ, already brought from Germany to Kazakhstan.

8.10 Champion of the Cause [Examples from Cambodia and Philippines] • The Water Program can be successfully implemented if there is a charismatic and highly respected “Champion of the Cause”.

8.11 Research on Subsidies It is necessary to evaluate subsidies in the water supply sector including those for group pipelines, membrane technology and Vodokanals and to develop a strategy to reduce or eliminate them over a period of time.

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PART IX ACTION PLAN

OFFICIAL ACTION PLAN TA 4585 RECOMMENDS

1. Rehabilitation WS • Republican Budget finances all Water Program • Monitor Service Levels Annually

2. Construction New WSS • Republican Budget finances all Water Program • Includes distribution network in rural settlements • Carry out willingness to pay surveys • Eliminate tankered water (1 mln. people) as 1st priority • Integrated rayon contracts

3. Ownership / Subsidies • Metering of all urban consumption & tariffs according to affordability in urban areas to allow financing of development • Evaluate subsidies of group pipelines and membrane technology water treatment • Performance benchmarking of Vodokanals

4. O&M Organization / Equip • Rayon Level Govt Enterprise like OSME (Taldykorgan) • O&M Equipment in budget.

5. Investigation GW /Other YES

6. Water Conservation /Use YES (100% metering in urban areas)

7. Sanitary / Water Bodies YES

8. Public Awareness / Media • Video • Website • Regular interaction with Press • Create greater respect for water at all levels of society & government

9. Sector Management • CWR more resources, independent, under PM – structured organization development (manual provided) Many tasks including, government policy statement, monitoring of Program, prequalification of contractors and suppliers, quality of construction, O&M responsibilities, state executive body for Vodokanals. • Regulation of service levels v tariffs v policy by CWR Recognize Time is of the Essence • Pre-qualification of consultants, contractors and

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suppliers • Negotiated all purpose contracts by region per pilot projects 1 rayon per oblast • Feasibility studies by rayon • Raise salaries of water sector professionals • Develop people – CWR responsible for building the sector • Funds allocated simultaneously with budget approval. • Sanitation by CSSEC (Piped water to come before improved sanitation) • Private Sector Participation not encouraged for rural areas unless economic enterprise established in settlement prefers to be responsible for all water. • Encourage use of appropriate technologies • Identify and appoint Champion of the Cause for the Water Program

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REFERENCES

1. Private Sector in Waters Supply for Small and Medium Cities of the Republic of Kazakhstan., Report provided to The World Bank and the Committee for Water Resources by Stone and Webster Consultants together with WRc Group and GHK International. Draft of Final Report, February, 2005 2. Analysis of the Activity of the Sanitary and Epidemiological Service of the Republic of Kazakhstan on the State Sanitary Control for Drinking Water Supply and Status of the Water Bodies in 2004. Head Doctor, Republican Sanitary and Epidemiological Station. 15 February, 2005. 3. Head Doctor, Republican Sanitary and Epidemiological Station, 21 February, 2005. 4. On Implementation of the “Drinking Water” Sector Program for 2002-2010 Report of A.D. Ryabtsev Chairman, Committee for Water Resources , for Meeting with the Prime Minister of the Republic of Kazakhstan 29 March, 2005 5. The Reports of the Round Table regarding the Implementation Process of the First Stage of the “Drinking Water” Sector Program, taken place in the Majilis of the Republic of Kazakhstan, April, 19, 2005. 6. Information on organizations that have license for the design and construction of water supply and sewerage facilities. (12 companies). Pavlodar Oblast 10, August, 2005. 7. Discussion of The Deputies of the Majilis on the Implementation of the Water Program September, 2005. 8. Speech of the President of Kazakhstan N. Nazarbaev at the opening of the Second Civil Forum in Astana on September 12, 2005. 9. Draft Final Report of TA-4484-KAZ Institutional Strengthening of Committee for Water Resources 20 October 2005. 10. Water Economy Journal of Kazakhstan, October, 2005 11. Kazakhstan’s Experience in Implementation of the ADB Water Policy – Achievements, Lessons Learned, Problems and Investment Capacities. A.K. Kenshimov, Deputy Chairman, Committee for Water Resources, October, 2005. 12. Draft Law of the Republic of Kazakhstan on “Water Supply and Drainage” 24 May, 2004 13. Water Resources of Kazakhstan in the New Millennium, UNDP, Almaty, 2004 14. Analysis of the Activity of the Sanitary and Epidemiological Service of the Republic of Kazakhstan on the State control for Public Bathhouses in 2004. 15. On State Procurements Law of the Republic of Kazakhstan of 16 May, 2002 No. 321-11 including amendments 2003 and 2004. 16. Resolution of the Government of RK of January 23, 2004 #75 “On approving rules for referring water body to the drinking water supply sources” 17. Resolution of the Government of RK of January 23, 2004 #76 “On approving rules for subsidizing the cost for water supply services from highly important group water supply systems which are non-alternative drinking water supply sources in the republican property”

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18. Digest “Regions of Kazakhstan, 2004” Agency of RK on Statistics. 19. Asian Water Supplies- Reaching the Urban Poor- Arthur C McIntosh, Asian Development Bank, 2003 20. Concept Note for the National IWRM and Water Efficiency Plan, UNDP March, 2003. 21. Water Supply and Sanitation Sector Profile Republic of Kazakhstan, Asian Development Bank, May, 2003 22. Water Code of the Republic of Kazakhstan, 481-11 of 9 July 2003 23. National Rural Development Programme in the Republic of Kazakhstan for 2004-2010 by Decree of the President of the Republic of Kazakhstan No. 1149 of 10 July 2003. 24. Report and Recommendation of the President to the Board of Directors on a Proposed Loan and Technical Assistance Grant to the Republic of Kazakihstan for the Rural Area Water Supply and Sanitation Sector Project, September, 2003 25. Development of rural settlements in Kazakhstan: Problems and outlooks. National report on human development, UNDP, Mapbook “Development of rural settlements in Kazakhstan”, Almaty 2003. 26. Resolution of the Government of RK of December 12, 2003 #1265 “On approval of the list of highly important group water supply systems which are no-alternative water supply sources”. 27. Decree of the Government of the Republic of Kazakhstan of 23 January, 2002, No. 93 On “Drinking Water” Sector Program for 2002-2010. 28. The Concept of Small Towns Development, Ministry of Economy and Budget Planning, Astana, 2002. 29. Water for All – The Water Policy of the Asian Development Bank, October, 2001. 30. The Reports to the Government of the Republic of Kazakhstan on Implementation of the “Drinking Water” Program for the period of 2002-2004 given by the Minister of Agriculture and the Chairperson of the Committee of Water Resources. 31. The Work of the World Bank in the Framework of the “Drinking Water” Sector Program, Yoko Katakura, Chief Financial Specialist of the Power Engineering and Infrastructure, Central Asian Regional Office of World Bank. 32. Plan of Activities for Implementation of the “Drinking Water” Sector Program for 2002- 2010. (Attachment to the Drinking Water Sector Program for 2002-2010). 33. Working materials of CWR: references to the Government on implementation of the Program, annual reports of oblast “RSE…vodkhoz” and other related to the Water Program.

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