Completion Report

Project Number: 28321 Loan Number: 1695 October 2007

Maldives: Regional Development Project

CURRENCY EQUIVALENTS

Currency Unit – rufiyaa (Rf)

At Appraisal At Project Completion 31 July 1999 23 April 2007 Rf1.00 = $0.086430 $0.077821 $1.00 = Rf11.57 Rf12.85

ABBREVIATIONS

ADB – Asian Development Bank ADF – Asian Development Fund CEO – chief executive officer EA – executing agency EIRR – economic internal rate of return FIRR – financial internal rate of return IA – implementing agency IsDB – Islamic Development Bank MCPI – Ministry of Construction and Public MEEW – Ministry of Environment, Energy and Water MHUD – Ministry of Housing and Urban Development ML – megaliter MOAD – Ministry of Development MOFAMR – Ministry of Fisheries, Agriculture and Marine Resources MOFT – Ministry of Finance and Treasury MOH – Ministry of Health MPND – Ministry of Planning and National Development NDR – northern development region PSC – project steering committee O&M – operation and maintenance PIU – project implementation unit PMU – project management unit PPTA – project preparatory technical assistance PSC – project steering committee RAC – regional advisory committee RDMO – regional development management office RRP – report and recommendation of the President SDF – social development fund SDR – southern development region STELCO – State Electricity Company TA – technical assistance VPA – vulnerability and poverty assessment WACC – weighted average cost of capital

GLOSSARY

Freshwater lens – Convex lens-shaped body of freshwater positioned above seawater, floating within the aquifer and separated from it by a transition zone. The freshwater lens contains the island’s freshwater reserves and is within the island’s shell and coral debris.

Focus islands – Selected regional growth centers where pilot infrastructure and planning and environment management initiatives are to take place. In this project, it includes nine islands in the northern development region and four islands in the southern development region.

o Northern – Group of three atolls, part of the , between 6 0’N and development region 7o30’N and 72o30’E and 73o30’E. It comprises the atolls of Haa Alifu, Haa Dhaalu and Shaviyani.

Regional growth – Regional urban growth centers, outside Malé and its immediate centers surroundings, where a wide range of employment and investment opportunities are to be created by building on economic, environmental, and social competitive advantages.

Southern – Group of four atolls, part of the Maldives, between 0o60’N and development region 0o60’S and 72o30’E and 73o30’E. It comprises the atolls of Seenu, Foammulah, Gaafu Dhaalu and Gaafu Alifu.

NOTES

(i) The fiscal year (FY) of the Government and its agencies ends on 31 December. FY before a calendar year denotes the year in which the fiscal year ends, e.g., FY2000 ends on 31 December 2000.

(ii) In this report, “$” refers to US dollars.

Vice President L. Jin, Operations Group 1 Director General K. Senga, South Asia Department (SARD) Director H. Kim, Urban Development Division, SARD

Team leader T. Gallego-Lizon, Urban Development Specialist, SARD Team members M. Otsuka, Economist, SARD H. Austria, Assistant Project Analyst, SARD

CONTENTS

Page

BASIC DATA i MAP v I. PROJECT DESCRIPTION 1 II. EVALUATION OF DESIGN AND IMPLEMENTATION 1 A. Relevance of Design and Formulation 1 B. Project Outputs 2 C. Project Costs 6 D. Disbursements 7 E. Project Schedule 7 F. Implementation Arrangements 7 G. Conditions and Covenants 8 H. Consultant Recruitment and Procurement 8 I. Performance of Consultants, Contractors, and Suppliers 9 J. Performance of the Borrower and the Executing Agency 10 K. Performance of the Asian Development Bank 10 III. EVALUATION OF PERFORMANCE 10 A. Relevance 10 B. Effectiveness in Achieving Outcome 11 C. Efficiency in Achieving Outcome and Outputs 12 D. Preliminary Assessment of Sustainability 12 E. Impact 13 IV. OVERALL ASSESSMENT AND RECOMMENDATIONS 14 A. Overall Assessment 14 B. Lessons 14 C. Recommendations 15

APPENDIXES 1. Project Framework 16 2. Project Costs and Financing Plan 17 3. Breakdown of Annual Disbursements of ADB Funds 18 4. Comparative Implementation Schedule 20 5. Status of Compliance with Loan Covenants 22 6. Relevance Assessment 28 7. Effectiveness Assessment and Lessons Learned 33 8. Financial and Economic Reevaluation 57 9. Sustainability Analysis 69 10. Overall Project Rating 74

SUPPLEMENTARY APPENDIXES A. Due Diligence on Resettlement Activities

i

BASIC DATA

A. Loan Identification

1. Country Maldives 2. Loan Number 1695 3. Project Title Regional Development Project 4. Borrower Republic of Maldives 5. Executing Agency Ministry of Finance and Treasury 6. Amount of Loan SDR5.864 million 7. Project Completion Report Number 997

B. Loan Data 1. Appraisal – Date Started 9 May 1999 – Date Completed 16 May 1999

2. Loan Negotiations – Date Started 2 August 1999 – Date Completed 3 August 1999

3. Date of Board Approval 2 September 1999

4. Date of Loan Agreement 6 December 1999

5. Date of Loan Effectiveness 6 March 2000 – In Loan Agreement 02 March 2000 – Actual 0 – Number of Extensions

6. Closing Date – In Loan Agreement 31 December 2004 – Actual 31 December 2005 – Number of Extensions 1

7. Terms of Loan – Interest Rate 1% per year during the grace period and 1.5% thereafter – Maturity (number of years) 32 – Grace Period (number of years) 8

8. Terms of Relending (if any) – Interest Rate – Maturity (number of years) – Grace Period (number of years) – Second-Step Borrower

9. Disbursements a. Dates Initial Disbursement Final Disbursement Time Interval

26 May 2000 20 November 2006 78 months

ii

Effective Date Original Closing Date Time Interval

02 March 2000 31 December 2004 57 months

b. Amount (‘000) Last Net Category Original Amount Revised Amount Amount Undisbursed Allocation Canceled Allocation Available Disbursed Balance (SDR) (SDR) (SDR) ($) ($) ($) Civil Works 953 (453) 1,406 1,808 1,795 13 Equipment and Materials 1,979 466 1,513 2,074 2,067 7 Consulting Services 1,488 (304) 1,792 2,360 2,250 110 Institutional Development 212 92 120 161 280 (119) Interest Charge 293 132 161 230 230 - Unallocated 939 859 80 121 - 121 Total 5,864 792 5,072 6,754 6,622 132 ( ) = negative.

10. Local Costs (Financed) - Amount ($) 154,447.00 - Percent of Local Costs 64.02 - Percent of Total Cost 2.00

C. Project Data 1. Project Cost ($ million) Cost Appraisal Estimate Actual

Foreign Exchange Cost 10.50 12.86 Local Currency Cost 3.50 3.56 Total 14.00 16.42 2. Financing Plan ($ million)

Cost Appraisal Estimate Actual Implementation Costs Borrower Financed 3.00 3.93 ADB Financed 8.00 6.62 Other External Financing 3.00 5.87 Total 14.00 16.42 IDC Costs Borrower Financed 0.00 0.00 ADB Financed 0.40 0.16 Other External Financing — — Total 0.40 0.16 ADB = Asian Development Bank, IDC = interest during construction, — = not available.

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3. Cost Breakdown by Project Component – ADB Portion ($ million) Component Appraisal Estimate Actual A. Base Cost 1. Civil Works 0.80 1.80 2. Materials and Equipment 2.54 2.07 3. Institutional Development 1.80 2.25 4. Consulting Services 1.19 0.28 5. Project Implementation 0.00 0.00 Subtotal (A) 6.33 6.40

B. Contingencies Physical 1.27 0.00 Subtotal (B) 1.27 0.00

C. Interest During Construction 0.40 0.23

Total 8.00 6.63 ADB = Asian Development Bank

4. Project Schedule Item Appraisal Estimate Actual Date of Contract with Consultants Q4 2000 Q2 2000 Completion of Engineering Designs Q3 2001 Q4 2001 Civil Works Contract Date of Award Q4 2000 Q3 2001 Completion of Work Q3 2004 Q4 2004 Equipment and Supplies Q3 2001 Q3 2000 Dates First Procurement Q4 1999 Q3 2000 Last Procurement Q3 2001 Q2 2005 Completion of Equipment Installation Q4 2004 Q4 2005

5. Project Performance Report Ratings Ratings

Development Implementation Implementation Period Objectives Progress From 2 Sep 1999 to 31 Dec 1999 Satisfactory Satisfactory From 1 Jan 2000 to 31 Dec 2000 Satisfactory Satisfactory From 1 Jan 2001 to 31 May 2001 Satisfactory Highly Satisfactory From 1 Jun 2001 to 31 Dec 2001 Satisfactory Satisfactory From 1 Jan 2002 to 31 Dec 2002 Satisfactory Satisfactory From 1 Jan 2003 to 31 Dec 2003 Satisfactory Satisfactory From 1 Jan 2004 to 31 Dec 2004 Satisfactory Satisfactory From 1 Jan 2005 to 31 Dec 2005 Satisfactory Satisfactory From 1 Jan 2006 to 30 Sep 20061 Satisfactory Satisfactory

1 The project performance report was kept open until 28 May 2007, the loan closing date of the Project.

iv

D. Data on Asian Development Bank Missions No. of No. of Specialization Name of Mission Date Persons Person-Days of Membersa Loan Fact-Finding Mission 10–24 Feb 1999 5 60 a, c, l, g, m Follow-up Loan Fact-Finding Mission 4–9 April 1999 1 5 a Appraisal Mission 9–16 May 1999 7 49 a, c, d, e, f, g, h Inception Mission 14–18 Nov1999 2 8 a, k Loan Review 1 21–26 Jan 2001 2 10 a, k Loan Review 2 29 Jul–13 Aug 2001 2 22 a, i Loan Review 3 2–15 Apr 2002 3 39 i, b, g Midterm Review 23–30 Oct 2002 1 7 i Loan Review 4 10–13 Oct 2003 2 6 b, k Loan Review 5 22 Nov–1 Dec 2004 1 9 i Loan Review 6 6–14 Nov 2005 3 18 i, k, j Project Completion Reviewb 9–24 April 2007 4 38 i, c, j, k a a - engineer water supply, b - environment specialist, c – economist, d – social development specialist, e – counsel, f –associate operations analyst, g – environmental consultant, h – water supply and sanitation consultant, i – urban development specialist, j – senior resident advisor, k – assistant project analyst, l – TA consultant, m – domestic consultant. b The report was prepared by Tatiana Gallego-Lizon, Urban Development Specialist/Mission Leader, Misuzu Otsuka, Urban Economist, and Hannelli Austria, Assistant Project Analyst.

Map 1

o o 72 00'E 74 00'E 72 o 55'E 73 o 10'E THILADHUNMATHI UTHURUBURI Dhidhdhoo (Haa Alifu ) Gallandhoo Channel THILADHUNMATHI DHEKUNUBURI (Haa ) lNORTHERN DEVELOPMENT REGION ne Maamakunudhoo Atoll an M A L D I V E S h MILADHUNMADULU UTHURUBURI C by () es Funadhoo or o M o 6 00'N MILADHUNMADULU DHEKUNUBURI6 00'N () MAALHOSMADULU UTHURUBURI REGIONAL DEVELOPMENT PROJECT ()

Ugoofaaru NaifaruFAADHIPPOLHU () (FOCUS ISLANDS) MAALHOSMADULU DHEKUNUBURI () (as completed) Beenaafushi

MALÉ ATOLL Dhapparu () ARI ATHOLHU UTHURUBURI Dhapparu (Alif Alifu Atoll) MALÉ Channel Naridhoo Kandu ARI ATHOLHU DHEKUNUBURI Channel (Alifu Dhaalu Atoll) Naridhoo Ariadhoo Channel FELIDHE Vashafaru () DHIDHDHOO NORTH NILANDHE Vattaru Channel () Nilandhoo Muli SOUTH NILANDHE MULAKU (Dhaalu Atoll) () Kudahuvadhoo Channel Gaafushi Kandu Filadhoo Maarandhoo Aidhuffarufinolu KOLHUMADULU el (Thaa Atoll) nn Veymandhoo ha o C Gaafushi Alidhoo ho Maa Kanduolhi nd Mulidhoo ma Thakandhoo ey HADHDHUNMATHI Dhonakulhi V () Mulidhoo Kandu Dhonakulhi Muraidhoo One and Half Degree Channel Kandu

1 o 00'N Vilingili 1 o 00'N Maafahi UTHURUBURI (Gaafu Alifu Atoll) Atoll Administrative Boundary HUVADHU ATOLL DHEKUNUBURI () SOUTHERN DEVELOPMENT REGION Ruffushi Kanduolhi Equatorial Channel Baarashu Dhekunu Kandu FOAMULAKU () ADDU Foahmulah Faridhoo (Seenu Atoll) Hodaafushi Hithadhoo 72o 00'E 74o 00'E Hodaidhoo Ruffushi 6 o 45'N Veligandu Hanimaadhoo o Naivaadhoo 6 45'N Theefaridhoo

Rafushi Hirimaradhoo Kudafanrufasgandu Nellaidhoo Hanimaadhoo Kandualhi Kanamana Hirinaidhoo

NOLHIVARAMFARU Huraa Kudanaagoashi Kuribee Kanduolhi N

Nolhivaram Milaafaru Kandu Muiri Kuburudhoo Nolhivaramu Kanduolhi 0 2 4 6 8 10 Kudamuraidhoo

Kulhuduffushi Kilometers

Adharanfaru Kandu Keylakuna Kulhudhuffushee Kanduolhi National Capital o 6 35'N International Airport 6 o 35'N Inhabited Island Reef Muridhoouthuru Kandu Vaikaradhoo Kumundhoo

Neykurendhoo Kumundhoo Kanduolhi 73 o 10'E Vaikaramuraidhoo 72 o 55'E

o 73 05'E 73 o 15'E

o Koattey Kedevaahera 0 35'S Boduheragadu Hikahera Fen Muli Kaohera 0 o 35'S Maahera Maa Kandu Kuda Kandu Kandu Huraa Kuda Kandiheraganda HITHADHOO Fathikedeheragadu Heretere SEENU ATOLL (SOUTHERN Aboohuraa DEVELOPMENT REGION) Gaukedi Geskalhuhera Hankede 0 o 40'S Hankedehajara Mulikeda 0 o 40'S Maradhoo- Feydhoo Viligili Kandu N Viligili

Madihera 0 2 4 6 8 10 Ocean Reef Kandu Club Gan Kilometers

o 73 o 05'E 73 15'E

07-3041e RM Map 2

MALDIVES REGIONAL DEVELOPMENT PROJECT KULHUDHUFFUSHI ISLAND (as completed)

N

0 100 200 300 400 500

Meters

TO BE RECLAIMED

Pilot Sanitation Scheme

Regional Development Management Office

Pilot Sewerage Treatment Plant

Solid Waste Management Center

Pilot Sanitation Scheme

Regional Port Project Subcomponents Other Regional Development Initiatives of the Government of the Maldives

Industrial Zone Environment Protection Zone Conservation Zone Local Harbor Basin Regional Harbor Basin

07-3041c RM Map 3

73 o 05'E 73 o 15'E 73o 05'E

Kedevaahera o Koattey 0 35'S Boduheragadu Hikahera Fen Muli Kaohera 0 o 35'S Maahera Hulhumeedhoo Maa Kandu Kuda Kandu HITHADHOO Kandu Huraa Kuda Kandiheraganda SEENU ATOLL Fathikedeheragadu Heretere (SOUTHERN DEVELOPMENT Aboohuraa REGION) Gaukedi Geskalhuhera Hankede 0 o 40'S Hankedehajara Mulikeda Maradhoo 0 o 40'S Maradhoo-Feydhoo Feydhoo Viligili Kandu Viligili

Madihera Gan Kandu Koattey Ocean Reef Gan o Club 0 35'S 0o 35'S 73 o 05'E 73 o 15'E Fen Muli Kaohera 73o 09’E

S Maahera

H Industrial Zone (16 ha)

S S Kuda Kandu S Regional Development Management Office

Kuda Kandiheraganda HITHADHOO Fathikedeheragadu Atoll Link Road

Power Station and Tank Farm

Port M A L D I V E S REGIONAL DEVELOPMENT PROJECT Solid Waste Management Center SEENU ATOLL (SOUTHERN DEVELOPMENT REGION) Aboohuraa (as completed)

Gaukedi N Hankede 0 0.5 1 1.5 2 o Hankedehajara 0 40'S Kilometers S 0 o 40'S

Maradhoo S S Tourist Resort

Feydhoo Maradhoo-Feydhoo

H S Viligili International Airport

S School

H Hospital/Clinic Ocean Reef International Airport Club Gan Gan Kandu Project Subcomponents

Other Regional Development Initiatives of the Government of the Maldives

o 73 05'E 73o 09’E

07-3041f RM

I. PROJECT DESCRIPTION

1. In 1997, the Fifth National Development Plan1 of the Government of the Maldives (the Government) identified the root causes of poverty in the Maldives to be regional disparity and unequal access to (i) economic and social infrastructure and (ii) benefits of the fishing industry and tourism. In response to the Government’s priorities, the Asian Development Bank (ADB) approved the Regional Development Project (the Project)2 in 1999, for a total of $14 million equivalent, of which $8 million equivalent was to be financed by ADB's Special Funds (the Asian Development Fund [ADF]), while the remaining cost was cofinanced, on a parallel basis, by the Islamic Development Bank (IsDB) and counterpart financing by the Government.

2. The Project was founded on two key premises: the need for equitable access to employment and social services throughout the country and the limited capacity of Male to accommodate growth. The general strategic approach aimed to promote economic growth centers (leading to opportunities for economic development), private investment and employment. A necessary precondition for such development, however, is the existence of critical physical and social infrastructure. The Project’s main goals were to (i) achieve equitable development and (ii) reduce population pressure in Male. The intended outcome was to achieve regional economic development in the northern and southern development regions (NDR and SDR, respectively). The Project included four outcomes3—institutional strengthening, providing social infrastructure, developing physical infrastructure and improving environmental conditions—in 13 focus islands. The expected outputs, as appraised, are presented in Table 1.

II. EVALUATION OF DESIGN AND IMPLEMENTATION

A. Relevance of Design and Formulation

3. Consistent with the Government’s Fifth National Development Plan (1997–2000) and ADB’s Country Operation Strategy (1995–2002), ADB formulated technical assistance (TA) in 1997 for preparation of the Atoll Development Project.4 The project preparatory TA (PPTA) focused on (i) identifying key infrastructure investments considered necessary for the development of regional growth centers, as well as (ii) defining conditions necessary to provide a growth engine at each center. ADB-financed investments in the NDR and SDR were key elements in a series of interventions coordinated by the Government.5

4. The project design is considered to be satisfactory, consistent with Government and island community requirements, and based on a sound problem analysis.6 The project design,

1 Ministry of Planning and National Development, Republic of the Maldives. 1997. 5th National Development Plan (1997–2000). Malé. 2 ADB. 1999. Report and Recommendation of the President to the Board of Directors on a Proposed Loan to the Republic of the Maldives for the Regional Development Project. Manila. 3 The design and monitoring framework prepared at appraisal is in Appendix 1. Outcomes were not explicitly presented in this document, but have been extracted from the component structure. 4 ADB. 1997. Technical Assistance to the Republic of the Maldives for the Atolls Development Project. Manila. 5 Interventions that complement the Government’s regional development initiatives in the NDR and SDR are listed in Appendix 2 of the RRP (footnote 2, above). Most are complete or substantially advanced, particularly in the SDR. 6 While the main components proposed by the PPTA were retained—including physical infrastructure (water, sanitation, road, and solid waste management subcomponents), and institutional strengthening (establishment of regional development management offices, land use planning and environmental monitoring)—a third component relating to income generation activities was omitted. This is believed to have been a sound decision given the restricted available funds, and the need for a sound project focus. Access to microcredit through social development funds was considered instead as a tool to promote small entrepreneurial activities.

2 as presented in the report and recommendation of the President (RRP), presented an adequate macroeconomic and political economy assessment, which specifically addressed issues of population growth and migration to Male as well as regional inequality, and proposed an institutional strengthening and infrastructure development package. These issues were consistent with local concerns and on-going parallel initiatives to create employment and generate regional development. Consistent with the twin objectives of regional development and environmental protection, which were priorities of both the Government and ADB, project components provided solutions to address (i) administrative discrepancies between Male and the outer islands, (ii) reduced environmental carrying capacity resulting from population growth, and (iii) erosion of unprotected coastlines. In addition, the Project also considered other important issues directly related to the project goal (e.g., participation by the private sector and women).7 Limitations were imposed by the islands’ high population densities and remoteness, but the Project utilized various regional development approaches, including support for (i) regional growth activities (e.g., the Gan-Hithadhoo road), and (ii) developmental activities for replication elsewhere, at both (a) atoll and large island level (e.g., solid waste management centers and a pilot sanitation scheme) and (b) household level (e.g., improved living conditions through provision of safe water using household water tanks).

5. While lessons presented in the RRP are relevant, they relate primarily to capacity constraints in the administration system, rather than lessons drawn from projects in sectors of interest. This may be due to limited country sectoral experience by ADB and/or other partners. Project components were identified after extensive consultation with the Government and other major funding agencies operating in the country (United Nations Development Programme, Kuwait Fund and IsDB). Project interventions therefore excluded port, airport and power initiatives in these regions, which were accommodated by other development partners. The project intervention appears to have been well-timed, as the country entered a critical stage of development after two decades of impressive economic performance, in which the regional inequality gap needed to be closed to enable continued growth.

6. The financing instrument selected for the Project corresponds to ADB’s project loan approach. The project modality appears suitable and well-justified given (i) allocated resources in a reduced number of locations; and (ii) the multisector nature of this intervention, which was the first to be implemented in the country, and the first to be implemented by the Implementing Agency (IA), the Ministry of Planning and National Development (MPND). Cofinancing arrangements on a parallel basis with IsDB were also suitably designed to ensure simplicity and ease of implementation.8 The Project considered means and methods to introduce a small microcredit component, a priority identified by the community and reflected in the TA report.

B. Project Outputs

7. A summary of project targets at appraisal versus actual outputs is presented in Table 1.

7 These are further elaborated in the PPTA final report (Opus. 1999. Atolls Development Project: PPTA 2895-MLD Final Report. Male) 8 The IsDB focus was on financing the Gan-Hithadhoo .

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Table 1: Project Targets at Appraisal and Completion NDR SDR Output a Unit Appr. Comp. % Appr. Comp. % Part 1: Institutional Strengthening RDMO offices bldg 1 1 100 1 1 100 RDMO equipment and furniture b set 1 1 100 1 1 100 RDMO vehicle provision c set 1 1 100 1 1 100 Sea transport study study 1 1 100 Part 2: Social Infrastructure Rainwater tanks unit 1,000 2,710 257 1,000 2,290 229 Septic tanks unit 1,000 15 1.5 Pilot sewerage scheme sch. 1 1 100 Desludger unit 1 1 100 1 1 100 Social Development Fund fund 1 1 100 1 1 100 Part 3: Physical Infrastructure Gan-Hithadhoo Link Road km 17 13.5 80 Coastal Protection m 200 200 100 m 70 100 d 140 Road equipment set 1 1 e 100 Road safety video f study 0 1 Part 4: Environmental Improvements Solid waste management set 1 1 100 1 1 100 Freshwater lens investigations study 1 1 100 1 1 100 Coastal erosion investigations study 1g 1 100 1g 1 100 Marine ecology monitoring study 1h 1 100 1h 1 100 Gipsy moth study f study 0 1 Appr. = appraisal, bldg = building, Comp. = completion, km = kilometer, m = meter, NDR = north development region, RDMO = regional development management office, sch. = scheme, SDR = south development region. a Some of the project subcomponents have been rearranged since appraisal in an effort to meaningfully link them with existing institutional mandates and responsibilities, and procurement. b Including eight computers, furniture and water quality testing equipment. c Includes a boat, van and motorcycle. d This figure is approximate; in addition to the initially envisaged Gaukendi-Hithadhoo bridge, bridge sections constructed under the Project include the link Gan-Feydhoo. e Different set of equipment provided. f Not envisaged at appraisal. g By means of satellite imagery and aerial photographs. h By means of underwater video traverses. Source: Asian Development Bank estimates.

1. Part 1: Institutional Strengthening 8. Regional development management offices (RDMOs) were established in Kulhudhuffushi (NDR) and Hithadhoo (SDR). In agreement with the mandate issued by the President’s Office9 and consistent the RRP, RDMOs were to handle four major functions: (i) development planning, (ii) information coordination with central (and other government) agencies, (iii) management of contracts for provision of services in the region, and (iv) maintenance of a database on human, natural and other resources in the region. The RDMOs, established within 9 months of loan effectiveness, encountered initial staffing difficulties as suitable interested candidates could not be easily identified and recruited. The NDR RDMO

9 President Office Circular No. 2002/27, dated 11 June 2002.

4 initially recruited more junior staff than the SDR RDMO,10 but has substantially increased its capacity, and has retained almost all of the 11 personnel that were trained.

9. Training was provided as outlined in Table 2, including short-term training for RDMO staff as well as overseas training for line agencies.11 Despite the Mid-term Review Mission’s12 suggestion to provide incentives to staff stationed in the RDMOs through provision of long-term training, funding for two diploma-level training programs was not utilized. No specific training program was developed at appraisal.

Table 2: Formal Training Received Under the Projecta Item NDR SDR PMU/ RDMO RDMO GOV’T MSc in Economics and Public Policy 0 0 1 BSc in Land Management 0 0 1 BSc in Information Technology 0 0 1 Managing Development Projects (2-week cert.) 1 1 0 Information Technology and Information Management (4-week cert.) 1 1 0 Planning Community Water Supply and Waste Management (4-week cert.) 1 1 0 GIS as a Management Tool (2-week cert.) 1 1 2 Environmental Impact Assessment and Review (4-week cert.) 1 1 0 Rural Road Development and Maintenance Management (6-week cert.) 1 1 2 Economic Evaluation of Environmental Impacts (3-week cert.) 1 1 0 Project Monitoring and Evaluation (4-week cert.) 1 1 0 Total 8 8 7 BSc = Bachelor’s of Science, cert. = certificate, Gov’t == Government, MSc = Master’s of Science, NDR = northern development region, PMU = project management unit, RDMO = regional development management office, SDR = southern development region. a On-the-job and practical training was also provided by consultants and contractors. Source: Ministry of Planning and National Development estimates.

10. The buildings constructed in Kulhudhuffushi (NDR) and Hithadhoo (SDR) to house each region’s RDMO were generally well designed, of good quality, and functional. The RDMO buildings substantially exceeded the initial budget, as their size was increased by two to three times to provide room for additional functions, including accommodations. The buildings remain fully furnished and well maintained, though partially underutilized. One van, one motorcycle and one launch were purchased for each RDMO, and the vans and motorcycles remain operational to date. The SDR RDMO launch is functioning well, while that in the NDR requires repair.13 Equipment purchased for the RDMOs under the Project initially included conductivity meters for the NDR and SDR, and this was further extended to include effluent quality testing equipment for the NDR. 14 This equipment continues to support sewage treatment plant and borehole monitoring activities, although the water quality monitoring program activities have been discontinued in the SDR and the equipment would require recalibration and possibly upgrading.

10 The SDR RDMO initially had two university graduates in project planning and accounting sections, whereas the NDR RDMO was staffed with high school graduates. 11 All staff trained in long-term educational programs returned to continue providing support under the Project. 12 ADB. 2002. Aide Memoire of the Mid Term Review Mission for L1695-MLD: Regional Development Project. Male. 13 The launches, selected specifically for their stability and adequacy to enable research activities and equipment operation on board, are reported to have suffered a number of problems and repairs. The NDR RDMO launch, which initially only suffered gearbox breakdown, was further damaged during the tsunami and later vandalized. 14 This includes a colorimeter, a biological oxygen demand tracking apparatus, blender and incubator and associated reagents and equipment to estimate total suspended solid, nitrates, and ammonia.

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2. Part 2: Social Infrastructure 11. A total of 5,000 tanks were provided under the Project in two batches. In the first batch 2,000 water tanks were provided (1,000 in each region) as initially designed. Based on demand and savings from unspent funds15 a second batch of 3,000 water tanks was procured and distributed. Repayment for water tanks started in early 2002. Social development funds (SDFs) have been conceptualized and established16 for both the NDR and SDR, but due to the absence of or frequent changes in atoll chiefs, meetings of the regional advisory committees—needed to endorse operation of the funds—could not be held between 2005 and early 2007. SDF guidelines have been approved and SDFs are expected to be launched before end 2007.

12. A pilot sewerage scheme was constructed in Kulhudhuffushi.17 Although the RRP did not explicitly indicate the number of households to be covered, a decision was made to limit the size of the pilot to 60 households, due to (i) limited funding and (ii) uncertainty over the results of the first organized sewerage scheme in a semi-urban area in the Maldives outside of Male. At appraisal, and as part of the on-site sanitation program in the NDR, the Project also envisaged provision of credit for families to construct and install 1,000 septic tanks. This component was substantially reduced in size, however, as (i) credit demand was lower than expected (most households in Kulhudhuffushi already owned septic tanks, although these were not always being of optimal size and quality); and (ii) total financing allocated for this subcomponent would have been insufficient for the construction of both a comprehensive sewerage scheme and on- site sanitation. Desludging equipment was provided in both the NDR and SDR.

3. Part 3: Physical Infrastructure 13. The Project’s largest component18 consists of a link road from Gan to Hithadhoo, , and a causeway with culverts. This component is designed to include revetments and other coastal protection measures. Detailed engineering design resulted in the road being shortened from 17 to 13.5 kilometers; the road alignment and design19 were partially revised to meet the budget 20 and incorporate community priorities. 21 A 70 meter (m) bridge from Gaukendi to Hithadhoo and a new bridge between Gan and Feydhoo were also constructed. Spare parts and basic equipment was provided under the Project, but procurement of supplementary heavy equipment22 may have been appropriate to support road maintenance unit activities in the atoll.

14. A sea transport study was finalized in December 2000 for the NDR, which collected and analyzed primary data in the nine focus islands and assessed (i) transport fleet capacity and (ii) the number of passengers and amount of cargo being transported within the NDR and to and from Male.23

15 These funds were initially allocated to assist in the provision of credit for new roofing for rainwater harvesting, but were later found not to be required by families in the community. 16 SDF guidelines, accounts, training and basic awareness have been conducted. 17 The scheme assumes primary treatment in septic tanks, and is characterized by discharge to a centralized pumping station feeding a modular recycling sand filter constructed above ground. 18 Cofinanced by ADB (the bridge), the IsDB (the road), and the Government. 19 The road is 7.5 m wide and 13.5 km long with 30 mm crowned surfaces, and built according to international standards, with sign boards and safety instructions. 20 While the existing budget was increased from appraisal figures, bids significantly exceeded the revised value. 21 The community requested that rather than upgrading sections of island , the link road be extended to connect to the population center in north Hithadhoo, and this was agreed to. The community has indicated that although early consultations took place, a consultation on the final design did not. 22 This includes trucks, front-end loader, grader, roller and/or asphalt mixer. 23 Findings from this study supported decision making and project development under ADB’s recently approved Domestic Maritime Transport Project and other partners’ investments, such as the IsDB pipeline.

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4. Part 4: Environmental Improvements

15. Two solid waste management centers were constructed under the Project, one in each development region. Sites were selected in consultation with island communities and final locations agreed to in Hithadhoo (Rujjehira) and Kulhudhuffushi (at the southeast corner of the island). Waste site preparation was initiated in March 2002 and waste equipment24 delivered in May 2003. Initial 1-year management contracts were formulated with project support and awarded by the RDMOs to the private sector in November 2002 (SDR) and July 2003 (NDR).

16. Groundwater investigations were conducted in the NDR and SDR. 25 A total of 27 boreholes (19 in the NDR and 8 in the SDR) were installed in 16 islands. Benchmark environmental surveys, leading to the establishment of sedimentation, marine ecology and baitfish population baselines were conducted in both regions. Underwater transects for coral and live fish monitoring were accomplished in coordination with the Marine Research Center, and an environmental assessment of coral mining activities was completed for both regions. A gipsy moth study was also prepared at the request of the Government.

17. Base maps and/or draft land use plans for Kulhudhuffushi, Hanimaadho and Dhidhdhoo, in the NDR, and Hithadhoo, Maradhoo/Maradhoo-Feydhoo and Feydhoo were prepared during Project implementation. To date, only Kulhudhuffushi’s land use plan has been finalized and approved by the Ministry of Housing and Urban Development (MHUD). Basic urban planning regulations were prepared by the Project for utilization by the RDMOs.

C. Project Costs 18. Appendix 2 presents a detailed comparison of the project cost at appraisal and completion. At appraisal, the project cost was estimated at $14 million equivalent.26 Actual final Project cost was $16.41 million equivalent. While some savings were achieved under ADB’s loan, $1.2 million was reallocated to the Tsunami Emergency Assistance Project in early 2005.27 Combined with the slight depreciation of the SDR against the dollar, the actual loan amount from ADB at closing was $6.62 million equivalent. Cost increases in link road and RDMO building construction necessitated increases in the IsDB loan amount (from $3.0 million to $5.86 million) and the Government’s contribution (from $3.0 million to $3.92 million).28

24 Equipment delivered in each atoll included a tractor, bailer, shredder and front end loader (in the NDR a crusher is also available on site). All equipment is still in operation, with the exception of the shredder in the NDR, which was partially damaged on delivery and in need of repair. 25 This aimed to (i) quantify depth, surface and sustainable yield of the freshwater lens, (ii) establish groundwater quality programs and identify potential contamination sources, and (iii) support land use planning on focus islands. 26 The Government requested a loan of $8 million equivalent from ADB’s Special Fund resources to cover 57% of the project cost, and a loan of $3 million from IsDB to cover 21% of the project cost. The Government was expected to provide the balance of $3 million to cover 21% of the project cost. 27 In March 2005, following the aftermath of the 2004 Indian Ocean tsunami, the Government requested ADB cancel surplus loan proceeds from three projects and reallocate these to the Tsunami Emergency Assistance Project. Of a total of $1.8 million, $1.2 million equivalent was cancelled and reallocated from the Regional Development Project. 28 The actual cost of civil works was $10.78 million compared with the appraisal estimate of $5.7 million. The cost increases in link road and RDMO building construction accounted for most of the difference in the civil works cost. The actual cost of equipment and furniture was $2.07 million, compared with the appraisal estimate of $3.1 million, as the water tank unit cost decreased substantially and the cost of environmental monitoring equipment was reduced. The actual cost of consulting services was $2.25 million, compared with the appraisal estimate of $2.03 million. Additional consultancy inputs were recorded in a contract variation to the original project management consultancy package and benefit monitoring and evaluation report assistance towards the end of the Project. The actual cost of institutional development was $1.09 million, compared with the appraisal estimate of $0.9 million, as the recurrent cost of the RDMOs was higher than estimated.

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D. Disbursements 19. Of the approved ADB loan amount of SDR5.864 million ($8.0 million equivalent), SDR4.945 million ($6.622 million) was disbursed, which is equivalent to a loan utilization rate of 84.3%. The breakdown of annual disbursement of ADB funds is in Appendix 3. Disbursement projections were not prepared at appraisal. While disbursements were slow during the first year of implementation, $4.319 million (equal to more than 54% of the total loan allocation or 65% of the total loan utilization), had been disbursed by end 2002 (year three of implementation). Loan proceeds were disbursed in accordance with ADB’s Loan Disbursement Handbook. At the Borrower’s request, loan proceeds were reallocated to accommodate an increase in the consulting services contract. One imprest account was opened with the Maldives Monetary Authority and operated satisfactorily. As most of the civil works and goods contracts under the Project were small in size, the statement of expenditure dispensation was used. Both imprest account and statement of expenditure procedures enhanced timely disbursement of funds.

E. Project Schedule 20. Overall, the Project was implemented smoothly. The loan was approved on 2 September 1999, signed on 6 December 1999, and took effect on 2 March 2002. At appraisal, the Project was to be implemented from the first quarter (Q1) of 2000 to end December 2004. Actual physical implementation commenced in March 2000, with the establishment of a project steering committee (PSC) and the project management unit (PMU). Although no activities (other than the finalization of the benefit monitoring and evaluation report) were implemented after December 2004, the loan closed on 31 December 2005.29 Appendix 4 gives a graphic comparison of the actual implementation schedule and the schedule at appraisal.

21. Identification and recruitment of suitable RDMO staff was delayed by approximately 9 months, which made the project dependent on consulting inputs during the early to mid-stages of implementation, and which complicated knowledge transfer, particularly in the SDR, where the chief executive officer (CEO) was not available until late in Q4 2002. The PMU and line agencies were instrumental in providing the necessary bridging support. The construction of the RDMO buildings was also partially delayed but this was easily overcome through provision of temporary facilities. Road and bridge procurement was timely with construction completed within 16 months instead of 4 years as initially programmed. 30 Similarly, the water tank program was well-timed, allowing for a second batch to be procured and distributed to beneficiaries. The only activity that was significantly delayed is the SDF launching, which is expected in Q4 2007.

F. Implementation Arrangements 22. The Ministry of Finance and Treasury (MOFT) was the Executing Agency (EA) for the Project, responsible for approval and coordination of disbursements. A PMU was established in the IA (MPND), and project implementation units (PIUs) were created in the NDR and SDR coinciding with the establishment of the RDMOs. The Project prescribed that MPND would coordinate closely with the Ministry of Atolls Development (MOAD, formerly the Ministry of Atolls Administration) to provide logistical support for the RDMOs and PIUs. While MPND was specifically selected to undertake these functions due to its strong capacity and the multisectoral nature of the Project (the first of its type in the country), MOAD had direct responsibilities for

29 In December 2004, the Government requested a 1-year extension to the loan closing date to utilize surplus loan proceeds for upgrading Kulhudhuffushi’s main road. ADB approved the request, but following the 2004 Indian Ocean tsunami and related emergency assistance, loan proceeds were cancelled and reallocated. 30 Certificate of completion was however issued in end 2004.

8 development activities in the atolls, and later for the functioning of the RDMOs.31 Despite good implementation and regular dialogue between the PMU, PIUs and ADB, difficult coordination between MPND and MOAD impacted the Project. MOAD’s resistance to some project outcomes, particularly those relating to institutional development, is believed to have partially inhibited institutionalization and operationalization of the RDMOs. Given the multisectoral nature of the Project, however, coordination among several ministries—including agencies with mandates relating to housing and land use planning, water and sanitation, environment, construction, fisheries and public works and transport—was at times complex; in some instances the Project was reported to be excessively centralized.32 Several changes to the Government’s ministerial portfolio occurred during project implementation.33 MOFT and MPND were not affected by the reorganization, and institutional changes did not significantly affect physical implementation of the Project, but revised responsibilities and changes in reporting staff led at times to discontinuity in reporting arrangements (particularly concerning the RDMOs).

G. Conditions and Covenants 23. The status of compliance with loan covenants in is Appendix 5. Specific conditions for loan effectiveness included matters relating to the Government’s obtaining cofinancing from IsDB for financing development of the road subproject and establishment of the PSC and PMU. The condition was fulfilled within 6 months of loan approval. Loan covenants have been generally complied with, except for five that are partly compliant; of these three are most notable.

(i) The first partially compliant loan covenant (which was originally complied with during implementation) regards the Borrower’s commitment to annually monitor freshwater quality and quantity, geomorphology of the coastlines and marine ecology. These activities, depending on the region, have been discontinued for at least 1 and in some instances up to 3 years. Compliance could be achieved if a firm monitoring program was agreed between relevant ministries and RDMOs for the collection and disclosure of data. (ii) The second instance of partial-compliance relates to the failure to operationalize the SDFs; guidelines and preliminary actions have been undertaken and launching is still expected Q4 2007. (iii) The third instance of partial-compliance relates to the objective to recover from beneficiaries operation and maintenance (O&M) and a portion of capital costs for the pilot sanitation scheme. This covenant does not appear to be directly relevant after project completion, as the pilot sanitation scheme was redesigned and reduced in size to cover a small proportion of Kulhudhuffushi’s population, and scaling and replication may not be viable from a cost-effectiveness and conceptual perspective. (iv) The two other partly compliant covenants relate to inadequate RDMO staffing.

H. Consultant Recruitment and Procurement 24. As proposed under the RRP, a single consultancy contract was issued to cover (i) detailed design and construction supervision, (ii) project management, (iii) institutional

31 Loan covenants specifically indicate that the Project will be implemented by MPND and the Ministry of Atolls Administration (now MOAD), which were both to be responsible for project implementation. 32 Such issues might have been resolved through discussions in the quarterly PSC meetings. However, frequent changes in ministerial mandates and staff may have compromised communications. 33 The Ministry of Atolls Administration became MOAD, and separate ministries with specific mandates on environment, housing and water and sanitation were created before project closing. RDMOs now report to MHUD.

9 development, and (iv) environmental monitoring. Consultants were engaged according to ADB’s Guidelines on the Use of Consultants and other procedures acceptable to ADB. The RRP provided for 78 person-months of consulting inputs (38 person-months of international inputs, including 24 for the team leader, and 40 person-months of national inputs). The recruitment process was rapid and efficient. 34 Two contract variations were introduced, increasing the allocated budget from $2.03 million to $2.22 million to extend the inputs of the team leader and deputy team leader. A local firm was also engaged to prepare the benefit monitoring and evaluation report in 2004.

25. Procurement conformed to ADB’s Procurement Guidelines and was in agreement with methods prescribed in the loan agreement and Appendix 6 of the RRP. All civil works contracts were awarded through international (road and bridge construction) or local competitive 35 bidding. Most of the supply contracts were awarded through international shopping procedures (rainwater storage tanks and solid waste-related equipment) and direct purchase (office equipment and furnishings and environmental monitoring equipment).

I. Performance of Consultants, Contractors, and Suppliers 26. The performance of the consultants, both international and domestic, was generally satisfactory. The expected inputs were completed according to the agreed schedule and the requirements of the IA. In the absence of fully staffed RDMOs, the consultant was particularly helpful in accelerating the design process early in the Project. Reported shortcomings include (i) limited coordination with other government agencies, (ii) partially incomplete road design,36 and (iii) partially deficient design of the pilot sanitation scheme.37 In addition, although the consultant carried out baseline surveys at the start of the Project, this data was not shared with RDMO, PMU and ADB.

27. The performance of the contractors was generally adequate, 38 although some implementation difficulties were encountered due to limited local capacity and/or remoteness of the islands. The performance of the international contractor engaged for road and bridge construction was generally effective, although asphalt was identified in several areas of the Hithadhoo road section shortly following completion.39 In coordination with the Ministry of Construction and Public Infrastructure (MCPI, formerly the Ministry of Construction and Public Works), the supervision engineer requested that the contractor make the needed repairs. Having demobilized, the contractor was slow to complete this work, with a completion certificate not issued until December 2004. Some local competitive packages encountered problems: (i) delivery of launches to the RDMOs was delayed, as they initially failed to meet specifications and later were reported to suffer operational problems; and (ii) construction of RDMO buildings, mainly in Hithadhoo, was delayed due to retendering following failure to complete a contract with a constructor.

34 Based on advance action approval, in November 1999 the Government issued an invitation letter to shortlisted firms. Negotiations were held in April; in May 2000, 2 months after loan effectiveness, the consultants were mobilized. 35 These include RDMO buildings, pilot sanitation scheme, solid waste management site and borehole drilling. 36 Reports indicate that incomplete design studies and supporting surveys resulted in design shortcomings, including: (i) some degree of subsidence in Gan-Feydhoo bridge, (ii) unforeseen erosion around bridges and (iii) drainage problems around Hithadhoo’s school. It is however noted that (i) full current modeling was not part of the consultants’ terms of reference and (ii) some problems may be due to other parallel activities (cable laying under bridge). 37 While many of the problems experienced by the pilot sewerage scheme are linked to inadequate operation and maintenance, the scheme’s design assumptions were reported to be unrealistic (e.g., existing septic tanks were of insufficient size, and screen sizing was inadequate, allowing solids to enter pump chambers and the treatment plant). 38 E.g., water tanks, solid waste management site works and equipment, borehole testing and equipment provision. 39 Samples collected and tested in an agreed laboratory suggested variability in the binder content of the samples.

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J. Performance of the Borrower and the Executing Agency 28. The performance of the Borrower, EA and IA was satisfactory throughout project implementation. The IA’s capabilities at the time of appraisal were adequate and have been further strengthened. In addition, the capacity of the RDMOs (wherever staff was retained) has substantially improved. The PMU was staffed since loan effectiveness. Difficulties in the identification of suitable personnel delayed PIU recruitment. Procurement and recruitment activities were undertaken in a timely manner and the Project progressed well and reportedly on schedule up to end 2003, having recovered from initial delays. In 2004 progress began to slow, with some activities not completed (launch of the SDFs, repairs to pilot sanitation scheme), probably due to internal conflicts, particularly with respect to RDMO operations and support. The Borrower provided the Project with adequate local counterpart funds under a tight budget.

K. Performance of the Asian Development Bank 29. Overall, ADB’s performance was generally satisfactory. ADB fielded eight review missions, including at loan inception and midterm review. In addition, several brief informal review missions were conducted in 2005 by the team leader during visits to the country for other purposes. The number of missions is below the semiannual reviews envisaged during preparation. Each mission provided a time-bound action plan that could be readily monitored. The missions met parties concerned with project implementation and visited subproject sites to give advice on project implementation problems. ADB generally acted promptly, reviewing and approving bid documents, awards and other matters such as contract variations or reallocations of loan proceeds. In December 2004 ADB approved a 1-year loan closing date extension and change in scope requested by the Borrower to accommodate an additional component; approval was contingent on meeting pending covenanted requirements (e.g., preparation of the benefit monitoring and evaluation report). ADB provided project implementation training to key project staff and supported RDMO staff capacity development through TA.40

III. EVALUATION OF PERFORMANCE

30. This section analyzes results achieved, project effectiveness and efficiency in attaining the intended outputs and outcome. After analyzing each of these by component, this section also assesses the Project’s overall preliminary (i) sustainability, (ii) institutional development, and (iii) environmental and other impacts. Appendixes 6, 7, 8 and 9 provide separate detailed narrative assessments relating to the Project’s relevance, effectiveness, efficiency and sustainability; Appendix 10 presents, numerically, a summary evaluation of the Project by assessing performance of each of the two regional development centers. The combined evaluations are then used to produce an overall weighted project assessment.41

A. Relevance 31. The Project, formulated in 1999, supported the Government’s development priorities as identified in the Fifth National Development Plan (1997–2000), and in particular objectives aimed to achieve regional and atoll development as a means to address disparities and access to basic services. Moreover, the Project, in line with regional development principles, remained a priority for the Government throughout the Sixth National Development Plan (2001–2005) and

40 ADB. 2003. Technical Assistance to the Republic of the Maldives for Capacity Building for Regional Development. Manila (TA 4261-MLD, for $350,000, approved on 16 December). 41 Methodology utilized closely follows (ADB. 2006. Guidelines for Preparing Performance Evaluation Reports for Public Sector Operations. Manila). Given the Project’s multi-location and multi-sectorial nature, allocated subproject ratings have been based on rating weights which are a function of subproject investment cost.

11 appears to be central to the Seventh National Development Plan (2006–2010), currently in draft form. The Project directly supported two of the three objectives defined in ADB’s country operation strategy 1995–2002: (i) regional development and support to population planning and (ii) environmental protection. The Project continued to be consistent with the Country Strategy and Program 2002–2004 and its updates. The Project was also coherent with the Bank’s Medium-Term Strategic Framework (1997–2000), which focused on economic growth, poverty reduction, improving the status of women, facilitating progress in population planning and environmental protection. The systematic formulation of island and atoll development plans was initiated after project processing was completed, but community and local stakeholder consultation reports indicate the project outcome (and indirectly, outputs) are aligned with community aspirations. Overall, the Project is rated “relevant”.

B. Effectiveness in Achieving Outcome 32. The results of the compounded assessment 42 indicate that the Project was “less effective” (bordering on “effective”). Although it initiated the broad objective of regional economic development in the NDR and SDR, through the prescribed performance targets of improving (i) basic infrastructure, (ii) institutional development and (iii) environmental monitoring, effectiveness in achieving the outcomes envisaged at appraisal differed between components and regional development centers. Construction and procurement activities relating to RDMOs were generally efficient, although establishment of these offices suffered from (i) low staff retention and the need to further enhance skills, particularly in the SDR; (ii) the need to institutionalize and streamline RDMO functions;43 and (iii) the need for consistent leadership by an independent CEO. The Government’s budgetary allocations for RDMO O&M have been adequate.

33. The water tanks subcomponent was very successful in increasing drinking water capacity in NDR and SDR households. Indirectly, it also helped substantially reduce the incidence of waterborne diseases, which benefited atolls. Households in the NDR have largely complied with repayments (80% to date), and the component is considered successful. Results in the SDR are less satisfactory, with only 50% of the amount due repaid to date. The NDR pilot sewerage scheme contract was signed in May 2002, civil works were completed in May 2003, and the system was commissioned in May 2004. The Kulhudhuffushi pilot scheme has reportedly malfunctioned since July–August 2004. While the scheme may have been efficiently procured, its operation has been deficient, due to design shortfalls and irregular maintenance.

34. The Project’s most sizeable component—a link road from Gan to Hithadhoo, and bridge and causeway with culverts—was effectively implemented. Despite parallel financing and potential complexities associated with the award of separate road and bridge contracts with separate financiers, good coordination and pre-qualification exercises ensured smooth implementation. Solid waste management centers established under the Project in Kulhudhuffushi and Seenu atoll instituted a formal system for waste collection and disposal control in both centers,44 leading to significant environmental and hygiene benefits among the population. Efficiency of operation varies significantly between regions, however.

42 Refer to Appendix 10 and specifically to Table A10.4. 43 Government agencies should respect regional RDMO mandates and inform them of ongoing and proposed programs, and delegate monitoring and support functions to the regions. Relevant ministries should jointly agree on annual RDMO work programs on regional matters, and training needs and support. 44 Collection and disposal levels in Kulhudhuffushi have reportedly increased from 0% (before the Project) to about 80% (after the Project). In Seenu atoll, 65% of all waste is currently being collected and disposed of in the landfill site.

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C. Efficiency in Achieving Outcome and Outputs 35. Overall, the Project is rated “efficient”. The findings of the economic and financial analyses, particularly the reevaluated economic and financial internal rates of return (EIRRs and FIRRs) presented in Appendix 8 indicate that (i) the water supply subcomponents in both regions and the link road in SDR are economically viable, with EIRRs above 12%; and (ii) the solid waste management subcomponents in both regions are financially viable, with FIRRs above the weighted average cost of capital (WACC) of around 0%. For the water supply subcomponents, the EIRR in the SDR was estimated to be 27.50%, and in the NDR to be 23.55%, higher than the corresponding appraisal estimates.45 For the SDR link road, the EIRR is 17.4%, which is also higher than the appraisal estimate.46 The link road and coastal protection component had many unquantifiable benefits, including improved access to social facilities such as hospitals and schools in Hithadoo and increased baitfish catch in the lagoon. As a result, this component is rated “highly efficient”. The solid waste management subcomponent in the SDR has an estimated FIRR of 6.37%, and that in the NDR a FIRR of 7.56%; these are higher than the WACC for the Project, but lower than the appraisal estimates, due to greater capital costs and currently lower service coverage. The efficiency of the sanitation subcomponent in the NDR was low. The pilot sanitation subcomponent was reduced in scope by decreasing the number of beneficiaries from 1,000 to 60 households, and the scheme implemented under the Project was therefore found to be costly, both in terms of capital investment and O&M costs relative to the small service coverage.

D. Preliminary Assessment of Sustainability 36. Overall, based on the compounded assessment, the Project is rated “less likely” to be sustainable (bordering on “likely”), but sustainability varies among components. This preliminary assessment considers the probability of achieving human, institutional, financial, and environmental sustainability (as relevant) in each of the components supported by the Project. Whilst significant progress has been achieved, RDMO ultimate sustainability hinges on streamlining and fully operationalizing RDMO functions. This requires (i) full empowerment of the RDMOs and (ii) adequate coordination with (and among) central government ministries and atoll and/or island offices. In addition, adequate and continuous leadership must be sustained. Staff should be encouraged and retained and human resource capacity further developed, which is likely in the NDR. Financial sustainability of the RDMOs has been secured through an annual budget prepared by the RDMO.

37. The cost of maintaining the water tanks and rainwater harvesting materials (roofs and gutters) provided by this subcomponent are minimal and rests with the household; it is therefore considered “sustainable”. Institutional sustainability relating to purchasing additional water tanks is secured through establishment of the SDFs. Rainwater harvesting is without operational costs, and no significant recurrent costs are expected to be incurred by households during the lifetime of the tanks. The NDR RDMO has provided operational support for the implementation of the pilot sanitation scheme; the adoption of a full-fledged scheme for the island would likely be in agreement with responsibilities outlined in the (draft) Local Governance Act (proposed to fall under the purview of the island office). Although pilot activities may be continued for the purpose of experimentation and plant optimization, no staff members have been allocated for this purpose. Similarly, while the financial sustainability of the pilot sanitation scheme has been

45 This is based on procurement of 3,000 tanks more than planned at appraisal, bringing annually 24.1 million liters of additional drinking water supply and (ii) the unit cost of the tanks was lower than estimated at appraisal. 46 This is because (i) the VOC saving per km is larger due to real increase in fuel prices experienced in recent years and (ii) time saving was not considered at appraisal but found significant after construction of the link road.

13 secured through RDMO funds specifically allocated to cover O&M costs of the unit, the island may need to establish a cost-recovery mechanism for future island-wide sewerage schemes (not within the purview of this project).

38. Institutional arrangements for the Gan-Hithadhoo link road are well established. Seenu atoll road maintenance unit (recently transferred to the Atoll Office), has a total staff of 46, 11 of whom are assigned exclusively to link road maintenance. Road maintenance functions are clear and funded from Government allocations: 2007 budgetary allocations for road maintenance in the atoll were Rf6 million.

39. Sustainable institutional arrangements for solid waste management were established at the onset of the project through delegation of administrative responsibilities to the atoll office and formulation of contractual agreements and tendering for private sector operation and management. Results have been variable, however, due to (i) the absence of a policy framework outlining responsibilities and mandates of both government institutions and households with regards to waste;47 (ii) the lack of monitoring and compliance with contractual conditions at the atoll office level (client contract party); and (iii) the lack of enforcement mechanisms to prevent random dumping, burning and other contravening activities. In Seenu atoll (SDR), sustainability levels are reasonable and in agreement with the existing contract. Household collection coverage is about 65% and expanding. The Kulhudhuffushi (NDR) site serves most of the island, but poor management has shortened the lifespan of the center, raised concerns, and in effect turned it into a dump site. In the SDR, a private-sector contractor has managed to generate a small profit from household waste collection and fees collected from vehicles disposing at the waste management site. In the NDR, the private sector contractor for the waste management site generates revenue only from septic tank desludging services for Kulhuduffushi households. Primary waste collection from households is provided by other independent private agents, compromising the financial sustainability of the current contract for management of the waste site, and rendering it financially unsustainable.

E. Impact 40. The Project was successful in initiating socioeconomic regional development in the NDR and SDR. It is expected that the full Project’s potential will be further realized in the near future with completion of other infrastructure leading to economic growth and employment generation. Major benefits already achieved include improved health and quality of life of residents living in selected focus islands, as evidenced by (i) the increased drinking water capacity in the NDR and SDR, (ii) reduced incidence of waterborne diseases, (iii) reduced casual garbage disposal, (iv) decreased prevalence of unhygienic sanitation. A conservative estimate of the total additional rainwater capacity gained through the Project is 40.36 megaliters per year.48

41. In addition, major economic and social benefits brought about by the construction of the road and coastal erosion prevention initiatives include (i) improved trade, supply chain and business opportunities; 49 (ii) improved bait and tuna fisheries as a result of improved sea–to- lagoon flows; (iii) improved access to and attendance at hospital and school facilities; and (iv) reduced incidence of and mechanical breakdowns. The vehicle count has increased

47 The Ministry of Environment, Energy and Water (MEEW) is preparing a solid waste management policy. A first draft is expected to be available before end 2007. 48 Axe Services (for the Ministry of Planning and National Development). 2005. Benefit Monitoring and Evaluation Report: Regional Development Project Phase 1 (2000-2004). Male 49 This includes improved access to island harbors for loading and unloading of cargo and passengers, rapid low-cost transfer of goods and improved access to Gan for work opportunities.

14 between 6 and 10 times and travel times and fuel consumption are estimated to have halved. In addition the road provided a sustainable solution to coastal protection by (i) preventing erosion,50 (ii) preventing flooding and facilitating removal of stagnant water areas by replacing solid causeways with bridge openings, (iii) improving drinking water supplies through road drainage, (iv) increasing coral growth in house reef by preventing sand runoff from the road, and (v) improving bait supplies for the tuna fishery through bridge openings.

42. Additional positive environmental impacts achieved in connection with components 1 and 4 of the project include (i) capacity development of staff within the islands to monitor and manage freshwater within the region; (ii) capacity building for coastal erosion and marine ecology monitoring; (iii) reducing pressure on and protection of freshwater lens and groundwater resources; and (iv) reducing environmental health hazards associated with random dumping of garbage, particularly in lagoons serving as habitat to a variety of fish and bird species. The project also paved the way for the creation of RDMOs, increased local capacity and initiated steps to support decentralization.

IV. OVERALL ASSESSMENT AND RECOMMENDATIONS

A. Overall Assessment 43. Overall, the Project is rated “partly successful” (bordering on “successful”).51 The Project was “relevant” to the Government’s development objectives and ADB’s strategy at appraisal and continues to be relevant at project completion. The Project was assessed “less effective” (bordering on “effective”); design revisions and inadequate arrangements to implement sanitation and solid waste management in the NDR compromised the outcomes. The overall Project was rated “efficient”; the water and road subcomponents were rated “highly efficient”, but the sanitation (and to a lesser degree) solid waste management components were rated “less efficient”. The Project is “less likely” to be sustainable, bordering on “likely”, as several subcomponents achieved their objectives, 52 but effort is needed to ensure the sustainability of solid waste management centers (particularly in Kulhudhuffushi) and RDMOs (SDR).

B. Lessons 44. The main lessons to be learned from the implementation of the Project are:

(i) Coordination between divisions and agencies concerned. There is need for better interministerial coordination to minimize delays and ensure long-term sustainability. This is particularly important for a multisectoral Project. (ii) Division of responsibilities and clarity of mandates. There have been a number of ministerial reorganizations with changes in mandates and leadership. It is essential that within a decentralized framework—currently under consideration—clear, realistic roles and responsibilities, and associated resources be allocated to different tiers of Government, with reporting lines (some cross-sectoral) established. Planning and administration functions may be separated, recognizing the support role that RDMOs can play. (iv) Policy formulation. In the absence of clear policies relating to solid waste management and, to a lesser degree, sanitation, investments risk to be ad hoc;

50 Continuous maintenance and reinforcement activities, as currently undertaken, are essential. 51 Although Table A10.3, Appendix 10, suggests the Project to be “successful”, this assessment has also considered the rating assessment by criterion provided in Table A10.4 concluding that the given rating is more appropriate. 52 Since this is a multisectoral project, weighting has been allocated based on investment levels for each component.

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vertical, and possibly horizontal, integration needs to be explored and responsibilities clearly defined. (v) Education programs. Programs at community and administrative level are critical to ensure the successful implementation of regional initiatives. Community awareness should be conducted continuously and programmed by RDMOs and other agencies annually. Similarly, environmental monitoring programs for RDMOs should be supported by central agencies through periodic visits and exchange programs. (vi) O&M mechanisms. O&M for main infrastructure functions and supporting (e.g., environmental monitoring equipment) are integral to the Project. They should be realistically designed and adequately implemented from the outset.

C. Recommendations 1. Project Related (i) Motivation, training and capacity enhancement of junior staff must be further pursued. As a means of promoting equitable regional development, long-term training opportunities should be given to individuals committed to return to their region of work in favor of staff to be retained in ministries in Male. (ii) To streamline and institutionalize RDMO functions, annual work programs should be agreed between RDMOs and line ministries. (iii) The SDFs should be launched immediately to provide a mechanism for accessing micro-credit facilities and maintain credibility within the community. (iv) O&M of the pilot sanitation scheme requires (a) strict compliance with essential O&M steps outlined sewage treatment plan manual, (b) implementation of a preventive maintenance program, (c) frequent and regular sampling and testing of influent and effluent, and (d) systematic emptying of household septic tanks. (v) Relating to solid waste management, (a) MEEW should rapidly finalize the policy framework outlining responsibilities and mandates of both government institutions and households with regards to waste, (b) responsible atoll or island offices should monitor contractors’ compliance with respect to agreed conditions, and (c) enforcement mechanisms to prevent random dumping, burning, and other contravening activities should be developed. (vi) Environmental monitoring functions (freshwater lens, marine ecology and coastal erosion) should be immediately resumed in the RDMOs, with the recently created MEEW providing necessary support to analyze collected data. New projects should consider the importance of continuity in ensuring success, including skills transfer among officers and clearly documented manuals.

45. Timing of the Project Performance Evaluation Report. Project performance evaluation should be carried out after mid-late 2009. This will enable completion of government- programmed economic activities interlinked with the Project’s goal and (in part) its outcome.

2. General 46. Consultations should be conducted during design and throughout construction and operation. Community ownership is key to ensuring sustainability; consultation is a powerful tool to manage changes of perception.

47. Reliable Costing. To minimize errors resulting from inadequate estimates, costing at appraisal should be based on market rates and include adequate contingencies.

16 Appendix 1

PROJECT FRAMEWORKa

Design Performance Monitoring Assumptions Summary Indicators/Targets Mechanisms Goal Equitable development 100,000 atoll residents to Project completion Regional development is benefit in general and 13 report better than spreading focus islands (40,000 resources too thinly among population) to benefit the populated islands specifically

Reduce pressure on Male Reduced growth of population on Male Population in Male Purpose Regional economic a. Basic infrastructure Project reports and ADB Assumes project inputs will development in the NDR b. Institutional development review missions spur economic growth and SDR c. Environmental monitoring RDMO Outputs NDR Grading, drainage and ADB review missions, Strong long-term budgetary SDR sustainable maintenance RDMO annual reports support to maintenance.

Road SDR 17 km upgrading from Gan to Project progress reports Realignment will greatly Hithadhoo benefit residents.

Bridge and SDR 70 m bridge Environmental Water flows into lagoon will culverts 200 m culverted causeway monitoring reduce coastal erosion and improve baitfish catch. Sea transport NDR Study completed and ADB review missions, Action to follow study. link recommendations approved RDMO annual reports Credit terms attractive enough to stimulate demand Rainwater NDR 1,000 HH assisted ADB review missions, Acceptance of technology by harvest SDR 1,000 HH assisted RDMO annual reports beneficiaries.

Sanitation units NDR 1,000 HH assisted ADB review missions, Willingness of staff to RDMO annual reports relocated. RDMO NDR Three professionals SDR Five professionals ADB review missions Government long-term commitment to Environmental NDR Annual monitoring of RDMO annual reports environmental monitoring. monitoring groundwater quality and quantity, coastal erosion and ADB review missions Willingness to pay for full marine ecology service. SWM NDR Private sector management RDMO monitors SDR Private sector management monthly, PMU quarterly, Credit for individual ADB missions household assistance in Social Development $2 million equivalent for semiannually and audit rainwater harvesting and Funds income generation, health, annually sanitation will be repaid in a education, environment and timely manner. recreation Inputs Civil works Civil works $7 million Project reports Adequate number of review missions. Materials and equipment Materials and $4 million ADB review missions Consultants and contractors equipment are competent and Consultants counterpart staff are Consultants $2 million Project accounts available. Administration expenditures Salaries/other $1 million Project accounts Total $ 14 million ADB = Asian Development Bank, HHs = households, km = kilometer, NDR = northern development region, PMU = project management unit, RDMO = regional development management office, SDR = Southern Development Region, SWM = solid waste management. a Based on the project framework presented in ADB. 1999. Report and Recommendation of the President to the Board of Directors for a Proposed Loan to the Republic of the Maldives for Regional Development Project. Manila. Appendix 2 17

PROJECT COSTS AND FINANCING PLAN

Table A2.1: Project Costs by Category ($ million) Item Appraisal Actual FE LC Total FE LC Total A. Base Cost 1. Civil Works 4.05 1.65 5.70 7.66 3.12 10.78 2. Furniture and Equipment 2.85 0.25 3.10 1.90 0.17 2.07 3. Consulting Services 1.93 0.10 2.03 2.14 0.11 2.25 4. Institutional Development 0.25 0.65 0.90 0.22 0.87 1.09 Subtotal (A) 9.08 2.65 11.73 11.91 4.27 16.18 B. Contingencies 1.02 0.85 1.87 0.00 0.00 0.00 C. Interest Charges 0.40 0.00 0.40 0.23 0.00 0.23 Total Project Cost 10.50 3.50 14.00 12.14 4.27 16.41 FE = foreign exchange, LC = local currency. Source: Asian Development Bank estimates.

Table A2.2: Project Costs by Component ($ million) Appraisal Actual Item ADB IsDB GoM Total ADB IsDB GoM Total A. Base Cost 1. Institutional Improvements RDMO Buildings 0.30 0.30 1.17 1.17 RDMO Furniture and Equipment 0.30 0.30 0.36 0.36 Training and Workshops 0.30 0.30 0.31 0.31 Consulting Services 2.03 2.03 2.24 2.24 Project Implementation 0.60 0.60 0.81 0.81 2. Physical Infrastructure Link Road Construction 1.75 1.90 3.65 5.86 1.94 7.81 Repairs 0.35 0.35 Road Maintenance Equipment 0.50 0.50 3. Social Infrastructure Water Tanks Program 1.70 1.70 1.33 1.33 Sanitation Units 0.60 0.60 0.18 0.18 4. Environmental Improvement Bridge 0.70 0.70 1.17 1.17 Solid Waste Management 0.34 0.34 0.63 0.63 Environmental Monitoring 0.36 0.36 0.17 0.17 Total Base Cost 6.33 2.60 0.20 11.73 6.39 5.86 3.92 16.18 B. Contingencies 1.27 0.40 0.20 1.87 C. Interest Charges 0.40 0.40 Total Project Cost 8.00 3.00 3.00 14.00 6.62 5.86 3.92 16.41 ADB = Asian Development Bank, GoM = Government of the Maldives, IsDB = Islamic Development Bank, RDMO = regional development management office. Source: Asian Development Bank estimates.

Table A2.3: Financing Plan ($ million) Appraisal Actual Item FE LC Total % FE LC Total % Asian Development Bank 7.76 0.24 8.00 57.1 5.76 0.86 6.62 40.3 Islamic Development Bank 2.74 0.26 3.00 21.4 4.17 1.70 5.86 35.7 Government of Maldives 0.00 3.00 3.00 21.4 2.21 1.71 3.92 23.9 Total 10.50 3.50 14.00 100.0 12.14 4.27 16.41 100.0 FE = foreign exchange, LC = local currency. Source: Asian Development Bank estimates.

18 Appendix 3

BREAKDOWN OF ANNUAL DISBURSEMENTS OF ADB FUNDS

Table A3.1: Breakdown of Annual Disbursements of ADB Funds per Quarter ($) Year Quarter Amount Cumulative

2000 I 0 0 II 299,000 299,000 III 696,000 995,000 IV 162,000 1,157,000 2001 I 194,000 1,351,000 II 75,000 1,426,000 III 341,000 1,767,000 IV 167,000 1,934,000 2002 I 375,000 2,309,000 II 480,000 2,789,000 III 571,000 3,360,000 IV 959,000 4,319,000 2003 I 558,000 4,877,000 II 815,000 5,692,000 III 181,000 5,873,000 IV 12,000 5,885,000 2004 I 196,000 6,081,000 II 452,000 6,533,000 III 39,000 6,572,000 IV 26,000 6,598,000 2005 I 134,000 6,732,000 II 0 6,732,000 III 35,000 6,767,000 IV 0 6,767,000 2006 I 13,000 6,780,000 II 3,000 6,783,000 III 0 6,783,000 IV (162,000) 6,621,000 6,621,000 ADB = Asian Development Bank, ADF = Asian Development Fund. Source: Asian Development Bank Loan Financial Information System.

Appendix 3 19

Table A3.2: Breakdown of Annual Disbursements of ADB Funds by Category ($)

Year Category Amount Cumulative 2000 1. Civil Works 256,973 256,973 2. Equipment and Materials 289,690 289,690 3. Consulting Services 606,059 606,059 4. Institutional Development 3,242 3,242 5. Interest Charge 1,375 1,375 Imprest Account 0 0 Total 1,157,339 1,157,339 2001 1. Civil Works 176,808 433,781 2. Equipment and Materials 50,982 340,672 3. Consulting Services 539,437 1,145,496 4. Institutional Development 0 3,242 5. Interest Charge 10,489 11,864 Imprest Account 0 0 Total 777,716 1,935,055 2002 1. Civil Works 1,073,678 1,507,459 2. Equipment and Materials 498,681 839,353 3. Consulting Services 780,558 1,926,054 4. Institutional Development 9,941 13,183 5. Interest Charge 21,084 32,948 Imprest Account 0 0 Total 2,383,942 4,318,997 2003 1. Civil Works 249,648 1,757,107 2. Equipment and Materials 569,792 1,409,145 3. Consulting Services 270,357 2,196,411 4. Institutional Development 267,058 280,241 5. Interest Charge 47,569 80,517 Imprest Account 161,583 161,583 Total 1,566,007 5,885,004 2004 1. Civil Works 37,573 1,794,680 2. Equipment and Materials 560,047 1,969,192 3. Consulting Services 49,598 2,246,009 4. Institutional Development 0 280,241 5. Interest Charge 65,972 146,489 Imprest Account 0 161,583 Total 713,190 6,598,194 2005 1. Civil Works 0 1,794,680 2. Equipment and Materials 96,854 2,066,046 3. Consulting Services 0 2,246,009 4. Institutional Development 0 280,241 5. Interest Charge 71,600 218,089 Imprest Account 0 161,583 Total 168,454 6,766,648 2006 1. Civil Works 0 1,794,680 2. Equipment and Materials 905 2,066,951 3. Consulting Services 3,863 2,249,872 4. Institutional Development 0 280,241 5. Interest Charge 11,725 229,814 Imprest Account (161,583) 0 Total (145,090) 6,621,558 ADB = Asian Development Bank. Source: Asian Development Bank Loan Financial Information System.

20

COMPARATIVE IMPLEMENTATION SCHEDULE

1999 2000 2001 2002 2003 2004 2005 2006 2007 4 Appendix Activity Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

Recruitment

Consultant Inputs

Regional Development and Management Offices

Design and Procurement

Construction NDR

SDR

Staffing Recruitment NDR

SDR

Operations NDR

SDR

Gan to Hithadhoo Road

Design and Procurement

Construction

Maintenance

Hankede Bridge

Design and Procurement

Construction

Activity 1999 2000 2001 2002 2003 2004 2005 2006 2007 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

Procure and Contract Implement Solid Waste Management Procure and Contract NDR Operations

SDR Operations

Survey and Procure Install and Repay Rainwater Collection/Sanitation SDR - Procure SDR - Implementation

NDR - Procure 1st Batch 2nd Batch

1st Batch NDR - Implementation 2nd Batch Pilot Sanitation

Survey and Design

Construction

Implementation

Organization Utilization Social Development Fund Organization Utilization

Environmental Monitoring

Male +SDR+NDR Project Management

Training

Project Performance

Management 4 Appendix

Actual Appraisal Source: Asian Development Bank estimates.

21

22 Appendix 5

STATUS OF COMPLIANCE WITH LOAN COVENANTS

Reference in Loan Covenant Agreement Status of Compliance

Environmental monitoring: LA, Schedule Partially complied with. (a) The Borrower shall ensure that the location, and 6, para. 9 (a-c) construction of the infrastructure components as referred Environmental Monitoring Manual under para 2(ii) to Schedule 1 shall follow the Bank’s approved by MEC (now MEEW). “Environmental Guidelines for Selected Infrastructure Development Projects”. Freshwater lens monitoring carried out annually up to 2004 in SDR only (b) The Borrower shall carry out on an annual basis the and till end 2005 in Kulhudhuffushi. environmental monitoring of the quality and quantity of freshwater lens, the geomorphology of the coastlines and Marine ecology baseline established the marine ecology of the surrounding waters of the Project but post project assessment not area and make available the results of the same to the available. public in a transparent manner. The community education and (c) The Borrower shall continue the public awareness on awareness component was however environmental conservation in schools, and through radio not replicated after 2003 by RDMOs and newspapers for adults. but other programs of MOH have been implemented.

Land use planning LA, Schedule Complied with. The Borrower shall in consultation with the Bank, prepare 6, para. 17 and use plans which shall facilitate the sustainability of Original Project scope met. MHUD natural resources including marine ecology in the Project has further taken initiatives by Area producing the Physical Development Plan for Kulhuduffushi approved by the President's office.

In addition to the scope of the project, MHUD is in the process of finalizing the land use for Hithadoo. Other draft base surveys available for islands in SDR and NDR.

NGOs, Cooperatives, Community-based Organizations, LA, Schedule Complied with. and Women’s Committees 6, para 16 On the focus islands under the Project, the Borrower shall Extensive participation sought for the facilitate the participation of NGOs, cooperatives, development of land use plans in the community-based organizations and women's committee SDR. Waste management toward an extensive and sustained information and awareness program conducted in education campaign to build public awareness for water SDR and NDR. A road video supply and sanitation, health, hygiene, environmental awareness was prepared to promote conservation, and other Project developments such as the road worthiness and safety. RDMOs.

Land allocation and Resettlement Plan LA, Schedule Complied with. The Borrower shall follow the Bank’s policy on Involuntary 6, para 10 Resettlement. During construction activities the Borrower No resettlement under the ADB- shall ensure that the EA takes necessary measures to Financed components of the Project. ensure that planning and implementation of construction Under the IsDB funded road activities are carried out in a manner minimizing adverse contract, the Government financed effect on local population. resettlement and compensation for 15 plots, 6 new houses have been constructed in place of those removed, and compensation and new land has been provided in

Appendix 5 23

Reference in Loan Covenant Agreement Status of Compliance accordance with Government policies and regulations. Extensive community consultation was carried out and a due diligence was conducted by Project Completion Review.

Social Development Fund (SDF). LA, Schedule Partially complied with. (a) The Borrower shall establish an SDF (the Fund) for use 6, para. 12 (a- in each of the 13 focus islands and for this purpose e) The Guidelines for the SDF were establish the Fund in the Bank of Maldives. The Fund shall approved by the Government in comprise all the monies paid back by individual households 2004. The established procedure under the credit assistance for provision of the rainwater developed under the UNDP program tanks and roofing materials and sanitation improvements is to be followed. Implementation on that particular island. A six member committee process for the SDR was drafted by comprising of 3 male members (from relevant island’s MPND/MOAD. Criteria for selection development committee) and 3 female members (from of application and their format relevant island women’s committee) shall be responsible remains incomplete. The SDF has for (i) the collection of the monies and deposit in the Bank not been established, partly due to of Maldives; (ii) ensuring that sufficient funds are available lack of appointment of CEOs and through Fund under respective account in the Bank of COOs. According to the recently Maldives to carry out a subproject; (iv) implementing the approved Public Finance Act, a subprojects; and (v) reporting on all aspects of the financial institution, in this case the subprojects every 3 months until completed. Bank of the Maldives, will administer the funds. Funds have not yet been (b) Each RDMO shall be responsible for monitoring on a operationalized. Their launch is monthly basis for each of the focus islands (i) the expected before end May 2007. collection; (ii) the deposits; (iii) the withdrawals from the Bank of Maldives; (iv) the subproject implementation progress, and report its findings to the PMU.

(c) The Bank shall review every 6 months the use of the Fund. An annual audit of the Fund by an independent auditor satisfactory to the Bank shall be conducted by the Borrower.

(d) The Fund shall be used in a limited manner by providing at least 50% for income generating activities, targeting the poor, and the balance for social infrastructure including health, environmental, educational and recreational needs of the community of each focus island as a whole. The activities under the Fund (i) shall be for the island community at large, (ii) shall not be formulated solely on a commercial basis, and (iii) shall not include activities already funded under similar schemes of the Borrower.

(e) The administration of the Fund including the criteria for the selecting the activities under sub-clause (d) of this paragraph shall be in accordance with guidelines acceptable to the Bank. The Borrower shall provide such guidelines to the Bank within 6 months of Loan Effective Date for its prior approval. Reports, Accounts, and Audit LA Schedule 6 The covenant is generally complied The PMU shall maintain separate accounts and records for para. 13 with. Marginal delays of very few the Project, including the SDF. The statement of days where noted in some instances expenditure records and the SDF shall be audited annually but these were minor: 2003 Audited by independent auditors acceptable to the Bank. PMU shall FS received by ADB first week of provide the Bank with copies of the audited accounts and Jan. 2005; 2004 Audited FS to be

24 Appendix 5

Reference in Loan Covenant Agreement Status of Compliance financial statements, together with the report of the auditors submitted in Dec 2005; 2005 Audited not more than 12 months after the end of the financial year FS received in Jan 2007. Financial to which they relate. statement of the SDFs were to be submitted to ADB by 31 Dec 05, however, did not occur due to lack of launching and lending of SDFs. To be followed up under RDP II. The audit reports were not qualified in any material respect by the auditors. Water supply and sanitation cost recovery LA, Schedule Partially complied with. (a) There shall be no direct subsidy for individual 6, para. 11(a- household improvement in water supply and sanitation. b) In both NDR and SDR, batch 1 and Credit shall be made available under the project for the 2 fully procured and distributed to total amount of improvements and the repayment period beneficiaries. Every month, shall be flexible to suit the beneficiaries, providing that a household is paying roughly MRf60 minimum repayment of Rf50 per month is made. Only to island office. A total of 5000 tanks households without rainwater tanks shall be eligible. For provided. Whilst contracts were any sewer schemes, the objective shall be to recover the signed with households, repayment operation and maintenance cost from the beneficiaries as at the time completion only amount well as a portion of the capital cost. to 80% in NDR and 46% in SDR. This is largely due to post-tsunami (b) The Borrower shall take all measures toward full cost donor activities which distributed recovery of the assistance to be made available on a credit tanks for free. Repayment prior to basis on the focus islands under the Project for the early 2005 was satisfactory. SDF approved individual household water supply and sanitation (NDR) currently holds Rs7 million, improvement (rainwater collection and sanitation units). whilst SDF (SDR) only amounts for Rs4 million

Required equipment to carry out microbiological testing of the treated water of the sanitation scheme was procured and the testing done in the SDRs and NDRs after trainings provided to RDMO staff by Public Health Laboratory.

The pilot sanitation scheme is still malfunctioning with discharge effluent quality below required levels. MPND engaged the services of an engineer in 2004 to rehabilitate the system, however, trained technicians to regularly operate and maintain the scheme are still necessary. Adequate budget allocations for separate O&M staff should be made. The Government is not intending to charge for this scheme, as it is considered a piloting activity, nonetheless, introducing a full island-wide scheme would require collection of charges for O&M from the community. Project Management Performance and Evaluation LA, Schedule Complied with. Activities were (a) The Project performance management and evaluation 6, para 14(a-d) conducted however the data may be system shall comprise of 3 parts: (i) benefit monitoring and questionable, as not available. evaluation (BME) to ascertain the impact of the Project on the beneficiaries; (ii) performance monitoring and Final BME Report submitted to ADB evaluation, which shall measure the efficiency of delivery of on 5 April 2006.

Appendix 5 25

Reference in Loan Covenant Agreement Status of Compliance the Project; and (iii) response monitoring and evaluation, A comprehensive database was set which shall measure the response of the community to the up at the beginning of the Project. development. Whilst a baseline was established, this is not at present available in RDMOs or MPND. Thus the BME could not evaluate scientifically data before and after the Project.

(b) BME Report which will include: The data was to be benchmarked in (i) use of well water for drinking and cooking purposes the: (ii) incidence of diarrhea diseases (i) first year of the Project (iii) incidence of casual garbage disposal (ii) at the midterm review (iv) prevalence of potholes and stagnant water in the (iii) end of the Project streets implementation (v) prevalence of mechanical breakdown of vehicles (vi) periodic daily vehicle counts Benchmarking was conducted at the (vii) prevalence of pumping of well water start of the Project but scientific (viii) incidence of sanitation by gifili (hole in ground) survey were not collected at (ix) knowledge of good hygiene practice completion for all indicators agreed, (x) time for vehicles to make the journey Gan to Hitahdhoo including baitfish, coastal erosion, (xi) baitfish prevalence in the lagoon diarrhea, etc. (xii) coastal erosion (xiii) employment outside the Project area Response monitoring was limited throughout the Project. (c) Performance monitoring and evaluation shall be Performance reviewed during review undertaken by the MPND in conjunction with Bank review missions. missions. They shall monitor (i) Project implementation schedule; (ii) Project costs; (iii) delivery of Project components; (iv) number of beneficiaries; and (v) O&M sustainability. This monitoring shall be done every 6 months from the start of the Project until 12 months after the end of the Project.

(d) Response monitoring and evaluation shall be conducted by the Bank review missions every 6 months and also by the Project completion mission. They shall record (i) any inconveniences to the people during construction; (ii) employment during construction; (iii) number of beneficiaries; (iv) comments on the Project from beneficiaries; (v) comments on the Project from nonbeneficiaries; (vi) visitors to RDMOs; and (vii) comments on O&M of Project facilities. The monitoring and evaluation shall be done through 3 levels of community, namely, (i) island chief, (ii) island development committee; and (iii) individual household sampling. Project Management Unit: LA, Schedule Complied with. (a) Prior to the Loan Effective Date the Borrower shall 6, paras 6. cause the PMU to be established in the MPND at Male and PMU was timely established and made fully operational including appointment of the adequately staffed at all time required staff. The PMU, headed by a Project Director, throughout the project. shall be responsible for overall Project management including monitoring of the performance of the nongovernmental organizations, cooperatives and other community based organizations. (b) The Borrower shall ensure that the PMU is at all time staffed with appropriate number of suitably qualified personnel, has suitable office accommodations, and has adequate budgetary resources for its effective operation during and after Project implementation.

26 Appendix 5

Reference in Loan Covenant Agreement Status of Compliance Project Implementation Units LA, Schedule Partly complied with. (a) Within six months of the Loan Effective Date, the 6, paras 7. Borrower shall establish and make fully operational, PIUs/RDMOs established within 6 including recruitment of staff, one PIU each in months but full staffing delayed to Kulhuduffushi and Hithadhoo. The PIU, in cooperation with mid 2001, when generally junior the Ministry of Construction and Public Works of the personnel were appointed. Borrower, shall be responsible for the detailed design and Budgetary allocations timely met construction supervision for the Gan-Hithadoo link road and throughout the Project. other infrastructure components under the Project and also for the preparation of specifications for bidding documents for the Gan-Hithadoo link road and environmental enhancement components, evaluation of bids, and coordinating the implementation of land allocation. (b) The Borrower shall ensure that each of the two PIUs are adequately staffed with appropriate number of suitably qualified personnel and have suitable office accommodations, and have adequate budgetary resources for their effective operation during and after Project implementation.

Fielding of Consultants LA, Schedule Complied with. 5, para. 5. Consultants fielded on 6 May 2000 as scheduled.

Implementation LA, Schedule, Complied with. The Project shall be implemented by MPND and MOAA 6, para. 2 Joint implementation of the Project which shall both be responsible for the implementation of by these 2 agencies. Coordination the Project however, difficult.

Regional Advisory Committee (RAC) LA, Schedule Complied with. The planning activities of each RDMO shall be guided by a 6, para. 5 local regional advisory committee consisting of participating RACs formed in NDR and SDR. atoll chiefs (chairperson on an annually rotating basis), the However, meetings irregularly RDMO chief executive officer, one community conducted with big shortcomings in representative from each participating atoll, and the 2005 and 2006. seconded planner appointed to the RDMO. Plans developed in the RDMOs shall become more responsive to local aspirations and shall conform to guidelines established in the development master-plans while remaining consistent with national development objectives.

Project Steering Committee: LA, Schedule Complied with. A PSC shall be established prior to the Loan Effective 6, para 3 Date. The PSC shall be chaired by the Minister of MPND PSC established and 1st meeting and shall be responsible for providing overall direction to was held in 4 Jan 01. Meetings the Project and assist in interagency coordination of irregular after 2004. activities. The PSC shall meet quarterly or more often as required to ensure efficient and effective Project implementation.

Regional Development Management Offices (RDMOs) LA, Schedule Partly complied with. Within 9 months of the Loan Effective Date, the Borrower 6, para. 4 Construction in both RDMOs have shall cause two permanent RDMO facilities to be been completed and furnished. The constructed, one at Kulhuduffushi island in the NDR and RDMO buildings occupied and the other at Hithadhoo island in the SDR. functioning.

The Borrower shall ensure that the RDMOs are at all times Staff trained but many had left the staffed with appropriate number of suitably qualified RDMO (SDR) at Project completion. personnel, have suitable office accommodations, and have New recruitment conducted but

Appendix 5 27

Reference in Loan Covenant Agreement Status of Compliance adequate budgetary resources for their effective operation junior untrained staff have not been during and after Project implementation. able to fulfill their functions. The Project also saw long periods without CEO and therefore without leadership.

PROCURMENT – If any substantial amendment of the (no reference Complied with. contract is proposed after its execution, the proposed in Loan changes shall be submitted to the Bank for prior approval Agreement, but recommended by OAGI)

CONSULTANTS – If any substantial amendment of the Schedule 5, Complied with. contract is proposed after its execution, the proposed para 6(d) changes shall be submitted to the Bank for prior approval

Others LA, Schedule Complied with. (a) The Borrower shall, in consultation with the Bank, 6, para. 8 (a-c) develop and enforce the code, particularly speed and (a) A road code in the form of a road truck use limits, for the Gan-Hithadhoo link road prior to its safety video prepared under the commissioning. Project.

(b) The Borrower shall utilize private sector contracts, (b) Private sector engaged for community based management or para-statals, whenever management of solid waste centers. feasible for provision of services to the public. (c) Adequate budgetary allocation (c) The Borrower shall ensure in agreement with the Bank, made for roads in Seenu. the adequate funds including through its annual budgetary provisions, for road and street maintenance.

ADB = Asian Development Bank, BME = benefit monitoring and evaluation, CEO = chief executive officer, COO = chief operating officer, FS = financial statement, IsDB = Islamic Development Bank, LA = loan agreement, MEC = Ministry of Environment and Construction, MEEW = Ministry of Energy, Environment and Water, MHUD = Ministry of Housing and Urban Development, MOAD = Ministry of Atolls Development, MOH = Ministry of Health, MPND = Ministry of Planning and National Development, NDR = North Development Region, O&M = operation and maintenance, PIU = project implementation unit, PMU = project management unit, RAC = regional advisory committee, RDMO = regional development management office, RDP = Regional Development Project, SDF = Social Development Fund, SDR = South Development Region.

28 Appendix 6

RELEVANCE ASSESSMENT

1. The relevance assessment for the Regional Development Project (the Project) addresses three separate aspects:

(i) Developmental program consistency examines consistency of the proposed outcome of the project with (a) the country’s development priorities, (b) the country and sector strategies of the Asian Development Bank (ADB), and (c) the island self-identified needs and aspirations, both at appraisal and at evaluation. (ii) Project design adequacy evaluates the extent to which the work used to justify project intervention was satisfactory and based on a sound problem analysis, considering both the overall project objectives and the design of specific components. (iii) Financing modality reviews the extent to which the design and the financing instrument selected were an appropriate response to the identified development problem.

A. Developmental Program Consistency

2. The Project, formulated in 1999, supported the development priorities of the Government of the Maldives (the Government), as identified in the Fifth National Development Plan (1997– 2000), and in particular the objectives that aimed to achieve regional and atoll development as a means to address disparities and access to natural resources, employment and income, housing and infrastructure, and education and health services. In addition, as indicated in Box A6.1, regional development remained a priority for the Government throughout the Sixth National Development Plan (2001–2005); it appears that it will so continue through the Seventh National Development Plan, currently in draft form. The Project’s relevance remains aligned with other Government’s policies (e.g. solid waste and sanitation) and action plans, particularly after the 2004 Indian Ocean tsunami, as awareness relating to environmental vulnerability and disaster risk management take a central role in the Government’s development strategy.

Box A6.1: Government Development Priorities and Strategies Since 1999

5th National Development Plan 1. To secure sustainable improvements in the living standards and quality of life of the population by pursuing appropriate growth strategies. 2. To ensure regional and atoll development addresses disparities and access to natural resources, employment and income, housing and infrastructure, and education and health services. 3. To ensure that the benefits of development are shared in a balanced manner among the population and address the hardship and vulnerabilities of dispersed island communities. 4. To ensure the sustainability of physical and natural resources by focusing on appropriate development and sound management. 5. To ensure good governance by effective executive Government through a streamlined and efficient public administration; a comprehensive, transparent and uniform set of laws enacted by the People’s Majlis, sound administration of justice through an independent, impartial and competent judiciary; maintenance of law by the National Security Service; and an up-to-date Constitution relevant to the nation’s affairs. 6. To strengthen national unity and social cohesiveness based on shared social, cultural and religious values.

Appendix 6 29

6th National Development Plan (2001–2005) 1. Diversify and expand the economy by further developing existing industries and by exploring new economic activities, while ensuring the sustainability of physical and natural resources. 2. Increase the role of private sector in the development process, particularly in expanding the economic base of the country. 3. Improve the quality and relevance of educational, health and social services, while ensuring that the benefits of development are shared equitably among the population. 4. Increase the human resource capacity and productivity by providing relevant training and employment opportunities. 5. Pursue legislative, regulatory, governance and administrative reform to facilitate rapid economic and social development. 6. Develop a sustainable and cost-effective transportation and telecommunication infrastructure to facilitate economic, social and regional development. 7. Ensure socio-political stability and democratic participation of all in the development process, while upholding the national unity and social cohesiveness based on shared social, cultural and religious values.

National Recovery and Reconstruction Plan- March 2005 - Disaster relief: help survivors of the tsunami cope with the immediate aftermath of the disaster. - Macroeconomic recovery and livelihoods revival: restore community livelihoods, revive key economic sectors and maintain macro-economic stability - Community empowerment: rebuilding lives with local ownership. - Environmental protection: protect and regenerate valuable marine ecosystems, strengthen disaster preparedness and mitigation measures. - Public service: restore access to basic services to all.

7th National Development Plan (First Draft) 1. Reduce vulnerability and poverty through human development and wider employment opportunities. 2. Improve access to opportunities and services through regional development and population and development consolidation. 3. Achieve development beyond pre-tsunami levels though rapid recovery and reconstruction. 4. Promote good governance through strengthening legal, administrative and political institutions and civil society. 5. Promote sustainable and equitable economic and social development through economic diversification and promotion of corporate social responsibility. 6. Strengthen family values and national unity through social, cultural and religious harmony.

3. Moreover, the Project directly supported two of the three objectives defined in ADB’s Country Operation Strategy 1995–2002: (i) regional development and support to population planning and (ii) the environment. The Project continued to be consistent with the Country Strategy and Program 2002–2004 and its updates. The Project was also coherent with ADB’s Medium-Term Strategic Framework (1997–2000), which focused on economic growth, poverty reduction, improving the status of women, facilitating progress in population planning and environmental protection.

30 Appendix 6

Box A6.2: ADB’s Development Objectives and Strategies since 1999

Objectives and Strategies under the 1995 Country Operation Strategy (i) Fiscal management (ii) Regional development, described in terms of social infrastructure for regional development, specifically in the following areas: (a) education—improving the quality of education through teacher training, reducing the rapid growth in education expenditures by replacing expatriate teachers, and reviewing the Ministry of Education; (b) health—upgrading regional hospitals, improving the skills of regional and community health workers, and providing assistance in determining cost-recovery measures for the health system;(c) population planning—-providing women in the atolls with improved access to education and health facilities through the support of women’s centers associated with hospitals and health care centers in the atolls (iii) The environment: the strategy was to support (a) investments in water supply and sanitation infrastructure to preserve underground freshwater aquifers; and (b) investments in breakwaters and coastal defense systems to combat coastal erosion, along with support for preparation of laws and regulations for improved environmental management, and support for environmental training and research. Strategies under the 2002 Country Strategy and Program ADB’s Medium-Term Country Strategy (2002–06) reflected the Vision 2020 statement of the President of the Maldives and the Government’s Sixth National Development Plan. The 2002 Country Strategy and Program addressed poverty reduction through the three pillars of pro-poor growth, social development and good governance. To foster pro-poor growth, the plan was to: (i) assist in fostering regional development, including the provision of basic infrastructure and capacity building; (ii) create an enabling environment for private sector development, including reform of the financial sector and the legal system; and (iii) develop an information and communication network in the atolls.

4. While the systematic formulation of island and atoll development plans was only initiated after processing of the Project was completed, it is noted from consultation reports with the community and local stakeholders1 that general agreement with and support for the regional development concept and the need to preserve the natural environment was being sought. During project preparation (1998–1999), major concerns highlighted by the community included the need to ensure (i) local provision of job and vocational opportunities, (ii) access to education and basic social services, (iii) access to adequate municipal services (including garbage collection) and (iv) microcredit opportunities. The islands’ aspirations are consistent with the project design, including components for social infrastructure, environmental and physical infrastructure, as well as the creation of a social development fund (SDF). Structured interviews with island development committees in Seenu atoll and Kulhudhuffushi island during the project completion review indicated (i) that construction of the causeway and bridge had major trade, social and environmental benefits, which have a direct positive impact in alternative job-creation, supply chain and fisheries; (ii) the continued need for job generation; (iii) major concerns over protection of the islands’ freshwater lens and access to safe drinking water; (iv) the need to address collection and disposal of household and other waste; and (v) the need for a comprehensive sanitation system. Therefore the Project continues to be directly relevant and necessary as perceived by the community.

5. While the Project constituted a priority intervention for the Government, and in particular the Ministry of Planning and National Development (MPND), community ownership of the

1 Opus 1999. Atolls Development Project: PPTA 2895-MLD Final Report, Appendix 12. Male.

Appendix 6 31

Project appears to have been mixed. This is due in part to limited consultation opportunities, but also to high community expectations and inadequate technical understanding.

B. Project Design Adequacy

6. The project design was found to be satisfactory and based on a sound problem analysis. The project design, as presented in the Project’s report and recommendation of the President (RRP), 2 contained an adequate macroeconomic and political economy assessment that specifically addressed issues of population growth and migration to Male as well as regional inequality, and proposed an institutional strengthening and infrastructure development package. These are also consistent with local concerns and ongoing parallel initiatives to create employment and generate regional development that would potentially help achieve the proposed goals and purpose of the Project: regional economic development in the northern and southern development regions (NDR and SDR, respectively).

7. Consistent with the objectives of regional development and environmental protection, and Government and ADB priorities, project components provided solutions to address (i) administrative discrepancies between Male and the outer islands, (ii) reduced environmental carrying capacity resulting from population growth and (iii) erosion of unprotected coastlines. In addition, the project carefully considered other important issues directly related to the goal of the Project (e.g., participation by the private sector and women.

8. The Project was classified and designed to be multisectoral, and several sectors were consequently analyzed. The RRP specifically assessed environmental and regional economic constraints at the national level. Although not covered at sectoral level, the analysis of the NDR and SDR areas described problems affecting road transport, water supply and sanitation and solid waste management. Project intervention appears to have been well-timed; after two decades of impressive economic performance, the country entered a critical stage of development, in which the regional inequality gap needed to be closed to enable continued growth.

9. While lessons presented in project documents are relevant, they primarily involve administrative system capacity constraints rather than lessons drawn from projects in sectors of interest. This may be due to limited sectoral experience on the part of ADB and/or other partners. Nonetheless, and within the regional development framework of the Government, coordination with development partners such as the United Nations Development Programme (UNDP), Kuwait Fund and the Islamic Development Bank (IsDB) was ensured. The project preparatory technical assistance (TA) was generally satisfactory and comprehensive in content, clearly identifying issues and risks affecting the Project.3

10. Implementation arrangements identified MPND as the implementing agency, with Regional Development Management Offices (RDMOs) established in the NDR and SDR. MPND was specifically selected as the implementing agency given (i) its strong capacity and (ii) the multisectoral nature of the Project. However, as indicated in the project preparatory TA final report, the Ministry of Atolls Administration had direct responsibility for administrative activities in the atolls, and its relative marginalization from the Project may have led to this ministry’s

2 ADB. 1999. Report and Recommendation of the President to the Board of Directors on a Proposed Loan to the Republic of the Maldives for the Regional Development Project. Manila. 3 This included, amongst other, (i) commitment to regional development, (ii) settlement consolidation, (iii) cost recovery and infrastructure development and (iv) future support to vulnerable islands.

32 Appendix 6 inherent opposition to project outcomes, particularly those relating to institutional development. The parallel responsibilities of these competing agencies were identified at the design stage, however, evolving ministerial mandates gave the Ministry of Atolls Development (successor to the Ministry of Atolls Administration) (i) responsibility for RDMOs in 2002 and (ii) greater developmental powers in 2003. These responsibilities have since been revised again, with RDMO responsibilities having been recently transferred to the Ministry of Housing and Urban Development.

C. Adequacy of Financing Modality

11. The financing instrument selected for this Project corresponds to ADB’s project loan approach. The project modality appears suitable and well-justified, given (i) the allocated resources ($14 million, of which $8 million was financed by ADB); and (ii) the fact that this was the first multisector intervention to be implemented in the country, and the first intervention to be implemented by the Ministry of Planning and National Development. Co-financing arrangements on a parallel basis with the IsDB were suitably designed to ensure simplicity and ease of implementation.4 The Project also considered means and methods to support the introduction of small microcredit facilities through the SDFs.

4 The IsDB focus was on financing the Gan-Hithadhoo causeway.

Appendix 7 33

EFFECTIVENESS ASSESSMENT AND LESSONS LEARNED

1. In this section, the evaluators have sought to determine whether the outcome of the project as defined in the design and monitoring framework was achieved or is expected to be achieved. Since outputs and activities envisaged under the Project were to enable accomplishment of the outcome, these are also separately assessed under this section.

A. Output Evaluation (Leading to Outcome Achievement)

2. This section has been structured in accordance with outputs outlined in the report and recommendation of the President (RRP).1 Data presented has been extracted from structured interviews, and primary and secondary data collected.2

1. Institutional Strengthening

3. RDMO Construction. Overall, this component is considered to have been effective in the northern development region (NDR) and less effective in the southern development region (SDR). Two buildings were constructed to house the Regional Development Management Offices (RDMOs) for the NRD and SDR, in the islands of Kulhudhuffushi and Hithadhoo, respectively. The offices, constructed under the supervision of the Ministry of Atolls Development (MOAD) with financing by the Government of the Maldives (the Government), substantially exceeded the initial budget, as the building size was increased by a factor of two to three, including the provision of accommodation. The buildings remain well maintained but are presently only partially utilized.3 To support the transition period—which should end with full RDMO empowerment—NDR RDMO has on a temporary basis accommodated other island and regional functions,4 and made the conference hall available for community meetings and other events. Construction of the RDMO buildings was agreed upon in July 2000; although partially delayed, civil works were completed in August 2002 (NDR RDMO) and September 2003 (SDR RDMO). In the interim, RDMO staff operated from temporary facilities.

4. Training. The project provided short-term training (varying between 2 and 6 weeks) for RDMO staff. While the nature and content of the overseas certificate courses received from internationally-recognized institutions was broad and comprehensive,6 it is generally recognized that the instruction received may not have been sufficient, given that most of the staff recruited for the RDMOs did not have a graduate degree. Technical assistance (TA) was therefore conceived and implemented by the Asian Development Bank (ADB) to complement and supplement courses provided though the training could not be attended by all RDMO officers.7

1 ADB. 1999. Report and Recommendation of the President to the Board of Directors on a Proposed Loan to the Republic of the Maldives for the Regional Development Project. Manila. 2 Although baseline data was produced under the Project, this could not be located by the Government at the time of PCR preparation. 3 This is also a criticism reported by the community. 4 At the time of the project completion review, NDR RDMO had leased some of the accommodation and was temporarily housing Kulhudhuffushi’s Court. 5 This includes AIT, Bangkok and IMA, Brisbane. 6 Courses included (i) planning for community water supply and waste management, (ii) GIS, (iii) environmental impact and review, (iv) rural road development and maintenance management, (v) economic evaluation of environmental impacts, (vi) project monitoring and evaluation and (vii) information technology and management. 7 ADB. 2003. Technical Assistance to the Republic of the Maldives for Capacity Building for Regional Development. Manila

34 Appendix 7

5. Staffing and Staff Capacity. An RDMO was established in both Kulhudhuffushi (NDR) and Hithadhoo (SDR). In agreement with the mandate issued by the President’s Office and consistent with the RRP, RDMOs were created to handle four major functions: (i) development planning, (ii) information coordination with central (and other government) agencies, (iii) management of contracts for provision of services in the region, and (iv) maintenance of a database on resources in the region, including human and natural resources. RDMOs were therefore structured with five sections (environment, projects, land use planning, accounts and administration and information coordination) under the supervision of a chief executive officer (CEO).

6. The RDMOs were established within 9 months of loan effectiveness. Although they encountered some initial problems in recruiting staff, as suitable interested candidates could not be easily identified, recruitment was completed by February 2001. The RDMOs remained staffed at completion, but knowledge retention and institutional memory varies significantly between the two offices. With the exception of the environmental officer, who left in January 2007, NDR RDMO staff have remained in place since February 2001, which has (i) increased their understanding of issues; and (ii) helped build the confidence of and maintain relations with the community and other administrative offices. Current activities undertaken by the NDR RDMO and its 11 staff include surveying and land use planning functions (on non-focus islands), information collection and coordination with ministries on price indices, national registration, public awareness, project prioritization support, sewage treatment plant operation and environmental monitoring. In SDR RDMO, staff retention has been low (only two staff have been retained from the original team), and the only functions active at present in this RDMO include project and surveying functions. New and additional training is needed, particularly in support of environmental monitoring and information coordination functions.

7. Streamlining and Institutionalizing of RDMOs. RDMOs were first conceptualized in the mid-1990s, but understanding of RDMO functions (mostly associated with planning, programming and monitoring) among ministries was, and in some cases remains, limited. This continues to be the case, in particular with MOAD (initially the direct line ministry), which appears not to see immediate benefits associated with the RDMOs, and perceives that they duplicate rather than complement the functions of the existing atoll administrative system.

8. Other ministries, particularly those with revised, reorganized8 or newly introduced9 mandates, have not always been able to familiarize themselves and/or establish relations with RDMO staff. There is need to streamline and simplify procedures and reporting for direct communication between RDMOs and line ministries responsible for planning and project management. Central government agencies should (i) always respect regional mandates (as described in para. 5 above) of the RDMO and inform the offices of ongoing and proposed programs, and (ii) delegate monitoring and support functions to the regions. RDMOs have developed relatively strong links and regular communications with the Ministry of Housing and Urban Development (MHUD) and the Ministry of Planning and National Development (MPND), particularly in the NDR, with a progressively developing relationship in SDR. There is room for enhancement in newer ministries, however, such as the Ministry of Environment, Energy and Water (MEEW) which should jointly agree on (i) annual work programs with RDMOs for regional matters and (ii) training needs and training support.

8 Such is the case with the ministry involved with environmental matters, which has seen its function revised several times in the past 4 years. 9 This is the case of the newly formed water function within the Ministry of Environment, Energy and Water. The Maldives Water and Sanitation Authority established an initial relationship with these offices that should be maintained.

Appendix 7 35

9. Chief Executive Officers (CEOs). Appointment of CEOs was compliant with the RRP, which indicated that the RDMOs would be resource centers available to participating atolls but that for administrative purposes, they would be controlled by the atoll office of the atoll in which they were established10. ADB missions have expressed some concern over the Government’s decision to allocate CEO functions to the atoll chief in charge of Seenu atoll (for SDR) and Haa Dhaal (for NDR), as joint functions could lead to a potential conflict of interest, with an excessive workload being placed on the CEOs, which may leave them unable to attend to RDMO matters. To overcome this problem, regional steering committees in both NDR and SDR recently agreed that the CEO function would rotate among each region’s atoll chiefs. Although this offers an initial solution, and may be adequate in combination with appointed Chief Operating Officer functions (which are in place in both regions), having the CEO and RDMO officers located in different atolls may produce communication difficulties. The most appropriate solution remains to appoint a separate full-time CEO to support both RDMO administrative functions and central government agencies. This view has also been expressed by selected atoll chiefs. This is particularly relevant in light of the fact that one of the difficulties facing the Project related to the frequent replacement of atoll chiefs (and therefore CEOs), and the need for postponement of regional steering committee meetings.

10. Budget. Throughout project implementation and after project completion RDMOs received operational budgets in line with financing agreed with ADB.11 A summary is presented below. Operational budgetary requests were prepared in all cases by the RDMOs and submitted through MOAD, demonstrating (i) the capacity of the RDMOs and (ii) renewed commitment by the Government to these offices.

Table A7.1: Summary of RDMO Annual Budgetary Allocations (Rf) Year RDMO SDR Budget RDMO NDR Budget 2000 210,002 2001 1,111,228 1,101,012 2002 1,063,818 983,064 2003 1,192,777 1,207,515 2004 1,229,691 1,130,496 2005 1,508,646 1,438,437 2006 1,693,646 1,540,540 NDR = northern development region, RDMO = regional development management office, SDR = southern development region. Source: SDR and NDR RDMO office records.

11. Vehicles and Equipment. One van, one motorcycle and one launch12 were purchased for each RDMO. To date the vans and motorcycles remain operational and well maintained in each RDMO. The launch in SDR RDMO is functioning well, while that in the NDR RDMO is not operative. The launches, selected for their stability and suitability for research activities and equipment operation, are reported to have suffered multiple failures and delayed repairs. In an effort to resolve the operation, maintenance and repair problems encountered with the drives and engines of the two boats, MPND organized focused trainings with boat and engine manufacturers, but the exercise was not attended by technicians from NDR. The NDR RDMO launch, which initially only suffered gearbox breakdown, was further damaged after the 2004

10 Regional Development Project RRP, para. 52. 11 Regional Development Project RRP, para. 57. 12 Purchased in March 2003 and July 2002, respectively.

36 Appendix 7

Indian Ocean tsunami by wave impact and subsequent vandalism. Quotations for fiberglass and other repairs are being sought by the RDMO.

12. Equipment purchased under the Project for the RDMOs includes conductivity meters for the NDR and SDR as well as a colorimeter, a biological oxygen demand (BOD) tracking apparatus, blender and incubator and associated reagents and equipment to estimate totals suspended solids, nitrates and ammonia for SDR. Equipment continues to be used in NDR to support sewage treatment plant and borehole monitoring activities, but activities under the water quality monitoring program have been discontinued in SDR for some time, and the status of the equipment could not be determined during the Project Completion Review Mission. The equipment should be calibrated annually in any case as part of routine RDMO operations.

2. Providing Social Infrastructure

13. The Project had two major subcomponents associated with social infrastructure: (i) provision of safe water through a water tank program in the NDR and SDR and (ii) provision of septic tanks and establishment of a pilot sewerage scheme in the NDR.

14. Water Tank Subcomponent. A total of 5,000 tanks were provided in two batches under the Project. A first batch of 2,000 water tanks13 was provided (1,000 in each development region) and based on overwhelming demand and savings from unspent funds (initially allocated under the loan to assist in the provision of credit for new roofing for rainwater harvesting, but no longer required by families in the community), a second batch (of 3,000 tanks) was procured and distributed.14 The program was very successful in providing essential drinking water facilities to households in NDR and SDR. The impact of the water tank program was significant, as shown by the increase in the number of households with water tanks over the Project implementation period (2000–2004) (Table A7.2).15 After project completion (in 2004) all supported atolls (i.e., all atolls in the NDR and SDR other than Shaviyani16) generally reported improvements in water availability; in all atolls the percentage of the population that suffered from water shortages during the previous year was below 16% (Figure A7.1), which is significantly below the country atoll average of 30%. In addition, with the exception of those atolls supported by the project, the percentage of the population reporting water shortages increased in all atolls in the Maldives between 1997 and 2004, reaching significant levels. The success of this program can therefore be measured both in absolute terms and in relative terms with respect to the rest of the country.

13 In the SDR, the six islands of Seenu atoll were initially selected for assistance. They received 1,000 rainwater tanks, 16 bases and 64 roofs. The program was then extended to Gaaf Alifu, Gaaf Dhaal and Gnaviyani. In the NDR, the program was also implemented in two phases in which 31 islands from Haa Dhaal and Haa Alifu received tanks. All tanks provided had a capacity of 2,500 liters (L). 14 Based on demand as well as other ongoing programs (Shaviyani in NDR benefited from a separate water tank fund provided by the United Nations Children’s Fund [UNICEF], thus no tanks were provided under the loan for this atoll), the second batch provided 1,290 rainwater tanks in the SDR and 1,710 in NDR. 15 The further increase in number of water tanks in the households over the 2004–2006 period is due to tsunami recovery programs. 16 Shaviyani was not supported under the Project as (i) it is also supported through a parallel program of the United Nations Development Programme and (ii) had a desalination plant available.

Appendix 7 37

Table A7.2: Water Tank Availability in Households Indicator Before the Project After the Project NDR SDR NDR SDR Total Number of Structures 8,694 a 9,482 a 7,512 b 8,044 b Households with Water Tanks (%) 40.39 a 39.89 a 79.2 c 81.42 c 96.04 b 94.05 b NDR = northern development region, SDR = southern development region. Sources: a Population and Housing Census of the Maldives (2000), b Population and Housing Census of the Maldives (2006), and c Vulnerability and Poverty Assessment (2004).

Figure A7.1: Water Shortages Reported in the Previous Year, by Atoll

80

70 VPA 2004 VPA 1998 60

50

40

30

20 % of atoll population % of atoll 10 Maldives Maldives Haa Dhaalu Haa Dhaalu A Haa Alifu Haa Alifu A Male Shaviyani Shaviyani A Vaavu Noonu Raa Lhaviyani Lhaviyani Meemu Faafu Thaa Kaafu

0 Baa Laamu Dhaalu Dhaalu Laamu Laamu Seenu Gaafu Dhaalu Gaafu Dhaalu Gaafu Alifu Gnaviyani Gnaviyani Seenu toll averag lifu Dhaalu lifu Dhaalu lif Alifu e Atoll VPA = Vulnerability and Poverty Assessment Source: Vulnerability and Poverty Assessment (1998, 2004) – reproduced.

15. As indicated by the Project’s benefit monitoring and evaluation report,17 the total additional estimated rainwater capacity gained through the Project is 40.36 megaliters (ML);18 although significant, the report suggests this would represent approximately 40% of the total per capita requirement,19 indicating the value of continuing activities through the social development funds. The 40% figure must be used with caution, however, as parallel (and slightly more sophisticated) probability calculations presented in project preparatory TA (PPTA) final report and based on monthly rainfall data20 indicate that up to 61 cubic meters (m3) in NDR and 68 m3

17 Axe Services (for the Ministry of Planning and National Development). 2005. Benefit Monitoring and Evaluation Report: Regional Development Project Phase 1 (2000–2004). Male 18 Calculations based on the benefit monitoring and evaluation report indicated potential replenishment of 3.5 times per year in the NDR and 3.5 times a year in the SDR. 19 Total annual drinking water demand for the approximately 70,000 population supported by the programs in the NDR and SDR is calculated (based on national standard for water supply of 4 L per capita per day) to be 102 ML. 20 A total of 68 months of rainfall data from Hanimaadho airport and 254 months from Gan airport were used for NDR and SDR calculations, respectively. However, the calculations are contingent on full roofs, of an estimated 60 m2 surface area, being used.

38 Appendix 7 in SDR could used annually from a 3 m3 tank,21 which would secure more than 5 liters (L) per capita per day for a family of 8, and thus substantial. Overall this subcomponent can be considered to have been “efficient” to “highly efficient” (particularly in the NDR).

16. Water Tank Repayment. The rainwater collection financing component was designed to help households purchase rainwater storage tanks and/or rehabilitate or improve rainwater harvesting equipment through a credit facility. Tanks procured in October 2001 and made available to the community in April-May 2002 (batch 1 tanks) were to be repaid over a period of 5 years, whereas tanks procured in March 2003 and delivered and distributed in September- October 2003 (batch 2 tanks) were to be repaid by households in 3 years. The current status of repayment is in table A7.3 (some repayments are still ongoing and are due over the next 6 months). More than 80% of the financed amount has been repaid in the NDR to date, and the component can be considered to be highly successful.22 In the SDR, results are less satisfactory, with only half of the total amount due having been repaid to date. While loss of water tanks during the December 2004 tsunami may be part of the problem, atolls such as Seenu and Gnaviyani in the SDR were not significantly affected by the disaster. Instead, subsequent provision of free facilities by several donors and development partners is believed to have negatively impacted household repayments.23

Table A7.3: Water Tank Repayment Location No Tanks Total Due (Rf) Total Received (Rf) Recovery (%) NDR 2710 8,852,449 7,029,873 80 SDR 2290 8,560,007 3,919,739 46 Gaaf Alif 250 783,250 152,720 20 Gaal Dhaal 520 1,629,160 583,116 36 Gnaviyani 520 1,629,160 759,606 46 Seenu 1000 4,518,436 2,424,295 54 Total 5000 17,412,456 10,949,612 63 NDR = northern development region, SDR = southern development region. Source: Asian Development Bank estimates.

17. Establishment of Social Development Funds. The Project envisaged that credit repayments by individual households would be collected and reutilized through a social development fund (SDF). SDF accounts in the NDR and SDR hold approximately Rf7 million and Rf4 million, respectively, which is in agreement with amounts recovered from tank repayments. While the project assurances (para 107 (x) of the RRP, footnote 1) indicated that draft guidelines on the administration of the SDFs would be available within 6 months of effectiveness, delays in the preparation and subsequent revisions meant the guidelines were not endorsed by ADB until during the November 2004 project annual review. Despite finalization of the SDF guidelines in 2004, and preparation of SDF application forms and training of four staff from both the SDR and NDR RDMO in 2005, launch of the SDFs was delayed until 2007. Delays have been due to (i) the Government’s need to attend to emerging priorities in the aftermath of the tsunami; (ii) the temporary appointment of several atoll chiefs/CEOs over the

21 This would provide a total of 321 ML additional annual rainwater harvesting capacity from rainwater tanks provided under the Project. The feasibility study also clearly indicated the need to provide larger water tanks in the NDR with respect to SDR. 22 It is also important to note that delayed repayments are still taking place and that the RDMOs have an ongoing program of reconciliation of accounts and communication with island offices (responsible for collecting repayments) to ensure full repayment and minimization of accounting errors. 23 The benefit monitoring evaluation report (footnote17, above) indicates that recovery in Seenu atoll as of February 2005 showed that 100% of the beneficiaries made timely monthly payments, thus indicating good management of the scheme and commitment by beneficiaries to repaying the loans.

Appendix 7 39

2005–2006 period and the absence of regional steering committee meetings to endorse and/or revise SDF terms; and (iii) the Government’s policy reform initiatives and associated approval of the Public Finance Act, requiring funds to be managed by a recognized financial institution. The delay has been used by the RDMOs as an opportunity to collect sufficient funds for launch of the SDFs, and to conduct community publicity campaigns. The SDFs will be launched in the NDR and SDR over the next 1–2 months, as guidelines have now been approved in recent regional advisory committee meetings in both regions, and an agreement has been reached with the Bank of the Maldives for administering both SDFs.24

18. Sanitation Subcomponent. The Project envisaged that the sanitation subcomponent would consist of three parts: (i) provision of septic tanks to 1,000 households, (ii) a pilot community sewerage system in Kulhudhuffushi and (iii) sludge removing equipment for each region.25 The provision of septic tanks was abandoned for Kulhudhuffushi because most households already had septic tanks within their compounds, although it is now recognized that the quality of septic tanks is not always adequate, leading to leaking; the demand-driven repayment scheme was therefore not pursued by the community.

19. The Pilot Sewerage Scheme. Although the RRP did not explicitly indicate the number of households that would be covered under the Project, the size of the pilot was limited to 50–60 households due to (i) the limited financial allocation and (ii) uncertainty over the results of what was to be the first organized sewerage scheme in the semi-urban Maldives outside of Male.26 The report produced by the consultant27 and submitted for discussion to the steering committee provided a brief summary of the option evaluation, but the specifications (provided in Appendix 5 of that report) do not appear exhaustive.28 The design was instead outsourced, and apparently had shortcomings from the outset.29

20. The pilot sewerage scheme was tendered in July 2001 but was postponed on several occasions due to a lack of bidders. The contract for the pilot sewerage scheme was signed in May 2002,30 civil works were completed in May 2003 and the system was commissioned in May 2004.31 The Kulhudhuffushi pilot scheme has been reportedly malfunctioning since July–August 2004, however. A consultant from MWH, the consulting company in charge of the scheme’s design, was engaged in August–September 2004 to repair and provide advice regarding the system, after which the sanitation scheme functioned adequately for a period of 2–3 months. The system developed new problems in October–November 2004, however, which have not yet been resolved, despite some partial design modifications proposed by the operating team.

21. Operation and Maintenance. The RRP for the Project (para. 57) indicated that operations and maintenance (O&M) for any community sewerage scheme would be contracted

24 Activities and eligibility criteria have been defined, interest rates agreed upon and the Bank of the Maldives administration fee fixed (at 1.8%). It is hoped that administration by the Bank of the Maldives will lead to higher repayment levels in the SDR for water tanks than those achieved to date. 25 Regional Development Project RRP, para. 38. 26 Some government agencies have reportedly expressed reservations with regards to the dangers of introducing pilot schemes due to the associated community impacts and expectations. 27 McAlister Elliot & Partners. 2000. First Regional Development Project: Northern and Southern Development Region: Focus Islands Water Supply and Sanitation Improvements. Male. 28 For instance, no discharge standards have been presented, and the land surface area has not been estimated. 29 E.g. the document assumes that effluent filters have been installed in septic tanks, yet this was not the case. 30 The scheme was constructed by Monaza Construction, Maldives. The system, which assumes primary treatment in septic tanks, is characterized by discharge to a centralized pumping station feeding a modular recycling sand filter constructed above ground. 31 The scheme was not fully commissioned, however, as the ultraviolet light disinfection unit was not installed.

40 Appendix 7 out, but the report submitted by the consultant in December 2000 (footnote 27) indicated that O&M would be the responsibility of the RDMO, which could either contract services to contractors, or train and employ a suitable person. The RDMO is currently responsible for O&M of the scheme, but no technical team has been specifically and exclusively given this responsibility. Selected RDMO staff members are supporting the scheme’s operation and effluent monitoring, but this is not systematically and regularly undertaken, and is instead forms part of other ongoing tasks. In addition, although much effort has been made by the staff, they lack expertise and technical qualifications, and training in O&M by the design consultant has been limited. Several shortcomings have been observed including: (i) essential O&M steps outlined in the manual prepared for the sewage treatment plan are not systematically followed (the system is run on more of a crisis-management basis); (ii) preventive maintenance and annual conditioning of several parts of the scheme are not undertaken; (iii) influent and effluent sampling is not regularly monitored and analyzed; and (iv) household septic tanks are not systematically emptied, allowing solids to be transported into the sewage treatment scheme.

22. Financial Arrangements. The RRP also indicates (para. 57) that beneficiaries would be expected to pay a fee covering the full O&M costs for the sewerage scheme. Section 3.5.1 of the Consultant’s report (footnote 27) indicates that cost recovery and O&M costs were to be recovered from beneficiaries by the RDMO. In practice—and based on the fact that the O&M of pilot activities for the limited number of households that agreed to participate in the pilot exercise would involve high costs—the Government decided that all expenditures associated with the scheme would be borne by NDR RDMO budgetary allocations. In retrospect, and given that the pilot scheme has not functioned adequately, households would likely have refused to pay for a deficient service, if a fee had been introduced.

23. Assessing Pilot Results. The objective of the pilot communal sewerage scheme was defined (footnote 27, above) as being to develop and demonstrate community sewage collection and treatment technology based on land treatment of wastewater, enabling water to be returned safely to the aquifer. The concept was that several such satellite schemes could be replicated to cover major population centers, utilizing small areas of unoccupied or unused land near the coast. While certain lessons have been learned from operation of the scheme, the objective would appear not to have been met from a technical and institutional point of view.

24. Technically, the scheme could only be partially demonstrated. With the exception of three households that had to be disconnected due to reported backflushing into the compound, the small-bore settled sewerage network was found to operate adequately, meeting the on-site sanitation needs of the households. The sewage treatment plant does not appear to have performed properly over the piloting period, however. A proper assessment of the performance of the sewage treatment plant has not been possible; despite recommendations by ADB missions,32 influent and effluent are not regularly sampled, and consequently no quality data are available. NDR RDMO does monitor water quality in the proximity of the sewage treatment plant through sampling and testing from six adjacent boreholes and nearby wells.33 Borehole samples collected and analyzed by both RDMO staff and Kulhudhuffushi hospital indicate that coliform (total and fecal) counts in groundwater adjacent to the plant exceed recommended levels (i.e., World Health Organization guidelines).

32 ADB. 2005. Aide Memoire: Loan Review Mission: Regional Development Project. Male (6–14 November). 33 Testing includes BOD, total suspended solids, nitrates and ammonia. Samples are taken monthly, on average, and analyzed in what appears to be a regular testing program.

Appendix 7 41

25. In the absence of an ultraviolet (UV) disinfection unit,34 the effluent, which is discharged into soakage pits built for this purpose within the RDMO compound, may be polluting rather than protecting the aquifer. Borehole data (see Table A7.4) indicate that concentrations for most parameters, and in particular BOD and ammonia, vary seasonally, but some appear to be increasing, indicating they are accumulating in the aquifer. Other shortcomings observed in the sewage treatment plant operation include effluent overflow, and irregular screen cleaning and flooding, resulting from insufficient ground absorption capacity.

Table A7.4: Sewage Treatment Plant Borehole Qualitya Parameter Ammonia (mg/L) Nitrate (mg/L) TSS (mg/L) pH BOD (mg/L) Date BH1 BH2 BH1 BH2 BH1 BH2 BH1 BH2 BH1 BH2 25-10-2004 0.5 0.0 5.5 0.7 1 0 7.23 7.25 24 13 25-11-2004 0.5 0.1 5.9 0.5 2 0 7.2 7 30 15 20-12-2004 0.4 0.1 5.8 0.5 2 0 7 7 26 10 22-01-2005 0.5 0.1 5.9 0.5 2 0 7.2 7 30 15 20-03-2005 0.1 0.0 4.0 1.2 2 0 7.2 7 25 16 25-04-2005 0.5 0.2 5.4 0.5 2 0 7.2 7 30 15 15-05-2005 0.2 0.0 5 0.5 2 0 7.2 7 30 15 19-06-2005 0.9 0.3 6.9 0.5 2 0 7.2 7 39 15 20-07-2005 0.8 0.3 5.0 0.4 1 0 7.0 7.0 27 18 10-09-2005 0.9 0.2 6.5 0.5 1 0 7.0 7.0 30 15 09-10-2005 0.5 0.3 5.0 0.1 2 1 7.0 7.0 32 12 B1 = Borehole within 1m of sewage treatment plant, B2 = Borehole within 6m of sewage treatment plant; BOD = biological oxygen demand, L = liter, mg = milligram, TSS = total suspended solids. a The groundwater quality monitoring program would appear to have been discontinued in 2006.

26. Institutionally, the scheme appears to have been only partially successful in introducing and formalizing O&M functions. Although a number of groundwater monitoring activities were institutionalized, this appears to be incomplete and has recently been discontinued. In addition, specific O&M staff have not been appointed, and training and preventive maintenance functions have not been introduced. Contractual targets and private sector participation have not been considered as part the institutional arrangements, and viability (through an assessment of available private sector expertise) was neither confirmed at the time of appraisal nor during implementation. Long-term administrative responsibilities, necessary for the establishment of a comprehensive scheme for the island, have not been defined.

27. Finally, although the concept of having multiple satellite schemes operating within the island might be adequate if these schemes were operated properly, it would nonetheless result in additional O&M requirements and costs. A centralized scheme—which could achieve greater benefits from economies of scale—may be unacceptable to the community, however, and require expertise that is not available. The capital cost per household of the pilot was more than $3,000, which is considered high. Overall the subcomponent is considered “less effective” to “ineffective”.

28. Desludging. A desludging tractor was provided in NDR and SDR to serve Kulhudhuffushi island and Seenu atoll, respectively. Original institutional arrangements indicated that the desludger was to be managed by the RDMO, which in turn would engage contractors to operate the system. The situation varies significantly between the NDR and SDR. In the NDR, ownership of the desludger was transferred from the RDMO to the atoll office in

34 No reason has been provided for the failure to install the bacteria (especially coliform) UV disinfection unit, but higher-than-desirable effluent turbidity could be the root cause for delaying UV lamp installation.

42 Appendix 7

April 2004, along with assets and responsibilities relating to the solid waste management center. Joint desludging and solid waste functions appear adequate and have led to the issuance of a single management contract, whereby solid waste management costs are cross-subsidized and partially recovered from the use of the desludger.35 The equipment is regularly used and relatively well-maintained. The waste management functions do not serve regional or atoll-level functions, however, and this may be more appropriately assigned to the island office; such a reassignment is now underway.36

29. The desludger in the SDR, which was due to serve all islands connected by the causeway, remains the responsibility of RDMO (and within their compound). The equipment is reportedly underutilized, however, with the community reluctant to pay fees for such services. This is likely to lead to accelerated pollution of groundwater resources.

30. Community Education and Participation Program. The Project envisaged the formulation and delivery of a community education and awareness program to focus on water and sanitation in the NDR and SDR. The program was to be implemented through the RDMO and target government agencies (health, island development committees, etc.), community interest groups and individual households. Available data indicates that relatively little support was provided by the Project for better health and hygiene practices, possibly in part because of the simultaneous implementation of hygiene education and awareness programs by the Ministry of Health and UNICEF.

31. Water tank programs, which provide an alternative drinking water supply for households dependent on contaminated well water, coupled with hygiene education programs are believed to have significantly contributed to a reduction in waterborne diseases in the two regions. Limited data available from Kuhudhuffushi regional hospital annual reports indicate a 60% reduction in reported cases of diarrhea over the implementation period.37 In addition, data on diarrheal incidence presented in the benefit monitoring and evaluation report reveal a 26% reduction in the number of cases from 2003 to 2004 in Seenu atoll (SDR).

3. Developing Physical Infrastructure

32. Link Road. The Project’s largest component38 consists of a link road from Gan to Hithadhoo and a bridge and causeway with culverts, which was also designed to support coastal protection in the SDR. The road’s39 design was modified from appraisal to incorporate community priorities,40 and reduced41 in length from 17 km to 13.5 km.42 The MEP/OPTI team of

35 Desludging fees vary between Rf900 and Rf1600 depending on the size of the septic tank. 36 As confirmed by atoll and island offices and private parties.

37 Annual reports from Kulhudhuffushi regional hospital indicate a reduction in diarrhea cases from 277 in 2002 to 110 in 2003. These data do correlate with data presented in the benefit monitoring and evaluation report for Haa Alifu and Haa Dhaal for 2003 and 2004, however. 38 Co-financed by ADB, IsDB and the Government of the Maldives. 39 The road is 7.5 m width and 13.5 km in length with a 30 mm crowned surface and built according to international standards, with sign boards and safety instructions. 40 The community requested that the rather than upgrade sections of island roads the link road be extended by 1.5kms to connect to the population center in north Hithadhoo, which was agreed to. The community has indicated that while early consultations did occur, a consultation informing them of the final design did not take place. 41 Although the existing budget increased from appraisal levels, bids significantly exceeded the revised value. Harbor upgrades were removed from the original scope. 42 Other modifications include (i) installation of ducts for communications (Dhiragu) and electricity (STELCO) in all bridge sections and (ii) asphalt surfacing by an Indian subcontractor under the supervision of the construction supervision engineer.

Appendix 7 43 consultants conducted a detailed topographic survey that established benchmarks for the road levels, which were then used to prepare a detailed design for the road.43 The contract was awarded to Hojggard and Schultz in June 2001 and civil works were completed 16 months after mobilization, in October 2002.

33. Despite parallel financing and the potential complexities associated with awarding separate road and bridge contracts,45 this component was efficiently implemented, with good coordination and pre-qualification exercises. Although visual inspection of the road and bridge indicate these are in good condition overall, a number of issues have been raised in relation to the design and construction quality. The Ministry of Construction and Public Infrastructure has indicated that partial design studies and supporting surveys and the reduction in scope and allocated funds resulted in some shortcomings, including: (i) partial subsidence in Gan-Feydhoo bridge46 and a few revetment sections (ii) erosion around new openings (particularly bridges) and (iii) drainage problems around Hithadhoo school. The Ministry of Construction and Public Infrastructure (MCPI) has initiated or is soon to start work to rectify these problems. In addition, soon after completion of the Hithadhoo road section, asphalt bleeding was identified in several road areas, in particular a section at the of the STELCO offices. In coordination with MCPI, the supervision engineer requested the contractor provide the necessary repairs. Samples collected and tested in an agreed laboratory suggested variability in the binder content of the samples exceeding prescribed specifications.47 The contractor was slow in completing rehabilitation, but repairs were finalized and a completion certificate issued in December 2004.48

34. Operation and Maintenance. Seenu atoll has a road maintenance unit, charged with maintenance of the link road as well as other roads and streets in the atoll; it has 46 staff, 11 of whom are assigned to maintenance of the link road. This unit is responsible for daily maintenance and cleaning of the link road (including edge marks, lamp posts, revetments and hazard marks), as well as minor repairs such as filling of holes, repairing surface tar and placing sand on eroded areas. In addition MCPI is responsible for the implementation of major repair works and coastal erosion initiatives. As part of client orientation and decentralization activities, the Seenu atoll road maintenance unit has recently been assigned to operate under the atoll office, although close links with MCPI are maintained. Until recently MCPI prepared the atoll’s budgetary allocation, but from 2007, the budget of Rf6 million is being administered locally. Beginning in 2008 MCPI intends to request that the road maintenance unit prepare its own budget as capacity is available. Proper maintenance has kept the road in good condition.

35. Overall Goals. Development of Seenu Atoll as a regional growth center was to be facilitated by linking the chain of islands from Gan to Hithadhoo with an all weather road. In addition the road was to provide a sustainable solution to coastal protection by (i) preventing erosion and flooding and enhancing removal of stagnant water areas through replacement of solid causeways with bridge openings, (ii) improving drinking water supplies through road drainage, (iii) increasing coral growth in house reef by preventing sand runoff from the road, and (iv) improving bait supplies for the tuna fishery by building bridge openings.

43 Detailed engineering designs may have not been completed, however. 44 This contractor is reported to be from Denmark and Lebanon. It is however noted that Denmark is not an IsDB member country, while Lebanon is not an ADB member country. 45 One under IsDB financing, the other funded by ADB. 46 This is due to wing-wall erosion, as minimal openings have led to heavy flows. MCPI is currently studying upgrading of this bridge with possible sheet piling of the wing wall again. 47 This is due either to the asphalt production plant not having controlled the bitumen content sufficiently or to changes in the asphalt mix recipe during the construction of the pavement. 48 The quality of the tar surface is still being questioned by some sections of the community.

44 Appendix 7

36. Most of these objectives have been met. There is a significant increase in the vehicle count, from 25 over 3 hours (at peak time) before the Project49 to 191 per hour at peak time (or 1099 per day) after the Project. There has also been a reduction in mechanical breakdowns, and changes in the nature of the breakdowns. Coral growth and bait supplies have improved, as reported by fish associations in Feydhoo and Maradhoo. The status of the freshwater lens cannot be confirmed in the absence of water quality data, and results are likely to be tentative, with additional seasons being required to confirm an improvement (particularly after the 2004 tsunami, though Seenu was not significantly affected by this event). While flooding in substantial parts of the islands has been significantly reduced as a result of the introduction of solid causeways with bridge openings, flooding during the rainy season has been reported in few sections of the causeway. If this persists after a thorough cleaning, this may require road drainage to be partially modified around the Hithadhoo school.

37. Other benefits highlighted by the community include (i) improved access to school and health facilities, (ii) a decrease in fuel expenditures and vehicle maintenance and repairs, (iii) increased lifespan of vehicles, and (iv) improved trade, supply chain and business development opportunities. This component is considered “successful” to “highly successful”.

38. Road Safety. A negative impact resulting from the construction of the road is the increased number of accidents. Although road signaling improvements—particularly where there has been vandalism of signs or lights—could improve road safety, speeding (in excess of posted limits) has been reported as the main cause of accidents. The Government has prepared a road safety video that highlights major principles of the road code and was distributed in schools and other centers.

39. Road Maintenance Equipment. Equipment proposed (by the PMU) for procurement under the loan included 2 trucks, a front loader, a grader and a roller. The equipment proposed by the departing contractor was old and inadequate, however, and was not procured. The increasing importance and role of the road safety unit may justify the purchase in the near future. Spare materials and parts (road marking paints, aggregate, street light poles, speed limit signs, etc) were handed over to the unit.

40. Sea Transport Study. A sea transport study was finalized in December 2000 for the NDR, which collected and analyzed primary data in the nine focus islands and assessed the capacity of the transport fleet, and the number of passengers and amount of cargo being transported both within the NDR and to/from Male. The study provided essential information to support subsequent decision making on investment viability by ADB and IsDB.

4. Improving Environmental Conditions

41. In addition to the coastal protection reported above, this component comprised (i) the establishment of solid waste management centers in both regions, (ii) groundwater quality investigations, (iii) environmental monitoring for coastal erosion, (iv) marine ecology monitoring and (v) preparation of land use plans for focus islands.

49 As per para 20, Appendix 11, PPTA final report.

Appendix 7 45

Table A7.5: Environmental Problems, by Atoll (percentage of atoll population) Item Beach Bury or Dump No Toilet Cooking on High Erosion Garbage in Wood Population Non- Density demarcated Area 1997 2004 1997 2004 1997 2004 1997 2004 1997 2004 Maldives 70 68 20 8 16 4 0 24 44 50 Male 0 0 0 0 1 1 0 0 100 100 NDR Haa Alif 94 100 18 6 31 6 75 39 0 20 Haa Dhaal 98 98 9 5 27 12 100 50 0 46 Shaviyani 100 100 28 15 31 6 68 37 13 12 SDR Gaaf Alif 83 96 15 33 15 5 60 10 28 28 Gaal Dhaalu 100 100 29 16 29 2 48 49 52 15 Gnaviyani 100 100 15 1 15 6 100 0 0 0 Seenu 100 100 15 4 15 0 28 0 17 16 NDR = northern development region, SDR = southern development region Sources: Vulnerability and Poverty Assessment (1998, 2004).

42. General Overview. For most communities in the project areas of Seenu atoll and Kulhudhuffushi in Haa Dhaal, random disposal of solid waste was less of a concern after project implementation (Table A7.5). Beach erosion remains the communities’ major concern, increased understanding and tools kits and information developed will support monitoring functions.

43. Solid Waste Management Centers. Two solid waste management centers were constructed under the Project, in Kulhudhuffushi (on the south-east corner of the island, adjacent to the sports grounds) for NDR and in Hithadhoo (in the Rujjehira area) for SDR. Site selection was done in consultation with the island communities. The waste sites were established in June 2001, with site preparation initiated in March 2002 and waste equipment50 delivered in May 2003.

44. The original solid waste report51 prepared by the project management consultants presented some solid waste management options, but this was unfortunately not supported by waste quantity or characterization assessments, by a comprehensive willingness-to-pay or site lifespan analysis, or a community awareness campaign. The report indicated that the SDR solid waste management center was to operate at the atoll level, while the NDR site would operate at island level; results were to be monitored and evaluated for potential replication in neighboring islands throughout the region. The waste management systems developed in the SDR and the NDR had some initial common features, but these were adapted and evolved differently during implementation. Contracts initially developed as part of the Project on behalf of the RDMOs provided for solid waste collection and management through segregation of waste. These were awarded to a local contractor in each region in November 2002 (SDR) and July 2003 (NDR); services were provided for 12 months and paid for from project funds. At the end of this period,

50 Equipment delivered in each atoll includes a tractor, bailer, shredder and front end loader (in NDR a crusher is also available on site). All equipment is still in operation (with the exception of the shredder in NDR which partially damaged on delivery has never been used). 51 McAlister Elliot & Partners. 2000. First Regional Development Project: Northern and Southern Development Region: Solid Waste Management. Male.

46 Appendix 7 the assets were transferred to each of the respective atoll offices. The Seenu atoll office called for tenders and signed a new and amended 10-year contract in April 2004 with a local contractor; the new contract clearly outlined the segregation requirements, but was less comprehensive in scope than the original. Haa Dhall Atoll Office signed a new 2-year contract with a different service provider on 1 August 2004.

45. In Seenu atoll, Southern Maldives Contracting and Trading Company is currently responsible for the operation of the site. The contractor provides collection and waste disposal facilities to 1,200 households, or 50% of the total population served.52 In addition, the contractor also receives and segregates waste on-site from private parties. Coverage has increased from 0% to 60% of the atoll’s population over just 3.5 years, which is a significant achievement. The contractor has 17 staff and charges Rf50/week/household for collection and Rf20/load for independent disposal on site. Though increasing gasoline prices have driven up costs, the contractor does make a small profit, which he is reinvesting through procurement of two new trucks. This will be followed by the purchase of a compactor that will enable the sale of collected metal and plastic recyclables.53 Engine oil is reused in the construction industry, while batteries are separately stored and sold for recycling purposes. Although there is interest, composting activities are not being conducted on site. Households often dispose of small quantities of daily green waste on plot. Some kitchen waste is disposed of in the sea, a practice that should be stopped. The site is not lined but given the nature of its location (on a thin strip between islands), no groundwater pollution is expected from green waste leachate. The SDR solid waste management subcomponent is considered “successful”.

46. The situation is considerably different in Kuhudhuffushi (NDR). The contract initially awarded to the contractor for provision of waste collection (Rf15/week/household) and waste site management was progressively modified, as new competitors took on parallel collection functions for a smaller fee followed by random dumping. The contractor, having stopped waste collection activities, negotiated with the atoll office for the use of the desludger as a source of revenue, which in exchange should support management of the waste site. Information provided indicates that the contractor is unable to make any profit and revenues cover only staff salaries and bulldozer fuel. No segregation appears to be taking place in the households or at the site, and little plastic or metal are separated. Private service vans or individuals with wheelbarrows discharge on site without further instructions. The waste site is poorly managed and concerns over methane pockets are increasing; as a result of vandalism, the site has been set alight on different occasions. Reclamation of marshy land using waste is continuing, while the site is approaching the end of its useful life much more quickly than expected. The contractor has reported that the community appears to be unwilling to pay a waste disposal fee, although structured discussions with community representatives indicate that private collection services are already in place. The 2-year contract, which expired 8 months ago, is currently being renegotiated by the island office. Interviews suggest that waste from 80% of the population, a very substantial figure, is dumped in the solid waste management center, which has significantly reduced disposal elsewhere in the island. The NDR solid waste management subcomponent is considered “partly successful”.

47. Management Practices. As indicated in the sections above, solid waste management practices could be improved. In Seenu atoll there appears to be reasonable understanding, but

52 The initial database consisted only of 60 households but this has continuously grown and expanded to restaurants and other business. The total number of households as per latest Census (2006) in the group of islands combining Hithadhoo, Maradhoo, Maradhoo-Feydhoo and Feydhoo is about 2,500. 53 The contractor has reported offers to sell metal for Rf700/TN. It is estimated that 1,000 TNs of metal and 100 Tns of plastic have been collected over a period of 3 years.

Appendix 7 47 activities could be improved and the life of the site extended. In Hithadhoo the pontential for management improvement is significant. Contracts have in all cases been awarded to local contractors. While this is believed to be beneficial, in that the contractor will have local knowledge and be aware of local practices, it is unlikely that local solid waste management expertise will be available, as these constitute some of the first schemes of this type in the Maldives. Alternatives to be considered include (i) establishing joint ventures with other specialized firms in the region or (ii) providing blanket solid waste management training to interested contractors throughout the country.

48. Change Management within the community represents one of the biggest challenges to ensuring the success of solid waste management or any other activity. Although conceptualized as part of the project, a comprehensive community education and awareness program must be continued to develop understanding of essential sustainability principles among community members.

49. Contract Monitoring and Compliance. Discussions with (i) atoll office, (ii) island office and (iii) island community representatives have revealed that, despite contract provisions, contract monitoring and compliance is limited to submission of contractor monthly reports describing revenues and expenditures. Service quality monitoring and compliance reviews should be conducted at regular intervals (no less than every 3 to 6 months). Evaluations should be transparent and information should be disclosed to the community. This will also ensure progressive buy-in from the households. Failure to comply with contract provisions could be accompanied by penalties or contract termination.

50. Policy – Regional versus Atoll versus Island Responsibilities. More importantly, one of the major gaps encountered in the implementation of this subcomponent relates to the absence of a clearly defined policy at national level. MEEW is mandated with ensuring that solid waste management activities are compliant with the Environment Protection and Preservation Act (Law No. 4/93), but doing so requires that standards be defined. In addition, it is not practical for MEEW to assume responsibility for implementation of solid waste management functions at the local level, as this may overlap with the service delivery functions of other administrative offices, such as atoll or island offices. The institutional roles and responsibilities of all entities to be involved in solid waste management,54 the associated terms of reference, levels of management (depending on the nature of the waste),55 and associated financing mechanisms all need to be clearly identified and defined. This is particularly important within the context of the draft Local Government Act, which is reportedly currently in preparation.

51. Enforcement and Asset Ownership and Transfer. There is an urgent need to identify an enforcement mechanism to prevent indiscriminate dumping and other prohibited activities. A legal framework to support enforcement needs to be identified, either through the application of existing laws (e.g., the Environment Protection and Preservation Act) or the formulation of a new specific law. Enforcing agencies should be consulted and informed.56 In addition, assets

54 Policy and licensing functions, which for instance could be allocated to MEEW, should be clearly separate from administrative responsibilities, which on the other hand could be allocated to local offices. Monitoring functions could be undertaken by RDMOs operating as an extended field unit of MEEW. 55 This may include clear separation of responsibilities for green waste (to be retained within the island for composting and soil enrichment), recyclable materials (to be collected and stored prior to sale) at atoll or regional level, toxic waste (for which MEEW may need to take central responsibility to ensure compliance with international treaties, and which may need to be handled by a specialized international contractor). 56 Questions to be addressed would include: (i) would the police be fining non-compliance or would local administration offices do so; (ii) would this task be undertaken by MEEW; and (iii) will this relate to the nature of the offence and prescribed institutional responsibilities?

48 Appendix 7 are not currently registered and transfers are conducted informally without valuation. For accounting and other purposes, this practice needs to be formalized with an assessment of the status of the assets at the time of transfer.

52. Groundwater Monitoring Program. Groundwater investigations were conducted in the NDR and SDR in order to (i) estimate groundwater water quantity by defining depth, extent and sustainable yield of freshwater lenses, (ii) establish groundwater quality programs to identify potential groundwater contamination and (iii) support land use planning in focus islands. A total of 27 boreholes (19 in NDR and 8 in SDR) were installed in 16 islands. Boreholes, drilled at a maximum depth of 21 meters (m), were designed to allow multilevel monitoring (water could be pumped at 4, 6, 9, 12, 15 and 21 m from an average of six tubes installed in each borehole. The holes included a peizometer, borehead casing and a locked cap. Water samples are tested for salinity (with equipment provided by the Project) and different fecal coliform levels.

53. Drilling started in SDR in October 2000 and the monitoring program was initiated in November-December 2000. A report was prepared in January 2001 for SDR and in June 2001 for NDR. The reports were comprehensive and training was provided for RDMO staff. Although regular monitoring was recommended, the program appears to have been discontinued in SDR, with no samples collected or analyzed for over 2 years, mostly as a result of staffing problems. Reports indicate that six boreholes in SDR remain functional. In NDR the program continues to operate but is currently restricted to few boreholes in Kulhudhuffushi (regularly monitored), due to the absence of a functional launch. Marine ecology and reef monitoring was conducted by the Marine Research Center, and they are reported to have information available. This subcomponent is considered “successful” to “partly successful”.

54. Land Use Plans. The Project supported the preparation of initial land use plans for Kulhudhuffushi, Hithadhoo, Maradhoo-Feydhoo and Didhoo, and provided training of RDMO staff, which exceeded appraisal forecasts. The RDMOs are currently engaged in the preparation of survey maps and land use plans for more than 10 islands in each atoll. This function is active and coordination with MHUD is dynamic. This subcomponent is considered “highly successful”.

B. Achieving the Outcome

55. The Project’s outcome (termed purpose at the time of project approval) was defined to be regional economic development in the NDR and SDR. Three indicators were selected as representative under the project framework: (i) basic infrastructure, (ii) institutional development, and (iii) environmental monitoring for evaluation purposes. These are partly reviewed under the outputs section (above) and further analysis is provided below through a separate review of access to infrastructure. In addition, four other indicators have been reviewed in support of the outcome. These are (i) wellbeing and overall improvement in social indicators, (ii) generation of business opportunities, (iii) employment, and (iv) trade and transport from and within the region.

56. Access to Basic Infrastructure. Access to basic infrastructure and services, a clear indicator or regional development, has significantly improved over the project implementation period. Aside from social and environmental infrastructure (discussed in the previous section), there have been remarkable improvements in access to electricity by communities in both the SDR and NDR (Table A7.6), while access to communications and media has also improved significantly (Table A7.7). The Project was part of the Government’s development vision for the northern and southern atolls. The information below shows consistency in the approach and overall development of basic infrastructure in both regions over the period. While urban-rural migration did not stop during the evaluation period, (see para. 62), the provision of basic

Appendix 7 49 facilities is reported by the population57 to have generated the necessary incentives to retain a significant fraction of the active workforce.

Table A7.6: Access to Electricity (% atoll population) Item No Electricity 6 Hours or Less Electricity per Day 1997 2004 1997 2004 Maldives 7 0 20 1 Male 0 0 0 0 Atolls average 9 0 28 2 NDR Haa Alif 24 1 62 14 Haa Dhaal 10 0 25 2 Shaviyani 7 1 44 2 SDR Gaaf Alif 23 1 48 1 Gaal Dhaal 13 0 41 0 Gnaviyani 2 0 0 0 Seenu 0 0 0 0 NDR = northern development region, SDR = southern development region Source: Vulnerability and Poverty Assessment (1998, 2004).

Table A7.7: Access to Communication Services (% atoll population) Item No Radio No Landline No Mobile No Television No National Newspaper Telephone Telephone on the Island 1997 2004 1997 2004 1997 2004 1997 2004 1997 2004 Maldives 53 19 88 69 46 75 13 44 37 Male 48 29 57 35 22 45 9 0 0 Atoll average 55 14 97 84 56 86 15 59 52 NDR Haa Alif 30 14 100 98 56 85 23 79 44 Haa Dhaal 70 8 100 72 57 91 15 20 35 Shaviyani 64 11 100 98 63 90 16 94 74 SDR Gaaf Alif 60 21 100 99 73 84 9 80 73 Gaal Dhaal 52 12 100 78 67 89 15 48 32 Gnaviyani 58 15 90 22 47 87 7 0 0 Seenu 72 21 84 21 45 79 4 53 6 NDR = northern development region, SDR = southern development region. Source: Vulnerability and Poverty Assessment (1998, 2004).

57. Improved Social Indicators. The Project directly and indirectly contributed to the improvement of (i) health conditions within the islands through improved (a) water and, to a certain extent, sanitation and (b) access to hospital facilities; and (ii) education through improved access to schooling facilities. As reported in the Vulnerability and Poverty Assessment (2004), 58 life expectancy in the SDR is currently 72 years of age, the highest in the country, while infant mortality rates in the SDR are the lowest in the country. While there are multiple contributing factors, the availability and access to medical facilities, particularly under emergency conditions, plays a major role. As reported by the local community, easy access via

57 Structured interviews with Hithadhoo Island Development Committee and Seenu Atoll Development Committee. 58 Ministry of Planning and National Development in cooperation with the United Nations Development Programme and the International Bank for Reconstruction and Development. 2004. Republic of Maldives: Vulnerability and Poverty Assessment II. Male.

50 Appendix 7 the new paved road in Seenu has had a positive outcome. Similarly, the road has made it possible for all students in the five connected islands to gain access to schooling facilities up to grade 12, a service otherwise only available on single islands on four of the country’s atolls (including Male); this encourages youth to complete their secondary studies within the region rather than either abandoning their studies or migrating. This has an economic benefit of attracting investment, due to the better trained workforce.

Table A7.8: Percentage of the Population with Health Service Problems (% population) No Doctor No Nurse No Health No Midwife No Worker Pharmacist Location 1997 2004 1997 2004 1997 2004 1997 2004 1997 2004 Maldives 43 26 52 27 7 0 4 1 47 24 Male 0 0 0 0 0 0 0 0 0 0 NDR Haa Alif 85 36 76 56 22 0 21 0 59 36 Haa Dhaal 65 40 65 33 6 0 2 0 65 31 Shaviyani 96 54 96 54 4 1 0 4 100 48 SDR Gaaf Alif 74 47 60 42 12 0 6 0 74 48 Gaal Dhaal 48 42 63 35 6 0 0 0 48 30 Gnaviyani 0 0 0 0 0 0 0 0 0 0 Seenu 6 9 42 15 0 0 0 0 9 11 NDR = northern development region, SDR = southern development region. Source: Vulnerability and Poverty Assessment (1998, 2004).

58. Although available data are limited, the immediate health benefits resulting from the introduction of rainwater storage are presented in para. 16, above. Regional-level economic benefits resulting from improvements in the population’s health stem from (i) less lost income due to the inability of an earning member of the family to work because of their own sickness, or that of a family member; and (ii) reduced costs for medical treatment and medicines.

59. Generation of Business Opportunities. The Project has helped generating improved business opportunities in several areas. First, as indicated in para 41, coastal improvements have led to improved coral growth and bait supplies and therefore increased fish catch. Although exact figures are not available, basic fisheries statistics59 indicate an increase in tuna and fish reef catch.

60. Improved communications and infrastructure development as well as the development of the RDMOs has led to greater regional integration and communication with central agencies, thereby attracting foreign and local investment. Although limited exclusive economic zone fishing data are available, the Maldives Industrial Fisheries Company Ltd (MIFCO) indicates there has been significant investment, especially in the SDR. Based on 2005 statistics, 75% of the dhoni’s working for MIFCO were based in SDR, and they produced 84% of the catch.60 In response MIFCO has opened two fish processing complexes (in Gaafu Alifu and Seenu); these investments coincide with the regional harbor development in Hithadhoo and upgrading of the airport to international standards, and development of the road linking these with the processing site.

61. Provision of basic services such as solid waste collection has also proven to be an incentive for business in the region, particularly in the SDR, where the Southern Maldives

59 Ministry of Fisheries, Agriculture and Marine Resources (available: www.fishagri.gov.mv). 60 In 2005, the total catch reported by MIFCO was 56 metric tones (available: www.mifco.com.mv/statistics.php).

Appendix 7 51

Contracting and Trading Company is responsible for the collection and disposal of waste from several small hotels and restaurants, as well as from construction works in neighboring Vilingili island, where a new five star resort is under construction. A contract for collection and disposal from this island is under preparation for day-to-day operation, once the resort is officially opened. Such services are essential to facilitate and attract investors, especially in relation to tourism,61 which is the country’s primary sector in terms of contribution to GDP.

62. Employment. Data extracted from population and housing censuses for the Maldives indicate that the employed population in the NDR and SDR increased over the 2000–2006 period. Data extracted from poverty and vulnerability assessments undertaken in 1998 and 2004 indicate a rise in unemployment, both in Male and the atolls, particularly among youth.62 With some exceptions, the gap in unemployment levels between Male and the NDR and SDR also marginally increased over the 1997–2004 period. Female labor force participation rates have generally increased, but female unemployment has also increased. Variability in the data is believed to be due to (i) the slightly different nature of the indicators and (ii) the increase in employment opportunities that followed the 2004 tsunami. The percentage of the population registered in key islands in the NDR and SDR but working outside the islands generally increased over the project period (Table A7.9). Data on employment generation (Table A7.13) indicates an overall improvement in both the NDR and SDR, in both absolute and relative terms.

63. Direct employment generated by the Project includes (i) 25 staff employed in the RDMOs (all are originally from the growth centers), (ii) 10 additional staff recruited to maintain the Gan-Hithadhoo link road, and (iii) 18 staff recruited in solid waste management centers in the NDR and SDR. Indirect measurable employment resulting from the Project includes people employed at petrol stations, small business and restaurants created next to the Gan-Hithadhoo link road. In addition, the Project, coupled with recently or soon-to-be completed infrastructure initiatives (e.g., the Hithadhoo regional port, Seenu atoll power project, and Vilingili tourist resort in SDR, and the Kuhudhuffushi regional port and Uigamu marina project in NDR)63 is expected to result in a significant number of new jobs in the tourism and fisheries sectors.

61 Since appraisal, the Government has granted concessions for more than 30 resorts; seven are in the NDR and at least one is in the SDR. 62 Many young secondary school graduates are ambitious and have high expectations, and do not plan to return to their islands to work in traditional sectors such as fisheries. If they fail to find better work they are likely to be frustrated and disillusioned. 63 Please refer to Appendix 2 of the Regional Development Project RRP for the full list of government-approved subprojects in the SDR and NDR.

52 Appendix 7

Table 7.9: Labor Force Participation, Employment, and Unemployment (% of population) Labor Female Labor Male Labor Employed Unemployed Females Males Force Part. Force Part. Force Part. Unemployed Unemployed Rate Rate Rate Location 1997 2004 1997 2004 1997 2004 1997 2004 1997 2004 1997 2004 1997 2004 Maldives 48 55 34 43 64 69 90 86 10 14 22 23 4 7 Male 48 55 34 38 61 74 94 91 6 9 10 13 4 6 NDR Haa Alif 46 47 36 43 59 53 77 66 23 34 44 53 8 11 Haa 44 58 29 53 61 63 93 83 7 17 18 24 1 9 Dhaal 51 52 38 43 67 65 91 89 9 11 22 17 0 4 Shaviyani SDR Gaaf Alif 53 53 40 36 69 73 81 87 18 13 38 24 5 7 Gaal 56 54 46 43 68 65 79 81 21 19 40 32 5 9 Dhaal 43 47 32 36 56 65 90 80 10 20 20 29 4 11 Gnaviyani 46 52 25 39 68 71 91 78 9 22 28 30 3 15 Seenu NDR = northern development region, Part. = participation, SDR = Southern Development. Sources: Vulnerability and Poverty Assessment (1998, 2004).

Table A7.10: Labor Force Employed Outside the Regional Growth Centers Location 2000 2004 Pop. Persons Employed % Pop. Persons Employed % (> 18 Outside the Island (> 18 Outside the Island yrs) M F Total yrs) M F Total Seenu Hithadhoo 8044 1796 42 1838 23 8718 1834 56 1890 22 Feydhoo 3269 477 79 556 17 3160 475 100 575 18 Mara- 851 89 24 113 13 986 238 24 262 27 Feydhoo Maradhoo 2026 85 55 140 7 2062 815 63 878 43 Haa Dhaal Hanimaadhoo 664 135 10 145 22 735 86 13 99 13 Kulhudhuffushi 3852 575 110 685 18 3974 115 910 1025 26 Haa Alif Hoarafushi 1389 290 22 312 22 1350 282 30 312 23 Dhidhdhoo 1503 421 27 448 30 1717 282 168 450 26 F = female, M = male, Pop. = population. Source: Axe Services (for the Ministry of Planning and National Development). 2005. Benefit Monitoring and Evaluation Report: Regional Development Project Phase I (2000–2004). Male.

64. Trade and Transport from and within the Region. Few statistics are available relating to vessel movement as most of these services are private, with no information recorded or collected. While the NDR maritime study (see para 40) provide a baseline, no post-Project comparison is possible. Information relating to air transport is also incomplete, as it does not reflect air taxi and other services,64 but nevertheless indicates a substantial increase in activity at the regional level (Table A7.11). The number of flights in the NDR tripled since 2000, while the number of passengers nearly doubled, and cargo throughput remained approximately constant. In the SDR, the number of flights and passengers increased by about 60% and the cargo throughput by about 50%. Cargo throughput in SDR is 100 times that in NDR (due in part to the international airport), while cargo output in NDR is more than twice the cargo input, indicating next exports.

64 These constitute a small proportion of air services and cater mostly to the tourism sector, which is currently under development in the NDR and SDR.

Appendix 7 53

Table A7.11: Transport through Regional Airports

AIRPORT OPERATION 2000 2001 2002 2003 2004 2005 Flights 1,298 1,914 1,944 1,936 2,226 1,858 Passenger IN 15,256 19,100 19,185 20,167 24,843 26,215 Passenger OUT 14,488 19,522 19,896 20,336 26,455 26,778 Passenger Throughput 29,744 38,622 39,081 40,503 51,298 52,993

GAN Cargo IN 2,575,110 2,500,319 3,321,406 3,715,471 2,720,092 2,957,566 Cargo OUT 1,894,874 1,891,096 2,279,340 2,616,521 1,837,203 2,097,485 Cargo Throughput x 100 44,700 43,914 56,007 63,320 45,573 50,551 Flights 566 1,306 1,126 1,030 1,418 1,612 Passenger IN 7,359 8,386 8,518 8,895 10,420 12,244

DHOO Passenger OUT 7,128 8,213 9,144 9,096 10,671 12,390 Passenger Throughput 14,487 16,599 17,662 17,991 21,091 24,634 Cargo IN 14,191 11,198 8,404 10,977 14,278 17,478 Cargo OUT 49,460 20,066 17,651 24,856 20,403 39,201 Cargo Throughput 63,651 31,264 26,055 35,833 34,681 56,679 HANIMAA Source: Ministry of Transport and Communication Statistics.

65. Evaluation of project outcomes in the Maldives must consider the extreme hurdle posed by population dispersion.65 Although the outcome evaluation period is limited to 18–24 months since completion of civil works and other project outputs, results appear very promising, with some direct and indirect contributions to regional economic (and other) development evident. The outputs of this Project must be considered in the context of the Government’s regional development program, however, and most the other major infrastructure activities are due for completion shortly. When output and outcome achievement are considered in light of these factors, the project is considered “efficacious” overall.

C. Achieving the Goal (Preliminary Assessment)

66. Migration. As highlighted in the Government’s several national development plans, and reflected by the Project appraisal document, regional development is key to easing the development pressure on Malé as well as solving inequity problems. Population in the Maldives has increased from 253,300 in 1997 to 298,968 in 2006, with an average annual growth ranging from 1.1%66 (for 1997–2004) to 1.69%67 (for 2000–2006), depending on the reference year and document. Over the same period, Male’s population has increased disproportionately, with a reported average annual growth rate of 5.59% for the 2000–2006 period. There was exceptional growth in the capital city during 2004–2006 (Table A7.12), largely as a result of the December 2004 tsunami, which displaced communities and resulted in significant reconstruction activity and opportunities. The average annual population growth in Male over the implementation period (2000–2004) was around 3.5%, or approximately twice the country’s annual average growth rate of 1.7%, indicating a sustained moderate level of migration to the capital. While patterns of migration to Male could not be expected to reverse over the short 5-year project period, Male’s growth rate has declined from the 4.6% estimated for the 1997–2000 period.

65 Of the 196 inhabited islands in the Maldives, 72 have a population of less than 500, a further 59 have a population between 500 and 999, 49 islands have a population between 1000 and 1999, 12 islands have a population of less than 5000, while a further 3 have a population under 10,000. Male has a population of around 100,000. (Ministry of Planning and National Development. 2006. Population and Housing Census of the Maldives. Male). 66 United Nations Development Programme. 2004. Vulnerability and Poverty Assessment. Male. 67 2006 census (footnote 59).

54 Appendix 7

Table A7.12: Population Growth in the Maldives and Male Population Year Maldives Male Male % of the Total Population 1997 a 253,300 64,400 25.4 2000 b 270,101 74,069 27.4 2004 c 288,800 85,600 29.6 2006 d 298,968 103,693 34.7 Sources: a Vulnerability and Poverty Assessment (1997), b Population and Housing Census of the Maldives (2000), c Vulnerability and Poverty Assessment (2004), and d Population and Housing Census of the Maldives (2006).

67. Although annual population growth in the NDR and SDR is negative (Table A7.13), growth in focus islands specifically targeted under the Project remains positive or marginally negative. This is the case in Kulhudhuffushi and Hithadhoo, where local average annual population growth is 0.76% and 0.01%, respectively. These values remain much below the average values for the country, however.

Table A7.13: Basic Population and Income Indicators in NDR and SDR Indicator Before the Project After the Project NDR SDR NDR SDR Population 42,523 a 46,178 a 41,672 b 44,937 b Annual Population Growth (%) (0.33) c (0.44) Population Employed 11,660 a 11,668 a 14,215 b 13,219 b Population Employed/Total Population (%) 27.42 a 25.26 a 34.11 b 29.41 b Income Levels d (%) 61.83 a 53.47 a Average Household Income 21 e 20 e 21 f 32 f (Rf/person/day) ( ) = negative, NDR = northern development region, SDR = Southern Development Sources: a Population and Housing Census of the Maldives (2000), b Population and Housing Census of the Maldives (2006), c Kulhudhuffushi population growth positive and equal to 0.76%, d Population 15 years of age or over by income with than Rf500 over total population 15 years and above, e Vulnerability and Poverty Assessment (1998), and f Vulnerability and Poverty Assessment (2004).

68. Regional Disparity – Poverty Incidence. Data show that average income levels in the NDR remained approximately constant for the 1997-2004 period at 21 Rf/person/day, whereas incomes in the SDR grew from 20 Rf/person/day to 32 Rf/person/day, or more than 50% (Table A7.13). The gap between average income levels in NDR and Male is even more noticeable; over the same period, Male’s average income increased from 35 Rf/person/day to 57 Rf/person/day. Further increases probably took place during 2004–2006.

69. Income poverty headcount ratios decreased significantly from 1997–2004 in SDR, while declines in NDR have been less marked, with a significant decrease in proportion below the two lower poverty lines, but only a slight decline in the slightly higher income bracket of Rf 15/day (Table A7.14).

Table A7.14: Regional Distribution of Income Poverty - Headcount Ratios by Region (%) Poverty Line NDR SDR Male 1997 2004 1997 2004 1997 2004 below Rf 7.5 per day 12 8 9 2 0 0 below Rf 10 per day 23 9 20 3 8 0 below Rf 15 per day 47 43 42 13 19 3 Source: Vulnerability and Poverty Assessment (2004).

Appendix 7 55

70. Regional Disparity – Inequality. The Gini coefficients68 for the Maldives for 1997 and 2004 were 0.42 and 0.41 respectively (Table A7.15), levels that are similar to those in many other countries (e.g., USA, 0.41; Singapore, 0.43; Trinidad and Tobago, 0.40; and Saint Lucia, 0.43). However figure for the Maldives is notably higher than that in neighboring countries (e.g., Sri Lanka, 0.34; India, 0.33; Pakistan, 0.33; and Bangladesh, 0.32). Moreover, the Gini coefficient between Male and the atolls increased significantly, from 0.12 to 0.18. While the data indicate that over 1997–2004 period the there was a decline in inequality within Male as well as within the central regions, the decrease in inequality in the NDR was only marginal, while the Gini coefficient for the SDR remained unchanged. Similarly, over the same period there was an increase in inequality between Male and the atolls.

Table A7.15: Gini Coefficients by region Gini Coefficients 1997 2004 Maldives 0.42 0.41 Male 0.39 0.33 Between Male and the Atolls 0.12 0.18 NDR 0.39 0.36 Central North 0.41 0.38 Central 0.38 0.33 Central South 0.44 0.31 SDR 0.34 0.34 NDR = northern development region, SDR = southern development region. Source: Vulnerability and Poverty Assessment (2004).

71. Overall Assessment on Achievement of the Outcome. Preliminary conclusions drawn from findings presented in this section indicate that:

(i) The Project reasonably achieved the desired outcome, measured according to targets described in the Project’s design and monitoring framework, as well as from data used to compare other indicators. (ii) Although access to basic infrastructure and services have improved significantly, both across the country and in particular in the SDR, other conditions must be met to catalyze regional development. (iii) Poverty incidence in the Maldives, the NDR and particularly the SDR have decreased. However, the income generation gap between Male and the two regions, particularly the NDR, have increased. (iv) Inequality within the regions decreased over the 1997–2004 period, but increased in comparison with Male. (v) Migration from the NDR and SDR towards Male continues to be a problem. Although annual migration rates decreased over the 1997–2004 period, they increased during 2004–2006 as a result of the 2004 tsunami. (vi) Employment generation continues to be a problem in Male and elsewhere with unemployment having increased in the country over the 1997–2004 period, but apparently having decreased in relative terms in the NDR and SDR.

72. Project interventions are closely dependent on other parallel employment generation activities pursued by the Government in the NDR and SDR, which have only been recently completed, or will be completed within 2007–2008. To obtain a meaningful evaluation of the

68 The Gini coefficient measures the extent to which the distribution of income (or, in some cases, consumption expenditures) among individuals or households within an economy deviates from a perfectly equal distribution. The coefficient ranges from 0 (meaning perfect equality) to 1 (complete inequality).

56 Appendix 7 project goal and outcome, it is recommended that a full assessment be postponed by a further 1–2 years. It must also be acknowledged that provision of infrastructure alone does not necessarily lead to economic growth, and must be accompanied by policy and local capacity development.

Appendix 8 57

FINANCIAL AND ECONOMIC REEVALUATION

A. Financial Evaluation

1. Scope and Methodology

1. The financial internal rates of return (FIRRs) of solid waste management components in the southern and northern development regions (SDR and NDR, respectively) were evaluated. The results were compared with the weighted average cost of capital (WACC) as well as the FIRR estimated at appraisal. The project cost, financing plan, and revenues were revised based on various reports and information provided during the Project Completion Review Mission. The financial analysis was conducted in constant 2007 prices. The summary of the financial analysis is shown in Table A8.1.

2. Project Costs and Revenues

2. Capital costs were revised based on actual expenditures recorded at project completion. The costs of operations and maintenance (O&M) were financed under the Project for the first seven months of operation and are currently borne by private contractors the solid waste management centers in the SDR and NDR under the contract agreements with the atoll office and the island office, respectively. In SDR, the O&M of the solid waste management center and collection of waste from households were contracted out to one private sector firm, the Southern Maldives Contracting and Trading Company Private Ltd., under a 10-year agreement with the atoll office. Under this agreement, the private contractor is allowed to collect from households Rf50 per month for once–per-week collection services, Rf100 for twice-per-week collection services, and Rf150 for collecting three times per week; Rf20 per vehicle is charged for disposing of waste at the waste collection site. The number of households subscribing to the collection services has increased from 60 in the first year to 1,200 households currently. While the private contractor was provided with the machines and equipment procured under the Project to use at the solid waste management center, four collection vehicles of two tons capacity were purchased by the private contractor, who is currently planning to rent two additional collection vehicles of the same capacity. The private contractor is making a marginal profit of about Rf130,000 per year by employing 17 staff.

3. In the NDR, the O&M of the solid waste management center was also contracted to a private sector firm (the Jaufar), under a 2-year agreement1 with the island office at Kulhudhufushi. The private contractor was provided with the solid waste management machines and equipment as well as the desludger procured under the Project. Under the agreement, the private contractor is allowed to collect charges of Rf900 for each septic tank desludging service, with one third of the profits (if any) paid to the island office. Collection of waste from households is currently being made by other private sector agents on a commercial basis, whereby private sector agents charge around Rf40-50 per month for primary collection services from households. About 80% of households of the island (1,000 households) are subscribing to these services. While the collection services are being run as profitable businesses, the O&M of the solid waste management center is not fully covered by the income generated from Jaufar’s septic tank desludging services. Hence, without any income other than desludging charges, the Jaufar is generating a loss from employing six staff and incurring fuel and electricity costs in the O&M of the solid waste management center. If primary waste collection services and desludging

1 The 2-year contract has expired, but , the Jaufar is still operating the waste management site on a voluntary basis.

58 Appendix 8 services are combined, revenues from both services would be sufficient to cover the O&M costs of the combined operations.

3. Financial Reevaluation

4. The FIRRs for the solid waste management subcomponents in SDR and NDR were recalculated individually, and for the two centers combined, using the actual project cost, updated financial revenues, and O&M cost data. The financial revenues and costs were on an incremental basis and were projected up to 2029, using constant 2007 prices. The number of households subscribing to collection services was assumed to increase at the annual rate of 5% in the SDR and 1% in the NDR, while the O&M cost was assumed to increase at the annual rate of 1–3%. Though the private contractor in the SDR can sell scrap metal to India several times a year and the private contractor in the NDR formerly sold compost from sludge to farmers, these additional revenues are not included in financial evaluation, as they are not predictable or stable at present.

5. The FIRRs of the solid waste management subcomponents were recalculated and compared with the WACC of about 0%. The FIRRs in the SDR and NDR were 6.37% and 7.56%, respectively, lower than the 12.2% and 10.0% estimated at appraisal. Even though the monthly service charges for solid waste management services increased from that assumed at appraisal (Rf25 per month in SDR and Rf20 per month in the NDR, in constant 1999 prices, to Rf50 per month in the SDR and Rf40 per month in the NDR, in constant 2007 prices), the higher than estimated capital cost and the lower service coverage contributed to the lower FIRR at project completion. In the NDR, the revenues include collection service charges as well as septic tank desludging service charges (the desludging service, along with solid waste management site operation, is provided by one private sector contractor under agreement with the island office). While primary waste collection services are provided by private sector agents independent from the main private sector contractor for the solid waste management site operation, in this analysis for solid waste management in the NDR, the revenues from both the primary collection services and desludging services are considered for the total financial revenues. The FIRR for the combined solid waste management subcomponents in both regions was 6.80%. Sensitivity analyses were also undertaken with respect to increases in capital cost and decreases in revenue. Tables A8.3, A8.4, and A8.5 present the detailed FIRR calculations for the SDR, NDR and the two combined.

Table A8.1: Financial Internal Rate of Return and Sensitivity Analysis Item At Appraisal At Project Completion SDR: Base Case 12.20% 6.37% (i) Capital cost increase by 10% 9.80% 5.87% (ii) Revenue decrease by 10% 8.80% 4.51% (iii) Combination of i and ii 4.90% 4.06% NDR: Base Case 10.00% 7.56% (i) Capital cost increase by 10% 8.40% 6.79% (ii) Revenue decrease by 10% 6.90% 5.74% (iii) Combination of i and ii 5.50% 5.29% Both SDR and NDR: Base Case 6.80% (i) Capital cost increase by 10% 6.20% (ii) Revenue decrease by 10% 5.04% (iii) Combination of i and ii 4.50% NDR = northern development region, SDR = southern development region. Source: Asian Development Bank estimates.

Appendix 8 59

6. In both regions, potential revenues can be expected if recycled materials (including scrap metal, glass and batteries as well as compost) are better marketed. In the SDR, it is reported that Indian traders are interested in paying Rf700 per ton for scrap metal if the metal is compacted for easy transport. In the NDR, the private contractor stopped selling compost from sludge, as communities complained that the private contractor was selling black solids. Due to the lack of compactors and adequate marketing efforts, potentially valuable recyclables are not exported for profits, while potentially valuable compost is not utilized, due to a lack of public awareness. While the Project has reduced the incidence of random dumping of waste, the coverage of primary collection services, enforcement of environmental regulations, and minimization and/or recycling of waste should be further improved. The financial profits from the solid waste management business could be much greater if service coverage was extended and recycled materials and compost marketed effectively in both regions.

B. Economic Evaluation

1. Scope and Methodology

7. The economic analysis estimates the economic internal rates of return (EIRRs) of (i) the water supply subcomponent in both development regions, (ii) the sanitation subcomponent in Kulhudhufushi (NDR), and (iii) the link road subcomponent in SDR. The results were compared with the economic opportunity cost of capital of 12%, and the EIRR estimated at appraisal. Project costs and benefits were reassessed, based on the information provided by the government offices, the interviews conducted during field visits with beneficiaries and those responsible for O&M of the facilities in the two regions, and the available recent socioeconomic surveys in the concerned regions.

2. Project Costs and Benefits

8. The updated financial costs were converted to economic costs using the shadow wage rate factor of 0.6 for unskilled labor costs and the standard conversion factor of 0.9 for all nontradable input costs that are generally represented by civil works. The analysis was undertaken in constant 2007 prices.

9. The water supply subcomponents of the Project provided 2,500 liter (L) water tanks to households in the SDR (a total of 2,290 tanks) and NDR (2,710 tanks). The cost was around Rf3,700 (US$288) per tank. Originally, the water supply subcomponents were expected to provide 1,000 tanks to households in both the SDR and NDR (for a total of 2000). Due to the large demand for water tanks, a second batch of 3,000 tanks was procured. The amount of water made available due to the project (40.3 million L per year) accounts for 20%, 24% and 43% of the national target2 for water supply in the Seenu (SDR), Haa Dhaalu (NDR) and Haa Alifu (NDR) atolls respectively. The quantifiable benefits of the water supply subcomponents in the two regions were (i) savings in resource costs that would have been incurred to obtain the amount of drinking water without the project, but that are no longer needed, and (ii) the value of additional drinking water consumed with water tanks provided under the Project. Each 2,500 liter tank can provide 4.8 and 4.1 L per capita per day of drinking water in the SDR and NDR, respectively.3 Of the water available from each tank, 4 L per capita per day is considered as non-incremental water supply that replaces the water consumption from alternative sources,

2 The national target for water supply in the Maldives is set as 4 L per capita per day for drinking and cooking purposes. 3 Rain water can fill a 2,500 L tank 3.5 times a year in SDR and 3 times a year in NDR.

60 Appendix 8 and the amount beyond 4 L per capita per day is considered as incremental water supply. Without rain water tanks, households would have to obtain drinking water from groundwater through wells, from neighbors’ rainwater tanks, or from bottled water. During serious water shortages desalinated water is sometimes delivered from a plant in Male. Hence, the resource costs saved due to the non-incremental water supply available from the water tanks include treatment costs of groundwater from wells, opportunity cost of time spent collecting water, and the price of bottled water purchased. The value of resource cost savings is estimated to be around Rf0.15 per L. The benefit from incremental water consumption is evaluated at the demand price (Rf0.11 per L) which is estimated as the average of financial prices of water from rainwater tanks and water from alternative sources.

10. The sanitation subcomponent of the Project provided a pilot sewerage scheme for 60 households in Kulhudhufushi, which is a small bore pipe system connected to refurbished septic tanks to drain effluent to a central treatment facility. The capital cost of the pilot system was around Rf2.12 million and the O&M cost is around Rf12,000 per year, consisting mainly of the electricity cost, which is paid out of the budget of the Regional Development Management Office for NDR. The benefit of the sanitation subcomponent was estimated from data regarding household’s willingness to pay for sanitation services, which were collected in the socioeconomic survey of households in Kulhudufushi. According to the survey, the willingness to pay for sanitation services was estimated to be around Rf175 per month per household.

11. The link road of 13.5 kilometers (km) in SDR connecting four islands in the Seenu atoll was constructed under the Project. The cost of link road construction was around Rf101.83 million, while the incremental O&M cost is estimated to be around Rf1.8 million per year. Prior to the construction of the link road, the road connecting Gan and Hithadoo was in very poor condition, with frequent drainage problems, which made journeys by vehicle very difficult and time-consuming. The condition of the road was worst during bad weather. The quantifiable benefits include (i) savings in vehicle operating cost and (ii) savings in travel time. The four islands in the Seenu atoll had nearly 4,000 vehicles registered as of 2004. According to the traffic survey on the link road, the average daily traffic counts are 1,099, consisting of 60% motorbikes, 28% bicycles, 7% cars, 3% trucks, and 2% vans. The average vehicle can save 0.26 L of petrol per km by using the upgraded link road, while the average vehicle can reduce its travel time from 45 minutes to 20 minutes over the entire length of the road. Furthermore, garage owners indicated that mechanical breakdowns of vehicles requiring expensive spare parts have decreased after the construction of the link road, and that the lifespan of vehicles would increase. The mechanical breakdowns were caused in part by the potholes and the stagnant water puddles frequently observed during the rainy season prior to the construction of the link road. The link road construction also provided unquantifiable benefits including improved access to (i) the health facilities and senior schools in Hithadoo for residents of the other three islands, (ii) the work opportunities available in Gan and the Villingilli resort for residents in all other islands, (iii) the solid waste management center constructed under the Project for the all islands, (iv) the new international airport in Gan for residents of and visitors to all the islands, (v) the fire fighting service in Hithadhoo, and (vi) the fuel supplies from the central power station in Hithadoo, and (vii) increased baitfish catch in the lagoon due to the improved flow of sea water into the lagoon through bridges and causeways along the link road.

3. Economic Reevaluation

12. The results of the economic evaluation showed that the water supply subcomponents generated the highest EIRRs, the link road generated the second highest EIRR, and the sanitation subcomponent generated the lowest EIRR. The EIRRs calculated for the water

Appendix 8 61 supply and link road subcomponents were higher than those estimated at appraisal. The EIRRs for the water supply subcomponents are estimated to be higher than at appraisal since (i) 3,000 more tanks were procured, making 24.1 million L of additional drinking water available per year and (ii) the cost of the water tanks was lower than estimated at appraisal. The EIRR for the link road subcomponent is estimated to be higher than at appraisal, because (i) the vehicle operation cost (VOC) saving per km is larger due to the real increase in fuel prices experienced over recent years and (ii) time saving was not considered at appraisal but was found significant after the construction of the link road. The EIRR calculated for the sanitation subcomponent indicated that the pilot sewerage scheme at Kulhudhifushi is not economically viable due to the high capital and O&M costs relative to the small coverage of services. Sensitivity analysis showed that the projects were the most sensitive to delays in benefits. The summary of results is presented in Table A8.2, while the detailed calculations are presented in Tables A.6.6–A.6.9.

Table A8.2: Economic Internal Rate of Return and Sensitivity Analyses Item At Appraisal At Project Completion Link Road - SDR: Base Case 15.30% 17.40% (i) Capital cost increase by 10% 14.10% 16.18% (ii) Revenue decrease by 10% 13.80% 16.06% (iii) One year delay in benefits 13.30% 15.27% (iv) Combination of i and iii 12.70% 14.44% (v) Combination of i+ii+iii 11.00% 13.34% Water Tank - SDR: Base Case 24.20% 27.50% (i) Capital cost increase by 10% 22.10% 24.67% (ii) Revenue decrease by 10% 21.80% 23.81% (iii) One year delay in benefits 20.10% 20.61% (iv) Combination of i and iii 19.80% 18.67% (v) Combination of i+ii+iii 16.70% 16.13% Water Tank - NDR: Base Case 22.30% 23.55% (i) Capital cost increase by 10% 20.30% 21.01% (ii) Revenue decrease by 10% 20.00% 20.15% (iii) One year delay in benefits 18.60% 17.77% (iv) Combination of i and iii 18.20% 15.95% (v) Combination of i+ii+iii 15.40% 13.52% Sanitation - NDR: Base Case 2.20% (i) Capital cost increase by 10% 1.50% (ii) Revenue decrease by 10% 1.30% (iii) One year delay in benefits 1.80% (iv) Combination of i and iii 1.10% (v) Combination of i+ii+iii 0.20% NDR = northern development region, SDR = southern development region. Source: Asian Development Bank estimates.

62 Appendix 8 Appendix Table A8.3: Financial Internal Rate of Return Calculation – SDR (Rf)

Sensitivity Cases Year Capital Cost O&M Cost Service Service Revenue Net 10% 10% Combined Coverage Charge Revenue Increase Decrease in in Capital Revenue Cost 2001 844,303 (844,303) (928,733) (844,303) (928,733) 2002 1,688,606 (1,688,606) (1,857,466) (1,688,606) (1,857,466) 2003 1,266,454 304,000 50 53.75 51,450 (1,519,004) (1,645,650) (1,524,149) (1,650,795) 2004 211,076 393,000 60 53.75 57,900 (546,176) (567,283) (551,966) (573,073) 2005 211,076 482,000 440 53.75 303,000 (390,076) (411,183) (420,376) (441,483) 2006 571,000 820 53.75 548,100 (22,900) (22,900) (77,710) (77,710) 2007 660,000 1,200 53.75 793,200 133,200 133,200 53,880 53,880 2008 679,800 1,260 54.29 840,219 160,419 160,419 76,397 76,397 2009 700,194 1,323 54.83 890,073 189,879 189,879 100,872 100,872 2010 721,200 1,389 55.38 942,933 221,733 221,733 127,440 127,440 2011 742,836 1,459 55.93 998,982 256,146 256,146 156,248 156,248 2012 765,121 1,532 56.49 1,058,411 293,290 293,290 187,449 187,449 2013 788,075 1,608 57.06 1,121,426 333,351 333,351 221,209 221,209 2014 811,717 1,689 57.63 1,188,243 376,526 376,526 257,702 257,702 2015 836,068 1,773 58.20 1,259,092 423,024 423,024 297,115 297,115 2016 861,150 1,862 58.79 1,334,217 473,067 473,067 339,645 339,645 2017 886,985 1,955 59.37 1,413,877 526,892 526,892 385,505 385,505 2018 913,594 2,052 59.97 1,498,346 584,751 584,751 434,917 434,917 2019 941,002 2,155 60.57 1,587,914 646,912 646,912 488,120 488,120 2020 969,232 2,263 61.17 1,682,890 713,658 713,658 545,369 545,369 2021 998,309 2,376 61.78 1,783,601 785,292 785,292 606,932 606,932 2022 1,028,258 2,495 62.40 1,890,395 862,136 862,136 673,097 673,097 2023 1,059,106 2,619 63.03 2,003,638 944,532 944,532 744,168 744,168 2024 1,090,879 2,750 63.66 2,123,721 1,032,842 1,032,842 820,469 820,469 2025 1,123,606 2,888 64.29 2,251,058 1,127,452 1,127,452 902,346 902,346 2026 1,157,314 3,032 64.94 2,386,087 1,228,773 1,228,773 990,164 990,164 2027 1,192,033 3,184 65.59 2,529,274 1,337,240 1,337,240 1,084,313 1,084,313 2028 1,227,794 3,343 66.24 2,681,112 1,453,317 1,453,317 1,185,206 1,185,206 2029 1,264,628 3,510 66.90 2,842,124 1,577,496 1,577,496 1,293,284 1,293,284 O&M = operations and maintenance, SDR = southern development region, ( ) = negative Source: Asian Development Bank estimates.

Table A8.4: Financial Internal Rate of Return Calculation – NDR (Rf)

Sensitivity Cases Year Capital Cost O&M Cost Service Service Revenue Net 10% 10% Combined Coverage Charge Revenue Increase Decrease in in Capital Revenue Cost 2001 844,303 (844,303) (928,733) (844,303) (928,733) 2002 1,688,606 (1,688,606) (1,857,466) (1,688,606) (1,857,466) 2003 1,266,454 304,000 50 53.75 51,450 (1,519,004) (1,645,650) (1,524,149) (1,650,795) 2004 211,076 393,000 60 53.75 57,900 (546,176) (567,283) (551,966) (573,073) 2005 211,076 482,000 440 53.75 303,000 (390,076) (411,183) (420,376) (441,483) 2006 571,000 820 53.75 548,100 (22,900) (22,900) (77,710) (77,710) 2007 660,000 1,200 53.75 793,200 133,200 133,200 53,880 53,880 2008 679,800 1,260 54.29 840,219 160,419 160,419 76,397 76,397 2009 700,194 1,323 54.83 890,073 189,879 189,879 100,872 100,872 2010 721,200 1,389 55.38 942,933 221,733 221,733 127,440 127,440 2011 742,836 1,459 55.93 998,982 256,146 256,146 156,248 156,248 2012 765,121 1,532 56.49 1,058,411 293,290 293,290 187,449 187,449 2013 788,075 1,608 57.06 1,121,426 333,351 333,351 221,209 221,209 2014 811,717 1,689 57.63 1,188,243 376,526 376,526 257,702 257,702 2015 836,068 1,773 58.20 1,259,092 423,024 423,024 297,115 297,115 2016 861,150 1,862 58.79 1,334,217 473,067 473,067 339,645 339,645 2017 886,985 1,955 59.37 1,413,877 526,892 526,892 385,505 385,505 2018 913,594 2,052 59.97 1,498,346 584,751 584,751 434,917 434,917 2019 941,002 2,155 60.57 1,587,914 646,912 646,912 488,120 488,120 2020 969,232 2,263 61.17 1,682,890 713,658 713,658 545,369 545,369 2021 998,309 2,376 61.78 1,783,601 785,292 785,292 606,932 606,932

2022 1,028,258 2,495 62.40 1,890,395 862,136 862,136 673,097 673,097 Appendix 8 2023 1,059,106 2,619 63.03 2,003,638 944,532 944,532 744,168 744,168 2024 1,090,879 2,750 63.66 2,123,721 1,032,842 1,032,842 820,469 820,469 2025 1,123,606 2,888 64.29 2,251,058 1,127,452 1,127,452 902,346 902,346 2026 1,157,314 3,032 64.94 2,386,087 1,228,773 1,228,773 990,164 990,164 2027 1,192,033 3,184 65.59 2,529,274 1,337,240 1,337,240 1,084,313 1,084,313 2028 1,227,794 3,343 66.24 2,681,112 1,453,317 1,453,317 1,185,206 1,185,206 63 2029 1,264,628 3,510 66.90 2,842,124 1,577,496 1,577,496 1,293,284 1,293,284 O&M = operations and maintenance, NDR = northern development region, ( ) = negative Source: Asian Development Bank estimates.

64

Appendix 8 Table A8.5: Financial Internal Rate of Return Calculation – Both SDR and NDR (Rf)

Sensitivity Cases Year Capital Cost O&M Cost Service Revenue Net 10% 10% Combined Coverage Revenue Increase Decrease in in Capital Revenue Cost 2001 844,303 2002 3,676,044 2003 2,591,413 504,060 203 185,015 (2,910,458) (3,169,600) (2,928,960) (3,188,101) 2004 211,076 593,060 264 215,986 (588,149) (609,257) (609,748) (630,856) 2005 211,076 685,532 849 559,173 (337,435) (358,543) (393,352) (414,460) 2006 778,083 1,433 902,359 124,276 124,276 34,040 34,040 2007 870,715 2,222 1,343,632 472,917 472,917 338,554 338,554 2008 894,230 2,292 1,400,509 506,278 506,278 366,228 366,228 2009 918,425 2,365 1,460,418 541,994 541,994 395,952 395,952 2010 943,319 2,442 1,523,537 580,218 580,218 427,864 427,864 2011 968,933 2,522 1,593,049 621,116 621,116 462,111 462,111 2012 995,289 2,605 1,660,153 664,864 664,864 498,849 498,849 2013 1,022,408 2,693 1,734,057 711,649 711,649 538,243 538,243 2014 1,050,314 2,784 1,811,982 761,668 761,668 580,470 580,470 2015 1,079,029 2,879 1,894,162 815,133 815,133 625,717 625,717 2016 1,108,578 2,979 1,980,846 872,268 872,268 674,184 674,184 2017 1,138,985 3,083 2,072,297 933,313 933,313 726,083 726,083 2018 1,170,275 3,192 2,168,794 998,519 998,519 781,639 781,639 2019 1,202,476 3,306 2,270,632 1,068,156 1,068,156 841,093 841,093 2020 1,235,613 3,426 2,378,125 1,142,512 1,142,512 904,699 904,699 2021 1,269,715 3,550 2,491,605 1,221,889 1,221,889 972,729 972,729 2022 1,304,811 3,681 2,611,423 1,306,612 1,306,612 1,045,470 1,045,470 2023 1,340,929 3,818 2,737,953 1,397,023 1,397,023 1,123,228 1,123,228 2024 1,378,101 3,960 2,871,590 1,493,488 1,493,488 1,206,329 1,206,329 2025 1,416,358 4,110 3,012,753 1,596,395 1,596,395 1,295,120 1,295,120 2026 1,455,731 4,267 3,161,886 1,706,155 1,706,155 1,389,966 1,389,966 2027 1,496,254 4,431 3,319,460 1,823,206 1,823,206 1,491,260 1,491,260 2028 1,537,961 4,602 3,485,975 1,948,014 1,948,014 1,599,416 1,599,416 2029 1,580,888 4,782 3,661,959 2,081,071 2,081,071 1,714,875 1,714,875 NDR = northern development region, O&M = operations and maintenance, SDR = southern development region, ( ) = negative Source: Asian Development Bank estimates.

Table A8.6: Economic Internal Rate of Return Calculation – Link Road in SDR (Rf)

Sensitivity Cases Year Capital O&M VOC Time Net (i) 10% (ii) 10% (iii) One (i) and (ii) (i), (ii) and Cost Cost Savings Savings Revenue Increase in Decrease in Year Delay Combined (iii) Capital Revenue in Benefits Combined Cost 2000 27,493,730 (27,493,730) (30,243,103) (27,493,730) (27,493,730) (30,243,103) (30,243,103) 2001 45,822,883 549,875 (46,372,758) (51,010,034) (46,372,758) (46,372,758) (51,010,034) (51,010,034) 2002 18,329,153 1,466,332 (19,795,486) (21,775,034) (19,795,486) (19,795,486) (21,775,034) (21,775,034) 2003 1,832,915 12,053,213 2,856,353 13,076,650 12,893,359 11,585,694 (1,832,915) (2,016,207) (2,016,207) 2004 1,832,915 12,776,405 30,27,734 13,971,224 13,787,933 12,390,810 13,076,650 12,893,359 11,402,402 2005 1,832,915 13,542,990 3,209,398 14,919,473 14,736,181 13,244,234 13,971,224 13,787,933 12,207,519 2006 1,832,915 14,355,569 3,401,962 15,924,616 15,741,324 14,148,863 14,919,473 14,736,181 13,060,942 2007 1,832,915 15,216,903 3,606,080 16,990,068 16,806,776 15,107,769 15,924,616 15,741,324 13,965,571 2008 1,832,915 16,129,917 3,822,445 18,119,447 17,936,155 16,124,211 16,990,068 16,806,776 14,924,478 2009 1,832,915 17,097,712 4,051,791 19,316,588 19,133,297 17,201,638 18,119,447 17,936,155 15,940,919 2010 1,832,915 18,123,575 4,294,899 20,585,559 20,402,267 18,343,711 19,316,588 19,133,297 17,018,347 2011 1,832,915 19,210,990 4,552,593 21,930,667 21,747,376 19,554,309 20,585,559 20,402,267 18,160,420 2012 1,832,915 20,363,649 4,825,749 23,356,482 23,173,191 20,837,542 21,930,667 21,747,376 19,371,017 2013 1,832,915 21,585,468 5,115,293 24,867,846 24,684,554 22,197,770 23,356,482 23,173,191 20,654,251 2014 1,832,915 22,880,596 5,422,211 26,469,892 26,286,600 23,639,611 24,867,846 24,684,554 22,014,478 2015 1,832,915 24,253,432 5,747,544 28,168,060 27,984,768 25,167,962 26,469,892 26,286,600 23,456,319 2016 1,832,915 25,708,638 6,092,396 29,968,119 29,784,827 26,788,015 28,168,060 27,984,768 24,984,671 2017 1,832,915 27,251,156 6,457,940 31,876,181 31,692,889 28,505,271 29,968,119 29,784,827 26,604,724 2018 1,832,915 28,886,225 6,845,416 33,898,726 33,715,435 30,325,562 31,876,181 31,692,889 28,321,979 2019 1,832,915 30,619,399 7,256,141 36,042,625 35,859,333 32,255,071 33,898,726 33,715,435 30,142,271

2020 1,832,915 32,456,563 7,691,510 38,315,157 38,131,866 34,300,350 36,042,625 35,859,333 32,071,779 Appendix8 2021 1,832,915 34,403,956 8,153,001 40,724,042 40,540,750 36,468,346 38,315,157 38,131,866 34,117,058 2022 1,832,915 36,468,194 8,642,181 43,277,459 43,094,167 38,766,422 40,724,042 40,540,750 36,285,054 2023 1,832,915 38,656,285 9,160,711 45,984,081 45,800,790 41,202,382 43,277,459 43,094,167 38,583,130 2024 1,832,915 40,975,662 9,710,354 48,853,101 48,669,810 43,784,500 45,984,081 45,800,790 41,019,090 2025 1,832,915 43,434,202 10,292,975 51,894,262 51,710,971 46,521,544 48,853,101 48,669,810 43,601,208 2026 1,832,915 46,040,254 10,910,554 55,117,893 54,934,601 49,422,812 51,894,262 51,710,971 46,338,253 2027 1,832,915 48,802,670 11,565,187 58,534,941 58,351,650 52,498,156 55,117,893 54,934,601 49,239,521 2028 1,832,915 51,730,830 12,259,098 62,157,013 61,973,721 55,758,020 58,534,941 58,351,650 52,314,864 65 2029 1,832,915 54,834,680 12,994,644 65,996,408 65,813,117 59,213,476 62,157,013 61,973,721 55,574,728 O&M = operations and maintenance, SDR = southern development region, VOC = vehicle operation cost, ( ) = negative Source: Asian Development Bank estimates

66

Table A8.7: Economic Internal Rate of Return Calculation – Water Supply in SDR Appendix 8 (Rf)

Sensitivity Cases Year Capital O&M Benefits Net (i) 10% (ii) 10% (iii) One (i) and (ii) (i), (ii) and (iii) Cost Cost Benefits Increase Decrease Year Delay Combined Combined in Capital in in Benefits

Cost Revenue 2001 347,911 - - (347,911) (382,703) (347,911) (347,911) (382,703) (382,703) 2002 3,249,641 17,396 116,931 (3,150,105) (3,475,069) (3,161,798) (3,267,036) (3,592,001) (3,592,001) 2003 525,568 180,052 1,209,118 503,498 450,941 382,586 (588,689) (641,246) (652,939) 2004 2,664,854 208,131 1,385,758 (1,487,226) (1,753,711) (1,625,802) (1,663,866) (1,930,352) (2051,264) 2005 1,687,741 343,454 2,281,401 250,206 81,432 22,066 (645,437) (814,211) (952,787) 2006 431,276 2,848,641 2,417,365 2,417,365 2,132,501 1,850,125 1,850,125 1,621,985 2007 435,589 2,848,641 2,413,053 2,413,053 2,128,188 2,413,053 2,413,053 2,128,188 2008 439,945 2,848,641 2,408,697 2,408,697 2,123,833 2,408,697 2,408,697 2,123,833 2009 444,344 2,848,641 2,404,297 2,404,297 2,119,433 2,404,297 2,404,297 2,119,433 2010 448,788 2,848,641 2,399,854 2,399,854 2,114,990 2,399,854 2,399,854 2,114,990 2011 453,275 2,848,641 2,395,366 2,395,366 2,110,502 2,395,366 2,395,366 2,110,502 2012 157,808 2,848,641 2,390,833 2,390,833 2,105,969 2,390,833 2,390,833 2,105,969 2013 462,386 2,848,641 2,386,255 2,386,255 2,101,391 2,386,255 2,386,255 2,101,391 2014 467,010 2,848,641 2,381,631 2,381,631 2,096,767 2,381,631 2,381,631 2,096,767 2015 471,680 2,848,641 2,376,961 2,376,961 2,092,097 2,376,961 2,376,961 2,092,097 2016 456,401 2731,710 2,275,309 2,275,309 2,002,138 2,275,309 2,275,309 2,002,138 2017 274,196 1,639,524 1,365,327 1,365,327 1,201,375 1,365,327 1,365,327 1,201,375 2018 246,732 1,462,883 1,216,151 1,216,151 1,069,863 1,216,151 1,216,151 1,069,863 2019 96,040 567,240 471,200 471,200 414,476 471,200 471,200 414,476 O&M = operations and maintenance, SDR = southern development region, ( ) = negative Source: Asian Development Bank estimates.

Table A8.8: Economic Internal Rate of Return Calculation – Water Supply in NDR (Rf)

Sensitivity Cases Year Capital O&M Benefits Net Benefits (i) 10% (ii) 10% (iii) One (i) and (ii) (i), (ii) and Cost Cost Increase Decrease Year Delay Combined (iii) in Capital in in Benefits Combined Cost Revenue 2001 2002 3,707,611 (3,707,9611) (4,078,372) (3,707,611) (3,707,611) (3,707,611) (4,078,372) 2003 1,909,419 185,381 1,112,952 (981,848) (1,172,790) (1,093,143) (2,094,800) (2,280,180) (2,285,742) 2004 4,430,595 282,705 1,686,123 (3,027,177) (3,470,237) (3,195,789) (3,600,348) (3,883,053) (4,154,702) 2005 507,062 3,016,101 2,509,039 2,509,039 2,207,358 1,179,061 671,999 1,010,448 2006 512,133 3,016,101 2,503,968 2,503,968 2,202,358 2,503,968 1,991,835 2,202,358 2007 517,254 3,016,101 2,498,847 2,498,847 2,197,237 2,498,847 1,981,593 2,197,237 2008 522,427 3,016,101 2,493,674 2,493,674 2,192,064 2,493,684 1,971,248 2,192,064 2009 527,651 3,016,101 2,488,450 2,488,450 2,186,840 2,488,450 1,960,799 2,186,840 2010 532,927 3,016,101 2,483,173 2,483,173 2,181,563 2,483,173 1,950,246 2,181,563 2011 538,257 3,016,101 2,477,844 2,477,844 2,176,234 2,477,844 1,939,588 2,176,234 2012 543,639 3,016,101 2,472,462 2,472,462 2,170,852 2,472,462 1,928,822 2,170,852 2013 549,076 3,016,101 2,467,025 2,467,025 2,165,415 2,467,025 1,917,950 2,165,415 2014 554,566 3,016,101 2,461,534 2,461,534 2,159,924 2,461,534 1,906,968 2,159,924 2015 560,112 3,016,101 2,455,989 2,455,989 2,154,379 2,455,989 1,895,877 2,154,379 2016 565,713 3,016,101 2,450,388 2,450,388 2,148,778 2,450,388 1,884,675 2,148,778 2017 358,280 1,903,148 1,544,868 1,544,868 1,354,554 1,544,868 1,186,588 1,354,554 2018 252,121 1,329,978 1,077,857 1,077,857 944,859 1,077,857 825,735 944,859 NDR = northern development region, O&M = operations and maintenance, ( ) = negative Source: Asian Development Bank estimates.

Appendix 8

67

68

Appendix8 Table A8.9: Economic Internal Rate of Return Calculation – Sanitation in NDR (Rf)

Sensitivity Cases Year Capital O&M Benefits Net Benefits (i) 10% (ii) 10% (iii) One (i) and (ii) (i), (ii) and (iii) Cost Cost Increase in Decrease in Year Delay Combined Combined Capital Cost Revenue in Benefits 2002 318,611 (318,611) (350,472) (318,611) -318610.5 (350,472) (350,472) 2003 1,699,256 (1,699,256) (1,869,182) (1,699,256) -1699256 (1,869,182) (1,869,182) 2004 106,204 (106,204) (116,824) (106,204) -106203.5 (116,824) (116,824) 2005 12,000 126,000 114,000 114,000 101,400 -12000 (12,000) (12,000) 2006 12,000 126,000 114,000 114,000 101,400 114000 114,000 101,400 2007 12,000 126,000 114,000 114,000 101,400 114000 114,000 101,400 2008 12,000 126,000 114,000 114,000 101,400 114000 114,000 101,400 2009 12,000 126,000 114,000 114,000 101,400 114000 114,000 101,400 2010 12,000 126,000 114,000 114,000 101,400 114000 114,000 101,400 2011 12,000 126,000 114,000 114,000 101,400 114000 114,000 101,400 2012 12,000 126,000 114,000 114,000 101,400 114000 114,000 101,400 2013 12,000 126,000 114,000 114,000 101,400 114000 114,000 101,400 2014 12,000 126,000 114,000 114,000 101,400 114000 114,000 101,400 2015 12,000 126,000 114,000 114,000 101,400 114000 114,000 101,400 2016 12,000 126,000 114,000 114,000 101,400 114000 114,000 101,400 2017 12,000 126,000 114,000 114,000 101,400 114000 114,000 101,400 2018 12,000 126,000 114,000 114,000 101,400 114000 114,000 101,400 2019 12,000 126,000 114,000 114,000 101,400 114000 114,000 101,400 2020 12,000 126,000 114,000 114,000 101,400 114000 114,000 101,400 2021 12,000 126,000 114,000 114,000 101,400 114000 114,000 101,400 2022 12,000 126,000 114,000 114,000 101,400 114000 114,000 101,400 2023 12,000 126,000 114,000 114,000 101,400 114000 114,000 101,400 2024 12,000 126,000 114,000 114,000 101,400 114000 114,000 101,400 2025 12,000 126,000 114,000 114,000 101,400 114000 114,000 101,400 2026 12,000 126,000 114,000 114,000 101,400 114000 114,000 101,400 2027 12,000 126,000 114,000 114,000 101,400 114000 114,000 101,400 2028 12,000 126,000 114,000 114,000 101,400 114000 114,000 101,400 2029 12,000 126,000 114,000 114,000 101,400 114000 114,000 101,400 NDR = northern development region, O&M = operations and maintenance, ( ) = negative Source: Asian Development Bank estimates.

Appendix 9 69

SUSTAINABILITY ANALYSIS

1. The analysis presented in this section looks at the probability of achieving human, institutional, financial, and environmental sustainability (wherever relevant) in each of the components supported under the Regional Development Project (the Project) , and whether these are sufficient to maintain the outcome achieved over the economic lifetime of the project. It also looks at potential risks to be overcome, and how this can be managed. Sustainability is an integral part of operational performance and is affected by project design and implementation.

A. Institutional Strengthening Component

2. Much progress has been achieved in this sector, however, ultimate institutional sustainability of the Project hinges on streamlining and institutionalization of regional development management office (RDMO) functions. This requires (i) full empowerment of the RDMOs as per order of the President 1 and (ii) adequate coordination with (and among) ministries of the Government of the Maldives (the Government) and atoll and island offices. While the establishment of the RDMOs encountered certain resistance, particularly within the responsible line ministry, dialogue and a maturing relationship between RDMO staff and line ministries (particularly the Ministry of Housing and Urban Development [MHUD], the Ministry of Planning and National Development [MPND] and the Maldives Water and Sanitation Authority) have enabled the northern development region (NDR) RDMO to execute its functions to a reasonable degree. The southern development region (SDR) RDMO is less well-institutionalized but efforts are being made to overcome this.

3. It is essential that work plans be jointly prepared at the start of each year and agreed upon between the “client” (those ministries with planning and programming mandates),2 the RDMOs, and their line ministries.3 Subsequently, lines of communication must be simplified enabling a direct client-RDMO relationship. If RDMO mandates are extended in the future to include other decentralized planning support functions (economic development and education planning functions are currently under discussion), this should be formalized using an appropriate legal tool (presidential order, ministerial order, etc.).

4. In addition, adequate and continuous leadership is necessary and must be sustained, preferably in the form of independent chief executive officers (CEOs). In the interim, chief operating officers should continue their functions while being able to discuss executive matters with line ministries. As per current arrangements, the regional advisory committee (RAC) does and should continue to act as a regional policy decision-making body, however decisions should be formalized through minutes of meetings and other documentation available to the public.

5. Human Resource Capacity. While training provided under the Project was limited, subsequent coaching by some of the central ministries as well as other ongoing programs4 has provided an adequate platform for enhancing the capacity of relatively young staff. In the NDR RDMO retention levels and staff team work, confidence and motivation are high, providing an environment conducive to enhancing technical knowledge through additional training and

1 President’s Office Circular No. 2002/27, dated 11 June 2002. 2 This includes at present MHUD, MPND and the Ministry of Environment, Energy and Water (MEEW), but functions can be extended with a growing RDMO mandate 3 In 2007, it would appear that only RDMO NDR had such program, though formal documentation was not made available. 4 2003. ADB. Technical Assistance to the Republic of the Maldives for Capacity Building for Regional Development. Manila (TA 4261-MLD).

70 Appendix 9 coaching from the Government and private agencies.5 In SDR RDMO, most staff are new to their jobs (all but two have recently taken over their current functions), the working environment is difficult, and identification of annual targets and training programs for several of the RDMO functions should be immediately rectified with support from central and regional offices. In addition, establishing an exchange program between the two RDMOs would help in sharing ideas and initiatives.

6. The RDMOs are funded by the Government, with budgets prepared by each RDMO on an annual basis, submitted to the line ministry and approved as part of the Government’s annual budget. RDMOs should be allowed to defend these budgets. In addition, other income that is generated—e.g., through activities such as room rental—should be retained within the RDMO, as this would support O&M activities.

B. Providing Social Infrastructure - Water Subcomponent

7. Institutional sustainability relating to the maintenance of water tanks and rainwater harvesting materials (roofs and gutters) of the water subcomponent rests with the households and therefore is believed to be sustainable. As part of maintenance activities, most, if not all households commonly clean their roofs at the end of the dry season, and this is followed by flushing of the tanks during the first rains.

8. Rainwater harvesting has no operational costs associated with it, and no recurrent costs are expected to be incurred by the households. Financial sustainability of this subcomponent relates in part to recovery of funds invested, which are to be placed into the NDR and SDR SDFs. Repayment rates are relatively high in the NDR (80%), but this figure is much lower in the SDR (46%), limiting funds available for future reinvestment.

9. Institutional sustainability relating to the purchase of additional water tanks has been secured through the establishment of the social development funds (SDFs). Institutional arrangements for managing the funds are clear and have been agreed to, with requests from individuals being collected by the island offices, coordinated by the RDMOs and approved by the RAC.

10. The revised guidelines for the establishment of the SDFs have included the participation of the Bank of the Maldives, which will be responsible for the collection the concessionary loan funds. This is expected to increase the repayment performance of households.

C. Providing Social Infrastructure – Sanitation Subcomponent

11. Institutional Sustainability and Human Resource Capacity. To assess the sustainability of this subcomponent, it is important to differentiate between the institutional sustainability of pilot sanitation activities and those of a potential future comprehensive sewerage scheme for Kulhudhuffushi. As agreed at the outset set the RDMO has provided operational support for implementation of the pilot, but it is expected that the adoption of a full- fledge scheme for the island would be in agreement with responsibilities outlined in the (draft) Local Governance Act, which is expected to fall under the purview of the island office.

12. While pilot activities may be continued for the purpose of experimentation and plant optimization, no specific staff members have been allocated for this purpose. Personnel

5 This should be the case for the rehabilitation of the sewage treatment plant.

Appendix 9 71 currently supporting this initiative are also responsible for other RDMO functions and none has a specific technical background relating to sanitation. Plant alterations have been introduced without a technical review, and although staff are enthusiastic and committed to the operation of the scheme, training has been minimal.6

13. O&M is handled primarily on a crisis-management basis, with consequent progressive deterioration of the system. Although prescribed in the operation manual prepared during project implementation, the following regular activities are not undertaken: (i) a daily monitoring routine, (ii) prevention maintenance programs, (iii) standard operating procedures, (iv) effective corrective maintenance and (v) safety programs for operation. These should be introduced and institutionalized. Immediate remedial actions should include (i) appointing a specialist (civil engineer) to maintain and train RDMO staff on adequate O&M practices and (ii) introduction of standard operating procedures, including regular cleaning.

14. The Government should take this opportunity to determine the institutional arrangements that should be used for future sewerage schemes for the island. Issues to be resolved include (i) should the scheme be operated by a private specialized entity or by the Government (considering the need to recruit trained staff and undertake needs planning; (ii) should revenue be collected by this contractor or by the island office; and (iii) how should fees be determined, given that water is at present sourced from rainwater harvesting and wells within the plot.

15. Financial Sustainability. As outlined in para. 12, the financial sustainability of a pilot or experimental scheme should be dissociated from that of a potential full-scale scheme serving the entire island. The financial sustainability of the pilot sanitation scheme has been secured through RDMO funds specifically allocated to cover unit O&M costs. This covers costs related to power (electricity) and does not include specifically appointed staff, preventive maintenance programs, calibration, etc., and thus can only be considered to partially cover the needs of the scheme.

16. During this period, the population should have been sensitized regarding the cost and responsibilities associated with the introduction of a new comprehensive scheme on the island, and a willingness-to-pay survey conducted.

17. Environmental Sustainability. Based on actual performance reports, current operation practices of the pilot sanitation scheme are not environmentally sustainable. This should be immediately corrected, as there is a risk of pollution of the freshwater lens as a result of lens recharge by discharge of wastewater that has not been disinfected.

D. Developing Physical Infrastructure

18. Institutional Sustainability and Human Resource Capacity. Institutional arrangements for the Gan-Hithadhoo link road are well established. The Seenu atoll road maintenance unit (recently transferred to the atoll office), has a total staff of 46, 11 of whom are assigned to link road maintenance. The unit is responsible for daily maintenance and cleaning of the link road, while the Ministry of Construction and Public Infrastructure (MCPI) is responsible for the implementation of major repair works and coastal erosion initiatives. Maintenance and repair activities are regularly attended to, including filling of holes, and maintenance of lamp posts, revetments and hazard marks. Provision of additional equipment,

6 One week of basic training was offered in 2004 by the design company during commissioning and rehabilitation of the scheme.

72 Appendix 9 including initially proposed trucks, front-end-loader, grader and roller, as well as an asphalt mixer, would facilitate and enhance the function of this unit. Proper maintenance has kept the road in good condition.

19. Financial Sustainability. As prescribed in the report and recommendation of the President (RRP), road maintenance functions are being funded from government allocations. 2007 budgetary allocations for road maintenance in the atoll were Rf6 million, which substantially exceeds preliminary RRP figures amounting to a total of Rf0.73 million. The budget initially prepared by MCPI has been delegated for local administration. MCPI also intends, from 2008, to request that the road maintenance unit prepare its own budget as capacity is available.

E. Improving Environmental Conditions – Solid Waste Management Subcomponent

20. Policy and Institutional Sustainability. While sustainable institutional arrangements were established at the onset of the Project through delegation of responsibilities to the atoll office and contracts with private sector contractors for O&M activities, the results have been variable. This is due to (i) the absence of a policy framework outlining the responsibilities and mandates of both government institutions and households with regards to waste,7 (ii) the lack of monitoring and compliance of contractual conditions at the atoll office level, and (iii) a lack of enforcement mechanisms 8 to prevent random dumping, burning and other contravening activities. As per a recent agreement between Haa Dhaal (HDh) atoll office and Kulhudhuffushi island office, institutionally it would be better if the island office took responsibility for the local solid waste management center, as this serves the island rather than the atoll.

21. Environmental Sustainability. In Seenu atoll, reasonable sustainability in agreement with the existing contract has been achieved. Total household collection coverage is only about 50% (with an additional 10-15% of households reported to be disposing of waste onsite through other means), which shows a significant increase over a 3 year period;9 few private parties have been reported to be conducting waste collection and dumping in unauthorized10 sites elsewhere in the islands. Management practices within the site can be improved, particularly with respect to the segregation of biodegradable and non-biodegradable household waste, but every effort is being made to incorporate reuse and recycling principles. The location of the site (i.e., the distance from the community) has thus far prevented any nuisance impacts to households; fresh water lens pollution is not likely, as groundwater has not been identified within the site. Green waste is being dumped in marshy areas, however, and should instead be composted.

22. The Kulhudhuffushi site serves most of the island, but poor management has in effect turned this into a dump site, led to the faster-than-planned filling of the site, and shortened its lifespan. Moreover, the lack of waste segregation is of concern from the perspective of disposal of toxic and hazardous substances. The lack of planned disposal (for instance using cells) and

7 MEEW is in the process of preparing a solid waste management policy. A first draft is expected to be available before end 2007. 8 Enforcement within small communities is often complex, particularly when penalties are introduced. Atoll offices have reported not having sufficient staff to conduct random monitoring of dumping and households do not report these events. A strong sensitization and enforcement awareness campaign may need to be conducted. Every island, including Kulhudhuffushi, has a court within the island that could accommodate penalty functions. 9 The number of households registered and served has increased from zero to over 1500 in 3 years, and the number continuous to grow annually. 10 No law or ordinance prescribes the existence of authorized and non-authorized sites.

Appendix 9 73 compacting activities are expected to lead to heavy anaerobic activity, with associated methane production, and are therefore potentially hazardous.11

23. Financial Sustainability. In the SDR, a private sector contractor has managed to generate a marginal profit from household waste collection and fee collection from vehicles at the waste management site. The contractor indicated that as volumes were approaching adequate viability, Indian companies had shown interest in purchasing recyclable materials stored on site if these are suitably compacted for easy transportation, however, the contractor will require installing compactors on site. This is expected in short. Given the increasing demand for collection services from households in the atoll, the contractor is planning to rent more collection trucks, indicating that the business is financially viable.

24. In the NDR, the private sector contractor for the waste management site generates revenues only from septic tank desludging services for households in Kulhuduffushi. Primary collection of waste from households is provided on a commercial basis by other independent private agents, who pay no fees to the waste management contractor for dumping the waste at the site. As a result, the contractor for the waste management site generates insufficient revenues to adequately cover the site’s O&M costs. The current contract for management of the waste site is thus only partially financially sustainable, and requires revision by the island office. As in the SDR, the potential for marketing recycled waste and compost should be explored.

11 This is particularly relevant as burning has been reported on the waste site, which is adjacent to the State Electricity Company’s oil tanker and plant.

74 Appendix 10

OVERALL PROJECT RATING

Table A10.1: Assessment of NDR Component

NDR Assessment Rating Weight Weighted (0–3) (%) Rating

A. Institutional Development Relevance Relevant 2 0.20 0.40 Efficacy Effective 2 0.30 0.60 Efficiency Less Efficient 1 0.30 0.30 Sustainability Likely 2 0.20 0.40

Provisional Rating S 1.70

B. Water Tanks Relevance Relevant 2 0.20 0.40 Efficacy Highly Effective 3 0.30 0.90 Efficiency Highly Efficient 3 0.30 0.90 Sustainability Likely 2 0.20 0.40

Provisional Rating HS 2.60

C. Sanitation Relevance Relevant 2 0.20 0.40 Efficacy Less Effective 1 0.30 0.30 Efficiency Inefficient 0 0.30 0.00 Sustainability Less Likely 1 0.20 0.20

Provisional Rating PS 0.90

D. Solid Waste Management Relevance Relevant 2 0.20 0.40 Efficacy Less Effective 1 0.30 0.30 Efficiency Less Efficient 1 0.30 0.30 Sustainability Less Likely 1 0.20 0.20

Provisional Rating PS 1.20

HS = highly satisfactory, NDR = northern development region, PS = partially successful, S = successful. Source: Asian Development Bank estimates.

Appendix 10 75

Table A10.2: Assessment of SDR Component

SDR Assessment Rating Weight Weighted (0–3) (%) Rating

A. Institutional Development Relevance Relevant 2 0.20 0.40 Efficacy Less Effective 1 0.30 0.30 Efficiency Inefficient 0 0.30 0.00 Sustainability Less Likely 1 0.20 0.20

Provisional Rating PS 0.90

B. Water Tanks Relevance Relevant 2 0.20 0.40 Efficacy Effective 2 0.30 0.60 Efficiency Highly Efficient 3 0.30 0.90 Sustainability Likely 2 0.20 0.40

Provisional Rating S 2.30

C. Link Road and Coastal Erosion Program Relevance Relevant 2 0.20 0.40 Efficacy Effective 2 0.30 0.60 Efficiency Highly Efficient 3 0.30 0.90 Sustainability Likely 2 0.20 0.40

Provisional Rating S 2.30

D. Solid Waste Management Relevance Relevant 2 0.20 0.40 Efficacy Effective 2 0.30 0.60 Efficiency Less Efficient 1 0.30 0.30 Sustainability Likely 2 0.20 0.40

Provisional Rating S 1.70

HS = highly satisfactory, SDR = southern development region, PS = partially successful, S = successful. Source: Asian Development Bank estimates

76 Appendix 10

Table A10.3: Overall Rating Based on Proportion of the Project

Individual Proportion Weighted Component Rating (%) Proportion

1. Institutional Development 1.30 0.306 0.40 2. Water Tanks 2.45 0.083 0.20 3. Sanitation 0.90 0.011 0.01 4. Link Road and Coastal Erosion Program 2.30 0.561 1.29 5. Solid Waste Management 1.42 0.040 0.06

Overall Project Rating S 1.96 S = successful. Source: Asian Development Bank estimates.

Table A10.4: Rating for Each Component by Criterion

Component Relevance Effectiveness Efficiency Sustainability

1. Institutional Development 2 1.5 0.50 1.5 2. Water Tanks 2 2.5 3 2 3. Sanitation 2 1 0 1 4. Link Road and Coastal Erosion Program 2 2 3 2 5. Solid Waste Management 2 1.44 1 1.44

Overall Rating 2.0 1.9 2.1 1.8 Assessment Relevant Less Efficient Less Effective Likely

Assessment Ratings: Relevance: 3 = highly relevant, 2 = relevant, 1 = partly relevant, 0 = irrelevant. Efficacy: 3 = highly effective, 2= effective, 1 = less effective, 0 = ineffective. Efficiency: 3 = highly efficient, 2 = efficient, 1 = less efficient, 0 = inefficient. Sustainability: 3 = most likely, 2 = likely, 1 = less likely, 0 = unlikely Institutional development and other impacts: 3 = substantial, 2 = moderate, 1 = little, 0 = negligible.

Overall rating: HS = highly successful 2.5 < HS ≤ 3.0 S = successful 1.6 ≤ S ≤ 2.5 PS = partially successful 0.6 ≤ PS ≤ 1.6 U = unsuccessful < 0.6

Source: Asian Development Bank estimates.