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Greater Colombo Wastewater Management Project

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Greater Colombo Wastewater Management Project Report and Recommendation of the President to the Board of Directors Sri Lanka Project Number: 36173 September 2009 Proposed Loans Democratic Socialist Republic of Sri Lanka: Greater Colombo Wastewater Management Project CURRENCY EQUIVALENTS (as of 14 August 2009) Currency Unit – Sri Lankan rupees (SLRe/SLRs) SLRe 1.00 = $0.0087 $1.00 = SLRs114.8 ABBREVIATIONS ADB – Asian Development Bank ADF – Asian Development Fund CDTA – capacity development technical assistance CEA – Central Environmental Authority CMC – Colombo Municipal Council DSC – design, supervision, and management consultant EIRR – economic internal rate of return EMP – environmental management plan FIRR – financial internal rate of return IDC – institutional development consultant ICB – international competitive biding IEE – Initial environmental examination LIBOR – London interbank offered rate MLGPC – Ministry of Local Government and Provincial Councils NGO – nongovernment organization NWSDB – National Water Supply and Drainage Board OCR – ordinary capital resources O&M – operation and maintenance PCR – project completion report PIU – project implementation unit PMU – project management unit PSC – project steering committee PPMS – project performance management system QCBS – quality- and cost-based selection NOTES (i) The fiscal year (FY) of the Government of Sri Lanka and its agencies ends on 31 December. (ii) In this report, "$" refers to US dollars. Vice-President X. Zhao, Operations 1 Director General K. Senga, South Asia Department (SARD) Director H. Kim, Urban Development Division, SARD Team leader G. An, Urban Development Specialist, SARD Team members H. Austria, Assistant Project Analyst, SARD R. C. Barba, Safeguards Specialist, SARD R. Diamat, Administrative Assistant, SARD T. Gallego-Lizon, Senior Planning and Policy Specialist, Strategy and Policy Department A. Gamaathige, Resettlement Officer, Sri Lanka Resident Mission (SLRM), SARD J. Ghimire, Counsel, Office of the General Counsel H. Ikemoto, Urban Economist, SARD K. Tamaki, Senior Urban Development Specialist, SARD M. Thiruchelvam, Project Implementation Officer, SLRM, SARD F. Tornieri, Social Development Specialist, SARD In preparing any country program or strategy, financing any project, or by making any designation of or reference to a particular territory or geographic area in this document, the Asian Development Bank does not intend to make any judgments as to the legal or other status of any territory or area. CONTENTS Page LOANS AND PROJECT SUMMARY i MAP I. THE PROPOSAL 1 II. RATIONALE: SECTOR PERFORMANCE, PROBLEMS, AND OPPORTUNITIES 1 A. Performance Indicators and Analysis 1 B. Analysis of Key Problems and Opportunities 2 III. THE PROPOSED PROJECT 5 A. Impact and Outcome 5 B. Outputs 5 C. Special Features 8 D. Project Investment Plan 8 E. Financing Plan 9 F. Implementation Arrangements 10 IV. PROJECT BENEFITS, IMPACTS, ASSUMPTIONS, AND RISKS 14 A. Project Benefits 14 B. Social and Environmental Safeguards 15 C. Risks 16 V. ASSURANCES 17 VI. RECOMMENDATION 19 APPENDIXES 1. Design and Monitoring Framework 20 2. Problem and Constraints Analysis 23 3. Sector and Institutional Analysis 26 4. External Assistance to the Water and Sanitation Sector 32 5. Outline Structure of Combined Contract 33 6. Detailed Cost Estimates by Financier and by Implementing Agency 35 7. Project Implementation Arrangements 37 8. Implementation Schedule 38 9. Procurement Plan 39 10. Summary Poverty Reduction and Social Strategy 45 11. Summary Short Resettlement Plan 49 12. Summary Initial Environmental Examination (Short) 54 SUPPLEMENTARY APPENDIXES (available upon request) A. Chronology B. Draft Memorandum of Understanding for Inter-agency Sewer Discharge C. Key Features of Combined Contract D. Implementation Responsibilities of Project Management Unit and Other Agencies E. Outline Terms of Reference for Design, Supervision, and Management Consultant F. Outline Terms of Reference for Institutional Development Consultant G. Economic Analysis H. Financial Analysis I. Short Resettlement Plan J. Summary Initial Environmental Examination K. Initial Environmental Examination and Environmental Management Plan LOANS AND PROJECT SUMMARY Borrower Democratic Socialist Republic of Sri Lanka Classification Targeting classification: Target intervention (non-income Millennium Development Goal [TI-M]) Sector (subsector): Water supply and other municipal infrastructure and services (water supply and sanitation) Themes (subthemes): Social development (human development), environmental sustainability (urban environmental improvement), capacity development (institutional development) Location impact: Urban (high), national (medium) Environment and Social The Project is classified as category B for environment. An initial Safeguards Assessment environmental examination and an environmental management plan were prepared and are summarized in Appendix 12. The Project is classified as category B for involuntary resettlement. Appendix 11 contains a summary resettlement plan. Project Description The Project is designed to improve the urban environment and public health for the urban and suburban residents in Colombo through improvements to wastewater management services. The Project will support (i) upgrading the sewerage infrastructure, including pumping stations, sewer pipes, and discharge outfalls; (ii) strengthening institutional and operational capacity in asset management, financial management, operational performance monitoring, environmental regulatory compliance, customer services, and pro-poor sanitation services; and (iii) project management and implementation. Rationale Colombo is Sri Lanka’s economic and administrative center. The Government, in its Ten-Year Development Framework, 2006– 2016, targets high and steady economic growth and modernization of the capital region as the national growth engine. The Western Region Structure Plan, adopted by the Government as the development plan for the country’s capital region, emphasizes the critical role of basic infrastructure and services, including wastewater management, in sustaining the national economy and improving the quality of life in the Greater Colombo area. While the Colombo urban area is rapidly expanding, the coverage of the existing public sewerage infrastructure is limited. Most of the system has been run exceeding its technical life and is therefore inefficient and unreliable. Emergency repairs rather than planned maintenance are normal practices. Assets are not inventoried and there is no accurate database on the condition of assets. The customer database is inaccurate and is not regularly updated. Frequent blockages in the system cause flooding in low- lying areas and the uncontrolled overflow has serious environment and public health implications. There is no institutionalized mechanism to monitor operational performance or environmental compliance. ii Impact and Outcome The expected impact of the Project is improved urban environment and public health for 1.5 million urban and suburban residents in Greater Colombo. The expected outcome of the Project is improved wastewater management services to approximately 645,000 residents within the project area. Project Investment Plan The investment cost of the Project is estimated at $116.6 million, including taxes and duties of $16.5 million. Financing Plan The Asian Development Bank (ADB) will provide a loan of $80 million from its ordinary capital resources (OCR) and a loan of $20 million equivalent from its Special Funds resources (ADF). The OCR loan will be provided under ADB’s London interbank offered rate (LIBOR)-based lending facility and will have a 25-year term, including a grace period of 5 years, and financing charges determined in accordance with ADB’s LIBOR-based lending facility. The ADF loan will have a 32-year term, including a grace period of 8 years, an interest rate of 1% per annum during the grace period, and 1.5% during the amortization period. The Government will finance the full amount of taxes and duties and the temporary resettlement cost. Total Source ($ million) Percent Asian Development Bank 100.00 OCR Loan 80.00 68.6 ADF Loan 20.00 17.1 Government 16.63 14.3 Total 116.63 100.0 Source: Asian Development Bank estimates. Allocation and Relending The Government will pass on the ADB loan proceeds to the Terms Colombo Municipal Council (CMC) and the National Water Supply and Drainage Board (NWSDB) as a blend of grant (82.5%) and loan (17.5%). The relending terms for the loan portion will be at the rate of 10% per annum, with a repayment period of 25 years, including a grace period of 5 years. Period of Utilization Until 30 June 2015 Estimated Project 31 December 2014 Completion Date Executing Agency Ministry of Local Government and Provincial Councils (MLGPC) Implementation MLGPC will be the Project’s Executing Agency. CMC will be the Arrangements implementing agency responsible for most of the activities, except for the pumping station rehabilitation works within the NWSDB service area, for which NWSDB will be the implementing agency. A project management unit (PMU) will be established within CMC, directly under the municipal commissioner, led by a CMC officer at senior management level for the duration of the Project. A project iii implementation unit (PIU) will be established under NWSDB for implementing the works within NWSDB service area. A national project steering committee will be chaired by the secretary of MLGPC to provide policy guidance and coordination to the government agencies involved
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