Document of The World Bank Public Disclosure Authorized
ReportNo. 14401-ET
STAFF APPRAISAL REPORT Public Disclosure Authorized
FEDERAL DEMOCRATIC REPUBLIC OF ETHIOPIA
WATER SUPPLY DEVELOPMENT AND REHABILITATION PROJECT Public Disclosure Authorized
MARCH 8, 1996 Public Disclosure Authorized
Energy and Infrastructure Operations Division Eastern Africa Department CURRENCY EQUIVALENTS
Currency Unit = Ethiopia Birr US$1.00 = Birr 6.3 (at appraisal) Birr 1.00 US$0.15 US$1 = SDR 1.49021 (as of 11/30/95)
Government Fiscal Year
July 8 - July 7
Weights and Measures
Metric System
GLOSSARY OF ABBREVIATIONS
AAIIUDP Second Addis Ababa Urban Development Project AMWTI = Arba Minch Water Technical Institute AWSA = Addis Ababa Water and Sewerage Authority CIS = Computer Information System ERRP = Emergency Recovery and Reconstruction Project EU = European Union EVDSA = Ethiopia Valleys Development Study Authority EWWCA = Ethiopian Water Works Construction Authority FINNIDA = Finnish International Development Agency GFDRE Government of Federal Democratic Republic of Ethiopia IFAD = International Fund for Agricultural Development MNRDEP Ministry of Natural Resources Development Environmental Protection MOH = Ministry of Health MOWR = Ministry of Water Resources MTDP = Market Towns Development Project MWUD = Ministry of Works and Urban Development NGO = Non-Governmental Organization NMSA = National Meteorological Service Agency NRDEPB Natural Resources Development and Environmental Protection Bureau O&M = Operation and Maintenance RWS = Rural Water Supply SEPRA = Southern Ethiopia People's Regional Administration SIDA Swedish International Development Agency
TA = Technical Assistance UNCDF = United Nations Capital Development Fund UNDP = United Nations Development Programme UNICEF = United Nations Children's Fund WHO = World Health Organization WRDA = Water Resource Development Authority WSSA = Water Supply and Sewerage Agency WWCE = Water Works Construction Enterprise WWDA Water Well Drilling Agency ETHIOPIA
WATER SUPPLY DEVELOPMENTAND REHABILITATIONPROJECT
STAFF APPRAISAL REPORT
TABLE OF CONTENTS
CREDIT AND PROJECT SUMMARY ...... (i) L BACKGROUND...... 1 A. SECTOR OVERVIEW AND OBJECTIVES...... I B. SECTOR ORGANIZATIONS...... 2 C. ISSUES AND CONSTRAINTS...... 5 D. BANK ASSISTANCE STRATEGY...... 8 E. 1PLEMENTATION EXPERIENCEAND LESSONS LEARNED...... 11 11. THE PROJECT...... 13 A. PROJECT ORIGIN AND RATIONALE FOR IDA INVOLVEMENT...... 13 B. PROJECT OBJECTIVES ...... 13 C. PROJECT COMPONENTSDESCRIPTION ...... 13 D. COST ESTIMATES ...... 2 1 E. FINANCING...... 23 F. PROCUREMENT...... 23 G. DISBURSEMENT...... 26 MII.IMPLEMENTATION ...... 28 A. PROJECT ADMINISTRATION...... 28 B. PROJECT MONITORING AND MID-TERM REVIEW ...... 3 1 C. WATER TARIFF AND FINANCIAL MANAGEMENT...... 32 IV. PROJECT JUSTI CATION ...... 37 A. MAIN BENEFITS AND BENEFICIARIES...... 37 B. ECONOMIC ANALYSIS...... 38 C. ENVIRONMENTALIMPACT ...... 42 D. SUSTAINABILITY...... 43 E. PROJECT RISKS...... 43 V. AGREEMENTS AND RECOMMENDATION ...... 44
This report is based on the findingsof a missionwhich visited Ethiopia from November 30-December 20, 1994. The mission was led by Mr. T. Kainata(Financial Analyst and Task Manager) and includedMr. B. Almassy(Senior Urban Engineer), Mrs. C. Jones (OperationsAnalyst), Mr. T. Lium (Rural Water Supply Specialist), Mr. E. Moudoud (Institutional Capacity Building Specialist), Mrs. K. Ruiz (Economist) and Mr. Kenji Yoshida (ManagementInformation System Specialist). Mr. L. Rasmusson(MN2PI) was the lead advisor and Mr. Guillermo Yepes (TWUWS)was the peer reviewer. Mmes.J. Littlefordand B. Coronado-Garciaprovided secretarial support. Mr. S. Weissmanand Mr. J. Adamsare the DivisionChief and Director,respectively, for the operation. List of Annexes
I - Letter of Sector Policy 2 - List of Major Urban Water Supply Schemes 3 - Description of MOWR 4 - Description of AWSA 5 - Activities of Donors 6 - List of Vehicles & Equipment for AWSA and Regions 7 - Disbursement Table 8 - Monitoring Indicators 9 - Supervision Mission Plan 10 - AWSA New Tariffs as of May 1995 11 - AWSA Financial Projections 12 - Cost Benefit Analysis 13 - Documents Available in Project File
Map - IBRD 26859 (i)
ETHIOPIA
WATER SUPPLY DEVELOPMENT AND REHABILITATION PROJECT
CREDIT AND PROJECT SUMMARY
Borrower: Ethiopia
Implementing Agencies: Ministry of Water Resources (MOWR) Addis Ababa Water and Sewerage Authority (AWSA) Regional Governments of Tigray, Afar, Amhara, Oromia, Somali, Benshangul, Southern Ethiopia People's and Harar
Beneficiary: Not applicable
Poverty: Not applicable
Amount: SDR 24 million(US$35.73 million equivalent)
Terms: Standard IDA terms with 40 years maturity
Commitment Fee: 0.50% on undisbursed credit balances, beginning 60 days after signing, less any waiver
Financing Plan: See para 2.10
Economic Rate of Return: 18.4% for water supply rehabilitation and capacity building components (23% of total project costs). NPV of those components, at a 12% discount rate, is US$10.6 million; benefit/cost ratio is 1.27.
Map: IBRD No. 26859
I. BACKGROUND
A. SECTOROVERVIEW AND OBJECTIVES
1.01 The water supply and sanitation sector in Ethiopia is characterized by: i) severe deficiency of physical infrastructure for provision of water supply and sanitation services; and ii) inadequate managing capacity in the sector institutions to handle policy and regulatory issues, and to plan, operate and maintain the water supply and sanitation services. This is, in part, a result of underinvestments and inadequate financial policy in the sector during the twenty-year civil war.
1.02 Rehabilitation and Improvement of the Sector Infrastructure: The physical need in the water supply and sanitation sector is overwhelming. Investments in the sector were severely depressed during the previous regime. Access to sufficient and safe water supply is very limited; only about 17 percent of the total population has safe potable water, and sanitation service coverage is even lower. Water supply coverage in urban areas, where some 10 percent of the population lives, is better (about 70 - 90%), but with significant inequalities in the larger towns, especially Addis Ababa, where over half of the people live in areas which have serious deficiencies in basic infrastructure and little or no access to municipal services. Even the existing schemes are suffering from low production level and high leakage of water. Of some 200 urban water supply schemes, serving 3 million people (including the satellite schemes), 80 percent require major rehabilitation or additional construction. Currently, only 22 schemes are newly constructed, 7 are under construction for additional capacity and 12 are under rehabilitation (the list of main urban water supply schemes are attached in Annex 2). Of more than 6,000 rural water supply schemes serving 17 million people, some 30 percent are not functioning properly due to lack of maintenance. Water quality is also poor: problems include high bacterial pollution, high fluorine and mineral content, salinity, and the existence of guinea worm. The population in Ethiopia desperately needs safe water and sanitation facilities to improve health and raise productivity. The Government of the Federal Republic of Ethiopia (GFDRE) plans to undertake this task, first, by carrying out emergency rehabilitation; second, by building new water supply schemes for which engineering designs have already been completed; and finally, by undertaking engineering studies for future expansion of water supply operations. The emergency rehabilitation of the war affected northern part of the country is already underway with support from the Emergency Recovery and Reconstruction Project (ERRP, Cr. 2351-ET); GFDRE would now like to start the nationwide rehabilitation and improvement of water and sanitation facilities. A list of projects in GFDRE water sector development plan is available in the Project File.
1.03 Capacity Building of the Sector Institutions: A basic condition for the success of such a program is the development of adequate capacity in the water supply and sanitation institutions. These include: the Ministry of Water Resources (MOWR); the Regional Governments and Addis Ababa Water and Sewerage Authority (AWSA); and other related Ministries and their affiliated institutions. 2
1.04 Subsequent to the devolution of power to the Regional Governments in 1993, water supply and sanitation operations, which had previously been managed by central water agencies, are being decentralized to the Regional Governments. Details of sector institutions and the regionalization exercises are provided in the Section B (Sector Organizations).
1.05 The new institutional structure brought about the urgent need for human resource development and capacity building. For some of the Regions, transfer of personnel from the central institutions to the Regional Government has been carried out on a limited scale, and most of the Regional Governments do not have the experience to manage water supply and sanitation schemes. The newly-established MOWR requires additional qualified personnel to effectively handle regulatory issues.
1.06 Management capacity in the water supply sector institutions is inadequate to conduct sound sector planning efficiently, operate and maintain the operations, or ensure their financial viability. Most of the central institutions lacked sufficient qualified personnel: for example, 80 percent of the employees of the Water Supply and Sewerage Authority (the precursor of the Water Supply and Sewerage Agency - WSSA), were semi- skilled or unskilled workers. Financial management of the Water Supply and Sewerage Authority and AWSA was very weak: the Water Supply and Sewerage Authority never completed a consolidated financial statement for its operations until 1993.
1.07 Sector Objectives: The main objectives of the sector, which are stipulated in GOE's transitional economic policy and incorporated in IDA's Country Assistance Strategy, are to improve the health and productivity of the populations and to ensure the long-term viability of water supply and sanitation operations in line with the Government's regionalization policies. These objectives would be met by: (a) rehabilitation and improvement of the water supply and sanitation infrastructure and operations; and (b) capacity building of the Regional Administrations and water supply and sanitation sector institutions. The achievement of the sector objectives would greatly contribute to the alleviation of poverty, the primary development objective for the country, through better health and higher productivity of the population, capacity development, income and employment generation, and private sector development. GFDRE intends to achieve these objectives initially through rehabilitation of existing water supply schemes, and then through construction of new water supply schemes.
B. SECTOR ORGANIZATIONS
1.08 Prior to the Government's policy of regionalization, the Water Supply and Sewerage Authority had responsibility for planning, implementing, operating and maintaining water supply and urban sewerage systems throughout the country, except in Addis Ababa which had its own independent authority, AWSA. Water resource assessment and planning was carried out at two institutions, the Water Resource Development Authority (WRDA) and the Ethiopia Valleys Development Study Authority (EVDSA). There were two Government engineering and construction institutions under 3 the Ministry of Works and Urban Development (MWUD): the Ethiopian Water Works Construction Authority (EWWCA) and the Water Well Drilling Agency (WWDA). The Ministry of Health (MOH) provided health education and rural sanitation, and supervised some small scale rural water supply schemes. All the sector institutions reported to the Water Resource Commission, which coordinated and supervised all the sector issues and institutions.
1.09 In 1992, a new policy of regionalization of the government structure was established by issuance of the NationaVRegional Self-Governments Establishment Proclamation No. 7/1992. This policy was to provide greater autonomy for the regional governments. Under this policy, a new institutional structure of government emerged ("Definition of Powers and Duties of the Central and Regional Executive Organs of the Transitional Government of Ethiopia Proclamation No. 41/1993"). At the central government level, a new ministry in charge of overall natural resource management and environmental management, the Ministry of Natural Resource Development and Environmental Protection (MNRDEP), was established. The Water Resource Commission was abolished and its responsibility for supervising sector institutions was assigned to the MNRDEP. For water resource management (at the central level), WRDA and EVDSA were merged into one organization. WSSA focused on providing technical support for the Regional Governments. At the operational level, the Natural Resources Development and Environmental Protection Bureaus (NRDEPB) of the Regional Governments have taken over the managing responsibilities for water supply and sanitation operations from the Water Supply and Sewerage Authority, except in Addis Ababa where AWSA still remains an independent organization under the Region 14 Government.
1.10 In August 1995, following establishment of the Federal Democratic Republic of Ethiopia, GFDRE restructured all the ministries. MNRDEP was restructured to focus on water resource management and water supply and sewerage regulations, and a new Ministry of Water Resources (MOWR) was established. Most of the NRDEPs of the Regional Governments were restructured to the Water, Mines and Energy Bureaus. WSSA and WRDA were dismantled and their duties and functions were absorbed into various departments of MOWR.
1.11 Thus, the following institutions are currently involved in the sector: (a) MOWR and its associated central sector institutions; (b) the Water, Mines and Energy Bureaus of the Regional Governments; and (c) other ministries involved in the provision of sanitation services. In addition, there are several donors and more than twenty active non- governmental organizations (NGOs) involved in provision of small scale rural water supply services. The mandate and functions of these institutions are given below:
1.12 Central Government Institutions: The mandate and functions of MOWR and its associated central sector institutions are as follows. 4
(a) Central Government Institutions:
* MOWR has taken over the mandate and functions of MNRDEP, WSSA and WRDA and is now in charge of water resource management, policy formulation and regulation of the water sector, provision of technical assistance to the Regional Governments, studies on regulation and protection of water, design and construction of dams and large-scale irrigation projects, and development of master plans for river basins. Many technical staff from MTNRDEP,WSSA and WRDA have been incorporated into MOWR, providing continuity in its operations and its contacts with agencies such as the World Bank; nevertheless, being a new Ministry, it still has to organize its internal structure, recruit additional qualified personnel and initiate a wide range of activities. Details are in Annex 3 and its human resources are included in the Project File. the National Meteorological Service Agency (NMSA) conducts surveys and studies of climatic and atmospheric conditions throughout the country.
(b) Regional Governments and AWSA:
the Regional Governments have taken over the managing responsibility for water supply and sanitation operations. A description of the Regional Governments and their human resources are presented in the Project File. AWSA. AWSA provides water supply services and waste water and sludge disposal services for Addis Ababa under the Region 14 Government. A detailed description of AWSA is in Annex 4 and its human resources are presented in the Project File.
(c) Other Ministries and Institutions:
MWUJDused to provide urban sanitation services (except sewerage operations) through the municipalities. Its future relations with the Regional Governments are yet to be established. MWUD also supervises WWCE and WWDA (see below).
* the Water Works Construction Enterprise (WWCE), an independent government-owned construction contractor for major water and irrigation works, is a new enterprise formed from the EWWCA under the "Waterworks Construction Enterprise Establishment, Council of Ministers Regulation No. 156/1994." S
* WWDA is a small autonomous government-owned contractor for drilling water wells in urban and rural areas under the MWIJD; it is expected to be corporatized, and eventually privatized.
* MOH provides health education, rural sanitation and supervises some small scale rural water supply schemes.
1.13 Other Donors and NGOs. A number of donors and NGOs are active in the water supply and sanitation sector in Ethiopia. The African Development Bank, the European Union, KfW (Germany) and UNDP are the major donors in the urban water supply sector. In the rural sector, Sweden, Canada, GTZ (Germany) and UNICEF have been most active. Finland has recently begun a four-year rural water supply program. Other donors involved in the sector include Japan, Italy, the Netherlands and Belgium. Further details on the activities of the major donors are given in Annex 5.
1.14 NGOs are also active participants in the water supply and sanitation sector in most regions of the country and have made a substantial contribution to providing safe water and improving sanitation. Some forty churches and humanitarian organizations work in the sector under the overall umbrella of the Christian Relief and Development Association. In general, the NGOs have adopted low cost technologies such as boreholes, handdug wells, hand and motorized pumps, protected springs, ponds, micro dams and latrines; several have also experimented with alternative technologies such as solar power, windmills and rainwater harvesting systems. Individual NGOs tend to concentrate on specific areas of the country (e.g. Norwegian Church Aid in SEPRA; Oxfam in SEPRA and Afar; Hope International in SEPRA and Somali; and Water Aid in Oromia, SEPRA and Amhara).
C. ISSUES AND CONSTRAINTS
1.15 Four main issues hamper GEDRE' s achievement of its sector objectives: (i) delays in preparation of the water resources assessment and master plan and establishing the regulatory framework (ii) lack of capacity in the new institutional structure, (iii) inadequate cost recovery; and (iv) insufficientdonor coordination.
1.16 Delays in Preparing the Water Resources Assessment and Master Plan and Establishing the Regulatory Framework: Ethiopia has eight major river basins: Tekeze, Abay, Awash, Wabi-Shebele, Genale, Rift Valley, Omo-Gibe and Baro. The Tekeze, the Abay and the Baro are tributaries of the whole Nile basin, which has Sudan, Egypt and Eritrea as co-riparians. The Abay (the Blue Nile) is by far the dominant river basin, whose run-off is estimated at 52 million cubic meters, or half the total volume of river run-off in Ethiopia. Brief summary statistics are included in the Project File.
1.17 Ethiopia has not yet completed a comprehensive national water resource master plan. Preparation of such a plan will be initiated soon, with assistance from a bilateral donor. Preparation of water resource master plans for the major river basins has been in 6 progress to varying degrees: studies or recruitment of experts have been initiated for most of the major river basins. For Tekeze river basin, a consultant teamnhas been selected and work has been initiated. For Abay basin, a consultant team has been selected and mobilization is under way. For Awash basin, the surface water study has already been undertaken. For Wabi-Shebele basin, preparation of a master plan is scheduled for 1996. For Genale basin, preliminary capacity assessment has been undertaken. For Rift Valley basin, a preliminary survey has been prepared and a study will be initiated soon. For Omo/Gibe basin, preparation of a master plan is under way. For Baro river basin, the lower portion of the basin has been studied and data for the upper portion is being collected. GFDRE intends to share information with IDA once the national water resource master plan is completed. The establishment of a water resources management policy and strategies would facilitate future IDA assistance for major physical investments related to the use of water.
1.18 The regulatory mechanism to reflect the new policies addressed in the Letter of Sector Policy and the new administrative system in the water supply and sanitation sector have not yet been established. Currently, two proclamations have been issued: the "Water Resources Utilization Proclamation No. 92/1994" which defines the administration of water allocation, rights and permits; and the "Definition of Power and Duties of the Central and Regional Executive Organs of the Transitional Government of Ethiopia Proclamation No. 41/1993" which defines the powers and duties of, among others, MNRDEP (the precursor of MOWR) and the NRDEPBs of the Regional Governments. However, establishment of a regulatory framework, covering the introduction of full cost recovery principles, efficient allocation of water resources across the regions, and the possible future participation by the private sector and the public, is imperative. The regulatory framework should also include standard of service, water quality and environmental protection, market entry and exit, financial viability of utility operations, incentives and disincentives for performance, control of monopoly and enforcement provisions.
1.19 Lack of Capacity in the Institutional Structure: The institutional structure in the sector has been defined, including relations between MOWR and the Regional Governments and awaiting issuance of proclamations. Although the Regional Governments have, de facto, taken over the responsibilities and the claims for revenues from the operations and maintenance of urban and rural water supply and sanitation schemes, critical issues remain undefined, including the roles of the sector institutions, functions of the water supply units (ex-WSSA branches) vis-a-vis the Water, Mines and Energy Bureaus of the Regional Governments, management of cross-regional water resources, and relations with budgetary system of the Regional Administrations. The Regional Governments also lack management capacity and human resources at this stage. Many of the Regional Governments have not yet established their human resource requirements or filled the authorized positions. Their capacity needs to be developed as soon as possible to facilitate a smooth transition of water supply and sanitation operations from the central authorities. GFDRE's commitment to formalization of the institutional 7 setup has been confirmed by the Letter of Sector Policy. The letter of sector policy is attached in Annex 1.
1.20 Inadequate Cost Recovery: Ethiopia's water and sewerage tariffs are considerably lower than the economic costs of the water supply and sewerage operations. Tariffs for most of the water supply schemes have not been revised for more than 15 years and are not sufficient to cover operation and maintenance expenses, let alone capital investments. Of the major urban water supply schemes whose tariffs are known, over eighty percent have water tariffs equal to or less than ETB 1.0 per cubic meter for private connections and public water points, which is not sufficient to cover operation and maintenance expenses. In Addis Ababa, the uniform water supply tariff of ETBO.5 per cubic meter has been applied to all the customers without differentiation for 43 years, which has led AWSA to become a financiallyweak institution. A high proportion of the rural water supply schemes are not functioning, since cost recovery has drawn little attention of communities and donors. The tariffs for major water supply schemes are shown in Annex I and detailed description of tariffs and financial management of water supply operations in the Project towns of the Regions is in paras. 3.15-3.29.
1.21 GFDRE has agreed in principle that water supply and sewerage tariffs should reflect adequate economic cost and that the cost recovery principles should be implemented over time. In the context of the Third Policy Framework Paper dated October 18, 1994, GFDRE has already established guidelines for pricing and cost recovery for water supply and sanitation operations. The Regional Governments have agreed to implement the new water tariffs. Some tariff increases have already been effected in towns where new schemes or augmentations have been completed according to the guidelines for water pricing issued in January 1995. For example, Aykel in Amhara Region and Moyale in Oromia Region now have tariffs of ETBI5.0 for private connections and public water points.
1.22 The "Basic Principles and Guidelines for Water Tariff Study" issued by the Government in January 1995 and approved by the Council of Ministers in May 1995, provides principles for pricing to achieve efficient allocation of economic resources, ensure social objectives of fairness and equity and meet financial requirements for utility operations. The efficient allocation of economic resources will be achieved through improvement in operational efficiency, rehabilitation of existing systems and development of least cost solutions. The social objectives will be achieved by elimination of government subsidies to utility entities and introduction of cross-subsidization among different consumption and income groups, with phasing over 8-10 years, taking into account the ability to pay of the various groups. The financial needs of the utilities will be met by full recovery of investment costs, debt services, depreciation and operation and maintenance costs; and by establishment of appropriate financial targets.
1.23 Agreement has been reached on the tariff increases required to meet the financial covenants under the ongoing IDA-financed urban projects. Revised water tariffs have been implemented for: (i) Assela and Shashemane in Oromia Region to comply with 8
Section 4.02 of the Project Agreement of the Market Towns Development Project (MTDP) (Cr. 2103-ET); and (ii) Addis Ababa by AWSA to comply with Section 4.02 of Project Agreement of the Second Addis Ababa Urban Development Project (AAIIUDP) (Cr. 2161-ET). It was also agreed that tariff revisions to recover operation and maintenance costs would be implemented for all the project towns by June 30, 1998.
1.24 GFDRE's Relations with Donors: Donor coordination in the sector has been inadequate. Generally, assistance has focused on physical construction and maintenance of water supply schemes in individual towns or regions and there has not been consistent consideration of overall sector policies. ADB, CIDA, IDA and KfW have separately financed engineering design, rehabilitation and construction of urban water supply schemes for towns in various Regions. ADB, EU, IDA and Italy have financed engineering designs and expansion of Addis Ababa water supply and sewerage systems, responding to requests for assistance from AWSA. GTZ, IDA JICA, UNDP and UNICEF have individually provided capacity building technical assistance in operations improvement and sector policy establishment for the sector institutions. For NGOs, there is an active forum in Addis Ababa organized by an NGO, Christian Relief and Development Association, for periodic information exchange among NGOs in the country. To date, however, involvement of Ethiopian authorities has been limited and issues such as standardization of equipment have remained unsolved.
1.25 To establish etYective donor coordination, GFDRE will actively coordinate dialogue with donors and sector stakeholders and, inform them of sector policy issues and mobilization of the necessary financial resources required for future sector investments. There has been some initiatives taken by the donors: UNICEF has conducted research to collect information on donor and NGO activities in the water supply and sanitation sector. An initial donor coordination workshop will be held by GFDRE in June 199'6 with assistance from an IDA project team. Follow-on consultative meetings v. ould be organized bi-annually during project implementation to facilitate GFDRF.'s donor coordination.
D. BANK ASSISTANCE STRATEGY
1.26 The Country Assistance Strategy for Ethiopia was discussed by the Executive Directors on June 16, 1995. The central objective of the Bank's program of assistance for Ethiopia is the reduction of poverty through a combination of sustainable economic growth and employment generation; improvements in basic social services; and special targeted measures to improve income, self reliance and quality of life for the poorest groups and communities. Economic growth is the essential basis of a long-term strategy to reduce poverty through increased employment and food production. The aim of the Bank's program is to promote this growth through: support for a policy framework that will stimulate production, export, and private sector growth; a reliable flow of inputs for the productive sectors; essential improvement and expansion of infrastructure; environmental rehabilitation and conservatior and institutional capacity building essential for sustainable economic growth. 9
1.27 The Bank's water sector program is aimed at assisting GFDRE's achievementof the sector objectives -- establishmentof a sound sector policy, rehabilitation and improvement of the sector infrastructure, and strengthening of sector institutional capacity. IDA's operations would consist of on-going activities under the existing portfolio and two phases of future activities. The activities under the existingportfolio include augmentation of two water supply schemes in Oromia Region under MTDP; expansionof a water supplyand sanitationscheme in the suburbs of Addis Ababa under AAIIUDP; and supply of emergencyequipment under the water supply component of ERRP. The first phase of future activitiesis to focus on resolvingpolicy issues, building managementcapacity and rehabilitatingthe existingwater supply schemesthrough FY97. This will be carried out through lending operations and other non-lending instruments. The lending operations consist of this Project: the proposed Social Rehabilitationand DevelopmentFund Project which will focus, among others, on rural water supply and sanitation;and a Health Sector Project, which will assist improvementof sanitation. The non-lendinginstruments include the PolicyFramework Paper, Economicand Sector Work and the Public ExpenditureReview, which will review progress on overall private sector participationin the sector and follow-upon cost recoveryprinciples. The second phase would be to provide support for investments in physical expansion of the sector infrastructureand for continuedcapacity building after FY97. This phase would includea follow-on investment project for the project towns and an investment project for augmentationof water supplysystem and sanitationin Addis Ababa. A summaryof IDA's strategyand relationswith other donors is presentedin Table I below: Table 1: Summary of IDA Sector Stratefy, Sector Objectives. Policy Issues and Relation with Other Donors
SectorObjecties _ ___Policy Issues ____JScope K. I I j~~~~~~~~~~~~~~~~~~~~~~~~~~~WaterS*~ Sanitation imovaait of Capacity Watm Resumrce b1stitutiona Ced Rwovezy Dcnor UbnRalUrban Rural IDA Progras Jnfi2struture Building & Reg. Stru4ure Coordhistica - I
MadkdTows Developmaii(Cr.2103-ET) x x - I - I x j __ X x SeomdAddsUxbmiDevelqp.(Cr.2161-Er) x x i -{11 - X Em-oSeo very &RdiimimbdrCr.235 - jr X x ______-, X Wataf SujpplyDcv atid RdhabilitatiknProjct x x _____X X x X x
HealthSelm(i Prqjed x - ______j X X Sedct Wcirk ______x ______x x x PFPand PER I " t ____ x x
AddisWater Supply aid iatnticmPrje _____ x j Jx - Regiwnal Touuns Devclqrn=t Prqjed ______x ______X x X
Other Donors __o__y__Issues__Scope
ADB _____
Belgium ______X X
CIDA ______X _ _
Eurpean Union _____ x _
FINNIDA ______X Germany (GTZ) ______X x X
Gernisy (Kf1W) ______X
Italy ______X _ _
Japan ______X
TheNetherlands ______x____
SIDA ______X
UNCDF _____X X UNDP _____ X ____X X X
UNICEF ______X ______XXX
WHO ____
X: SignificantContribution x: COntribution -: Not Relevant 11
1.28 The Bank's involvement in the water supply sector began in the early 1970s with a loan to AWSA for improvements to its water supply system (Ln. 81 8-ET). Since the early 1980s, the Bank has continued its involvement through the UNDP/WB Regional Water and Sanitation Group water program aimed at supporting the development of urban and rural water and sanitation systems. Currently, the Bank provides financing for the upgrading of the water supply schemes in two towns and parts of Addis Ababa as components of the MTDP and the AAIIUDP. In 1992, some of the funds provided under the MTDP were re-allocated to the ERRP to assist procurement of spare parts and equipment for the water supply systems in the war-affected northern part of the country.
E. IMPLEMENTATION EXPERIENCE AND LESSONS LEARNED
1.29 Lessons learned from Bank's operational experiences in the sector have been incorporated in the design of the Project. OED's 1992 review' of the Bank's 120 water supply and sanitation projects from 1967 to 1989 points to the need to have: (i) a comprehensive water resource management strategy; (ii) an appropriate sector regulatory framework; (iii) sufficient autonomy of water supply and sanitation institutions; (iv) appropriate tariff levels and structure: (v) clear measures to reduce unaccounted-for water; (vi) a human resource management system; (vii) better assessment of environmental impact; (viii) better assessment of poverty alleviation; and (iv) better compliance with covenants. The comprehensive water resource management study is under way at GFDRE's initiative. The establishment of an appropriate sector regulatory framework would be one of the major outputs under the Project. Autonomy of the executing agencies would be reviewed in the context of establishing the new sector institutional framework. Water tariffs for Addis Ababa, Shashemane and Assela have been increased in accordance with the financial covenants of the two on-going urban projects; and tariff increases to cover operation and maintenance costs would be implemented in all the project towns by June 30, 1998. The technical management study would include identification of physical and commercial causes for the unaccounted-for water; a quick rehabilitation program for reducing unaccounted-for water would be part of the Project for the project towns in the Regions and part of the follow-on investment project in Addis Ababa. For the assessment of the Project's impact on poverty alleviation, socio-economic monitoring indicators and baseline data would be established through the baseline study under the Project.
1.30 A review of 24 water supply and sanitation projects in the Africa Region in 1993 indicated that the improvement of performance of water utilities requires: (i) earnest efforts to build local capacity; (ii) private sector participation; and (iii) demand driven planning and management. Capacity building at the regional level is the primary objective of the Project. Higher participation of the sector stakeholders in sector planning would be reviewed and proposed by the studies under the Project and a pilot scheme to promote a
"Water Supplyand SanitationProjects - The Bank's Experience- 1967-1989"June 19, 1992 OperationEvaluation Department, The World Bank 12 participatory approach for rural water supply development would be established with involvement by NGOs and other donors.
1.31 In reference to AWSA's past performance, the Project Performance Audit Report on the Bank's loan to AWSA 2 raised issues of: (i) difficulty in land acquisition; (ii) delays in audit; (iii) inconsistent financial covenants; (iv) poor financial management; (v) high level of unaccounted-for water; and (vi) lack of autonomy in deciding key policy issues. The Project does not involve any land acquisition that requires resettlement. Audits under the ongoing urban projects are now up to date. AWSA's financial management would be strengthened by the technical assistance and training under the Project. Rehabilitation of the distribution network would be carried out in the follow-on investment project in Addis Ababa in order to reduce the high rate of unaccounted-for water. AWSA's new institutional charter provides AWSA's Board with sufficient autonomy.
2 "PPAR: Ethiopia AddisAbaba Water Supplyand SewerageProject" No. 2861, February 1980, OperationEvaluation Department, The WorldBank. 13
II. THE PROJECT
A. PROJECT ORIGIN AND RATIONALE FOR IDA INVOLVEMENT
2.01 Dialogue with Government of Ethiopia and its sector institutions regarding the Bank's further support of the sector beyond the ERRP began in April 1992. These discussions focused on capacity building and continued assistance for rehabilitation and augmentation of existing systems in Addis Ababa and war-affected and neglected regions. Based on these initial discussions, the idea of a Water Supply Development and Rehabilitation Project was agreed upon and confirmed during the Project Concept Papers discussion in October/November 1994.
2.02 The Project is consistent with GFDRE's sector objectives and the Country Assistance Strategy in that: (i) it will contribute to better access to safe water and sanitation facilities for the population in the project towns and for the adjacent rural populations, which will improve health and raise the productivity of the population; (ii) it will support human resource development and capacity building for the Regional Governments; and (iii) it will help define and establish a regulatory framework which is conducive to the introduction of full cost recovery principles in the utility operations and the greater involvement of various stakeholders.
B. PROJECT OBJECTIVES
2.03 Project Objectives: The main objectives of the Project are to ensure the long- term viability of water supply and sanitation operations in line with the Government's regionalization policies and, in the long run, improve the health and productivity of the population. These objectives would be met by providing assistance for: (i) capacity building of the Regional Governments and water supply and sanitation agencies for management of urban water supply and sanitation schemes and rural water supply operations; (ii) formulation of policies to ensure long-term financial and managerial viability of water supply operations, establishment of regulatory arrangements and sound investment planning by the Regional Governments and water supply agencies; and (iii) short- and medium-term physical rehabilitation, augmentation and establishment of urban water supply and sanitation schemes in war-affected and the most deficient regions.
C. PROJECT COMPONENTSDESCRIPTION
2.04 The Project would have the following components:
A. Institutional Capacity Building
(a) Water Supply Sector Capacity Building (i) Regional Studies (Financial, Organizational, Technical Management) 14
Project Towns (Tariff, Asset Evaluation and Baseline Studies) Regulatory Study for MOWR (ii) Technical Assistance for Regions and AWSA (iii) Training for Regions and AWSA
(b) Rural Water Supply Pilot Scheme (i) Studies (ii) Technical Assistance and Miscellaneous Equipment (iii) Construction of Pilot Scheme
B. Feasibility and Engineering
(a) Water and Sanitation Scheme Feasibility and Engineering Design (i) Rehabilitation Studies (ii) Engineering Design for Expansion
(b) Building Work Design
C. Physical Works
(a) Water and Sanitation Scheme Rehabilitation (b) Building Works
The coverage of each component is summarized in Table 2. 15
Table 2: Proiect Comonents
Project Components Regional Project MOWR AWSA I Buremus Towns 7. A. InstitutionalCapacity Building _ (a)Water SupplySector Capacity Building (i) Studies Financial,Organizational, X and TechnicalManagement Tariff, Asset Evaluation X and Baseline _ _ RegulatoryFramework x 0 & M and MIS,and Tariff x StudyUpdate for AWSA (Hi)Technical Assistance Implementationof Capacity X X BuildingStudies for Regions Implementationof O&M and x MISand Tariff Studies (iii) Training X _ X (iv) Equipment,Service Rigs, Mobile x X X Workshopsand Vehicles (b) Rural Water SupplyPilot Scheme __X__ V_____
(i) Studies x _ _ _ (ii) TechnicalAssistance and Misc. x Equipment (iii) Constructionof Pilot Schemes X B Feasibility and Engineering (a) Water SchemeFeasibility and EngineeringDesign (i) RehabilitationStudies X (ii) EngineeringDesign for Expansion X (b) BuildingWorks Design Afar,Sonali X Benshangu
C. PhysicalWorks ______(a) Water SchemeRehabilitation X (b) BuildingWorks Afar, Soniali X Benshangul Ganbefl
2.05 Regional Scope: The Project would cover all the Regional Governments in the country, including Tigray, Afar, Amhara, Oromia, Somali, Benshangul, Southern Ethiopia People's, Gambella, Harar and Addis Ababa. The 25 towns (Table 3) of the above Regions except for Addis Ababa are included in the Project for rehabilitation works, baseline and tariff studies, and feasibility and engineering designs. Capacity building assistance and building works would be provided to Addis Ababa through AWSA. 16
Table 3: Selected Towns
Regions |_ Towns |Population Tigray 1 Adigrat 28,000 2 Indasellasse 20,400 3 Maichew 26,100 Afar 4 Asaita 12,000 Amhara 5 Dabat 18,960 6 Addis Zemen 19,450 7 Fenote Selam 21,000 8 Debark 28,060 9 Koladiba 18,600 Oromia 10 Dembidollo 20,800 11 Gebreguracha 11,000 12 Holeta Genet 20,000 13 Sebeta 19,300 14 Shambu 17,000 15 Fitche 37,500 16 Kibre Mengist 21,000 Somali 17 Degahabor 5,000 18 Kebridehar 11,410 Benshangul 19 Assosa 10,000 South Ethiopia People 20 Alaba Kulito 14,700 21 Butajira 19,300 22 Dilla 49,765 23 Wolkite 15,185 Gambella 24 Gambella 13,300 Harar 25 Harar 93,795 Addis Ababa (AWSA) 26 Addis Ababa I- TOTAL (exel. Addis) [[ - j549,195
2.06 Criteria for Selection of Towns: The project towns were selected according to the following five criteria:
(a) the number of beneficiaries of water supply operations is generally more than 10,000;
(b) the town has strong development potential in respect to its administrative functions, as an agricultural production and distribution and commercial center;
(c) the existing water supply schemes require urgent rehabilitation in regard to the yield of sources, the production system such as pumps and generators, and the distribution network; 17
(d) considerations of equity among regions, taking into account priorities of the towns affected by drought and civil war; and
(e) the lack of major assistance from other donors or NGOs.
2.07 A brief description of the Project towns and water supply schemes is available in the Project File.
2.08 The details of the components are as follows:
A. Institutional Capacity Building (US$28.5 million)3
The objectives of this component are to improve Regional Governments' organizational, financial and technical management of water supply and sanitation operations; to ensure cost recovery; and to monitor sector performance, including the socio-economic impact on the population. This component would cover various levels of management in urban and rural water supply and sanitation operations, and is complementary to other donor assistance for regional and central capacity building, including the UNDP and UNICEF programs. The component comprises the following sub-components:
(a) Water Supply Sector Capacity Building. This component consists of: (i) studies, (ii) technical assistance; (iii) training; and (iv) provision of equipment, service rigs, mobile workshops, vehicles and workshops.
(i) Studies for the Regional Governments consist of: (a) an Organizational Management Study to assess and improve the organizational structure, the staffing and incentive system, and the management information system; (b) a Financial Management Study to facilitate investment planning and financial management in the Regions, including improvement of revenue collection and billing procedures and development of a sound accounting system; and (c) an Urban Water Technical Management Study to improve the technical capability, design standards and operation and maintenance (O&M) practices of zonal offices and water supply units of the Regions. These studies would be carried out for all Regional Governments (except Addis Ababa) at the management level of water resource departments, zonal offices and water supply units. In addition, two studies would be carried out for the 25 project towns: a Baseline Study to establish a basis for performance evaluation of the water supply operations and their socio-economic impact; and an Asset Evaluafion and Tariff Study to ensure the cost recovery of the water supply utility
3 Figures given are base costs. 18
operations. The tariff study would be carried out in two phases: the first phase is to identifythe O&Mexpenses of current water supply operations so that immediate tariff adjustmentscan be introduced to ensure cost recovery by June 30, 1998; the second phase is to ensure the long-run marginal cost recovery, taking into account the results of the asset evaluation and future investment plans to be developed under the engineeringstudies under the Project. Terms of Reference(TORs) for the studies are in the Project File; the implementationarrangements and schedulesfor the studiesare in the Project ImplementationManual.
For AWSA,the Organizationaland Management Study, the Water and Sewerage Tariff Study and the Management Information Study, which were carried out under the ongoing urban project, will be updated. The update of the organizationalstudy is aimed at establishinga solid ground for implementingthe new organizationaland managementstructure. The update of the managementinformation study is to improvethe efficiencyof systemdevelopment during implementationof the recommendationsof the study. The update of the water and seweragetariff study is to facilitate implementationof the new water and seweragetariffs in its new computer system.
For MOWR, a Regulatory Study will be conductedto review the existing regulationsand propose a regulatoryframework which is conduciveto the introduction of full cost recovery principles, efficient allocation of economic resources, the possible corporatization of water supply operationsin the regionsand participationby the privatesector. The study would be synchronizedwith UNICEF'sassistance for MOWR to fortulate rural water supply and sanitation policies. TORs for the study are in the Project File.
(ii) Technical Assistance for the RegionalGovernments would be providedto facilitate implementationof the recommendationsof the Organizational ManagementStudy, the FinancialManagement Study and the Urban Water TechnicalManagement Study. The technical assistance will comprise a phase of orientationand work planning,a subsequentphase of design and installation of new procedures and a final phase of supervision and monitoring. In addition,short term technicalassistance will be providedto the water supply units of the 25 project towns for implementationof the recommendationsof the baselinestudy and the tariff and asset evaluation study. TORs for the technical assistance will be prepared by the study teams of the above studies. Implementationarrangements are included in the ImplementationManual. Technicalassistance would be provided to AWSA to facilitate implementation of the updated organizational managementstudy and managementinformation system study, including implementationof the revised tariff structure in its new computer system. 19
The TORs for the AWSA technical assistance are presented in the Project File.
(iii) Training will be provided for personnel of the Water Resource Departments of the Regional Governments, AWSA and MOWR. The training would include the following aspects: (1) general management, including top management skills, human resource, financial and information management; (2) specific management skills, including supervision skills, environmental management, maintenance management, material management and customer service management; and (3) other professional courses, including budget planning and preparation, legal matters, safety training, maintenance of service rigs, pollution control and accounting and auditing. For the Regions, training will be provided for grass-root working level staff, mid-level management and top management of the bureaus, departments, zonal offices and water supply units. A detailed description of the component is given in the Project File.
(iv) Equipment, Service Rigs and Mobile Workshops Vehicles will be provided to facilitate the capacity building of the Regional Governments. There are no private sector rig operators in the Regions, and the Regional Bureaus themselves are responsible for carrying out maintenance of boreholes and wells. To improve their capacity to provide preventive as well as emergency maintenance, 13 maintenance rigs would be provided to clean up boreholes and wells, and 13 mobile workshops to maintain machinery and water schemes. The Regions have the capacity to maintain the maintenance rigs; most of them have at least one qualified mechanical/electrical engineer and mechanics and there are maintenance facilities such as ex-WSSA regional workshops, private garages and other construction site workshops available at the locations where these rigs normally go through maintenance services. The Regions of Afar, Somali, Benshangul and Gambella will, if necessary, receive additional assistance from MOWR in operating and maintaining service rigs at the initial stage. The training component will also include training of rig operators, mechanics and artisans. Detailed information on the Regions' maintenance capacity is included in the Project File. In addition, the water supply unit in each project town would be provided with a vehicle to facilitate implementation and subsequent operation of the rehabilitated schemes. Miscellaneous equipment, water meters and vehicles would be provided to AWSA to improve its maintenance and operational capacity and help to implement the new water and sewerage tariffs. A list of equipment, mobile workshops, maintenance rigs and vehicles is included in Annex 6.
(b) Rural Water Supply (RWS) Pilot Scheme. The main thrust of this component is to explore how community involvement, particularly management of completed schemes, can improve cost-efficiency and long term sustainability. The 20 following achievements are expected: identification of good practices; establishment of a framework for information exchange among communities and NGOs, development of procedures for promotion of community managed projects, implementation of pilot projects; and establishment of a rural water supply strategy for communities. The RWS pilot component will be vested regionally with the respective Water Resources Development Departments with assistance from the Water Supply and Sewerage Department of MOWR. This component would comprise the following main elements:
(i) Studies to review the current practices and institutional arrangements of rural water supply schemes among different communities, regions and NGOs and prepare appropriate national/regional strategies to improve operations;
(ii) Technical assistance and miscellaneous equipment to create a RWS Forum for exchange and dissemination of experiences among the Government, donors, NGOs and communities, centrally and in each region; and
(iii) Construction of pilot schemes for testing and application of the detailed strategies. It is envisaged that most of the pilot schemes will be constructed voluntarily by partner members of the RWS Forum. In order to carry out some independent testing, the project would also finance construction of several schemes (about 6-15) in each of the regions. These would be implemented through the regional bureaus, and will serve a training role in the overall capacity building effort.
The community based approach, design standard and promotion strategies developed under the pilot scheme component could be followed up by the proposed Ethiopia Social Rehabilitation and Development Fund Project, which will have a substantial rural water supply component (estimate at appraisal US$75 million).
A number of NGOs active in RWS development expressed willingness to work in partnership with the pilot component and to contribute to the generation and sharing of experiences. During the donor coordination meetings specific procedures will be worked out for collaboration with NGOs which will allow them to retain their autonomy while still being committed to the RWS Forum framework. Continuous consultations will be held with UNICEF and other donors to ensure complementarity with their programs. Details of the component are included in the Project File.
B. Feasibility and Engineering Studies (US$5.6 million)
(a) Water Schemes Feasibility Studies and Engineering Designs. This sub- component is to provide assistance in the form of engineering designs for immediate rehabilitation of water supply and sanitation schemes and for long-term investment planning for future expansion of the urban schemes in the 25 towns. The environmental 21 impact of the physical work will be assessed during the studies and engineering designs. The component includes:
(i) Rehabilitation studies to identify the immediate rehabilitation needs of water supply schemes in the project towns, which would be carried out under the component C(a); and
(ii) Engineering designs and environmental assessments for future expansion of the water supply schemes of the project towns, the physical works for which would be carried out under the follow-on investment project.
TORs for the above consultancy are included in the Project File.
(b) Building Works Designs. Designs would be prepared for the construction or improvement of headquarters offices for the water supply operations in Afar, Somali, Benshangul and Gambella Regions, which the currently have no administrative facilities, and for the branch offices of AWSA. The physical work would be carried out under component C(b).
C. Physical Works (US$19.7 million)
(a) Water Scheme Rehabilitation Works. Physical works will be provided for immediate rehabilitation of the water supply schemes in all the project towns as per the measures to be identified under sub-component B(a)(i) (Rehabilitation Studies).
(b) Building Works for Water Supply Headquarters and AWSA's Branch Offices. Headquarters facilities would be constructed or improved for the regional water supply headquarters in Afar, Somali, Benshangul and Gambella Regions. AWSA's branch network will be upgraded through construction of six new branch offices and six storage areas in order to improve its customer services.
D. COST ESTIMATES
2.09 The total cost of the Project is estimated at US$65.5 million, with a foreign exchange component of US$29.28 mnillion,or 45 percent. Total project cost includes physical and price contingencies and duties and taxes. Price contingencies have been calculated on average annual price increase indices in the range of 4.50% to 2.50% for foreign costs and 11.0% for FY95/96, 7.30% for FY96/97 and 5.20% for FY96/97 and thereafter for local costs. Physical contingencies of 10% have been added to the base cost of civil works and other physical works and 5% for consultancy and studies. A summary of project costs is given in Table 4 below. Details are in the Project File. 22
Table4: SUMMARY OF PROJECT COSTS
Component Birr Million US$ Million 9% % of Local Foreign Total Local Foreign Total Foreign Total
INSTITUTIONAL SUPPORT
Water Supply Sector Capacity Building StUdies ior Regions 8.21 19.60 27.81 1.30 3.11 4.41 70.5 6.7 for AWSA 1.62 3.53 5.15 0.26 0.56 0.82 68.5 1.2 for MOWR 0.47 4.98 5.46 0.08 0.79 0.87
Toclhnical Assistanice and Training for Regions 8.10 7.28 15.38 1.29 1.16 2.44 47.3 3.7 for AWSA 4.05 8.83 12.88 0.64 1.40 2.04 68.6 3.1
Misc. EnUipmt. and Vehicles tor Regions 27.39 59.41 86.80 4.35 9.43 13.78 68.4 21.0 for AWSA 5.34 8.08 13.42 0.85 1.28 2.13 60.2 3.3
RLuralWater Supply Pilot Scheme StLidies 4.19 0.00 4.19 0.67 0.00 0.67 0.0 1.0 Fechnical Assistance Adv. Services & Training 4.73 0.00 4.73 0.75 0.00 0.75 0.0 1.1 Off. Equipt. & Vehicle Spares 0.19 0.54 0.73 0.03 0.09 0.12 73.9 0.2 Pilot Scheme Construction 2.84 0.00 2.84 0.45 0.00 0.45 0.0 0.7
Sub-total 1 67.13 112.24 179.38 10.66 17.82 28.47 62.6 43.5
FEASIBILITY AND ENGINEERING
W'aterSchemies Erngineering& Corist. Supervision 11.03 21.11 32.13 1.75 3.35 5.10 65.7 7.8
Building Works Engineering & Const. Supervision Buiilding Works for Regions 1.13 0.00 1.13 0.18 0.00 0.18 0.0 0.3 Buildirrr Works for AWSA 2.28 0.00 2.28 0.36 0.00 0.36 0.0 0.6
SLub-total 2 14.44 21.11 35.55 2.29 3.35 5.64 59.4 8.6
iPHIYSICAL WORKS oViter Schemes for Regions Irionnediato Improvement Works 10.43 6.95 17.38 1.66 1.10 2.76 40.0 4.2 Dulling Works 2.27 2.35 4.62 0.36 0.37 0.73 50.8 1.1 Civil Works 32.76 0.00 32.76 5.20 0.00 5.20 0.0 7.9 Si,pIly Conttracts 17.77 17.58 35.35 2.82 2.79 5.61 49.7 8.6
Bijildirin Works .R Regions 11.34 0.00 11.34 1.80 0.00 1.80 0.0 2.7 lor AWSA 22.79 0.00 22.79 3.62 0.00 3.62 0.0 5.5
Suh total 3 97.37 26.88 124.25 15.46 4.27 19.72 21.6 30.1
LAND ACOUISITION/COMPENSATION 0.63 0.00 0.63 0.10 0.00 0.10 0.0 0.2
BASE COST TOTAL 179.57 160.23 339.80 28.50 25.43 53.94 47.2 82.3
Phlysical Contingencies 14.08 12.87 26.95 2.23 2.04 4.28 47.8 6.5 Price Contingencies 34.51 11.38 45.89 5.48 1.81 7.28 24.8 11.1
TOTAL PROJECT COST 228.16 184.48 412.64 36.22 29.28 65.50 44.7 100.0
Ililerest during construction 0.00 0.00 0.00 0.00 0.00 0.00 GOE firranced
F[1 AL FINANCING REQUIRED 228.16 184.48 412.64 36.22 29.28 65.50 23
E. FINANCING
2.10 The total project cost of US$65.5 millionwould be flianced as shown in Table 5 below:
Table 5: Project FinancingPlan
Local Foreien Total ------(US$ million)------
IDA 6.45 29.28 35.73
GFDRE 29.77 0.0 29.77
36.22 29.28 65.50
The IDA credit of US$35.73 million, including a Project Preparation Facility (PPF) advanceof US$200,000,would finance55 percent of total project costs; GFDRE would contributeUS$29.77 million equivalent including about US$9.6 millionequivalent in taxes and duties. Project funds will be transferredto the Regional Governmentsand AWSA as part of the budgetary allocation. A Grant Agreement will be concluded between the Ministry of Finance (MOF) and AWSA for the transfer of these funds. Signingof the Grant Agreementwill be a conditionof effectiveness.
F. PROCUREMENT
2.11 Procurementof goods, works and services for all IDA-financedcomponents will be carried out in accordancewith the Guidelinesfor Procurementunder IBRD Loans and IDA Credits, publishedJanuary 1995. A summaryof procurementarrangements is given in Table 6. During negotiations,standard procurement processing times were agreed for all key procurementactivities. MOWR will report periodicallyon status of procurement as per format agreed with IDA. 24
Table6: Summary of ProposedProcurement Arrangements (US$ millionequivalent)
ProcurementAethod ProjectElement ICB NCB Other NBF TOTAL
1. Works I.I ImmediateImprovement Civil Works 1.45 1.45 (0.00) 1.2 Rehabilitationof Water SupplySchemes Civil Works 6.56 6.56 (0.00) Drilling Works 0.97 0.97 (0.47) (0.47) Building Works for Regions 2.38 2.38 (0.00) for AWSA 4.78 4.78 (0.00) 1.3 Rural Water Pilot Schemes 0.62 0.62 (0.00) 2. Goods 2.1 ImmedizteImprovement Materialsand Equipment 2.00 2.00 (1.31) (1.31) 2.2 Rehabilitation.ofWater SupplySchemes Materialsand Equipment 6.95 6.95 (3.30) (3.30) 2.3 Rural Water SupplySchemes Office Equipmentand Spares 0.14 0.14 (0.10) (0.10) 2.4 TechnicalAssistance Misc. Equipmentand Vehicles for Regions 16.19 0.30 16.49 (10.72) (0.30) (11.02) for AWSA 2.57 2.57 (1.50) (1.50) 3. Consultancies 3.1 Institutional SupportStudies for Regions 5.01 5.01 (5.01) (5.01) for AWSA 0.92 0.92 (0.92) (0.92) for MOWR 0.98 0.98. (0.98) (0.98) 3.2 Short-termConsultancies and Advisory Servicesand Training for Regions 2.90 2.90 (2.90) (2.90) for AWSA 2.31 2.31 (2.31) (2.31) 3.3 RuralWater Supply Pilot Schemes Studies 0.81 0.81 (0.00) Advisory Servicesand Training 0.97 0.97 (0.00) 3.4 FeasibilityStudies, Engineering Design and ConstructionSupervision Water Schemes Tigray andAmhara 1.89 1.89 (1.89) (1.89) Oromia,Gambella, Benshangul 2.13 2.13 (2.13) (2.13) Afar, Somali,Huar, SEPRA 1.89 1.89 (1.89) (1.89) BuildingWorks for Regions 0.22 0.22 (0.00) for AWSA 0.45 0.45 (0.00) 4. LandAcquisition and Compensation 0.10 0.10 (0.00)
TOTALS 28.82 18.33 18.34 65.49 (17.40) (18.33) (0.00) (35.73)
Note: Figuresin parenthesesare the respectiveamounts financed by theIDA Credit NBF= Not BankFinanced 25
2.12 The implementing agencies (MOWR and AWSA) have demonstrated their capability to handle procurement matters (including acquisition and distribution of goods) under the ongoing Market Towns Development Project (Cr. 2103-ET) for the Assela and Shashamene water supply components as well as for the ERRP component and AAIIUDP (Cr. 2161-ET). The staff of MOWR are well experienced with the Bank's procurement rules and have been kept up-to-date with the revision in the Guidelines for Procurement under IBRD Loans and IDA Credits. The use of the Bank's revised Standard Bidding Documents will be mandatory for the Bank-financed components.
2.13 Civil works and building contracts would be financed by GFDRE. IDA shall, however, be satisfied that the selected contractors are capable of carrying out the works and that costs are reasonable.4 Drilling works for rehabilitation and augmentation of water supply schemes will be combined into single contracts within the regions and will be procured on the basis of international competitive bidding (ICB).
2.14 Procurement of goods (vehicles, equipment, and pipes and accessories) will, wherever practicable, be combined into single supply contract(s) and would be procured through ICB.5 MOWR will be responsible for the acquisition and distribution of goods to the regional administrations and to the selected civil works contractors. AWSA will be responsible for the acquisition of goods for the AWSA sub-components. Proper records and accounts of materials and supplies as issued will be maintained by MOWVRand AWSA which will be reviewed periodicallyby IDA and Auditor. Goods and office equipment, and minor water supply equipment and spare parts under the Immediate Improvement works, to cost less than the equivalent of US$20,000 each to an aggregate amnount of US$200,000 may be procured on the basis of international shopping from at least three suppliers from two countries. Proprietary spare parts for the rehabilitation and repair of the existing electrical and mechanical equipment under the Immediate Improvement component, to cost less than the equivalent of US$10,000 each to an aggregate amount of US$100,000 may be obtained from the sole authorized agent of the equipment. All contracts with a value of US$100,000 equivalent or more will be subject to prior review by IDA. Contracts below this amount will be subject to random post review (one in five).
2.15 Institutional and feasibility studies, engineering designs (including preparation of bid documents and construction supervision) will be carried out by consultants to be employed by the implementing agencies (MOWR and AWSA), whose qualifications, experience and terms and conditions of employment shall be satisfactory to IDA.6 Such consultants shall be selected in accordance with the "Guidelines for Use of Consultants by World Bank Borrowers and by the World Bank as Executing Agency" published in August 1981. Consulting contracts with firms and individuals estimated to cost $100,000
4 The value of the individualcivil workscontracts are estimatedto be betweenUS$0.2 and 0.4 million equivalent. 5 DA will finance the foreignexchange component. 6 The StandardForm of Contractfor Consultants'Services (published by the WorldBank in June 1995)shall be obligatory. 26 or more and $50,000 or more, respectively, will be subject to IDA's prior review including all TOR(s), sole source contracts, etc., as indicated in the DCA. A three-month period is allocated for the selection of consultants at project start-up in the implementation schedule.
2.16 The General Procurement Notice will be published in the Development Business Forum, at least 60 days prior to the issue of the bid documents.
G. DISBURSEMENT
2.17 Disbursements from the IDA credit would be in accordance with normal IDA procedures set out in the Disbursement Handbook (November 1992). All consultancies and advisory services and training would be financed 100% by IDA, except the engineering designs and construction supervision for the building works which will be filly financed by GFDRE. Civil works would be financed 100% by GFDRE, while the foreign cost of all other components would be financed by IDA. Payments under US$200,000 equivalent would be on the basis of Statements of Expenditure.
2.18 The credit would be disbursed over four and a half years, beginning the second quarter of FY96. The Project completion date is December 31, 1999, and closing date is June 30, 2000. An estimated disbursement schedule is given in Annex 7.
Summary of Disbursements
Category Amountof CreditAllocated % of Expendituresto be (USS) Financed
(1) Drillingworks and well 420,000 100%of foreignexpenditures construction
(2) Goods 15,490,000 100%of foreignexpenditures
(3) Consultants'services, and 16,200,000 100% training
(4) RefundingPPF 200,000 Amountdue
(5) Unallocated 3.420.800
Total 35,730,800 27
Estimated IDA Disbursements (in US$ millions)
FY96 FY97 FY98 FY99 FY00
Annual 1.25 7.25 11.9 10.3 5.03
Cumulative 1.25 8.5 20.4 30.7 35.73
Cumulative (%) 3.5 23.8 57.1 85.9 100
2.19 To facilitate disbursements, an MOWR special account would be opened in a commercial bank, with an authorized initial deposit of US$1 million, equal to three months' estimated expenditures. Until disbursements reach the equivalent of US$3.5 million, which is anticipated for the first project year, the initial deposit will be restricted to US$500,000. MOWR would be the signatory for withdrawals from the IDA credit. In addition, an AWSA special account would be opened with an initial deposit of US$500,000; MOWR and AWSA would be the signatory for withdrawals.
2.20 Audit Arrangements: MOWR would establish one Project Account for all regions. For the AWSA components, AWSA will submit its Financial Statements. The MOWR Project Account, AWSA Financial Statements, the MOWR Special Accounts, AWSA Special Account, the MOWR Statements of Expenditures and the AWSA Statement of Expenditures would be audited by an independent auditor satisfactory to IDA. The audit reports would be submitted within six months of the close of each fiscal year. The accounting capacity of AWSA has been improving under IDA's on-going urban projects: AWSA has cleared all audit backlogs in the past one year. 28
III. IMPLEMENTATION
A. PROJECT ADMINISTRATION
3.01. The water supply operation units of the Water Resources Development Departments under the Bureaus of Water Resources of the Regional Governments will be the beneficiaries of the Project. To facilitate implementation and enhance ownership of the regional components, a Project Manager will be appointed by each Regional Water Resource Development Department. Counterpart staff for the studies and technical assistance will be explicitly appointed for the project activities. The Regional Managers will have responsibility for day-to-day implementation; they will report to the National Project Coordinator at MOWR through the Regional Bureau Heads of Water, Mine and Energy who will have responsibility for supervision of quality of outputs under the Project. The National Project Coordinator's Terms of Reference are in the Project File. MOWR will coordinate and supervise all project activities, including signing of contracts on behalf of the Regional Governments, except for the AWSA sub-component for which AWSA would be the executing agency.
3.02. A Steering Committee with decision making powers has been established under the chairmanship of the Vice-Minister of MOWR to supervise implementation of the project. Steering Committee members include: the Chief Engineer, Senior Economist, Water Supply and Sewerage Department Head, Contract Administration Department Head, and Design Department Head of MOWR; and members from AWSA, Regional Bureaus and related Ministries as necessary. The National Project Coordinator will be the secretariat of the Committee and will report on progress of the Project and any issue which requires the Committee's intervention.
3.03. Agreement was reached that contracts for the consultancy and advisory assignments would be grouped into three geographical areas:
1. Tigray and Amhara Regions; 2. Oromia, Gambella and Benshangul Regions; and 3. Afar, Somali, Southern Ethiopia People's, and Harar Regions
in order to ensure that the assignments will be carried out simultaneously in all regions in the early phase of the implementation period. Such grouping would, moreover, encourage mutually beneficial sharing of experiences between institutionally relatively stronger and weaker regions. In the shortlisting of consultants, qualified local consulting firms would be included, and joint ventures with international consulting firms will be encouraged, as per the procurement guidelines. The engineering designs and construction supervision for the building works will be entirely locally financed.
3.04 Management of Studies and Technical Assistance: Special implementation arrangements to manage the studies and technical assistance would be established to ensure that they provide maximum benefits to the Regional Governments. These 29
arrangements are aimed at: enhancing ownership of the project activities by the Regional Governments; establishing accountability in the process of skill transfer from the technical assistance experts to the counterpart personnel; and ensuring sustainability of the improved performance of the Regional Governments.
3.05 Ownership of the studies and technical assistance by the Regional Governments would be enhanced by including MOWR personnel in the experts' team and by assigning the Region's counterpart staff to the expert teams as required. The counterpart staff includes the Project Manager, water supply engineer, economists or accountants and extension workers. Accountability of the technical assistance experts in transferring skills to the counterparts would be established by preparing detailed work plans for the experts with clearly defined measurable outputs, by establishing an objective evaluation system of technical experts' performance with feedback from top management of Regional Governments and the National Project Coordinator, and by providing appropriate incentives to the experts to the extent the contractual agreements permit. Sustainability of improvement of performance would be ensured by providing the counterpart staff with clearly defined work plans, incentive schemes and an objective performance evaluation system; by establishing clearly defined exit mechanisms with time-bound performance monitoring targets; and by coordinating the technical assistance with other training activities. The appointment of counterpart staff (staff composition is specified in the Implementation Manual). will be completed by June 1996 for the regional studies. technical assistance and training under the water supply sector capacity building component. Summary of the arrangements is presented in Chart 1 below. 30
Chart 1: Summary of TA Manaeement Arrangements
PHASES I Formulationand Transfer of Skill Improvement in Initiation Organizational Performance FOCUS OWNERSHIP JACCOUNTABILITY J SUSTAINABILITY KEY ImpvedP PLAYERS L=9-)&VJ1
ACTIONS - inclusionof MOWRand - establishmentof detailed - establishmentof detailed Regionalcounterpart workplans for TA experts workplansfor counterpart staff to the expert team with measurableoutputs staff with measurableoutput
- divisionof regional - quarterlyperformance - quarterlyperformance studies into three evaluationof experts by evaluationof counterpartstaff packagesto optimizethe counterparts,Regional by the experts,Regional numberof regions management,Project management,National coveredand the Coordinatorand Steering Project Coordinatorand efficiencyof contractual Committee SteeringCommittee management - moraleincentives for - performancebased incentive expertsby feedbackfrom schemefor counterpartstaff Regionalmanagement, Project Coordinatorand the - exit system:rotating the SteeringCommittee expert team amongRegions to enablecounterpart staff to performindependently
- establishmentof organizationalmonitoring indicators
3.06 An Implementation Manual has been prepared which sets out details of the implementation activities and roles and responsibilities of the various entities involved in project implementation. The contents of the Implementation Manual include a description of the project, its objectives and cost; implementation arrangements, including responsibilities and procedures; guidelines for procurement and disbursement; monitoring and evaluation indicators; and the project implementation schedule and timetable of key events. The Implementation Manual is in the Project File.
3.07 In order to facilitate higher participation of stakeholders in the sector, a participatory approach would be adopted in the implementation of the pilot scheme of rural water supply system with the involvement of NGOs and other donors. The experiences and lessons learned from this pilot scheme would be utilized for future investments in the rural water and sanitation operations to be financed, in part, by the proposed IDA-Financed Social Rehabilitation and Development Fund Project. 31
B. PROJECT MONITORING AND MID-TERM REVIEW
3.08 The Project Managers of the Regional Governments and AWSA will report progress of project implementation to the National Project Coordinator at MOWR. MOWR will aggregate the reports and submit them to the Project Steering Committee and the Bank. The reporting will be made quarterly.
3.09 Progress with technical assistance will be particularly closely monitored. Detailed work plans for consultants and Regions' counterpart staff will be developed with measurable output. The performance of the consultants and counterparts will be evaluated monthly by the Regions' management and reported to the National Project Coordinator and the Project Steering Committee. The National Project Coordinator will closely monitor quality of output, and will raise any issues to the Project Steering Committee. The Regions will have opportunities to evaluate counterpart staff performance independently because the expert teams will be rotated among the Regions.
3.10 Monitoring indicators to measure the impact of the Project on organizational, technical and financial management, human resource development, community involvement, socio-economic aspects and physical improvement of infrastructure have been developed at both Regional level and Project town level and included in the Project Implementation Manual. For the organizational, technical and financial management aspects, the indicators include efficiency indicators and financial ratios. For human resource development, various indicators related to staffing and training are included. For community involvement, customer contact and public relations indicators have been developed. For socio-economic impact, indicators, including infant mortality rate, burden of disease, affordability and labor burden, have been established. For the physical improvement of the infrastructure, service coverage indicators, rehabilitation progress and water quality are included. The Monitoring Indicators are attached in Annex 8 and in the Implementation Manual. To expedite collection of baseline data, a draft letter of invitation for carrying out the capacity building studies was submitted to IDA during negotiations. Prior to credit effectiveness, the terms of reference for the preparation of the monitoring indicators will be furnished to IDA. and the consultancy contracts will be awarded. By November 30, 1996, target monitoring indicators will be agreed, based on the results of the baseline survey, for review at mid-term and project completion.
3.11 Because of the geographic diversification of the project towns, IDA's supervision requirements would be higher than normal engineering and technical assistance projects. It is expected that IDA would field three supervision missions per year. An interim review would be conducted some 18 months into the Project as a basis for determining progress of project implementation and policy reform, and mid-course adjustments, if necessary, according to the performance criteria to be established in the implementation manual. During negotiations, agreement was reached that an interim review would be undertaken by September 30, 1997. A supervision mission plan is included in Annex 9; details are in the Implementation Manual. 32
Sector Approach
3.12 The Project has laid the basis for a sector operation approach. First, the Project, which will be implemented in all the Regions in Ethiopia, covers broad policy issues through the project preparation, the regulatory study and donor coordination forums. Second, there is a strong support and ownership of the Project by the Regional Governments, especially by the newly established remote Regions. The Regions proposed the type of support and selected the Project towns. Third, donor coordination is a central feature of this Project. A donor coordination forum will be held in June 1996, and bi- annual donor conferences are planned under the chairmanship of MOWR. In addition, there will be a rural water supply forum involving NGOs to facilitate exchange of information and dissemination of good practices. The policy issues, including cost recovery and institutional structure, have been discussed with major donors and there is a consensus on the conditionalities on these issues. Foreign technical assistance has been kept to a minimum, considering Ethiopia's enormous demand for technology transfer. There will be strong participation of local consultants and beneficiaries' counterpart staff, and technical assistance will be phased out through a clearly designed exit plan.
Client Consultation
3.13 Each Region has been visited by the Project preparation team and their specific requests for assistance have been discussed. In addition, the Prime Minister's Office has held several seminars for the Regional Bureaus' management to discuss policy issues and institutional structures; Bank staff participated in the seminars to discuss the issues and the Project.
3.14 The ultimate beneficiaries of water supply and sanitation operations, the consumers, have been consulted at public water fountains and communal sanitation facilities during field trips to the Project towns. To ensure systematic client consultation, the terms of reference for the various studies will include, where applicable, identification of stakeholders and definition of a framework for their participation.
C. WATER TARIFF AND FINANCIAL MANAGEMENT
1. THE REGIONAL GOVERNMENTS
3.15 Overall Financial Status of Water Supply Operations in the Regions: Due to the low water tariffs, which have not been revised for over 15 years, most of the water supply operations in the country do not recover the operations and maintenance expenditures of routine operations. Major maintenance and new investments are subsidized by the national and regional governments.
3.16 Financial Status of the Water Supply Operations of the Project Towns: The financial status of the water supply schemes in the Project towns is generally characterized 33 by insufficient revenue generation and inefficient cash management. The typical Project town has an annual revenue of some US$14,000 - US$40,000, with fixed assets of US$25,000 on an historical cost basis. Revenue has not grown over a long time of period since the water tariffs have not been revised and no new investment to increase water sales has been made. Revenues of most of the schemes are insufficient to cover operation costs, such as fuel, lubricants, chemicals and wages. Maintenance and replacement costs are barely covered even though depreciation charges are grossly understated since value of the fixed assets is still based on historical cost. Revenue collection is generally poor: some of them have outstanding balances of accounts receivable equivalent to two-year revenues. As a result, there is generally a high outstanding balances of accounts payable since the payment obligation cannot be honored due to cash shortages. Financial statements and financial performance indicators of the water supply schemes of the Project towns are included in the Project File (information on some of the towns is not available due to the civil war and transfer of documents between the Regions).
3.17 Improvement Plans: Under the proposed Project, the Financial Management Study for the Regional Governments will look into the current financial management system of the Regional Bureaus, including a review of the current accounting system and measures to improve revenue collection. The Tariff Study (Phase I) will help the Project towns to restore accounting records and establish new water tariffs to cover operations and maintenance costs (on historical fixed assets value). The Baseline Study, which will be conducted with the Phase I Tariff Study, will include an affordability analysis and review willingness to pay. Implementation of new water tariffs in the project towns to cover operations and maintenance costs will be completed by June 30. 1998. The tariffs will be required to be reviewed and updated bi-annually to cover operations and maintenance costs. After the Asset Evaluation Study re-evaluates the replacement cost of the fixed assets and the Engineering Design Study makes cost estimates of the future expansion works, the Tariff Study (Phase II) will assist Regions to establish the water tariffs based on the long-term marginal cost recovery principle.
2. ADDIS ABABA WATER AND SEWERAGE AUTHORITY (AWSA)
AWSA Water Tariffs
3.18 Current AWSA Tariffs: AWSA's water and sanitation tariffs were under government regulation until the new Board was established in 1993. The basic water tariff of Birr 0.50/m3 has not been revised since 1948. The rental fee for a 1/2 inch water meter is ETB1.00 and for a 3/4 inch meter, ETB5.00. For sewerage service, there is an initial connection fee and an additional sewerage fee of ETB 0.40 applied for each cubic meter of water consumed. The fees for disposal of sewage from pit latrines and septic tanks are between Birr 25 and 30: however, due to the shortage of vacuum cars in the past, the actual fees were raised to Birr 49.
3.19 Requirements of Tariff Increase under On-going Bank Project: Under AAIIUDP, AWSA is required to increase the water and sanitation tariffs in order to 34 sustain its operation and maintenance activities, carry out replacement of fixed assets, and meets its debt service obligations. The Project Agreement between IDA and AWSA requires that AWSA, after FY91/92, generate total revenues equivalent to not less than the sum of: (i) its total operating expenses; and (ii) the amount by which debt service requirements exceed the provision for depreciation. AWSA did not comply with the covenant for FY92/93 through FY94/95.
3.20 Tariff Increase: Following agreement reached between GOE and the Bank under the Third Policy Framework Paper and the Project Concept Paper discussions in October/November 1994, AWSA has agreed to increase water and sewerage tariffs, starting in June 1995. The new tariffs maintain the current tariff structure, consisting of the fixed charge (meter rent), volume charge, and sludge disposal fee, and are intended to cover only a one year period up to FY95/96 until a modified tariff structure becomes ready for implementation. The new tariffs are estimated to increase AWSA's total annual revenue by over 200 percent, from ETBI17 million to ETB50 million. This is sufficient to maintain a positive cash flow after operations and maintenance expenses and debt service, thus, satisfying the financial covenants of the Project Agreement under the AAILUDP. After FY95/96, the tariff structure will be modified to introduce more appropriate customer classification to connection fees, network charges, volume charges and sludge disposal fees. During the Project period, AWSA will continue to be required to maintain a positive cash flow after operation and maintenance expenses and debt service are covered. The new tariff structure, which was implemented in June 1995, is included in Annex 10 and financial projections for AWSA for the Project period are included in Annex 11.
3.21 Affordability of the New Tariffs: The new tariffs will not have an adverse effect on the poor since the volume charge for public fountain operators will remain at ETB0.5 per M3 and the low income group is not served by individual standpipes or house connections. The current cost of hand carried water is estimated to be marginally affordable to the poor. The population depending on public fountains and vendors is estimated to constitute a significant portion of the population of Addis Ababa. This low income group typically lives in wood and mud housing and the majority earn less than ETB200 per month. Since the hand-carried water costs ETBO.50/M3 to ETB2.50/M3, it is estimated to take between 2 percent to 20 percent of the household income. On the sanitation side, these households are typically either served by a communal latrine or utilize open ground; therefore they do not incur cash expenses.
3.22 Future Capacity Expansion and Tariff Perspective: Addis Ababa has been facing serious water supply constraints: AWSA's current treated water production from the existing Legadadi and Gafarsa treatment plants has been reduced to 125,000 cubic m3/day due to safe yield considerations, while the demand for treated water is estimated to reach over 500,000 m3/day by the year 2020. In order to meet the fast growing demand, AWSA plans to undertake a series of capacity expansion projects for the next twenty years. The following are AWSA's future investment plans (Table 7): 35
Table 7: AWSA Future Investment Plan
First Yearof Operation SourceWork Included AdditionalTreated EstimatedProlect Cost Water 1998 Dire Darn 40,000M /day AkakiGround Water 125,000M3/day USS165million 1999 Leakage&PipeReplace 60,O00M-/day 2000 Gerbi 33,000M3 /day Sibilu phase I 125,00OM3/day US$265million 2011 Sibilu phase 2 125,000M3/day USS200million 2017 Gafarsa 43,00OMW/day US$400 million
Sewerage and Sanitation
M.- MM5 Wfuly,,lel-l,.|me R*.lWnrl 6'i1- 13v lg lltot tiv, a ll
3.23 Based on the above investment plan, a tariff study has been made under AAIIUDP which estimates that the economic long-run marginal cost of AWSA's water supply is in the range of ETB2.8-3.4/M3 in constant 1992 terms. In order to recover future investment costs, future recurrent expenses, replacement of its fixed assets and debt service, AWSA will have to gradually raise the water supply tariffs to ETB2.32 in financial terms (constant 1992 ETB) by 2003. It was agreed under the Third Policy Framework Paper, that cost recovery of water supply and sanitation operations of AWSA would be achieved and this would be a condition of future Bank support for AWSA's investment program.
3.24 AWSA Financial Management: AWSA's financial management has been hampered by a shortage of manpower and insufficient financial skills. Although a full time acting financial manager has recently been appointed, there is a need to upgrade the skills of financial staff, especially relating to the introduction of the new computer system, incorporating the result of the Organizational and Management Study which was finalized in June 1993.
3.25 Billing: Billing is one of the key components in AWSA's operations. It starts from the reading of water meters at customer locations by branch personnel. Then the water meter readings (customer water consumption data) are sent manually to the head office to process customer bills by the mainframe computer system. The meter reading and billing are performed every two months. The collection is made by branch office personnel for most customers, while the head office is currently responsible for the collection from some large account customers.
3.26 For many years, inaccurate and late billing to customers has been one of the most critical problems of AWSA. About 20% of the water meters are not functioning, and those customers are currently billed at a flat rate based on their previous consumption 36 levels. To alleviate this problem, AAIIUDP provides assistance for procurement of water meters and extension of the meter repair/calibration workshop.
3.27 Besides malfunctioning water meters, it is alleged that the poorly designed computer billing system and poor data conversion in the past have resulted in inaccurate and late customer billing. Currently, there is no computer at branch offices and the billing system can only be operated within the Computer Information System (CIS) at the head office. The meter readings have to be inputted and processed at CIS. This centralized operation has taken more time for the input data verification and yet failed to reduce the occurrence of incorrect bills. Improvement will be made based on the recommendations made under the Management Information System study to be updated under the Project.
3.28 Collection: For continuing customers, branch offices and the Finance Department and CIS jointly perform their work in billing and collection in a two-month cycle. Due to inefficient collection, AWSA has accumulated a high outstanding balance of accounts receivable at end- FY90/91 of ETB 12 million, or over 8 months equivalent of the water sales revenues. AWSA will reduce its accounts receivable to 120 days by end-FY95/96. 90 days by end- FY97/98. and 60 days by end- FY98/99 and thereafter.
3.29 Status of AWSA Audit: There are no outstanding audits for AWSA's Financial Statements, Special Account and Statements of Expenditures. 37
IV. PROJECT JUSTIFICATION
A. MAIN BENEFITS AND BENEFICIARIES
4.01 Benefits: The Project is expected to produce the following immediate benefits: (a) the Regional Governments would develop improved technical, financial, planning and administrative capacity to implement and manage urban water supply and sanitation schemes and rural water supply operations at both water bureau and operational level; (b) four Regional Governments would have administrative office headquarters and small-scale service facilities to provide technical support for rural water supply operations; (c) AWSA would develop a well-functioning financial management system, and administrative and planning capacity as well as administrative facilities required to undertake major future investments in water supply and sanitation schemes in Addis Ababa; (d) pre-investment studies and consequent detailed engineering studies would be carried out for the 25 towns in all the Regions to facilitate future sector planning of the Regional Governments; (e) appropriate principles and management capacity for pricing and cost recovery for the urban water supply operations would be established and implemented by MOWR and the Regional Governments; (f) a sector regulatory framework would be established by MOWR and the Regional Governments, which would take into account market entry and exit, participation of the public, incentives for performance, control of monopoly and enforcement of regulations; and (g) immediate rehabilitation of water schemes and provision of maintenance rigs and mobile workshops will improve availability, reliability and quality of water supply.
4.02 The development of management capacity and establishment of an appropriate regulatory framework would contribute to the improvement of performance of both urban and rural operations. The direct and immediate benefit of these improvement is, among others, a reduction, in unaccounted-for water. The short-term minor rehabilitation of water supply and sanitation systems in the project towns and establishment of administrative headquarters would have a positive impact, primarily on urban and adjacent peri-urban populations. A study and a pilot scheme for developing least cost rural water supply systems would benefit the rural populations. In respect of the physical improvement of the sector, major rehabilitation of the urban systems in the project towns would be carried out in a follow-on investment project, and actual investments in rehabilitation and development of rural water supply systems would be made with assistance of IDA's proposed Social Rehabilitation and Development Fund Project.
4.03 Although the Project is not a direct poverty intervention program,7 in the long run it would have a particularly beneficial impact on the poor and women. A general improvement in health arising from the provision of safe water and sanitation services, including a reduction in intestinal morbidity and infant mortality, would contribute to higher labor productivity of the population. Easier access to a reliable supply of safe
7 Therefore,the povertycategory of the project is "Not Applicable",in the Credit and Project Summary. 38 water would relieve women of the burden of fetching water, allowing them to spend more time on productive pursuits and caring for their families. In addition, the poor are likely to be the major beneficiaries of employment to be generated through future follow-on sector investments.
B. ECONOMIC ANALYSIS
4.04 Project Benefits: The economic benefits of the Project would include:
(a) health benefits from the reduction in water-borne morbidity and infant mortality,8 which would contribute to higher labor productivity of the population;
(b) reduction of women's and children's burden of fetching water;
(c) consumers' surplus to be generated from an increase in water consumption;
(d) potential increase in the efficiency of production costs and extension of the lifetime of the water supply network due to improved managerial efficiency and employees' productivity; and
(e) potential reduction in unaccounted for water, both administrative and physical, which is currently estimated to be approximately 40 percent of total production, from improved managerial efficiency and immediate rehabilitation of the water system.
4.05 For the economic analysis of the Project, two areas of benefits are quantified: (i) the benefits from the incremental quantity of water supplied to the 25 Project towns, including new water production and a reduction in unaccounted for water; and (ii) the health benefits brought by a more reliable and accessible supply of safe water to the 25 Project towns and in other areas where maintenance service would be improved. Approximately 550,000 people who live in 25 project towns and about 8.2 million people who live in other areas where maintenance service would be provided are considered as beneficiaries of the Project (this excludes additional potential beneficiaries in the adjacent peri-urban population and Addis Ababa, in order to be on the conservative side of the estimate). Shadow prices and exchange rates were not estimated since Ethiopia has been undertaking a series of macroecomic reforms which have reduced distortions.
8 The secondmajor cause of under-5morbidity in 1990was gastro-enteritisand colitis (this morbidity rate was 13.4 percentaccording to the Ministryof Health,Comprehensive Health ServiceDirectory, 1991),and aboutone quarter of all under-5morbidity were water-borne related. 39
4.06 Benefits from Incremental Quantity of Water. The incremental quantity of water will be used by the beneficiaries to: (i) replace existing sources, e.g., water from vendors, and (ii) increase water consumption. Only benefits from increased water consumption were estimated. This gives a conservative estimation of benefits, since we have not estimated the consumers' surplus due to replacing water from vendors because of lack of reliable information related to vendor water prices beyond the 25 project towns. The benefits from replacing vendor water could be substantial given that people are paying ETB 5 to 25 per m3 of water. The following facts and assumptions are used:
(a) water consumption in the 25 project towns will increase from the current 7 liter per person per day (Ipd) to 15 lpd by the year 2000 and will be gradually increased to the national standard of 20 lpd by the year 2003;
(b) water consumption in the other areas, where maintenance service will be improved with the equipment acquired through the project, will increase from the current 15 liter per person per day (Ipd) to 16 lpd by the year 1998;
(c) the average current tariffs, ranging from ETB 0.5 to ETB 2.5 in the project towns, will be gradually increased to an average tariff of ETB 2.5 by the year 2000; 9 and
(d) Unaccounted for water in the 25 project towns will be gradually reduced from 40 percent to about 30 percent to the year 2005.
The NPV of the benefits from increased water supply is US$31.5 million. The details are presented in Annex 12.
4.07 Health Benefits. We have included health benefits in the calculation to take into account the expected improvements in water quality, which may not be captured by the current willingness to pay by consumers. However, to avoid duplication, we have only included 50 percent of the estimated health benefits. To be on the conservative side as well, these benefits do not include the benefits of higher productivity brought about by an improvement in the health of the population. The following assumptions and data are used:
(a) prevailing rates of water-borne disease which is, on average, 45/1000 in a two-week period; average days of restricted activity (6.2 days per incidence); and average expenditure on treatment of disease (ETB 17.5 per capita per year);'0
(b) a current average of US$130 per capita income and an average annual two percent growth; and
9 The tariff of ETB 2.5/m3 is taken as a proxy to willingnessto pay. 10 From the Central StatisticalOffice report on Rural Health. 40
(c) it is assumed that the economically active population lose 80 percent of their income when they are sick due to water-borne disease. For the younger and older population, only 20 percent of their income per capita is assumed to be lost when they are sick."
From these assumptions, about US$4 are estimated to be lost per capita due to water borne/wash diseases. Only half of this amount, however, has been used to estimate the health costs caused by water bome/wash diseases. The present value of the savings on health costs is estimated at US$18.0 million.
4.08 Project Costs and Least Cost Solution: Project costs include both investment and recurrent costs. To carry out the economic analysis, investment costs were calculated for the rehabilitation of the water supply facilities of the 25 towns which total US$11.4 million (net of duties and taxes, but including physical contingencies), or 23 percent of total investment. The capacity building components, including studies, training, technical assistance and institutional support (equipment and buildings), have also been included in the project costs because they will have a positive impact on the supply of water. The capacity building and institutional support activities which are aimed at the 25 project towns have been included in full amount, while the ones directed to regions have been apportioned according to the number of towns to be serviced or rehabilitated under the project relative to the total number of towns in the regions. These capacity building components total about US$13.3 mnillion,bringing the total costs to US$ 24.7. Recurrent costs are estimated at about US$2.9 million per year for the 25 towns and other regional towns, increasing with the increase in output. All costs are calculated taking into account the least cost of rehabilitation and O&M, including physical contingencies. The NPV of the project costs (both investment and O&M) due to the Project is US$38.8 million.
4.09 Economic Rate of Return. The estimated economic rate of return (ERR) of the water supply rehabilitation and capacity building components is 18.4% (See Table I in Annex 12). The net present value of the rehabilitation works and capacity building at a 12 percent discount rate is US$10.6 million. The benefit cost ratio is 1.27.
4.10 Project Risks and Sensitivity Analysis: The major risk to this Project is that GFDRE would delay implementing key policy issues, including establishment of an appropriate institutional framework and implementation of tariff increases. An additional risk is that the project management capacity of the newly created regional administrations may not improve as fast as desired. To mitigate these risks technical assistance, training and conditionalities will be provided. A sensitivity analysis was carried out to measure the effect of these risks on the expected returns of the Project. Five variables were taken into account: (i) delays in tariff increase; (ii) lower water consumption; (iii) higher operating
Thispercentage is smallerfor thissegment of the populationsince their participationin income generatingactivities is smaller,but has to includethe burdento the adultswho might have to limit their incomegenerating activities to takecare of sickchildren. 41 costs; (iv) prolonged implementation period; and (v) smaller health benefits. If the tariffs are increased only to ETB 1.65 by year 2000, the ERR would be reduced to 12.0 percent. If water consumption reaches only 8.2 lpd, instead of 15 lpd by the year 2000, the ERR will be 12.0 percent. If the investment and O&M costs are 23 percent higher than the estimated US$24.7 million and US$2.9 million per year, the ERR will be reduced to 12.0 percent. If we include only 20 percent of the health benefits, compared with the base case, the ERR would be 12.0 percent. Two years' delay in implementation of the project (including higher O&M costs due to delay) will lower the ERR to 12.4 percent. The summary is in Table 8 below.
Table 8: Sensitivity Analysis
Scenario Economic Rate of Return Base Case "most likely" Scenario: Tariff = 2.5 ETB/m3; Water Consumption = 15 lpd by the year 2000 and 21.8 lpd by the year 2005; Total Investment = US$24.7; O&M Costs = US$2.9 million per year; US$2 per capita lost due to water borne/wash diseases 18.4% Lower Tariff: Tariff = 1.65 ETB/m3 12.0% Lower Water Consumption (about 50% of base case); Water Consumption = 8.2 lpd by the year 2000 and 8.8 lpd by the year 2005 12.0% Higher Investment and O&M Costs (23% higher) Total Investment Cost of Component = US$30.5 million and O&M = US$3.8 million per year 12.0% Smaller Health Benefits 20% of estimated base case health benefits 10.0% 2 Year Delay in Implementation Implementation takes 6 instead of 4 years (including higher costs due to delay) 12.4%
4.11 Poverty Impact and Affordability: The project will improve water supply for about 8.7 million people in small towns with relatively high poverty. Most water consumption in these towns is for domestic use, with very small amounts used for commercial or institutional uses. In a survey carried out by WSSA in 198912,for a town with similar characteristics, about 52% of the population had an annual per capita income of US$97 or less, which means that this project, serving a similar population, will benefit a large percentage of poor. The current tariff varies from ETB 0.5 to ETB 2.5 per cubic meter of water in the project towns. As noted in para 3.15, tariffs have not been raised in some of the towns for decades, therefore, this increase is included in the Government
12 WSSAand DEVECON,Five Towns Water and Sanitation Study,Phase I Report, VolumeI - Gore, 1993. 42 strategy for the sector. People interviewed expressed their willingness to pay higher tariffs as long as water is available; many of them are already paying vendors from ETB 12.5 in the wet season to ETB 25 in the dry season, per cubic meter of water. In two towns where water supply schemes have been constructed, the water tariffs have been increased to ETB 5.00. At the estimated tariff of ETB 2.5, the cost of water in 2000 would constitute some 2 percent of an average household income, which is less than in other African countries. If a progressive tariff structure is introduced, the burden on poor households could be reduced. This aspect will be further analyzed under the Project.
C. ENVIRONMENTAL IMPACT
4.12 Since the Project would not involve any major civil works, no adverse environmental impact is expected. The Project would, in the long run, contribute to the improvement of the environment in the form of safe water and better sanitation for the local populations. The Project has a "C" environmental rating. All costs are calculated taking into account the least cost design of schemes estimated at appraisal.
4.13 Environmental Assessment: The integration of environmental concerns in the water sector is one of the major subjects of studies and training under the Project. The engineering studies and design component includes an environmental assessment of the impact of the works for construction and expansion of the new water supply schemes to be carried out under the future follow-on project. The technical assistance sub-component for technical management of water supply operations and the training component include mitigation of any adverse environmental impact of water supply operations and environmentally sustainable planning methods.
4.14 Riparian Issue: Since the Project only involves minor rehabilitation of existing systems and engineering studies, it will not have any impact on other riparians and will not be appreciably harmed by the other riparians' possible water use. Among the 25 water supply schemes, only two towns have water sources from an international waterway or a tributary of an international waterway: Gambella's water source is the Baro River, which originates in Ethiopia, and Gebreguracha's source is a tributary of the Abay River, which also originates in Ethiopia (Lake Tana). All the other schemes' sources are boreholes, springs or domestic lakes. For Gambella town, no rehabilitation works or engineering study for water supply schemes will be carried out under the Project since UNICEF is already undertaking source improvement work. For Gebreguracha, since the immediate rehabilitation work is confined to a minor rehabilitation of the existing scheme, the scheme's nature and scope will not be changed and there will be no impact on the river.
4.15 Land Acquisition and Resettlement: Land acquisition is required only for construction of water supply headquarters in Afar, Gambella, Somali and Benshangul Regions and there is no resettlement involved. All these Regions, including their capital towns, are very scarcely populated. The sites, which have been identified, are already used for other administrative functions of the Regional Governments or already reserved for construction of the office buildings. 43
D. SUSTAINABILITY
4.16 Sustainability: The Project is essentially designed to ensure the sustainability of the water supply and sanitation operations by assisting capacity building of the sector institutions, sector investment planning and establishment of an appropriate regulatory framework.
4.17 Mechanisms have been built in to ensure accountable transfer of skills and sustainable improvement of institutional capacity, the technical assistance and training components to be provided under the Project. Sustainability of improvement of performance would be ensured by providing the counterpart staff with clearly defined work plans, incentive schemes and an objective performance evaluation system; by establishing clearly defined exit mechanisms with time-bound performance monitoring targets; and by coordinating the technical assistance with other training activities. The design of studies and technical assistance includes those features, as described in para. 3.05. Financial sustainability would be ensured by appropriate water tariffs to be implemented by the Regions.
E. PROJECT RISKS
4.18 The major risk would be delays in GFDRE implementing key policy issues, including establishment of an appropriate institutional framework and implementation of tariff increases. This risk would be minimized by confirmation of the Government's commitment in the Letter of Sector Policy and upfront tariff increases. The project management capacity of some of the newly created Regional Governments may not improve as fast as desired; this risk would be mitigated by early initiation of capacity building activities through utilization of the Project Preparation Facility and the proposed technical assistance and training to be provided under the Project. 44
V. AGREEMENTS AND RECOMMENDATION
5. 01 During Negotiations: The following agreements were reached during negotiations:
(a) Tariff increases to cover operation and maintenance costs for the project towns would be implemented by June 30, 1998 (paras. 1.23 and 3.17);
(b) Audit reports would be subrnitted to IDA within six months from the close of each fiscal year (para 2.20);
(c) Counterpart staff for the regional and towns studies components would be appointed by June 1996 (para 3.05);
(d) The project progress report, including performance against the monitoring indicators (except socio-economic indicators), will be submitted to the Bank every quarter of the fiscal year (paras 3.08 through 3.10);
(e) By November 30, 1996, target monitoring indicators would be agreed, based on the results of the baseline study, for review at mid-term and project completion (para 3.10).
(f) An interim review will be undertaken by September 30, 1997 (para 3.11);
(g) AWSA will be required to generate total revenues equivalent to not less than the sum of: (i) its total operating expenses; and (ii) the amount by which debt service requirements exceed the provision for depreciation, for the project period (para 3.19); and
(h) AWSA will be required to reduce its accounts receivable to 120 days by end FY95/96, 90 days by end- FY97/98 and 60 days by end- FY98/99 (para 3.28);
5.02 Prior to Effectiveness of the Credit: The following actions would be taken prior to effectiveness of the Credit:
(a) Signing of Grant Agreement between the Ministry of Finance and AWSA (para 2.10);
(b) Provision of terms of reference, acceptable to IDA, for the preparation of monitoring indicators (para 3.10); and 45
(c) Award of capacity building studies consultancycontracts, which include establishmentof monitoringindicators (para 3. 10).
RECOMMENDATION
5.03 Based on the above assurances and agreements the Project is suitable for a Credit to Ethiopia in an amount of SDR 24 million (US$35.73 equivalent).
ANNEX-I Page1 f 17
rhe rederal Democratic Republic of Ethiopia Ministry of Water Resources
Mr. Stephen Weissman Division Chief, AF2 El The World Bank 1818 H.Street, N.W Washington D.C., 20433 ILSA
Sub: Letter of Sector Policy
Attached herewith please find a copy of the Letter of Sector Policy which was finalised according to our discussion during the Negotiation held in Washington, D.C, from December 11-15, 1995.
Best Regards
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PleaseQuote our Ref. No. When Rtpivint
I .: .ex~I Telefax p. o. BO!,
ADDIS ABABA ANNEX 1 Page 2 of 17
FEDERAL DEMOCRATIC REPUBLIC OF ETHIOPIA MINISTRY OF WATER RESOURCES
Letter of Sector Policy
January 1996
t-%Q7ztt K.- e e ANNEX 1 Page 3 of 17
Table of Contents
Summary Action Plan...... i
1. Background of Water Supply and SanitationSector.....I...... I
2. Sector Objectives ...... 2
3. Regionalisation(Decentralisation) ...... 3
4. Linkage with other Sectors...... 3
5. Water Resource Management...... : 3
6 Technology Development...... 4
7. Institutional Framework ...... 5
8 Capacity Building...... 7
9. Establishmentof National Standard...... 8
10. Cost Recovery and Financing Strategy ...... 9
11. Roles of the Public and Private Sectors...... 10
12. Performance Incentives and Accountability...... 11
13. Efficiency Management...... 11
14. Participation of Stakeholder ...... 12
15. Enforcement of Regulations and Monitoring ...... 12
16. Investment Planning ...... 13
17. Donor Coordination ...... 14
, ~~~~~~~~~~~t ANNEX 1 Pkge 4 of 17 FEDERAL DEMOCRATIC REPUBLIC OF ETHIOPIA Letter of Sector Policy
Summary Action PlaD
ISSUES ACTIONS Time Frame Regulatory Completion of Regulatory Framework Study 1997 Framework Developmentof rural water supply policy 1997 Integration of water Implementation of integrated water supply and sanitation 2000 supply and sanitation schemes in 64 Woredas Rehabilitation and Rehabilitationof systems for 12 towns 1996 improvement of Rehabilitationof systems for some of the 25 Project towns 1999 existing water supply under WSDRP and sanitation systems Capacity Building improvement of technical management, financial management 1999 and organization management for the Regional Govemments , Water Supply Policy Development and Promotion by UNICEF 1997 Establishment of TA unit in the Ministry for Regional on-going Governments Construction of new Consrtruction: 2 towns financed by IDA 1996 water supply systems Construction: 7 towns to be commenced with finance from AfDB 1996 FFeasibilitystudy for 11 towns financed by JICA 1998 Feasibility study for 3 towns financed by Kfiv 1998 Linkage with Other Establishmentof consultative forum among government agencies mid-1996 Sector Water Resource Establishmentof integrated data systems for water resource 1998 Management management Establishmentof water resource master plan for river basins Omo/Gibe and Baro basins 1996 Tekeze and Abay basins 1999 Awash, Wabi-Shebele, Rift Valley and Genale basins 2000 Technology Research for development of appropriate technologies for rural on-going Development water supply at MOWR Research for development of appropriate sanitation technology 1999 with assistance from UNDP Cost Recovery Finalization of timing for implementing tariff increases for non 1996 Project related towns Study on rural water supply tariffs with assistance from UNDP 1998 Performance Study on incentive schemes for regional bureaus with assistance 1996-1997 Incentive and from WSRDP Accountability Efficiency Introduction of demand control 2005 Management Legal provisions for protection of water supply resources 1998 Improvementof operational efficiency with assistance from 1996-1999 WSDRP Participation of establishment of forum for rural water supply with assistance 1996 Stakeholders from WSDRP community based construction and maintenance of rural water 1996 supply systems under ESRDFP onward Donor Coordination Establishment of donor consultation forum 1996
., Resour ANNEX 1 Page 5 of 17
1. Background of Water Supply and Sanitation Sector
1.1 The status of the water supply and sanitation sector in Ethiopia, is rather poor. Most of the population, urban and rural alike, do not have adequate and safe access to potable water supplies or sanitation facilities, leaving people vulnerable to a host of water and sanitation related infectious diseases. Women and young girls are overly burdened within the sector, as they are the main suppliers and users of domestic water, and therefore, remain the most susceptible to water-related illnesses. Environmental degradation is an immediate concern, with grave implications for the provision of water and sanitation, severely impairing the natural conditions of the country and resulting in a forest cover of under 4 percent in 1990. In brief, over 70% of disease in the country are water-borne diseases.
1.2 Adequate water supply in Ethiopia is defined as 20 litres/capita/day available within a range of 0.5 -1 km from a dwelling. Sanitation is defined only by accessibility to a latrine without consideration of the status of such a facility, as well as the determination of its use. The level of heath/hygiene education and the general awareness of the population concerning potable water and safe environmental sanitation is extremely low. Water quality is a major problem. Reports on water quality from various parts of the country indicate that the existing situation is far from satisfactory.
1.3 Existing data indicate that the overall coverage of water supply is 26%, while the national coverage for sanitation is estimated to be 7%. Further analysis of the coverage indicates that out of the total estimated 46.8 million rural population only 9 million or 18.8% have access to safe drinking water through an estimated 6000 different rural water supply schemes. The water supply coverage in urban areas, where some 10% of the population lives, is relatively better with about 76% of them supplied with potable water. The urban percentage includes those with low levels of services. Major problems in the urban water supply services include, low production levels, inadequate distribution systems and leakage in many areas, estimated to be more than 30% of the water passing through the distribution network.
1.4 The existing financial policy for water supply is not adequate. Current tariff rates are not based on cost recovery and as a result, there is hardly any room for rehabilitation and expansion of the schemes. Actual investment for water supply are far below requirements particularly when one takes into consideration the overall water supply coverage in the country.
1.5 In summary, during the last several years, a number of constraints have greatly suppressed the possibility of achieving the targets which have been set for the water and sanitation sector. Water supply and sanitation issues have not been addressed in an integrated fashion. Lack of sufficient involvement from project beneficiaries have forfeited success and sustainability of most projects. Inappropriate technology and experimentation on low cost options has resulted in few affordable alternatives. An urban bias for water supply and sanitation activities has kept rural development at an all-time low. In the past regime government allocations to the sector have been relatively low. Poor co-ordination among sector partners has resulted in excessive duplication and no synergism.
1.6 The major factor that accounted for the existence of the above mentioned constraints is the lack of sector policy. The purpose of this document is, therefore, to describe the sector policies that the country plans to follow during implementation of the proposed IDA financed and other donors projects. ,,'vernme. '. -\a
?< S 9~~~-/ ANNEX 1 Page 6 of 17
2. Sector Objectives
2.1 The overall development objective of the sector is to improve the well- being, health and productivity of the population by increasing coverage and ensuring the long-term viability of water supply and sanitation operations in line with the government's regionalization policies. These objectives will be achieved through:
- establishing the regulatory framework for the sector; - formulation of integrated water supply and sanitation programmes; - ensuring sustainability and efficiency through rehabilitation and improvement of the water supply and sanitation infrastructure and operations; - construction of new water supply and sanitation in urban and rural areas giving due considerations to least cost options; - capacity building, including institutional infrastructure & manpower development of the Regional Administrations and water supply and sanitation institutions; and involvement and participation of the communities, particularly women; this is assisted by the community participation and promotion offices established under zonal water sections.
2.02 These measures are supported by the following donor assistance programs:
- The Regulatory Framework Study to be carried out by 1996 under the IDA financed Water Supply Development & Rehabilitation Project (WSDRP) and the UNICEF's 1994-99 Programme output, through its Water Supply Policy Development & Promotion (WSPDP), will assist in developing policies to be used as guidelines especially for the development of rural water supply;
- The integrated sanitation program is now underway with the assistance of UNICEF's WISS programme in 64 "weredas" during the programme period. FINNIDA is also following this approach under its Rural Water Supply & Environmental Programme (1994-1998) in the Amhara Region;
- Currently rehabilitation of 12 towns water supply schemes is underway with a grant obtained from the government of Germany (KfW). The proposed IDA project also addresses this issue and implementation will be undertaken in some of the 25 towns;
- Construction of water supply schemes is recently completed in 5 Towns (ADS financed), and underway in other 2 Towns with IDA credit. In other 9 Towns (7 of them to be financed by ADB) it is expected to commence in the 2M quarter of 1996;
- Technical assistance and training will be provided through the implementation of the IDA's WSDRP, the UNICEF's WSPDP and other donors' programmes.
3. Regionalisation (Decentralisation)
3.1 The national policy, understandably urges a rapid increase in the water supply coverage of the population. Moreover, in order to improve the sustainability of the water supply and sanitation sector, different measures have been taken among which decentralisation of former WSSA functions through strengthening of regional capacities is one of them. The water sector was reorganised, in 1992, and again reviewed and as a result the Ministry of Water Resources was established in August 1995, to bring it in line with the general administrative changes being made in the country. Strategic decisions concerning this reorganisation have
rt^_ ,- ';< O n' >Qeb.,- >- >1IA~~~' . J ANNEX 1 Page 7 of 17
already taken place. Ownership of water supply schemes and responsibility for their operation and maintenance has been passed to the new administrative regions. WSSD, created under the Ministry, will be reaponsible, by and large. for giving technical assistance for the newly established regions. The decentralisation process shall continue with added impetus stressing optimum utilisation of available resources and the requirements of the New Regional Governments.
4. Linkage with other Sectors
4.1 The Ministry of Water Resources (MoWR) is the overall authority for the sector. The other important government agencies, either directly involved or of particular relevance to the sector, are the following:
- Ministry of Economic Development and Cooperation (MEDaC) - Ministry of Works and Urban Development (MoWUD) - Ministry of Health (MoH) - Ministry of Agriculture (MoA) - Ministry of Finance (MoF) - Disaster Prevention & Preparedness Commission (DPPC) - Water Works Construction Enterprise (WWCE) - Water Well Drilling Enterprise (WWDE) - National Meteorological Services Agency (NMSA) and - Addis Ababa Water and Sewerage Authority (AAWSA).
4.2 Coordination among the sector partners, has been weak. However, in order to maximise the economic and social benefits, linkages and co- ordination among the above sector partners shall be improved, and, to this effect the government will oroanise consultative forums for governmental sector Partners beainnina from mid 1996. Consultation meetings will be held at least once annually. The MoWR will be the chairman and secretary of the Meeting and the Vice Ministers, Commissioner and General Managers of the sector organisations will be members of the consultation meeting. S. Water Resource Management
5.1 Water for agriculture and community water supplies are areas that will merit priority attention. Equally important will be problems related to pollution of water resources. Still other areas of critical concern include the incidence of floods and droughts, water for hydroelectric power generation, industry and matters related to the utilisation and management of shared water resources.
5.2 Assessment of the water resources is an important prerequisite to planning, development, policy formulation and the operation and management of water resources in their multiple uses. The establishment of integrated, reliable data Eystems, to include the functions of gathering, storage, retrieval, analysis, dissemination and use of meteorological, hydrometeorological, hydrological and hydrogeological data will, therefore, be a priority consideration. To this effect, a study assisted by the Netherlands government under its 'miliev" programme, (80% to be financed from the "miliev" facility) will be undertaken beginning from mid 1996.
5.3 An integrated inter disciplinary approach to the formulation of water policies and appropriate legislative and administrative arrangements will be important components of national water management. Considerations will include cost-effectiveness as well as social benefits and environmental conditions. The creation of consultative forum, indicated under 4.2 above, will help in the formulation of Policies and guidelines aoorooriate to the realisation of such oblectives. / c Coernme.,0 ANNEX 1 Page 8 of 17
5.4 Appropriate legislation will be fundamental to the optimum development of water resources. Provisions which regulate water management will be enforced and will be periodically reviewed and updated. To this effect, Water Resource Utilisation Proclamation no. 92/94 is issued in 1994. Guidelines for the establishment of Water Committees has also been prepared by the former WSSA and is being used by the zonal water sections.
5.5 For proper co-ordination of all water related national activities, a centralised authority responsible for policy preparation and implementation as well as a decentralised approach to water policy making and implementation to suit a federal system of government are considered and the appropriate institutional arrangement is under implementation since 1993 (proclamation No. 41/1993).
5.6 The establishment of a water resource master Plan for each river basin has been in progress to varying degrees. For Omo/Gibe and Baro-Akobo river basins, preparations of master plans is underway (Completion Target: 1996). Studies have also been initiated for most of the major river basins. For Abay and Tekeze basins, consultants teams have been selected and works are under progress (Completion Target: 1999). For Wabi Shebele baain, preparation of master plan is scheduled for 1996 (Completion Target: 2000). For Awash basin, the surface water study has already been undertaken (Completion Target: 2000). For Rift Valley basin, a preliminary survey has been prepared and a study will be initiated soon (Completion Target: 2000). For Genale basin, only preliminary capacity assessment has been undertaken (Completion Target: 2000).,
6. Technology Development
6.1 A systematic approach to applied research, aimed at exploring alternative options and developing these for practical application, has not been sufficiently promoted in the past. Efficient mechanisms for the dissemination of replicable technologies are lacking and co- coordination and registration of experimental projects as inputs to the learning process has not been initiated.
6.2 For water supply many approaches have been tried out in practice and many innovative technology modifications have been put to test. These should be pursued with added vigor in the future and new programs should be initiated and expanded. Researches are being undertaken on hand pumps, solar power and wind mill driven pumps.
6.3 However, sanitation has not been a priority and therefore knowledge of recent developments in technology and approaches remains limited. The concept of the ventilated improved pit latrines is known, but not fully understood by technicians and extension workers. There is also a clear need to further refine and adalt low-cost and aprocriate sanitation technolocv for urban areas. as the use and application of conventional water-borne sewerage will be minimal. This can be demonstrated throuch the Dlanned "Urban Sanitation Proiect" expected to be financed by UNDP in the near future. With local staff, studies have also been conducted on sanitation in some of the major urban areas under the Public Works Programme, even though it is not yet implemented due to lack of financial resources.
6.4 The relevant policy issues to be considered will be: (i) creating a favourable environment for the public sector to fulfill promotional and regulatory functions [this is already created]; (ii) building local manufacturing capacity, [the new economic reform of 1992]; (iii) facilitating the growth of local well/bore hole drilling enterprises, (the Water Well Drilling Enterprise is improving its efficiency and other public and private enterprises are coming to the market); and (iv) overnr.5
J~~~~~0 ANNEX 1 Page 9 of 17
establishing appropriate technology standards suitable to local conditions. The MoWR intends to assist recions' technology develonment with assistance from some donors much as UNCDF. UNDP and UNICEF. 7. Institutional Framework 7.1 The Ministry formulates policies, strategies and provide guidelines, while the Regional Bureaus are implementors of same and their own plans The existing institutional arrangement/frameworkfor the sector includes the following, and their main duties and responsibilities are indicated below:
The Ministry of Water Resources (MoWR) It has powers and duties, inter alia, to determine the condition and methods required for the optimum allocation and utilisation of water that flows across or lies between more than one regional self- governments, among various uses and regions, including transboundary water. It also initiates the preparation of master plans for the development of valleys, including the undertaking of studies pertaining to water tariff and collection of bulk charges for large scale water supply schemes, dams and the like. [The powers and duties of the Ministry still go further to the extent of controlling the impact of natural resources on the environment and preventing water, soil and air pollution]. it carries out its functions in the sector through the following major/technical departments.
- Planning and Projects Departsent It prepares the country's water resource policy and strategy; coordinates the relevant government offices and various Departments of the Ministry to prepare the Federal Water Policy, Prepares an integrated short, medium and long-term plans for the water sector. Besides, it follows up implementation,evaluates and prepares socio-economic studies for vital projects and conduct studies on water tariff policy. The Department prepares and provides to the Federal Government, Regional Governments and investors as, required, detail of projects that were covered by the Master Plan Studies.
- Basins Development Studies Department
Studies and prepares the country's water basin master plans, identify projects that could be implemented with in basins, conduct feasibility studies and realize that the Master Plan studies take the nation's water resources, natural resources, land and socio-economic features into account.
- Trans-boundary Rivers Study Department Conduct studies on trans-boundary rivers, realize that the benefit from such rivers are secured and in line with the international water use principles, national integrity and advantages.
- Design Department Conducts survey and design of various water works that are to be undertaken by the Federal Government; control and follow-up works of foreign consultants. The Department monitors and finds out remedies for any environmental impact of designed construction works associated with prepared designs. It provides technical and professional support for water supply).igation works to Regional Administrations. , >
/ ~,~ ~~~~~. ANNEX I Page10 of17
Contract Administration Department
Develop estimate for water works of the Federal Government projects; prepares specification and contract agreements; prepares equipment, material, financial and manpower requirements for projects implementation, prepares tender documents; monitors that construction works and equipment installations are done as per the agreement. Develops and implements water works studies and design standards; besides, approves the existence of professional efficiency for water resources development studies and design.
Water Rights Administration and Water Utilization Control Department
Plans methodologies on rational distribution of water resources between regions. Follow up their implementation as approved. Provide permits for irrigation and various water works implementing parties on regions-crossing rivers/water; follow up water tariff implementation; controls bulk use of water; controls and monitors the safety of dam and irrigation structures; cooperate with relevant parties to conduct studies and research that improves water management methodologies.
Water Supply and Sewerage Department (WSSD)
Plans methodology for expansion of water supply & sewerage services in the country. Studies and presents for decision, water quality standards for various uses and safeness of different sewers; follow-up and monitors their practicality as approved; generate relevant policy for sanitation and sewage disposal; plans implementation strategies; provides technical support and professional advises for regional administration water supply and sewerage service offices.
National Meteorological Service Agency (NNSA)
NMSA collects, analyses and disseminates data and information on climatic, weather and atmospheric conditions through out the country.
REGIONAL GOVERNMENTS
At a regional level, the Regional Water, Mines and Energy Bureaus are responsible for the overall development, management and utilisation of water resources:
The duties and responsibilities of the bureaus, among others, include the following:
to ensure that central government laws, regulations and directives issued in relation to the conservation and utilisation of water resources are respected in the regions; to control the implementation of the country's water resources development policies; to grant permits to persons engaged in water works construction activities, such as dams and other works, in view of utilising the water resources of the regions; - to supervise the balanced distribution and utilisation of the water resources of the regions for various types of services or uses; - plan, study and design rural water supply schemes; - supervise and inspect the activities of.wAt_r service units;
. '/ 1., v ANNEX 1 Page 11 of 17
- provide technical and maintenance services for the water service units and the rural water points; and - promote community participation.
The Regional governments have the authority to decide on water and sewerage tariffs. They also formulate their investment plans within the budget ceiling allocated to them by the central government.
8. Capacity Building
8.1 Given Ethiopia's potential resource base, to support overall economic and social activity, and the radically new approach of decentralisation, new management skills will be required, both for MoWR and the regions. In this regard, there is a need to formulate a comprehensive management system to increase the capacity to manage, administer, operate and maintain the existing systems, as well as to implement new programmes and projects. With emerging decentralisation in water supply and sanitation activities, the creation of a strong management and planning systems at regional levels is absolutely necessary. In brief, the pillars for sustainability of water supply and sanitation services is capacity building at different levels.
8.2 There is also a need to upgrade the facilities and equipment, particularly those of the Regional bureaus. Clear operational procedures and lines of information flow need to be established between the central and the regional bureaus. There is also a need to set-up a system of standardisation of equipment, management and information flow to provide logistic support to the regions. The number of professional staff in the different regional bureaus need to be increased and upgraded in order for them to handle new technological applications, methodologies, as well as to adapt transfer of skills to zonal and water supply units. In brief, the capacity building effort will concentrate on:
- formulation of comprehensive management system,; - formulation of training Droqrammes for senior. medium and lower level mannower geared towards programme formulation. implementation, monitoring. overation and maintenance. etc.; and - strengthening the institutional capacity through providing eauipment. logistics support, spare Parts. workshop. and water chemicals.
8.3 In order to improve the efficiency and sustainability of the organisational, financial and technical management of the water supply operations in the country, a project has been identified to be financed by the World Bank. Other than this IDA's WSDRP, in the 5th cycle Country Programme (1995-1996), UNDP has a capacity building component for regional as well as central institutions which is now under implementation. The output of the programme is expected to build and strengthen the institutional capacity as well as develop human resources in the sector in order to facilitate the provision of water supply servic-e. These Programmes will helo to develop management capacity of the recional administrations to implement Policies, guidelines. etc.
9. Establishment of National Standard
9.1 With the present commitment to accelerate water supply coverage and to bring the economic and social benefits of safe drinking water and sanitary facilities, to both the urban and rural populations, more resources are needed. To utilise the limited resources effectively requires, among other things, that the planning process be guided by standards that will assist in evaluating programmes and projects so that those selected for implementation can be rationally justified.
9.2 Theoe standards relate to the quantity and quality of water to be supplied for various uses. In the urban areas, domestic consumption per capita per day in related to the level of service, ranging from in-house connections to public fountains. Taking the existing crude data, the standard for project planning, based on population size and level of service, are indicated below; Levels of Service for Water Supply in Ethiopia Size of Population Type of Service Level of Service Group < 100 Dug Well Provided by community self help 101 - 400 Dug Well hand pump fitted (Large diameter) 401 - 2000 Drilled well hand pump fitted 300 - 350 person. per well 2000 - 5000 Piped supply 95% service by public fountain 300 - 350 person per fountain 5000 - 10,000 Piped supply 80% service by public fountain 400 - 500 person per fountain 10,000 and above Piped supply 60% service by public fountain 400 - 500 person per fountain 9.3 With regard to quantity standards, the present standard in 3S-40 l/c/d for urban contras and 15-25 l/c/d for rural water supply schemes. However, it has to be noted that, the design parameters for urban centres allow higher values than the one indicated above, As far as quality standards are concerned, the country has attempted to establish its own standard, with the view of achieving WHO standard. 10. Cost Recovery and Financing Strategy 10.1 Cost recovery is of paramount concern throughout the water supply and sanitation sector. Because of the policies pursued in the past, there has been a tendency to treat water as a free commodity for which the people are not expected to directly pay. However, changes are being forced upon the government in view of the magnitude of the investment, operation and maintenance costs of water supply serviesm, particularly in urban areas. The lack of clear policy toward cost recovery has greatly contributed to the financial problema of water supply services. Experience shows that, as long as water supply services are dependent on central government budget allocations, they can hardly operate efficiently. Safe and convenient water supply, delivered to the consumer's house, is a highly valued consumer good, and ther is no reason why the consumers should not pay for it. The financial strateay in urban arasa ther-fore, should be desianed to encourao- conservation of water rerources and at the sam time, it .-- .- . , *} *~~~~~~:x, ANNEX 1 Page 13 of 17 should be in a position to cover operation and maintenance costs. Capital cost recovery should be maximised based on the populations ability to pay: the lona term coal being the phaging out of government subsidies. Within this framework. tariff structure that accomplish these obiectives will be introduced. 10.2 To this effect the government has established basic principles and guidelines for pricing and cost recovery for urban water supply and sanitation operation (March 1995). According to the document the tariff will be signed on marginal cost Pricing alproach which takes into account economic. social and financial oblectivec of water utilities. The tariff increase for Addis Ababa, effective in May 1995, has been approved by AAWSA's Board. A formal approval for the tariff increases for urban water supply in Oromia Regional Administration, including Assela and Shashemene towns, will be given by the Oromia Regional Council and a notification will be issued accordingly. Tariff increases in other towns will be made step-by-step after some studies are conducted and approved by the respective Regional Administrations. By 1996 Regions will finalize a tinmeframe for implementation of the tariff increase and commence implementation thereafter in the remaining towns. The imolementationof tariff adiustment will be in phases and the full cost recovery (urban water suoolv) may be reached over a oeriod of time depending on the objective condition of each region. 10.3 With respect to rural water supply tariff, there was no clear policy. In some areas the users pay for water while in others it is free of charge, but actively participate in construction and operate and maintain the schemes through their water committees. The policy of supplying water free of charge, however, proved that the schemes could not be sustained. Hence, in order to address this problems and ensure a sustainable rural water supply, a national rural tariff study is llanned to be launched under the UNDP financed 5th Cycle Country Proaramme (1994-99). The study is expected to come up with tariff structure, based on affordability, which will enable to cover at least the operation and maintenance costs of rural water supply schemes. The study is expected to commence in the second quarter of 1996. 11. Roles of the Public and Private Sectors 11.1 The role of the public sector is to prepare policy guidelines and regulations, plans and strategies, provide budgetary and technical assistance, monitoring and supervision for the overall development of the sector, while the role of the private sector is providing consultancy services for feasibility studies and design and actively participating in construction, drilling and supplying of pumps, generators, pipes and fittings, etc. Specifically, the private sector can participate in the following areas; (a) As consulting and counselling services: - conduct pre-feasibility and feasibility studies; - prepare designs and tender documents; - construction supervision; and - studies on institutional capacity building, tariff, etc. -~~~~~~~~~*1 *F ) ANNEX 1 Page14 of 17 (b) As a contractor: - water well drilling; - construct new water supply schemes; and - rehabilitate and maintain existing schemes. (C) As a provider of sanitation services - solid waste disposal; and - sewerage systems services. 11.2 The government will assess the conditions and leaal framework for the Participation of vrivate sector in the area of water supplv activities. Accordingly. urivate sector Participation in managina. overating and maintainina water suuolv services. particularlv in urban areas. will be considered in order to create comoetition and control monomol . Consumers participation in controlling monopoly will also be encouraged. In order to satisfy the fast growing demand of the Regions, the involvement of the public sector will continue until the private sector fully takes over these activities. 12. Performance Incentives and Accountability 12.1 The inadequacies in operation, maintenance and monitoring, both in the urban and rural water services is partly a manifestation of poor management, lack of performance incentives and accountability. There is a near depletion of professional manpower in the sector. There is no incentive, whatsoever, as a result morale and motivation of staff is low. Coupled with normal aging of facilities, this situation has resulted in many of the water supply systems, mostly in rural areas, being non-operational. Hence, there is a need to formulate incentive policies (such as bonuses, better payment, long leave, training opportunities, etc.) with clearly defined accountability if the water services are going to be properly managed, operated and maintained. Oroanizational study under the IDA's WSDRP will look into this issue and make recommendations. 13. Efficiency Management 13.1 Master plan study preparations are under way in some of the river basins aiming at optimum utilisation and allocation of different users within a framework of integrated development approach of water resources. A master plan study for water supply financed by the Dutch Government is also expected to start by mid- 1996. However, the maximum utilisation and efficient management of these resources is very complex by nature and will require not only a coordinated planning among the different users, but a sound institutional framework that will allow to formulate policies, mechanism for coordinated planning, cost recovery, monitoring and evaluation. 13.2 In this regard, measures that will help for the efficient manaaement will be introduced.based on the outcome of the study. Thus, - legal measures for the control and balanced use ANNEX 1 Page 15 of 17 of water resource will be introduced; - demand-spreadina technigues aimed at relieving peak demand pressure will be introduced; and - leoal provisions for the protection of water supplv sources and enforcement of rules on use and conservation of water will be introduced by giving relevant authorities responsibility in water resource system planning, simulation and optimisation. 13.3 Furthermore, throuah the institutional capacity buildino comoonent of the World Bank Project (Water SuOolV Development and Rehabilitation} assistance will be provided to improve olerational efficiency of water supolv and sewerace utilities in each region. Trainina will be Provided to the regions' water supplv managers to improve their manaaement efficiency. 14. Participation of Stakeholder 14.1 The main participants in the sector are the government, bilateral and multilateral organisations, international financial institutions, NGOs and the consumers (communities). The government's main role is formulating sector policies, planning and coordination, budget allocation and capacity building, while the role of the donors is mainly contributing funds for construction, rehabilitation and, to a certain deogree,for capacity building and operation and maintenance. The rural communities are also participating by contributing funds, labour for construction, but their main contribution is operating and maintaining the schemes through their water committees. 14.2 In the future, the government will continue its role as promoter, facilitator and coordinator. The rural water supplv 2ilot Proiect. one of the components of WSDRP. will create a forum for rural water supolv activities. The Bank's Social Rehabilitation Fund Proiect, which is under preparation, includes community basgd construction approach. The oroanizational study of WSDRP will make recommendations as to how to improve communication with stakeholders in decision making. 15. Enforcement of Regulations and Monitoring 15.1 To improve the water supply and sanitation sector management, operation and maintenance, effective legal and regulatory framework that will allow enforcement of regulation need to be created. The existing regulatory and monitoring framework rests within the MoWR. The regions are also responsible for regulating and monitoring, within their respective area, and supposed to report to the central government. 15.2 Policies, guidelines and directives so far developed for the enforcement of regulations include: - Water Resource Utilisation Proclamation (92/1994). This is the Ily instituted s, " ANNEX 1 Page 16 of 17 instrument for the development, management and utilisation of the water resource of the country; - guidelines for the establishing of water committees which is meant to involve communities in all aspects of water supply activities; - directives issued with respect to drilling for organisations involved in drilling, construction and rehabilitation of boreholes and related works; - Basic Principles and Guidelines for Urban Water Tariff Study has been recently approved by the government. The regions will be implementors of the policy; and - a draft irrigation policy has been prepared, but it has not been finalised. This policy requires to be finalised and its implementation should follow. 16. Investment Planning 16.1 Meeting targets for providing communities with safe water and the formulation of a step-by-step approach to achieve this aim is considered a priority. Specific and detailed plans will be adopted on water supply services suited to specific conditions focusing on the interests of the most disadvantaged communities. According to the plan of action for the period 1993-1999 programme, prepared in August 1992, national population coverage of 35% for rural and 95% for urban water supply and 12% and 70% rural and urban sanitation respectively will be achieved by the end of the decade. 16.2 To improve the existing water supply service level and coverage, the techniques of investment planning need to be reviewed taking into account the new structural set-up of the country as well as the New Economic Policy. The existing investment planning processes are composed of four main components: - identification of projects and programmes; - project determination, selection and funding; - determination of financial resources; and - budgeting and programming. 16.3 The broad investment planning process in the sector begins with development strategy of the country focusing on exploration, survey, evaluation of water resources, and analysis of water use demand. Within the framework of the sector objectives and priorities, funds for projects are derived from the following sources: - external loans and grants; - government budget; - NGOs; and - community contribution. 16.4 Apart from the MoWR the investment planning involves the following Ministries/agencies: - the Ministry of Economic Development and Cooperation (MEDaC) (for a_pcasal and approval 0~~~~2 gp.-G0v , %;~~~~~'Z X ;~~~~~~~~'C' ANNEX 1 Page 17 of 17 of plan budgets); - the Ministry of Finance (for the indication of overall financial resources); and - the Regional Bureaus prepare budgets and plan for projects and programmes within their respective area. 16.5 The major selection criteria for water supply projects/programmes are the following: - number of beneficiaries; - strong development potential in respect to its administrative functions; production, distribution and commercial activities,; - consideration of equity among regions; and - lack of major assistance from other donors or NGOs. 17. Donor Coordination 17.1 The existing coordination among the many government agencies, bilateral, multilateral and NGO's operating in the water supply and sanitation sector is not up to the desired level. This is a reflection of the past tendency to work in isolation. Their policies, objectives and strategies need to be focused and coordinated to the better performance of the sector. In this regards, the MoWR, which is responsible to register and approve donor projects and programmes, particularly NGOs, need to take further steps to coordinate overall activities. Such an approach will help to standardise the large number of types and models of imported and donated equipment. It will also avoid duplication of inputs and encourage thrust in support of the national programme. Hence, as a policy development, there is a need to create a strong mechanism of policy coordination at the Ministry level, to work closely with all government agencies, donors and the Regional Administrative Offices. Such an approach will not only facilitate smooth implementation of programmes and projects funded by donors, but will also help for equitable distribution of foreign assistance to the different regions. 17.2 Sector assistance coordination initiation meetina. inviting donors and NGOs. would be oraanised by the MoWR. in order to exchanae information on assistance activities and to work on the modalities of future coordination mecbanism. The agenda for this initial meeting will be presentation of brief reports by the participants on their activities, participants' interest in coordination, issues to be discussed in the future forum, modalities of future forum (timing, venue, financing, secretariat, budget & assistance), etc. - - ';.I L~ s I. URBAN WATER SUPPLY SERVICES 8Y REGION Naeefr fPoulton Wate nul ae imberNur of ConneciFons PulcTp ariff (irrM REGION No. Town 1993/94 Srodeuction Cosmption Domestic OhrsToa Fuc otuc Private Public GradB ______-- ~~~~~--- (EM IIIM) AM Connection __~Ji t ionin g Connection Tap (Statuis 4 A liamata 124 80 _Spring ______ 3_ A___wa _ 20857B-H + Sp. 80834 32849 -200- 300 500 9 ______2.50 5 Axum 26800.00 Bore hole ______3_ REGION 1 2 Endaselassie 23109 ___ 7 FHurnera 20532 ______3__ (TIGRAY 8 Korem _ 15918 ______4_ _ 9 Mekele 92036 Bore hole 724160 470704 3446 __ 3446 ___14 1.00 2.00 10 Michew 26103 __94170 65919 ______3__ 1 1 Ramma 14214 ______1- ______1 2 She-raro 14216 ______j__ _L______~13Wukro 22680 Bore hole ______SW TOT _ _ -__34234= ~ _ _ _ _ _I _ _ _ 1 Assaia 988____ 62000 58822 4 _25 ____ 1236 4____ (AFAR) 3 Dubti j 14737 Bore hole 12 6 _____ 4______Mille ~4 7000 Boe hole __ _ _ - ______SLJBTOTAL 4~ 78 ______ 1 Addis Zemen 19446 Bore hole 23688 23588 227 46 273 7 ____ _1_00 _ 2 v e L 140 2 _ __ 6___4______3 BahidrDar 8i2691 -La-ke+ MR 423394 423394 -3275 885 3860 2 ______0 ____ 4 ati 14957 Bore hole 80000 70000 451 _99 550 12 ______1.00 ___ 5icea - ~ 15000 Bore hole 21473 19444 163 53 216 5 2___ 1.25__ 1.25 4__ 6 urre 25075 Sjg-63635 58422 ~ 43 47 90 10o 3__ 1.00 .00 7 Chaanij 1205.4 Bore hole 78871 57898 247 84 331 11 ______4__ 8 Dabat 18958 ______9 D~~~gla ~~15997 Bore hole 231 30 5 7 3 1______10 Deba1k 19448 ______11 Debre Eirhan 38559 Sprig 225780 134436 2-0-15 141 2156 11 0__75_0__75_3 12 Debre Markos 60068 Bore hole 355841 159942 2444I 220 2664 31 ~ 2 1.00 1.00 2 13DebreSina 1694 S n 12316253 2601 27 287- 10 ______4 14 Debre Tabor 24882 Bore hole 190541 17565 202183 285 2 10 1.00 1.00 4 REGION 3 15 Debrework 12701 B.H 21451 19041 87 161 103 9 __ -1.25 1.25 - 16 Dejen ~~~~13560Bore hole 27650 247239 90 329 7 ____ 1.00 1.00 4__ (AMHiARA) 17Dessie 103888 BH+Spr. 500000 46500 36 495 3-5957 -16 -~ ___0_50 18Ep esson 9548 Bor~ehole 13160 ~13160 4 50 54 5 1__25__1__25 19 Fenote Selamn 19358 __fi~ng 25096 25096 271 61 332 6 1.00 1____4___ 20 Gondia 1040-54 Bore hole 262206 - 626 2667 568 3235 49 ______21 Haike 12506 Bore hole 29986 29986 ~ 70- 62 132 8 ___1.00 1.00 - 221 Karakore 12424 Bore hole 98121 9812 ___ 7 _____ 1.25 1 . 23 Kobo} ~ 20434 Bore hole 1150001 90000 _ 29 131 420 7 ______1______3 24 Koladiba 18644 Bore hole 14372 14302 - 41 25 66 5 1.00__ 1.00 4___ 25 Kombolcha )yl 23814 Bore hole 110000 100000 5261 131 657 14 1 ___0_0_75 _3 26 Lalublea 15150 Bore hole_____ 27 MoUt-a - 16581 Bore hole 38636 ~32871 1441 41 185 10 r 1.25 1.25 4 -28 NefasMewcha 29269 Bore hole 23366 - 233~66 219 59 278 14 ______29 Sekota 18095 Bore hole___ 30 Shoa Robit 14005 Bore hole 63372 38868 2 7 49 10 . 10 31 Werota 14810 Bore hole 41160 41160 491 39 88 10 1.~00 1.00 4 ______32 Woldia -23674 Bore hole 90200 8500 6 ~ 1861 755 11 ______0 r LTOTAL __ 861442~ _ _ _ _ L~ ~ _ _ _ ~ ______Ser. Name of {PopulationWater Average Annual Water Number of Connections IPublicLTap Tarwif(Bir/ REGIONNo. Town ~~~~1993/94Source Prodluction Consumption Domestic Others T oa uc tFn nat Pbic (~~~~~~~Estimate) M3) (M3) Connection * j___ tioni I tionincg Connection Tap 1 AddisAl-em ___ 15185 __1.00 1.00 2 Agaro- 28313 Bore_hole4 601i00 _40342 ~227 -170 39 22 0.75 0.75 3 Alem Tena 17600 4 AJemaya 18848 Lake______5 AsebeTeferi 17116 Sprinig 73088 71755 649 168 817 11 ___0.75 0.75 6 Assela 55408 -Spring 27402 - 1513 353184~ 17 ____ 0.50 0.50 7 Bakko 16335 Spring 26233 22236 67 381 105 6 1.00 1.00 *8 Bedelle 10542 River 29668 28996 262 841 346 -18 -- 1.00 1.00 9Bedessa 14750 __prn~g 164 164_ _24 1 222 6 1.00 1.00 10 Debrezeit 43504 Bore hole 858684 418044 360 395 4001 34___1.00 1.00 1 11 Deder 123 Spring 35588 35588 99 110 209 17 __ 1.00 1.50 12 Dembidollo 20284 Bore hole 31680 20656 __2.96 30 326 14 __ 1.00 1.00 13 Dodola 12176 River 31680 20656 192 103 291, 11 ____1.00 1.00- 14 Fltche 37501 Spring 167844 66516 74 154 8681 14 0.50 0.50 15Gebreguracha 13574 ______ 1 6Geddo 14723 ______17 Ghion 25365 River 115182 99216 562 196 758 17 _ 1.00 1.00 18, Ohlmbi 19763 Spring 15532 13340 294 38 332 - 1.25 1.25 191Ginchi 14723 Bore hole 17528 _ 103 13 116 7 __ 10 10 201 Gnnir 12968 River - 49466 245 81 326 10 ____ 1.25 1.25 2-1 Goba 34649 River 62867 _ 83 58 _141 8 1.__0___0O 1.-25 REGION 4 22 Gore 11200 ______23 Hagere Hiwot 26143 River 107508 90300 797 198 9951 15 _100 10 (OROMIYA) 24 Ha eremariam 17016 Bore hole 34490 107 70 177 6 ___ 1.00 1.25 25 Hima 17502 Spin 24876 24424 194 14 208 7 __ 10 1.00 26 Holeta Genet 21511 Bore hole 17451 14256 360 30 390 13 __ _1.00 1.00 27 Jimma 92033 Bore hole 225048 191704 941213 2167 18a 0.50 0.50- 28 Kbme t 20601 Bore hole 41122 491 153 664 10 ____ 00 1.25 29 Koee15004 ______30 Umugenet 88 1 ______31 Meki 165 oeoe 748 60300 24-4 -99 _343_ .0 0 32 Metehara 189Bo~re_hole 731886 28-23-6- -129 -1 13 2427 - 00 00- 33, Mettu 1884M7 Rie 092 992375 145 5201 20 _ 10 1.00 34 Mojjo 21041 Bore hole, 93152 89760 523 154 677 16 - iO 0.75 35 Moyale 5177 Bore hole 172586______36 Nazreth 115109 Bore hole 1-593960 1555932 5712 811 6523 23 ___0.50. 0 50 37 Ned] o .. .. 14025 ______38 Negele Arsi -19761 Borhl _7436 43188 389 121 510 50.5 .7 39 Negele Borena 17173 Bore hole 61056 549 30 579 17 1.25 1.25 40, Nekempt 43493 River 128318 713 431 1144 11 -. 0 1.00-_ 41 Robe (Arsi) 14038 ______1.00 1.25 42 Roe(a~le) 17040 River ____ 3~8616 387 98 485 12 _ _1 00o -1.25' 43 Sebetta 14379 Sprin 141324 85200 638 67 705 _5, __0.50Q -0.5-0 44 Shambu 16806 ______45 Shashemene _____ 47123 River 157570 970 344 1314 19 ____1_0_0 F125 46 Sie _ _ _ 14868 ______47TirisaeBirhan 230186032 128724 ______05 0.5 48 Welenchhl 17605 Borehole 105300 84936 173 84 257 9 75 0.7 9935__ EFwehol____ 10.7 0.75 49Zuwa ~ 95BrhLe -94900_ 83220 _ 129 ___ 29.]L___ .0 07 [E,b=T______J - -.-- . I - _---- ______-____- Ser. Narneof IPopulationf Water Averag nnual Water Number of Connections Pubic T Tarfff (Bir REGION No. Town 1993194 Source JProduction IConsumption Domestic Others I Total Func- otFn Private Public Grade ______Estimate) __ Ml____ I Connection L tioning ____Connection Taps (Status) 1 Degehabur ~~3249____j-2.50 2.501 - REGION 5 2 Gode 30001 - ___ 3 (SOMALI-) 3 A jfi3498 Borhole _606644 22833 1546 19 1715 - ~ 171 1 00 1.001 2 ______~~4Kiebridahar 11412 ______-- ___ __ 1.25- STOTAL W 1 ~41 526421 _ _ _ _ _ I] Z 7_ _ _ _ REGION 6 1 j6ssossa - - 157841 ] ______2.50] 2.50 - (BENISHEANGUL) 2 1Begi 78031____ 172 - 1______S WJTOTAL 2~ ______163671 ------__ T _I ~ _ _ 7 _ _ _ _ _ '1 Alaba Kulito 12743 Borehole _____ 65028 - 4411 63 54 41[ 5 1.00___ 2Aletawondo 30784 Borehole 43044 31969 278, 144 422 181.00 4__ 3Aba Minch 32174 Spring -498802 3j62-653 1345 302 1647 22 1.00 1.25 2__ Awassa 547 ie 036 840392 3161 281 -3442 27 ____1.00 1.25 2 tBsong 19036 B-oreh-ole 12386 12386 - 79- 94 13 9 -~1.00 1.00 4 6 Butajirra 19595 Borehole 46619 40920 106 56 162 8 1.00 1.00 3 88.00 7 Chencha 14314 ______SEPRA B Dilla 49765 River 813078 175351 1001 202 1203_ 7 1.00 1.25 3 9 Feleg Nwa -11604 Borehole 17952 17952 __ 23 03--_ (7-11) lOGidole 21004 ___ 11 Hagere Selam 16512 ______12 Hlosaena 22884 River 186032 128724 7-78 2121 990 12 1.00 1.00 3 13 Jinka 13529 Borehole 6323 3836 3 _llj 14 13 1.50 1.50 - 14 Leku 17975 Borehole 24-158 24158 _61 _20 81 9 1.00 1.25 - 15 Mizan Teferi 9344 Borehole 15844 14846 10 30 40 17 1.75 1.75 4 16 Top 7399, Spring 12824 9864 21 34 55 8a___ 1.75 1.75 - 17 Welayta 38833 Spring 210914 148028 892 210 1102 23 0.75 1.25 3 18 Welkite 15185 Borehole 52560 36792 __ 11 ___ 3 19 Yabllo 13950 Borehole 34398 34398 86 __45 131 91.25, 1-.25 4 20 Yirg heffe__ 18890 ______I _ __ 4 ______21 Yir alem 24147 River 149003 __ 073__ 89 8} 953 23,____- 1.00] 1 .2 3 SIBTOTAL ~21______464243 _ _ _ _1_ _ I- 1 __GAM_EL_A_ ~1Gam83161 Rie 104886 1048661__ 671 128j 41___ 1.00j 1.o 4 REGION 13 1 __ DIR I [i~~~Harar 93795f Lake__ 11269296 52944715930 **_ 3 6168JL____1 0.50] 0.50[ 1 G'rcMsional 1 Dire Dewa 1480331Bore holel 2532000 1871681 _4822 3731 51951 171___ .00.50 i 1 GRANDTOTAL[129 13198816[ 250920131 1203764~011 ______I Water Production: Volume of water produoed or delivered into the network. ______Water Consumption: Volume of water used by the customers. Where full information is not available for water Number of Connections : Number of Customiers production or consumption, the same figure *: Include induistrial /commercial establishm-ents, is taken for both. [production = consumption] *:Private &commercial **:Industrial & govemnmental O M3: CubicMeter ( SEPRA: South Ethiopia Peopke's Regional Administration ANNEX3 Page 1 of 4 ETHIOPIA WATER SUPPLY DEVELOPMENT AND REHABILITATION PROJECT MNISTRY OF WATER RESOURCES (MOWR) I MTheMinistry of Water Resources will have the following duties and responsibilities: 1. Devises methodologies and sets conditions for the rational distribution and usage of waters that cross or border more than one regions. 2. Prepares Laws for the protection and usage of Water Resource. I 3. Gives permission for and regulates Water Work activities and the use of the likes water bodies mentioned in paragraph (1). 4. Makes studies on water tariff policies and when approved, charges for the likes of water bodies mentioned in paragraph (1) on Water-bulk basis. 5. Makes studies on the use of trans-boundary rivers and when approved follows up their implementation. 6. Prepares plans for the proper utilization of water resources for development and when approved controls their implementations. 7. Gives support to Regions regarding water resources development when ever required. 8. Based on Laws, signs international agreements regarding trans-boundary rivers. 9. In collaboration with concerned bodies sets water quality standard for various uses. 10. Controls if Meteorological services are properly rendered. 2. Orfanizational structure of the Ministry 2.1 Heads of the Ministry The Ministry of Water Resources is made to be headed by a Minister and a Vice Minister for the voluminous and complexity of works and relative ANNEX 3 Page 2 of 4 emphasis given to the sector. Under the Office of the Minister, it will have a senior economist to head studies, planning, development and expansion works and a Chief engineer for services and controL For the successful accomplishment of the sector's duties and responsibilities, the following together with other support services and departments (like the supplies and equipment, Administration and Finance, Women's affairs, Public Relations and Information, Management and Training, Legal and Audit) have been organized under the Ministry. 2.2 Planning and Projects Department It will prepare country's water resources policy and strategy; coordinate with relevant government offices and various Departments of the Ministry to prepare the Federal Water Code. It will prepare an integrated short, medium and long term plan for the water sector. Besides it will follow up implementation, evaluate and prepare socio-economic studies for vital projects and conduct studies on water tariff policy. The Department prepares and provides to the Federal Government, Regional Governments and investors as required detail of projects that were covered by the Master Plan Studies. 2.3 Basins Development Studies Department Studies and prepare country's Basin master plan, identify projects that could be implemented with in Basins, conduct feasibility studies and realize that the Master plan studies take the nation's water resources, natural resources, land and socio-economic features into account. 2.4 Trans-boundary Rivers Study Department Conduct studies on trans-boundary rivers, realize that the benefit from such rivers are secured and are in line with the international water use principles, national integrity and advantages. 2.5 Design Department Conduct survey and design of various water works that are to GE undertaken by the Federal Government; control and follow-up works of foreign consultants. The Department monitor and find out remedies for any Environmental impact of designed construction worse associated with prepared designs. It provides technical and professional support for irrigation works to Regional Administrators. ANNEX3 Page 3 of 4 2.6 Contract Administration Department Develop cost estimate for water works of the Federal Government; prepares specification and contract agreements; prepares equipment, material, financial and manpower requirements for projects implementation; prepares tender documents; monitors if construction works and equipment installation are as per agreement. The department negotiates in cases of price changes on the course of implementation. Develops and implements water works studies and design standards. 2.7 Water Rights Administration and Water Utilization Control Department Devises methodologies and sets conditions for the rational distribution and usage of waters that cross or boarder more than one regions; Follow up their implementation as approved. Gives permission for and regulars water works activities and the use of the above types of water bodies; follows up water tariff implementation; controls the bulk use of water; collects fees; controls and monitors the safety of damn, and irrigation structures; cooperate with relevant parties to conduct studies and research for the improvement of water management methodologies. 2.8 Plans methodology for expansion of water supply & sewerage services in the country. Studies and presents for decision, water quality standards for various uses and sameness of different sewers; follows up and monitors their practicality as approved; generates relevant policies for sanitation and sewage disposal; plans implementation strategies; provides technical support and professional advises for regional administration water supply and sewerage service offices. 2.9 An Autonomous organization to be structured under the Ministry Though the National Meteorological Service Agency provides services for various governmental offices; viewed from its high integration to the water sector, the technical features and the relation of working patterns to similar international and continental organizations is decided to be organized under the Ministry of while its management autonomy is maintained within itself. It is however, understood that there is close interconnection (coordination) between Water Resources Registration and Information Management Department of the Ministry and the Agency; their future integration if accepted can be structured and be renamed as Hydra-Meteorology Service Agency and the detail is to be seen in the future. Ministry of Water Resource OrganizationalChart Minister Planningand Project ~~~~~~~~~~ManagementPublicRelation Administration Suppliesand Wmen's Affair Department AuditService LegalService andTraining andInformation andFinanc EquipentDpartment Libraryand Documentation Service Computer and Geo-Information Laboratory Service Service Hydrology River Basin ll Boundary lDlslgContract Hydrology Master Plan Water Right and W| er S-.:,,plyand Rivers Study Design Administration Uilizaton Pmcessand Sewvs.ag Department Study Departrnent Service Departnt Department Contro Department Dcp;;,tnent National Methodological Services Agency SE ANNEX4 Page 1 of 7 ETHIOPIA WATER SUPPLY DEVELOPMENT AND REHABILITATION PROJECT DESCRIPTION OF ADDIS ABABA WATER AND SEWERAGE AUTHORITY (AWSA) AWSA will be the executing agency for the AWSA sub-components of the Project: technical assistance for implementation of Organizational Management Change and Management Information System Establishment. AWSA's origin goes back to the Water Supply Administration, the predecessor of AWSA, which was created in 1964 under the Municipality of Addis Ababa. AWSA took over the Water Supply Administration by Order No. 68 in 1971, as an autonomous public authority. AWSA did not have any reporting obligation to higher authorities of the sector, including the Water Resource Commission. AWSA's legal environment is being modified since the Regional Administrations were established under the Transitional Government of Ethiopia in 1993. The newly established Region 14 Administration has replaced the Addis Ababa municipality government. Region 14 Administtation has officially proclaimed the re-establishment of AWSA to redefine AWSA's power and duties. AWSA's major responsibilities to be stipulated in the forthcoming proclamation are to: (a) supply adequate safe water for household consumption and other domestic uses, sanitation of Sstreetsand disposal of sewage, protection against fire and other forms of combustion, industrial and commercial uses, and public parks and similar services; (b) provide waste water and sludge disposal services; and (c) maintain water service facilities, safeguard surface and underground water from undue exploitation and prevent its contamination. AWSA is now under the supervision of a new Board of Directors. The current members of the Board of Directors include: the Chairman of Region 14 Administration (Chairman of the Board), an official from the Prime Minister's Office, another three officials from Region 14 Administration, two officials from Oromia Regional Administration, the General Manager of AWSA, a vice minister from MWUD and an official from Ministry of Finance. The decision-making by the Board of Directors is still slow since the members of the Board have been highly involved in other activities. ANNEX4 Page 2 of 7 Organization: Under the Board of Directors, the General Manager is the chief executive of the organization. There are four main departments; Technical Services, Operations, Finance and Administration. It also has six service units; Planning, Programming and Budget, Organization & Methods and Manpower Development, Computer Information Services, Internal Audit, Public Relation and Legal Services. AWSA has its head office in downtown Addis Ababa, and five branch and one sub- branch offices to support field operations throughout the Authority's serving area. The sub-branch office is located in Akaki, where growing industries and population are expected. The current organizational structure is as shown below. THE ADDIS ABABA WATERAND SEWERAGEAUTHORITY The Current OrganizationStructure Board GeneralManager D.G.Manager Secretariate Planning.Programmig _ ntemalAudin andBudget Office Organkzation&Methods andP ManpowerDevelopment ComputerSeicee L Src Tehia Deprtmen Financial Department | Operation Department | |Administrative Department| I I | | _l j ~~~~~~~ ~ ~~~ ~ ~~~~~~~~~~~~~~~Waterj Engineering Water Services Sewerage Mechanical Elect Property & Accounting Laboratory Personnel General Serice Division Division ServicesDivisio Serv.Div. SupplyDivision Division Ion Deig& Treatment Opratios Electrical Gaae eviePucasn Plant Stin ShopsBranch Branvch ScinOtssc Legedadi Customer Electrical and had. Vehicle Property Elnico TesetiPatent CnSnection Mechanical Maintenance Contrnl xecindu Section Plant Sectionm Services SectionSeto Water& Reservoirs. Systems Major Strs Rvne CostAcct. Sewerage ~andPump Maintenance Welding Repair R ne 1 Saworator Scionp Section Section Section Section Secti'on Recruitment& Employees Pronel Constructon LargeLne |eeienMe Tols & Parsi Section Section and MaFt. Service Repair andStore Sttston | Station 0 , | Shop Section Vehiclead2 | SWater Sewage Finance SevcsServices Services Driver Pool |SectionSectin Section In realitythis Issimply a one-manoffice. Soure: The Organiation& Methodsand Manpower Development Service,AWSA. ON -I ANNEX4 Page 4 of 7 Human Resources: Although AWSA has relatively well qualified personnel, compared to other sector institutions, there is an imbalance between the required skills and available human resources. As of March 1994, AWSA's total number of permanent employees was 1,371, and in addition, 108 are working on contract bases. Out of 1,371 permanent employees, four percent are above BA/B.Sc. level, some thirty percent are above grade 12. The details of the numbers of employees by department and unit and their educational/professional level are presented in Attachment 1. Mainstream Service Process: AWSA's mainline business process in providing water services to customers begins by deploying water main pipes. From there, the process involves connecting water from main pipes to customers and performing cyclical billing and collection, and ends by disconnecting pipes. AWSA's departments and service units are taking part in performing the whole process. Once the construction of main pipes is completed by the Technical Department, branch offices of the Operation Department become primarily responsible for connecting and disconnecting water to customers. For continuing customers, branch offices, the Finance Department and Computer Information Services (CIS) jointly perform their work in billing and collection in a two-month cycle. For the sewerage service, there is no billing and collection cycle because currently no fees are required for sewerage usage. The Technical Department is in charge of the construction and maintenance of necessary pumps, water reservoirs and treatment plants to sustain infrastructure for the mainline customer services. Service Capacity; The present water production is about 125,000 m3/day. The number of water connections (including public taps) is about 130,000, of which about 900 are major customers. It is estimated that unaccounted-for-water amounts to more than 30% of water production and about two-thirds of that is attributed to physical losses in the system. Efforts are under way to reduce the losses with gradual rehabilitation of the system. At present, AWSA has a small sewerage network system serving only a limited part of the city's center. There are only about 1,300 connections to the sewerage system because the initial sewerage connection fees are very high and the public is unaware of the sewerage system. As a result, only about 10% of the sewerage treatment capacity is being used. Because of the low sewerage flows, the sewers must occasionally be flushed to avoid clogging. Instead of connecting to the sewerage system, many residents use septic tanks or pit latrines, and AWSA is responsible for providing them with tank emptying services. Capacity Development Plansi In order to meet the growing demand for water in Addis Ababa, AWSA has been implementing and preparing a number of projects. Under the on-going Second Addis Ababa Urban Development Project, expansion of water supply system in Akaki has been being undertaken, including construction of gravity transmission main with a bulk meter, storage reservoir, distribution network and auxiliary buildings. The project cost is estimated at US$4.5 million. An emergency interim project to increase the water supply to Addis Ababa in a short term will be undertaken shortly. The project will consist of construction of Dire Dam (US$24 million) and drilling of ANNEX4 Page 5 of 7 ground water in Akaki (US$27 million) and is to be financed by TGE. For the waste water management, AWSA will soon initiate a first phase of a waste water management project. The project will consist of increase of house connection, extension of sewers, construction of wastewater treatment plants, civil works and procurement of tankers for sludge collection, and sludge treatment and disposal schemes and plant. The project cost is estimated at some US$85 million and is to be financed by EU and TGE. The Addis Ababa Water Supply Stage IIIA Project (AWSIIIP) is being designed to significantly expand the water supply capacity to Addis Ababa. The IIIA Project includes: i) the construction of Gerbi dam and Sibilu dam; ii) the establishment and augmentation of transmission lines and distribution network; and iii) the abstraction of ground water from Akaki area. The total capital cost of the project is estimated at US$450 million. Institutional Capacity: AWSA's overall institutional capacity, in the areas of operational fixed assets, organizational structure, management and labor, manual procedures, human resource development and computer information systems, has to be improved in order to meet growing customers' demand, improve quality of services and carry out future large-scale projects. As for underinvestment in operational fixed assets, the malfunctioning water meters and very old water pipes , which cause an extremely high level of unaccounted-for-water, has to be replaced. An acute shortage of operational vehicles and computer terminals of branch offices have to be alleviated. In terms of organizational structure, AWSA's highly centralized organizational structure has to be restructured because the divisions performing the mainline business process do not receive high priority and workers and middle managers are unable to respond to customer needs and expectations in timely manner due to lack of appropriate authority. The number of organizational layers between management at the top and workers at the bottom has to be reduced to expedite decision-making. Certain responsibilities, which are currently allocated to inappropriate units, should be reassigned to appropriate units. Inadequate document management causes significant fluctuation of productivity accompanied by personnel changes and difficulty in converting manually prepared data into computer systems databases. AWSA has to develop better human resources planning and management system. There is significant imbalance between the required skills and the existing skills of the employees. Training programs are not necessarily available for all the professional streams . The lack of performance indicators, transparent promotion criteria and incentive schemes is affecting morale of the work force. MIS Despite continuing efforts by Computer Information Service (CIS) personnel to improve computing capacity of the mainframe computer system, AWSA's computer systems have been extremely unpopular among user departments due to the persistent problems in the functions of application software and the limited systems development capacity. A for t4e functions of the application software, due to poor communication between CIS and the end-users, the functions of application software is unsatisfactory to the users, created distrust of computer system outputs among users. The knowledge of functions of applicAtionsoftware has been kept within CIS and no manuals or training programs has been developed to make end-users understand the application ANNEX4 Page 6 of 7 functions. Primary examples are delays in billing and collection and closing of AWSA's accounts. In terms of the limited system development capacity, an appropriate system maintenance is not possible since there is no documentation on the existing application software for systems analysts or programmers to support their systems maintenance and there is not enough communication between the systems analysts and software programmers. For personal computers LAN, AWSA's recently installed eight personal computers have been underutilized. Some of them are occasionally used for computer games only. There is no incentives for end-users to use them for business purposes because of a lack of user training and very limited software support. Now CIS has developed an ambitious plan to build a LAN among these PCs and the mainframe, along with the introduction of a fourtht generation language to its application systems development. Although CIS is willing to learn new technologies, it is not yet fully confident of operating decentralized systems and employing computer network technology, which is not yet common in Ethiopia. AWSA Financial Performance: AWSA is financially defunct. AWSA has not been able to cover its operations and maintenance expenses mainly due to the low water tariff (ETBO.5 per cubic meter), which has not been revised for 43 years. AWSA's revenues were stagnating at around ETB17 million between FY88/89 and FY90/91 due to the unrevised tariffs and lack of significant capacity improvement of water supply. Its operating expenses increased from ETB25 million in FY88/89 to ETB32 million in FY90/91, which resulted in increasing net deficits for the three year period from ETB8.4 million in FY88/89 to ETB14.2 million in FY90/91. Its accumulated deficit amounted to ETB45 millon at the end of FY90/91. With the devaluation of Ethiopian Birr in 1992 from ETB 2.07/US$ to ETB5.OO/US$, AWSA's operating and maintenance expenses, such as fuel and chemicals, are expected to have increased significantly and AWSA's financial performance should have deteriorated further. Its capital structure is unsound: its operations and maintenance activities and capital investments are financed by contributions from the government, grants from donors and concessional long-term loans. AWSA has no debt service capability and has been subsidized by the government in meeting its debts service obligations. Without contributions and grants, AWSA incurred capital deficit of ETB28 million at the end of FY90/91. The outstanding balance of long-term loans at end-FY90/91 was some 9 times of the state capital. More than sixty percent of the creditors' balance at end-FY90/9 1 was interest charges payable which AWSA owes to the government. ANNEX4 Page 7 of 7 AWSA's cash position is also precarious. Due to inefficient collection, it accunulated high outstanding balance of account receivable and has not met payment obligations. Its outstanding balance of account receivable at end-FY90/91 was ETB12 million , or over 8 months equivalent of the water sales related revenues. Its financial charges on loans have been covered by the government on behalf of AWSA. AWSA' s audited financial statements between FY1988/89 and FY1993/94 are available in the project file. ANNEX 5 Page 1 of 3 ETHIOPIA WATER SUPPLY DEVELOPMENT AND REHABILITATION PROJECT ACTIVITIES OF DONORS A number of donors and NGOs are active in the water supply and sanitation sector in Ethiopia. Below is a brief description of the activities of the major donors: African Development Bank: ADB, through its soft-loan arm, the African Development Fund (ADF), is a major donor to the urban water supply sector. Its objectives are to assist in the formulation of sectoral policies, priorities and objectives, to provide necessary funding and to attract financial resources from other sources required for sector expansion. ADF has provided loans for eleven urban water supplies and for sewerage in Addis Ababa, in addition to grants for studies. Belgian Survival Fund: The Fund is providing grant finds for a major sanitation/water supply program being implemented by the Ministry of Health (MoH) in various parts of the country. The program is being executed by IFAD in conjunction with UNICEF, WHO and UNDP. Canadian International Development Agency: CIDA has provided support to the sector since 1977, concentrating its assistance in the southern part of the country through the Rural Water Supply and Sanitation Programme. This project was initially oriented towards construction of new rural water supply schemes; over the years the focus has changed to capacity building, with particular emphasis on operation and maintenance. European Union: The EU has provided grant funding through the European Development Fund for a water supply program in the west and northwest, covering rehabilitation, development of rural water supplies, and strengthening regional capacity (with a major emphasis on sustainability). The EU also funded construction materials and technical assistance for the Addis Ababa Water Supply Project, Stage ILA, which involved the expansion of treatment plants, transmission lines, pumping stations and reservoirs. EU plans to finance Water Improvement Project in Addis Ababa. Finnish International Development Agency (FINNIDA): In 1994, after a delay of several years due to lack of security in the project area, FINNIDA began implementing a four-year, US$6 million Rural Water Supply Program in Amhara Region. Using simple technology and a participatory approach, the program focuses on spring protection and hand dug wells, with some irrigation and sanitation, as well as community education activities and preparation of watershed management plans. Finland also supports a number of Finnish church NGOs with small water projects. ANNEX 5 Page 2 of 3 Germany: Germany has assisted rural water supplies through GTZ, and urban supplies through KfW, with the major focus in rural areas. Since 1979, GTZ has supporteda majortraining program, largely at the Arba Minch Water Technology Institute (AMWTI). GTZ is also supporting the Central Region Rural Water Supply Programme which concentrates on rehabilitating existing supplies and strengthening operation and maintenance. KfW has assisted the urban water supply sector since the mid- 1970s. It is currentlypreparing a projectto fund rehabilitation of eight urban water supplies. Italy: Italyhas concentrated its assistance on the implementation of a rural water supply construction program in the Central Region, together with investments in operationsand maintenance. It has also provided a major loan for the Addis Ababa Water Supply Stage IIB. Japan: Japanhelped establish the Water Well Drilling Agency (WWDA) in the early 1970s, with a loan from OECF. Since then, through the Japanese International CooperationAgency (JICA), it has provided technical assistance to WWDA, WSSA, and AAWSA. JICA is currently undertaking a feasibility study of potential groundwater resources in eleven towns; the study will include formulation of a groundwater developmentplan and a maintenance plan for the water supply systems. The Netherlands: The Netherlands intend to provide assistance for preparation of a national water resource master plan; establishment of environmental database and monitoringsystem; and humanresource development. Swedish International Development Authority: SIDA has provided support to the sector since 1976, concentrating mainly on the Rural Water Supply Programme in Eastern Region. Through construction and rehabilitation, the Programme aims to strengthen and develop the capacity of the Water Resource Commission to plan, implement,maintain and operate the water supply system. SIDA has provided technical assistance and equipmentto AMWTI, as well as funding for research and development programs, andhas in addition contributed to the sector through support to NGOs. United Nations Capital Development Fund: UNCDF has provided technical assistance and water supply projects to the Central Region, as well as equipment to AMWTI. It is currently preparing a project in Amhara Region which will include a comnmnitydevelopment fund to finance sub-projects, including water supply projects. United Nations Development Programme: UNDP has provided support to AMWTI by funding lecturers, consultants, training and equipment. In conjunction with the World Bank, UNDP assisted WSSA to strengthen its management capacity and subsequent decentralization. UNDP was also involved in the execution of an Italian- fundedprogram which provided water supplies around Jijiga during 1986-90. United Nations Children's Fund: UNICEF has assisted the sector since 1975 and is a key donor for rural water supply. Initially involved solely in drilling wells, ANNEX 5 Page 3 of 3 activities expanded into developing shallow wells, spring protection, laying distribution systems and rehabilitation of defunct schemes; since the late 1980s, simpler and lower-cost technologies have been introduced in selected areas. The current UNICEF program (1994-99) is a nationwide water and sanitation program to assist the Government in fiormulting appropriate sector policies and guidelines, and their dissemination and implementationby the regions. World Health Organization: WHO's main assistance to the sector has been institutionalsupport for community water supply and sanitation programs under the MoH. ANNEX 6 Page I of 2 1. LIST OF EQUIPMENTAND VEHICLESFOR AWSA Description -__-Unit No. Cost 1/ |Total Cost 1/ fin US$ equivalent) 1. Pickup trucks, _ double cabin, 4 w/drive 17 27,500 467,500 __ - 2. 10-ton Truck ____ with crane 1 62,500 62,500 3. Spareparts ______- for existing fleet Allow __ 200,000___ 4. Radio Communications and Computer Equipment Allow 280,000 5. Misc. Tools and _ Workshop Equipment Allow 385,000 6. Water Meters 25 mm. 250 40 10,000 _- 40 mm. 100 100 10,000 50 mm. 50 200 10,000 TOTAL 1,425,000 ____ 1/ Basecost, net of taxes and duties . Pap 2 of 2 2. LIST OF VEHICLES, OFFICE TECHNOLOGY AND WORKSHOP EQUIPMENT FOR THE REGIONS Description No. Unit Cost 1/ | Total Cost 1/ (in US$ equivalent) 1. Pickup trucks, _ _ double cabin, __ _ _ _ 4 w/drive (1 for each town) 25 27,500 687,500 2. Land Vehicles, I 4 w/drive (2 for each region) 18 35,000, 630,000 3. 7-ton Trucks _ (1 for each region) 9 45,000 405,000 4. Office Equipment (computers, printers, copiers,fax machines, _ _ _ etc.) for each region 9 r Allow 20,000 180,000 5. Miscellaneous tools and equipment for repair/maintenance teams, for each region 9 Allow 75,000 675,000 6. Well Maintenance Rigs 13 500,000 6,500,000 7. Mobile Workshops 14 100,000 1,400,000 TOTAL _____ 10,477,500 1/ Base cost, net of taxes and duties I - ANNEX 7 ETMIOPIA WATER SUPPLY DEVELOPMENT AND REHABILITATION PROJECT Estimated Disbursement Schedule (US$ millions) Fiscal Year Annual Cumulative Cumulative % FY96 Jun-96 1.25 1.25 3.5 FY97 Sep-96 1.25 2.5 7.0 Dec-96 1.5 4.0 11.2 Mar-97 2.0 6.0 16.8 Jun-97 2.5 8.5 23.8 FY98 Sep-97 2.5 11.0 30.8 Dec-97 3.0 14.0 39.2 Mar-98 3.2 17.2 48.1 Jun-98 3.2 20.4 57.1 FY99 Sep-9 8 3.2 23.6 66.1 Dec-98 3.0 26.6 74.4 Mar-99 2.3 28.9 80.9 Jun-99 1.8 30.7 85.9 FYOO Sep-99 1.5 32.2 90.1 Dec-99 1.3 33.5 93.8 Mar-00 1.2 34.7 97.1 Jun-00 1.03 35.73 100.0 Project Completion Date: December 31, 1999 Project Closing Date: June 30, 2000 ANNEX $ ETHIOPIA: Water Supply Development and Rehabilitadon Project Page 1 of2 Monitoring Indicators RehiOnW lindicatonPinr i superviion Target I tr-S (bl Rehabilieton Profs r st b 6i) % of rehabilitation compbletd Ifeg,on lowns) (iii) % of o pierquipment and Teh.cllspurchsed (region to.na) iii) % ot Civil Works andt building or regional wer headuarters_ _ Oiii) % 0 otofice eqtuipment and vehiclas purChased _ _ Wateritc ruality(Region Towns)ne_ V9 % of w ter sulDp)ed rlet meeTs WFtO standards ! ivi % of wasue watertreated _ _/_ Id) Seaici QualityIRegion Townsl _ hi) WaGerproduction Isr DeCe/danu i0 Water consumptionaliser ptcs/dayl (iii) Average hours at sorv,ce De, darv (ivi Number of System breakeda-,= = duration (a)Efficncy of Operations Magin To*n sl | ti Unaccounted for water Iviiil Sae etcosis/operatingcrsts cos liv)ilAccountseces O b M unit cast berneof wator Droduged iffirrim3l) (fl FinHncialRetiou Region TownstI 51iilcontrabutper Growth in wgttr to caper(avenuescofnextiendtrs !_ _ . if Returnon net fixoecassets piilCurrent ration teliv)Account recsi_biaireveues 'lb O ersvi ro-T0 tvilccntribution to caDItaI eaPenditures= (vii) A~eage tariff/Av.rage incremental cost (g) Human ResourceDevelopment (Ragion H ada. Saflai 0 9i) StUlfing/lt connSctionsa professional technicians laborers liil Tuining lTotal s,Istaffl ______= _ professiconal technicians laborers (ivi Training lstaffl) with upgraded skillsin accounting, O&M. personnel of mid-levelmanegers wrth upgraded skills of regional department heads with uporeded skiPson Iv) Qualitative Indicators key menagementpositions are filled I______adequatecapacity for projecxtprpar. and implem, ____|__j new managementsystems and proceduresin place (hI CustomerContact and Public RelationsIReoion Towrs I (i) Number of meters installed/numberof connectons j liil Numberof repairs/numberof connections hii Number of complaints/numberof connections lin) Numberof applications for new connections/number of connections IvI Aver4geleng.h of wait for new connections (vi) Consumer satisfaction Des fno LpateTa a Mar-SeB tie T- VeY if Socio-aconomic Impact Indicators IRegion Towns) (i Infent mortality rate Init Under-Smortalty rate Oiii)Burden of disease by cause PrevalenceRates lper thousandl - Diarrhoea I I_I_I_I - G4stro Enteritis Worms in Ihe Stool - Other Oiarrhoeeand Abdominal Conditions liv) Time spent colleciing mater _ l Water Bill as a percentagecl "o,,sehold income (vi) Amort spentea water from vendors _ _ I I I ANNEX 8 ETHIOPIA: Water Supply Development and Rehabilitation Project Page 2 of 2 Monitoring Indicators Town Indicators Baseline Supervision Target Dec-95 (Seni-Annual Update) aisService Coverage Indicators (ii % of Populationserved by water supply system Piped connections Publictaps Vendors Other /ii0 % of Populationserved by sanitation facilities Piped discharge On site solutions (pit latrines) Others ib) RehabilitationProgress lil % of rehabilitation completed (iii % of office equipmentand vehiclespurchased (c] Water Quality li) % of water suppliedthat meets WHOstandards lii) % of waste water treated (dl ServiceQuality 1i0 Water production(liter p.c./day) liil Water consumption(liter p.c./day) (iii) Averagehours of serviceper day (iv) Numberof system breakdown/durantion/cause (el Efficiency of Operations 1i Unaccountedfor water (iii Staff per 100 water connections (iiii Staff costs/operatingcosts (iv) 0 & M unit cost of water producedIBirr/m3) tf) FinancialRatios {i) Growth in water revenues liii Returnon net fixed assets liii) Currentratio (ivi Account receivable/revenues (vl Debt service ratio (vii Contributionto capitalexpenditures (viil Averagetariff/Average incrementalcost Igl Human ResourceDevelopment (il Staffing/10 connections professional technicians laborers (iii Turnover/TotalStaff professional technicians laborers (iii) Training(# hours/#staff) professional technicians laborers Ih) CustomerContact and PublicRelations (i} Numberof meters installed/numberof connections (i) Numberof repairs/numberof connections (iii0Number of complaints/numberof connections (viv Number of applicationsfor new connections/numberof connections Ivl Averagelength of wait for new connections Baseline Update Target Mar-96 lEvery Two Yea,rs lil Socio-economicImpact Indicators (ii Infant mortality rate from water-bornediseases (iil Under-5mortality rate from water-bornediseases 0iil Burdenof diseaseby cause PrevalenceRates (per thousand) - Diarrhoea - GastroEnteritis - Wormsin the Stool - Other Diarrhoeaand AbdominalConditions fivl Time spent collecting water lvi Water Bill as a percentageof householdincome ANNEX 9 ETHIOPIA Page 1 of 2 WATER SUPPLY DEVELOPMENT AND REHABILITAION PROJECT Bank Supervision Plan Fiscal Year Approximate Date Activities jExpected Skills Ss FY95196 Jun-96 ProjectLaunch Workshop FinancialAnalyst 16 Water and Sanitation Engineer Institutional Development Specialist Rural Water Supply Specialist Operations Analyst ______Econom ist Procurement Specialist ______Environmental Specialist FY96/97 Oct-96 Supervision FinancialAnalyst 12 Water and Sanitation Engineer Institutional Development Specialist Rural Water Supply Specialist Operations Analyst Economist Feb-97 Technical Supervision FinancialAnalyst 4 Water and Sanitation Engineer Environmental Specialist May-97 Supervision FinancialAnalyst 12 ______Water and Sanitation Engineer Institutional Development Specialist Rural Water Supply Specialist Operations Analyst _Economist FY97198 Sep-97 Mid-termReview Mission FinancialAnalyst 24 l______Water and Sanitation Engineer ______Institutional Development Specialist I______=Rural Water Supply Specialist Operations Analyst Economist .______Procurement Specialist Environmental Specialist Feb-98 Technical Supervision FinancialAnalyst 6 Water and Sanitation Engineer Environmental Specialist Jun-98 Supervision FinancialAnalyst 12 Water and Sanitation Engineer Institutional DevelopmentSpecialist Rural Water Supply Specialist Operations Analyst Economist FY98/99 Oct-98 Supervision FinancialAnalyst 12 |______|______Waterand Sanitation Engineer .______|Institutional Development Specialist Rural Water Supply Specialist OperationsAnalyst Economist Feb-99 Technical Supervision FinancialAnalyst 4 Water and SanitationEngineer EnvironmentalSpecialist May-99 Supervision FinancialAnalyst 12 ______Water and Sanitation Engineer ______l Institutional Development Specialist |__ ANNEX 9 ETHIOPIA Page 2 of 2 WATERSUPPLY DEVELOPMENT AND REHABILITAION PROJECT Rural Water Supply Specialist OperationsAnalyst Economist FY9912000 Oct-99 Supervision FinancialAnalyst 12 Water and Sanitation Engineer InstitutionalDevelopment Specialist ______Rural Water Supply Specialist OperationsAnalyst Economist Feb-00 CompletionMission FinancialAnalyst 10 Water and SanitationEngineer Rural Water Supply Specialist OperationsAnalyst Economist ANNEX 10 ETHIOPIA WATER SUPPLY DEVELOPMENT AND REHABILITATION PROJECT AWSA NEW TARIFFS (AS OF MAY 1995) A. Meter Rent (Fixed Charge) Meter Size Monthly Charge Inch (Birr) 0.5 1.00 0.75 5.00 1.00 15.00 1.25 20.00 1.50 30.00 2.00 51.00 3.00 103.00 4.00 156.00 5.00 262.00 B. Volume Charge Bimonthly Consumption Birr/M3 Range(M3) Water Sewerage Total 0-15 0.50 0.00 0.50 16-40 0.75 0.08 0.83 Above 40 1.50 0.17 1.67 Public Fountain Operators 0.50 0.00 0.50 C. Sludge Disposal Fee Birr 49 Per Trip. (The Existing Rate will continue for all customers during the Short- term) ETHIOPIA WATER SUPPLY DEVELOPMENT AND REHABILITATION PROJECT AWSA Income Statements (ETB '000) .______FY ending July 8: FY1988 FY1989 FY1990 FY1991 FY1992 FY1993 FY1994 FY1995 FY1996 FY1997 FY1998 FY1999 FY2000 .______I------(Audited)------(Projected )---_-_-_ Revenues Water 13,031 13,531 13,080 14,039 14,741 15,478 16,252 17,064 46,926 47,396 47,870 52,657 53,183 Meter Rent 584 593 656 683 700 720 740 760 2,280 2,303 2,326 2,349 2,373 Connection Fee 898 1,525 1,704 1,450 1,600 1,650 1,700 1,750 1,785 1,803 1,821 1,839 1,857 Sewerage Service 479 614 463 419 470 479 489 499 504 509 514 - 519 524 Other Revenue 1,038 1,046 712 749 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 Total Revenue 16,030 17,309 16,614 17,339 18,511 19,327 20,181 21,073 52,495 53,010 53,530 58,364 58.937 Operating Expenses I _ Salaries and related expenses 5,755 6,166 6,619 6,768 7,242 7,966 8,763 9,201 9,385 9,479 9,573 9,669 9,766 Store issues and other expenses 3,758 4,157 5,121 4,665 5,132 6,158| 6,466 6,789 6,925 6,994 7,064 7,1351 7,206 Utilities and other services 2,428 2,319 2,508 2,953 3,544 4,2521 4,465 4.688 4,829 4,877 4.926 4,975 5,025 Depreciation I 8,346 8,464 7,980 7,834 8,016 8,416] 8,837 9,279 9,307 9,400 9,494 9,589 9.685 Amortization of deferred expenditure 202 0 0 0 0 0] 0 o0 _ _ _ _ Total Operating Expenses _ 20,489 21,106 22,228 22,020 23,933 26,793 28,531 29,957 30,446 30,750 31,058 31,368 31,682 I] I i_iI_i [ ( 5 Oratn Mamin (4,459) (3,797) (5,614) (4,681) (5,422) (7,466)j (8,350) (8,884) 22,050 22,260 22,473 j 26,996 27,256 Other Expenses | - - -______i |Interest and bank charges 3,497 3,203 3,366 3,689 4,000 4,200 4,300 4,400 4,400 4.400 4,400 4,400 4,400 |Auditfee I I 18 18 20 30 35 40 45 45 45 45 45 45 45 |Miscellaneous 64 384 154 126 150 170 180 190 190 190 190 190 190 Compensation/Forex losses 137 0 0 3,318 0 0 0 0 0 0 0 0 0 Provision for doubfful debts 644 680 647 1,623 1,500 1,600 1,600 1,600 1,600 1,600 1,500 1,600 1,600 Provisionfor obsolescence 65 360 1,172 710 800 800 900 900 900 900 900 900 900 Total Otherexpenses 4,424 4,645 5,358 9,496 6,485 6,810 7,025 7,135 7,135 7,135 7,135 7,135 7.135 I~- -- = S . - - = Notincomie(Deflcit) for the Yer (8,883)1 (8.442) (10.972) (14.176) (11.907)F (14,276) (15.375) (16,019) 14,915] 15,125 15,338 J 19,861 20,121 Accumulated Surplus/(Deficit) Brought Forward (7.489) (12,807) (21,566) (30,658) (44,837) (56,745) (71,020) (86,395) (102,415) (87,500) (72,375) (57,038)1 (37,177) PriorYearAdjustment I 1 3,565 (318) 1,880 (3) 0 [ 0 0 0 0 0 0 0 0 Accumubted Surplus(Deflclit) Carried Forward X (12,807)T (21,566)1 (30,658) (44,837)1 (56,745)] (71,020)] (86,395) (102,415) (87,500)1 (72,375) (57,038) (37,177)1 (17,056) ETHIOPIA WATER SUPPLYDEVELOPMENT AND REHABILITATIONPROJECT AWSA Balance Sheet (ETB '000) I___ ~FYending July 8: ____FY1988__fY1989 FY1990 FY1991 IFY1992 1FY1993 IFY1994 FY1995 FY199 FY199 FY1998 FY1999 FY2000 __ _ ~ ~ ---- ~~~~~~~~~~IF------(Audited)------(Estimated)------(Priojec-,te d)…------Current Assets ___I- ______~Cashand Bank_Balance -4,3 2,51 477552 ,61 570j ,61 5,~819 -5-,877 T 3g~ 5,995 F 6,05-5 6,1 _____ fStock ______~~~~~~~9,722110,1851 11,042 1 8, 61 8-,67741 9,-5411T 9,637 -,7339 - ,83 1 9,929 1-0,026 F1 11,031 F 11,141 ____ Debtors- ______16j326'14,149 110,0341 10,446 10,550 410,656 1 10,762 10,8701 10,9791 11,089 F 11,199 1131 11,425 !___Total Current Assets ____1 30,781 1 26.4851 25.7531 24,298 1 24,872 25,901126,160 26,422 ;2686f295 7,2r237 2861 Fixed Assets__ _ _ F ______1______-i ______I-- r _ _ Fixed Asets and Deferred_Epniue 1218,287221,221 222,702 225,940 230,459 3,6 3,7 4,6 2 9 5 5,4 259,534 311,44-1 373,729 ____Work in Progress r 599 51,342 65,733 76,108 80,674 85,515 90,646 96,084 ,101 850 107961 11448 154,491 208,564 ____(Depreciation)____1 (45,561-) (5-4,122-) (61,843) -(69.778-) -(71,442) 7,7) (74.329) (75,8 15)! (77,33 1)t (78,878)1 8,5) (96,547) (115,856) Total FixedAssets ____208,675 218,441 226,592 232,271 239,691 247,712 256.087 264,834 273,974 283,528 293,517 369,386 466,437 Total Assets L - 239,456 24492 2534 256,569 264,563 273,613 282,247 2156300,660 310,481 320,7393978 4518 Current Liabilities- _____207 846 ____Creditors _____22,794 23,237 26,2981 26,406 127,198 27,470 127,745 28,022 25,780 23,718 21,821 20_05 _1_46 ____Current Portionof LT Debts 1,613 1,794 2153 2,660 2.686 2,713 2,740 2,768 2,906 3,052 3,204 3,364 3,533 ______~~~~24,40725.031 28,450 29,066 29,885 30,183 30,485 30,790 28,687 26,770 25,025 23,439 22,002 Long-TermnLiabilities ___97,037 108,648 134,860 147,788 162,549 181.081 200,114 219,977 211,514 201,555 191,319 242,842 313,886 CapitalAccount -- ____State Capital 16,514 16,514 16,514 16,514 16,514 16,514 16.514 16,514 16,514 16.514 16,514 16,514 -16,514 ____Contnbution and Gants 114,305 116,300 103,179 108,039 112,360 116.855 121,529 126,390 131,446 138,018 144,919 1I52,165 159,773 ____Accumulated Deficit (12,807) (21,566) (30,658) (44,837) (56,745) (71,020) (86,395) (102,415) (87,500) (72,375) (57,038) (37,177)1 (17,056)1 ____Total 118,013 111,247 89,035 79,715 7210 62,349 51,6-48 40,489 60,460 82,15710,9 1352 1921 iTotal Liabilittiesand Equity - - 239,456 244,9268 252,345 256,569 2,53 273,6913 2822R47 9,510,6 1,8 2,3 9,8 9,1 ETHIOPIA WATER SUPPLY DEVELOPMENT AND REHABILITATION PROJECT AWSA Cash Flow Statements J(ETB '000) I I I I_ _ IFYendingJuly8: _ FY1988 FY1989_FY1990 FY1991 FY1992 IFY1993 FY1994 IFY1995 IFY1996 FY1997 FY1998 FY1999 FY2000 _ I I ------(Audited)--- I------(Estlmated)------(Projected)------Funds Generated from Operations ______10972 Net Income/(Deficit) ( _8_ (8,,442) () (14,176) (11,907) (14,276) (15,375) (16,01 4,915 15,125 15 19,861 20,121 Plus: Depreciations& amort. of FX losses 8,346 8,464 7,980 7,634 8,016 8,416 8,837 9,279 9,307 9,400 9,494 9,5891 9,685 Total _ L (537) 22 (2,992) (6,542) (3,891) (5,859) (6,538) (6,740) 24,222 24,525 24,832 29,450 29,805 Other Source of Funds - Increase in Grants _1_ _ (13,12 _4 10)4,99564,494 4 4,86 , _6_ 1,901 7,246 7608 Increase______in Long-term Debts ______11,611 26,212 12,928 14,7114,761 18,532 19,033 19,8631 (8463)l (9,959) (10,236) 51,5234 71,044 Total _ __ 13,606 13,092 17,788 19,083 23,026 23,707 24,724 (3.407)1 (3,387) (3,335)' 58,769 1 78,652 Total Sourceof Funds _ { 113,628 1 10,100 11,245b15,191 17,167 17,169 17,984120,814 1,138 21,497 88,219 108,458 U_soS Funds I t ____- - 27 Acquisitionof FixedAssets I__ I 18,21 15,872 13,613 9 9,0450 9 832 1 ,234 10,656 1 11,100 11,567 91,960 116,360 100 _ Increasein Non-cashWorking Capital I_ I (2,338) (6,677)1 (2,985) (301) 674 ( ) (101) 2,3091 2,125 1,955 2,700 1,661 Total __5,990 9,195 10,629 8,784 -10,124 9,732 10,133 112,966 13,225135221 94,660 118,021 Change in Cash Positon T t _ ! _ (2,3621 905 617 6,407 l 7,043 t7,43 7,85 7,848 t 7,913_T 7,975 (6,4421 (9,564) Change in Cash Position (Excluding Grants) (4,356) 14,025 (4,243) 2,086 , 2,549 2,763| 2,990 2,793 1,341 1,074 (13,688) 72) AWSAFinancial Indicators r t ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~i ANNEX 12 Page 1 of 5 ETHIOPIA WATER SUPPLY DEVELOPMENT AND REHABILITATION PROJECT COST BENEFIT ANALYSIS Methodology Cost/benefit analysis was carried out for the physical investments and for the capacity building component which will have a direct impact on the efficiency of the water supply operations. The economic rate of return was calculated by estimating the net benefits from the project. All costs and benefits are expressed in constant prices (base = December 1994) and include physical contingencies. The prices used in the analysis are net of duties and taxes. The estimated economic rate of return (ERR) of the physical investments of the project (including part of the capacity building, see explanation below) is 18.4 percent (see Table 1). The net present value of this component at a 12 percent discount rate is US$10.6 million. The benefit/cost ratio of this component is 1.27. The following describes the assumptions and estimations made. 1 Project Beneficiaries and Demand Projection The beneficiaries of the rehabilitation works and capacity building components will be about 550,000 people who live in the 25 towns and about 8.2 million people who live in other towns serviced by the Regional Governments in which rehabilitation works will be carried out, maintenance equipment and capacity building will be provided. Demand for water was projected taking into account an average consumption of 17 liters per capita per day (Ipd) and an annual population growth of 3 percent. Current average consumption is approximately 7 lpd. Production is assumed to grow gradually, until capacity of most systems is reached in the year 2005. Project Benefits Benefits from Increased Water Use and from Replaced Sources: The benefits from the rehabilitation component of the project arise from the incremental quantity of water supplied by the project. This incremental water could be used by the beneficiaries of the project to replace previously used sources, e.g., water from vendors, and to increase water consumption; we have not measured however, the benefits from water which replaces water sold by vendors. But if we would add benefits from replacing vendors, total benefits would be larger since from a survey carried out under a study undertaken Shadow prices and exchange rates were not estimated since Ethiopia is undergoing a series of macro-economicsreforms which has reduced distortions. The exchange rate used is US$ = Birr 6.25. ANNEX 12 Page 2 of 5 byt WSSA and DEVECON2 and from information provided by the Regional Governments, consumers are paying from 5 ETB to 25 Birr per cubic meter of water. To calculate the benefits from the increase in water consumption, we have estimated the increase in revenues as a result of the project. This is a conservative estimate since these revenues constitute a lower bound of the consumers' surplus. Using a tariff of ETB 2.5 and the projected consumption per capita, we have calculated the revenue streams with and without project. This is what we call "private benefits" in Table 1. The NPV - of the revenue streams without project is US$165.5 million and the one with project is US$196.9 million;therefore the incremental private benefit due to the project is US$31.5 million. Health Benefits: Estimating project benefits taking into account water which replaces previously used sources and increases consumption only captures private benefits and does not take into account public health improvements. Most consumers' willingness to pay for water may not include a willingness to pay for water due to health reasons since most consumers might not filly take into account the relationship between clean water and its effect on their health. Therefore, we have made a calculation of health benefits. The estimate of health benefits includes savings from money spent on treatment of sickness and lost income. To calculate the savings from money spent on treatment of water-borne disease by age, average days of restricted activity and average spent on treatment of disease.3 Lost income due to water-borne disease was calculated based on the number of days of restricted activity for the economic active population, multiplied by the average income per capita, assuming that 80 percent of their income is lost due to restricted activity. In the case of the younger population and older population, since their participation in income generation activities is smaller, only 20% of their per capita income is supposed to be lost. This assumption is feasible given that adults might have to limit their income generating activities to take care of sick children. The population of these towns consequently lose about US$4 per capita per year due to water-borne diseases. However, to avoid duplications and be on the conservative side, we have only included 50 percent of the estimated health benefits, namely, US$2 per capita. The present value of the savings on health costs is estimated at US$18.0 million. This amount is calculated finding the difference between the health costs with and without the Project. (see Table 1). Project Costs Project Costs and Least Cost Solution: Project costs include both investment and recurrent costs. To carry out the economic analysis, investment costs were calculated for the rehabilitation of the water supply facilities of the 25 towns which total US$11.4 million (net of duties and taxes, but including physical contingencies), or 23 percent of 2 WSSAand DEVECON,Five Towns Water and SanitationStudy, Phase I Report, Volume 1 - Gore, 1993. 3 Central StatisticalOffice, GOE, Reporton the Rural Health Survey,Volume 2. StatisticalBulletin No. 52. ANNEX 12 Page 3 of 5 total investment. The capacity building components, including studies, training, technical assistance and institutional support (equipment and buildings), have also been included in the project costs because they will have a positive impact on the supply of water. The capacity building and institutional support activities which are aimed at the 25 project towns have been included in flll amount, while the ones directed to regions have been apportioned according to the number of towns under the project relative to the total number of towns in the regions. These capacity building components total about US$13.3 million, bringing the total costs to US$ 24.7. Recurrent costs are estimated at about US$2.9 million per year for the 25 towns and Regional Governments, increasing with the increase in output. All costs are calculated taldng into account the least cost of rehabilitation and O&M, including physical contingencies. The NPV of the costs (both investment and O&M) due to the Project is US$38.8 million ANNEX 12 Table 1 ETHIOPIA Page 4 of 5 WATER SUPPLY DEVELOPMENT AND REHABILITATION PROJECT COST/BENEFIT ANALYSIS (US $ OOOs) Fiscal Without Project l With Project Incremental Incremental O&M Total F Total Year Private Health Private iHealthBenefits Investment Costsl Incremental Net Benefits Benefits Costs BenefitS Costs DUe tO DUe to D1e to | Costs DUe I Due to Project Project Project to Project Project 1996 18,435 17,043 18435j 17,0443 0 3,765 219 3,984 T -3,984 1997 18,508 18,010 19,716 I17,2801 1,938 14,860 412 15,272 -13,334 1998 18,581 19,031 21,082 17,5361 3,996 4,560 907 5,466 -1,470 1999 18,655 20,111 21,895 18,167 5,184 1,484 1,030 2,515 2,669 2000 18,962 20,9899 22,7741 18,746 6,055 0 2,885- 2,885 3,170 2001 19,395 21,771 23,589 19,330 _ 6,635 0 3,064 3,064 3,571 2002 19,900 22,513 24,444 19,912 7,146 0 3,253 3,253 3,892 2003 20,449 23,244 25,344 20,501 7,638 0 3,454 3,454 4,183 2004 21,031 23,981 26,292 21,103 8,139 0 3,668 3,668 4,471 2005 21,638 24,732 27,111 21,739 8,466 _ 0 3,747 3,747 4,719 2006 22,267 25,502 27,924 22,396 8,763 0 3,803 3,803 4,961 2007 22,917 26,295 28,762 23,072 9,067 0 3,859 3,859 5,208 2008 23,588 27,111 29,625 23,768- 9,380 0 3,917 3,9171 5,463 2009 24,279 27,953 30,514 24,485 9,702 0 3,975 3,975 5,727 2010 24,991 28,821 31,429 25,224 10,035 0 4,034 4,034 6,001 2011 25,725 29,717 32,372 25.985 10,379 0 4,095 4,095 6,285 2012 26,481 30,641 33,343 26,768 10,736 0 4,156 4,156 6,580 2013 27,2591 31,595 34,343 27,576 11,104 0 4,217 4,217 6,887 2014 28,061 32,580 35,374 28,407 11,485 0 4,280 4,280 7,205 2015 28,886 33,596 36,435 29,264 11,880 0 4,344 4,344 7,536 2016 29,736 34,644 37,528 30,147 12,289 0 4,409 4,409 7,880 2017 30,612 35,727 38,654 31,056 12,712 0 4,474 4,474 8,238 2018 31,514 36,844 39,813 31,993 13,150 0 4,541 4,541 8,609 2019 32,443 37,998 41,008 32,959 13,604 0 4,608 4,608 8,995 2020 33,400 39,189 42,238 33,953 14,074 0 4,677 4,677 9,397 NPV 165,476 180,676 196,940 162,714 49,423 19,397 19,402 38,7991 10,624 ERR I I I I_I_I_I I 18.4% B/C Ratio ______1.27 ANN:EX 12 Table 2 ETHIOPIA Page 5 of 5 WATER SUPPLY DEVELOPMENT AND REHABILITATION PROJECT BASIC DATA FOR POJECT TOWNS Region Town Population Existing Current Average Average Percent of Consumpti Source Tariff Annual Annual Losses per Capita ______Birr/m3 Production Consumptio m3/year m3 m3 Tigray (1) Adigrat 23,279 borehole 0.09 236,520 185,564 21.5 8.0 ______Indasellasse 23,109 borehole ______Maichew 26,103 borehole 0.50 94,170 65,919 30.0 2.5 Afar (2) Asaita 9,818 borehole 1.25 62,000 58,822 5.1 6.0 Amhara (3) Addis-Zemen 19,446 borehole 1.00 23,688 23,588 0.4 1.2 __ Fenote Selam 19,358 stream 1.00 25,096 25,096 1.3 Dabat 18,958 borehole Debark 19,446 stream Koladiba 18,644 borehole 1.00 14,372 14,302 0.5 0.8 Oromia (4) Dembidollo 20,284 borehole 1.00 31,680 20,656 34.8 1.0 Fitche 37,501 stream 0.50 167,844 66,516 60.4 1.8 Gebreguracha 13,574 riven Holeta Genet 21,511 borehole 1.00 17,451 14,258 18.3 0.7 Kibre Mengist 20,601 borehole 1.00 41,122 2.0 Sebeta 14,379 stream 0.50 141,324 85,200 39.7 5.9 Shambu 16,806 stream Somali (5) Degahabor 3,249 borehole 2.50 Benishangul(6) Assosa 8,564 borehole 2.50 16,772 15,784 5.9 1.8 Kebridehar 11,412 borehole 1.25 South Ethiopia (7-11) Alaba Kulito 12,743 borehole 1.00 Butajira 19,595 borehole 1.00 46,619 40,920 12.2 2.1 Dilla 49,765 river 1.00 83,078 1.7 Wolkite 15,185 borehole 52,560 36,792 30.0 2.4 Gambella(12) Gambella 8,316 river 1.00 104,886 12.6 Harari (13) Harar 93,795 lake Total/Average 545,441 71,546 882,503 39.0 2.7 ANNEX 13 Documents Available in Project File 1. Development Plan of Urban Water Supply Schemes 2. MOWR Human Resources 3. Regional Governments 4. Oromia NRDEPB Financial Management 5. AWSA Human Resources 6. Major River Basins in Ethiopia 7. Description of Project Towns and Water Supply Schemes 8. TOR for the National Project Coordinator 9. Project Implementation Manual 10. Regions' Capacity to Maintain Service Rights 11. Description of Regional Administrations (as of December 1994) 12. Terms of Reference for Studies under the Water Supply Sector Capacity Development Studies i) Organization and Management Study ii) Financial Management Study iii) Urban Water Technical Management Study iv) Baseline Study v) Tariff and Asset Valuation Study 13. Terms of Reference for MOWR Water Supply Regulatory Framework Study 14. Terms of Reference for Technical Assistance for AWSA - Organizational Change Management and Management Information System 15. Training proposal under Water Supply Sector Capacity Building Component 16. Rural Water Supply Pilot Scheme Component 17. Terms of Reference for the Feasibility and Engineering Study 18. Detailed Cost Estimates 19. Financial Status of Project Towns MAP SECTION 34' 36; 38 / 40r 42 44 46 48 ETHIOPIA WATERSUPPLY DEVELOPMENT AND REHABILITATIONPROJECT 6 ERITREA KIL ProjectTowns - 16' ! ERITREA St.4I Ih'- / 0 PROJECTTOWNS 0 SELECTEDTOWNS ( 63®^ NATIONALCAPITAL | / ~- \ __ REGIONS(Unofficial 1994 boundories) SUDAN- 1 4' ADIGRAT - INTERNATIONALBOUNDARIES (-4SUAG-RAY 0 INDASELLASSE The State/Regfon names are per Article 47 .10 0 ~~~~~~~~~~~~~~~~~~~~~~~ofthe Consfitutionof Ethiapao DEBARK MEKELE ( GONDER° DABAT 0 o ADDIS MAICHEW AFAR >_.f GULFOF T ,2' / KOLADIBA 9w/\EN ASAITA / ADEN 12- 2 FENOTAN,HARAOTEIOUTI BENSHANGJL SELNA ~ 0 DEBRE t . , ~~MARKOS /0O A AO 'GEBREGU&ACHA 0 DEMBADOLA SHAMBU ° FITCHE HARARO 0 A DEMBIDOLO0~~~~~~~~~~~ HOLETA~ (2 HARAR Jjg NEKEMPTI GENET 8 ADDIS Jijigc ' GrMBELLJ' - METU SEBETA ABABA -- GAMBELLA-R' 0 WOLKITED BUTAJIRAASSELA 0 D A U 8 (* i(]kto ° tX~~~~~~~~~~~~L~DEGAHABOUR .7 JIMAO S/lao Lze - ,- KULITO 0 'Se bondoe colPrs AWASSA / SOM/SALIA The bon,,nr,dreacokrcs .ARBA .DILLA KEBRIDEHAR d1no-catfolnn,a/ MINCH 6 other rtiformalfrrn shown MINC ktk. . 0 0orth,s reap do -1t AIs / -mply on the pc,rr or A The Wodld Bnk G,roup, \ 0 any sodomnnton the leg, ; ,fotns of ,,.y terr,toIy, _I KIBRE or Uscv endorse rerrr I 5rr acceptan,c& -f sLuch MENGIST ha rndl:s us ,r . ILOMETERS tl O0 ;3) 15'0 20tt 250 300 350 400 C-t / , KENYA t-l,-. -' ------t' 'tv 20 25.4~_ ( .r .. .. , ...... ,rI_ _ 20c_...... 2,0 KII~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~A~ ~ ~ ~~~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ I UGA35 -- Ci II 48~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~1 IMAGING Report No: 14401 ET Type: SAP