Document of The World Bank FOR OFFICIAL USE ONLY Public Disclosure Authorized Report No. 11786 PERFORMANCE AUDIT REPORT DOMINICAN REPUBLIC Public Disclosure Authorized NIZAO IRRIGATION PROJECT (LOAN 1655-DO) APRIL 12, 1993 Public Disclosure Authorized Public Disclosure Authorized Operations Evaluation Department This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. CURRENCY EQUIVALENTS Name of Currency (Abbreviation) = Peso (RD$) Currency Exchange Rate: Appraisal Year (1978) Average: US$1.00 = RD$ 1.00 Until December 31, 1984: US$1.00 = RD$ 1.00 Average 1985: US$1.00 = RD$ 3.11 Average 1986: US$1.00 = RD$ 2.88 Average 1987: US$1.00 = RD$ 3.23 On June 1, 1988: US$1.00 = RD$ 6.20 WEIGHTS AND MEASURES Metric System and 1 TAREA = 0.062 Hectares (ha) ABBREVIATIONS BA (Agricultural Bank) CAE (State Sugar Council) CDE (Electric Company) CPS Central Project Staff DR Dominican Republic ERR Economic Rate of Return FACI Food and Agricultural Organization of the United Nations GODR Government of the Dominican Republic LAD Instituto Agrario Dominicano (Dominican Agrarian Institute) IDB Inter-American Development Bank IFAD International Fund for Agricultural Development IICA Instituto Interamericano de Cooperacifn para la Agricultura (Inter-American Institute of Cooperation for Agriculture) INDRHI Instituto Nacional de Recursos Hidraulicos (National Institute of Hydraulic Resources) NIP Nizao Irrigation Project OED Operations Evaluation Department O&M Operation and Maintenance ONAPLAN (Planning Secretariat of the Presidency) OPS Operational Policy Staff PAR Performance Audit Report PCR Project Completion Report PRODAS (Agricultural Development Project - San Juan) SAL Structural Adjustment Loan SEA Secretary of Agriculture SECAL Sector Adjustment Loan GOVERNMENT OF THE DOMINICAN REPUBLIC FISCAL YEAR January 1 - December 31 FOR OFFICIAL USE ONLY THE WORLD BANK Washington, D.C. 20433 U.S.A. Office of Director-General Operations Evaluation April 12, 1993 MEMORANDUM TO THE EXECUTIVE DIRECTORS AND THE PRESIDENT SUBJECT: Performance Audit Report on DOMINICAN REPUBLIC Nizao Irrigation Project (Ln. 1655-DO) Attached is a copy of a report entitled "Performance Audit Report Dominican Republic Irrigation Project (Loan 1655-DO)" prepared by the Operations Evaluation Department. The audit confirms the findings of the Project Completion Report, especially the poor design and implementation, inadequate organizational arrangements and limited institutional development. Agricultural development was not given the needed priority, water management aspects were neglected and macroeconomic conditions were unfavorable. While some of the physical targets were attained, the project is rated as unsatisfactory overall because the economic return is now estimated at about 6 percent, well short of the 10 percent minimum threshold and only a fraction of the return estimated at completion (16 percent). An impact evaluation will be considered given the complex externalities of the project and Government indications that subsequent action has been taken to increase investment productivity and improve socioeconomic conditions. Attachment This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. FOR OFFICIAL USE ONLY PERFORMANCE AUDIT REPORT DOMINICAN REPUBLIC NIZAO IRRIGATION PROJECT (LOAN 1655-DO) TABLE OF CONTENTS PaeNo. PREFACE ...................................................... i BASIC DATA SHEET ................................................ iii EVALUATION SUMMARY ............................................ v I. INTRODUCTION ............................................... 1 A. Background .................................................. 1 B. History of Irrigation Development ................................. 1 C. Bank's Experience with Irrigation .................................. 2 D. Other Donors' Experience ...................................... 3 II. THE PROJECT .................................................. 4 A. Sectoral Considerations ......................................... 4 B. Project Objectives ............................................. 5 C. Project Costs ................................................. 5 D. Project Preparation and Design ................................... 6 III. IMPLEMENTATION EXPERIENCE..................................8 A. Early Stages..................................................8 B. Change in Project Directions......................................8 C. Changes in the Project Unit.......................................9 D. Weak Coordination Arrangements..................................10 E. Mid-Term Evaluation............................................11 F. Competition for Water .......................................... 12 G. Monitoring and Evaluation ....................................... 12 H. Supervision and Compliance with Conditionality ........................ 12 I. Overview of Implementation...................................8...14 IV. PROJECT OUTCOME.............................................15 A. General Performance............................................ 15 B. Water Management............................................ 17 C. Economic Rate of Return ....................................... 19 This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. Table of Contents Pa-e No. V. FINDINGS AND LESSONS ........................................ 22 A. Major Determinants of Sustainability ............................... 22 B. Design and Technical Problems ................................... 23 C. Sector and Macroeconomic Aspects of Performance .................... 26 D. Lessons ..................................................... 27 TABLES: 1. Surface Water Potential in the Dominican Republic ...................... 29 2a. Cumulated Area Under Irrigation (Potential) ........................... 30 2b. Irrigated Area Expansion Since 1985 ................................. 30 3. Sedimentation in a Sample of Reservoirs .............................. 31 4. Water Charges: Actual Versus Suggested 1989-1990 ..................... 31 5. Water Charges and Cost Recovery ................................... 32 6. External Financing Contracted According to Lender and Executing Agency ........................................ 33 ANNEX ...................................................... 35 LIST OF REFERENCES .............................................. 39 APPENDIX ...................................................... 43 ATTACHMENTS 1. Comments from ONAPLAN ........................................ 47 2. Comments from INDRHI .......................................... 49 MAP IBRD 13748 -1- PERFORMANCE AUDIT REPORT DOMINICAN REPUBLIC NIZAO IRRIGATION PROJECT (LOAN 1655-DO) PREFACE This is a Performance Audit Report (PAR) on the Nizao Irrigation Project for which an IBRD loan in the amount of US$27 million was approved on January 23, 1979, with the objective of financing, over a five-year period, works to rehabilitate the irrigation systems under the command of the Marcos A. Cabral and Nizao-Najayo canals, to better utilize regulated water from the Valdesia dam, and to extend the existing irrigation system. The loan became effective on January 16, 1980. The closing date of December 31, 1984 was extended to December 31, 1986 and ultimately to December 31, 1987. Final disbursement was made on June 30, 1988. The PAR is based on the Project Completion Report (PCR) of the project prepared by the Latin America and the Caribbean Regional Office (Dominican Republic - Nizao Irrigation Project - Report No. 7747 - May 1989), the Staff Appraisal and the President's Reports, the loan documents, the transcript of the Executive Directors' meeting at which the project was considered, on a study of project files, and on discussions with Bank staff. An OED mission visited the Dominican Republic in August 1991, and discussed the effectiveness of the Bank's assistance with several Government agencies and departments directly or indirectly involved in the project. The principal interlocutors were at the Instituto Nacional de Recursos Hidraulicos (INDRHI). Their kind cooperation and valuable assistance in the preparation of this report is gratefully acknowledged. The PCR provides a barely satisfactory account and assessment of the project experience, and discusses the performance of the Bank and the project executing agencies. The PAR elaborates on particular aspects such as the design and institutional issues, Bank operational effectiveness, and a series of implementation issues and constraints. Following standard OED procedures, copies of the draft PAR were sent to the Borrower on May 20, 1992. The comments received from the Borrower are reproduced in their entirety as Attachments 1 and 2 and noted in the main text or in footnotes. - iii - PERFORMANCE AUDIT REPORT DOMINICAN REPUBLIC NIZAO IRRIGATION PROJECT (LOAN 1655-DO) BASIC DATA SHEET KEY PROJECT DATA Actual as Reappraisal Actual or a % of Actual as a % Appraisal Estimate Estimated Appraisal of Reappraisal Estimate (May 1983) Actual Estimate Estimate Project cost (US$ million) 50.6 38.0 39.8 79 105 Loan amount (US$ million) 27.0 27.0 27.0 100 100 Date