Document of The World Bank FOR OFFICIAL USE ONLY Public Disclosure Authorized Report No: 42908-NI PROJECT APPRAISAL DOCUMENT ON A Public Disclosure Authorized PROPOSED CREDIT IN THE AMOUNT OF SDR 0.2 MILLION (US$0.3 MILLION EQUIVALENT) AND A PROPOSED GRANT IN THE AMOUNT OF SDR 12.0 MILLION (US$19.7 MILLION EQUIVALENT) TO THE REPUBLIC OF NICARAGUA Public Disclosure Authorized FOR A RURAL WATER SUPPLY AND SANITATION PROJECT May 12,2008 URBAN AND WATER UNIT CENTRAL AMERICA COUNTRY MANAGEMENT UNIT Public Disclosure Authorized LATIN AMERICA AND THE CARIBBEAN REGION This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents mav not otherwise be disclosed without World Bank authorization. CURRENCY EQUIVALENTS (Exchange Rate Effective March 3 1st, 2008) CurrencyUnit = SDR SDR0.60804 = US$1 US$ 1.64464 = SDR 1 FISCAL YEAR January 1 - December 31 ABBREVIATIONS AND ACRONYMS ANA National Water Authority APL Adaptable Program Loan BICU Bluefields Indian and Caribbean University CAPS Comitt de Agua Potable y Saneamiento (Water and Sanitation Committee) CIDA Canadian International Development Agency CONAPAS Comision Nacional de Agua Potable y Alcantarillado Sanitario (National Water and Sanitation Commission) COSUDE Swiss Agency for Development and Cooperation CP s Country Partnership Strategy cso Civil society organizations cv Curriculum vitae DAR Rural Aqueducts Directorate DGAF Direccidn General Adm inistrativa Financiera DO Development objective ENACAL Empresa Nicaraguense de Acueductos y Alcantarillados Sanitarios (Nicaraguan Water and Sewerage Enterprise) FISE Fondo de Inversion Social de Emergencia (Emergency Social Investment Fund) FM Financial management FOCARD-APS Forum on Potable Water and Sanitation for Central America and the Dominican Republic GEF Global Environmental Facility GoN Government ofNicaragua IBRD International Bank for Reconstruction and Development IC Individual Consultant ICB International Competitive Bidding ICR Implementation Completion Report IDA International Development Association IDB Inter-American Development Bank IFC International Finance Corporation IFR Interim Financial Report ILO International Labor Organization INAA Instituto Nacional de Acueductos y Alcantarillados (Nicaraguan Water and Sewerage Institute) INIDE National Information and Statistics Institute INIFOM Instituto Nicaraguense de Foment0 Municipal (Nicaraguan Institute for Municipal Development) IPP Indigenous Afro-Descendant Peoples Plan ISDS Integrated Safeguards Datasheet ISR Implementation Status Report JMP Joint Monitoring Program (of the World Health OrganizatiodUNICEF) KfW German Development Bank M&E Monitoring and evaluation MABE Miniacueducto por Bombeo Electric0 (small piped systems using pumps) MACPM Municipal Project Cycle Management Manual FOR OFFICIAL USE ONLY MAG Miniacueducto por Gravedad (small gravity fed piped systems) MDGs Millennium Development Goals MINSA Ministry of Health NCB National Competitive Bidding NGO Nongovernmental organization O&M Operation and maintenance OPEP Organization of Petroleum-Exporting Countries PCN Project Concept Note PDO Project Development Objective PEBM Pozo Excavado con Bomba de Mano (excavated wells with hand pumps) PGC Proyecto Guiado par la Comunidad (Community-driven Project) PHRD Policy and Human Resources Development Fund (Japanese Trust Fund) PIC Public Information Center PICE Indigenous Peoples and Ethnic Groups PID Project Information Document PIMM Plan de Inversidn Municipal Multianual (Multiyear Municipal Investment Plan) PLANSAR Rural Basic Sanitation National Plan PND Plan Nacional de Desarrollo (National Development Plan) PPBM: Pozo Perforado con Bomba de Mano (boreholes with hand pumps) RAAN Regidn Autdnoma del Atlantico Norte RAAS Regidn Autdnoma del Atlantico Sur RMS Results Management System SBDs Standard Bidding Documents SDR Special Drawing Rights SEAR Regional Autonomous Education System SEFIN Secretariat ofFinance SEPA Procurement Plan Execution System SIA Nicaragua’s Financial Management Information System SIL Specific Investment Loan SIMA: Sistema de Mejoramiento y Ampliacidn de acueducto de agua potable y saneamiento (Rehabilitation and extension of existing systems) SOE Statement of expenditures SRfP Standard Request for Proposals SWAP Sector-Wide Approach TORS Terms of reference UIFRs Summary Reports UNDP United Nations Development Programme UNICEF United Nations Children’s Fund UNOM Operation and Maintenance Units URACCAN Regional University ofthe Caribbean Coast USAID United States Agency for International Development UTM Unidad Tdcnica Municipal (Technical Unit in Municipalities) VIP Ventilated improved pit W&S Water and sanitation WSP Water and Sanitation Program wss Water supply and sanitation Vice President: Pamela Cox Country Director: Laura Frigenti Sector Director Laura Tuck Sector Manager: Guang Zhe Chen Task Team Leaders Maria Angelica Sotomayor / David Michaud 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. NICARAGUA Rural Water Supply and Sanitation Project CONTENTS Page I. STRATEGIC CONTEXT AND RATIONALE ................................................................. 9 A . Country and sector issues .................................................................................................... 9 B. Rationale for Bank involvement ....................................................................................... 11 C . Higher-level objectives to which the project contributes ................................................. 12 I1. PROJECT DESCRIPTION ........................................................................................... 13 A . Lending instrument ........................................................................................................... 13 B. Project Development Objective and key indicators .......................................................... 13 C . Project components ........................................................................................................... 13 D. Lessons learned and reflected in the project design .......................................................... 18 E. Alternatives considered and reasons for rejection ............................................................ 20 I11. IMPLEMENTATION .................................................................................................... 21 A . Partnership arrangements .................................................................................................. 21 B. Institutional and implementation arrangements ................................................................ 22 C . Monitoring and evaluation ofoutcomes/results ................................................................ 23 ... D. Sustainability..................................................................................................................... 24 E. Critical risks and possible controversial aspects ............................................................... 25 F. Loadcredit conditions and covenants ............................................................................... 26 IV. APPRAISAL SUMMARY ............................................................................................. 27 A . Economic analysis ............................................................................................................ 27 B. Technical ........................................................................................................................... 28 C . Fiduciary ........................................................................................................................... 29 D. Social................................................................................................................................. 31 E. Environment ...................................................................................................................... 32 F. Safeguard policies ............................................................................................................. 32 G. Policy exceptions and readiness ........................................................................................ 33 Annex 1: Country and Sector or Program Background......................................................... 35 Annex 2: Major Related Projects Financed by the Bank and/or other Agencies ................. 40 Annex 3: Results Framework and Monitoring ........................................................................ 42 Annex 4: Detailed Project Description...................................................................................... 49 Annex 5: Project Costs ............................................................................................................... 57 Annex 6: Implementation Arrangements ................................................................................. 58 Annex 7: Financial Management and Disbursement Arrangements ..................................... 61 Annex 8: Procurement Arrangements ...................................................................................... 66 Annex 9: Economic and Financial Analysis ............................................................................. 71 Annex 10: Safeguard Policy Issues ...........................................................................................