WATER AND SANITATION PROGRAM: TECHNICAL PAPER Public Disclosure Authorized Economic Assessment of Sanitation Interventions in Lao People’s Democratic Public Disclosure Authorized Republic A six-country study conducted in Cambodia, China, Indonesia, Lao PDR, the Philippines and Vietnam under the Economics of Sanitation Public Disclosure Authorized Initiative (ESI) August 2013 Public Disclosure Authorized The Water and Sanitation Program is a multi-donor partnership administered by the World Bank to support poor people in obtaining affordable, safe, and sustainable access to water and sanitation services. THE WORLD BANK Water and Sanitation Program East Asia & the Pacifi c Regional Offi ce Indonesia Stock Exchange Building Tower I, 9th Fl. Jl. Jend. Sudirman Kav. 52-53 Jakarta 12190 Indonesia Tel: (62-21) 5299 3003 Fax: (62 21) 5299 3004 Water and Sanitation Program (WSP) reports are published to communicate the results of WSP’s work to the development community. 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For more information, please visit www.wsp.org. © 2013 International Bank for Reconstruction and Development / The World Bank The World Bank 1818 H Street NW Washington DC 20433 Telephone: 202-473-1000 Internet: www.worldbank.org Economic Assessment of Sanitation Interventions in Lao People’s Democratic Republic A six-country study conducted in Cambodia, China, Indonesia, Lao PDR, the Philippines and Vietnam under the Economics of Sanitation Initiative (ESI) Economic Assessment of Sanitation Interventions in Lao People’s Democratic Republic Executive Summary A. INTRODUCTION Lao PDR has made signifi cant strides in improving access to sanitation facilities in recent years. Th e JMP reports that Access to improved sanitation is a major concern in the Lao the proportion of the population with access to improved People’s Democratic Republic (PDR). Recent estimates sanitation increased by 18% between 2005 and 2010 alone, from the Joint Monitoring Programme for Water Supply from 45% to 63%, nationwide, exceeding the MDG target and Sanitation (JMP) of the World Health Organization of 54% access to improved sanitation. However, many chal- (WHO) and the United Nations Children’s Fund (UNI- lenges remain in terms of improving access. Recent studies CEF) show that only 63% of the population of the country by Baetings and O’Leary (2010) and Giltner et al. (2010) had access to improved sanitation facilities in 2010. Sanita- show that sanitation has received little attention from gov- tion conditions are worse in rural areas, where only 50% of ernment and continues to take a low priority compared to the population had access to improved facilities and about 3 water supply. Apart from limited funding, there are also out of 10 people still practice open defecation. Within rural coordination issues among the many government agencies areas, access to improved sanitation also varies widely be- involved in sanitation. Th e two studies mentioned above tween those that have and do not have roads. Hutton et al. assert that the “interface between [government] agencies is (2009) cited the Multiple Indicator Cluster Survey (MICS) not clearly articulated” (Giltner et al., 2010, p. 15) and it is III, which found that 39% of rural households with access not clear which agency is ultimately responsible for sanita- to roads also had access to improved sanitation facilities. tion. Th is was more than 2 times higher than rural households that did not have roads. Th ere is also a wide discrepancy in B. STUDY AIMS AND METHODS access to improved sanitation at the provincial level. Based on the 2011 Lao Social Indicator Survey, fewer than 4 out Th is study aims to generate evidence on the costs and ben- of 10 people in the provinces of Saravane, Phongsaly, At- efi ts of sanitation improvements in diff erent contexts in Lao tapeu and Sekong had access to improved sanitation. Th is PDR. Conducted with a view towards identifying the most stands in contrast to Vientiane Capital where coverage rates economically effi cient options under diff erent conditions, are close to 100%. it seeks to contribute to improved decision making by gov- ernment, donor agencies, non-government organizations Th e low rate of access to improved sanitation imposes a (NGOs) and other institutions. heavy burden on the Lao economy. A previous phase of the Economics of Sanitation Initiative (ESI) estimated the Th e study quantifi ed the costs and benefi ts associated with overall economic cost of poor sanitation in the country to various sanitation options in diff erent study sites. Th e ben- be in the order of US$193 million (at 2006 prices) per year, efi ts included the impacts on health, water sources and or the equivalent of 5.6% of gross domestic product (GDP) water treatment practices, and access time. Th e costs in- (Hutton et al., 2009). Th is translates to about US$34 per cluded both the investment and recurrent costs associated person per year, and approximately 60% of these losses with ensuring sustained delivery of each sanitation option. were attributable to health-related costs. Th e costs and benefi ts of the sanitation options were syn- www.wsp.org iii Economic Assessment of Sanitation Interventions in Lao People’s Democratic Republic | Executive Summary thesized using standard indicators of economic effi ciency. Table A shows the sanitation interventions that were exam- Th ese indicators included the benefi t-cost ratio, net pres- ined in each of the study sites. In the analysis, the benefi ts ent value, internal rate of the return, and payback period. from the interventions were compared against a baseline Cost-eff ectiveness ratios – cost per disability-adjusted life of open defecation, and diff erent rungs on the sanitation year (DALY) averted, cost per disease case averted and cost “ladder”. It is important to note that there is currently no per death averted – were also calculated. sewerage system that treats wastewater in Lao PDR. Hence, the economic effi ciency of a sewerage system with treated C. DATA SOURCES AND STUDY SITES wastewater was modeled for Vientiane Capital using cost data from ESI studies in other countries. Th e study used primary and secondary sources of data in its analysis. Th e instruments for the primary data collec- Additional surveys were implemented to explore the im- tion included household surveys and focus group discus- pacts of inadequate sanitation outside the community level sions (FGD). Th ese surveys were implemented in selected and the economy as a whole. A tourist survey was con- villages and localities of the following sites: ducted at Wattay International Airport in Vientiane and in selected tourist locations in Vientiane Capital in order • Site 1: Chantabouly District, Vientiane Capital to explore how international holiday and business visitors • Site 2: Xaythany District, Vientiane Capital were aff ected by poor sanitation in Lao PDR. A survey of • Site 3: Meun District, Vientiane Province selected fi rms in Vientiane Capital was also implemented to • Site 4: Nam Bak District, Luang Prabang Province explore how poor sanitation aff ects business activity. • Site 5: Nan District, Luang Prabang Province • Site 6: Champone District, Savannakhet Province D. MAIN ECONOMIC ANALYSIS RESULTS To supplement and triangulate the data collected from Th e key fi nding of the study is that there are net benefi ts as- fi eld sites, and to fi ll key gaps in information, further sociated with all of the interventions evaluated. Th e benefi t- evidence was collected from international and local litera- cost ratios (BCRs) were greater than one for all interven- ture, project and government documents and surveys, and tions (Figure A), suggesting that the monetized gains exceed data from various institutions. Th e opinions of experts in every kip that is spent on the intervention. For example, the local sanitation sector were also solicited to validate dry pit latrines in rural areas had a BCR of 9.0. Th is means data, and fi ll in knowledge gaps from primary or second- an average return to society of 9 kip for every kip that is ary sources. invested in dry pit latrines in rural areas. Rural areas (Sites TABLE A. SANITATION OPTIONS COMPARED IN THE STUDY SITES Site Option 123456 Urban Urban Rural Rural Urban Rural Open defecation Shared: Wet pita Shared: Toilet to septic tanka Dry pit latrine Wet pit latrine Toilet to septic tank Toilet to sewer (with treatment) a Refers to facilities that are used by two or more households. iv Economic Assessment of Sanitation Interventions Economic Assessment of Sanitation Interventions in Lao People’s Democratic Republic | Executive Summary 2, 3, 4 and 6) with higher BCRs than urban areas showed reason for these seemingly contradictory results is that the most favorable results for wet and dry pit latrines. On the BCRs for private wet pit latrines were substantially the other hand, wet pit latrines showed the most favorable lower in Sites 4 and 6, which reduced the average BCR indicators for urban areas (Sites 1 and 5).