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Implementation Completion Report (ICR) Review - Monagas Water

1. Project Data:   
ES Date Posted:
Project Name:
Monagas Water
Project Costs(US $M)
 71.1  40.2
Loan/Credit (US $M)
 39  25.5
Sector, Major Sect.:
Water sanitation and flood protection
Cofinancing (US $M)
 5.5  2.0
L/C Number:
Board Approval (FY)
Partners involved
Closing Date
12/31/2000 02/28/2001
Prepared by: Reviewed by: Group Manager: Group:  
Robert C. Varley
Ronald S. Parker Alain A. Barbu OEDST

2. Project Objectives and Components:

a. Objectives
The project's overall objective was to increase the efficiency and quality of WS&S (Water Supply and Sewerage) services in Venezuela through the development of a model for decentralization, institutional strengthening, and expanded private sector participation. There were three specific objectives:-

  1. assist in the strengthening of AdM (Monagas Water and Sewerage Company), develop its financial self-sufficiency, and involve the private sector in the management and operation of the company;
  2. rehabilitate and improve the quality of WS&S services in Monagas; and
  3. support sector development and decentralization at the national level, including water resources management.

b. Components
The estimated projects costs at appraisal (net of contingencies and interest during construction) were $54.4million. The costs of regional and national components were 74.2% and 25.8% of this total, comprising: - 1. Regional $US million
Institutional Support to AdM 3.8;
Rehabilitation Investments 32.8;
Rural Rehabilitation 3.9;
2. National Institutional $US million
Technical Assistance (TA) Program 4.6;
National Training Program 3.2;
Other 6.2

c. Comments on Project Cost, Financing and Dates
By June 2000 the flow of counterpart funds had ceased, leaving $14 million of the Bank loan unused; it had become a "problem project." A one-year extension would have been sufficient to complete the project, but the undisbursed balance was cancelled and the loan closed on December 31, 2000.

3. Achievement of Relevant Objectives:

A management contract with a private operator was successfully implemented and the collection rate improved from 29% to 48%. While this was far short of the target of 80%, the baseline of 64% used in the SAR was a gross overestimate.
  1. Only 66% of urban rehabilitation works were completed but the quality of service did improve substantially - average service hours increased from 11 to 21 hours per day and unaccounted for water declined from 73% in 1996 to 55% in 2000. The rural rehabilitation experienced long delays and only 18% of the budget was disbursed.
  2. Institutional progress in national sector development, decentralization and water resources management, was delayed and only partially achieved. Seven standards were issued, exceeding the target of four. However the desired national demonstration effect of the project was not achieved. No action was taken to implement the water resources management framework and create a confederations of users in Monagas

4. Significant Outcomes/Impacts:

Significant advances were made during the project, even though improvements were not sustained. AdM managed its components extremely well, improving financial performance and service quality, in spite of the very unfavorable financial and political environment.
  • The project design incorporated several studies with useful results - for willingness to pay, health and legal-institutional developments
  • During the 4-year implementation the real value of tariffs was maintained by index-linked inflation adjustments, in some cases on a monthly basis.

  • 5. Significant Shortcomings (include non-compliance with safeguard features):

    There was no consolidation or follow-through of reforms as the new 1999 government was not committed to the project.
  • Institutional impact was minimal since changes were reversed and the government failed to formulate sector policies, support the reforms or develop a coherent regulatory framework. Even prior to the change of government, local governments failed to comply with financial commitments and support tariff policy.
  • The indicators used to measure performance of the private sector operator should have been revised after audit revealed that baseline performance had been significantly overestimated (nonetheless, the Bank supported the imposition of penalties when the private operator did not reach the first year targets).
  • The Borrower alleges that there appear to have been a number of accounting irregularities and misuse of funds, although these are not confirmed by the Bank's record.
  • The models adopted for the basic provision of services did not have the broad-based support needed to transcend political and ideological viewpoints.
  • 6. Ratings:ICROED ReviewReason for Disagreement/Comments
    Institutional Dev.:
    Bank Performance:
    SatisfactorySatisfactoryThe Bank made the right decision to close the loan when its dialogue with the new Government reached an impasse
    Borrower Perf.:
    Quality of ICR:

    7. Lessons of Broad Applicablity:

    In an environment of political turmoil a management contract can provide some stability for water services.
    1. The Bank's privatization policy for the sector is especially difficult to implement when there is frequent political change.

    8. Audit Recommended?  Yes

              Why?  There are substantial differences between the Bank and Borrower views on the reasons for unsatisfactory outcome.

    9. Comments on Quality of ICR:

    The ICR is satisfactory overall but there were 2 significant deficiencies:
    • the ICR is not a standalone document - many acronyms are undefined, and as a result the review required frequent reference to the SAR glossary; and
    • the ICR values for NPV and ERR are not very meaningful since they have been derived by multiplying the SAR estimates by a fixed percentage and not an analysis of revised cash-flows.

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