|1. Project Data:
ICR Review Date Posted:
|Ry Urban Wtr Supply & Sanitation Apl
Project Costs(US $M)
Loan/Credit (US $M)
Cofinancing (US $M)
Board Approval Date
|Water supply (45%), Sanitation (45%), Sub-national government administration (5%), Central government administration (5%)|
|Pollution management and environmental health (33% - P)
Access to urban services and housing (33% - P)
Water resource management (17% - S)
Other financial and private sector development (17% - S)|
||ICR Review Coordinator:
||Robert Mark Lacey
|2. Project Objectives and Components:|
a. Objectives:The project was the first in a proposed series of two Adaptable Program Loans (APL). As stated on page 3 of the Project Appraisal Document (PAD), “The APL program purpose [is]: To provide efficient and sustainable water and sanitation services in Yemen's urban areas through: i)increase in urban water supplies initially through improved operation and reduction of water losses (Phase I) and subsequently through development of new water resources including the reuse of wastewater (Phase II); ii) improvement of sector management through establishment of financially viable regional corporations with significant participation of the private sector; and iii) provision of affordable sewerage facilities that assure protection of the environment and permit the reuse of wastewater for agriculture or artificial recharge.”
The PAD (page 3), describes the project development objective as follows: “For Phase I and II: To provide efficient and sustainable water and sanitation services in Yemen's major urban areas.”
The project development objective, as stated in the Development Credit Agreement (Schedule 2, page 13), “is to assist the Borrower in providing efficient and sustainable urban water and sanitation services.”
This Review will use the statement of objectives in the PAD as it is more specific and monitorable.
The PAD (page 7) states four expected outcomes from Phase I: “First, there should be a significant increase in the availability of water and sewerage services in the project cities. Next, a sector regulator should be established. Third, there should be significant PS [private sector] participation in the management of the Sana'a facilities. Finally, the Phase I project cities should have achieved financial viability and accountability, improved implementation capacity and be eligible for on-lending arrangements in Phase II.”
b. Were the project objectives/key associated outcome targets revised during implementation?
Component 1: Rehabilitation and Improvement of Water and Waste Water Facilities (Planned: US$122 million Actual: US$147.2 million) was designed to finance the infrastructure works and equipment required to improve the water and sanitation services in the project cities. It included:
- Civil works, goods and equipment for the rehabilitation and expansion of the water supply networks and related facilities (pumping stations, reservoirs);
- The rehabilitation and drilling of new bore holes;
- The rehabilitation and expansion of waste water networks, treatment plants and related facilities; and
- Basic water supply and waste water treatment works for six small urban centers with undeveloped networks that could not qualify to participate in Phase 1 of the APL.
Component 2: Institutional Support (Planned: US$16 million Actual: US$23.4 million) was designed to provide technical assistance, training and equipment to support the implementation of the project, build the local corporations’ capacity and prepare the second Phase of the Program. The assistance was to include training and workshops for local corporations, the National Water and Sanitation Authority, and staff of the Ministry of Water and Environment. Local and international advisors would be provided for institutional development, and capacity building to establish a regulatory body for the water and waste water sector. To address the need for comprehensive investment planning for the waste water collection, treatment, sludge disposal and waste water re-use, this component also included:
- A stand alone Sector Environmental Assessment for the Sana’a Capital Trust area that would result in: (i) a government policy on the waste water issue; and (ii) a waste water investment plan for the short, medium and long terms, and
- A feasibility study for a new waste water treatment capacity in the Sana’a Trust area.
Component 3: Maintenance Works in Sana’a (Planned: US$10 million Actual: US$0.00) was designed to finance maintenance related works, equipment and services for the existing water and waste water facilities in the city of Sana’a.
d. Comments on Project Cost, Financing, Borrower Contribution, and Dates
The project’s final costs were US$170.6 million, US$20.6 million or 14% above the appraisal estimate of US$150.0 million (including contingencies). The cost increases were primarily in the physical works (water and waste water) in the large cities, where the actual costs were about US$38.4 million (40%) above appraisal estimates while the costs for the physical works in the small urban centers declined by about US$13.0 million or 52%. The cost increases expressed in dollars were due largely to the appreciation of Special Drawing Rights during the life of the project, which enabled more work than expected to be carried out.
The signing of a lease contract for the capital city (Sana'a) was a disbursement condition for Components 1 and 3 in that city. Three international companies were short-listed and participated in a pre-bid meeting in October, 2002. However, none of them submitted a bid by the deadline, citing unfavorable security conditions. Upon the Government's request and commitment to move from a lease to a management contract, the Bank agreed (in June, 2003) to unblock the funds allocated for civil works in Sana’a (US$16 million), but continued to block the funds allocated to Component 3. Therefore, Component 3 (Maintenance Works in Sana'a) was never implemented. The funds allocated for that Component (US$10.0 million) were reallocated to other activities.
US$128.28 million of the original IDA credit of US$130 million were disbursed. Due to the depreciation of the dollar against Special Drawing Rights (SDR), the dollar amount disbursed represented SDR84.67 million of the SDR104.2 million made available at Board approval. On December 8 2010, an amount of SDR19.52 million (US$29.58 million equivalent) remained unspent -- despite extensions of the closing date totaling three years -- and was canceled. SDR16.27 million (US$24,65 million equivalent) of this consisted of uncommitted funds. The remaining SDR 3.25 million (US$4.92 million equivalent) were related to the financing of misprocured consultancy services in February, 2006.
The financing provided by the Borrower more than doubled from US$20.0m at appraisal to about US$42.32m.
The closing date of the project was extended twice for a total of three years (from December 31, 2007 until December 31, 2010) to accommodate implementation delays. The reasons were:
- A first extension of almost two years, until December 15, 2009, was granted on December 17, 2007 to complete the ongoing works in some of the project cities and to allow an opportunity to allocate usefully the excess funds (resulting from the Special Drawing Rights appreciation) to new sub-projects and other activities.
- A second extension until December 31, 2010 was granted on August 20, 2009 in order to complete all contractual commitments under the project.
|3. Relevance of Objectives & Design:|
a. Relevance of Objectives:Substantial.
The project's objectives remain relevant to the Government’s December 2008 National Water Sector Strategy and Investment Program. The Government’s goal is to “increase urban water supply and sanitation coverage while keeping services affordable to the poor, safe, sustainable and properly regulated”.
The objectives are also consistent with the World Bank Group's Country Assistance Strategy (CAS) for Yemen, covering the period FY 2010-FY 2013. During this period, the Bank group intends to direct its assistance towards: (i) increasing annual water savings through improved water efficiency (mainly in irrigation); and (ii) extending rural access to water supply and sanitation services. Improving the efficiency of urban water supply is cited in the CAS (page 25) as one of the factors supporting the Fourth Strategic Objective, "Slow down the depletion of water resources."
b. Relevance of Design:Modest.
Project design was only partially relevant in that attention was given to improving the extent and quality of water and sewerage services by rehabilitating and expanding existing networks and through improved operations. Additional water resources were only to be developed in the second phase of the program. Components 1 and 3 of the project were intended to improve the physical networks through rehabilitation and expansion of civil works and through improved maintenance of the networks in four major cities. Component 2 was to fund the technical assistance needed to improve the capacity of the operators and to establish a regulator. However, insufficient account was taken of increasing resource scarcity due to the depletion of the ground water which was the main source of supply for the project cities. In the absence of adequate supplies of water, the impact of network improvements on service quality and financial viability would be severely reduced.
|4. Achievement of Objectives (Efficacy) :|
The degree of achievement of the project's development objective -- to provide efficient and sustainable water and sanitation services in Yemen's major urban areas -- is assessed below under the headings of the objective's two component parts (efficiency and sustainability).
As a result of the civil works financed by the project, a total of 71,196 new or rehabilitated water and sewerage connections were provided, exceeding the appraisal target of 60,000.
Sana’a: Production – (i) a 5,000 m3 ground storage tank, and (ii) 3 boreholes, drilled (out of contracts to drill a total of 15).Distribution – (i) 47 km of secondary water pipes, (ii) 161 km of tertiary mains, and (iii) 12,547 new connections, (iv) 20,000 water meters and values were procured with 7,500 now available in inventory for future use.
Taiz. 615 km of new distribution water pipes were installed, 33,000 water meters and valves were replaced, and two reservoirs were constructed. In addition, the project added over 31 km of sewer lines including 1,312 connection chambers, and an interceptor was built to convey waste water to rehabilitated lagoons.
Al Hodeidah. 27 km of transmission pipeline were built to connect the new well field funded by the Islamic Fund to the distribution network. 19 km of distribution pipeline were installed and 12,000 connections were replaced. The sewerage network was expanded with 1,650 new connections and the rehabilitation of 1,855 manholes.
Al-Mukalla: Existing boreholes were rehabilitated and new boreholes drilled. The sewerage network was expanded, with a total of 6,700 new connections, 60 km of pipeline, and a waste water treatment plant with a capacity to process 27,000m3 twice per day.
Dhamar: Works including transmission mains, sewer trunk lines, reservoirs of 6,000 m³ capacities and distribution networks covering a large part of the city reached 80% achievement at the end of the Project. They were fully completed in May, 2011.
Al-Qaidah: Works for a new waste water collection and treatment system were initiated but suspended due to Contractor’s default. They should be completed by March 2012.
Aden and 14 small urban centers: Drilling of test wells completed.
Institutional Support and Capacity Building
- The establishment of local water and sanitation corporations in Hodeida, Mukallah and Taiz was carried out before project appraisal.
- Comprehensive technical assistance in water and sanitation reform was provided to the Ministry of Water and Environment, including a review of the Ministry's organization, methods, staff and capacity to identify major short comings. There was also technical support for the Project Management Unit (PMU) housed in the Ministry of Water and Environment.
- A performance evaluation of the nine local corporations was carried out.
- Technical assistance for the decentralization of six branches of the National Water and Sanitation Authority was provided.
- A study for the establishment of a Water Sector Regulatory Authority was carried out, but the Authority has not been created.
- Feasibility studies, environmental assessments and the preparation of tender documents for additional cities to be covered by the Program were completed.
- A feasibility study and preparation of tender documents for a brackish water desalination plant in Taiz and a hydro-geological model for Al-Hodeidah were completed. These studies will assist the Government in planning and implementing the next phase of investments in the sector.
- A large number of local corporations and autonomous utilities received basic training in utility management.
- Office equipment, computer hardware and software, vehicles and machinery were provided for the PMU and for five small centers that have been corporatized during the project period.
- Consulting services were provided for project supervision at the central level by the Ministry and by the PMU. However, since this absorbed approximately 50% of the funding from Component 2, insufficient financing for support at the local corporation or utility level was left.
1. To provide efficient water and sanitation services in Yemen's major urban areas. Modest.
Source: ICR, pages 27-30
- Unaccounted For Water (UFW) in the four major cities was reduced from 36% to 34% in Sana'a and from 40% to 22% in Taiz. However, the rate remained unchanged at 37% in Hodeidah and rose from 32% to 36% in Mukalla. The target in all four cities was 35%.
- The target of increasing the availability of urban water and sewerage services by at least 20% was not achieved in any of the four major urban centers. In fact, availability -- measured in terms of cubic meters of water sold per connection per day -- actually fell in all four cities over the project period. According to the ICR Data Sheet (page iii) , it is expected that, by the end of 2011, the target would be achieved in Sana’a once the wells under construction there are commissioned.
- The frequency of water availability from the public systems for all customers was targeted to double the 2002 level. However, the 2002 level is unrecorded so there are no baseline data. The ICR Data Sheet (page iv) records frequencies at project closure of between 12 and 24 hours in Sana'a, Hodeidah, and Mukalla, and of "less than once a week" in Taiz.
- Although the volume of water sold in all four cities rose between appraisal (2001) and 2009, employment in the four water companies rose even faster so that water sold per employee declined:
|City||Water sold (000 m3)||No. of employees||Water sold per employee (m3)|
|Hodeidah|| 7,980|| 9,681||400|| 620||19,959||15,615|
|Taiz|| 4,085|| 4,305||400|| 545||10,213|| 7,899|
2. To provide sustainable water and sanitation services in Yemen's major urban areas. Modest.
- By an alternative measure of productivity (number of employees per thousand water and sewerage connections), Sana'a and Hoedeidah improved slightly between 2001 and 2009 (from nine to eight and from six to five respectively), while Mukallah and Taiz worsened (from nine to eleven and from six to seven respectively).
- "Significant private sector participation in the management of the Sana'a facilities" (PAD, page 7) was expected at appraisal, not as an end in itself, but rather "as an effective means to achieve the primary objectives of enhanced access, quality/reliability and efficiency" (ICR, page 6). As noted in Section 2d above, a lease contract was prepared, but none of the short-listed international firms submitted a bid. Although the Government committed itself to a management contract as a substitute for the lease arrangement, this too failed to materialize. The ICR attributes the lack of private sector interest to the deteriorating security situation in Yemen. The ICR reports (page 24) that the recruitment of small private operators was initiated in Sana'a in 2010 in three sites governed by three different Local Corporations.
- There is little discussion and almost no evidence in the ICR concerning any improvements in efficiency resulting from the investments in new and rehabilitated sanitation infrastructure.
The cash ratio shows cash revenues as a percentage of cash expenditures.
- The following table compares the cash and Operating Cost Coverage (OCC) ratios for the four major cities at appraisal (2001) and in 2009. The end-project target established at appraisal is also shown.
|City|| Appraisal 2001|| Target end project|| Actual 2009|
|Cash ratio||OCC ratio||Cash ratio||OCC ratio||Cash ratio||OCC ratio|
The OCC ratio shows the coverage of operating costs by revenues (including receivables but excluding government subsidies).
Source: ICR, pages 27-30.
APL Program Objectives
- By project closure, no city was generating sufficient cash revenue to cover its cash expenditures. The only city to improve its OCC ratio was Sana'a, and even there the achievement was below the target. Financial viability of water and sanitation services in the cities benefiting from the project was not achieved. As the ICR (page 31) points out, “despite some improvements, most notably the increase in access to water and wastewater services, the financial performance of the utilities is still unsustainable, whether in the short-, medium- or long-term.”
- There are four main reasons for the utilities' continued financial weakness. First, except in Sana'a, tariffs have hardly been increased since 2001. In the other three cities, average revenue per cubic meter of water sold was about 70 US cents in 2009. Even in Sana'a, it was US$1.19, which is considerably less than the average cost to consumers of alternatives to piped water -- for example, purchasing from vendors -- which varies from a minimum of US$1.40 to over US$3.00 per cubic meter. Second, except for Mukallah, collection efficiency hardly improved at all and accounts receivable were well in excess of the target. Third, the utilities' small revenue base is linked to low per capita water consumption (less than 30 liters per day in some cities) combined with what household surveys suggest to be a large number of people per connection. The low consumption may well be linked to the fact that water is scarce. Water production increased significantly during the project period only in Mukallah, where it almost doubled to 22.8 million cubic meters. In the other three cities combined, production rose by only 12.5% to 43.1 million cubic meters during the eight years ending in 2009. Fourth, building, operating and maintaining a fully integrated piped network system for such low production and consumption volumes means high costs per unit of output and of sales. As noted in Section 8a below, project design did not address the water scarcity issue in any detail, and it assumed optimistically that the investments supported by the project would lead to significant consumption increases which would spread the cost over a larger sales volume.
Urban water production was increased, but by less than anticipated. Almost no progress was made in improving sector management through establishment of financially viable regional corporations with significant participation of the private sector. Little evidence is presented in the ICR of progress towards the provision of affordable sewerage facilities that assure protection of the environment and permit the reuse of waste water for agricultural or artificial recharge. A sector regulator has not yet been established.
The Bank and the Government decided to not proceed with the second phase of the APL, and the investments planned for phase II have been included in the Water Sector Support Project (H449 RY).
The PAD (page 14) calculated an economic rate of return (ERR) of 24%, but which is stated to cover only US$25 million worth of investments. The ICR (Annex 3, Section 2) reports that reproducing the PAD's cost-benefit analysis in order to estimate an ERR at closure would be "fraught with difficulties" because: (i) the assumptions behind the economic analysis in the PAD are unclear; (ii) the supply of water entering the processing system declined during project implementation; (iii) in some towns, IDA-funded investments were supplemented by those financed by other external partners leading to difficulties in benefit attribution; (iv) data on benefits are very incomplete; and (v) the collection of further data was rendered almost impossible by the deterioration in the security situation.
The ICR, therefore, made what it describes as a "qualitative assessment based on unit costs, which identified that the expected economic returns from the investments funded by the Bank were affected by the depletion of the groundwater, which is the primary source of water in all the project cities" (page 11). The high unit costs reflect the fact that the project was planned without taking into account the severe constraints on water availability. The network was expanded and rehabilitated, while the water supply available for processing was declining, leading to under-usage of the infrastructure, reduced benefits and high unit costs.
The project took eight years to complete instead of the five years foreseen at appraisal. Much of the delay was the result of administrative inefficiencies.
Efficiency is assessed as negligible.
a. If available, enter the Economic Rate of Return (ERR)/Financial Rate of Return at appraisal and the re-estimated value at evaluation:
* Refers to percent of total project cost for which ERR/FRR was calculated