|1. Project Data:
ICR Review Date Posted:
|Bangladesh Water Supply Program Project
Project Costs(US $M)
Loan/Credit (US $M)
Cofinancing (US $M)
Board Approval Date
|Water supply (85%), Micro- and SME finance (10%), Sub-national government administration (5%)|
|Water resource management (33% - P)
Pollution management and environmental health (33% - P)
Rural services and infrastructure (17% - S)
Infrastructure services for private sector development (17% - S)|
||ICR Review Coordinator:
||Robert Mark Lacey
|2. Project Objectives and Components:|
a. Objectives:According to the Development Grant Agreement (DGA, Schedule 2, p. 19) and the Project Appraisal Document (PAD, p.3), the objective of the Project was “to contribute to the Recipient’s efforts to achieve the Millennium Development Goals (MDGs) in water supply and sanitation by 2015, specifically by piloting innovative measures to scale up the provision of safe water supply free from arsenic and pathogens in rural areas and small towns.”
The outcome target was to provide safe water to at least 1.25 million persons in villages and towns; there was no outcome target related to sanitation.
The Board approved a restructuring of the project on October 6, 2008. The project development objective after restructuring was: “to contribute to Bangladesh's efforts to achieve the Millennium Development Goals in water supply and sanitation by 2015. Specifically, the project will (i) deliver increased access to the water and sanitation services in selected rural villages and small towns, focusing on areas affected by the 2007 floods and cyclones, and (ii) pilot some innovative service provision measures, including private sector participation in rural schemes” (Project Restructuring Paper, page 3).
When the project was restructured, disbursements stood at US$2.30.million (5.6% of the original and 14.5% of the disbursed IDA Grant).
The outcome target was reduced to the provision of safe water to 570,000 people in villages and towns.
The project’s development objective – “to contribute to Bangladesh's efforts to achieve the Millennium Development Goals in water supply and sanitation by 2015” – did not change as a result of the restructuring. The deliverables through which it was expected that the objective would be achieved were changed. This Review does not, therefore, undertake a split evaluation.
b. Were the project objectives/key associated outcome targets revised during implementation?
If yes, did the Board approve the revised objectives/key associated outcome targets?
Date of Board Approval: 10/06/2008
c. Components:There were seven components:
A. Piped water supply in villages and growth centers (Appraisal: US$23.1 million; Restructuring: US$4.7 million; Actual US$2.83 million). This component aimed at ensuring sustainable and safe water supply to select rural villages with more than 900 households by outsourcing design, construction, and management of piped water supply systems to private sponsors (entrepreneurs, cooperatives, NGOs etc.), who would meet 50% of the capital costs and would charge users for the water supplied and levy connection fees. The private sponsor would operate the system for a maximum of 15 years under a Service Agreement with the Water User Association or other local government authority. This component would also provide technical assistance and a partial capital cost grant (50%). Grant payments would be determined according to an Output-Based Aid approach, with disbursements made upon certified achievements of project milestones (such as functioning connections). The Government, through the Department of Public Health and Engineering and other institutions would be responsible for regulation and monitoring key aspects of operation such as water quality, technical standards and service levels.
At the 2008 restructuring, the financing of this component was reduced to US$4.7 million from the appraisal amount of US$23.1 million. The number of schemes targeted was reduced from 300 to 21, and beneficiary households reduced from 100,000 to 25,000. In addition to this reduction in scope, the following revisions were made: (i) IDA would finance a 70% capital contribution per scheme rather than 50%; (ii) the maximum IDA grant contribution limit was raised from approximately U$69 to US$175 per household; (iii) the payment schedules were simplified and clarified; and (iv) the private sponsor would operate the system for a maximum of 18 rather than 15 years
B. Water and sanitation services in medium-size towns (Appraisal: US$14.8 million; Restructuring: US$4.3 million; Actual US$3.60 million). This component was initially conceptualized to provide safe water in 3 to 5 mid-sized urban areas (pourashavas) through establishing ring-fenced Pourashava Water Supply Entities (PWSEs). The PWSEs would own the assets of the municipal water supply system and would outsource the design, construction and management of the piped water supply system to private operators in a contractual arrangement for a 10 year period. While rehabilitation and construction of water systems would be 100% financed through the IDA grant, the Pourashavas, through the PWSEs, would be obliged to repay 50% of the investment grant. This component would also provide technical assistance to finance pre-feasibility studies for urban sanitation.
On restructuring, the financing of this component was reduced to US$4.3 million, and the establishment of PWSEs, the contracting of private operators, and investment in major works were cancelled. In addition the urban sanitation pre-feasibility study was dropped. Instead, immediate priority works in the five pourashavas and 19 other flood affected pourashavas would be undertaken. The Water Department in the pourashavaswould be accountable for the operation of the water systems, as well the financial accounts subject to annual audits.
C. Non-piped arsenic mitigation activities for villages (Appraisal: US$4.4 million; Restructuring: US$5.61 million; Actual US$9.24 million). This component aimed to provide funding for non-piped supplies to serve villages of under 200 households located in three priority Upazilas Parishad (sub-districts), especially fringe areas of villages where piped water supply will be provided, but where it will not be feasible, for technical reasons to cover all households, and where more than 60% of the households’ tube wells were contaminated with arsenic. It was expected that around 200 villages would be covered in provision of arsenic and pathogen safe water sources by working with Support Organizations, Union Parishad’s and Ward Arsenic Committees, on a demand driven basis using the approach successfully piloted in the then ongoing Bank-supported Bangladesh Arsenic Mitigation Water Supply Project. Benefitting communities would contribute 10% of the investment cost and Ward Arsenic Mitigation Water User Groups would help develop arsenic mitigation action plans, handle contracting and operation and maintenance.
On restructuring, the financing of this component increased by 28% from the appraisal amount of US$4.4 million to US$5.6 million, and it was accordingly revised to include, in addition to the original project scope , the construction by the Department of Public Health and Engineering of 5,000 water points at a cost of US$3.61 million, in cyclone-affected areas. This would be 100% financed by the project.
D. Capacity building, regulation and training (Appraisal: US$3.2 million; Restructuring: US$1.36 million; Actual US$0.71 million). This component consisted of three sub-components:
(i) Capacity Building and Training:
(ii) Regulatory Frameworks:
- Technical advisory services, capacity building programs, and training workshops for potential stakeholders on issues related to rural piped water supply services; and provision of technical advisory services through experts in conversion of municipal water departments to commercially viable entities;
- Capacity building programs for monitoring, planning, implementation and operations of investment.
- Technical assistance through NGOs to Union Parishads and Ward Arsenic Committees to procure, implement, monitor, and maintain the chosen arsenic mitigation package;
- Design and implementation of client satisfaction surveys in communities.
(iii) Water Monitoring:
- Technical advisory services for development/strengthening of regulatory frameworks in (a) involving the private sector in rural and urban piped water supply systems with community participation; and (b) ground water management and administration.
At restructuring, this component was reduced by 58% from the appraisal amount of US$3.2 million to US$1.36 million. The Technical Assistance (TA) to develop the regulatory framework and benchmarking systems for the pourashava private operators, and activities to support the regulatory framework for groundwater management was cancelled. Water quality monitoring of all wells drilled under the Bangladesh Arsenic Mitigation Water Supply Project and this project would be undertaken and the findings entered into a national water quality database. In addition, ground water mapping, including the ongoing riverbank infiltration pilot activities would be completed; and a water safety plan for all schemes constructed under the project would be developed.
- Strengthening water quality monitoring routines and capacity nationally at the Department of Public Health and Engineering (DPHE), union parishad and pourashava levels through technical advisory services, equipment and logistical assistance.
- Institutional capacity building support.
- Ground water monitoring.
- Development and testing of the application of risk-based approaches to water safety management.
E. Development of local credit markets and risk management mechanisms for village piped water supply (Appraisal:US$4.9 million; Restructuring: US$0 million; Actual: component cancelled) . This component aimed to develop local credit markets and insurance services for rural piped water supply provision in Bangladesh, initially through local private banks and financial mechanisms (for example, a Take-Out Facility, a Partial Credit Guarantee, and/or related financial mechanisms) interested in lending or through direct loans appraised and administered by the Infrastructure Development Company Ltd. This component was cancelled on restructuring as it had made almost no progress, was unlikely to be completed by closure, and was considered less relevant to the down-sized rural piped water supply component.
F. Monitoring and Evaluation (Appraisal: US$1.4 million; Restructuring: US$0.5 million; Actual US$0.12 million). This was initially planned to draw lessons from implementation of water-supply schemes using innovative institutional and investment approahces, monitor compliance by sponsors and communities, develop systems that the Government could use for large-scale piped water programs, develop benchmarking system for piped water supply schemes, and continue evaluation of non-piped arsenic mitigation measures. After restructuring, this component was significantly scaled down, and relied mainly on data provided by private sponsors, proposals, progress, and TA reports. In addition one technical and performance audit was planned.
G. Project management (Appraisal: US$3.3 million; Restructuring: US$2.19 million; Actual: US$2.42 million). This component financed the Project Management Unit (PMU) within Department of Public Health Engineering. The budget envelope of this component was reduced by 34% on restructuring. It financed provision of goods, equipment, technical advisory services and logistical assistance required by the PMU for the management of the project.
d. Comments on Project Cost, Financing, Borrower Contribution, and DatesProject Costs:
The cost of the project was initially estimated at US$55.11 million equivalent, on restructuring the projects costs were reduced by 66% to US$ 24.12 million equivalent. At closing project costs were US$18.91 million equivalent (ICR, p.19), or 34% of the original project costs and 78% of the restructured amount.
At appraisal an IDA grant commitment of US$40.0 million was approved. On project restructuring this amount was reduced by almost 47% to US$18.67 million. According to the ICR (p. 19), the actual amount disbursed at project closure was US$15.89 million, 85% of the restructured amount. The balance of US$2.78 million was cancelled. There were no other external financing sources.
At appraisal, local communities, sponsors and beneficiaries were expected to contribute US$9.2 million equivalent; on project restructuring this was revised to US$1.97 million equivalent; the actual contribution was US$1.16 million equivalent (59% of the restructured amount).
At appraisal the Borrower planned to contribute US$5.83 million; on project restructuring this was revised to US$3.48 million; the actual contribution was US$1.90 million (55% of the restructured amount).
To enable the completion of works and achieve target outcomes, the project closing date was extended at the time of the restructuring by 8 months until December 31, 2010.
|3. Relevance of Objectives & Design:|
a. Relevance of Objectives:High
- The project’s objective is relevant to the Bank’s Country Assistance Strategy (CAS) for the period Fiscal Years 2011-2014. It responds directly to “Strategic Objective 3: Improve Social Service Delivery,” and “Outcome 3.2: Expanded Access to Safe Water and Sanitation Services,” in both urban and rural areas. It is also relevant to “Strategic Objective 4.3: Increased effectiveness of public service,” focusing on strengthening the institutional framework for government and public service delivery at the local level.
- The project’s objective is relevant to government strategy for the water and sanitation sector in Bangladesh, which is focused on the attainment of the Millennium Development Goals (MDG), inter alia through the development of new approaches in the water sector (ICR, page 2).
- The objective is relevant to resolving the issue of poor access to water supply and sanitation facilities in the rural areas of Bangladesh. 40% of pourashavas (rural municipalities) did not have piped water and used hand-pumps at the time of appraisal. Daily supply averaged between 3 to 12 hours. Almost 79 million people in Bangladesh were exposed to arsenic from well water with contamination levels significantly exceeding WHO guideline of 10ppb. Microbial contamination was equally serious. Despite some improvement in water supply and sanitation facilities, water related disease incidence is common and accounts for a large number of deaths every year.
b. Relevance of Design:Modest.
Although the development objective was clear and measurable, the project was ill-designed to meet the objective. It involved both pilot testing of innovative approaches (for example, supporting private sponsors to design, construct and operate rural piped water supply schemes, and the contraction of private operators to design, construct and operate water supply schemes in the pourashavas) and the scaling up of such approaches.
A rigorous M&E framework should have been a cornerstone of such a design. However, despite the inclusion of a separate component for M&E, M&E design was so weak that no structure for monitoring the results of the pilot approaches was in place when implementation started, and was still not in place at the time of restructuring over four years later.
The likely interest of private sponsors in the schemes supported by the project does not appear to have been well researched. The only obstacles to such interest that are identified in project design are lack of credit and of insurance, and these are inadequately addressed. This is despite the fact that “given the large number of schemes, a large number of sponsors will be required” (PAD, page 53).
With regard to insurance, sponsors had indicated the need for support that would insure them against natural events like floods or tornadoes that could damage the infrastructure facilities, or against the appearance of arsenic or other contaminants despite detailed engineering analyses conducted during each project preparation” (PAD, page 7). The PAD acknowledges that there is no insurance industry in Bangladesh that would provide this kind of cover to private sponsors, and states that “this component would provide protection to private sponsors against well-defined conditions identified in the sub-project grant agreement" (PAD, page 37). No further details are provided.
Concerning credit, the intention was to develop a mechanism to interest local banks in long term maturity loans to sponsors or provide such loans through a special entity such as the Infrastructure Development Company. However, no such instrument was developed. As the ICR acknowledges, “preparatory work for this component appears limited. The Mid-Term Review Mission pointed to the fact that private sponsors could not come up with the required capital as one of the bottlenecks leading to restructuring” (ICR, page 9). The credit and insurance activities were cancelled at restructuring.
There was also an insufficient underpinning for the approach of using private operators to design, build and manage municipal water supplies in the pourashavas. The previous Bank-supported Bangladesh Arsenic Mitigation Water Supply Project “had done nothing in pourashavas, due to some early failures, and preparatory work for this component in [the project under review] was deferred to project implementation. The time required to do this preparation work (including changes in local government legislation, building political consensus in each identified pourashava, the selection and mobilization of the private operators) was significantly underestimated” (ICR, page 10).
The objectives specify safe water supply. However, the activities included in the design to monitor and regulate water quality and safety consisted of capacity-building and training and the development of water safety plans. These were insufficient to ensure the monitoring of water safety and the adoption of remedial measures where necessary.
The objectives (the MDGs) specify sustainability. Yet there were few project outputs to support technical and financial sustainability of the facilities constructed.
Equally, the objectives specify not only water supply, but also sanitation. There are practically no activities built into the project design to increase access to improved sanitary facilities.
There is no indication in the ICR that design took account of exogenous factors that might affect the project’s outcome.
At the October 2008 restructuring, some of the shortcomings in design were addressed. 75% of the Credit was canceled, and outputs were simplified as well as being reduced in number. 85 of the rural piped water schemes were canceled and 21 retained for which construction had already started. The scope and extent of innovative measures was also reduced. However, several shortcomings remained, including those related to the inadequacy of activities to ensure safe water supply, sustainability and access to improved sanitary facilities, all of which continued to be specified in the objectives.
|4. Achievement of Objectives (Efficacy) :|
The achievement of the project’s development objective -- to contribute to Bangladesh’s efforts to achieve the Millennium Development Goals (MDGs) in water supply and sanitation by 2015 – is rated substantial.
- 21 rural piped water schemes had been started by project closure. The original target was 300; the revised target after restructuring was 21. Each scheme included 2 production tube wells, one pump house, a pump and pumping machinery, storage tank, piped distribution network, and consumer connections. According to the ICR (page 20), none of the schemes was completed at project closure: six are described as “fundamentally completed," meaning that they were in operation but the consumer connections needed to be completed; twelve were “80-95% completed,” with seven of them awaiting electricity connection; and three were “65-75% completed."
- Sixteen NGOs and 3 private enterprises served as sponsors for the 21 rural piped water schemes constructed. The ICR (page 21) reports that “all these sponsors are committed to cost recovery. However, they all have a rather relaxed attitude toward recovering their capital investment; they are as much concerned with providing a service to the communities. This is even true for the 3 private enterprises, all of which manage schemes in their owners’ home communities.”
- The ICR (page 25) reports that, in the pourashavas, and according to the Department of Public Health and Engineering, 9,156 additional domestic and public standpost connections serving 21,974 households were delivered against a (revised) target of 20,000 households. No information on the actual percentage of physical work completed in each pourashava schemes is provided in the ICR or the Borrower’s ICR.
- A total of 13,159 deep tube wells were constructed for the provision of non-piped water, against a (revised) target of 7,000. Of these 3,500 tube wells were drilled in heavily arsenic affected areas (target 2,000), and 9,659 shallow and deep tube wells were constructed in cyclone affected areas (target 5,000). A consultant survey at the end of the project found that all tube wells were working and providing water of “acceptable” quality. The rural non-piped schemes targeted 167,320 households in arsenic, and cyclone affected areas; however, in view of the weakness of the M&E framework, there is uncertainty about the number of outputs and their degree of completion at project closure.
- The benchmarking and monitoring framework and the water safety plans for water quality control were not implemented. Work on the water quality regulatory framework was stopped at the restructuring. Water quality plans were supposed to be completed for each scheme, but this target was not achieved. The project did undertake water quality assessments of 81% of the wells constructed, but only 58% were entered in the national database.
- Nowhere in either the PAD or the ICR are Bangladesh’s Millennium Development Goals (MDGs) in water and sanitation described. There is no evidence presented in the ICR showing the progress made towards attaining them, nor analysis indicating the extent to which progress made could be attributed to the project. According to the UNDP’s “The Millennium Development Goals: Bangladesh Progress Report, 2011,” the MDG for water and sanitation is “to halve, by 2015, the proportion of people without sustainable access to safe drinking water and basic sanitation.”
- However, in its comments on a draft version of this Review, the Department of Public Health Engineering (DPHE) provided the following additional information: "As per JMP [an independent consultancy] estimate (JMP Report, 2012), people’s access to improved (safe drinking) water at national level was achieved 81% in Bangladesh by 2010 of which 6% achieved in piped water and 75% in non-piped water. Since 1995, 20% of the population gained access to safe drinking water. The estimate shows that population of Bangladesh was 148.69 Million in 2010 and accordingly 29.74 Million new people gained access to safe drinking water since 1995. [The project under review] implemented water schemes mostly during 2009-10 and provided safe water to about 996,514 population, which contributed to 3.35% increase in safe water coverage of the country and hence to MDG achievement." According to the DPHE figures, therefore, some 17% of the increase in improved water coverage since 1995 can be attributed to the project.
- The DPHE statistics are somewhat different from, though not wholly inconsistent with, those of the UNDP Progress Report cited above, according to which the percentage of Bangladesh's population using an “improved drinking water source” rose from 78% to 86% between 1999 and 2009 (Annexure-1, page 99). The 2015 target is 100%.
- The ICR states (page 13) that the project provided access to improved water sources for 996,514 people, against a (revised) target of 575,000. By far the largest increase was estimated in access to non-piped water – 836,642 people (661,642 in cyclone-affected, and 175,000 in arsenic-affected areas) as against a target of 350,000. The rural piped water schemes are estimated to have provided access to around 50,000 people by project closure against a target of 125,000, a 60% shortfall. According to subsequent information provided by the DPHE, dating from September-November 2012, “61,433 people [compared to about 50,000 at closure according to the ICR] were being served through [the] 21 [piped-water] schemes." The pourashava schemes are thought to have benefited 109,000 people against a target of 100,000.
- There is no conclusive evidence presented in the ICR that the drinking water provided under the project is safe (though it may reasonably be assumed to be safer than that available prior to the project). According to subsequent information provided by DPHE, groundwater in Bangladesh (which is plentiful and available at shallow depths) is of much better microbiological quality than surface water. By the early 1990s, nearly 98% of the population had access to what was presumed to be relatively safe groundwater. The discovery of arsenic in groundwater in 1993 reduced this estimate to 74%. The project under review was one of several initiatives taken by the Government and its international partners to start systematic arsenic screening and mitigation programs. DPHE reports that the project's contribution was significant.
- The DPHE also states that, "during implementation of the rural piped water supply schemes, a test tube well was installed for each scheme and water sample was tested for required parameters in [project-selected] laboratories. Based on the test results of the water quality, PMU allowed the sponsors to implement the schemes with or without water treatment facilities. Before going for official commissioning of the schemes, water quality tests were repeated in the laboratories.” For non-piped water options, "commissioning and payment of the contractors was dependent on the successful demonstration of water quality at the point source."
- However, as noted above, the benchmarking and monitoring framework, and the water safety plans for quality control, were not implemented. Consequently, as DPHE acknowledges, “after the project was closed, there was no system or mechanism in the project to follow up the activities of the completed project. So routine monitoring of water quality of the schemes could not be continued any more, [although] DPHE local offices were instructed by the office of the Chief Engineer to continue monitoring of the scheme including water qualities of all the water supply options and provide technical assistance as and when required.”
- The ICR (page 11) reports that the final supervision mission visited a random sample of rural piped and non-piped supplies, and found “no problems with construction impact, water quality, or health.” According to the Beneficiary Survey, conducted just prior to project closure, consumers served through non-piped supplies were satisfied with the water quality, access, and location of the hand-pumped sources, though pourashava and some piped water beneficiaries complained about water quality. The ICR states (page 37) that the Survey was conducted by a consultant whose field work “included discussions with beneficiaries and other stakeholders in the rural pipe, pourashava, and rural non-piped components.” The ICR expresses reservations about the Survey’s methodology (see Section 10 below).
- There is no evidence of increased provision of improved sanitary facilities (specified in the objectives), since there were no related components or activities.
- The MDGs specify sustainable access to safe drinking water and basic sanitation. Several schemes had not started operating by project closure, and most others had been in operation only a short while. At closure, therefore, evidence was still lacking about the willingness and ability of consumers to pay the necessary tariffs to cover the full cost of operation of the piped-water schemes, including interest and other financial charges, as well as about the capacity of the sponsors to operate the schemes in a sustainable manner.
- According to the DPHE, "[Of the 21 piped water schemes], 9 schemes were operating at profit and 8 schemes were operating at break-even and the remaining 4 schemes needed some technical assistance to make these schemes commercially sustainable…..The monitoring findings also revealed that [non-revenue water] was [reduced] in 15 schemes (26.8%) and collection efficiency was 81.5%, which were quite satisfactory in consideration of innovative pilot nature of the schemes. It is evident from the above findings that people are willing to pay tariff for the piped water supply, if quality service is ensured.”
Economic rates of return were estimated ex-ante and ex-post. The ex-ante cost benefit analysis covered three components (representing 77% of estimated project costs) -- rural piped water, the pourshava piped water supply, and non- piped improvements in rural water supply. Benefits of rural and pourshava piped water supply schemes consisted of the economic value of the water supplied plus estimated reductions in health costs. Benefits of the rural non-piped water supply were the potential time savings from reduced fetching and carrying, and estimated health cost reductions. Depending on assumptions about benefits, the economic rates of return (ERRs) ranged from 20% to 45% for the rural piped water supply, 16% to 34% for the pourshavas, and from 20% to 75% for the rural non-piped water supply. The overall, weighted average ERR was 30.4%.
The ex-post economic analysis used essentially the same methodology with updated information. The ERRs were estimated at 14.2% for the rural piped water supply component (including health benefits), 14.6% for the pourshavas (based on willingness to pay a flat rate tariff of US$ 2.3 per connection per month), and 61.3% for the rural non-piped water supply. Together, these accounted for 83% of actual project costs. The overall ERR was 42.1%. This was higher than the appraisal analysis because of the much greater weight of the non-piped water schemes (which, because of their low cost, had a higher rate of return) than at appraisal.
During the 33 months between effectiveness and restructuring, only 5.6% of the grant amount was disbursed, indicating low administrative efficiency. Even after restructuring, at which the scope of the project was reduced by 66%, 15% of the greatly diminished credit amount remained undisbursed at closure. There were significant operational inefficiencies. For example, the planning process for the rural piped water schemes took considerably longer to complete than anticipated. The number of months required to go from a Memorandum of Understanding with the sponsor to the completion of an approved design study ranged from 10 to 39 months, with a median of 20 months. From there to the grant agreement required a further 17 months on average. Thus, in most cases more than three years passed between the signature of the MOU and the breaking of ground. According to the ICR (page 21), the reasons for the long time lag included: weak performance on the part of the Project Management Unit; sponsors’ difficulty in making capital contribution, and cash flow problems; difficulties in procuring land; the need for additional test drilling; and price escalation. Inefficiencies also stemmed from the lack of an effective M&E framework throughout implementation.
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