Document of The World Bank FOR OFFICIAL USE ONLY Report No: 20260 IMPLEMENTATION COMPLETION REPORT (19870; 19871) ONA CREDIT IN THE AMOUNT OF SDR 163.5 MILLION (US$216.9 MILLION EQUIVALENT) TO THE ISLAMIC REPUBLIC OF PAKISTAN FOR THE SECOND KARACHI WATER SUPPLY AND SANITATION PROJECT June 21, 2000 Infrastructure Sector Unit South Asia Region This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. CURRENCY EQUIVALENTS (Exchange Rate Effective March 1, 2000) Currency Unit = Rupee (Rs.) Rs. 1.00 = US$ 0.0192 US$ 1.00 = Rs. 51.89 FISCAL YEAR July I June 30 ABBREVIATIONS AND ACRONYMS ADB = Asian Development Bank CDC = Commonwealth Development Corporation GOP = Government of Pakistan GOS = Government of Sindh IDA International Development Association KMC = Karachi Metropolitan Corporation KWSB = Karachi Water and Sewerage Board KSDP = Karachi Special Development Project ODA = Overseas Development Administration (now called Department for International Development-- DflD) Vice President: Mieko Nishimizu Country Manager/Director: John W. Wall Acting Sector Manager/Director: Jonathan S. Kamkwalala Task Team Leader/Task Manager: Manuel G. Mariffo FOR OFFICIAL USE ONLY PAKISTAN SECOND KARACHI WATER SUPPLY AND SANITATION PROJECT CONTENTS Page No. 1. Project Data 1 2. Principal Performance Ratings I 3. Assessment of Development Objective and Design, and of Quality at Entry 2 4. Achievement of Objective and Outputs 4 5. Major Factors Affecting Implementation and Outcome 10 6. Sustainability 11 7. Bank and Borrower Performance 13 8. Lessons Learned 15 9. Partner Comments 16 10. Additional Information 17 Annex 1. Key Performance Indicators/Log Frame Matrix 18 Annex 2. Project Costs and Financing 22 Annex 3. Economic Costs and Benefits 24 Annex 4. Bank Inputs 27 Annex 5. Ratings for Achievement of Objectives/Outputs of Components 29 Annex 6. Ratings of Bank and Borrower Performance 30 Annex 7. List of Supporting Documents 31 Annex 8. Comments on ICR from the Borrower 32 Table 1 6 Table 2 8 This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not be otherwise disclosed without World Bank authorization. Poje,ct ID: P010325 Project Name: KARACHI WATER & SANI TemLeader: Manuel G. Marino TL Unit: ECSIN IC :ye Core ICR Report Date: May 19, 2000 1. Project Data Aame: KARACHI WATER & SANI L/C/TFNumber: 19870; 19871 CountryIDepartment: PAKISTAN Region: South Asia Regional Office Sector/subsector: WU - Urban Water Supply KEY DATES Original Revised/Actual PCD: 10/28/86 Effective: 08/24/89 12/13/89 Appraisal: 12/09/87 MTR: Approval: 02/28/89 Closing: 06/30/98 06/30/99 Borrower/lImplementingAgency: Government of Pakistan/KARACHI WATER & SEWERAGE BOARD (KWSB) Other Partners: STAF'F Current At Appraisal Vice PDresident: Mieko Nishimizu W.P. Thalwitz Country Manager: John W. Wall H. Eberhard Kopp Sector Manager: Jonathan S. Kamkwalala Yoshiaki Abe Team Leader at ICR: Hiroaki Suzuki Neil E. Boyle ICR Primary Author: Manuel G. Marifno; Omar Hayat; Herman J. Nissenbaum 2. Principal Performance Ratings (HS=1ighly Satisfactory, S=Satisfactory, U=Unsatisfactory, HL=Highly Likely, L=Likely, UN=Unlikely, HUN=Highly Unlikely, HU=Highly Unsatisfactory, H=High, SU=Substantial, M=Modest, N=Negligible) Outcome: U Sustainability: UN Institutional Development Impact: M Bank Performance: U Borrower Performance: U QAG (if available) ICR Quality at Entry: U U Project at Risk at Any Time: Yes 3. Assessment of Development Objective and Design, and of Quality at Entry 3.1 Original Objective: Inefficient, inadequate provision of water had long been a glaring problem in Karachi, Pakistan's fast growing, largest city. This was aggravated by low water pressure and intermittent, sometimes contaminated supply. When the Second Water Project (K2) was conceived, the city's piecemeal supply system was not meeting demand, and its sources were gradually diminishing. The oldest one, the Dumlottee wells, neared exhaustion, and the newly completed Hub River dam system was only expected to meet some 26 percent of projected demand. Thus, with the city's already substantial population doubling about every twelve years, there was urgency in relying more on the Indus River and Kinjher Lake. These factors stimulated the decision to supplement the 320 million gallons per day (mgd) then drawn from the Indus and 100 from Hub dam. K2's main objectives were to help: (a) increase Karachi's potable water supply by 100 mgd; (b) expand sewerage treatment capacity; and (c) improve the financial viability, organization and management of the Karachi Water and Sewerage Board (KWSB). These clearly set out goals followed from the Government's recognition that significantly expanded infrastructure and reduced water losses were needed to meet the scarcity of supply sources and the projected demand increase, as well as to modernize the sewer network. It also realized that KWSB's management capacity required upgrading. 3.2 Revised Objective: Ref. para. 3.4. 3.3 Original Components: The project had three components: (a) Water Supply: a 30-km canal and a 70-km conduit to bring water from the Indus to Dhabeji; four main pumping stations; two direct filtration treatment plants; storage reservoirs; 40 km of primary distribution mains; 10 km of steel pumping main; and expansion/rehabilitation of the distribution network; (b) Sanitation: three new sewage treatment plants, together with associated trunk sewers; repair and cleaning of existing sewers; small-bore sewers for low-income neighborhoods; and (c) Institutional strengthening: technical assistance, training and studies to improve the organization and management of KWSB; technical and management services and equipment to introduce financial planning, improve multi-year budgeting, reporting and commercial practices; and equipment and technical assistance to help KWSB plan and execute large-scale projects, improve operations and maintenance, and improve and extend sanitation in the City and coastal areas. The project did not include work on the strengthening or reform of the regulatory framework in which KWSB operates. The scheme called for parallel external financing arrangements for 80 percent of the estimated near US$333 million Project. IDA and United Kingdom aid sources (ODA, CDC) would help finance the water supply component while the Asian Development Bank (ADB) would help cover the second component. No provisions were made to coordinate assistance with ADB -2 - (save for the cross-effectiveness of the respective financing agreements), and financing and implementation of sewerage investments were carried out independently from the water supply and institutional components, which were implemented by the World Bank. Data on the results of the sewerage component are presented in chapter 2.4 (d) of the Borrower's contribution to this ICR. Therefore, this part of the report deals solely with the water supply and institutional strengthening components. 3.4 Revised Components: The basic objectives of the Project remained constant throughout its execution and did not change when the Project was amended in 1993, but it became necessary to scale down its scope (ref. 'para. 3.5). Components involving some 27 percent of the original project cost for the water component were deferred. The primary water distribution mains were cut from about 50 km to 10 km and one of the three water treatment plants was eliminated. Conversely, the amendments included the addition of the repair of the Hub River main. Also, increased emphasis was placed on leak detection and water loss reductions, along with enhanced revenue mobilization and opening opportunities for new service delivery methods. The Project components were accordingly amended to include services for preparation of a KWSB corporate plan, expansion of its computer stock, measures to increase collections and educate consumers and examination of the possibilities of private finns' participation in sector activities. These amendments formed the basis for the 1993 supplemental Credit (ref. para. 5.4) 3.5 Quality at Entry: Unsatisfactory. The Project's preparation was deficient, especially by today's "quality assurance" standlards. Appraisal of the works was based on only preliminary engineering designs along with a somewhat ambiguous definition of the works' final scope. The construction unit rates selected proved to be invalid because of reliance on inaccurate figures. Early in project execution as a result, examination indicated a cost underestimation of about 20 percent for civil works, and about 42 percent for plant and equipment. Moreover, the final design studies showed the necessity for conveyance system changes and some construction expansion. The initial Project's base cost was estimated to have then increased by approximately 73 percent. The design also concentrated on physical engineering and financial matters compared with institutional and regulatory issues, although the Board's serious deficiencies and the inadequacy of the regulatory framework in which it operated were well known then. Remedial measures for these issues were rather narrowly treated in the appraisal report, as was the proposed funding support for their implementation. The organizational and management component attempted to strengthen KWSB through poorly designed and aimed technical assistance, without fully addressing the reasons for poor performnance. Furthermore, with a US$1.5 million budget,it received less than .005 percent of total base costs. - 3 - 4. Achievement of Objective and Outputs 4.1 Outcome/achievement of objective: Unsatisfactory. The outcome is judged "unsatisfactory." Although it achieved substantial, greater than forecast economic benefits (22% ERR), the Project is considered "unsatisfactory" because it lacks sustainability and did not address regulatory and institutional issues adequately. The Project had three objectives: (i) to increase the supply of potable water; (ii) to improve sanitary conditions in the city of Karachi (including its low income and coastal areas) through the improvement of the sewerage services; and (iii) to improve the financial viability, organization and management of KWSB. The Project was successful in increasing the supply of potable water to Karachi and in the short term helped reduce the impact of a potentially critical water supply shortage (ref. 4.2 A). However, its achievements in reducing the deficit are still far off from the SAR expectations and lack sustainability (ref. 6.1). Achievement of the second development objective is discussed in the Borrower's contribution to this ICR (ref. annex 8). The third objective was only partially achieved too. KWSB organizational improvements were modest, partly reflecting unfavorable circumstances, like the inadequate regulatory framework and the acute law and order disruption of recent years, but still constructive. The current situation, with many unresolved problems, indicates that, despite KWSB efforts and the strong commitment to development from its management, more profound institutional reform and regulatory issues are still required, including management capacity strengthening (par. 4.2B). The services are still unsatisfactory despite many years of local and external efforts (including K2's added contribution), as well as large sums of international assistance, which have been devoted to upgrading the city's water system networks and building capacity. No effective solution has yet been found to the low availability of water, and ensuring an adequate supply is not in sight. The 1987 appraisal concluded that overall gross water demand then exceeded supply by about 78 mgd. By contrast, KWSB in November 1999 estimated the shortfall then at 213 mgd. Service remains intermittent and has in fact deteriorated, while complaints about its inequality prevail. Moreover, the aging water distribution system suffers numerous bursts and leakage, clearly indicating that more substantial efforts are needed on maintenance and rehabilitation. Nevertheless, works were completed only one year longer than forecasted, notwithstanding numerous obstacles. While reliable data on the Karachi situation are limited, it seems to represent a case of essential services only being available at heavy social costs. The Board concedes that its distribution system is unbalanced, particularly in the wake of sizable unplanned growth in many areas. Reportedly, a much larger percent of high-income rather than low-income residents have adequate supplied connections. In the slum areas (katchi abadis), there is no proper water supply service to serve about half of Karachi's city population--these areas have grown at 9 percent annually, almost twice the overall rate. Their residents therefore have had to buy water from private venders at high costs. However, this situation would be much worse without the Project's contribution though. According to the data supplied by KWSB, the Project did have a significant impact on poor areas as intended at appraisal, even though KWSB has only relatively recently -4 - completed the civil works and it is much too early to evaluate which areas wereserved by the new distribution mains. Besides, with the sizable, continuing migration into Karachi, the figures available are not apt to capture accurately the lack/availability of water service in areas distinguished by different income levels/social strata. In any case, KWSB has done its earnest best in the past few years (through the subsidized tanker provisions) to overcome the Hub shortfall where the Board felt social needs were pressing. 4.2 Outputs by components: A. Works: Satisfactory The main works came into operation in mid-1998 and reached full capacity at year's end, providing 19,480 more cubic meters per day than projected (ref. Annex 1). KWSB also completed these in only one year longer than forecast at project reformulation, a commendable accomplishment considering their several delays. Full appreciation of the impact of these works has to take into consideration the unprecedented depletion of water storage at the Hub Dam reservoir late in the project period and the impact this had on the overall water system. Hub's supply declined to almost nothing during the first eight months of 1999 due to a succession of dry years. As a result, in May 1999, KWSB was only capable of distributing about 23 mgd on alternate days from Hub, which almost offset the additional supply that K2 provided. Therefore, even after the latter's commissioning, the majority of KWSB's customers still only received spasimodic supply. The northeast Karachi areas dependent on Hub remained particularly water short although the Board diverted Indus water provided through the newly commissioned K2 scheme to them, together with limited free tanker supply to deficient areas on an emergency basis. So, in the final analysis, in the short term K2 helped alleviate the emergency situation, but its resullts are short of those expected at appraisal and lack sustainability. Instead of controlling losses or managing the demand, to mitigate the emergency, KWSB proposed constructing an additional trunk main to divert some of the water provided to the Pakistan steel facility, which was only using a third of its supply. KWSB sought to use Project funds for this purpose, which IDA rejected because of the Board's deficiencies in fulfilling agreed measures. Instead, KWSB carried out a project fully financed by KWSB and the Government of Sindh which added 17 mgd to the total available supply. Additionally, KWSB later commissioned a special operation which successfully added another 40 mgd, helping serve the areas not benefiting from K2. These actions have had only a limited impact and do not resolve the supply deficit and associated bad service quality the city suffers. - 5 - Table I KWSB: Water Supply and Demand 1985-1999 700 - 650- 60 600 - 550 - Demand 450.1 - -Actual 400 ...u , . 350 * --- - 300- ,_,, 1985 1990 1995 1999 B. Institutional Strengthening: Unsatisfactory Unsatisfactory management capacity in KWSB remains the major impediment to improving service quality and increasing its sustainability. This situation is worsened by the lack of a regulatory framework for the service and the insufficient management autonomy KWSB suffers. KWSB operates under inadequate institutional arrangements and incentives leading to a generally unsatisfactory performance, marked by episodes of short-term localized improvements resulting from the actions of above-average managers. Significant and sustainable operational improvements are likely to be achieved only with a combination of adequate institutional arrangements and incentives, and a qualified independent management team. KWSB only came into existence some five years before the Project, amalgamating three organizations with different service rules and benefit plans, which had not yet coalesced. Further, its enabling legislation was only enforced in 1996, simultaneous with the Sindh Province's assumption of control of KWSB from the municipality. These factors hampered the implementation, and limited the usefulness, of the Project assistance aimed at institutional strengthening, even though the Credit helped the Board become somewhat more modern and capable. The creation and expansion of its Development Wing gave it some additional ability to carry out contract administration, bid evaluation, contract negotiation and award, construction management and works supervision. However, KWSB still depended on extemal advisors, particularly for the more technical engineering and economic tasks, reliance on whom has only slowly diminished. Also, although the Board has increasingly gained competence in financial administration with the computerization of the Finance Department, this too is heavily dependent on consultants. The unsatisfactory outcome of this component is not without several important accomplishments, mainly due to the Board's appointment in February 1995 of a new managing -6- director, whose forceful manner and adroit use of strong political skills appear to have energized the institution to a more forceful level. This was fortunate since efforts to achieve the Project's institutional strengthening objectives had slowed by then. Moreover, the Managing Director won a delegation of greater operating powers, facilitating the reduction of union interference and tightening of operating expenses and investments. With IDA pressure and under the leadership of the Managing Director, KWSB took other constructive measures, most notably a 46 percent staff cut in 1995-96, an important accomplishment by all measures. Others included some steps toward increasing and rationalizing the Board's tax base and more persistently pressing local government on reducing its agencies' late water bill payments. Recently, KWSB solved this long-standing problem with the city electricity corporation. Also, its settlement of a meter ownership dispute allowed it to disconnect consumers that refused to be metered, and helped accelerate meter replacement and installation. There were also the widespread introduction of computerization within KWSB and the first steps toward formulating a corporate plan and impleimenting systematic manpower development. But these strides were--and still are--overshadowed by continued shortcomings in essential operational matters. KWSB has an inadequate knowledge or control of water resources because of lack of proper measurement and monitoring devices. It does not meter domestic consumption, which it justifies by the intermittent nature of water supply. It appears to pay no particular attention to the environmental or health consequences of water availability (or its absence). Nor has it curbed the "water mafia", which runs the tanker sales. Water losses are estimated to be in the 30-40 percent range, and maintenance activities are not yet adequate. Staff training in repair methods has only been gradually introduced. In addition, the aforementioned upgrading of the Board's project management capabilities has only enabled it to perform this task at a relatively modest level. Pakistan Army engineers' involvement was instrumental in the achievement of the recent 40 mgd supply increase, that was implemented without major KWSB input. Similarly, the Board's financial administration strides have not advanced its management of these matters to a level of commercial expertise, achieving only limited improvements in its commercial and financial management practices. In their absence and without significant organizational reform, the Board's decision-making practices remain too hierarchical while political factors and union pressures excessively affect routine management matters. Further, nothing was achieved towards engaging private enterprise in sector activities nor in the development of an strategy and agenda for the role of the private sector. C. Financial: Unsatisfactory The Board is still at considerable distance from attaining a firm financial footing. Over the later years of the project period, KWSB registered gains in financial performance (see financial data in Annex 3 and table below), but the Credit targets were not accomplished. It thus fell short of re.alizing the federal authorities' desires for provincial government assumption of financial responsibility for sector services. KWSB survived through the 1990s on subsidies, and has only recently managed to run an operating surplus. KWSB has suffered from chronic failures to collect receivables, and the arrears have grown to alarming proportions recently (see annex 3). Although KWSB projects improved financial results over the next ten years, these projections depend on - 7 - assumptions about increases in tariffs, billings, and collections that are not supported by historical performance, and are suspect at best. There seems to be some noteworthy progress though in financial discipline. KWSB accounts reflect positive net operating results in FY96-98, with small profits in the first two years and a more substantial one at the end. Following its staff cuts, the Board has contained staff costs (labor costs in 1997-98 were lower than in 1994-97). Also, the overall level of direct expenses for 1997-98 shown on the income and expenditure statement was below the 1994-95 sum. Meanwhile, water and sewerage revenues in 1997-98 were three times greater than in 1992-93 and over a third greater than in 1996-97. In the commercial management area, KWSB carried out a survey of unconnected customers and reclassified some connected customers, linked its revenue department to the MIS system, created a collection center, and mobilized external help for producing monthly accounts. KWSB accounts have been audited in recent years. However, although the auditors concluded that "KWSB accounts give a true and fair view of the state of the Board's affairs", the ICR mission detected errors in the report and has serious concerns about the validity and reliability of the Board's accounting and financial management information. Table 2: Key Financial Performance Indicators 1990-91 1995-96 1998-99 Water Production 348.0 388.0 525.0 in mcd Operatine Ratio 1.0 0.9 0.7 Income Per 000 3.9 10.0 14.2 Gallons Expenditure per 4.1 9.1 10.2 000 Gallons Debt Servicine 0.1 - Debt Servicing 0.0 - 000 Gallons Cost Recovery 0.8 0.9 1.2 Ratio Self Financing 6.4% 2.6% 6.2% Ratio (cap. Investment) Annual Billing 496.4 1,416.1 2,723.2 (Rs. million) Annual Collection 399.0 1,266.0 1,778.0 (Rs. in million Collection Ratio 80.4% 89.4% 65.3% Collection Period 411.0 517.1 1.035.0 - 8 - It is also believed that KWSB made a commendable effort in the final years to reduce arrears despite its lack of success in increasing collection rates and the delays of scheduled payments from the provincial and local governments, as well as KDA. However, the arrears still remain high, unsurprising given the difficulties of cracking down hard on collections during periods of water scarcity, as well as the recurrent law and order emergencies in Karachi. In paiticular, KWSB has lost ground in its collection efforts, despite significant improvements in other aspects of its commercial management: water tariffs roughly doubled from FY91 to FY99 in real terms, and billings increased by more than 150 percent in real terms. Although because of increased tariffs and increased billing collections of about 89 percent in the same time, the average collection period has doubled, from about 525 days throughout FY91 to FY96, to about 1,066 days in the past three years (see lessons in paragraph 8 for further comments on this subject). Therefore, more protracted financial improvements remain necessary, particularly to further advance the important initiatives on collections and related issues. KWSB deferred action on domestic metering and thereby nullified the benefits of the metering study it carried out. Similarly, there was no follow-up of the aforementioned survey of unconnected customers and new areas, whose prospective billings therefore did not fully materialize. In retrospect, the Government, as well as the Bank, clearly had unduly high expectations of KWMSB's revenue-generating capability at the outset. Financial covenants of the Credit were designed to help KWSB improve its financial standing, and to provide convincing measures of the improvement. However, KWSB consistently failed to meet these requirements. The primary one was ihat KWSB should generate, in each year, total revenues to cover the sum of: (a) total operating expenses; (b) debt service requirements; (c) increases in net working capital other than cash; and (d) not less than 20% of KWSB's capital expenditures. Not only has KWSB failed to generate funds to cover the sum of these items, it instead: (a) failed to cover operating expenditures before FY96; (b) failed to meet debt service obligations since FY96; and (c) gene]rated cash from operations sufficient to cover only about six percent, not twenty percent, of capital expenditures. Despite improvement in the last four years of the Project in operating ratios, the overall financial performance during the Project has been one of clear failure. These shortcomings are to some extent understandable in view of the substantial Project cost increases over the initial estimates (which were not of KWSB's doing and lead to a Supplemental Credit in 1993), but equally if not more important, this raises questions about the realism of the Project financing plan. 4.3 Nret Present Value/Economic rate of return: 22 percent The January 1993 Memorandum of the President (MOP) for the Supplemental Credit estimated the economic internal rate of return (EIRR) at 11 percent. Retrospective analysis of data provided by KWSB shows that the realized economic rate of return was much higher: 22 percent (see annex 3 for details) under the assumption that physical losses are 35% (a conservative estimate according to all consulted sources) and water is valued at two-thirds of present tanker supplied water prices that the population has been shown willing to pay. The Project economic returns exceeded expectations, partly because of cost savings in construction -9- (against the cost estimates used in the Supplemental Credit), and partly because of questionable conservative financial projections. Additionally, O&M costs are lower than the MOP assumed 5 percent of capital costs, and market prices for water, estimated in the MOP to be constant over the life of the Project in real terms, have instead been slowly increasing. 4.4 Financial rate of return: N/A The SAR did not include a financial IRR for the project. 4.5 Institutional development impact: Modest On balance, the Project failed to improve KWSB management capacity and institutional setting far beyond its condition at the end of previous IDA-supported activities. The Board did not substantially upgrade its competence in planning, project execution or service delivery as a result of the technical assistance provided. It has barely changed to become more independent and competent. Also, it does not have the required capacity to gather or analyze essential data and its information system is not comprehensive. Little management capacity, despite the enthusiasm and commitment of most Board members, combined with insufficient autonomy and lack of an independent, adequate regulatory framework to carry out essential management decisions, such as tariff fixing, are the main obstacles faced by KWSB to improve the quality and financial sustainability of its service. 5. Major Factors Affecting Implementation and Outcome 5. Factors outside the control of government or implementing agency: The Project was scheduled over an eight-and-a-half-year period in recognition of the fact that it was larger than the First Project (Cr. 1374). In the end it was concluded in nine years. Project implementation before the adoption of a revised plan (ref. para. 3.4) and supplemental credit was marred by the emergence of cost overruns over the initial estimates (ref. para. 3.5). Overall, the Project took between PCD approval and Appraisal and Closing date 12 and 11 years respectively. This large span weakened the leverage the Project could exert to facilitate institutional reforms and the development of an adequate environment for sector improvement. Little interest by foreign contractors in bidding for the civil works was mentioned in the supervision reports among project execution difficulties. Contracting was also slowed because ODA/CDC procurement requirements complicated matters (and incidentally hiked plant and equipment costs). Too frequent government changes in Sindh Province and law and order problems in Karachi hampered Project implementation as well. 5.2 Factors generally subject to government control: KWSB's limited autonomy within the Municipality and Province caused significant implementation problems. Cumbersome approval and review procedures in Pakistan caused initial delays in project - 10- execution while the tardy effectiveness of the supplemental Credit impeded contract awards. Additionally, the Government's replenishment of the counterpart revolving fund grew irregular, thereby delaying contractor payments. Furthermnore, KWSB's finances persistently suffered from high levels of public sector arrears. Consequently, KWSB was unable to generate sufficient contributions to capital or cover the mounting debt service problems. The provincial as well as local government and KMC should have done more to reduce their overdue payment arrears, as well as to improve KWSB's management capacity and autonomy. 5.3 Factors generally subject to implementing agency control: KWSB desired to employ local contractors in the works in order to increase their experience in such activities. But this laudable objective had adverse consequences. The works were obstructed by these firms' inexperience in such operations and their limited capital resources, several of which required corrective measures. Consequently, save for a tunnel bypass activity, no contract was completed within its original schedule. Only the pipeline contracts were completed within their extended deadlines. Although management capacity, including financial management, was weak in KWSB and only achieved limited improvements, this was not a major reason for these delays. 5.4 Costs andfinancing: The Project downscaling (ref. para. 3.4) led to a revised funding plan which reduced the cost estimate while the projected foreign exchange component increased. IDA's portion thus was programmed to rise from $125 million to $217 million with the help of the Supplemental Credit, while local sources' portion increased from $38.5 million to $66 million. ODA/CDC were scheduled to continue to finance a significant share of the foreign costs. IDA thereby assumed a far greater share of total costs, rising from 38 percent to 67 percent, while the co-financing share dropped from 42 percent to 15 percent. At project completion, the actual figures were below these estimates, except for IDA's larger contribution (ref. Annex 2). 6. Sustainability 61 Rationale for sustainability rating: Sustainability: Unlikely The K2 works are completed and functioning. But the prospects for their sustainability as those of the other project achievements are full of uncertainties. Because of the rush to make the K2 works operational, many of the technical tasks were not fully carried out. Some of the minor works (employees' housing, the walls surrounding the Dhabeji pumping station and the water treatment plant) were not completed, and the conduits, pumps and the water treatment plant untested. These tasks are likely to be finished in time, but KWSB's record of poor operations and maintenance practices pose concerns about the durability of, and obtaining full benefits from, the Project investments. Inspection, flow measurement, cleaning and maintenance of the water systemn have been infrequent over the years. And KWSB does not have accurate data on pump or rising main performance. Further, the four 40-year-old pumping stations are beyond their design life and already rely on their standby pumps. 6.2 Transition arrangement to regular operatiosns: In light of these deficiencies, several Bank missions recommended that KWSB involve a - 11 - private operator to ensure quality functioning of its new assets. Nothing came of this proposal at the time. During the ICR mission though, new Government authorities expressed interest in enlisting IDA funding for such a scheme to help provide a basis for continuing effective operation of the Project. However, even success in achieving the latter would only partially alleviate sector conditions --and still not adequately address the basic Karachi water problems, such as excessive leaks, in-efficient allocation of water among users, control of water "mafias" and adequate commercial practices. There are substantial grounds to judge that the solution to Karachi's water problems should not depend as exclusively as initially perceived on supplementing the city's gross supply. Important as have been the efforts to augment the latter, there should be more weight given to improving management capacity and providing the adequate regulatory and institutional framework to allow it to improve efficiency and operation, as well as introduce demand management measures. As mentioned, KWSB has failed to significantly cut its high water losses. Moreover, the known deficiencies in the distribution system are considered substantial enough to crimp the realization of the full benefits of the additional water from K2. On these accounts, it appears clear that a fundamental management and regulatory change is needed, rather than to continue pursuing incremental KWSB improvements along the past approaches. Some of the steps on the path to follow can be suggested from the experience and lessons learned with the execution of this project: * One might be to implement a coherent decentralization of some water sector services in a manner that opens a substantial role for private enterprise. Engaging more market-disciplined operators appears necessary for replacing KWSB's outdated management practices and responding to demands more agilely. - A second element is to put greater emphasis on water distribution, reduction of water losses, introduction of demand management and better and more equitable allocation, with less focus on production. * A third element is to recognize that Karachi's economic and social conditions do not lend themselves to solutions dependent on market-level financial performance. Full (or even quite high) recovery of water charges is dubious in the short term at such low income levels. * Another would be to draw on international successes in effective civil society collaboration with local government and private operators in meeting essential urban services, which Karachi in fact provides. Its low-income Orangi settlement and a local research and training institute have evolved a partnership scheme that has helped overcome sewerage problems for over 15 years. It has since been replicated in over 45 other settlements in Karachi and 7 other cities. To be sure, there are great differences between the Orangi's experience in building flush latrines and secondary sewers compared with the construction and operation of far more costly, complex centralized water system infrastructure. However, the partnership model has been shown globally to confirm the willingness and ability of local groups (along with NGOs) to help organize and even assist in managing public service facilities-as well as to invest in these measures. - 12 - The success of the suggested reform path outlined above depend on many unresolved issues though. These refer mainly to the existence of sufficient agreement among the different actors in the society (both official and non-official, particularly through the local NGOs, some of which have been a vocal opponent to the involvement of the private sector) on the reform path and the subsequent development of an appropriate regulatory framework. Governance, adequate treatment to low-income areas, social acceptability of the PSP model to use and improvement of financial management practices should be the priority issues to address. 7. Bank and Borrower Performance Bank 7.1 Lending: Unsatisfactory The shortcomings in project appraisal and preparation discussed in para. 3.5 were supplemented by the inadequate appreciation during these processes of the extent of Karachi's sizeable infrastructure backlog. The Project did not address the lack of an adequate regulatory framework that could facilitate the reforms and developments needed to improve service quality in a sustainable way. There should have been a stronger appreciation that the 20 percent capital expeniditure coverage target was unrealistic and an inappropriate motif of the Credit's financial conditions. The team also appeared to have made a too optimistic assessment of the commitment of the government and KWSB's capacity-strengthening prospects. 7.2 Supervision: Unsatisfactory Although the Bank accurately and fairly judged, rated and reported project implementation progress and performance, it failed to appreciate the importance that institutional reform and adoptiion of an adequate regulatory reform had to achieve project objectives in a sustainable manner, inappropriately stressing physical achievements over overall service development. On the positive side, it gave helpful technical advice to KWSB and the government in very supportive ways. It maintained a positive balance between rigorously enforcing Credit covenants (which was instrumental in KWSB's staff reduction and cutting the payment arrears of Karachi government agencies) and showing flexibility when needed. At a critical juncture, the Bank demonstrated notable cooperation by significantly increasing funding support for the Project, which served to offset the Borrower's and Government's failures to provide their scheduled contributions. It did the same also in agreeing to cut the sum required for replenishing the counterpart revolving fund. Also., at one point, the IDA team carried out a helpful participatory-type examination of KWSB's institutional problems and exploration of options for its strengthening (abetted by ODA and PHIRD support), although KWSB did not implement them. - 13- With hindsight, it can be considered that project closing date was correctly extended to complete on-going works and allow the entrance into operation of the expanded system. Despite the sustainability issues referred to above and the lack of advance in the institutional development of KWSB, the completed works proved critical to, in the short term, avert a huge water crisis with its related social and political costs. Both the initial appraisal report and the MOP for the supplemental credit state that the Project's civil works are almost exclusively in desert areas or in land already owned by the Government/Board, and therefore KWSB did not need to relocate or resettle any local people. No reference on resettlement have been found in the project records --even though US$930,000 was spent on land acquisition--, and Bank safeguard policy on resettlement seems to have been properly complied with. 7.3 Overall Bank performance: Unsatisfactory The overall Bank's performance is judged unsatisfactory primarily because its contribution, instrumental for the completion of the physical works, failed to achieve their sustainability. Although attention during supervision was also given to some factors that affect the financial viability of KWSB, such as adequate tariffs and staffing levels, and advances can be seen in these areas, it failed to adequately address essential issues related to the regulatory and institutional framework and the Government's commitment to the Project's concept and objectives (ref. paras. 7.5 below). This is despite the recognition of the importance of the completed works and their impact on the preservation of essential water supply volumes for Karachi's needs in a critical period. These would not have been accomplished --and Karachi's condition could have been more perilous-- without IDA's help. Similar assessment applies to KWSB's organizational improvements. However, it bears noting the abundance of IDA's resources devoted to alleviating Karachi's water problems. From January 1984 until December 1989, three IDA projects addressing these problems were being implemented (Karachi Water Supply I, Credit 1374, US$25.0 million; elements of the Karachi Special Development Project, Credit 1652, US$70 million, and K2, US$217 million). A fourth project was prepared (but ultimately foundered) during K2's execution. Borrower 7.4 Preparation: Satisfactory Within the limits of its technical capabilities, KWSB ably contributed to project preparation. 7.5 Government implementation performance: Unsatisfactory Government support was particularly deficient in not providing a suitable policy environment for its desired decentralization of sector financial responsibilities, including the - 14 - development oif an adequate regulatory framnework for the service that delegated management autonomy to K'WSB. As a result, KWSB's --and Karachi's municipal-- officials were too closely engaged in day-to-day operations and management decisions more suitably left to technically skilled KWSB personnel. Additionally, the absence of consistently timely, adequate counterpart funds caused costly problems. 7.6 Implementing Agency: Unsatisfactory KWSB performed well in comrpleting the civil works largely on time, bettering its past operations. However, this was overshadowed by its limited progress in upgrading other aspects of its functions and meeting Project commitments (ref. paras. 4.2 B and C, 4.5, 5.3, 6.1). Additionally, it showed poor project financial management, including a lack of adequate financial controls as reflected in qualified audit reports and insufficient follow-up of significant audit observations. 7.7 Overall Borrower performance: Unsatisfactory (for the reasons indicated in paras. 7.5-7.6) 8. Lessons Learned Three main lessons can be drawn from this project's implementation: (i) the need for an adequate regulatory framework that provides sufficient management autonomy and a path for reform that guarantees sustainability; (ii) the limitations of financial covenants and conditionality without the former; and (iii) the need to incorporate in project design valuable local experiences, particularly when they specifically address poverty alleviation. Project results show the importance of addressing the lack of a regulatory framework, together with the strengthening of the institution and the execution of physical works. No action on the regulatory framework that would give KWSB management the autonomy to undertake the changes--private sector involvement sector, tariff adjustments, collection enforcement through service disconnection and demand management, among others-prevented its capacity to improve service quality in a sustainable manner. Without this regulatory framework in place, KWSB's management team ability and possibilities to make full use of the support provided by the project to strengthen the institution were greatly constrained. Apart from limiting the sustainability, subsequent management capacity shortcomings prevented the full realization of the project benefits, as the increased supply achieved was partially offset by continued leaks, no demand management and inequality in the allocation of the scarce resources available. Related to this, the project also shows wrong beliefs that tariff increases reduce collection efficiency. KWSB's collections kept pace with billings through the first half of the decade, through nominal tariff increases of 50 percent and (twice) 30 percent. However, real collections stagnated and the collection ratio declined, from 1997 to 1999, when no tariff increases took place. Rather than tariff rates, collection efforts and commercial management capacity--and ultimately the existence of an adequate regulatory framework-.-explain poor collection performance. - 15- This project provides yet another example of the limitations of financial covenants when the implementing agency does not have de facto full authority to take all the actions needed to assure full compliance. It also calls into question the usefulness of focusing on financial undertakings in designing Bank loan conditionality when the fundamental problems concern other issues. They were in this instance the obstacles to deal with "tanker mafias" and ensure the adequacy of water supply (particularly to low-income customers comprising large portions of the service market); lack of governance; and an adverse environment for commercial incentives. Third, the reasons for the unsatisfactory outcome of the Project show the importance of incorporating in project design the valuable local experiences available. The Orangi experience, with its lessons of community involvement and responsibility sharing, would have been of great value in giving more attention to the issues of leak's control and equitable allocation of resources, which have a significant impact on the poor communities of the city. Weak management, including poor financial management, is the main factor that prevented KWSB from performing more efficiently. Some lessons can be drawn from this experience: (i) for a project that put so much emphasis on the utility's gaining financial self-sufficiency, the design/appraisal of the financial management capability was entirely inadequate, with a too small budget ($1.5 million) for TA, and only limited provisions in the TA description for this purpose; (ii) while KWSB finally got a clean audit report, the ICR mission's discussion with the auditors (from the private sector and well regarded) raised numerous questions about their capabilities, thus, even though the Bank can't check out auditors in the normal course of project preparation/supervision/ICRs, some form of control of their work might be necessary; and (iii) to devise a suitable strategy for making/keeping itself more financially viable, KWSB lacked --and needed as a priority-- to bring together its sorry tracking of losses/collections/UFW and assess (from a financial management standpoint) their collective picture. Finally, although the scope and complexity of the works to be financed and the weak implementation capacity of KWSB recommended a long implementation period, its excessive span (12 years from PCD approval to completion) made it more difficult still to achieve the institutional objectives of the project. It also hindered the possibility to identify --and address-- issues not properly identified during preparation, such as the need to improve the regulatory framework for the sector. A series of projects, with smaller project implementation periods, might be more efficient to address the complicated issues and sector development difficulties in situations like this of Karachi. 9. Partner Comments (a) Borrower/implementing agency: KWSB stated that its principal lessons from the project experience were: (i) the utility of having established a separate executing entity (the Development Wing) to administer foreign-aided projects; (ii) the benefit of having delegated full authority for the Project to an internal steering committee; - 16 - (iii) the benefit of international consultants' support from the very initial stages to assist the Board in planning the implementation of the Project, monitoring and evaluating it, providing monthly reports on its progress, and assisting in sorting out disputes during its implementation; (iv) the usefulness of having procedural manuals and updating them, as well as maintaining project databases, during project execution; and (v) the benefits of linking Government requirements for payments with IDA audit requirements. More detailed comments are included in Annex 8. (b) Cofinanciers: The Bank team preparing this ICR asked for comments from ADB and DFID in response to the references made by KWSB to their participation in the project. These comments had not been received at the time of going to press. If received, they will be added to the project files. (c) Other partners (NGOs/private sector): As part of project evaluation, a workshop with all involved stakeholders took place in Karachi, from June 28 to 29. The conclusions of this workshop will be available after this ICR goes to press. They will be added to project files 10. Additional Information n/a - 17 - Annex 1. Key Performance Indicators/Log Frame Matrix Outcome / Impact Indicators: 1. Water Transmission and Distribution Construction of about 150km water Provision of about 1 OOkm of second The works constructed began at Guijo, some transmission system conveyance system for 100mgd more raw 90km southeast of Karachi, from where the Indus water to new treatment facility at water gravitates 30km to Dhabji. From there, northeast Karachi the water is pumped to High Point and again gravitates in a conduit some 50km to the northeast Karachi treatment plant. Water treated there either gravitates or is pumped into the distribution system through new pipelines. The new system was brought to full capacity (496,480 m3/d) by December 1998, The works included: -Built new headworks at the tail of the Kinjhar/Guijo canal. They were connected to the existing canal system (without disruption to water supply) in April 1998. -Installed some 9.8km conduit and road crossing under National Highway and 2km pipe to cross Gharo creek -Built forebay structure at High Point; reinforced conduit of 3.85km and, 13km conduit; buiKt pipes for crossing Sukkur Nallah; and built an additional 13km concrete box conduit -Built a twin rising main 4.6km long, along with major road and railways crossing -Constructed 6km pipelines to transmit 320,000 m3/day to University Reservoir -Constructed 4.4km long pipeline designed to transmit 140,000 m3/day of treated water to central Karachi -Installed 130 meter and 6,565 meter pipelines to improve distribution to northeast Karachi zone -Installed 2,914 meter and 35 meter pipelines to improve distribution to central Karachi zone -Built concrete reservoir of 45,460 ,m3 capacity within site of NE treatment works -Strengthening of the primary distribution -Reduction of distribution mains to some system through provision of about 50km of 10km; elimination of mains in southeast new mains in northeast, southeast and Karachi central Karachi -Repaired and plugged 2,235 joint in Hub -Addition of repairs to Hub system main main (which were 30 years old and leaking badly). Works were canied while supplies partially continued via a parallel main during dosure period -Kinjher/Guijo canal was remodeled -Upgrading Koti Feeder and Kinjher Lake works -K3 engineenng not -Preparation of detailed engineering for accomplished Karachi IlIl Project (K3) - 18- 2. W\ater Treatment -Expansion, construction and equipping -Elimination of expansion of treatment -Constructed 450,000m3/day works in treatment facilities at Pipri, Manghopir and facilities northeast Karachi for direct sand filtration, northeast Karachi -Construction of facilities limited to northeast with pump stations, administration building, Karachi standby generator house and site works -Installed complementary plant and equipment at northeast Karachi treatment site for manufacture, installation and commissioning of equipment -Built treatment plant works boundary and staff housing -Expansion of pumping station at Dhabeji -Expanded the Dhabeji station to capacity 477,000m3/d; constructed its boundary wall and staff housing; installed equipment for its mechanical and electdrical plant; installed rising main, major road and railway crossings. -Computerize data systems for water -Deletion of provision for introduction of -System management study partially carried operations computer-based inventory of water network out and improved mapping of water system -Study on improving water system -Addition of preparation of study for -Consultants assisted in the preparation of management privatization of water distribution functions in privatization proposals, which were set aside high income areas -IDA support provided for carrying out detailed study of Karachi's overall water loss reduction and system strengthening needs. A project addressing these was prepared. However, it did not advance because of problems over the proposed privatization measures. 3. Institutional Strengthening -Modifying KWSB's organizational structure; -Added preparation of a corporate plan and -Some restructuring was carried out and systems and procedures; training senior an agenda and strategy for a private sector elements of a corporate plan were prepared. managers and key technicians; role As indicated above, a strategy for a private sector role was designed but this was not implemented. -Establishing Development Wing -Achieved -Study metering and preparation of metering -Study canied out but recommended program program was not implemented due to problems regarding metering equipment -Train KWSB staff in engineering, -Board staff received considerable ;procurement, operations and management on-the-job training in these fields -Build and manage training center -Attempts were undertaken to build the center but these uitimately were abandoned -Increase collections -Added provision for fumishing collections division with PCs - 19- -Complete computerization of billing and -Added provision for upgrading mainframe -Progress on computerization of financial collections; upgrade financial planning and computer operations budgeting -Review tariff structure and implement -There were some analyses of tariffs but recommendations their condusions were not comprehensively implemented. Tariff adjustments were only ad hoc -Develop and manage consumer education -Relatively little was carried out program -Computerize information system for -Not done operations and inventory of sewerage maps -Equip KWSB for industrial effluent survey -Industrial effluent monitoring equipment and monitoring installed and KWSB's laboratory is operational -The Sindh Protection Agency was established, but it proved to be ineffective, partly for lack of funds. -Strengthen KWSB/GOS to enforce -The KWSB and KMC Council passed environmental ordinances; establish Sindh sewage by-laws. These are being considered Protection Agency; begin actions on priority by the Karachi Council. environmental issues Output Indicators: -Potable water supply was increased by -The project's successful addition of 105 about 100 mgd mgd (19,480 more cubic meters per day than projected) increased water production for Karachi's needs. However, there was a depletion of Hub reservoir supply at the same time. Normally 100 mgd, it now fumishes only some 15 mgd). Thus, K2's production provided less of a net increase than an offset for Hub's reduced supply-although it was very tmely and helped avert a more serious tightening of supply. -Reduce water wastage -The reception of the new supply has been favorable in the areas most directly supplied by it, whose previous volumes were poor. -Water transmission system investments listed above: (a) provide control facilities to divide water flow between KWSB system and new canal works; (b) new pipelines enhance distribution in urban areas (c) Kinjher/Guijo canal remodeling permits conveyance of entire Federal water allocation from Indus to head of project works at Guijo -Northeast Karachi treatment facility provides first stage of facility aimed to ultimately have capacity of 200 mgd - 20 - -KWSB acivities to reduce leakages in hts system included the above noted repairs in the 66 inch diameter trunk main carrying water from Hub reservoir. These are estimated to save some 6-8 mgd of water. -Metering program had no impact -KWSB collections improved to 90 percent -KWSB progressively lost ground in of billings, and water bills are settled within collection effidency. The average collection three months peiiod rose from some 525 days in FY91-96 to about 1,066 days in past three years. -K'NSB achieve a self-financing ratio of at -KWSB survived through the 1990s through least 22 percent subsidies; has only recently run an operating surplus. -KNSB generate funds sufficient to cover 20 percent of capital expenditures beginning in FY92 -KVVSB achieve debt service coverage of no -KWSB has failed to meet debt service less than 2.3 requirements since FY96. -KWSB's billings rise from Rs. 510 million -Billings in real terms increased by over in '1988 to Rs. 1,332 million in 1993. 150%. -KWSB's annual collections exceed Rs. 1.3 -Real collections increased about 89 percent million in FY91-99. However, arrears remain high. -KWSB reduce its personnel and not -KWSB cut staff 46 percent in 1995-96 and increase its manpower costs in real terms contained staffing costs thereafter. In addition, KWNSB's 1997-98 direct expenses were below those for 1994-95. End of project - 21 - Annex 2. Project Costs and Financing Pro ect Cost by Comr nent (in US$ million e uivalent) Civil Works 192.70 213.60 110.84 Equipment and Installation 65.90 74.52 113.08 Institutional Strengthening 18.40 19.71 107.12 Engineering and Supervision 22.60 17.03 75.35 Land Acquisition 3.70 0.93 25.14 Total Baseline Cost 303.30 752.99 Physical Contingencies 15.00 Price Contingencies 13.40 Total Project Costs 331.70 752.99 Total Financing Required 331.70 752.99 *Revised estimate (Ref. MOP, January 14, 1993) Project Costs b Procurement Arran ements (A raisal Estimate) (US$ million equivalent) 1. Works 216.20 0.00 0.00 0.00 216.20 (173.00) (0.00) (0.00) (0.00) (173.00) 2. Goods 0.00 1.10 0.00 67.70 68.80 ______ __ (0.00) (0.90) (0.00) (0.00) (0.90) 3. Services 0.00 0.00 43.00 0.00 43.00 (0.00) (0.00) (43.00) (0.00) (43.00) 4. Miscellaneous 0.00 0.00 3.70 0.00 3.70 (0.00) (0.00) (0.00) (0.00) (0.00) 5. Miscellaneous 0.00 0.00 0.00 0.00 0.00 (0.00) (0.00) (0.00) (0.00) (0.00) 6. Miscellaneous 0.00 0.00 0.00 0.00 0.00 (0.00) (0.00) (0.00) (0.00) (0.00) Total 216.20 1.10 46.70 67.70 331.70 (173.00) (0.90) (43.00) (0.00) (216.90) - 22 - roject Costs by Procurement Arrangements (Actual/Latest Estimate) (US$ million equivalent) Procument Method. Expedfture Ctgory ICP rNCF Oter . Total Cost 1. 'Works 213.60 0.00 0.00 0.00 213.60 (188.77) (0.00) (0.00) (0.00) (188.77) 2. Goods 0.00 0.30 0.00 74.22 74.52 _____________________ (0.00) (0.24) (0.00) (0.00) (0.24) 3. Services 0.00 36.74 0.00 36.74 _____________________ (0.00) (0.00) (36.74) (0.00) (36.74) 4. Miscellaneous 0.00 0.00 0.93 0.00 0.93 (0.00) (0.00) (0.00) (0.00) (0.00) 5. Miscellaneous 0.00 0.00 0.00 0.00 0.00 _____________________ (0.00) (0.00) (0.00) (0.00) (0.00) 6. Miscellaneous 0.00 0.00 0.00 0.00 0.00 _____________________ (0.00) (0.00) (0.00) (0.00) (0.00) Total 213.60 0.30 37.67 74.22 325.79 _____________________ (188.77) (0.24) (36.74) (0.00) (225.75) 4. 1Miscellaneous=Land Acquisition " Figures in parenthesis are the amounts to be financed by the Bank Loan. All costs include contingencies. 2 2. Goods -- N.B.F. figure cofinanced in parallel by ODA/CDC: procured in accordance with ODA and CDC regulations. - 23 - Annex 3: Economic Costs and Benefits Net Present Value/ERR: 22 percent The January 1993 MOP for the Supplemental Credit estimated the economic internal rate of return (EIRR) at 11 percent. Retrospective analysis of KWSB's data provided by KWSB shows that the realized economic rate of return was much higher: 22 percent. The Project economic returns exceeded expectations, partly because of cost savings in construction (against the cost estimates used in the Supplemental Credit), and partly because of questionable conservative financial projections. Additionally, O&M costs, which the MOP assumed would be equal to 5 percent of capital costs, are lower, and market prices for water, estimated in the MOP to be constant over the life of the Project in real terms, have instead been slowly increasing. To be in the conservative side, the analysis assumes that: (1) KWSB will fail to reduce system water losses to below 35 percent in the next twenty years; and (2) realized benefits, even for delivered water, would be only two-thirds of observed tanker prices that the population has been shown to be willing to pay. In addition, the EIRR calculation limits the time horizon to the year 2018, instead of extending it to the full forty-year span of the Project. - 24 - PAKISTAN SECOND KARACHI WATER AND SANITATION PROJECT ECONOMIC INTERNAL RATE OF RETURN (ICR) Costs | Benefits Project O&M Incremental Incremental Incremental Net Capital Cost Production Delivery Revenues Benefit Year Rs Ml Rs. Milf MGD3 MGD4 Rs. Mil5 Pre-93 842 (842) 1993 686 (686) 1994 768 (768) 1995 807 (807) 1996 1,155 (1,155) 1997 946 (946) 1998 860 303 55 36 1,353 285 1999 508 329 100 65 2,507 1,620 2000 329 100 65 2,556 2,177 2001 329 100 65 2,605 2,226 2002 329 100 65 2,655 2,276 2003 329 100 65 2,706 2,327 2004 329 100 65 2,759 2,380 2005 329 100 65 2,812 2,433 2006 329 100 65 2,866 2,487 2007 329 100 65 2,921 2,542 2008 329 100 65 2,978 2,599 2009 329 100 65 3,035 2,656 2010 329 100 65 3,094 2,715 2011 329 100 65 3,153 2,774 2012 329 100 65 3,214 2,835 2013 329 100 65 3,276 2,897 2014 329 100 65 3,339 2,960 2015 329 100 65 3,404 3,025 2016 329 100 65 3,469 3,090 IRR 22.03% NPV@10% 5,229 1,862 | 15,236 7,947 - 25 - Notes: Water values were estimated at two-thirds of estimated tanker prices for water. Observed tanker prices were: (I) Rs.100/1,000 gallons in 1990; and (2) Rs.300-400/1,000 gallons in 2000. A water value of Rs.350/1,000 gallons was used in the analysis. This value was converted to 1993-equivalent prices. The real growth rate in the value of water was calculated at 1.9 percent per year from 1990 to 2000. This growth rate was assumed in the 1 990s and for the remainder of the project. Source: Karachi Water and Sewerage Board -26 - Annex 4. Bank Inputs (a) Missions: S_age of Project Cycle No. of Persons and Specialty Performnn Rai (e. 2 Economists, I FMS, etc.) Implementation Development Month/Year Count Specialty Progress Objective Identification/Preparation n/a n/a n/a n/a n/a n/a Appraisal/Negotiation December 1987 na n/a March 1992 4 1 SE; 1 Ec; I Eng; I Consultant; (supplemental credit -- 1 FA Cr. 1987-1) Supervision n/a n/a n/a July 1989 4 1 OS, 2 SE, I FA HS HS December 1989 2 1 SE, I FA HS HS July 1990 I I SE HS HS February 1991 2 1 SE, 1 FA HS HS July 1992 2 1 Eng, I Consultant S HS December 1992 2 1 Ec, I SE HS S July 1993 3 1 OS, I SE, I FA HS S February 1994 3 1 SE, I OS, I FA HS S June 1994 3 1 FA, I OS, I SE HS S October 1995 2 1 MFS, I SE S S May 1996 2 1 MFS, I SE S U October 1]996 2 1 MFS, I SE U U August 1997 2 1 MFS, I EE U U May 1998 2 1 WSE, I MFS S S May 1999 1 IWSE S U ICR January 2000 3 1 WSE, 1 FA, 1 Consultant S U Key: Ec=Economist EE=Environmental Engineer FA=Financial Analyst MFS=Municipal Finance Specialist OS=Organizational Specialist S]E=Sanitary Engineer WSE=Water/Sanitary Engineer - 27 - (b) Staff. Stage of Project Cycle Actual/Latest Estimate :::______________ _ :I No. Staff weeks US$ (,000) Identification/Preparation n/a n/a* Appraisal/Negotiation n/a 253.8* Supervision 499.5 ICR 38.2 Total 791.5 *Includes costs of Identification/Preparation/Appraisal/Negotiation. - 28 - Annex 5. Ratings for Achievement of Objectives/Outputs of Components (H=-High, SU=Substantial, M=Modest, N=Negligible, NA=Not Applicable) Rating FMacro policies O H O SU O M O N * NA FSector Policies O H OSUOM *N O NA ZE Physical O H * SU O M O N O NA F Financial O H O SU O M * N O NA z Institutional Development 0 H 0 SU * M 0 N 0 NA IEnvironmental O H OSUOM * N O NA Social f Poverty Reduction O H OSUOM O N * NA NGender OH OSUOM ON *NA FE Other (Please specify) O H OSUOM ON * NA F Private sector development 0 H O SU O M 0 N 0 NA i Public sector management 0 H O SU O M 0 N 0 NA M Other (Please specify) O H OSUOM ON * NA -29 - Annex 6. Ratings of Bank and Borrower Performance (HS=Highly Satisfactory, S=Satisfactory, U=Unsatisfactory, HU=Highly Unsatisfactory) 61 Bank performance Rating 1Z Lending OHS Os *U OHU Z Supervision OHS OS *U OHU H Overall OHS Os * u O HU 6.2 Borrower performance Rating • Preparation OHS *S OU O HU • Government implementation performance O HS O S 0 U 0 HU • Implementation agencyperformance OHS OS * U O HU • Overall OHS OS * U O HU - 30 - Annex 7. List of Supporting Documents Available in Project files: 1. ICR mission Aide Memoire 2. Staff Appraisal Report 3. President's Memo Armex 8 -- Borrower's Comments - 31 - Annex 8: Borrower's Comments Karachi Water and Sewerage Board. The Second Karachi Water Supply and Sanitation Project. (Credit 1987-1 PAK) Borrowers Contribution to the Implementation Completion Report. (ICR) 1.0 Introduction. This evaluation statement has been prepared in compliance with the requirements of the IDA ICR preparation procedures BP 13.55 April 1994. The statement is based the presentations of departments of KWSB and other concerned authorities to the IDA ICR Mission of November 1999 but without repetition of facts and data already contained in the IDA Implementation Completion Report. 'The Federal Government allocation of water from the River Indus for the water supply of Karachi is 1200 cusecs (approxirnately 650 million gallons per day (mgd)). The Second Karachi Water Supply and Sanitation Project (KII) was a step towards development of the water supply infrastructure serving Karachi, to convey and introduce into the existing water distribution system, the balance of the federal allocation, This balance was of the order of 230 mgd. in parallel with and complementary to this development, the capacity of the sanitation infrastructure of the city was to be increased. During the process of project preparation, increasing project costs and financial constraints led to decisions to implement the project with a nominal capacity of 100 mgd but designed to facilitate future development of the remaining balance of the federal allocation (130 mgd). In addition, full treatment of the 100 mgd scheme was to be provided together with development of existing water treatment facilities to provide full treatment to all water supplied to the city. From the inception of the project, the need for strengthening the institutional integrity and administrative capability of the recently established KWSB was identified. In addition, the distribution system required strengthening and water loss reduced. In consequence, components were introduced into the project to start to address these issues. The Project commenced against a background of preparatory work. In particular, the locally funded Balance Conveyance Scheme (nominally 42 mgd) and the rehabilitation of the KG Canal funded jointly by the IDA (Credit 1652) and the GOP under the Karachi Special Development Project I. (KSDP 1) and the institutional strengthening work carried out under IDA Credits 1652 and 1374. The most significant event during Project implementation was agreement on the reformulation of the project definition and enhanced funding formalised in the Supplemental Credit Funding Agreement of 1993. By this agreement, the objectives of the Project were modified and the scope of the Project works reduced. Specifically, some physical works, mainly those associated with additional water treatment facilities at existing treatment works, were deferred, increased emphasis was placed on leak detection and water loss reduction, revenue collection efforts were to be enhanced, and an in depth examination of possible options for public/private sector participation in the provision of water and sanitation services undertaken. -32- Independently, preparation procedures for the funding of the sanitation element of the project by the Asian Development Bank led to a reduction in the proposed treatment capacity from 94 MGD to 80 mgd to be provided by two treatment works located at Mauripur (54 mgd ) and Korangi (26 mgd). Ultimately, funding constraints led to the deferment of the Korangi plant and the work proceeded under the title of The Greater Karachi Sewerage Project - Phase I (Stage 1). It is against the objectives and definition of the reformulated projects of the IDA Supplemental Credit Agreement and the ADB loan that this evaluation is made. However, the opportunity is taken for observations regarding the original scope of works. 2.0 The Project Objectives and Evaluation. 2.1 (a) To increase potable water supply by 100 mgd (about 31%) and further augment water availability by strengthening loss reduction measures. The physical works of the water supply element of the Project were commissioned at full capacity in October 1998. These works which provide a new and complete 100 mgd water supply facility to the City of Karachi were a major undertaking across some 120 kilometres from Gujjo in the east to the heart of the City distribution system. The measured discharge of the Dhabeji pump station with three duty pumps in operation (the design condition) was 107 mgd. .All elements of the bulk conveyance system proved capable of sustained operation at this flow, the water treatment works proved capable of treating the flow to the specified standards, and the new primary distribution mains successfully introduced the new water into the existing distribution system. The objective of development of the water supply infrastructure has been fully achieved. However, the comnissioning of the scheme coincided with an unprecedented reduction in the supply of water from the Hub River source and was crucial to averting severe water shortage in the city. As a consequence, the overall enhancement of the water supply to Karachi has yet to be realised and its impact evaluated. Early work on the water loss reduction and leak detection in the context of the primary credit agreement assisted in indicating extent and nature of the problem. As a consequence, and consistent with the revised scope of the project, repair of the Hub Trunk Main was included in the physical works programme of the project works redefined in the Supplemental Credit Agreement. In addition, under Part C:(c) of the project description, the Project Consultants were commissioned to prepare a dedicated water loss reduction and system strengthening project, for appraisal by the IDA. Repair of the Hub Trunk Main comprised the repair of approximately I Okm of 66 inch diameter (1 .7m) prestressed concrete pipeline using a proprietary joint repair system. The contract period was four months from the instruction to cornmence the work. The work was in fact completed over a period of two years. Primary reasons for the delay were time taken to develop working techniques, the difficulty, given the already limited daily supply of water in the area to give a series of closely spaced closures of the pipeline, and departmental interfacing within the KWSB. Following completion of the work subsequent inspections of the ground surfaces and drainage channels adjacent to the main indicated that leakage from the barrel of the 66 inch main had been reduced almost to zero. Proposals to perform a drop test in the Hub Reservoir to measure residual leakage in the main were not performed due to the continuing necessity to avoid disruption to water supplies. Nevertheless, the performance of the work gave useful inforrnation regarding the difficulties, organisational requirements, physical condition of large diameter water pipes, and cost effectiveness of repair work which should be of use in future planning. -33- The Water Loss Reduction and System Strengthening Project was prepared and available for appraisal by the IDA, by June 1996. No Appraisal was performed. This component of the of the Project, intended to provide a spring board to the implementation of work in this crucial area of neglect, has therefore not precipitated the progress hoped for. 2.2 (b) Improve the financial viability of KWSB through increased revenues, cost reductions, and greater operational efficiency. Measures introduced as a result of the terms of the Credit agreement (improved revenue collection and regular tariff increases.) resulted in a significant increase (approximately six fold) in revenue from the sale of water and related charges over the life of the Project. This improved performance continues. However, revenue remains well below both billed and potential revenue. Increases in water charges have been resisted by the Government at each stage and have been approved only as a result of pressure of potential consequences of default on agreements with the IDA in the context of the Credit agreement. The requirement for the KWSB to reduce costs by reducing the total number of personnel engaged was tackled with great difficulty. Never the less, a substantial reduction was achieved, by a combination of both disciplined application of terms of employment and a scheme to encourage personnel to leave the their employment. The personnel of the KWSB was reduced from approximately 14,000 to approximately 8500. While assisting materially with the financial management of KWSB it is not perceived that operational efficiency in the KWSB has improved as a consequence of these achievements. 2.3 (c) To improve the organization and management of KWSB. Consequent upon earlier studies and actions, particularly those resulting from Credits 1374 and 1652, the organisational structure of KWSB was reformed. The KII Project built on this restructuring by confinning the identity and enhancing the performance capability of some departments. In particular, the establishment of the Development Wing as a dedicated unit in its own separate offices and the capability finance department., training exposure and computerisation of the accounts department. The Development Wing was successfully established in new offices under the Director of Foreign Aided Projects. It played a crucial role in the performance of the Borrowers obligations and in coordination, administration, supervision, and ultimately the completion of all aspects of the Project. By working as part of the construction supervision organisation of the Project Consultants, or interfacing with them in the performance of the obligations of the Employer under contracts for the procurement of physical works, staff of the Development Wing gained significant first hand experience of construction supervision and contract administration The improved performance of the Finance Department is clearly demonstrable in the increasing billing and collection of water charges and operation of disbursement procedures and rapidly available financial data. In addition, the Department prepares its accounts annually to a standard conforming with International Audit Standards (IAS). Except as a result of steady strengthening of the capability of the Development Wing and the performance of the Finance Department, there have been no significant improvements in the organisation and management of KWSB which are attributable to the Project. 2.4 (d) To improve sanitation in the City including its low income and coastal areas by increasing sewerage coverage by 232 mgd and treatment capacity by 94mgd. -34- Independent of the Water Supply Component, preparation procedures for the funding of the sanitation element of the project by the Asian Development Bank led to revision in the proposed treatment capacity from 94 mgd to 80 mgd. This additional capacity was to be provided by two treatment works located at Mauripur (54 mgd ) and Korangi (26 mgd). Ultimately, funding constraints led to the deferment of the Korangi plant and the work proceeded under the title of The Greater Karachi Sewerage Project - Phase I (Stage 1). The Mauripur treatment works was commissioned in December 1997 with a capacity of 54 mgd. In addition, the Lyari Trunk sewer having a capacity of 138 mgd was laid together with some 31.25 km of trunk and secondary sewers in the Baldia area. These sewers serve significant low income areas but not coastal areas. The Project did not include extensive tertiary sewers. The KWSB are working to connect existing upstream networks to the Project trunk mains and to construct improvement works to increase the load delivered for treatment at Mauripur. These works are being funded from local sources and by this means the area effectively served is steadily being increased. Throughput at Mauripur treatment works is currently of the order of 35 mgd. The primary physical objectives of the Project have been substantially achieved though the full benefit through ongoing expansion of the sewerage system is yet to be achieved. Primary project covenants to increase the Sewerage Tax and increase revenue by improved tax collection have been partially achieved. The sewerage tax is levied on all water consumers who have been reluctant to pay the tax before the benefit of the expanding sewerage system is available to them. 3.0 Implementation Record and Major Factors affecting the Project. 3.1 Physical Works. Water Component. The implementation of the Project was not performed within the time frame of the original credit. The time frame was extended by two years from June 1995 to June1997 in the Supplemental Credit Agreement and subsequently to June 1998 by which time the physical works were substantially complete. A further one year extension was granted to permit the completion of outstanding works and to facilitate discharge of the final contractual obligations of the KWSB. The principal reasons contributing to delay were- (i) The initial inadequacy of project funding which became apparent shortly after award of the early construction contracts. This led to delay in the award of further contracts until the Supplemental Credit Agreement was made effective in 1993. The principle reasons for the inadequacy of funding are presented in the IDA Report P-5794-PAK dated January 1993. These reasons were changes in the scope of some civil works, escalation in prices of construction materials, currency exchange rates, low contingency provisions, and a mixed response from foreign contractors. (ii) Following the Establishment of the Supplemental Credit and as a consequence of the quality of response resulting from the initial contract procurement procedures, the IDA required that these procedures should be reviewed and revisions approved before further contract procurement could proceed. The results of the review were development of a strategy to promote participation in the bidding process of local contractors, revision of the prequalification documents from a subjective points system to a simple pass/fail system against non subjective criteria and the appointment of the Project Consultants as the Engineer rather than an officer of the KWSB. -35- Consequent upon the Review and implementation of its results, bidding for the nine remaining contracts, including all the trunk distribution mains to be laid in urban Karachi, was not commenced until December 1994 leading to award of the contracts in September 1995. (iii) Following award of the pipe line contracts the Pakistan Steel Corporation, a protected industry in Pakistan, was unable to supply hot rolled steel coils for conversion into welded steel pipe. These unforeseeable circumstances led to conflict with the IDA Procurement Procedures which in turn required renegotiation of affected materials supply clauses of the concerned contracts. As a consequence, contractors were unable to place orders for pipework until September 1996. (iv) The construction contracts awarded prior to revision of the contract procurement procedures were all significantly late in completion. The principal reasons appeared to be poor construction management, and the use of sub-contractors of dubious status. Also, because of delays to commencement in other works, some Contractors appeared to become complacent as it was clear completion of their contracts did not threaten commissioning of the Project as a whole. The later contracts, with the exception of staff housing, performed significantly better. In the case of contracts for the civil works construction of the NEK Treatment Works and the Dhabeji Pump Station (bid prior to the Supplemental Credit Agreement but as a condition enforced by IDA, not awarded until immediately after it) the delays in completion led to consequential delay in commencement of erection of electrical and mechanical plant, and ultimately, commissioning, and significant justifiable claims from the plant contractor. Sanitation Component. The implementation of the Sanitation Project was delayed by approximately nine months due to suspension of the Loan on account of KWSB having not settled accounts with the KESC. In addition, some further delay was attributable to contractor=s performance for reasons similar to the Water Component. Ultimately, due to local political perceptions towards the end of the Project, KWSB requested alteration to some components of the Works. This proposal was not acceptable to the ADB and in consequence some sewer laying was not commenced and ultimately the opportunity to construct these works was lost. 3.2 Project Funding. Provision of counterpart funding (GOS/GOP) frequently fell short of both the projected funding requirement and the actual demand. In consequence, disbursement from the IDA Credit was on occasions withheld. Ultimately, full counterpart funding was provided which enabled all financial settlements to be made in respect of works funded from the Credit before its closure. The funding provided in the Supplemental Credit Agreement of $216.9 together with counterpart funding from the GOP of some Rs 2360 M, proved adequate for the project elements to which it was applied. On closure of the Credit, a balance of some $10.OM of the Credit remained unutilised. Parallel funding for electrical and mechanical plant at Dhabeji Pump Station, Pipri Filter Plant and North East Karachi Treatment Works was provided through a British Government Grant and a loan (L27470 1) from the Commonwealth Development Corporation (CDC). As with the IDA funding, the initial provision was inadequate for the works contemplated and the scope of the works financed was reduced to fit the available funds. The result was that the funding was applied to plant at Dhabeji Pump Station and North East Karachi Treatment Works only. Hub Treatment Works and the extension of the Pipri Treatment Works were deferred. -36- These funding facilities were extended in line with the extended period of the IDA Credit. However, in September 1998, disbursement from the CDC loan was stopped due to default by the GOP in payment of interest and some capital repayment. Shortly after this event the loan validity period expired. No resolution of the loan servicing default has been achieved. In consequence, available project funding has been reduced by the unutilised balance of the loan of some , 3.2 million. As the estimated cost of the contract works approximate to the originally available funding, there is an unexpected shortfall in available funding of the order of, 3.0 million. As a consequence KWSB are in substantial default on contract payments. The contract is effectively suspended and this vital element of the 1 00, mgd system, though in operation, has not been brought to satisfactory completion.. ADB funding was adequate for the Project works undertaken, but on closure of the loan a balance of some 10,000 dollars remained undisbursed. 3.3 Compliance with Covenants and other Elements and Objectives of the Project. Project Consultants were engaged and arrangements made for the retention of their services throughout the implementation period of the project. Water and sewerage tariffs have been levied, generally in line with the levels agreed at successive stages with the IDA. The latest increases announced as effective from April 1998 have not been applied pending restoration of the Hub source. Staffing levels have been significantly reduced from approximately 14000 to approximately 8500. Designs and bidding documents were prepared for up-grading of the Kotri Barrage Feeder Canal and Kinjhar Lake impounding embankments. No funding has been made available for the commissioning of these works to proceed. These works are crucial to the security of the water supply from the Indus Source and its subsequent further increase to the full federal allocation. Detailed designs were prepared for the Hub and Pipri treatment works and south east Karachi primary distribution system st-engthening. These are the works deferred in the Supplemental funding Agreement. The treatment works have subsequently been funded by the Government of Pakistan and the Japanese funding agency JBIC. The project is ongoing. Neverthe]Less, and not withstanding what was achieved inj strengthening some departments of the KWSB, lack of a clear and consistent policy for reform of Karachi municipal authorities in successive governments throughout the implementation period of the project, has impeded progress towards a number of project objectives associated with institutional strengthening and administrative reform. In particular - Strengthening the management of operational departments within the reorganised structure. The capability for training facilities were enhanced by the establishment of a training centre headed by a Director of Training. Never the less, implementation of training programmes has been impeded by limited budget provisions. The development of systems and procedures manuals. The Training and Pilot Privatisation Project. 4.0 Project Sustainability. 4.1 Physical works. -37- The sustainability of the physical works of the Project depends on the level and competence of maintenance provided. Water Board staff remain technically (technical competence and material resources) ill equipped to operate and maintain the infrastructure assets of the Board including those of the KII Project. This problem is common to all staff levels and prevents the formulation of effective operation and maintenance practices and their implementation. For reasons indicated in section 9 below, KWSB were unable to benefit from facilities provided under the Project contracts for the training of staff at Dhabeji Pump Station and North East Karachi Treatment Works. At Dhabeji Pump station, urgent remedial works are required to correct aberrant pressure pulse generation from the impellers of the pumps installed, which excites heavy vibration throughout the installed plant. These remedial works are delayed primarily due to the effective suspension of the contract consequent upon the funding agency (CDC) suspending disbursement from their loan. The consequences of the vibration are seriously aggravated by the continued operation of the pump station to meet the water demand in Karachi in the face of depleted supplies from the Hub River source. -38- At Mauripur Treatment Works (STP 3.) an operations and maintenance contract has been awarded to a local contractor funded from KWSB resources. It is hoped that this initiative can be sustained and extended to the operation and maintenance of water works. 4.2 Financial. Improved revenue collection and more realistic tariff levels implemented in compliance with the covenants of the IDA Credit are now yielding encouraging results. The increased revenue promotes the opportunity to invest in improved maintenance. However, the continuation of improved revenue collection and its application to the needs of the KWSB remain dependent on uncertain political will and policy. 4.3 Institutional Strengthening Consequent upon the project implementation, some departments of the KWSB have improved their working performaance. This is particularly the case in the Finance Department and the Development Wing. Generally however, Bulk Water Supply, Water Distribution and service departments have not been strengthened as a result of the project. The performance of these departments is vital to both the sustainability of the project works and the benefits to flow from them. These operational departments remain largely the domain of political and union influence. 4.4 Conclusion. Given the continued lack of a clear and consistent government policy for reform and support of KWSB, the sustainability of the project works, the benefits resulting from them, and improvements in the performance of the KWSB are not assured. In the short term, the new I OOmgd water supply is seriously threatened by failure of the pumps at the new Dhabeji Pump Station consequent upon suspension of the plant contract caused by premature closure of the CDC Loan. 5.0 Bank Performance. IDA Task; Managers and other personnel, particularly those of the permanent Pakistan Country Mission in Islamabati worked closely with the KWSB throughout the implementation stage of the Project. The support and advice of Task Managers and their sometimes forceful pursuit of Project objectives and compliance with the covenants of the Credit before the Government of Sindh, were of particular value in maximising what could be achieved given the external constraints and pressures on the Government of Sindh. The constructive attitude of the Bank at the preparation of the Supplementary Funding Agreement, and subsequent extensions of the effectiveness of the Credit were crucial to satisfactory completion of all works financed from it. The essential need for strengthening of the water distribution system and water loss reduction within it, to maximise the benefit of the additional 100 mgd of water to consumers, was a corner stone of policy in justifying investment in the project. This aspect of policy was strengthened still further in the terms of the Memorandum and Recommendations of the Bank Report P-5794-PAK, upon which the Supplemental Funding Agreement was based. As a consequence preparation of the proposed Water Loss Reduction and System Strengthening Project was funded and prepared for appraisal by the Bank. No appraisal was performed despite close involvement in the project preparation by IDA mission staff. Instead, a policy shift towards privatisation/private sector participation in the Karachi water supply operations was launched -39- by the IDA. In consequence, the momentum towards direct improvement of the distribution system and its operation to maximise the benefit of the anticipated 100 mgd of additional water, was stalled and remains stalled. While appreciating that the issue of privatisation is an option in considering the future of the water supply of Karachi, stalling of the proposed Water Loss Reduction and System Strengthening Project has been detrimental to realisation of the full benefits of the KII Project and created a vacuum in which ad hoc development has flourished in its place. 6.0 Borrower Performance. We believe Borrower performance on completion of the project should be judged as creditable, given the weakening of the national economy, the previous limited experience of large internationally funded projects and the political instability in the country, particularly Karachi, throughout the project period. The provision of counterpart funding, while subject to serious constraints was ultimately adequate. Despite a pattern of failure to meet budgeted requirements and some administrative impediments, available counterpart funds were generally adequate for actual requirements and were not an impediment to the progress of the Project works. Covenants of loan agreements, in particular the introduction of increasing tariffs, improved revenue collection and staff reduction were ultimately met. Much of the this achievement was accomplished in the late years of the Project. These matters were all politically sensitive and achieved despite almost continuous civil strife in the City. A serious default in servicing the CDC Loan agreement by the GOP led to suspension of disbursement and ultimately premature closure of the loan. In consequence, there is a funding deficit of some , 3.OM and rising default in contract payments. Procurement of the works through competitive bidding was conducted with increasing competence, transparency and professionalism by the KWSB Development Wing. 7.0 Assessment of Outcome. The City of Karachi is now served by an additional supply of treated water of some 100 mgd as a result of the Project. This is a considerable asset. Supply of water into the city water distribution system has been enhanced by some twenty percent. The fact that the impact of the additional water was not felt as directly as it might have been due to the reduced supplies from the Hub River Source, does not lessen the significant benefit resulting from the scheme. In addition, the position of the KWSB has been strengthened by enhanced revenue collection, reduced costs and an increased capability to manage development projects. However, the need for improved management of operational departments, strengthening of the water distribution system and water loss reduction remain to tackled . 8.0 Future Operation. The future operation and management of the infrastructure of water supply and sanitation in the City of Karachi is the subject of current but inconclusive debate. It is foreseen however, that in this important aspect of the provision of city services, progress will only be achieved in partnership with international funding agencies. -40- 9.0 Key Lessons Learned. 9.1 Lack of International Interest in Bidding Procedures and Consequences. All invitations to bid were characterised by a lack of interest from truly commercial international contractors. Typically the response to invitations to bid has been from the local market and from companies from the Peoples Republic of China. The one commercially independent international contractor who has consistently bid and has won two contracts, had established a long term presence in Pakistan prior to the commencement of the Project. The contract documents for IDA funded works, are with two exceptions, dedicated to International Competitive Bidding. 'Bids by local contractors with only local experience and aspirations, limited overheads and commercial responsibilities, and the Chinese Corporations with their qualified commercial status, introduce into the procurement of the works, a large measure of incompatibility with the principles upon which the contractual responsibilities and expectations are based. This incompatibility is prejudicial to a response from truly commercial international contractors. Ultimately, it leads to the award of contracts to contractors who, while accepting the contracts with good intent, have an inherent and fundamental lack of commitment to performance as contracted. The consequences are lower contract values at the cost of reduced quality and delayed completion. 9.2 Division of the Works. From the outset, the project works were divided into relatively small contracts reflecting types of construction. eg - a pump house, a canal, a conduit. In consequence most contracts were relatively small in value. Later, as part of the re-appraisal of procurement strategy conducted by the IDA, the original contract packages were broken down still further. The fragmentation of the physical works into more and smaller contracts led to greatly increased contact administration which stretched the resources available for contract supervision to an extent that effected overall project management. It was a fact that the three smallest contracts suffered the greatest delays in proportion to their contracted time for completion, and of these, two (the LCB contracts) delivered the poorest quality work. It is concluded that larger contract packages are to be preferred. 9.3 Security of the Completed Works. Consequent upon completion, elements of the Project works, in particular, the canal and conduits in rural areas, and the NEK treatment works, have been subject to immediate vandalism and theft of anything that can be removed or abused irnmediately following departure of the contractors from the sites. These circumstances threaten the effectiveness of the project works and even the works themselves. KWSB are unable themselves to provide the required level of security. The issue of security of the water supply infrastructure throughout its entirety is an issue to be addressed by the Government as a matter of national policy. 9.4 Politically Motivated Interference in the Management of the Project. Throughout the implementation of the project there has been significant politically motivated interference in the management of the KWSB. The influence of this has had both direct and indirect effects on the Project. In the context cf the Project, such actions may well have been well intentioned, but on many occasions were made without em appreciation of consequential ramifications. In consequence, the interests of the project, in particular -41- contractual discipline, the long term service of physical elements of the Project and institutional strengthening have not always been promoted. Of particular note in this context are directives to commission works in the final stages of their completion, prematurely. For the sake of a few weeks, additional costs were needlessly incurred while, more significantly, the long term performance of structures and plant was prejudiced in the headlong rush to comply with a chairman=s demands for early commissioning. The principal effect of such demands, was to cause contractors to abandon all contractual responsibility on the excuse of compliance with unrealistic demands. A failure of one of the rising mains from Dhabeji Pumps station shortly after commissioning was directly attributable to this cause. In addition, the KII (100) mgd water supply project was commissioned on the 26th of June 1998 at a nominal level of 30mgd. This commissioning was premature (albeit, precipitated by the reduced the supply from the Hub river source). The early commissioning of the project works and delivery of additional water to Karachi at a time of acute shortage, was achieved at the cost of delay in bringing many contracted works to full completion. In some cases, because access was no longer available, outstanding or remedial works were never completed. In particular, as once commissioned, the supply of water through the system was maintained, there has been no opportunity to carry out adjustments, modifications or additional works where the need for these became apparent following early operation. Nowhere have the negative consequences of this early commissioning been more seriously manifest than at Dhabeji Pump Station. The plant was put to use before commissioning trials of individual pump sets, satisfactory testing of the pipework and performance of the contractual requirement of the 30 day full scale operation test, had been performed. Whereas, from the outset, the hydraulic characteristics of discharge from the pumping plant was in accordance with design expectations, significant vibration in the pipework was observed. By August 1998 the matter was the subject of concern and written communication between the consultants, the Contractor and the KWSB. By March of 1999 because of the continuing use of the pumps the Consultants advised the KWSB that conditions were such that operation of the pumps should only be permitted in circumstances of the most compelling necessity pending rectification of operating characteristics. They remain in operation. The KIT Project works are more sophisticated than any other works operated by the KWSB to date. Despite provision in the Contracts for the training of personnel at Dhabeji Pump Station and NEK Treatment Works, the opportunity provided by these provisions was, for the most part not taken advantage of. This was principally because of union or political influence. Staff appointments were either not made, or staff were appointed who had no intention of attending the works as part of the work force. As a result of these circumstances the plant contractor, at the request of KWSB operated the pump station and treatment works for a year as an additional duty. The contractor ceased this service in June 1999 since when these key installations have been operated by KWSB staff who have had no Aworks specific@ training. Due to a change of political priority, proposals were made to the ADB for revisions to the programme of works. These proposals were ultimately refused as being contrary to the loan agreement. As a consequence, some project works of the Sanitation Component were lost and full utilisation of available funding not achieved. It is concluded that the direction and administration of the KWSB should be depoliticised and union actions set within enforceable limits. -42- 9.5 Coordination with the Sindh Government. Throughout the implementation of the Project, administration of contracts and the Credit Agreement have been hampered by apparent conflict with the administrative procedures of the Sindh Government. Although many of the consequent difficulties were resolved, solutions were for the most part achieved at the cost of delay and additional cost. More particularly, the solutions were artificial, avoiding but not resolving fundamental incompatibilities which thus remain pitfalls to other and future international contracts and credit agreements. Problems of this sort are particularly obvious in the processing of contract payments. The contracts provide that the Employer (KWSB) shall pay the Contractor within a stated period of receipt of an Interim Payment Certificate. The KWSB accounting procedures reflect the procedures of the Sindh Government and are audited against these rules by the Government auditor. These rules provide that payments are made only on the basis of the Measurement Book, a document prepared and signed off by an Executive Engineer. Preparation of interim certificates by the Engineer and the measurement book by the XEN (a relatively junior officer) are based on entirely different concepts. The one being a general valuation conferring no degree of acceptance for work done and issued to promote fnancial turnover. The other, essentially signifying acceptance of specific work done and custodial to the interests of a government department. Preparation of these documents reflect their provenance and are in consequence, incompatible. A careful[ examination by most senior and appropriately experienced executives of concerned departments and their advisors, of the administrative interface problems between the provincial government and executive agencies such as KWSE should be conducted. The purpose being to establish appropriate procedures to facilitate works based on FIDIC type contracts and International funding agreements. 9.6 Coordination of Funding Agencies. The suspension and subsequent closure of the CDC loan has prejudiced the new IDA financed 100 mgd water supply facility. The sanitation element of the project suffered a delay of some nineteen months and consequential contract costs due to the cessation of disbursement from the ADB Loan pending settlement of KWSB indebtedness to the Karachi Electricity Supply Corporation (KESC). Also, a concentration of effort by IDA to promote privatisaition led to stalling of the physical improvement of the Water Loss and Distribution Strengthening Project. There appears to be a clear need for a formal joint agreement between funding agencies co-funding a project of the size and scope of the Second Karachi Water Supply and Sanitation Project. Such agreement should bind the agencies to act in concert for the promotion of the project, provide commitment to uniformity of approach and emphasis, and provide a vehicle to act in concert to address circumstances which threaten the beneficial application of their separate funds to a Project. -43- 2ND KARACHI WATER SUPPLY & SANITATION PROJECT UNDER IDA CREDIT 1987-1 PAK IMPLEMENTATION COMPLETION REPORT (ICR) KWSB'S PARAWISE COMMENTS ON DRAFT ICR # 20260 DATED 26-4-2000 3.0 ASSESSMENT OF DEVELOPMENT OBJECTIVE & DESIGN AND OF QUALITY AT ENTRY 3.1 Original Objective: The objectives of the K-II water could not be fulfilled by the World Bank under IDA credit 1987 and the major objective of "Strengthening Loss Reduction Measures" with a view to augment the water supply system could not be taken up, although pre-appraisal is done. Similarly during negotiation for the supplemental loan for Second Karachi Water Supply and Sanitation Project, the scheme was reformulated and some of the water supply components were deferred which includes the water treatment (direct filtration plant) at Hub and partly primary distribution mains so as to meet the financial provisions give in the IDA's re-formulated scheme and the project cost. The writeup is not understandable by a reader unless the objective reproduced below & given in SAR are commented in specific terms. The objective of the project (a) increase potable water by 31 % (100 million gallons per day) and further augment availability by strengthening loss reduction measures; b) improve financial viability of KWSB through increased revenues, cost reduction & increased operational efficiency c) improve the organization & management of KWSB; d) improve sanitation in the City, including its low income and coastal area by increasing sewerage coverage by 232 mgd and treatment capacity by 94 mgd. The achievement of the objectives (a) to (d) can be analyzed as under for some assessment of performance rating. Objective (a) 100% physical achievement not sustainable (reasons to follow) 25% achieved by strengthening and implementing loss reduction measures through the leak detection program. Objective (b) 25% achieved in the increased revenue (i) 50% achievement in operational efficiency (ii) Staff cost reduction 100% implemented. (Exemplary due to IDA/KWSB coordination). Objective (c) improve the organization & management of KWSB; A considerable improvements by the creation of Development Wing to take up the additional responsibilities independently. KWSB's re-organization plan also implemented as outcome of in depth O&M study. Objective (d) 30% achievement in the improvement in sanitation of the city. Second Karachi Water Supply & Sanitation Project with IDA financing for the water supply and the Institutional components while ADB financing arrangements for Karachi Sewage & Sewerage disposal scheme under ADB loan 1001 & 1002 although the loan was once frozen for a period of 2 years and even the project was completed. IDA never reviewed PCR/ICR of ADB. KWSB faced problems in implementation. 50% of these targets achieved & 100% physical implementation done. US$ 10 million surrendered in IDA -44- Credit 1987-1 Pak and without improving the coverage due to political environment at that time. The original objectives are not analyzed by the original formulators, the appraisal mission of World Bank and the Task Manager, who remained involved for maximum duration. The Master plan report of water as well as SAR clearly mentioned that Indus Source is the only potential & reliable source for Karachi water supply and they recommended a project of 240 mgd. IDA in consultation with KWSB bifurcated this project into two phases of 100 mgd each due to fmnancial constraints and to restrict a cost within $ 100 million & later it was agreed for $ 125 million, the additional $ 25 million due to inclusion studies to be carried out by international consultants. Thus, it is suggested that para 3.1 based on Part 11 ICR of KWSB as agreed by IDA may please be seen for background information and the Bank Staff who remained involved for the maximum period of the project shall be consulted. 3.2 Revised Objective: Refer comments for 3.4. 3.3 Original Components: The scheme of Second Karachi Water Supply and Sanitation Project has got a parallel financing from ODA Grant-UK & CDC Loan-UK, to accomplish the water supply components. During the process of the supplemental financing of the K-II project it was agreed between IDA and Co-financier M/s. CDC/ODA that the effectiveness of the IDA Credit 1987-I will prevail on whole of the financing plan. Unfortunately, CDC has failed to fulfill the commitment on the loan closing of IDA Credit 1987-1 Pak dated 30-06-1999. Moreover, CDC has stopped payments effective from September 1998 in consequence KWSB is in default of making payments on two contracts (WI 8 & W19) which includes the supply and installation of the water treatment plant and pumping station at NEK and Dhabeji. It was agreed with the donors during loan negotiations that: a. IDA portion of loans will be exclusively used for the civil works and the institutional components of the project. b. ODA grant and CDC loan will finance the plant and equipment component of the project. C. ADB financing will include the development works for the sewerage and sewage disposal schemes. As mentioned the borrowers contribution is given in 2.4(d) of the report there was a coordination of KWSB/ADB but not IDA because for this IDA have not reviewed ADB PCR/ICR of loan 1001 & 1002. Similarly, IDA did not help coordination with CDC/ODA in resolving the payments of M/s. PWT by CDC or contributing from the surrendered money of US$ 10.0 million of IDA Credit 1987-1 Pak although the components of WI 8 & W19 i.e. Dhabeji pumping station & NEK water treatment works the electrical & mechanical funded by CDC / ODA & civil works by IDA coherent to each other, this non cooperative behavior is the main cause of un- sustainability of the project. 3.4 Revised Components: In general the comments are acceptable further it should also be taken into account that IDA has assumed a larger contribution by increasing its share from 38% to 67%, while CDC/ODA have dropped their shares from 42% to 15% and even not fulfilling their commitments and obligations by unilateral decision of suspension of the CDC Loan in September 1998 and against the conditions of the supplemental loan wherein it was agreed that the -45- effectiveness of the CDC Loan & ODA Grant will remain the same as the effectiveness of the IDA Credit 1987-1 Pak. To achieve the basic objectives, project components were amended to include some more additional service and the fate of some of those services still remains in deed, such as Loss Reduction, PSP, Consumer Education Program etc. 3.5 Quality at Entry Declared unsatisfactory by IDA. In this connection kindly refer minutes of negotiations for supplemental loan which has given the reasons very clearly. The quality at entry was deficient due to the ambiguity created by IDA. The PCD in the first instance considered a project of 240 mgd which IDA has curtailed to 100 mgd due to financial constraints & the cost curtailment was applied in the estimates. KWSB did not agree to these estimates and immediately invited two bids for the assessment of market rates in 1991 & requested for supplemental financing IDA suspended project invitation activities for almost 2 years & allowed bidding after the effectiveness of supplemental credit. Regarding regulatory framework, nowhere in the SAR this word has been used or even discussed. A small component of PSP was mentioned and on that basis PSP study was carried out through PHRD grant which identified requirement of a regulatory framework. Draft regulation were prepared and PSP Steering Committee was formed by GOS & then it was sabotaged by NGO's & political environment at that time in the absence of IDA monitoring. 4.0 ACHIEVEMENT OF OBJECTIVE & OUTPUTS 4.1 Outcome / Achievement of Objective: Heavy social cost concept is confused when we say that larger percent of higher income rather than low income percentage has adequate supply connections. Katchi abadis considered as low income areas should not be compared because its 50% of existing population it is to be believed that they are not paying any water tax, there is un-authorize occupation of land, the 9% increase per annum of Katchi Abadis means that 50% of city population is receiving water free of charge. The major reasons of the agencies / personals involved in this mushroom unplanned growth are the NGO's using self help terminology or the political environment where the system is laid on political pressure. The major example is Orangi where un-authorize occupation is common, the people are living and encroaching every day even up to the extent of hill tops or to the bottom of river beds/nallahs. To further reinforce please refer IDA Credit 1652 where a provision for Katchi Abadis component was taken on the concept & understanding that the beneficiary has to pay for the services utilized, spend minimum, provide community water taps, provide community latrines, establish a revolving fund etc. But in the current Credit, IDA has no provision of that component i.e. development of Katchi Abadis, IDA's assistance in providing additional conveyance system for the treatment of bulk water supply system is praise worthy but impact of the system could not be demonstrated because IDA has not devoted to upgrading the city water system network, strengthening primary distribution system, IDA has realized that substantial efforts are needed for the rehabilitation of the old water distribution system in order to reduce the intermittent-brusts & leakages but due to financial constraints could not be implemented. 4.2 (a) Outputs by Components: In line 5 of the third paragraph the word Karachi Development Association may be deleted & corrected as KWSB/GOS. 4.2 (b) Institutional Strengthening: -46- This shall be declared 'MODEST' instead of unsatisfactory. 4.2 (c) Financial: This shall be declared 'MODEST' because there are commendable efforts made by KWSB in the financial discipline of its fnance & accounts management. 4.3 Net Present Value / Economic Rate of Return: No comments. 4.4 Financial Rate of Return: Agreed. 4.5 Institutional Development Impact: Agreed. 5.0 MAJOR FACTORS AFFECTING IMPLEMENTATION AND OUTCOME 5.1 Factors Outside the Control of Government or Implementing Agency: Agreed, also mention IDA Credit 1652. 5.2 Factors Generally Subject to Government Control: No further comments. In line 8 of second para the word KDA may be corrected/replaced by 'KMC'. 5.3 Factors Generally Subject to Implementing Agency Control: Whereas the local contractors have performed well. The foreign contractors involvement have increased the foreign currency payment this needs more clarification. However, KWSB has desired to encourage the local construction industry but has failed in promoting the object due to the improper coordination, understanding of the problems of the local contractors and their solutions by the international consultants M/s. Mott Macdonald International Limited - UK whereas they were provided the support of local consultants as well. The selection of the contractors was entirely based on the World Bank procurement guidelines which is through pre-qualification, the process of evaluation of pre-qualifications was done by the international consultants MMIL. The concurrence of the shortlisting of the firms by IDA was given on the basis of consultant independent evaluation report, as such there were never any choice for employment of local contractor by KWSB. 5.4 Cost & Financing: This upward revision by 74% was done after 2 years when the project was taken up and the work was in full swing. It needs to be analyzed as to why the cost of the project had to be almost doubled when the project was almost half way through. What were the major reasons for the consultants for firming up the cost at the time of original approval and clearance by ECNEC and then again the cost had to be revised and the World Bank/KWSB had to sign a supplemental credit. Consequent upon signing the supplemental credit, the entire financial projections prepared at the time of starting the project based on original cost had to be revised upward. The repayment schedule increased exorbitantly. The principle and the interest amount increased. The targets set out under the covenants were therefore increased tremendously and therefore it became next to impossible for KWSB to meet this covenants. In order to analyze the position in its true perspective, it is necessary to determine as to, on what basis the consultants firmed up the original estimates which were approved by ECNEC and then what were the reasons for the consultants to enhance and revise the estimates by 75% when the project was almost in the middle of -47- completion. This analysis will help in determining if the expenditure incurred on this project was within reasonable limits or it has surpassed the limit of reasonability. It will also help in determining as to on which component the expenditure was higher and whether the ratio of expenditure on different components was compatible and reasonable. After analyzing the above issue it will then be easy to determine as to why KWSB could not meet its financial covenants. 6.0 SUSTAINABILITY 6.1 Rationale for Sustainability Rating: The minor works on the housing & boundary wall at Dhabeji and NEK is not directly affecting the operational works. The suspension of the CDC loan in September 1998 has largely affected the project in the sense that the international contractor M/s. PWT Projects Limited have delayed the trial of individual pumpsets, satisfactory testing of the pipe works and the performance of the plant & equipment before commissioning of the system. A significant vibration in the pipework of Dhabeji pump station was observed in August 1998 & the same could not be rectified till date due to suspension of CDC loan in September 1998 and IDA did not bother. KWSB suggested to IDA not to fmalise ICR & come forward to resolve this matter so as to make the project sustainable which can be achieved through IDA support only by all co-financer involvement with GOP because in the present circumstances of Hub crisis any breakdown at Dhabeji will deprive of 100 mgd which now cannot be avoided for single day and may create havoc. IDA requested to stop ICR activity where sufficient work has already been done, instead they should come forward to resolve this issue on priority. 6.2 Transaction Arrangements to Regular Operations: Agreed, no comments. Refer in the last paras of section 6.2 for steps on the path to follow the experience & lessons learned I & 2 are agreeable, lesson 3 must be deleted, because poverty alleviation or NGO's involvements was not included anywhere in the project objectives & guidelines. International successes in effective civil society collaboration with local government is misconceived in Pakistan. Low income group related with Orangi settlement, local research & training institute has been pictured to IDA without making them understand the 15 years sewerage problem being tackled by this institute. -48- It has not constructed any flush latrins or secondary sewers rather misconceived the sewerage engineering as excreta is sitting on the streets. Excreta when open or even if covered without flow, allows disease to spread. Epidemic: hazards may occur as "Shelley once wrote that hell is city much like London". Sewers, the conduits beneath the street carry away the unmounted excreta to a point of treatment & disposal, un-doubtly have done more to improve the quality of life in a community than any other social or technological advance, with the possible exception of water supply. They have improved the communities quality of life more than art or architecture, literacy or drama. Such facilities given in Orangi on self help basis no doubt has given a facility on one hand moving excreta from on house to another house by misuse of storm water drainage system but on the other hand the disease of un-authorize occupation of land is wide spread and the encroacher now spreading over hilltops and in river beds. There is no appropriate technology application i.e. what they can afford and no concept of pour-flush latrin, aqua privies, septic tank community latrines is known to the society. Previous World Bank reports in this connection may be referred and avoid such NGO's partnership which may bring health hazard not known to poor people. This last paragraph may please be deleted. 7.0 BANK & BORROWER PERFORMANCE 7.1 Lending: This section shall be considered 'MODEST' because poverty issue & regulatory framework are not mentioned in SAR or during supervision mission reports anywhere and are not included in the objective of the project. Recommended for reconsideration and declaring 'MODEST'. 7.2 Supervision: This shall be declared 'Modest' instead of unsatisfactory because supervision was in accordance with the bank guidelines and fulfilling all criteria, terms and condition of the IDA's Credit Agreement and the Project Agreement. The bank has tried to accomplish the original objective which could not be achieved due to financial limitations as such could not implement the concept of institutional reforms & the regulatory reforms. 7.3 Overall Bank Performance: It should be noted that the bank has strongly pursued the privatization of KWSB and have provided techniical as well as the financial assistance in the preparation of the strategy/feasibility reports and the selection of the options in respect of the privatization of water & sewerage sector of Karachi. Moreover, the PSP in KWSB was ultimately the key factor in the abandonment of the implementation of this water loss Reduction & System Strengthening Project named as the "fourth project". Implementation of this fourth project would have been greatly enhanced the operation of the distribution system and helped towards to equitable distribution of water simultaneously with the 100 mgd KII water supply scheme. We suggest that still if this project is implemented in future, would bring fruitful results. The following four indicators have been selected to declare satisfactory or un-satisfactory, the overall bank performa,nce in respect of the bank funded schemes. 1. Karachi Water Supply Credit 1374. 2. Karachi Special Development Program. Credit 1652. 3. Second Karachi Water Supply Scheme. Credit 1987-1 Pak. 4. Water Loss Reduction & system Strengthening Project. IDA pre-appraised. Three have been achieved, the fourth one not achieved but partially achieved with a sense that the concept was clearly understood by KWSB although it was not the major objective of the project. The achievement is -49- therefore more than 25% in this sector. The concept of previous IDA credits as mentioned could not bring any fnancial viability in KWSB but identified clearly future requirements where a future strategy can be established easily. IDA Credit 1374 & 1652 actually identified mainly dealing with improvement and rehabilitation works where policy reform was not the major objective except identifying improvement of income of KWSB and water & sanitation requirements upto 2025. IDA Credit 1987 included several studies which also included identification of the fourth project i.e water loss reduction & system strengthening project which was pre-appraised by IDA and then IDA failed to take up this matter due to harsh financial covenants which were achievable only with a clear concept by GOP/GOS. This section therefore falls in a 'MODEST' category with a clear version in the writeup given. 7.4 Borrower Preparation: Satisfactory. 7.5 Government Implementation Performance: This shall be declared 'MODEST instead of unsatisfactory because this is first time that although delayed, counterpart funds were arranged by GOS & thus the final accounts were settled within the closing dates of IDA Credit 1987 i.e. June 30, 1999. 7.6 Implementation Agencies: This shall be declared 'MODEST' instead of unsatisfactory because lot of project commitments were fulfilled also except the tariff increase which was not possible due to Hub drawn down situation. The reasons are also explained in paras 4.2B & C, 4.5, 5.3, 6.1. 7.7 Overall Borrower Performance: This shall be declared 'MODEST in the light of the explanations provided in the above paras 7.5 and 7.6. 8.0 LESSONS LEARNED No Comments. -50- '' brD' _Arxo.wlsr:r. bria' .,g PAKISTAN20' IBRD 20572R HUB CONEV!AKITA -PEPA(RS(I WAE ADPRJC °' t N KK h '\' ;' @ ' 0' ' P/ / SECOND KARACHI W ATERrSPLY N SANITATIONPRJC N5U' F1u3Yt\t O. 2NC, g 1u _ >-> a PROPOSED WATER SUPPLY IMPROVEMENTS TO BE FINANCED BY IDA AND THE OVERSEAS DEVELOPMENT ADMINISTRATION OF THE UNITED KINGDOM PREYIOASLY FINANCED PROPOSED PROJETc BY IDA PER.EXISTN- 2SSEM C El, ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~C.nol .d C-nduity PAno"ing Mo' PH-noy DistribAti-t \ , a a a ^ ,, ,~~~~~~~~~~~~~~~ , ,, , 'j u sr 2 Pumping Stot=ns~~~~~~~~~~~~~~~~Pu.i. 5.1 0 Li 0 ~~~~~~T-f-innt W-nks )%<2dA A iS F' ;- b A Syphons Moti-nld eyibo (( A i /i-t . / , f d-=lnps...leo 4 : - rM | ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~h,dwi1 C...i.i1 A \<__ 2S C, t Irthrnatl=nd S=und=ries ~~~~~~~~~~~~~~~~~24 50 >,,,P,~~ ~ ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ t. -Eyn ,nABn R.At2 Sd.Rn n; 5 < i-- SO .s.A Asss~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~R.R.~~o...t . B - - ,~ ~ ~ ~ ~~~6o Tm, 1 -' F , - - 9>|,1.* T hKMNI-STAN wU_g) , ( REGIONAL WATER SLIPPLY SYSTEM a A \ a G ] [2 SC/ > * _ 5 9 /tf v 1 AIG- r^SIt ,=-t2 , ... . .... A> ro.. L ~, i .n u Sea B */ f dLs INDI ___ _ W t~~~~VvL i>Js t zs1kle 24*452 ^ = i 24-4G_ 1P SlArCb= SL9 ; W!- obTA t : NLm ;d