WATER AND SANITATION PROGRAM: RESEARCH BRIEF 73414 Findings from Hygiene and Key messages Sanitation Financing Study • Household financing accounted in Lao PDR for more than half of total expenditure on domestic sanitation in 2008/09; only 18 October 2012 percent of new construction was subsidized by government or donors. • The sanitation sub-sector is INTRODUCTION heavily dependent on donor In Lao PDR, poor sanitation and hygiene This study aims to present an overview support, but there is no mechanism causes at least three million disease of the current status of sanitation and in place for coordinating government episodes and 6,000 premature deaths hygiene financing and to provide use- and donor resources. annually. Diarrheal disease – which is ful information and recommendations closely associated with poor sanitation that can help strengthen planning and • The cost of building an improved and hygiene – is in fact tied with pneu- accelerate progress in sanitation and latrine is currently high, making monia as the second largest killer of hygiene. it unaffordable to most low income children under five. Poor sanitation also households. contributes significantly to water pollu- This Research Brief summarizes the tion, adding to the cost of accessing mains findings of the study in Lao PDR. safe and clean drinking water. The con- sequences go even further. A recent METHODOLOGY study by the World Bank’s Water and This study estimates the sources and Sanitation Program (WSP) found that uses of financing for basic sanitation in 2006, the country lost an estimated and hygiene in a single “focus year� LAK1.9 trillion (US$193 million) due to 2008/09 – clearly expenditure may dif- poor sanitation and hygiene, equivalent fer in other years, but this year provides to 5.6 percent of Gross Domestic Pro- a useful overview of the current sanita- duct (GDP). Strengthening planning tion. In addition, the study takes an in- and accelerating progress in sanita- depth look at a) a project funded by the tion and hygiene could yield substantial Asian Development Bank called North- benefits, not just for the economy but ern and Central Regions Water Sup- by prolonging life and improving the fu- ply and Sanitation Sector Project, and ture for the people of Lao PDR. b) a program financed by the Danish Red Cross, to see how funds for sani- In Laos, very little information is available tation promotion have been deployed on how much money is being spent on and consider what lessons there might sanitation and hygiene, by which enti- be for resource allocation in the sector ties, for what purposes, or in what lo- as a whole. Together, these provide a cations. There is also little information snapshot of donor support to the sub- on who benefits from this expenditure. sector, since the former is a large urban 2 Findings from Hygiene and Sanitation Financing Study in Lao PDR Sanitation and Hygiene Financing Study project (although the term “urban� has no strict definition in FIGURE 1: NATIONAL BUDGET REPORTED ACTUAL BUDGET Lao PDR) coordinated by an international financial institution, EXPENDITURE FY2007/081 Ministry of Health Other (Reserve) while the latter is a small rural program undertaken by an in- 1% 27% ternational NGO. Importantly, both organizations had data readily available. Ministry of Education 5% The study team visited the provinces of Oudomxay (includ- ing Houn and Xay districts) and Savannakhet (including Ch- Ministry of Public Transport amphone and Atsaphangthong districts). Oudomxay, in the 9% north, was chosen because it has some designated poor dis- tricts and several active sanitation-related projects: not only Ministry of Agriculture and Forestry the ADB-funded project but also UNICEF and JICA programs 3% supporting school sanitation and NGO projects including one Ministry of Finance 4% Prime Minister’s by the Lao Red Cross. Savannakhet, a southern province, Of�ce and Admin Provincial Budgets has the second largest city in Lao PDR and is more prosper- Agency 30% 13% ous overall than Oudomxay, though it has a significant num- FIGURE 2: ESTIMATED SANITATION AND HYGIENE FINANCING IN ber of poor rural communities and a number of development 2008/09 partners supporting water and sanitation projects. It therefore offered the potential to examine rural sanitation projects and see how donor coordination works at provincial level. 100% Government 12.5% Software KEY FINDINGS 39% 26.3% Development 1. Sector funding partners The study investigated not only total expenditure in recent 35.3% 61% years but also the sources and uses of funds, and consid- ered how changes in sector financing might help to speed up progress towards national goals. It found that government allocations to the sub-sector are very limited, and minimal funds are allocated for sanitation and hygiene promotion at Hardware 73.7% community level. This means that the National Centre for En- Households 100% vironmental Health and Water Supply (Nam Saat) has targets 52.2% to meet, but almost no resources for meeting them. Ministry of Health funding accounted for just 1 percent of total govern- ment spending in 2007/08 (see Figure 1) and, within this con- strained budget, sanitation was not treated as a funding pri- ority, regardless of the targets adopted by government. Total Private sector (value unknown est. at 1.7%) national spending on sanitation stood at just US$5.9 million Total Value = LAK49,7 billion (US$5.9 million) in 2008/09 (see figure 2), of which only 12.5 percent came from government and was spent entirely on salaries and ad- ministration. Roughly 52.2 percent was spent by household mined but was evidently very low, probably less than 2 per- on hardware, and 35.3 percent by development partners: two cent. If current approaches to sanitation promotion are con- thirds of it on sanitation hardware and one third on software tinued, annual expenditure would need to increase roughly (personnel, administration, communications, logistics etc.). 2.5 times to achieve 60 percent coverage by 2015, and by 4 The level of private sector contribution could not be deter- times to reach 70 percent (see Figure 3). Lao PDR Ministry of Finance, Official Gazette 2009 1 www.wsp.org Sanitation and Hygiene Financing Study Findings from Hygiene and Sanitation Financing Study in Lao PDR 3 2. Sector planning and coordination FIGURE 3: ESTIMATED ANNUAL SANITATION AND HYGIENE At the time of writing, no strategy is in place for meeting na- EXPENDITURES TO REACH 60% AND 70% COVERAGE IN 2015 tional or international sanitation goals in Lao PDR, nor is a national monitoring framework that tracks both government and development partner activity in the sector. This makes sector planning and coordination very difficult, since donor funds are allocated through a variety of mechanisms and at 30 various levels, with little predictability as to the total funds that will be available in each province each year. Having said this, a new rural water supply and sanitation sector strategy is being 25 developed in 2012 as a multi-stakeholder initiative and this should help to improve both the efficiency and effectiveness of resource allocation in the sector. 20 US$, million 3. Established approaches to sanitation 15 promotion Of the 47 poorest districts in the country, development part- ners are supporting sanitation and hygiene promotion in just 10 over half, and most projects operate on a fairly small scale, covering only selected villages rather than entire districts. Typically these projects support the installation of a single 5 technology option: the pour-flush toilet with a soak pit lined with three concrete rings. This design is very popular, but also fairly expensive: over US$100 if a durable super-struc- 0 ture is used. Percent of population with access to improved sanitation in 2015 Households Development partners Government This approach to sanitation promotion has three critical weak- nesses: • it is too expensive to scale up; Only 18 percent of household latrine construction in 2008/09 • it creates community expectations of external support, re- was subsidized, with the vast majority funded from house- ducing the motivation of householders to build latrines at holds’ own resources. Three quarters of these household- their own expense; and built latrines costing around LAK2.3 million (US$318), and • it makes it very difficult for private masons and suppliers to one quarter spent around LAK5.5 million (US$614) (see generate business since their products are not subsidized. Table 1). These are substantial sums and such toilets would only be affordable to middle- and high-income earners; for In remote locations, where many of communities are poor, large numbers of poor households to build their own facili- the cost of installing improved sanitation is even higher due to ties, more affordable technology options would need to be the problem of materials supply. Seasonal limitations in water available. supply can also affect the viability of pour flush toilets. RECOMMENDATIONS In contrast to this constraint, a very encouraging finding of With nearly half the population lacking adequate sanitation, the study was that households with the necessary resources the challenge facing Lao PDR is daunting, but there are steps are willing to pay for good quality toilets. Household financing that government and development partners could take to is in fact the main reason that coverage is, slowly, increasing. make the national targets achievable. www.wsp.org 4 Findings from Hygiene and Sanitation Financing Study in Lao PDR Sanitation and Hygiene Financing Study TABLE 1: CALCULATION OF HOUSEHOLD EXPENDITURE ON LATRINE CONSTRUCTION FY08/092 Related reading Total household Estimated average cost of For the full report, please see Lao PDR contribution latrine and superstructure (all hardware) including labor Sanitation and Hygiene Financing Study, available by request to WSP-EAP. Percent LAK USD Number of HH building 1,900 18.3 635,000* 74* subsidized latrines Number of HH with medium- 7,838 75.7 2,725,000 318 Acknowledgments cost, non-subsidized latrines This research brief was written by Jeremy Number of HH with high- Colin (independent consultant), based on the 622 6.0 5,500,000 643 cost, prestige latrines study and full report by study team members * Represents cost of superstructure only; development partner subsidies for substructure are included Sandra Giltner, Penelope Dutton and Phimthong among development partner contributions. Kouangpalath. Please see full report for complete acknowledgments. Some proposed key actions include: education, marketing, technical support and attractive financing op- 1. Give sanitation higher priority on the tions. About the study national development agenda and 5. Reduce dependency on hardware The “Lao PDR Sanitation and Hygiene Financing within national rural water and sanita- subsidies, which have proved inef- Study� was undertaken in March 2010 to tion strategy, which is currently under fective in creating the demand for support both the government of Lao PDR and revision. toilets and in any case cannot be its development partners in planning levels 2. Allocate operational resources so offered on a large scale due to the of financial support, types of initiatives, and that Nam Saat field staff can actively cost. Instead, develop and promote formation or revision of policies and strategies for promote sanitation and hygiene at a range of affordable technology op- basic sanitation and hygiene. community level. tions for improved sanitation. 3. Establish a government-led national 6. Find a more cost-effective approach working group on water supply and to sanitation promotion that can be Contact us sanitation with government and de- scaled up district-wide. With this in For more information: velopment partner representation. mind, extend ongoing work by Nam email: wspeap@worldbank.org or Not only could this improve sector Saat, WSP, SNV and other develop- visit www.wsp.org coordination; but it would also help to ment partners in Lao PDR to intro- ensure that donor support is aligned duce Community-Led Total Sanita- with government and priorities. tion, which offers the potential for 4. Promote and enable increased eradicating open defecation across household financing of latrine con- entire community without the use of struction through information and hardware subsidies. Development partner data, authors’ estimates based on reports in Oudomxay and Savanakhet provinces. 2 WSP is a multi-donor partnership created in 1978 and administered by the World Bank to support poor people in obtaining affordable, safe, and sustainable access to water and sanitation services. WSP’s donors include Australia, Austria, Canada, Denmark, Finland, France, the Bill & Melinda Gates Foundation, Ireland, Luxembourg, Netherlands, Norway, Sweden, Switzerland, United Kingdom, United States, and the World Bank. WSP reports are published to communicate the results of WSP’s work to the development community. The boundaries, colors, denomina- tions, and other information shown on any map in this work do not imply any judgment on the part of the World Bank Group concerning the legal status of any territory or the endorsement or acceptance of such boundaries. © 2012 Water and Sanitation Program (WSP)