V . Z02o The World Bank Policy, Planning and Research Staff nfrastructure and Urban D)evtopan Department Report INU OR4 OVERVIEW OF WATER AND SANITATION ACTlVITIE FY89 FILE COPY Report No.:11202 Type: (MIS) Title: OVERVIEW OF WATER AND SANITAT11 Author: INU Ext.: 0 Room: Dept.: Water and Sanitation Division December 1989 General Operational Review This is a document publisbed infomalDy by the Wodd Ban& e v and interpretatos ein are those of the author and should not be atttibuted to the Warld ak to its affiliated orgmnizations, or to any indMidual acting on thir behal£ Copyright 1989 The World Bank 1818 H Street, N.W. Washington, D.C. 20433 All rights reserved First Printing January 1990 Ibis is a document published infmally by the World Ban1 Ihe Worki Bank does not accept responsibility for the viws expressed herein, wbich are those of the authors and should not be attributed to the World Bank or to its afiiated organizations. The findings, interpretations, and conclusions are the results of research supported by the Bank; they do not necessarily represent official poicy of the Bank. The designations employed and the presentation of material in this document are solely for the couvenience of the reader and do not imply the exession of any opinion whatsoever on the part of the World Bank or its affiliates conoerning the legal status of any country, terrtory, city, area, or of its authorities, or concerning the delimitations of its boundaries or national affiliation. The principal author is ALfonso Zavala of the Infrastructure and Urban Development Department of the World BankL Copyright 1989 The World Bank 1818 H Street, N.W. Washington, D.C. 20433 All rights reserved First Printing January 1990 Thi is a document published Iformaiy by the World Ban. The World Bank does not accept responsibility for the viw expressed herein, which are ths of the authors and sbould not be attributed to the World ank or to its adiliated organltrn The fmndb* interpretations, and conclusions are the results of research supported by the Bag they do not necesarly represent offldal polic of the Bank. The desgations employed and the presentation of material in this docment are solely for the convaen of the reader and do not imply t expression of any opinion whatsoever on the part of the World Bak or its affiliates concerning the legal status of any country, territory, city, area, or of its authorties, or concerning the delim of Its boundais or national affiliation. Th prncal author Is Alfoso Zavala of the Infbastructure and Urban Devbpment Department of the World Bank. Overviaw of Water and Sanitation Activities FY89 TABLE OF CONTENTS Page 1. Summary and Recommendations 1 Issues in the Sector 1 The Sector in the Bank 2 Recommendations 3 2. Review of FY89 Activities in the Sector 5 Overview 5 Lending 6 Sector Strategy Studies 13 Annex 16 1 SUMRY AN REOMMENATNS i;sues in the Sector This ovenriew of FY89 analyzes lending and sector operations, draws some conclusions, and finishes with recommendations for future activities within the sector. Lending in FY89 has concentrated to a greater extent than in previous years on the problem of rapidly increasing demand for water (one of the main issues identified in the FY88 Review), wMth a particular focus on providing services to the poor in burgeoning urban areas. The growth in sewerage and sanitation lending which had been foreseen for FY89 did not occur however, prompting concern for health and environmental implications. Growing demand for water for industrial and municipal use has come in conflict with agicultural demand for irrigation needs. This conflict has forced the issue of availability and quality of water resources at a time when the marginal costs of expanding supply have been rising. Several of the operations approved for FY89 have given careful consideration to the issue of water resources competition, including projects in Brazil (Sao Paulo sector), Ghana (rehabilitation), and Nigeria. In addition, INUWS is ready to begin research work in the water resources area which will examme measures to optimize water use and which will propose conservation measures. Many developing countries are facing serious financial constraints in attempting to meet cross-sectoral funding requirements, and the WSS sector is not among those receiving priority in investment. FY89 has seen two important developments concerning this prominent issue. First, the catalytic role of the Bank in attracting cofinancing has increased to proportions previously unknown, which has permitted ier aia a high 50 percent external contribution of total cost in seven projects, as a substitute for local matching funds. Secondly, a more realistic cost recovery approach based on improved, legaLly supported financial policies has been widely accepted. Pricing to promote conservation and more down-to-earth tarff levels and structures appeared in about half of the operations approved in FY89, and are being carefuly weighed in projects under preparation in the Phbippines, Argentina, CMte d'Ivoire, and Brazil, among others. One of the major issues pinpointed in the FY88 Review was the weakness in operational management and maintenance of existing facilities in the context of the adequacy of sectoral institutions, a problem that has also been underlined in OED reports. It would seem that lessons learned are starting to have the desired effect, with nearly 70 percent of this year's projects and the majority of the sector operations proposed for the next few years which have been reviewed giving adequate attention to the optimization of use of existing assets, including well thought out rehabilitation and operations management improvement components. In the context of the main findings of OED's annual review of project performance, the issues of insufficient project preparation, land acquisition, and non-revenue producing water reduction are still pervasive in the FY89 lending program projects. Other important aspects that require more attention in the up3oming sector and project preparation work are related to 2 acceptable water quality standards, use of intermediate alternative technologies to reduce capital and operating costs, water demand analysis based on dependable data, and the environmental impact of providing additional amounts of water for which no sanitary sewerage is foreseen in the near future. The Sector in the Bank Although the number of water supply and saitation projec approved this year is 100 percent higher than in FY88, the sector's 3.7 percent of total Bank lending is lower than the 5 percent long term average. Nevertheless, the total cost of WSS projects of $2.06 billion is second only to the FY87 total, and it is 29 percent higher than the average of the last three years. This is an impressive achievement, particularly since there was no sector lending activity in Asia. If the water and sewerage cost components of several urban development projects approved in FY89 are added to the WSS total, aggregate project costs would rise to more than $2.3 billion, brnging the sector lending share closer to the long term average in real terms. Water supply and sanitation components in rural development projects are not included in these figures. Approximately 10.5 million or 50 percent of expected benefciaries of projects approved for this year are beneath the poverty threshold, according to the SARs of the projects in Mexico, Pakistan, Brazil, Nigeria, Egypt, Guinea (Conakry), Ghana, Haiti, and Yemen D.R. This is the largest low-income population proportion to benefit from WSS services in any fiscal year. Another sector landmark is the fiint project orented primarily to the advancement of the role of women in society by providing not only water services, but financial resources for income-generating activties and training to develop capability in smali industries, handicrafts, and farming. In contrast to the previous year when nine sector studies were carried out, no formal sector studies have been completed in FY89. This is reflected in the total of only 72 staffweeks in sector work, less than half the 1984-1988 average of 168 staffweeks per year. Nevertheless, through a coordinated effort wth the UNDP-World Bank Program, two signficant rural water supply and sanitation strategy papers have been prepared: the Africa Rural WSS Strategy Paper, which suggested a more productive catalytic role for the Bank in supporting the sector and in the preparation of country sector strategy plans; and the India Rural WSS Paper, which recommended that the Bank concentrate on helping countty efforts for resource mobilization, integrated health education, community involvement, promotion of the private sector, and an increased role for women in plannig, operating, and using services. A project incorporating these concerns is currently under preparation. An additional strategy paper for Turkey addresses the needs of urban areas and the Bank's role in sector development in the context of macroemnomic objectives Staff time intensity for lending and project supervision activities has been within the average of recent years (about 2200 staffweeks). Hower, sector work has been significantly below recent mean values, which has hindered the Bank's dialogue with borrowing countries, limited sector knowledge, and reduced lending prospects. 3 Recommendations It is apparent that there is a strong demand for a Bank role in the sector. There is also a need for the Bank to continue to expand its catalytic capacity to assist countries in obtaining badly needed financial resources, and in improving project planning, implementation, and operation. This needs to be done in conjunction with regional development banks and bilateral institutions in order to mitigate the scacity of local resources for irnestment in the sector. Future four year lending plaw for the sector suggest an upward trend in lending, with an annual average of 19 operations, the majorty in urban areas, which will benefit millions of poor and which will have a more adequate sector-wide orientation. In light of the occurrences and the trends which the water and sanitation sector has faced in FY89, the following specific recommendations are made for improving water resource and sector management: Project preparation and financial management o Although cost recoveiy targets and tariff increase expectations seem more realistic, these should conform to clearly agreed and enforceable sector financial policies, to avoid the frequent defaults which retard sector development. o Acotrding to OED findings, projects with techniually complex components are conntly facing serious implementation delays (ie. India, Algeria, Sri Lanka). These delays can be avoided by addressing design problems early in the project cycle. o Service demand analysis and forecasting should be more carefully substantiated through more precise studies of consumption/price and willngness to pay, in order to optimize size and tming of project components. Project desigrn and operations management O A comprehensive and integrated approach, with specific, attainable annual targets and action plans, is required to reduce the persistently high non-revenue producing water figures that pervade water services. Basic prepartion steps which lead to a solid unaccounted-for water reduction program should be a condition for project appraisaL O More attention must be given to water quality, in accordance with acceptable standards, and to the reductin of intermittent water supplies on financial health, and economic grounds. O The use of low-cost or intermediate alternative technologies deserves greater consideration in the study of feasible technical solutions to extend services to the poor. 4 Protection of the environment O The problem of proper collection and disposal of additional water borne sewage should be more carefully addressed in connection with the environmental impact of water supply projects without sewerage components. Sector work O Ihe paucity of sector work in the year, linked with a record low of SOD manpower assigned to these studies, is restraining dialogue with borrowing countries and retarding Bank knowledge of sector issues and country strategy planning, and it will eventually affect lending. A reassessment of regional policy on sector studies and an improvement in country sector development planning through an increased budget allocation is highly advisable. NUWWS policy and research work related to these recommen2ations is currently proceeding. Areas of study include: O Identification and analysis of private sector options for delivery of soLid waste servces and rural water supply and sanitation services. O Pmancing issues in the sector, with an emphasis on cost recovery through user charges and through tax, transfer, and loan mechanisms. O Identification and analysis of water resource issues affecting availability, quality, and cost of water for water supply services, as well as optionm for improved management of water resources. O Review of literature of benefits of water supply and sanitation services, including types of benefits, methods for their estimation, and likely magnitudes, as well as analysis of urban demand (in Tunis and Rabat) and willingness to pay for sanitation services (initialy in Kumasi). 0 Identification of intermediate sanitation options, including their design features and costs and the implications of these options for sanitation planning. 5 RBVIEW OF FY89 ACIITVIES IN TH SECTOR Overview The water supply and sanitation (WSS) sector in FY89 saw stepped up lending over the previous year, continued preparation of important region/country strategy papers, and growing interest in human resource development issues, but little work on formal country sector studies. Lending for FY89 was closer to long term average levels after approval of a mere five projects in FY8& The Board approved ten projects vth a total cost of $2.06 billion in FY89, of which Bank financing covered $791.2 million, nearly 4 percent of total Bank lending for the year (these figures do not include the substantial WSS components of urban projects in Brazil, Cameroon, Mozambique, and Zimbabwe). As a result of implementation of these WSS projects, about 10.5 mibion people below the poverty threshold are expected to benefit from water supply and/or sewerage and sanitation services. The sectores lending continued to focus on urban water supply, and was specifically directed at improving operating efficiency (evident in 70 percent of the projects approved), maling better use of assets to increase output (as in Ghana), and using the marginal cost pricing approach to better allocate scarce resources in projects already in place (as in Brazil and Guinea). While sector project lending is shaping up for this and coming years, the expected shift toward sanitation activity foreseen in the FY88 sector studies analysis is not yet taking place. Seven projects in the FY89 lending program will be cofinanced, mostly through parallel fnancing from bilateral agenaes, regional development banks, and commercial banks. This cofinancing amounts to nearly $580 million, or almost half of the cost of these seven projects, with IBRD/IDA financing comprising only 36 percent of cost. This external resource mobilization is indicative of the important catalytic role of the Bank in the sector. At the same time, it is evidence of a wealness in local resource allocation, stemming from weak internal cash generation, low government contribution to investments, and a financial crisis in the sector. Although rural water supply and sanitation components have been almost absent from FY89 lending, the emphasis of strategy papers prepared for Africa ("Devlopment of Sustainable Effectively Utilized Water Supply and Sanitation Facilities") and India has been on provision of rural services. The only other sector strategy paper, for Turkey, focused on institutional, social, financial, and environmental issues. There have been no formal sector studies in FY89. Wider use of innovative approaches to sector financing and institutional structures was apparent among FY89 projects A good example of this trend is the project in Conakry, Guinea, where water supply services have been privatized through a lease contract with a company owned 51 percent by the government and 49 percent by a private foreign company. Almost all ongoing projects in the sector include components designed to improve operations and maintenance of facilities, cautious improvements in cost recovery, and more down-to-earth targets to reduce non-revenue producing water, as in Lagos and Sao Paulo. 6 The year saw the first Bank-financed project in the sector linking water supply and sanitation services with advancement of the role of women in society. This project in Mexico provides not only basic services in selected rural and low-income urban areas, but also financial resources for income-generating activities and training to develop capability in small industries, handicrafts, and farming. In the area of human resources development, a "General Operational Review of the Treatment of Manpower and Training Issues in Sector Work prepared in August 1988 by the PHR Department for eight sectors showed that the water supply and sanitation sector ranked second (after PHR) in quality of attention to manpower and training issues in sector work The water and sanitation sector sample consisted of fourteen studies issued between 1980 and 1987. Of these, the 1982 Philippines, 1983 Yemen A.R., and 1986 Colombia studies gave training issues the most thorough treatment according to the report However, a Project Related Training Survey (April 1989) carried out in the Africa region on 80 CD4 projects under implementation or in the lending program concluded that: 'There is almost unanimous consensus among task managers that institutional and workforce development objectives are rarely achieved through project operations as they have been designed and implemented during the past two decades." In addition, a Project Related Training Survey on water supply and sewerage projects in India circulated in October 1988 concluded that the "overall progress of state water agencies in strengthening manpower development capacities (with Bank assistance or not) has not been particularly encouraging." Human resources development is an issue that, despite the encouraging words of the PHR review, deserves special attention in our sector. The lnfrastructure and Urban Development Division of the EDI is playing an important role in preparing and carrying out water supply and sanitation training workshops to identify priority areas for training development and to propose guidelines for the planning and implememtation of training prog s Examples include the recent workshops in Bangkok (for the East Asia Region), Beijing (China), and Nairobi (Kenya), which were conducted in cooperation with the UNDP-World Bank International Training Network (IIN) in an effort to promote the creation of national and regional training facilities. Lending As forecast in the FY88 Annual Sector Review, FY89 has marked a return to near normal lending levels (excluding the Asia Region) in water supply and sanitation after approval of only five project in FY88 The FY89 lending was closer to the FY83-88 annual average of 13.6 projects cosing $1.56 billion. In total, ten projects in three regions (Africa, EMENA, and LAC) were approved by the Board in FY89 at a total cost of $2.06 billion. Bank financing consisted of $569.2 million in IBRD loans and $222 miDion in IDA credits for a total of $791.2 milion, representing 3.7 percent of total Bank lending for the year. This was higher than FY88Ss 2.8 percent and closer to the FY86-88 average of 4.2 percent. The average total project cost of $206 milion was substantially higher than the previous three years ($107 million in FY88, $65 million in FY87, and $41 million in FY8. 7 WORLD BANK WATER SUPPLY & SANITATION SECr7OR LENDING (in millions $US) FY 1984 FY 1985 FY 1986 ASA248 SAM 2* < ~ GAC 41 AFaRICA 3% J4t e?i 8202euN w X* uNA2 % 8 Total: $640.8 Total: $780.8 Totak: $598.8 F$Y 1987 FY 1988 FY 19839 Mee ENCENA~~ U on EWEMA 42s AfRICEA >$C Zb wi$26~~~~~~~~~~~~~~~~~22.3 b Ttal: $9694. ToaL $51S.3 Total: $791.0 WVATER SUPPLY & SANITATION TOTAL PROJECT COSTS (in millions $US) $2500-v_ $2000~~~20 $1500~~~~~~~~~~~~~~~~~~~~~MK $0 1984 1985 1386 1987 1988 1989 _M AFRICA SASIA m EMENA LA 8 Bank financing in FY89 accounted for only 38 percent of total project costs compared with an average figure of 50 percent for the last six years. Contnbution to investments from internal cash generation vanes widely in the three regions, from 42 percent in the Yugoslavia and Brazil projects, to a level of about 9 percent in Al Mukalla, Karachi, and Guinea, and a level of zero in the Alexandria and Lagos projects. A significant participation by ICO of 25 percent of project cost is expected from the Ghana Water and Sewerage Corporation. Perhaps the most important financial achievement has been the evolution of the Bank's catalytic role in attracting project cofinancing. The cofinancing of seven projects in FY89 has come at a time of an evident financial crisis in the sector. Important Iztnres of the FY89 Program included: o Optimization of existing assets use through well-designed rehabilitation and operations management project components in Ghana, Yemen D.R., Guinea, Yugoslavia, Haiti, Egypt, and Brazil. o Provision of services to low-income populations in practically all projects (except Yugoslavia). Around 10.5 million people, or almost 50 percent of total beneficiaries are under the poverty tl,eshold. o The fist Bank-financed project in the sector specifically oriented toward improving the role of women in society in Mexico. o Promotion of water conservation through adequate pricing policy in Guinea, Ghana, and BraziL o Direct involvement of a private company in the provision of urban water supply services in Guinea. o An innovative contnbution to economic evaluation through use in Ghana of the water demand curve to calculate households' willingness to pay for increased water supply as related to project benefits. This approach was used instead of the conventional expected revenues approach. Several urban projects submitted to the Board in FY89 have significant water supply and sewerage investments. The two most important are the Zimbabwe Urban Sector and Regional Development, with a water and sanitation component of nearly $100 million (16.5 percent of total project cost) and the Brazil State of Parana Municipal Development that includes provssion of water supply and sewerage services representing $75.6 million or one third of the total project cost of $226.9 million. If these and other investments planned for Cameroon and Mozambique are counted in the aggregate water supply and sanitation sector costs for the year, the total project cost figure for FY89 would be over $2.3 billion, second only to the all-time high of $2.5 billion in FY87. 9 A, Leding Pwspect The proposed lending program for FY90 has 12 water supply and sewerage projects with a total cost of around $2.25 billion to be financed through Bank loans and credits amounting to $925 million. Included in these figures is a proposed $350 million urban project in Indonesia formed almost exclusively of water supply and sanitation components. It is anticipated that lending in the following years will continue the growth trend. If the SODs, with the help of the UNDP-World Bank Program, continue to play a catalytic role in obtaining external resources and coordinating project financing, it is possible that the effect of the developing countries' economic crisis on medium term investments in the water supply and sanitation sector could be mitigated. FUTURE WATER SUPPLY AND SANITATION LENDING (in millions $US) FY 1990 FY 1991 ASIA -g :380. 42%8 $14S.6 14% [AC[C . 2D%$345. 3$89.5 21% E285. 26% Total: $914.3 Totp: $1,197.6 FY 1992 FY 1993 ASIA o APRICA S35^oSIA A_CA $ JM 5516. 33435.21% $237. 15% $0.S4 26% 390.4e TotaL $1,553. Total: $2,0293 The main characteristics of the projects planned for the next few years include: o Continuation of the trend toward funding of urban projects. Examples include Angat in the Philippines, Nairobi in Kenya, Jabotabek in Indonesia, Cote d'Ivoire Sector Adjustment, Ankara Sewerage in Turkey, and the Argentina Water Supply and Sewerage Sector. Concentration in urban areas is essential, since as stated in documentation of the FY89 Sao Paulo project, 'demand is outpacing supply because of rapid urbanization" in most developing countries. 10 o A continued focus on the needs of the poor. Several projects under preparation will benefit millions of urban and rural poor in Indonesia (Jabotabek), Pakistan, India (rural WSS), the Philippines (Angat), and Kenya (Nairobi), among others. o Special attention to environmental issues. Examples include projects under consideration for China (Beijing, Second Shanghai Sewerage, Tianjin), Turkey (Ankara Sewerage), CMte d'Ivoire (Abidjan Lagoon), and Jabotabek, Indonesia, which will deal mainly with water pollution abatement and resettlement issues. o Priority to problems of efficient assets use, operations management, and institutional strengthening. This focus is shown in operations proposed in Argentina, Nepal, Bolivia, India, and Mexico. o Preferential attention to realistic cost recovery policies and mechanisms, including tariff structures. This provision is demonstrated in the Argentina Sector, CMte d'Ivoire Sectoral Adjustment (provision of urban water and sanitation service through a concession contract with a private agency), Philippines Angat, and Brazil Parana Sector projects. B. Project Preparation and Supervision The most recent OED Annual Review of Projects Performance Results stresses insufficient project preparation as the main cause of problems. This lack of preparation ranges from overlooking legal and political aspects at the national and municipal levels, to failure to consider projects within the macroeconomic context, to land acquisition problems in India, Sri Lanka and YAR. Other instances of inadequate preparation include exaggerated and optimistic financial assumptions, and failure to achieve required revenue increases because of excess capacity and/or unsold production. The latter failure is a result of an inability to reduce non- revenue producing water figures significantly. The OED review leaves an open door to improvement by stating that even projects with serious shortcomings had well-prepared and efficiently implemented components, a clear indication of a level of expertise and a potential to improve project preparation in the SODs. Analyzing the projects approved for FY89 in the context of OED's salient findings, we might infer the following: o Insufficient project preparation comes up frequently in project implementation reviews and the subject should be discussed in the pertinent paragraphs of the SARs. However, in the Mexco, Brazil, and Egypt (Alexandria) projects the issue of project preparation and final engineering status for contract;ng and construction was not adequately discussed. o Land acquisition needs have received little attention in 50 percent of the SARs. Exceptions are YDR, Egypt, and Yugoslavia. o The important issue of conforming to acceptable drinking water quality standards in existing and proposed new services is practically ignored in 80 percent of the projects. 11 o The use of low-cost and/or intermediate alternative technologies to reduce capital and operating costs is scexcely addressed in countries where this issue is relevant such as YDR, Haiti, Egypt, Nigeria, and Pakistan. o Unaccounted-for water reduction programming is incomplete and addressed in a piecemeal fashion in most of the projects, with the exceptions of Brazil, Ghana, and Yugoslavia. o Cost recovery targets and tariff structures seem more realistic than in previous years in the majority of the approved projects. Because of difficulties inherent to controlling service quality in Pakistan, and historical problems in Egypt and Nigeria, cost recovery assumptions are at a higher risk in these countries. o Water demand analysis is being more thoughtfully done now than in recent years, but some projects still present difficulties in assessing service demand due to lack of information on consumption and pricing, specifically in Pakistan, Guinea, and Egypt. o About 50 percent of the projects present an acceptable environmental impact assessment. However, in those projects without sewerage and/or sanitation components, the effects produced by additional water borne sewage and the impact on the land and water environments, as in the Nigeria, Ghana, and Guinea projects, are not being thoroughly analyzed. The OED report also mentions that there are not established indicators to assess the sector's quality of supervision, nor do the project documents provide satisfactory means to evaluate it. We agree that there is room for project supervision improvement and that the Bank should review its effectiveness in supervision and find ways of assessing it. Intensity of supervision during FY89 was &4 staffweeks per project, 21 percent less than the FY83-88 average of 10.6 staffweeks/project. Total staffweeks devoted to supervision were 904 during this year, significantly less than the 1129 staffweeks of FY88. Since intensity and quality of supervision are a Bankwide issue as recognized by the operations staff, it should be understood that they are not specifically sector problems. AVERAGE NUMBER OF STAFFWEEKS OF SUPERVISION PER PROJECT Regon FY83 FY84 FY8S FY8 FY87 FY88 FY89 Africa 9.2 10.5 9.0 10.9 11.4 12.9 8.6 Asia 0.8 143 11.4 11.7 12.1 12.6 83 EMENA 7.1 8.4 8.2 7.1 8.1 8. 8.7 LAC 12.5 12.4 9.7 11.2 13.4 13.8 7.9 Average 9.7 11.0 9.4 10.2 11.3 11.9 84 12 TOTAL STAFFWEEKS ON LENDING, SUPERVISION, AND SECTOR WORK BY FISCAL YEAR AND REGION FOR FY83-FY89 LENDING Region 83 84 85 86 87 88 89 Africa 356 334 357 506 434 392 35I Asia 182 233 386 211 120 176 341 EMENA 266 2W 241 293 334 254 207 LAC 200 273 327 261 243 237 303 Total 1003 1135 1312 1270 1131 1058 120 SUPERVISION Repon 83 84 8S 86 87 88 89 Africa 285 340 308 314 331 314 268 Asia 275 358 262 316 368 296 266 EMENA 232 244 250 234 213 239 234 LAC 35S 321 24S 283 355 2S1 206 Total 1147 1264 1065 1151 1267 1129 904 SECTOR Region 83 84 85 86 S7 88 89 Africa 4S 23 49 40 47 49 28 Asia 42 33 12 3 iS 189 27 EMENA 37 9 15 18 24 104 5 LAC 39 38 32 31 49 64 11 Total 162 102 106 92 13S 405 72 TOTAL Regio% 83 84 8S 86 87 88 89 Africa 686 697 714 860 812 755 647 Asia 499 624 660 530 503 661 634 EMENA 53S 549 506 550 sn 597 496 LAC 594 632 604 575 648 582 520 TotlD 2314 2502 2484 2515 2534 259S 2247 FY89 Figures complete as of July 12, 1989 13 Through the end of 1988, there were about 96 water supply and sanitation projects under supervision, nearly 6 percent of the Bank portfolio. The regions' 1988 ARIS reports unanimously show concern about the intensity of supervision required as sector projects become more complea, and about the alarmingly low coefficients in some SODs. Other important findings during this implementation review are frequent defaults related to cost recovery and financial targets, unrealistic cost recovery expectations, shortfafls in local financing and domestic funding, and the need to address the problem of complexity of project design and final engineering early in the project cycle to avoid serious implementation delays. Sector Strategy Studies FY89 was devoid of sector studies. Unlike FY88 when a high of nine studies were completed (making the five-year average for FY84-88 six per year), the intensification of lending activities has taken its toil in reduced sector work. In previous years sector work has contributed to improving the lending portfolio, maintaining a constructive dialogue with borrowing countries, and increasing our sector knowledge. Although there were no formal sector studies in FY89, Strategy Papers have been prepared for Africa and India through the Well-coordinated efforts of the relevant country and technical divisions and the UNDP-World Bank Program Additionally, a sector strategy paper for Turkey was circulated in January. The Africa Rural Water Supply and Sanitation Strategy Paper is a major undertaking. It proposes to capitalize on past experiences and lessons learned, and recommends the preparation of RWSS country sector strategy plans addressing specific issues in Sub-Saharan countries These plans would be linked to action plans for the preparation and implementation of programs at national, regional, and local evels based on the analysis of the followng: o The role of water supply and sanitation in rural development (issues of financial and economic project justification, value of time, women in development, poverty alleviation, health impacts, and linkages to productivity, among others). o Institutional issues (public/private service delivery systems, human resource development, community management, non-governmental organizations, bilateral agencies, the role of women, etc.). o Technology choices (best applicable technology, standards of service, water resource allocation, systems rehabilitation). o Resource mobilization (sources of funds, cost recovery). o Investment needs (macroeconomic scenario). The paper suggests a catalytic role for the Bank in supporting the RWSS sector in Sub- Saharan Africa, not only by conveying and coordinating external support agency assistance, but also by ensuring more effective inrestments in the sector, and achieving a rational approach to rehabilitation and new service imvestments Likewise, the Bank, with the support of the UNDP- 14 World Bank Program, has initiated some supporting studies such as the health impact of water supply and sanitation projects. The strategy brief properly brings in the main social and technical miscnceptions and the suceses in the Sub-Saharan Africa rural water supply and sanitation sector, and discusses in detail all the issues mentioned above. However, it faDls to focus on a few specific issues common to this group of countries and to define them on a priority basis After a background analys that includes institutional responsibilities, sector policies and programs, imtenectoral linkages, the role of women, levels of service, and social and health indicators, the India Rural Water Supply and Sanitation Strategy Paper identifies the mam issues in the sector. The sector's needs include: increased investment and coverage in the rural water and sanitation sector, given tight financial constraints; coordination of engineering, rural development, and health agencies at all goverment levels to obtain maximum benefits; development of flenxble and feasible technology options; improvement of operation and maintenance practices with community and private sector participation; adherence to realistic cost recovery policies and mechanisms; optimization of water resources use, particularly in arid zones; and strengthening and coordination of sectoral institutions, including non-governmental organzations. Accordingly, Bank strategy would concentrate on helping country efforts in resource mobilization and cost recovy at all government and community levels; use of appropriate technologies; government agenc coordination to integrate water resourcs management; and promotion of the invement of the private sector, women, and community in the planni implementation, maintenance, and proper use of services. A proposed project structured along these lines is under preparation. The Turkey Water and Sewrage Strategy Paper addresses the urban areas' needs and points out the Bank's role in sector development in the context of macreconomic objectives Such objecives include effictive investment linbd to reducing public expenditures in the sector, protection of assets in operation through better maintenance and rehabiitation; support of growth of fi exchange earings by proviig water services and emvironmental protection in tourist areas; and encouraging financially self-sufficient, decentralized, and autonomous water authorities in line with recently agreed-on gonm ent policies. A well-coordinated Bank/gonment effort has resulted in the joint addressing of the strategic sector development issues that define the Bank's assistance in ongoing and future projects in Turkeqr o Avoidance of investment over-progamming (size and timing of investments), which has been linked to poor infrastucture construction quality by the Mler Bank, the ailing financial intermediary agency responsible for most of the water and sewerage works. o Decentralization of responsibility for investment and management to the municipalities under clear cost recovery policies and proper autonomous authorities, which may lead to privatization of selcted activities. o Serng poor regions and populations with low levels of services through cross- subsidization and graduated block tariff 15 o Enronmental protection through water pollution abatement and prevention measures, providing domestic and industrial srage and sewage treatment facilities in urban centers and important foreig exchange-earning coastal tourist area. Other signfficant studies which have been undertaken include: the LAC Regional Study on Management of Water Supply and Sanitation Companies that will lead to an international regional seminar on the subject (including the impact of pratization and admiLnative decenuraation) to take place in Costa Rica in December 198, EMENA's study on Potential Applications for Wastewater Reclamation and Reuse discused in the December 1988 Water Week and being completed with the support of the UNDP-Bank Program; and an Infiastrcte Sector Strategies/FY89 Work Program prepared by AS2I with a useful country- by-country analysis on rationales for Bank assistance strategy and invoement 16 ANNEX LIST OF FIGURES 1. Number of Water Operations FY72-FY89 2. FY89 Lending Projects; Total Bank and IDA Lending 3. WSS Lending Projects; Total Bank and IDA Lending and Total Project Costs By Region FY84-FY89 4. WSS Lending by Region As a Percent of Total Yearly Lending FY84-FY89 5. Water Operations by Region FY73-FY89 6. WSS Lending by Subsector FY83-FY89 7. Proposed WSS Lending Programs; Total Bank and IDA Lending by Region FY90-FY93 17 FIGURE 1 NUMBER OF WATER OPERATIONS FY72-FY89 Fiscal Year AiMca Asia EMENA LAC Total 1972 1 0 1 1 3 1973 1 3 3 2 9 1974 1 3 2 2 8 1975 2 2 4 2 10 1976 2 3 5 2 12 1977 2 3 5 3 .13 1978 3 0 6 5 14 1979 6 8 4 3 21 1980 3 5 4 3 15 1981 2 1 3 5 11 1982 6 1 3 1 11 1983 7 4 5 3 19 1984 2 2 7 2 13 1985 6 2 2 3 13 1986 2 6 2 5 15 1987 5 4 5 3 17 1988 1 0 1 3 5 1989 3 0 4 3 10 18 FIGURE 2 FY89 LENDING PROJECIS TOTAL BANK AND IDA LENDING (in millions $US) Total Country Project Bank IDA Total PCost Brazil Sao Paulo 280.0 .0 280.0 600.0 State Water Sector Egypt Alexandria Water II 36.0 .0 36.0 102.5 Ghana Water Sector .0 25.0 25.0 125.0 Rehabilitation Guinea Water II .0 40.0 40.0 102.6 Haiti Port Au Prince Water .0 20.0 20.0 32.0 Mexico Water, Women and 20.0 .0 20.0 27.0 Development Nigeria Lagos Water Supply 173.2 .0 173.2 461.8 Pakdstan Kaachi Water and .0 125.0 125.0 331.8 Sanitation Yemen (PDR) Al Mukalla Water .0 12.0 12.0 34.7 Yugoslavia Ibtria and Slovenia 0.0 .0 60.0 243.9 Water and Sanitation Total 569.2 222.0 791.2 2061.3 Bank Total 16,403.4 4808.1 21,211.5 FIGURE 3 WSS LENDING PROJECrS; TOTAL BANK AND IDA LENDING AND TOTAL PROJECT COSIS BY REGION FY84-FY89 (in millions $US) tE Ila No Total Rego Brak n, IDA TOd P. Cant Regoa o Buat IDA TOtal P. Ct Afria 2 220 10.9 329 as Atoca 6 720 8.9 I50" 2292 Asia 2 76.5 730 151.3 3199 Ads 2 9ff Boa 17. 202 EMENA 7 420D 7* 4278 3,1437 1ENEA 2 290 292D 619A LAC 2 23.6 2O 34 s4o3 tAC 3 1638 0D 163* 429 Totl 13 5499 90.9 640.81 TOa 13 622. 15 7908 1,4829 FY16 FY$7 No. TOtW No. Toad Region Prj BRak IDA TOa P. Cot , Regia PIj l IDA TOWa P. Cost Afnca 2 Q * 195 195 43.9 Al 5 0 0 61a 611 210.0 Asia 6 2123 8*0 2903 m4 Ad& 3 93*0 193* B4 4S7.9 EMENA 2 120* 0* 120 299* EmEA 5 554.0 5.6 5596 1471.2 LAC 4 1690 0. 169D0 334 LAC 3 640 0.0 6" 114.0 TOWal 14 5013 ".5 S9.8 1,249.1 Told 16 711?0 258.4 904 2,253.1 FM FY89 NM Total NM TOWa Reon Proq flak IDA Totd P. Cost Regi r Bk IDA ToW P. Cst Afdca 1 0.0 4S0 4S* 51.6 Africa 3 1732 65.0 23&2 68.4 Asga 0.0 QO 0.0 0.0 As 00. 0.0 0.0 ENA 1 2180 Q 21&80 S0.9 EMENA 4 96.0 137.0 233.0 712.9 LAC 3 523 0D 2523 6582 LAC 3 30Q0 20.0 3200 65s. TOed s 4703 45.0 S153 1,79.7 TOW 10 5692 222.0 791.2 2,061.3 'lIrca are comp,de aso et 312, 1989 20 FIGURE 4 WSS LENDING BY REGION AS A PERCENT OF TOTAL YEARLY LENDING FY84-FY89 (in millions $US) FY84 US$ MilL % FY85 USS Mill. Africa 32.9 5.1 Africa 150.0 19.2 Asia 151.5 23.6 Asia 175.0 22.4 EMENA 427.8 66.7 EMENA 292.0 37.3 LAC 28.6 4.4 LAC 163.8 20.9 Total 640.8 100.0 Total 780.8 100.0 FY86 USS Mill. % FY87 USS Mill % Africa 19.5 32 Africa 61.8 5.5 Asia 290.3 47.9 Asia 284.0 38.4 EMENA 120.0 19.8 EMENA 559.6 50.2 LAC 169.0 28.9 LAC 64.0 5.7 Total 598.8 100.0 Total 969.4 100.0 FY8 US$ %ilI FY89 US$ ML % Africa 45.0 .0 Africa 238.2 30.2 Asia 0.0 0.0 Asia 0.0 0.0 EMENA 218.0 40.7 EMENA 233.0 29.4 LAC 252.3 50.8 [AC 320.0 40.4 Total S15.3 100.0 Total 791.2 100.0 Note: Peentages may not acd to 100 due to rounding Plgure ate mplete as of Jul 12 1989. FIGURE 5 WATER OPERATIONS BY REGION FY73-FY89 NO. OF PROJECTS 22 20 18 16 - 12 - I0 | ] 2 0 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 YEARS AFRICA ASIA Ml EMENA LAC FIGURE 6 WSS LENDING BY SUBSECrOR FY83-FY89 (in millions $US) FY83 FY84 FY85 FY86 FY87 FY88 FY89 T1TAL SECIOR US$ % USS % US$ % USS % USS % L'SS % US$% [Us$ % Water Supply 614.5 76 191.4 30 599.3 77 48S.5 81 649.6 67 3203 62 446.2 S6 3306.8 64.7 Sewerage and Drainage 56.4 7 366.8 57 0.0 0 70.0 12 60.0 6 0.0 0 0.0 0 553.2 10.8 Pollulion Control 30.0 4 0.0 0 0.0 0 0.0 0 0.0 0.0 0 0.0 0 30.0 0.6 Sodid Waste 97.0 12 9.0 1 0.0 0 0.0 0 0.0 0 0.0 0 0.0 0 106.0 2.1 Water Sector Loan 13.0 2 73.6 12 181.5 23 43.3 7 2S9.8 27 195.0 38 345.0 44 1111.2 21. Total 810.9 100 640.8 100 780.8 100 598.8 100 969.4 100 5153 100 791.2 100 5107.2 100.0 23 FIGURE 7 PROPOS1ED WSS LENDING PROGRAMS TOTAL BANK AND IDA LENDING BY REGION FY90-FY93 (in millions SUS) FY90 FY91 No. No. Proj Proj Bank IDA Total Proj Proj Bank IDA Total Africa 3 99.0 64.8 163.8 Africa 4 0.0 148.6 148.6 Asia 5 360.0 20.0 380.0 Asia 4 34.0 285.0 319.0 EMENA 2 175.0 6.0 181.0 EMENA 5 230.0 115.0 345.0 LAC 3 184.0 5.0 189.5 LAC 3 260.0 25.0 285.0 Total 13 81&0 95.8 914.3 Total 21 524.0 573.6 1097.6 FY92 FY93 No. No. Proj Prj Bank IDA Total Proj Proj Bank IDA Total Afica 7 600.0 83.9 683.9 Africa 7 250.0 204.3 454.3 Asia 3 170.0 50.0 220.0 Asia 4 0.0 350.0 350.0 EMENA 1 125.0 0.0 125.0 EMENA 8 425.0 10.0 435.0 LAC 8 835.0 0.0 835.0 LAC 7 790.0 0.0 790.0 Total 16 1730.0 133.9 1863.9 Total 26 1465.0 564.0 2029.3 *Figum ae oompket as of July IZ 198.