Page 1 INTEGRATED SAFEGUARDS DATA SHEET CONCEPT STAGE Report No.: AC2674 Date ISDS Prepared/Updated: 02/06/2007 I. BASIC INFORMATION A. Basic Project Data Country: Mozambique Project ID: P104566 Project Name: Water Services and Institutional Support Project Task Team Leader: N. Jane Walker Estimated Appraisal Date: April 19, 2007 Estimated Board Date: June 19, 2007 Managing Unit: AFTU1 Lending Instrument: Specific Investment Loan Sector: Water supply (100%) Theme: Access to urban services and housing (P) IBRD Amount (US$m.): 0.00 IDA Amount (US$m.): 5.00 GEF Amount (US$m.): 0.00 PCF Amount (US$m.): 0.00 Other financing amounts by source: BORROWER/RECIPIENT 0.00 Africa Catalytic Growth Fund (ACGF) 15.00 15.00 B. Project Objectives [from section 2 of PCN] The development objectives of the project are to: (i) increase coverage in the five cities of Maputo, Beira, Nampula, Quelimane, and Pemba to consolidate financial sustainability of FIPAG, maintain the delegated management model, and increase growth prospects of benefiting cities; (ii) provide capacity building and institutional support to fill the gap in sector strategy for smaller cities and towns; (iii) support on-going GoM/donor efforts to establish a SWAp for the village systems to help align future Bank activities with programmatic approaches. The objectives will be accomplished through the following implementation strategies: Consolidation of NWDP II gains: First, the project will help consolidate the gains made by FIPAG and supported by CRA, by building on institutional strategies and policies developed under NWDP II, and by providing investment funds to expand networks and distribution in the short term. These investments will take advantage of the increased production capacity achieved under NWDP II and improve service coverage in the FIPAG towns. By serving more consumers and by improving its operational performance, FIPAG's financial position will strengthen and this will also create an improved business opportunities for the private sector operators, key players in the delegated management framework. Page 2 GAPASU for town water supply: Second, the project will support DNA and the creation of the proposed Office of Urban Water Supply and Sanitation (GAPASU). GAPASU is modeled on the delegated management model in that it will be empowered to manage assets, plan and oversee the execution of investments, and engage third party operators in smaller cities and towns that are not sufficiently viable to meet the FIPAG criteria of financial viability. GAPASU addresses the gap for smaller cities and market towns that were piloted under NWDP I, and will be supported under the project with capacity building and operational costs. GAPASU will be closely linked with investment funding under the proposed MCC project and therefore will be piloted in Zambezia and the three northern provinces of Mozambique, Cabo Delgado, Niassa and Nampula. Eventually it is expected the model will be rolled out nation wide though there will be a steep learning curve and considerable risk associated with this new institution. Support for the preparation of SWAp: Third, the project will provide capacity building and institutional support with respect to development of the SWAp approach for rural systems - village and remote point source. The project will support DNA, in collaboration with other donors, in preparing the medium-term expenditure framework and a strategy to implement its sector policy and to the extent possible, common guidelines for all future investments in the sector regardless of the source of financing. Though this close dialogue with donors, it is expected that analytical work within the sector can be undertaken jointly as the sector moves to more program-based lending. The Bank's value added includes recent experience in regional water sector Swaps in Tanzania and the comprehensive approach to the water sector in Uganda. Harmonization and Implementation strategies: The implementation strategies enhance the main elements of the harmonization agenda. GAPASU, like FIPAG, is expected to be an autonomous agency and capacity and skills build-up in the agency will be fully interested into the sector's institutional structure and will not relay on a parallel PIU. The SWAp, in addition to transitioning the Bank to a programmatic approach, offers a wide range of opportunities for donor coordination and sharing of analytical work. At present the project preparation has relied greatly on baseline institutional studies done by MCC in the development of Gabinet de Gestao do Patrimonio do Abastecimento de Agua e Saneamento Urbano (GAPASU). C. Project Description [from section 3 of PCN] The project will finance the following two components: (A) investments and support in the cities under the responsibility of FIPAG - mainly supported by the ACGF; and (B) capacity building, institutional and operational support to DNA mainly supported by the IDA credit. The lending instrument is suggested is a specific investment loan (SIL). The proposed project is expected to enhance the effectiveness of an additional US$300 million plus grant from MCC. The MCC is keen to rely on the Bank's experience in the sector, particularly with respect to institutional arrangements already in place via FIPAG and new arrangements through GAPASU. While the MCC investments would go ahead with out the Bank's project, these investments may be scaled down without the Bank's support of the key sector institutions. Page 3 Component A: Investments and support in the Cities under the responsibility of FIPAG (US$15 million) via the ACGF). This will: (a) Expand and extend the networks and distribution through limited investments in small works in Pemba, Nampula, Quelimane, and Beira, currently operated and managed by a private operator; (b) Provide physical investments to improve the operational efficiency in the urban cities currently under the responsibility of FIPAG; and (c) Support the appropriate type of private operator contract in the four cities to consolidate gains under NWDP II. Component B: This Capacity building, institutional and operational support to DNA (US$5-10 million) Sub-component B1: Establishment and Operationalization of GAPASU: This will: (a) Adapt the proven sustainable institutional and regulatory modalities for secondary cities (GAPASU), based on the delegated management model proven in the experience from FIPAG cities where FIPAG can act as mentor; (b) Ensure that the appropriate regulatory, policy, and institutional framework will be developed and tested as the delegated management model is scaled up; (c) Build the capacity of the sector players, including DNA, district and local governments, municipalities, public and private sector, and small scale providers; (d) Promote small scale private sector participation in service delivery; (e) Provide bridge subsidies during the transition period in achieving O&M and cost recovery. Sub-component B2: Implementation of Sector Policy/Preparation of SWAp: This will: (a) Develop a strategy to scale up the demand driven community participatory model for village piped systems and non-piped systems; (b) Support the government in developing a clear strategy and time-bound plan for implementing its sector policy and achieving the MDGs for water and sanitation, particularly the guidelines for rural water SWAp; (c) Include measures to mitigate the risks from HIV/AIDS, develop a strategy and an implementation plan through a consultative process that involves all sector stakeholders. MCC's Project: Urban, Town, and Village Water Supply and Sanitation Investments (up to US$370 million). Concurrently, the MCC is planning to implement a project in the North of Mozambique at the request of the Government. Actions between the Bank's proposed project and that of MCC intend to be fully coordinated. This MCC project will: (a) Improve water supply and sanitation services in three FIPAG cities and seven second tier municipalities in the Northern Provinces, including Cuamba, Lichinga, Nacala, Ilha de Mozambique, Angoche, and Macuba, currently managed by parastatal companies; (b) Improve water supply in 16 small towns through rehabilitating the existing systems; (c) Improve water supply in rural areas of Cabo Delgado and Nampula through drilling 1,500 boreholes and wells; and (d) provide Community mobilization activities to ensure proper O&M for rural systems, either through community-user group management or contracting out to operators. D. Project location (if known) Maputo, Pemba, Nampula, Quelimane, and Beira area E. Borrower’s Institutional Capacity for Safeguard Policies [from PCN] FIPAG has build up capacity for environment and safeguards under the implementation of NWDP II. The environmental and safeguard considerations for NWDP II included large civil Page 4 works and two substantial RAPS. These have been completed to a satisfactory status so far. NWDP III will include mainly extension to water supply networks and distribution systems. F. Environmental and Social Safeguards Specialists Mr John A. Boyle (AFTS1) Mr Mohamed Arbi Ben-Achour (AFTS1) II. SAFEGUARD POLICIES THAT MIGHT APPLY Safeguard Policies Triggered Yes No TBD Environmental Assessment (OP/BP 4.01) X The Environmental Assessment (OP/BP 4.01) Policy will be triggered by the proposed project due to its focus on extension the water supply networks and distribution systems. As the project is a repeater, it is expected that the environmental assessment report as established under NWDP II and implemented by FIPAG will serve as a guideline. This will need to be updated where necessary, approved and disclosed prior to appraisal. Subproject EAs and/or environmental management plans (EMPs) will be prepared, as required, and disclosed prior to the approval of subproject financing. Natural Habitats (OP/BP 4.04) X Forests (OP/BP 4.36) X Pest Management (OP 4.09) X Physical Cultural Resources (OP/BP 4.11) X Indigenous Peoples (OP/BP 4.10) X Involuntary Resettlement (OP/BP 4.12) X The Involuntary Resettlement (Op/BP 4.12) Policy may be triggered by the proposed project because project activities such as extension of water supply facilities can result in temporary or permanent loss of assets, ie. land, crops, and other means of income generation. A Resettlement Policy Framework (RPF) prepared for NWDP II will be revised to handle such unforeseen circumstances. The revised RPF document will be disclosed prior to appraisal. If necessary, RAPS will be prepared and disclosed prior to the approval of subproject financing. Safety of Dams (OP/BP 4.37) X Projects on International Waterways (OP/BP 7.50) X Projects in Disputed Areas (OP/BP 7.60) X Environmental Category: B - Partial Assessment III. SAFEGUARD PREPARATION PLAN A. Target date for the Quality Enhancement Review (QER), at which time the PAD-stage ISDS would be prepared: 02/15/2007 B. For simple projects that will not require a QER, the target date for preparing the PAD-stage ISDS: N/A Page 5 C. Time frame for launching and completing the safeguard-related studies that may be needed. The specific studies and their timing 1 should be specified in the PAD-stage ISDS. The Environmental Assessment Report prepared for NWDP I was updated in February 1999 to ensure full coverage of the final project scope of the NWDP II . The EA took account of the beneficiary assessment studies for the five cities which obtained and analyzed information on social structures, views of existing and potential future customers on existing water facilities and services (formal and informal), other urban services, preferences for water supply service options, and willingness to pay for improved services. These beneficiary studies were updated in 2003. Currently beneficiary studies are monitored by CRA - the regulatory authority with respect to tariff policy. (1) Update the current EA for NWDP II including the Environmental Management Plan: February 15 - March 1, 2007 (2) Update the NWDP II - Resettlement Policy Framework (RPF): February 15 - March 1, 2007 (3) EAs/EMPs and RAPS for the first year physical works to be reviewed, cleared and disclosed prior to the approval of subproject financing. The Sector Manager Unit has agreed to accept transfer of the safeguards responsibilities. IV. APPROVALS Signed and submitted by: Task Team Leader: Ms N. Jane Walker 02/06/2007 Approved by: Regional Safeguards Coordinator: Mr Warren Waters 02/06/2007 Comments: Sector Manager: Mr Jaime M. Biderman 02/06/2007 Comments: 1 Reminder: The Bank's Disclosure Policy requires that safeguard-related documents be disclosed before appraisal (i) at the InfoShop and (ii) in-country, at publicly accessible locations and in a form and language that are accessible to potentially affected persons. Page 6