63678 The Global Partnership on Output-Based Aid The Global Partnership on Output-Based Aid Annual Report 2009 Supporting the delivery of basic services in developing countries ii GPOBA Annual Report 2009 ©2010 The Global Partnership on Output-Based Aid World Bank 1818 H Street, NW Washington, DC 20433 Website: www.gpoba.org E-mail: gpoba@worldbank.org All rights reserved. This report was produced by the Program Management Unit of the Global Partnership on Output- Based Aid (GPOBA). The findings, interpretations, and conclusions expressed herein do not necessarily reflect the views of GPOBA or the Board of Executive Directors of the World Bank or the governments they represent. Neither GPOBA nor the World Bank guarantees the accuracy of the data included in this work. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgment on the part of GPOBA or the World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. Note on the data: All amounts are in US dollars unless otherwise specified. Design: The Word Express, Inc. Photo credits: Cover: World Bank (top, bottom left, and bottom right): Bangladesh rural electrification, Uganda reproductive health, Uganda small towns water supply, and GPOBA (bottom center): Colombia natural gas; Pages 3, 6, and 14: GPOBA; Pages 4, 9, 10, 13, and 15: World Bank. iii Table of Contents Message from the Program Manager ...................................................................................v Overview ........................................................................................................................... 1 Translating the vision into action ................................................................................... 1 Support from donors .................................................................................................... 3 Operational activities ......................................................................................................... 4 Grant agreements signed ........................................................................................... 4 Project results ........................................................................................................... 5 Technical assistance .................................................................................................. 7 Collaboration with development partners .................................................................. 8 Center of expertise activities ..............................................................................................10 Review of OBA .........................................................................................................10 Monitoring and evaluation ....................................................................................... 11 Dissemination of best practices................................................................................. 11 Knowledge and learning ...........................................................................................13 Communication .......................................................................................................14 Lessons learned from GPOBA projects ...............................................................................16 Targeting the poor ....................................................................................................16 Mobilizing financing .................................................................................................16 Incentives for efficiency, quality, and innovation .........................................................17 Sustainability ...........................................................................................................18 Developing OBA facilities .........................................................................................18 Looking to the future .........................................................................................................19 Annexes Annex 1: Financial Statement .......................................................................................... 20 Annex 2: GPOBA Core Team............................................................................................ 22 Annex 3: GPOBA Portfolio of Signed Grant Agreements as of June 30, 2009 ...................... 23 Boxes Box 1: What is OBA? ..................................................................................................... 1 Box 2: Ethiopia: Dealing with the “last mile” paradox in rural electrification ..................... 9 Box 3: India: Community water project in Andhra Pradesh .............................................12 Box 4: Morocco: Extending water service to the poor in urban and rural areas.................13 Figures Figure 1: Grant agreements signed in FY09: Share of funding by IDA, IDA blend or IBRD country ................................................................................. 5 Figure 2: Grant agreements signed in FY09: Share of funding by region ................................ 5 Figure 3: Grant agreements signed in FY09: Share of funding by sector................................. 5 Figure 4: Volume of OBA subsidy by sector and region in the WBG .....................................10 Figure 5: Funding mobilized by GPOBA grant agreements ..................................................17 iv GPOBA Annual Report 2009 Tables Table 1: Grant agreements signed in FY09 ......................................................................... 4 Table 2: Disbursements as of June 30, 2009 ...................................................................... 6 Table 3: Outputs delivered and verified as of June 30, 2009 ................................................ 7 Table 4: Technical assistance and dissemination activities approved in FY09........................ 8 v Message from the Program Manager T his has been an active year for the Global OBA pilot projects are yielding results: Partnership on Output-Based Aid of GPOBA’s 28 signed projects, 16 are now (GPOBA) as we began our transition into delivering outputs and 11 have disbursed a Center of Expertise in line with the Vision against verified outputs for a total of US$12.4 Statement we adopted in 2008. The main million, benefiting over 491,000 people. A sign of this has been a broadening of our project in Colombia closed in fiscal year 2009, activities to include inter alia a new knowledge having connected 35,000 poor households to and learning program on output-based aid natural gas supply. The switch to natural gas (OBA), targeted efforts to mainstream OBA in for cooking purposes will enable these families World Bank country programs, and increased to save money, and is expected to significantly dissemination of best practices among OBA improve their health, due to a reduction in practitioners. indoor air pollution. Output-based aid is being used to help At one of our training workshops on OBA, improve delivery of basic infrastructure and in April 2009, we were fortunate to have the social services to the poor. It is an approach participation of two officials from Promigas, that is “maturing” and proving to have a the grant recipient in the Colombia natural meaningful role both in the World Bank Group gas project. Listening to their account of (WBG) and the wider development community. lessons learned, I was struck by the wealth Research that we conducted jointly with the of experience which all those involved in WBG’s IDA/IFC Secretariat has identified about OBA approaches—service providers, staff of 131 OBA projects in the WBG, compared to donor agencies, NGOs, and governments— about 32 projects identified for the period now have to share. Our goal at GPOBA is to 2002–2003. Another 66 projects have been make this experience available to the broader identified outside the WBG. This is impressive development community and to continue to progress and an indication that OBA has gather new lessons to help improve delivery of found its place in the spectrum of results- basic services to low-income households. based instruments available to donors and GPOBA would not be able to fulfill its governments. mandate without the support of our donors. GPOBA has continued to develop its Sincere thanks to all of them, and especially portfolio of subsidy funding, which now to the World Bank’s Finance, Economics, and includes 28 projects for a total of US$109.3 Urban Development Department which hosts million, expected to benefit nearly 6 million GPOBA’s Program Management Unit. poor people. This year we signed nine new The views expressed in this report represent grant agreements aimed at increasing access to those of the GPOBA Program Management essential services. A project in Ghana will use Unit and should not be attributed to any one of solar energy technology to increase electricity the GPOBA partners. access for around 15,000 poor households in remote rural regions. Other projects will help provide healthcare for low-income families in Lesotho, electricity for slum-dwellers in India, communications services for poor Patricia Veevers-Carter households in Cambodia, and clean water for Program Manager disadvantaged families in Indonesia. January 2010 1 Overview W hile the global economy is showing Within this context, the Global Partnership tentative signs of recovery, many on Output-Based Aid (GPOBA) is working developing countries are still suffering to fund, design, demonstrate, and document the consequences of the global recession. The OBA approaches to improve delivery of basic World Bank estimates that as a result of the infrastructure and social services to the poor. crisis 89 million more people will be living in Now in its sixth year of activity, GPOBA has a extreme poverty, on less than $1.25 a day, by the portfolio of active OBA pilot projects totaling end of 2010. The global recession has also put at $109.3 million in the water and sanitation, risk $11.6 billion of core spending in areas such energy, health, and telecommunications sectors as education, health, infrastructure, and social in 22 countries. This report presents GPOBA’s protection in the most vulnerable countries. activities in fiscal 2009 (July 1, 2008 to June 30, In this challenging environment, results- 2009) and GPOBA’s financial statement for based financing mechanisms such as output- fiscal 2009 (annex 1). based aid (OBA) have become especially relevant. OBA is used in cases where poor Translating the vision into action people are being excluded from basic services In 2008, GPOBA adopted a Vision Statement because they cannot afford to pay the full to guide its activities over the next five years. cost of user fees such as connection charges. The vision is that by fiscal year 2012–2013: Through the use of performance-based subsidies, payable on results, OBA can make • OBA will be a well-tested results-based investment opportunities more attractive to instrument regularly incorporated in project the private sector, while reaching low-income design to support the sustainable delivery of households in an affordable way. OBA also basic services to target populations. (This contributes to aid effectiveness as it is clear is commonly referred to as “Mainstreaming who will provide the subsidy, what it is for, and OBA”.) how many people benefit (see box 1). BOX 1: WHAT IS OBA? Output-based aid (OBA) is a results-based financing mechanism There are six core concepts associated with OBA: that is being used to improve delivery of basic services to the poor in developing countries. Basic services include energy, water 1. Increasing transparency through the explicit targeting and sanitation, transportation, information and communications of subsidies, tying these subsidies to defined outputs technologies (ICT), healthcare, and education. 2. Increasing accountability by shifting performance risk to service providers by paying them only after they have Unlike traditional approaches, OBA links the payment of aid to delivered an agreed output the delivery of specific services or “outputs.” These can include, 3. Increasing engagement of private sector capital for example, connection of poor households to electricity grids and expertise by encouraging the private sector to serve or water supply systems, installation of solar heating systems, or customers (usually the poor) they might otherwise disregard delivery of basic healthcare services. 4. Encouraging innovation and efficiency by leaving the service “solutions” partly up to the service provider Under an OBA scheme, service delivery is contracted out to a 5. Increasing sustainability of public funding through the third party, usually a private firm, which receives a subsidy to use of one-off subsidies and by linking ongoing subsidies to complement or replace the user fees. The service provider is sustainable service responsible for “pre-financing” the project until output delivery. 6. Enhancing monitoring of results since payments are made The subsidy is performance-based, meaning that most of it is paid against agreed outputs only after the services or outputs have been delivered and verified by an independent agent. The subsidy is explicitly targeted to the poor, for example by focusing on areas in which poor people live. 2 GPOBA Annual Report 2009 • GPOBA will be a recognized Center of of this report as the basis for more systematic Expertise on OBA, providing funding for engagement with the World Bank regions technical assistance and dissemination. on how to incorporate OBA in their regional Subsidy funding will be phased out by fiscal programs. It is also scheduled to be published year 2013. as a book in 2010. The Review of OBA section below gives more details. Fiscal year 2009 has been a year of Earlier this year, GPOBA staff conducted transition for GPOBA as the program started a review of OBA in World Bank country to implement this vision. The move toward assistance strategies (CASs) and poverty becoming a Center of Expertise on OBA reduction strategy papers (PRSPs), to see led to changes in the composition and role if GPOBA activities were aligned with these of the GPOBA team. Under the leadership documents. The review found that OBA was of Patricia Veevers-Carter, who has been mentioned in only 29 percent of the CASs for program manager of GPOBA since 2005, countries with GPOBA projects (active, closed, the unit expanded to include 12 full-time or in the pipeline) and in only two PRSPs. staff. A notable addition was a procurement GPOBA subsequently initiated a more proactive specialist whose brief is to help World Bank dialogue with the relevant country and sector Group (WBG) staff navigate the complexities teams, and began reviewing relevant CASs of the institution’s fiduciary requirements as in a more systematic manner. GPOBA also they relate to OBA. Another four staff in the contributed to a paper setting out how OBA World Bank’s Finance, Economics, and Urban can be used as a tool for mitigating the impact Development Department (FEU) and one in of the financial crisis on the urban poor as part the Middle East and North Africa Region, all of slum upgrading programs under the World of whom are experts on OBA, work regularly Bank’s INFRA platform.2 with GPOBA and are considered as part A key challenge in scaling up OBA of the core team (see annex 2). Together, operations in the World Bank is to reconcile these staff members have contributed to the the institution’s traditional approach of input- development and implementation of GPOBA’s based financing based on expenditures with new knowledge and learning program, and to an output-based approach where the focus stepped-up dissemination of best practices is on results that are independently verified in OBA, including the creation of an OBA before Bank funding is disbursed. The World Community of Practice. Bank is currently undertaking a reform of its Mainstreaming OBA has been an underlying investment lending that foresees the creation goal of all GPOBA’s activities this year. of a new lending instrument that will be both Within the World Bank Group, GPOBA has programmatic and results-based. Under this worked to consolidate the place of OBA as an instrument, the Bank will finance outputs and innovative, results-based financing mechanism outcomes within sound fiduciary and safeguard that responds to specific country and sector frameworks, but without the need for direct needs. GPOBA conducted a major new review accounting linkages between disbursements of OBA, jointly with the World Bank’s IDA/ of its own resources and expenditures by the IFC Secretariat,1 that provides a snapshot of client. This is a very positive development for the OBA universe and presents lessons learned the mainstreaming of OBA in World Bank and best practices in six sectors. GPOBA and operations. the IDA/IFC Secretariat plan to use the findings 1 The IDA/IFC Secretariat was established in February 2008 to help improve and increase collaboration between the World Bank and IFC in IDA countries. 2 The Infrastructure Recovery and Assets (INFRA) Platform, officially launched during the WB/IMF 2009 Spring Meetings, supports counter-cyclical spending on infrastructure and protects existing assets and priority projects. The intention is to provide the foundation for rapid recovery and job creation and to promote long-term growth. Overview 3 To encourage the adoption of OBA Beneficiary of a approaches by developing country community water governments, GPOBA’s priority this year has project in Kenya been to identify pilots for potential scaling- up at the regional or national level. To this end, GPOBA team members have engaged in substantive dialogue with a number of governments, for instance, Morocco and the Philippines, two countries in which GPOBA is funding OBA pilots in the water sector. The experience of the GPOBA-supported OBA facility for the water sector in Honduras (which so far due to the political situation in the country has not been able to disburse subsidies) is already yielding some initial made a one-time pledge to GPOBA in fiscal lessons on setting up OBA facilities. 2009 through its Water Facility for the African, To encourage adoption of OBA approaches Caribbean and Pacific countries. by other development partners, GPOBA GPOBA benefited enormously this year both focused its efforts in fiscal 2009 on offering from having access to World Bank networks more knowledge and learning activities, and and experience and from the guidance disseminating best practices. The aim is to provided by its donors on the transition into provide donor agencies, regional development a Center of Expertise. The program was also banks, and other actors in development with able to attract additional donor funding and the knowledge and tools they need to develop as of June 30, 2009, total funding including their own OBA projects. The Knowledge and contributions and pledges reached $238.7 Learning section below provides more details. million, up from $179.3 million a year earlier (see annex 1). Donor contributions paid in Support from donors this year totaled $45.2 million. Of this, $24.6 GPOBA is one of four global partnership million came from AusAID, which has now programs administered by the World Bank’s honored its full pledge. DFID pledged an Finance, Economics, and Urban Development additional GBP 37 million (approximately Department.3 The program was set up in 2003 $61.3 million), part of which GPOBA will use by the UK’s Department for International to scale up existing pilots and part to test OBA Development (DFID), initially as a World approaches in sectors where they have not yet Bank-administered multi-donor trust fund. been well developed, such as public transport, GPOBA now counts four additional donors: irrigation, and solid waste. The focus will be the Australian Agency for International on low-income countries, especially in Sub- Development (AusAID), the Dutch Ministry Saharan Africa and South Asia. The EU’s of Foreign Affairs (DGIS), the International one-time pledge of approximately $2.2 million Finance Corporation (IFC), and the Swedish will help scale up the Kenya micro-finance for International Development Cooperation small water schemes project from 21 to 55 Agency (Sida). The European Union (EU) also communities. 3 The others are Cities Alliance, the Global Facility for Disaster Reduction and Recovery, and the Public-Private Infrastructure Advisory Facility. 4 Operational activities GPOBA supported two types of operational these activities, and looks at how GPOBA is activity in fiscal 2009: grants for OBA subsidy collaborating with other development partners funding and technical assistance. This section to implement them. reviews the status and initial results of Grant agreements signed A slum electrification GPOBA has been providing grant financing project in Mumbai, for OBA subsidies since 2006, with the aim India is tackling of building a robust sample of pilot projects problems such as from which to draw lessons and develop best illegal wiring practice in output-based approaches. In fiscal 2009, GPOBA continued to add new pilots to its portfolio, while at the same time devoting more time and resources to supervising and monitoring schemes that are already underway. As of June 30, 2009, GPOBA has signed 28 grant agreements for subsidy funding totaling $109.3 million and expected to benefit nearly 6 million people. A table giving details of these projects can be found in annex 3. GPOBA signed nine new grant agreements in fiscal 2009 for a total of $37.3 million, expected to benefit around 3 million poor people (see table 1). GPOBA continues to direct most of its funding to the poorer countries and seven of the nine new projects are in IDA or IDA blend countries; the other two are in Indonesia which graduated from IDA in fiscal 2008 (see figure 1). Four projects are in Sub-Saharan Africa, TABLE 1: GRANT AGREEMENTS SIGNED IN FY09 Grant Amount # of people Average subsidy Country Project Name (US$m) benefiting per person (US$m) Cambodia Increased Access to Telecommunications Services for Rural 2.50 261,000 9.58 Poor in Cambodia Ethiopia Ethiopia Electrification Access Rural Expansion Project 8.00 1,142,857 7.00 Ghana Solar PV Systems to Increase Access to Electricity 4.35 90,000 48.33 India Mumbai Improved Electricity Access to Indian Slum Dwellers 1.65 104,000 15.87 Project Indonesia Expanding Piped Water Supply to Surabaya’s Urban Poor Project 2.41 77,500 31.06 Indonesia Extending Telecommunications in Rural Indonesia 1.87 758,210 2.46 Lesotho Lesotho Health PPP Project 6.25 500,000 12.50 Nigeria Nigeria Pre-Paid Health Scheme Project 6.02 22,500 267.34 Vietnam Targeted Service Expansion Through Water Loss Reduction 4.27 123,076 34.69 Project Total 37.31 3,079,143 12.12 Operational Activities 5 which will receive 66 percent of the funding, up FIGURE 1: from 57 percent in fiscal 2008; four projects are GRANT AGREEMENTS SIGNED IN FY09: in East Asia (30 percent of funding) and one is in South Asia (4 percent) (see figure 2). SHARE OF FUNDING BY IDA, IDA BLEND GPOBA’s new subsidy schemes concern OR IBRD COUNTRY four sectors: three projects are in energy (with IDA Blend 38 percent of funding), two are in health, two 4% are in water and sanitation, and two are in telecommunications (see figure 3). This is a IBRD more even spread than in fiscal 2008, when 11% water and sanitation received two-thirds of new funding. The energy projects include schemes to improve electricity access for slum-dwellers IDA 84% in Mumbai, India, and for rural populations in Ethiopia and Ghana, including through solar home systems. A grant agreement for $6.02 million will help low-income households in Nigeria access pre-paid health insurance. In Indonesia, two new projects will expand water FIGURE 2: supply for the urban poor in Surabaya and GRANT AGREEMENTS SIGNED IN FY09: extend phone and Internet access to rural areas. As shown in table 1, the average subsidy SHARE OF FUNDING BY REGION amount for the grant agreements signed in fiscal 2009 is $4.15 million and the average subsidy per beneficiary is $12.12. This compares to South Asia 4% an average subsidy per beneficiary of $19.92 in fiscal 2008; the difference is due mainly to a lower average subsidy per beneficiary in the energy projects and the low subsidies per capita in the telecommunications projects. The average East Asia Pacific Sub Saharan subsidy per beneficiary is $33.30 for the water 30% Africa 66% and sanitation projects, $23.48 for the two health projects, $10.47 for the energy projects, and $4.29 for the telecommunications projects. Project results FIGURE 3: Fifteen GPOBA-funded OBA projects are GRANT AGREEMENTS SIGNED IN FY09: disbursing based on verified outputs as of June SHARE OF FUNDING BY SECTOR 30, 2009, up from ten projects a year earlier (see table 2). Two of the first GPOBA schemes have completed their activities: Water 18% • A pilot project in Mongolia provided access Energy to modern information and communication 38% technology (ICT) services to over 22,300 people in remote rural areas, reducing Telecom 12% their communication costs, strengthening family ties, and improving security and Health coordination associated with migration and 33% response to harsh weather; 6 GPOBA Annual Report 2009 Natural gas project in Colombia (households with and without a connection) • An OBA scheme in Colombia connected In total, GPOBA projects have disbursed 35,000 low-income households to the $11.3 million based on independently verified natural gas network, enabling them to make outputs, benefiting more than 423,000 people significant savings in household expenses as of June 30, 2009. Advances have been and making their living environment safer provided to seven projects, amounting to $2.86 and healthier. million, which will be disbursed by the fiduciary TABLE 2: DISBURSEMENTS AS OF JUNE 30, 2009 IN US$ Disbursements against Total Country Project Name Advances verified outputs disbursements Armenia Access to Gas & Heat Supply for Poor Urban Households in 2,322,940 2,322,940 Armenia Bolivia Decentralized Electricity for Universal Access 50,000 50,000 Colombia Natural Gas Distribution for Low Income Families in the 4,880,380 4,880,380 Caribbean Coast Honduras Extension of Water and Sanitation Services in Low Income Areas 426,690 426,690 of Honduras India Improved Rural Community Water in Andhra Pradesh 403,410 403,410 Kenya Micro-finance for Small Water Schemes 234,237 65,763 300,000 Mongolia Mongolia OBA Pilot Project of Universal Access Strategy 257,335 257,335 Morocco Morocco Urban Water and Sanitation 1,797,060 1,797,060 Nepal Biogas Support Programme 588,530 588,530 Philippines Improved Access to Water Services in the East Zone of Metro 160,682 160,682 Manila Project Senegal Senegal On-Site Sanitation Project 411,956 146,244 558,200 Uganda OBA in Water Supply in Uganda’s Small Towns and Rural Growth 650,130 650,130 Centers Uganda Reproductive Health Vouchers in Western Uganda 1,039,450 1,039,450 Vietnam Vietnam Rural Water (EMW) 681,510 681,510 Yemen Yemen Safe Motherhood Program 49,440 49,440 Total 2,861,903 11,303,855 14,165,757 Operational Activities 7 TABLE 3: OUTPUTS DELIVERED AND VERIFIED AS OF JUNE 30, 2009 Number of Country Project Name Output Description Verified Output beneficiaries Armenia Access to Gas & Heat Supply Households with access to heating either through 2,825 11,441 for Poor Urban Households in individual connection or through local boiler Armenia systems Colombia Natural Gas Distribution for Low Households with gas connection 34,138 204,828 Income Families in the Caribbean Coast India Improved Rural Community UV water purification system providing public 15 45,000 Water in Andhra Pradesh access to clean water Kenya Micro-finance for Small Water Households benefiting from increased access to 1,436 6,893 Schemes water supply services Mongolia Mongolia OBA Pilot Project of 1) Public access telephone network for herder 1 public access 22,315 Universal Access Strategy community 2) Wireless network for soum telephone network 2 wireless networks Morocco Morocco Urban Water and Households with water and sanitation connection 3,426 17,130 Sanitation Nepal Biogas Support Programme Biogas plants for rural Nepalese households 4,772 33,655 Philippines Improved Access to Water Individual water service connection, after-the- 1,567 7,365 Services in the East Zone of meter piping and 2 faucets, & water closet Metro Manila Project Senegal Senegal On-Site Sanitation Households benefiting from increased access to 431 3,879 new sanitation facilities Uganda Uganda NWSC Public Water Points and Water Yard Taps 1,723 31,785 Uganda Uganda Small Towns Water Yard Taps 302 5,436 Vietnam Vietnam Rural Water (EMW) Households with piped water connections 6,670 33,350 423,077 agent based on verified outputs, or for the will be able to seek care from service providers hiring of consultants such as the independent of their choice. Funds will therefore follow verification agent (tables 2 and 3). The overall the patient and, through this change in the progress is encouraging, with an increase of 50 flow of finances, it is expected that the service percent in total disbursements and 72 percent providers will improve quality of their services in the number of beneficiaries since fiscal 2008. to be able to attract and retain patients. These figures can translate into life-changing results for individual families in developing Technical assistance countries. For instance, in February 2009, GPOBA has provided technical assistance since Jeninah Komugisha became the first woman to its inception in 2003, mainly to support the give birth safely, with attention from trained design, implementation, and evaluation of medical professionals, under the Reproductive individual OBA projects. In fiscal 2009, GPOBA Health Vouchers in Western Uganda project. approved seven technical assistance activities to This pilot, which builds on an earlier scheme support pilot projects for a total of $503,000 funded by the German development bank (table 4). The largest amount ($165,000) KfW, is expected to benefit a total of 50,500 supported the preparation of a project to mothers and their children, as well as 35,000 expand provision of safe drinking water supply patients suffering from sexually transmitted and sanitation services to urban and peri-urban diseases. Thanks to the voucher system, people households in Yemen. The related subsidy 8 GPOBA Annual Report 2009 TABLE 4: TECHNICAL ASSISTANCE AND DISSEMINATION ACTIVITIES APPROVED IN FY09 Country Project Amount (US$) Technical Assistance Nigeria Nigeria Prepaid Health Scheme Pilot 6,000 St. Lucia St. Lucia Water and Sanitation Project 25,000 Uganda Establishing a baseline and doing a follow-up evaluation for an OBA project in the water sector in Uganda 74,000 Uganda Initiating an OBA fund in Uganda’s water sector 73,000 Vietnam Vietnam EMWF Rural Water Supply Development Project (Technical Training) 20,000 Vietnam Vietnam Education 140,000 Yemen Yemen Al Qabel Village Water Supply 165,000 Sub-total 503,000 Dissemination Global Compilation and development of draft terms of reference (TOR) for designing OBA schemes 20,000 Global Guidance Publication on Development of OBA Facilities 39,500 Global OBA Supplemental Review IDA/IFC 155,000 Vietnam Vietnam EMWF Rural Water Supply Development Project (Dissemination) 30,000 Sub-total 244,500 Total 747,500 scheme has been approved as eligible for Development Association (IDA), the branch of subsidy funding from GPOBA. the WBG that lends to the poorest countries. GPOBA aims to use technical assistance Some examples include: increasingly to help developing countries set up OBA facilities from which they will be able to • Ethiopia rural electrification. This scheme fund various projects in a particular sector (in was originally designed as part of the most cases, water and sanitation). Although Second Electricity Rural Expansion Project no new funding for technical assistance to set (EAREP II) which benefits from a $130 up OBA facilities was approved in fiscal 2009, million loan from IDA. Subsidies are now GPOBA made good progress on this activity, being made available in all of EEPCo’s engaging in substantive discussions with several grid-electrified area, not only in the countries including Brazil, Morocco, and the EAREP II project area. The OBA scheme Philippines. The actual implementation of the is accelerating the pace of connections facilities is expected to take place in the next in electrified areas and fostering energy two years. OBA facilities take time to set up as efficiency (see box 2). governments need to identify specific funding • Ghana solar PV systems. This project is and implementation mechanisms, and may part of a larger Ghana Energy Development need to adjust project design to ensure that it is and Access Project which involves $90 sufficiently targeted to the poor. million in IDA funding, as well as $5.5 million in funding from the Global Collaboration with development Environment Facility. partners GPOBA’s collaboration with development Other examples of partnership include the partners expanded in fiscal 2009 to include Nigeria pre-paid health scheme project, in more dissemination and training activities as which GPOBA is partnering with the Health well as operational work. GPOBA continued Insurance Fund, a Dutch NGO, and the to work closely with the International Lesotho hospital PPP project which is part of Operational Activities 9 BOX 2: ETHIOPIA: DEALING WITH THE “LAST MILE” PARADOX IN RURAL ELECTRIFICATION Ethiopia’s rural electrification sector suffers from what is known as the “last mile” paradox. Ethiopia has a competent public utility, with a mandate to increase the number of rural towns and villages with electricity access; and government and donor support for the rural electrification program, including through IDA. However, even in towns and villages that have been electrified, the program does not always go the “last mile” to ensure that households are actually connected to the grid. In the meantime, many poor households pay more for alternative fuels, such as kerosene, than they would for metered grid-based electricity. For poor families, the barrier to access is the cost of connection, originally designed as part of the World Bank’s Second Electricity which at an average of $75 can represent up to 15 percent of Access Rural Expansion Project (EAREP II), which benefits from a $130 their annual income. For the utility, the Ethiopian Electric Power million IDA loan. Within this framework, GPOBA is providing a $8 Corporation (EEPCo), the connection cost represents only 3 percent million grant, which will enable EEPCo to connect and provide loans to of its upstream investment. But EEPCo cannot finance this cost 229,000 households, representing a population of 1.1 million people. because, according to the regulatory compact, its responsibility stops at the meter. GPOBA pays a subsidy to EEPCo only after independent verification of pre-agreed “outputs”: a working metered connection to a A few years ago, EEPCo tried to help poor households pay the household, a five-year loan from EEPCo to help repay the connection connection cost by providing them with microcredit, and the pace cost, and two energy-efficient compact fluorescent lamps (CFLs). of electrification accelerated. However, the concession of these loans consumed considerable amounts of the utility’s working The GPOBA grant offered EEPCo a different business model through capital, which needed to be channeled to the backbone of the rural which the utility would be properly compensated for providing the electrification program. loans. The energy efficiency component of the project also helps the customers, as using CFLs can lower their electricity bill by 55 In October 2008, GPOBA signed a grant agreement with EEPCo for a percent. The project became effective in May 2009. It has potential scheme to deal with the last mile paradox and to make the connection for scaling up, for instance by using future IDA funds to top up the cost affordable for poor rural households. The GPOBA project was GPOBA resources. a larger public-private partnership financed which will develop about 75 village-based by IFC. IFC provided both funding (through piped water schemes, has installed piped water GPOBA) and staff expertise for the Lesotho connections for 6,670 households as of June OBA scheme, which will subsidize inpatient 30, 2009, benefiting a total of 26,680 people. services at a new 390-bed National Referral EMWF and GPOBA have also worked together Hospital and outpatient services at three semi- to provide technical training for local water urban filter clinics that are being refurbished. managers and to disseminate lessons from the In the Vietnam rural water project, GPOBA project through workshops with partners in is collaborating with the East Meets West Danang and Hanoi. The aim is to demonstrate Foundation (EMWF), an NGO, to provide safe how the output-based approach could be drinking water to about 30,000 poor families applied to other regions of Vietnam and in the central part of the country. The project, eventually to other countries in Southeast Asia. 10 Center of Expertise activities As part of its transition into a Center of review built on GPOBA’s ongoing monitoring Expertise on OBA, GPOBA has developed a both of its own-funded projects and of OBA range of activities to gather, document, and projects financed by the WBG and other share information and knowledge on OBA development partners. projects. The cornerstone of GPOBA’s Center The review covers OBA schemes in six of Expertise program this year has been sectors: education, energy, health, ICT, creating synergies—between people and teams transportation, and water and sanitation. It working on OBA, and between OBA-related identified 131 OBA projects in the WBG, with activities and products. This section reviews the a total subsidy value of around $3.5 billion, results of these activities in fiscal 2009. up from approximately 32 OBA projects (value around $1.5 billion) in the period 2002–2003. These projects are expected to benefit at Telecommunications least 61 million people. Over half the subsidy project in Cambodia funding has gone to the Latin America and the Caribbean Region and to the transportation sector (figure 4). In addition to the WBG funding, private financing for the 131 OBA projects identified in the WBG amounts to $323 million. Some WBG projects have also received complementary subsidy funding from recipient governments for a total of $2.8 billion. Another 66 OBA schemes have been identified outside the WBG, mostly in the ICT, Review of OBA transport (mainly roads), and energy sectors. GPOBA completed a major review of lessons Funding for some of these schemes comes learned and best practices in OBA this year, from other donors, such as KfW in the health jointly with the WBG’s IDA/IFC Secretariat. The and renewable energy sectors or DGIS through FIGURE 4: VOLUME OF OBA SUBSIDY BY SECTOR AND REGION IN THE WBG WBG OBA Portfolio by Region WBG OBA Portfolio by Sector (Total = US$ 3.5 bn) (Total = US$ 3.5 bn) Education 5% SAR, 9% Water & Sanitation Energy 6% MENA 5% 1% AFR, 33% Health 24% LCR, 52% EAP 3% Transport ECA 58% Telecom 2% 2% Center of Expertise activities 11 the Energizing Development program. More The review also identifies some cross-cutting than US$6 billion have been made available challenges in implementing OBA approaches. for ICT universal access funds, mainly through For instance, as mentioned above, OBA shifts surcharges and levies on operators. More performance risk to service providers by paying generally, in developing countries OBA schemes them only after delivery of services. But in some that do not involve donor support are mainly OBA schemes, the service providers—especially found in middle-income countries that are able if they are small local companies—find it difficult to fund subsidy schemes from cross-subsidies to access the finance they need to “pre-finance” or tax revenue. the agreed outputs. Other financial instruments The review finds considerable evidence such as guarantees can be used to mitigate of the purported advantages of OBA over this constraint. More broadly, as governments traditional input-based approaches. For and donors move towards scaling up OBA example: approaches, it is important to recognize that any OBA scheme is only as sustainable as the • Shifting project risk to service providers: environment within which it operates. A pilot, OBA shifts performance risk to service by definition, may seem to some extent to be providers by virtue of the fact that isolated from broader sector reform issues in the payments are made after delivery of short term, but for greater impact with scaling- verifiable outputs. For instance, in the up and mainstreaming, a supportive enabling Rural Community Water Project in Andhra environment is critical. Pradesh, India, the subsidy is paid to the Naandi Foundation in installments Monitoring and evaluation after independent verification of three Monitoring and evaluation (M&E) continued pre-agreed outputs which Naandi pre- to be central to GPOBA’s efforts to define and finances through commercial borrowing. verify OBA standards in fiscal 2009. In addition A significant part of the subsidy is payable to conducting the OBA Review, GPOBA only after each community water scheme delivered semi-annual monitoring reports on proves it has provided reliable water all its own-funded projects to the donors. The services for at least three months after principal lessons drawn from these reports are becoming operational. summarized in the section below on Lessons • Efficiency gains: Output-based payments Learned from GPOBA Projects. lead to improvements in operational GPOBA also pursued its efforts to evaluate efficiency and delivery of innovative access- the development impacts of OBA projects. to-service solutions. The competitive Baseline surveys were conducted for the bidding process in the Water Supply in impact evaluations for two GPOBA projects Uganda’s Small Towns project resulted in Uganda: Kampala Water Connections for in an average efficiency gain in ten towns the Poor and Reproductive Health Vouchers of about 20 percent. Due to competitive in Western Uganda. These impact evaluations bidding, at least three towns did not need will compare the OBA approaches used with subsidies at all. existing input-based projects. GPOBA obtained • Private sector capital and expertise: OBA commitment for co-funding of the evaluation leverages private funding and expertise of the Kampala Water project from the Spanish to serve customers the private sector Impact Evaluation Trust Fund. might otherwise not serve. In Guatemala’s telecommunication projects, for instance, Dissemination of best practices each $1 of subsidy leveraged between $2 GPOBA’s dissemination program builds on and $4 of private investment, while in Peru, the M&E function to share lessons learned and an average of $2 of private capital was best practices in OBA with the development raised for each $1 subsidy. community. This year World Bank staff working on OBA approaches came together to form a 12 GPOBA Annual Report 2009 Community of Practice on OBA. Launched in and disseminated in print and electronic February 2009, this informal network provides form. Among these, two papers presented the a forum for staff to share best practices in experiences of the GPOBA projects in Ethiopia OBA through peer learning and knowledge rural electrification and India community water sharing, with a focus on practical issues such (boxes 2 and 3). Two other papers published as procurement and financial management in in English and French presented the design and OBA projects. To support knowledge-sharing initial results of Morocco’s OBA pilots in the across agencies, GPOBA also developed an water sector (box 4). Another paper looked at “online resources” section on its website that the cross-cutting issue of how OBA subsidies provides access to relevant toolkits, guidance can be used to target services to the poor. notes, and other documents to the wider GPOBA funds dissemination activities community of OBA practitioners. through its own Center of Expertise budget Recognizing that staff exchanges can also and through grants for specific activities, such be a good way to share knowledge, GPOBA as publications (other than OBApproaches), hosted its first secondee, Martin Schmid of workshops, and peer learning events. Four KfW, from April to June 2009. The secondment new grants for dissemination activities were aimed to enhance cooperation between approved this year, totaling $244,500 (table 4). GPOBA and KfW, and to encourage the use of The most important was a $155,000 grant to OBA in KfW project design. This experience led support the joint GPOBA-IDA/IFC Secretariat among other things to a meeting between KfW, review of OBA. A $30,000 grant supported GPOBA, and the Gates Foundation on the use dissemination of experiences and lessons of OBA in the health sector. learned in the Vietnam rural community water GPOBA also stepped up dissemination of project through two advocacy workshops in best practices through its OBApproaches series Danang and Hanoi (see Collaboration with this year, with eight new papers published Development Partners section above). BOX 3: INDIA: COMMUNITY WATER PROJECT IN ANDHRA PRADESH Safe drinking water is a key development issue in India, where only benefiting around 12,500 poor households in total. Each 18 percent of rural households have access to clean water. The state CSWS will have a water treatment plant connected to a water of Andhra Pradesh has increased the proportion of its population distribution point from which users will purchase water in with access to water from 3 percent to 65 percent in the last two jerry cans. Although this project does not envisage domestic decades. Nevertheless, estimates suggest that up to 17 million of connections, it is a first step in providing safe and affordable Andhra Pradesh’s 80 million inhabitants experience bacteriological drinking water in areas where typically the existing water source contamination of water. Those most affected are rural households is of poor quality. in the coastal districts. Barriers to improving access to water services in these areas include the lack of a sustainable tariff The GPOBA scheme provides a performance-based subsidy structure, poor operation and maintenance of existing systems, linked to the delivery of pre-agreed outputs which include three scarcity of public funds, and social factors such as illiteracy. months of billed water services. The output-based approach requires that tariffs paid by users for consumption cover the In 2006, Naandi Foundation, an Indian non-governmental costs of operation and maintenance, user-fee collection, and organization, and Water Health International (WHI), a disinfection education and communication activities with key stakeholders technology provider, approached GPOBA to request funding and vulnerable groups such as young mothers, infants, and for a pilot project in three coastal districts of Andhra Pradesh: families living below the poverty line. Tariffs also cover loan Guntur, Krishna, and West Godavari. The pilot would combine repayment, thus helping to ensure the long-term sustainability water purification technology with a community-driven and of the services. performance-based approach. The proposal was accepted by GPOBA which provided a $850,000 grant in May 2007. As of June 30, 2009, the project has installed safe water schemes in 15 villages, benefiting around 45,000 people. The project has The project aims to create Community Safe Water Schemes potential for replication in other villages in Andhra Pradesh and (CSWS) in 25 villages that lack access to clean drinking water, ultimately in other parts of India. Center of Expertise activities 13 BOX 4: MOROCCO: EXTENDING WATER SERVICE TO THE POOR IN URBAN AND RURAL AREAS Initial results show that this approach is helping to refocus service provision on the households, which has increased accountability, strengthened partnerships between local authorities and operators, and made monitoring of service delivery a priority. The World Bank is now working with the government to plan a scale-up program. Expanding Water Supply Service in Rural Areas Since the mid-1990s, Morocco has made big strides in developing access to potable water in rural areas. The National Water Supply Company, ONEP, has developed an important network of standpipes in rural communities and over 87 percent of the rural population has access to a source of drinking water. Many Two OBA pilots are being carried out in Morocco’s water sector, one households are now asking for domestic connections, but ONEP’s in urban and one in rural areas. fixed costs make service provision to smaller communities through the development of domestic connections a loss-making business. Extending Water Services to the Poor in Urban Areas Morocco is a middle-income country with good water To serve these populations better, ONEP is piloting Morocco’s first infrastructure that provides access to safe drinking water and public-private partnership to subcontract water service provision sanitation to the majority of the urban population. In 2005, and management in rural areas, using an affermage-type contract. Morocco made it a priority to extend service to poor peri-urban GPOBA provided a $465,000 technical assistance grant for the settlements, and encouraged operators and local governments to design of the pilot. reduce connection fees for their inhabitants. These connection fees had been priced at marginal cost. During the first years of the ten-year contract, the private operator will receive performance-based subsidies from ONEP under an OBA The government and the operators of water utilities in Casablanca, approach. This will allow the operator to break even early enough Meknès, and Tangiers subsequently requested a grant from GPOBA to develop a profitable business within the existing tariff structure. to pilot the introduction of performance-based subsidies. The If successful, this model for rural water supply could be scaled up aim was to encourage service expansion, using an OBA approach. in other small towns and surrounding rural areas, thus presenting GPOBA provided a $7 million grant for the pilot, which is expected business opportunities for the Moroccan private sector while to bring improved access to water and sanitation services to enhancing access to piped water services for the poor. around 11,300 households. Training workshop on OBA in Uganda Knowledge and learning This year saw the launch of GPOBA’s new knowledge and learning (K&L) program which aims to build awareness of OBA approaches among development partners through training events, tailored presentations, and e-learning. GPOBA began by designing a standard two-day workshop on the design and implementation of OBA which includes case studies on real OBA schemes. This workshop was successfully piloted with staff of AusAID and the US Millennium Challenge Corporation (MCC) in the fall of 2008, and a one-day workshop was also organized for staff of the Asian Development Bank in Manila. Training sessions were subsequently offered to WBG staff both at headquarters and in the South Asia and Africa regions. 14 GPOBA Annual Report 2009 and lessons learned at events such as the Sustainable Development Network’s Water and Energy Weeks. Gas and heat supply GPOBA also began the design of its project in Armenia e-learning course on OBA this year. The course will be open to OBA practitioners around the world and is expected to be available in summer of 2010. Communication In addition to the specific training and dissemination activities outlined above, GPOBA continued to reach out to the wider development community through a range of communication activities in fiscal 2009. A highlight of the year was the production of GPOBA’s first documentary film, on the Colombia natural gas project, which was hosted on the World Bank’s YouTube channel. The film, in Spanish and English, explains how the Colombia natural gas project works and shows its impact on the health and well-being of poor households through in situ interviews The OBA training events have been well with project partners and beneficiaries. The attended and involved various partners. video format has proved to be an effective For instance, a workshop in Uganda for communications tool and GPOBA staff are World Bank country office staff included using the film widely in training and awareness- representatives of three local donors: the raising activities. European Union, the African Development Many of GPOBA’s communications Bank, and the Dutch Ministry of Foreign products underwent a “spring cleaning” this Affairs. The course is now offered on a year, with the adoption of a new visual identity quarterly basis to WBG staff and on demand for the program, the move to a more dynamic to other development partners. GPOBA has and interactive platform for the website, and received invaluable help in designing and the revamping of GPOBA’s quarterly newsletter, launching its K&L program both from its renamed “OBA Connections.” The aim of these donors and from the World Bank’s Learning efforts was to make data and information on Board. OBA approaches more accessible and attractive In addition to organizing training events, to OBA practitioners and policymakers. GPOBA continued to participate in meetings GPOBA published several feature stories and conferences in order to raise awareness on its website, including an analysis of the of OBA approaches among the wider gender impacts of OBA schemes and a photo development community. For instance, GPOBA slideshow of the India rural community water team members discussed OBA in education project (see box 3). GPOBA also adopted with the Center for Global Development and new tools to monitor its web and electronic the Education for All Fast Track Initiative outreach in a more systematic way. (FTI) Secretariat. They also presented OBA GPOBA continued to benefit from approaches at international conferences such the support of its partners this year in as the Africa Energy Forum and World Water communicating about OBA. For instance, Week. Within the WBG, task team leaders GPOBA regularly disseminated OBA of OBA projects presented their experiences publications and project information through Center of Expertise activities 15 the newsletters of the WBG’s Sustainable at the country level. Articles on OBA were Development Network and those of other published in various outlets, including the global partnership programs, such as the Africa Energy Yearbook and Ernst & Young’s Water and Sanitation Program. Members development magazine, and the OBA water of the WBG’s communications network, pilots in Morocco were the subject of two including IFC communications officers, also chapters in a World Bank book on the water supported GPOBA’s media outreach, especially sector in MNA. 16 Lessons learned from GPOBA projects As outlined above, GPOBA’s portfolio of Mobilizing financing subsidy funding now includes 28 pilot projects GPOBA projects mobilize several forms of in various stages of implementation. While the financing: direct investment to be recouped intention is to continue building this portfolio, through tariffs, user contributions that these 28 projects are already generating complement the subsidy, micro-loans to a wealth of lessons on how to design and users to pay for part of the connection costs, implement OBA schemes in line with the core and other donor financing. By expanding concepts of OBA (see box 1 above). This access to poor households, OBA subsidies section summarizes the main lessons that can also increase the effectiveness of existing emerged in fiscal 2009. investments that are not being used to full capacity. One clear lesson in this case is that, Targeting the poor for network or utility services, mobilizing All but two GPOBA projects use geographic private finance is wholly related to tariff targeting to reach the poor. This is because reform: ultimately, the service provider must GPOBA generally funds small pilot projects be able to recoup costs not subsidized by the which cannot cover large project areas and so OBA project through connection charges and need to focus on areas in which poor people the tariff. Because OBA schemes target the live. While geographic targeting is easy to poor, who often are charged social tariffs or implement, it risks either including beneficiaries who consume small amounts, the amount of who are not as poor or excluding poor families investment that can be recouped and thus the who live outside the targeted areas, or both. opportunities for mobilizing finance in the For this reason, most GPOBA projects combine traditional sense are limited compared to non- geographic targeting with other mechanisms to OBA schemes that do not target the poor. improve targeting effectiveness. More than half of GPOBA projects use some • Figure 5 shows that for the 28 projects element of self-selection targeting, a method currently signed for a total GPOBA that can take three forms: grant funding of US$109.3 million, an additional US$222.7 million has been • Providing subsidies for outputs demanded mobilized from other sources such as user mainly by the poor (public water points, contributions (US$38.3 million), private pay phones). sector investment (US$134.3 million), and • Paying higher subsidies for more pro-poor co-financing from governments and other outputs such as smaller solar home systems donors. For every dollar in GPOBA funding (SHS) or biogas plants. for a project, other sources contributed • Phasing in the subsidy only after service nearly 2.04 dollars. has been available for some time in the • GPOBA funding has also resulted in project area, so that households that can additional funds raised either for scaling afford connections can be expected to be up existing projects (such as IDA funding connected already. of US$5.4 million for the Mongolia telecommunications project) or to conduct Additionally, a number of GPOBA projects additional pilots (such as European Union use some form of means-testing targeting, funding of approximately US$2.2 million either by relying on existing social targeting for the Kenya microfinance project). schemes implemented by governments or • Further, GPOBA technical assistance by taking measures to assess income during is being used to develop OBA facilities project implementation. in several countries, such as Brazil and Mexico, which may be able to mobilize Lessons learned from GPOBA projects 17 FIGURE 5: FUNDING MOBILIZED BY GPOBA GRANT AGREEMENTS Sources of funding $160.0 $134.3 $140.0 $120.0 $109.2 $100.0 (millions) $80.0 $60.0 $41.7 $38.3 $40.0 $20.0 $8.4 $0.0 GPOBA Grant User Contribution Private Sector Govt./Public Other Funding additional donor, government, and even have resulted in a 20–30 percent reduction in private sector financing. unit subsidies compared to initial expectations. Competitive bidding is not always possible, In some GPOBA projects, the competitive for instance where there is an incumbent service selection of service providers resulted in the provider or where several service providers conclusion that a subsidy was not needed. The exist in the same market. As a result, only five bidding for mobile phone services in Mongolian GPOBA projects involve competitive bidding. towns and the resulting pilot demonstrated Competitive bidding can be time-consuming, that mobile phone services can be provided particularly where small-scale local service on a commercial basis without subsidies in providers need capacity building in order to some cases. Similarly, the bidding for piped participate. Also, there is a risk that the bidding water supply in the Uganda small towns project process will not attract a sufficient number demonstrated that in at least three towns, of bidders, particularly in times of financial extensions could be made on a commercial crisis. Consequently, most projects for which basis, with the private sector estimating service providers were selected competitively that it could recoup the costs related to new have experienced significant delays. A connections through the tariff. notable exception to this is the Mongolia ICT project which, due to the widespread use Incentives for efficiency, quality, and of competitive selection in similar projects innovation in the ICT sector, was able to implement a Using competition either to ensure minimum competitive selection process relatively swiftly. costs for a standardized output or to improve Another form of competition, used mainly quality for a standard unit cost is one of the in small-scale infrastructure schemes, involves best ways to ensure value for money in OBA an open call for proposals combined with schemes. Efficiency gains are easiest to quantify a ranking of proposed sub-projects. This for projects that determine unit subsidies based approach is being used in three GPOBA projects on competitive bidding. Projects with GPOBA that provide piped water using small-scale involvement that have used competitive bidding providers. Experience with the Honduras water 18 GPOBA Annual Report 2009 project shows that a relatively simple formula • tariffs that cover operation and needs to be used for the ranking. Another way maintenance costs, providing an incentive of harnessing competitive pressures for OBA for ongoing service provision; projects is to use several service providers • service delivery used as a subsidy to compete for clients, where the nature of disbursement milestone; subsidized services allows that. This approach is • demonstration of implementation capacity being used in the Nepal biogas project and the of OBA recipients and implementing Uganda reproductive health project. agencies; and, Even without competitive selection of service • conformity with World Bank environmental providers, the transfer of project risk to service and social safeguards. providers in OBA schemes can help to improve aid effectiveness. For instance, in the Yemen Developing OBA facilities maternal health project, the NGO responsible For developing country governments, scaling- for outreach decided to step up marketing up of OBA approaches will require developing efforts to reach intended beneficiaries after OBA facilities and adapting government initial estimates of uptake did not materialize. systems to make them amenable to OBA. While In the Jakarta water project, the utility, PALYJA, all the lessons and challenges described above verified a sample of connections installed by are relevant, this also presents some additional contractors on its own. When it found that challenges: some of the connections did not meet its technical specifications, PALYJA introduced • It takes time to develop and establish the a corrective action plan to make sure that modus operandi of OBA facilities and to all connections met the necessary technical staff them. Sub-projects also need to be specifications before being verified by the developed for funding and this may require independent verification agent. coordination among various government agencies. The use of government systems Sustainability will require adjustments to financial The long-term sustainability of GPOBA projects accounting and procurement structures to will only become evident over time. So far, no deal with a shift in paradigm from input- to projects have reported specific issues with the output-based schemes. sustainability of service provision. Evidence • When implementing OBA facilities through from the Colombia natural gas project, which government systems, output verification has closed, shows that, depending on project and monitoring may be the responsibility location, 87 to 98 percent of beneficiaries were of a unit within a government ministry, continuing to use gas and were paying their as opposed to the responsibility of an bills within 30 days of receipt. independent verification agent that reports In general, all GPOBA projects must directly to the donor. demonstrate sustainability through various • With the use of government systems, criteria: service providers may lack confidence that payments will flow quickly after outputs • the one-off nature of the subsidy or have been verified, so there may be a need evidence of a clear and reliable stream of to mitigate payment risk. subsidy funding; 19 Looking to the future As outlined in this report, fiscal 2009 has country governments interested in scaling been a year of transition for GPOBA as the up OBA approaches; making data on OBA program started to implement its vision schemes more easily accessible to practitioners of mainstreaming OBA with development and policy makers; and sharing more lessons partners and becoming a recognized Center of learned and best practices in OBA through peer Expertise. learning activities, publications, and online The World Bank’s investment lending reform, resources. which foresees the creation of a new lending GPOBA will also continue to develop its instrument that will be both programmatic portfolio of subsidy funding in fiscal year 2010. and results-based, has been a very positive The priority will be to test and verify OBA development for the mainstreaming of OBA standards in mature sectors such as water and in World Bank operations. Contributing to sanitation, energy, and health, preferably with this initiative will continue to be a priority for co-financing from development partners. The GPOBA in 2010. bulk of GPOBA subsidy funding will go to low- GPOBA’s Center of Expertise activities income countries, especially in Sub-Saharan such as knowledge and learning have also Africa and Asia. GPOBA will also continue taken on a new importance in fiscal 2009 to promote scaling-up of OBA by providing and are absorbing an increasing proportion technical assistance to set up OBA facilities. of GPOBA’s time and resources. Priorities for In all these activities, GPOBA looks forward the future include developing a wider range to working in partnership with donors, of learning activities, toolkits, and guidance governments, and other development partners publications to enable practitioners to develop to increase access to basic services for the poor their own OBA projects; expanding the training and improve the effectiveness of public funding program to include workshops for developing by focusing clearly on results. 20 Annex 1: Financial Statement GPOBA derives its resources from donor TABLE A2: RECEIPT OF DONOR CONTRIBUTIONS contributions which are channeled through trust CUMULATIVE IN US$M funds administered by the World Bank Group. The World Bank Group recovers a small charge Donor FY041 FY05 FY06 FY07 FY08 FY09 TOTAL for costs associated with this task. GPOBA’s DFID 2.5 3.4 6.8 21.7 13.3 10.2 57.9 finances are subject to the World Bank Group’s IFC 35.0 25.5 60.5 annual “single audit” exercise for all trust funds. DGIS 11.0 8.0 9.3 28.3 As part of this exercise, the GPOBA program AusAID 0.3 4.2 24.6 29.1 manager signs a trust fund representation letter attesting to the correctness and completeness of Sida 6.9 6.9 the financial process for all GPOBA trust funds. EU2 1.1 1.1 GPOBA’s budget and accounting processes are TOTAL 2.5 3.4 41.8 33.0 57.9 45.2 183.8 aligned with the World Bank Group fiscal year, 1 The FY04 total contribution of US$2.5 million includes US$1.1 million for FY03 which runs from July to June. and US$1.4 million for FY04. 2 The EU’s contribution of EUR 760 ,000 is expressed in US$ equivalent as of June Contributions received 30, 2009 as holding currency is not in US$. As of June 30, 2009, GPOBA’s donors have pledged a total of $238.7 million to the program, of which $183.8 million (77 percent) TABLE A3: DONOR CONTRIBUTION PER FUNDING has been received (table A1). In fiscal 2009, WINDOW CUMULATIVE IN US$M GPOBA received a total of $45.2 million from Technical Assistance Subsidy four donors: AusAID, DFID, DGIS, and the & Dissemination Funding Admin/Fees1 Total European Union (table A2). Cumulatively, 29.3 195.6 13.8 238.7 most of the donor contributions received (82 percent) have been allocated to subsidy 1 In the FY08 Annual Report the Administrative & Program Management Fees funding, which includes project preparation were overstated by US$3 million and the Subsidy Activities were understated by US$3 million. and supervision (table A3). TABLE A1: DONOR CONTRIBUTIONS TO ALL Subsidy funding In fiscal 2009, GPOBA signed nine new grant GPOBA ACTIVITIES CUMULATIVE IN US$M agreements for subsidy funding with donor Donor Pledged Received To Be Received funding totaling $37.3 million. This is slightly DFID 1 111.7 57.9 53.8 less than in fiscal 2008 when the total was $41.7 million. All GPOBA donors provided IFC 60.5 60.5 0.0 funding for new projects except DGIS, whose DGIS 28.3 28.3 0.0 subsidy funding was committed in full in AusAID 2 29.1 29.1 0.0 previous years (table A4). Sida 6.9 6.9 0.0 GPOBA actual program expenditures EU3 2.2 1.1 1.1 GPOBA’s actual program expenditures totaled TOTAL 238.7 183.8 54.9 $4.1 million in fiscal 2009, up from $3.3 1 million in fiscal 2008 (table A5). The biggest A GBP 37 million pledge is expressed in US$ equivalent as of June 30, 2009. 2 FY08 Annual Report indicated a pledge of AUD 35 million equivalent to increase was in Center of Expertise expenditure, US$33.3 million based on foreign exchange valuation as of June 2008. Total which more than tripled, reflecting GPOBA’s received is less due to currency fluctuation. increasing focus on dissemination and 3 A EUR 1.52 million pledge is expressed in US$ equivalent as of June 30, 2009. knowledge and learning activities. Expenditure Annex 1: Financial Statement 21 TABLE A4: GPOBA SUBSIDY FUNDING GRANTS TABLE A5: GPOBA ACTUAL PROGRAM SIGNED IN US$M EXPENDITURES IN US$M Subsidy Funding FY09 FY08 FY07 Donor FY09 FY08 FY07 Total Program Management 0.8 0.8 0.8 DFID 12.6 8.7 9.4 30.7 Center of Expertise 1.1 0.3 0.2 IFC 12.3 13.3 17.7 43.3 Technical Assistance 1.2 1.4 2.6 DGIS 0.0 17.4 3.2 20.6 Portfolio (Preparation/Supervision) 1.0 0.8 0.4 AusAID 8.6 0.0 0.0 8.6 TOTAL 4.1 3.3 4.0 Sida 3.8 2.3 0.0 6.1 TOTAL 37.3 41.7 30.3 109.3 again in fiscal 2010/2011 as GPOBA promotes the development of OBA facilities to be funded on preparation and supervision of subsidy by developing country governments. While grants also increased slightly, continuing the technical assistance still represented the largest upward trend since fiscal 2007, while program share of expenditures (around 29 percent), the management expenses remained constant. Center of Expertise came a close second with Expenditure on technical assistance decreased nearly 27 percent of expenditures, up from only slightly this fiscal year, but is likely to increase 9 percent in fiscal 2008. 22 GPOBA Annual Report 2009 Annex 2: GPOBA Core Team Patricia Veevers-Carter Program Manager Xavier Chauvot de Beauchêne Senior Water and Sanitation Specialist Zenaida Chavez Resource Management Analyst Daniel Coila Information Specialist Mustafa Hussain Senior Infrastructure Finance Specialist Lars Johannes Infrastructure Specialist Esther Loening Infrastructure Specialist Cledan Mandri-Perrott Senior Infrastructure Specialist Iain Menzies Senior Infrastructure Specialist Josses Mugabi Young Professional Yogita Mumssen Senior Infrastructure Economist Mark Njore Program Assistant Carmen Nonay Senior Infrastructure Specialist Cathy Russell Communications Officer Mario Suardi Senior Infrastructure Specialist Luis Tineo Senior Infrastructure Specialist Leslie Villegas Infrastructure Specialist 23 ANNEX 3: GPOBA PORTFOLIO OF SIGNED GRANT AGREEMENTS AS OF JUNE 30, 2009 Average Grant subsidy Grant Amount # of people per person Signing Country Project Name IDA (US$m) benefiting (US$) Date Description Armenia Access to Gas & Heat Supply IDA 3.10 18,676 165.99 04/28/06 The objective of this project is to improve for Poor Urban Households Blend access to gas and heating services for in Armenia eligible households in urban multi- apartment buildings. This project will subsidize new service connections for 10,000 poor Armenian households. Bolivia Decentralized Electricity for IDA 5.18 45,000 115.00 06/26/07 This project aims to increase affordable Universal Access Blend access to electricity in rural areas of Bolivia by helping to fund the installation of at least 7,000 solar home systems for dispersed rural households, schools, clinics, and micro and small enterprises. Cambodia Increased Access to IDA 2.50 261,000 9.58 12/02/08 The objective of the project is to bring Telecommunications basic voice telephony services to Services for Rural Poor in low-income families in rural areas of Cambodia northern and northwestern Cambodia. Cameroon Cameroon Water Affermage IDA 5.25 240,000 21.88 04/07/08 This project will subsidize the cost of Contract - OBA for Coverage new connections to piped water for low- Expansion to middle-income households currently without access. Colombia Natural Gas Distribution for IBRD 5.10 210,000 24.29 05/19/06 The objective of this OBA scheme is to Low Income Families in the connect an estimated 35,000 families Caribbean Coast to the natural gas distribution network along the Colombian Caribbean Coast. The project closed on July 31, 2008. Ethiopia Ethiopia Electrification IDA 8.00 1,142,857 7.00 10/30/08 The OBA scheme will help EEPCo, a state Access Rural Expansion owned national utility, finance the cost Project of providing access to electricity in rural towns and villages with grid access to poor customers in Ethiopia. Ghana Solar PV Systems to Increase IDA 4.35 90,000 48.33 10/10/08 The GPOBA grant will provide increased Access to Electricity electricity access through renewable energy technology for poor households in remote rural regions of Ghana. Honduras Extension of Water and IDA 4.44 240,000 18.50 06/19/07 The objective of this project is to develop Sanitation Services in Low an output-based facility aimed at Income Areas of Honduras establishing an efficient and transparent mechanism for financing infrastructure in water and sanitation projects in Honduras. This project is expected to bring improved access to water and sanitation services to approximately 40,000 households. 24 GPOBA Annual Report 2009 ANNEX 3: GPOBA PORTFOLIO OF SIGNED GRANT AGREEMENTS AS OF JUNE 30, 2009 (continued) Average Grant subsidy Grant Amount # of people per person Signing Country Project Name IDA (US$m) benefiting (US$) Date Description India Improved Rural Community IDA 0.85 75,000 11.33 05/16/07 The objective of this project is to provide Water in Andhra Pradesh Blend safe drinking water to poor inhabitants of the coastal area of Andhra Pradesh through development of approximately 25 community water supply schemes. The project will benefit around 75,000 poor people in various districts of Andhra Pradesh. India Mumbai Improved IDA 1.65 104,000 15.87 04/27/09 The GPOBA grant will provide subsidies Electricity Access to Indian Blend for the costs of electricity connection Slum Dwellers Project and wiring for inhabitants of the Shivajinagar slum in Mumbai. Indonesia Expanding Piped Water IBRD 2.41 77,500 31.06 02/12/09 The objective of the OBA scheme is Supply to Surabaya’s Urban to extend piped water connections to Poor Project about 15,500 low-income households. Indonesia Expansion of Water Services IDA 2.57 55,824 46.09 11/01/07 The aim of this project is to bring water in Low Income Areas of Blend services to communities in low-income Jakarta areas of Jakarta by funding one-off connection subsidies for an estimated 11,630 poor households. Indonesia Extending IBRD 1.87 758,210 2.46 03/30/09 This project will facilitate access Telecommunications in to the Internet and associated Rural Indonesia telecommunications and data services through “community access points” in socio-economically disadvantaged areas. Kenya Micro-finance for Small IDA 1.15 60,000 19.19 12/06/06 The objective of this project is to Water Schemes increase access to and efficiency in water supply services for the poor in rural and peri-urban areas of Kenya through investments in around 21 community water projects. Lesotho Lesotho Health PPP Project IDA 6.25 500,000 12.50 02/23/09 The GPOBA grant will provide subsidies for inpatient services at a new 390- bed National Referral Hospital, and outpatient services at three semi-urban filter clinics that are being refurbished. Mongolia Mongolia OBA Pilot Project IDA 0.26 22,315 11.62 05/19/06 The aim of this project is to pilot a of Universal Access Strategy program to provide telephony services to herder communities, benefiting around 20,000 herders, and telephony and internet services to around 2,315 residents of Tariat and Chuluut soum centers. The project closed on October 31, 2008. Annex 3: GPOBA Portfolio of Signed Grant Agreements as of June 30, 2009 25 ANNEX 3: GPOBA PORTFOLIO OF SIGNED GRANT AGREEMENTS AS OF JUNE 30, 2009 (continued) Average Grant subsidy Grant Amount # of people per person Signing Country Project Name IDA (US$m) benefiting (US$) Date Description Morocco Morocco Urban Water and IBRD 7.00 56,000 125.00 01/29/07 The objective of this project is to Sanitation promote, following an output-based approach, the connection to water and sanitation services of around 11,300 low-income beneficiary households selected in disadvantaged peri-urban and rural neighborhoods of Casablanca, Tangiers, and Meknes. Mozambique Mozambique Water Private IDA 6.00 468,000 12.82 04/03/08 This project aims to provide subsidized Sector Contracts – OBA for water connections for domestic Coverage Expansion consumers in Maputo, Beira, Nampula, Quelimane, and Pemba. This project will construct around 30,000 shared yard taps which will benefit up to 468,000 people. Nepal Biogas Support Programme IDA 5.00 261,000 19.16 10/04/07 The aim of this project is to subsidize approximately 37,300 biogas plants for rural Nepalese households to increase access to clean and affordable energy for cooking and lighting. Nigeria Nigeria Pre-Paid Health IDA 6.02 22,500 267.34 10/23/08 The OBA scheme will provide affordable Scheme Project pre-paid health insurance plans for up to 22,500 beneficiaries (employees and their families) who belong to the Computer and Allied Products Association (“CAPDAN”) at the Ikeja IT village in Lagos. Philippines Improved Access to Water IBRD 1.05 37,600 27.93 10/19/07 This project will seek to provide Services in the East Zone of affordable piped potable water to poor Metro Manila Project households in the eastern portion of the National Capital Region (“NCR”) and most of the Province of Rizal. Senegal On-Site Sanitation Project IDA 5.76 135,900 42.41 07/06/07 This subsidy scheme aims to help offset the cost of new sanitation facilities for an estimated 15,100 poor households. Uganda OBA in Kampala – Water IDA 2.53 409,000 6.18 02/28/08 This OBA scheme will provide for a Connections for the Poor one-off connection subsidy to partially fund the cost of new domestic metered connections. The project envisages making about 19,000 new yard tap connections and installing about 800 new public water points over a period of three years. 26 GPOBA Annual Report 2009 ANNEX 3: GPOBA PORTFOLIO OF SIGNED GRANT AGREEMENTS AS OF JUNE 30, 2009 (continued) Average Grant subsidy Grant Amount # of people per person Signing Country Project Name IDA (US$m) benefiting (US$) Date Description Uganda OBA in Water Supply in IDA 3.21 55,511 57.77 02/12/07 This project seeks to increase access to Uganda’s Small Towns and sustainable water supply services for the Rural Growth Centers poor living in selected small towns and rural growth centers. It is expected to provide improved water access to around 55,511 people. Uganda Reproductive Health IDA 4.30 135,912 31.64 10/23/07 This project will increase women’s Vouchers in Western access to trained medical professionals Uganda throughout pregnancy and will also provide subsidized STD treatment to up to 135,912 poor Ugandans. Vietnam Targeted Service Expansion IDA 4.27 123,076 34.69 04/08/09 This OBA scheme aims to reduce water Through Water Loss losses and expand piped water supply Reduction Project for poor households living in Ho Chi Minh City and Tra Vinh Province. Vietnam Vietnam Rural Water IDA 3.00 150,000 20.00 11/30/07 This project aims to bring safe water (EMW) services to an estimated 30,000 poor families in rural Vietnam. Yemen Yemen Safe Motherhood IDA 6.23 80,000 77.90 06/10/08 The objective of the project is to provide Program sustainable maternal health services, including up to 40,000 safe child births, to poor women of reproductive age (15–49) in Sana’a, Yemen. Total 109.3 5,834,881 18.73 How to contact Email: gpoba@worldbank.org Website: www.gpoba.org