ICRR 10256 Report Number : ICRR10256 ICR Review Operations Evaluation Department 1. Project Data : OEDID : OEDID: C2124 Project ID : P002969 Project Name : Second Water Supply Project Country : Uganda Sector : Urban Water Supply L/C Number : Cr. 2124-UG Partners involved : GTZ, EEC, Government of Austria Prepared by : Tauno K. Skytta, OEDST Reviewed by : Ridley Nelson Group Manager : Alain Barbu Date Posted : 03/10/1999 2. Project Objectives, Financing, Costs and Components : Objectives:The project's main objectives were to : (i) expand water supply service to a larger proportion of the population in the seven project towns (Kampala, Entebbe, Jinja, Mbale, Masaka, Mbarara, and Tororo ); (ii) expand sewerage service to areas that can't be feasibly covered with on -site sanitation; (iii) establish a delivery system for large scale on-site sanitation; (iv) develop the national Water and Sewerage Corporation (NWSC) into a financially viable authority and strengthen its statutory functions; and (v) prepare NWSC for taking over other urban areas . Components : The project financed three main components : (i) WS&S system expansions in all project towns including the supply of materials, spare parts, water meters and chemicals for immediate operational improvements; (ii) TA and staff training to improve technical, commercial, and financial operations of NWSC; and (iii) coordination and supervision of project implementation by the project coordination unit (PCU). Costs: The total project cost estimate at appraisal was US$ 117.8 million (equivalent); the actual costs were US$120.8 million (equivalent). Financing : An IDA credit of US$60.0 million (equivalent) was approved in FY90. The credit was closed on June 30, 1998, two years behind schedule, and was fully disbursed . Cofinancing was provided by EEC, GtZ, and by the government of Austria, totalling US$ 31.4 million (equivalent). 3. Achievement of Relevant Objectives : Physical objectives were largely met with the exception of the Jinja and Entebbe components for which cofinancing did not materialize. Water supply reliability was enhanced through increased production, storage and transmission capacity. Coverage of both water and sewerage service did not, however, increase as planned because of limited extension of the networks and NWSC's inadequate commercial policy . Only limited progress was made in achieving institutional objectives . Although TA and training programs were implemented, metering (only about 40% of the target achieved), and leak detection and repair activities (UFW remains at 55%) still show substantial weaknesses . In addition, billing and collection records show only minimal improvements (up from about 35% to 45%), NWSC's accounts receivable are increasing, its staff index is at 40 staff/1,000 connections (well above the level of well functioning water utilities in Africa), and thus the staff cost of the total operating costs are high at about 60%. It should also be noted that no activities were carried out to establish a delivery system for on -site sanitation and to expand NWSC's operations to other towns due to non -existance of specific components for the purpose . 4. Significant Achievements : Although there are no significant achievements under this project, it should be noted, however, that the project helped to improve water legislation, and establish water quality monitoring and waste water effluent control facilities . These facilities are now reportedly being used for systematic water quality and effluent control activities . 5. Significant Shortcomings : The main significant shortcomings under this project are : (i) the lack of progress in institutional capacity building after several, focused efforts that the Bank supported; and (ii) poorly prepared project components which did not address some important objectives at all. 6. Ratings : ICR OED Review Reason for Disagreement /Comments Outcome : Unsatisfactory Unsatisfactory Institutional Dev .: Negligible Negligible Sustainability : Unlikely Unlikely Bank Performance : Deficient Unsatisfactory Borrower Perf .: Deficient Unsatisfactory Quality of ICR : Exemplary 7. Lessons of Broad Applicability : The ICR rightly highlights the most significant lesson from this project, i .e. that well designed specific components are necessary to address the many and complex issues related to major institutional reforms and improvements, as was the case in Uganda. Furthermore, to achieve meaningful results : (i) a realistic and gradual implementation program needs to be established; and (ii) TA and training, to be effective, need to be supported by appropriate incentives within the operating framework . Lessons from two previous projects were not adequately considered; as a result, "the quality at entry" of this project was poor, not only with regard to the institutional objectives, but also as no component was designed for dealing with an essential objective of sanitation improvements . The above, and many other useful project specific lessons, as presented in the ICR, have already lead to a detailed analysis of necessary reforms, privatization being one option under consideration . 8. Audit Recommended? Yes No Why? A program of several projects in Uganda (an engineering credit, followed by two investment projects) targeted a broad range of sector improvements . A cluster audit of such a program would cast more light into the process of project preparation under difficult conditions and help in developing a realistic WS&S strategy for Uganda. The timing of the audit should be after the mid -term review of the ongoing third investment project (Cr. 2583-UG, Small Towns WS&S Project) which is now scheduled for March 1999. 9. Comments on Quality of ICR : This excellent ICR with adequate information and data provides a sound basis for assessing the project achievements and Bank and Borrower performance . Further, the ICR candidly and comprehensively discusses the critical issues relative to project preparation and its implementation .