ICRR 11785 Report Number : ICRR11785 ICR Review Operations Evaluation Department 1. Project Data: Date Posted : 06/16/2004 PROJ ID : P008867 Appraisal Actual Project Name : Water Supply And Project Costs 33.7 5.53 Sanitation US$M ) (US$M) Country : Turkmenistan Loan/ Loan US$M ) 30.3 /Credit (US$M) 5.5 Sector (s): Board: WS - Water supply Cofinancing (77%), General public US$M ) (US$M) administration sector (7%), Health (7%), Sanitation (7%), Other social services (2%) L/C Number : L4171; LP312 Board Approval 97 FY ) (FY) Partners involved : Closing Date 02/28/2004 02/28/2004 Prepared by : Reviewed by : Group Manager : Group : Kavita Mathur Ridley Nelson Alain A. Barbu OEDST 2. Project Objectives and Components a. Objectives The stated objectives of the project were to: (i) improve water supply and sanitation in seven etrap centers (administrative zones) and nine collective farms in Dashogvuz Velayet; and (ii) initiate institutional changes in the water and sanitation sector to ensure that the project is financially and technically sustainable. b. Components The project consisted of four main components: (a) water supply improvements (appraisal US$ 20.1 million, actual US$ 1.1 million); (b) sanitation and health (appraisal US$ 3.4 million, actual US$ 1.7 million); (c) institutional strengthening (appraisal US$ 2.4 million, actual US$ 1.7 million); and (d) project management and construction supervision (appraisal US$ 3.0 million, actual US$ 1.1 million). c. Comments on Project Cost, Financing and Dates The Bank suspended the entire Turkmenistan country portfolio between March 1998 and June 1999. This resulted in an initial delay of fifteen months. There were further delays and problems with the project. Finally, the Government requested the Bank to cancel the loan in January 2003. Of the US$30.3 million, about US$23.97 (approximately 79%) was cancelled and US$ 5.5 million was disbursed at closing. 3. Achievement of Relevant Objectives: The objective of improving the water supply and sanitation in seven Etrap centers and nine collective farms in Dashogvuz Velayet was not achieved. Most of the investments were not completed, thus the project did not result in any significant improvements in coverage and service quality. There was only a slight increase in water supply coverage which increased from 38% in 1998 to 43% in 2002. There are concerns about how much of this increase can be attributed to the project considering most of the project investments did not occur. The quality of service delivery is poor with consumers receiving as little as 2 hours of service. The quality of water supplied is unsatisfactory, with over 80 % of samples in five out of nine Etraps, and more than 60% of water samples in all the Etraps failing bacteriological tests for quality. The objective of initiating institutional reforms to ensure project sustainability was not achieved. The Government reinstituted the policy of providing water free of charge. A National Sector Reform Study and the Action Plan for its implementation were prepared. However, most of the recommendations of the Study and the Action Plan were not implemented. A Regional Water and Sanitation Agency was formed, however, it remains largely ineffective due to resource constraints. 4. Significant Outcomes/Impacts: None. 5. Significant Shortcomings (including non-compliance with safeguard policies): 1. The quality at entry was unsatisfactory. The overall objective of the project was to support component 5.2 of the Aral Sea program. The Program addressed the environmental impacts of the Aral Sea Crisis. However, in the appraisal report it was never entirely clear how the project slotted into the overall Aral Sea program beyond the rather general statement that amelioration of conditions for the people in the area was a part of the program (for example, presumably pumping ground water by the project still has some potential negative environmental impact on the Aral Basin hydrology but this was not mentioned in the appraisal report). Notwithstanding claims in the appraisal report that the project was simple, the scope of the project was too wide, covering both urban and rural water supply as well as sanitation, health and hygiene sub-components. This required coordination with numerous government agencies, each with their own weaknesses and capacity constraints. 2. The government lacked commitment to support reforms: A presidential decree allowing for cost recovery for operation and maintenance expenses was issued by the Government in compliance with the loan effectiveness condition. This, however, was repealed and the Government reinstituted the policy of providing water supply services to the population free of charge. The recommendations of the Sector Reform Study and the Action Plan were not implemented. 3. The implementation progress was extremely slow. Lumping of the water supply component into a large civil works contract resulted in very high and diverse bid prices and significant implementation delays. 4. The project suffered from poor governance. Although some of the goods and materials for the investments were purchased, a large proportion of them were not installed or constructed. 5. There was inadequate communication between the central and regional government agencies responsible for the implementation of the project. 6. The Project's Supervision Reports neither defined nor monitored any of the indicators, as described in the indicators matrix. 6. Ratings : ICR OED Review Reason for Disagreement /Comments Outcome : Unsatisfactory Highly Unsatisfactory The project failed to achieve its major relevant objectives. Institutional Dev .: Negligible Negligible Sustainability : Highly Unlikely Highly Unlikely Bank Performance : Unsatisfactory Unsatisfactory Overall, the Bank Performance is rated Unsatisfactory. Appraisal was weak and the Project Supervision Reports neither defined nor monitored any of the indicators indicated in the matrix . Borrower Perf .: Unsatisfactory Highly Unsatisfactory Borrower Performance is rated Highly Unsatisfactory largely because the government lacked commitment to support reforms. Although a presidential decree allowing for cost recovery for operation and maintenance expenses was issued by the Government this was repealed and the Government reinstituted the policy of providing water supply services to the population free of charge. Also, the recommendations of the Sector Reform Study and the Action Plan were not implemented. Quality of ICR : Satisfactory NOTE ICR rating values flagged with ' * ' don't comply with OP/BP 13.55, but are listed for completeness. NOTE: 7. Lessons of Broad Applicability: Based on the ICR the key lessons are : In countries where the Bank has little or no previous experience, and where institutional capacity and/or knowledge of Bank operational procedures is weak, the Bank should design simple projects that focus on addressing the most critical problem, rather than trying to address all of the sectoral problems in one operation. The Bank needs to maintain a close dialogue with the Borrower, to ensure that the Bank and the Borrower are in agreement regarding the sector priorities and project development objectives. Moreover, the level of Government's commitment to reform should be critically assessed by the Bank during appraisal. Technical assistance needs to be accompanied by investments. The project experience shows that despite the Government priorities for sector development, the increasing frustration with lack of tangible investments on the ground contributed to the deterioration in attitude towards the project. The Bank should strengthen national procurement capacity and enhance understanding of the Bank's procurement guidelines in both the implementing agency and other relevant institutions of the Borrower that will be responsible for decision-making with respect to approval and contract award. Also, supervision missions need to give more emphasis to procurement aspects through adequate and periodic technical support. 8. Assessment Recommended? Yes No 9. Comments on Quality of ICR: The quality of ICR is barely satisfactory. There are some dates missing on the front ICR sheet. Also, it is hard to understand the sequence of policy and performance problems and the suspension and cancellations. More specifically the ICR could have elaborated on the following aspects: examining the underlying reasons for failure such as - Why the policy reversal? Why did the institutional reform stall? Did the Bank misread government ownership or did it change? clarifying the decision stages - At what point did it become apparent that the government ownership was gone? How did the timing of suspensions relate to changing project performance? Should the Bank not have suspended and then cancelled late 2001 or early 2002?