The World Bank Document of The World Bank FOR OFFICIAL USE ONLY Report No: ICR00004732 IMPLEMENTATION COMPLETION AND RESULTS REPORT IBRD - 80690 ON A LOAN IN THE AMOUNT OF US$110 MILLION TO THE ARAB REPUBLIC OF EGYPT FOR THE SECOND INTEGRATED SANITATION AND SEWERAGE PROJECT (P120161) June 24, 2019 Water Global Practice Middle East And North Africa Region This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. CURRENCY EQUIVALENTS (Exchange Rate Effective May 1, 2019) Currency Unit = Egyptian Pound (EGP) EGP17.17 = US$1 FISCAL YEAR July 1 – June 30 Regional Vice President: Ferid Belhaj Country Director: Marina Wes Senior Global Practice Director: Jennifer J. Sara Practice Manager: Carmen Nonay Task Team Leader(s): Mouhamed Fadel Ndaw, Heba Yaken Aref Ahmed ICR Main Contributor: Iyad Rammal, Elena Gagieva-Petrova, Dominick de Waal ABBREVIATIONS AND ACRONYMS BOD Biochemical Oxygen Demand ESIA Environment and Social Impact Assessment ESIAF Environment and Social Impact Assessment Framework ESMMF Environment and Social Management and Monitoring Framework FM Financial Management GoE Government of Egypt GRM Grievance Redress Mechanism GDP Gross Domestic Product HCWW Holding Company for Water and Wastewater HHC Household Connection HH Household ICR Implementation Completion and Results Report ISSIP2 Second Integrated Sanitation and Sewerage Project M&E Monitoring and Evaluation MoHUUC Ministry of Housing, Utilities, and Urban communities MTR Mid-Term Review NOPWASD National Organization for Potable Water and Sanitary O&M Operation and Maintenance PDO Project Development Objective PforR Program-for-Results PIU Project Implementation Unit PMC Project Management Consultant PMU Project Management Unit RF Results Framework RFB Request for Bids RPF Resettlement Policy Framework RSU Regional Support Unit WSC Water and Sanitation Company WWTP Wastewater Treatment Plant TABLE OF CONTENTS DATA SHEET ..................................................................................................................... 5 I. PROJECT CONTEXT AND DEVELOPMENT OBJECTIVES .................................................. 9 A. CONTEXT AT APPRAISAL ................................................................................................... 9 B. SIGNIFICANT CHANGES DURING IMPLEMENTATION ........................................................ 14 II. OUTCOME ............................................................................................................... 18 A. RELEVANCE OF PDOs ...................................................................................................... 18 B. ACHIEVEMENT OF PDOs (EFFICACY) ................................................................................ 18 C. EFFICIENCY ..................................................................................................................... 21 D. JUSTIFICATION OF OVERALL OUTCOME RATING .............................................................. 22 E. OTHER OUTCOMES AND IMPACTS ................................................................................... 23 III. KEY FACTORS THAT AFFECTED IMPLEMENTATION AND OUTCOME ........................... 24 A. KEY FACTORS DURING PREPARATION ............................................................................. 24 B. KEY FACTORS DURING IMPLEMENTATION ....................................................................... 24 IV. BANK PERFORMANCE, COMPLIANCE ISSUES, AND RISK TO DEVELOPMENT OUTCOME 25 A. QUALITY OF MONITORING AND EVALUATION (M&E) ...................................................... 25 B. ENVIRONMENTAL, SOCIAL, AND FIDUCIARY COMPLIANCE ............................................... 26 C. BANK PERFORMANCE ..................................................................................................... 28 D. RISK TO DEVELOPMENT OUTCOME ................................................................................. 29 V. LESSONS AND RECOMMENDATIONS ........................................................................ 30 ANNEX 1. RESULTS FRAMEWORK AND KEY OUTPUTS ...................................................... 33 ANNEX 2. BANK LENDING AND IMPLEMENTATION SUPPORT/SUPERVISION .................... 45 ANNEX 3. PROJECT COST BY COMPONENT ...................................................................... 47 ANNEX 4. EFFICIENCY ANALYSIS ...................................................................................... 48 ANNEX 5. BORROWER, CO-FINANCIER AND OTHER PARTNER/STAKEHOLDER COMMENTS 50 ANNEX 6. SUPPORTING DOCUMENTS ............................................................................. 59 The World Bank Second Integrated Sanitation and Sewerage Project - EG (P120161) DATA SHEET BASIC INFORMATION Product Information Project ID Project Name P120161 Second Integrated Sanitation and Sewerage Project - EG Country Financing Instrument Egypt, Arab Republic of Investment Project Financing Original EA Category Revised EA Category Partial Assessment (B) Partial Assessment (B) Organizations Borrower Implementing Agency Ministry of Investment and International Cooperation Holding Company for Water and Wastewater (HCWW) Project Development Objective (PDO) Original PDO The Project Development is to provide targeted populations in the Governorates of Menoufia, Sharkeya, Assiut and Sohag with increased access to improved sanitation and sewerage services. FINANCING Original Amount (US$) Revised Amount (US$) Actual Disbursed (US$) World Bank Financing 200,000,000 110,000,000 110,000,000 IBRD-80690 Total 200,000,000 110,000,000 110,000,000 Non-World Bank Financing 0 0 0 Borrower/Recipient 110,000,000 10,000,000 3,500,000 Total 110,000,000 10,000,000 3,500,000 Total Project Cost 310,000,000 120,000,000 113,500,000 Page 5 of 59 The World Bank Second Integrated Sanitation and Sewerage Project - EG (P120161) KEY DATES Approval Effectiveness MTR Review Original Closing Actual Closing 30-Jun-2011 16-Dec-2012 01-Feb-2015 31-Dec-2016 31-Dec-2018 RESTRUCTURING AND/OR ADDITIONAL FINANCING Amount Disbursed Date(s) Key Revisions (US$M) 22-Jun-2015 3.00 Change in Implementing Agency Change in Results Framework Change in Components and Cost Change in Loan Closing Date(s) Change in Financing Plan Reallocation between Disbursement Categories Change in Disbursements Arrangements Change in Legal Covenants Change in Institutional Arrangements Change in Financial Management Change in Procurement Change in Implementation Schedule 01-Nov-2017 50.47 Change in Results Framework Change in Components and Cost Change in Loan Closing Date(s) Cancellation of Financing Reallocation between Disbursement Categories Change in Implementation Schedule KEY RATINGS Outcome Bank Performance M&E Quality Highly Unsatisfactory Moderately Unsatisfactory Modest RATINGS OF PROJECT PERFORMANCE IN ISRs Actual No. Date ISR Archived DO Rating IP Rating Disbursements (US$M) 01 15-Aug-2011 Satisfactory Satisfactory 0 02 31-Jan-2012 Satisfactory Satisfactory 0 03 24-Jul-2012 Moderately Satisfactory Moderately Satisfactory 0 04 30-Dec-2012 Moderately Satisfactory Moderately Satisfactory 0 Page 6 of 59 The World Bank Second Integrated Sanitation and Sewerage Project - EG (P120161) 05 08-Jul-2013 Moderately Satisfactory Moderately Satisfactory 0 06 25-Dec-2013 Moderately Satisfactory Moderately Satisfactory 0 Moderately 07 16-Jun-2014 Moderately Unsatisfactory 0 Unsatisfactory Moderately 08 22-Dec-2014 Moderately Unsatisfactory 3.00 Unsatisfactory Moderately 09 11-Jun-2015 Moderately Unsatisfactory 3.00 Unsatisfactory Moderately 10 18-Dec-2015 Moderately Unsatisfactory 14.60 Unsatisfactory Moderately 11 31-Mar-2016 Moderately Unsatisfactory 15.88 Unsatisfactory 12 02-Jun-2016 Moderately Satisfactory Moderately Satisfactory 20.50 13 14-Nov-2016 Moderately Satisfactory Moderately Satisfactory 39.37 Moderately 14 12-May-2017 Moderately Unsatisfactory 39.71 Unsatisfactory 15 12-Oct-2017 Moderately Satisfactory Moderately Satisfactory 46.92 16 03-May-2018 Moderately Satisfactory Moderately Satisfactory 61.85 Moderately 17 18-Dec-2018 Moderately Satisfactory 99.43 Unsatisfactory SECTORS AND THEMES Sectors Major Sector/Sector (%) Water, Sanitation and Waste Management 100 Sanitation 100 Themes Major Theme/ Theme (Level 2)/ Theme (Level 3) (%) Urban and Rural Development 0 Urban Development 17 Services and Housing for the Poor 17 Rural Development 33 Rural Infrastructure and service delivery 33 Page 7 of 59 The World Bank Second Integrated Sanitation and Sewerage Project - EG (P120161) Environment and Natural Resource Management 0 Environmental Health and Pollution Management 33 Air quality management 11 Water Pollution 11 Soil Pollution 11 Water Resource Management 17 Water Institutions, Policies and Reform 17 ADM STAFF Role At Approval At ICR Regional Vice President: Shamshad Akhtar Ferid Belhaj Country Director: A. David Craig Marina Wes Senior Global Practice Director: Laszlo Lovei Jennifer J. Sara Practice Manager: Francis Ato Brown Carmen Nonay Mouhamed Fadel Ndaw, Heba Task Team Leader(s): Parameswaran Iyer Yaken Aref Ahmed ICR Contributing Author: Iyad Rammal Page 8 of 59 The World Bank Second Integrated Sanitation and Sewerage Project - EG (P120161) I. PROJECT CONTEXT AND DEVELOPMENT OBJECTIVES A. CONTEXT AT APPRAISAL Context 1. At the time of appraising this project, Egypt was undergoing a process of in-depth political and social transformation in the aftermath of the January 2011 revolution. The lack of citizen participation, poverty, poor living conditions, unemployment, and low wages came to the forefront of political and social debate during the revolution in 2011. At appraisal, it was correctly anticipated that this process would unfold over a relatively long period, during which significant risks and uncertainties would remain—but also during which external assistance could yield disproportionate social returns. 2. Regional disparities marked Egypt’s development, with greater poverty and less economic development in Upper Egypt compared to the heavily populated Delta region. During appraisal, Upper Rural Egypt had the highest incidence of poverty (34 percent) in the country. While poverty fell between 1995/1996 and 1999/2000 for the rest of Egypt, it increased in rural Upper Egypt, clearly indicating that the region is less well linked to the mainstream of the economy. The Government of Egypt (GoE) had ambitious plans for economic development to improve living standards in the country in intensifying investments in infrastructure projects and achieving regional balance by allocating 42 percent of local public investments to fostering development in Upper Egypt Governorates as part of the national project for the region's development1. 3. In addition to regional disparities, rural-urban welfare disparities were an enduring feature of poverty in Egypt. While poverty has been consistently the highest in Upper Rural Egypt, over half of the country’s poor are in Delta Egypt. The poorest 40 percent of Egyptian households (HHs) were concentrated in rural regions, where coverage rates in education, health, water, waste disposal, and sanitation were below national averages, and the current public spending structure was exacerbating inequities. Child malnutrition, for example, which includes stunting and is linked to inadequate sanitation, had worsened throughout the country and was particularly worrisome in rural areas where it added an additional burden on women2. 4. Egypt had experienced both global and domestic shocks to economic growth and was faced with a large fiscal deficit in 2011. The 2007/2008 global financial crisis led to a slowing down of the country’s gross domestic product (GDP) growth rate from over 7 percent in 2006–2008 to 4.5 percent in 2009. The January 2011 revolution was also expected to pull down economic growth, though even at appraisal this appeared to be temporary with expectations that GDP growth would rebound to at least 4 percent in 2012. However, Egypt was expected to face a large fiscal deficit in FY2011, in excess of 10 percent of GDP from 8.1 percent of GDP in FY2010 and significant pressures on its balance of payments3. Sectoral and Institutional Context 5. Egypt has experienced uneven access to improved drinking water and sanitation services, especially demonstrated through the urban-rural divide. From 1990 to 2010, Egypt had made significant progress in providing direct access to safe, piped drinking water at the HH level (from 39 percent to 93 percent) and basic sanitation services through traditional septic tanks (from 52 percent 1 The World Bank. Project Appraisal Document, Second Integrated Sanitation and Sewerage Project - EG (P120161). June 6, 2011 2 The World Bank. Program Appraisal document, Sustainable Rural Sanitation Services Program for results. June 10, 2015 3 Ibid. p. 1 Page 9 of 59 The World Bank Second Integrated Sanitation and Sewerage Project - EG (P120161) to 93 percent). Yet, until project appraisal, access to improved services was uneven and stark geographical and socioeconomic disparities persisted that affect the living conditions and health of millions of Egyptians, including the significant number of children exposed to unsanitary environmental conditions. An estimated 89 percent of HHs in urban areas were covered by public sewers compared to only 12 percent in rural areas, where 42 million people were underserved and were often faced with overflowing sewage from traditional septic tanks. Only 6 percent of Egyptian villages were provided with wastewater treatment as a service, where most of the wastewater is discharged to agricultural drains and sometimes to irrigation canals. Children in rural HHs were 8.5 times more likely than their urban peers to have no toilet facilities, and nearly 10 percent of HHs in rural areas used toilet facilities shared among multiple HHs4. 6. In support of the GoE’s sector reform agenda, the World Bank supported the first Integrated Sanitation and Sewerage Infrastructure Project (ISSIP1, Loan No. 7512-EGT,) in the amount of US$120 million for improvements in sanitation in three governorates in the Delta region. The objective of the project was to contribute to the sustainable improvement in (a) sanitation and environmental conditions for the beneficiary communities and (b) the water quality in the selected drainage basins within the served areas. ISSIP1 was a highly relevant project and therefore, the second Integrated Sanitation and Sewerage Infrastructure Project (ISSIP2) continued the World Bank support to the sector in priority governorates identified by the Government. Furthermore, the World Bank-financed Sustainable Rural Sanitation Services Program for Results (PforR) (SRSSP, P154112, US$550 million and additional financing, P166597, US$300 million with US$300 million co-financing from the Asian Infrastructure Investment Bank) requested by the GoE is reflective of the shift in how the sector would be managed piloting a set of institutional reforms and reinforcing the switch from centralized infrastructure investment to accountability for localized service delivery and increased responsiveness to citizens’ needs. 7. Since appraisal, the GoE has attached high priority to safe disposal of wastewater in rural areas and has been implementing a Governorate-wide ‘National Rural Sanitation Master Plan’.5 The Master Plan targets comprehensive sanitation coverage to the populations of all rural Governorates until 2037 with a required investment of EGP 62 billion. In addition, the Government’s 2008 ‘National Rural Sanitation Strategy’6 seeks to prioritize sector investments and provide a roadmap to comprehensive coverage of rural sanitation. Thus, in recent years, significant investments have been made to bridge the gap between supply and demand for wastewater treatment in rural areas. In the last decade, the GoE has invested US$4.6 billion equivalent in sanitation infrastructure7. While these investments have made some progress, they had generally suffered from (a) very slow implementation, (b) inflated construction costs and poor quality, (c) poor coordination between major infrastructure such as wastewater treatment plant (WWTP) and local network connections, and (d) use of technologies which resulted in high operation and maintenance (O&M) costs relative to service needs. Despite these efforts, there is still a significant gap between urban and rural sanitation coverage, which are estimated at 70 percent and 18 percent, respectively. 8. In 2004, as part of the reform, the Water and Sanitation Companies (WSCs) and the Holding Company for Water and Wastewater (HCWW), were established. This was followed by the creation of the Egypt Water and Wastewater Regulatory Agency, which has the role of monitoring the financial sustainability of the WSCs and reviews and decides on periodic tariff increases to improve levels of 4 Ibid. P. 13 5 National Strategy for Water Supply and Sanitation: Compilation of Water and Sanitation Master Plans, HCWW report for the European Commission, May 2009. 6 Egypt National Rural Sanitation Strategy, Holding Company for Water and Wastewater, September 2008. 7 Ibid. P. 15 Page 10 of 59 The World Bank Second Integrated Sanitation and Sewerage Project - EG (P120161) cost recovery. The sector reform agenda was taken forward with the approval and announcement of ‘Development Policies: Water and Wastewater Sector in Egypt’8 in September 2010, which serves to provide a framework and direction for further sector development and institutions, setting the achievement of “financial sustainability of the service providers, so as to enable them to improve their efficiencies and increase their levels of service” as its principal objective. At that time, the Egyptian water and wastewater sector had operated “under a regime of restricted pricing policies, limited investment programs, and under financing of operational activities,” and the WSCs were heavily subsidized by the GoE to cover funding gaps to meet operating expenses, as well as new capital investments and replacement of assets. 9. Institutional framework. The main institutional players in the water and sanitation sector are given below: (a) The Ministry of Housing, Utilities and Urban Communities (MoHUUC) is in charge of the water and sanitation sector and is primarily responsible for policy formulation, monitoring, and coordination. Since 2004, the MoHUUC has promoted institutional reform in the agencies working under it, based on corporatization, privatization, and regulation of the local WSCs. These reforms have consolidated facilities, personnel, and the O&M budgets for water and wastewater at the governorate level, so that the WSC became a cost and responsibility center distinct from other types of municipal services. The MoHUUC played the overall policy-making and monitoring role under the project. (b) The National Organization for Potable Water and Sanitary Drainage (NOPWASD) is the government agency under the MoHUUC responsible for the planning, design, and implementation of water and wastewater infrastructure throughout the country, with the exception of Greater Cairo and Alexandria. Under the project, it was responsible for the construction of the WWTPs and wastewater mains, which was later transferred to the HCWW during the project restructuring. (c) The HCWW is the owner of the subsidiary WSCs in 26 governorates. Its purpose was set by a Presidential Decree to purify, desalinate, distribute, and sell drinking water and collect, treat, and safely dispose of wastewater. Its original role to implement the construction of the wastewater networks was later modified to be the main implementation agency under the project. (d) The WSCs are responsible for service delivery of water and wastewater in their respective governorates. This includes O&M of water supply and wastewater facilities and rehabilitation. Their role under the project was to assist the project implementation in terms of construction supervision, community engagement, adding new customers to their system, and so on. Theory of Change (Results Chain) 10. The project aimed to provide the targeted population in the Governorates of Menoufia, Sharkeya, Assiut, and Sohag with increased access to improved sanitation and sewerage services. (a) Activities: As shown in Figure 1, the underlying logic of the proposed activities was to provide wastewater infrastructure systems for HHs within the targeted areas using appropriate technology, like sewerage systems comprising WWTPs, and/or collection 8 “Development Policies for the Water and Waste Water Sector in Egypt” MOHUUD, Policy Paper, September 2010. Page 11 of 59 The World Bank Second Integrated Sanitation and Sewerage Project - EG (P120161) networks connection (gravity sewers and pumping stations). (b) Intermediate results: Project activities were envisioned to lead to the construction and operation of a number of additional working wastewater connections and sewerage pipelines, pumping stations, and WWTPs operating at agreed standards and removing a targeted biochemical oxygen demand (BOD) pollution load volume. In addition, supporting institutional capacity through training and engineering supervision and technical assistance was envisioned. (c) Outcomes/Project Development Objectives (PDOs): The project outcome focused on increasing access to improved sanitation and sewerage services. 11. In this respect, sanitation is the process of adequate treatment and disposal of sewage (the means of separating people from fecal material). This can be measured by the functional WWTPs, volume of treated wastewater, and BOD pollution load removal. Sewerage is defined as the removal and disposal of sewage and surface water by sewers. It is the infrastructure system of pipes, chambers, manholes, and so on, that conveys the sewage or storm water. Thus, the improved sewerage can be measured under the project by the number of wastewater connections, pumping stations, and kilometers (kms) of pipelines laid. Figure 1. Theory of Change (Results Chain) PDO: to provide the targeted population in the Governorates of Menoufia, Sharkia, Assiut and Sohag with increased access to improved sanitation and sewerage services. OUTPUTS OUTCOMES LONG-TERM ACTIVITIES OUTCOMES *Additional working wastewater connections Improved Sewerage * Pumping stations Positive impact on environment Services: constructed * People connected * Sewerage pipelines laid to improved Increased and public health sanitation and *WWTPs operating at sewage services access to design flow rate improved * Volume (mass) of BoD sanitation pollution load removed Improved Sanitation: and Technical and * WWTPs operating sewerage management support: at Egyptian effluent standards services * Training (safeguards, project management & * Volume of technical) wastewater treated * Supervision and works contracts awarded. Project Development Objectives (PDOs) 12. The PDO was to provide the targeted population in the Governorates of Menoufia, Sharkeya, Assiut, and Sohag with increased access to improved sanitation and sewerage services. Page 12 of 59 The World Bank Second Integrated Sanitation and Sewerage Project - EG (P120161) Key Expected Outcomes and Outcome Indicators 13. The PDO was measured through the indicators listed in Table 1. Table 1. PDO indicators Outcome Indicator • Increased number of people connected to improved sanitation and sewerage service in the project areas Increased access to improved • Number of wastewater treatment plants meeting Egyptian effluent sanitation and sewerage services treatment standards • Volume of wastewater treated Components 14. The project had four components. The first two components focused on civil works in four governorates, grouped by geographic region, and the other two focused on project management capacity at the Project Management Unit (PMU); implementation supervision of social, environmental and procurement issues; and monitoring end evaluation. Component D has been added during the second restructuring. Table 2 shows the components costs (estimated at appraisal and revised) with the source of funds. (a) Component 1: Wastewater infrastructure systems in rural areas in Menoufia and Sharkeya provided wastewater infrastructure systems for HHs in nine villages in three clusters in the rural areas of the Governorates of Menoufia and Sharkeya using appropriate technology. It also provided sewerage systems comprising WWTPs and/or collection networks connection (gravity sewers and pump stations) for villages within three clusters in the two project governorates. (b) Component 2: Wastewater infrastructure systems in rural in Assiut and Sohag provided wastewater infrastructure systems for HHs in 22 villages in eight clusters in the rural areas of the Governorates of Assiut and Sohag using appropriate technology. It also provided sewerage systems comprising WWTPs and/or collection networks connection (gravity sewers and pump stations) for villages within eight clusters in the two project governorates. (c) Component 3: Project Management provided support to the MHUUC and the HCWW in project implementation, monitoring and evaluation (M&E), and management including construction supervision and environmental management services. Approximately US$3.8 million was financed from the loan proceeds with the remaining covered through counterpart funding. (d) Component 4: Support to MoHUUC PMU provided for the establishment of a PMU within the MoHUUC and for preparation of a follow-up project in the sanitation and sewage sector. Page 13 of 59 The World Bank Second Integrated Sanitation and Sewerage Project - EG (P120161) Table 2. Components Cost at Appraisal and Revision Component Total Cost at Total Cost at Total Cost at Revised Total Revised Total Appraisal Appraisal Appraisal from Cost from the Cost from the (US$, millions) from the the GoE (US$, World Bank GoE (US$, World Bank millions) (US$, millions millions) (US$, millions) Component 1 149.75 99.75 50 23.0 0 Component 2 149.75 99.75 50 77.0 0 Component 3 10.00 0.00 10 2.6 10 Component 4 0.00 0.00 0 6.9 0 Subtotal 309.50 199.50 110 109.5 10 Front-end fee 0.50 0.50 — 0.5 — Total 310.00 200.00 110 110.0 10 B. SIGNIFICANT CHANGES DURING IMPLEMENTATION Revised PDOs and Outcome Targets 15. The original PDO and outcomes were not modified during the project implementation. There were two restructurings (on June 22, 20159 and November 1, 2017) to maintain the achievement of the PDO. Both restructurings scaled down the PDO-level indicators and several at the intermediate level. Furthermore, the first restructuring was primarily to cancel US$100 million from the GoE contribution due to fiscal constraints. The second restructuring was to cancel a portion (US$90 million) of the World Bank financing and adjust the Results Framework (RF) to reflect the revised targets. Revised PDO Indicators 16. Revision of the RF was done twice of the lifetime of the project. The first restructuring reduced the targets as a result of the increased World Bank financing given that the GoE’s contribution was reduced from US$110 million to US$10 million due to fiscal constraints. This led to the reduction of the number of beneficiaries by 27 percent and 38 percent of the volume of the wastewater treated. It also introduced ‘Direct project beneficiaries’ as a World Bank core indicator which was identical to the other PDO indicator on the number of people connected to improved sanitation and sewage services. The PDO and the related intermediate indicators were further scaled down under the second restructuring to adjust for incorrect entries in the referenced documents citing that the previous calculations were taking all beneficiaries with the full WWTP capacity at 2050 horizon projections. Also, miscalculations were related to potential double-counting from other projects that would feed into the same network (table 3). As a result of the second restructuring, the beneficiaries were further scaled down by 68 percent, WWTPs - by two-thirds (66.7 percent), and wastewater volume - by a quarter (25.7 percent). The overall level of target reduction from initial to the second restructuring was quite sizeable by 76 percent for beneficiaries, 66.7 percent for WWTPs, and 54 percent for wastewater volume. 9The first restructuring for the project was communicated with the Borrower in an amendment to the loan on March 24, 2015, while it was processed in the World Bank Portal on June 22, 2015, which appears in the official documents. Therefore, for easy reference the date June 22, 2015 was used as the date for the first restructuring in this report. Page 14 of 59 The World Bank Second Integrated Sanitation and Sewerage Project - EG (P120161) Table 3. Original and Revised PDO Indicators Original Target Restructuring Restructuring 2 Original PDO Indicators as in the Project 1 November 1, Appraisal Document June 22, 2015 2017 Direct project beneficiaries — 878,340 285,000 Increased number of people in the project areas connected to improved sanitation and 1,200,000 878,340 285,000 sewerage services Number of wastewater treatment plants 15 15 5a meeting Egyptian effluent treatment standards Volume of wastewater treated (m3/d) 120,000 74,000 55,000 Note: a. The second restructuring paper, Chapter II Section A, table on the proposed changes to the RF says ‘no change’ for the number of WWTPs. However, the RF in the same document and subsequent Implementation Status and Results Report (ISRs) referred to five WWTPs as the end target, and therefore 5 WWTPs are also used in this Implementation Completion and Results Report (ICR) as the revised target. Other Changes 17. Other changes were done to enhance the project implementation as follows: (a) Cancellation of US$100 million from the US$110 million due to the GoE fiscal constraints. The remaining US$10 million was to finance construction supervision and technical assistance. This resulted in increasing World Bank financing to 100 percent for the civil works. (b) Cancellation of US$90 million from the World Bank loan as they were deemed as savings that could not be utilized by the project, reduction of the civil works, and reallocation of the loan proceeds and categories. (c) An amendment for the allocation of funds has reduced the unspent allocated amount of US$1.2 million from consultancy services category and added them to the works category. (d) Changing the institutional arrangements by giving the full implementation responsibility to the HCWW under the auspices of the MoHUUC and removing the NOPWASD from the project management. (e) Extension of the project closing date from December 31, 2016, to December 31, 2017, in the first restructuring and then to December 31, 2018, in the second restructuring. (f) The project components were modified during the project implementation, as shown in table 4. Table 4. Comparison of Original and Revised Componentsa Original Component Revised Components Remarks Component 1: Wastewater Component 1: Water 1. The component name and cost infrastructure systems in rural infrastructure systems in were modified in the first areas in Menoufia and Sharkeya Menoufia and Sharkeya restructuring; share from the World (Estimated cost: US$149.75 (Revised estimated cost: Bank loan was modified from million) US$35.74 million) US$149.75 million to US$35.74 million. 2. The scope was modified in the Page 15 of 59 The World Bank Second Integrated Sanitation and Sewerage Project - EG (P120161) Original Component Revised Components Remarks second restructuring paper from 36 to 9 villages and 8 to 3 clusters in the rural areas10. Component 2: Wastewater Component 2: Water 1. The cost share from the World infrastructure systems in rural infrastructure systems in Bank loan was modified from areas within the two Upper Egypt Assiut and Sohag (Revised US$149.75 million to US$148.76 Governorates of Assiut and Sohag estimated cost: US$148.76 million. (Estimated cost: US$149.75 million) 2. The scope was modified in the million) second restructuring paper from 40 to 22 villages and from 10 to 8 clusters, in Assuit and Sohag. Component 3: Project Component 3: Project Component cost from the World Management (Estimated cost: Management (Revised Bank loan was modified from US$10 US$10 million) estimated cost: US$18 million) million to US$18 million. in the first restructuring — Component 4: Support to PMU was established within the MoHUUC PMU (Proposed MoHUUC to provide support, cost: US$7 million) prepare and follow-up projects in the water and sewage sector. Specifically, it provided technical assistance to the PMU of the SRSSP PforR. Note: a. The total cost of the original components is US$309.5 million, with US$200 million from the World Bank (minus the front-end fee of US$0.5 million and US$110 million from the GoE). The revised component total cost is US$209.50 million (with the World Bank financing as is and cancelling US$100 million from the GoE). The total was revised once more by cancelling US$90 million from the World Bank funds, so US$109.5 million remained. Rationale for Changes and Their Implication on the Original Theory of Change 18. The changes in the project aimed at supporting the implementation and enhancing the achievement of the project objective. The rationale for such changes is explained below: (a) Cancellation of US$100 million from the GoE funds and the increase in the World Bank financing percentage to 100 percent to enable the modified new implementation arrangement to pursue the work. The GoE faced fiscal challenges, due to major macroeconomic changes related to currency devaluation (the exchange rate went from EGP 8.85 to over EGP 18 per U.S. dollar in November 2016) and changes in the value added tax and increase in energy prices. The contractors stopped the work or slowed implementation as they faced hardship in purchasing imported items because the contracts were fixed price. Therefore, part of the World Bank financing has been agreed to compensate the contractors, which helped in resuming implementation. (b) Cancellation of US$90 million from the World Bank loan proceeds. This modification in the loan amount was to reflect realistic project funding needs taking into account currency devaluation, which reduced the contracts values in terms of U.S. dollars. As a result, the total contracts values were reduced to almost 50 percent. The cancellation aimed at adjusting the loan to the levels needed for the remaining project implementation and improve disbursement results. Notwithstanding, the cancellation of 10 The Egyptian Central Agency for Public Mobilization and Statistics (CAPMAS) defines small communities as satellite, while it was called cluster in the Project documents, therefore it’s called cluster in this report for conformity. Page 16 of 59 The World Bank Second Integrated Sanitation and Sewerage Project - EG (P120161) about 45 percent of the loan amount had no direct impact on the revised project targets and goals. (c) The reallocation of the loan proceeds. To cover the cost for technical assistance to supervise the project implementation, the reallocation of US$15 million was necessary because the HCWW was not able to provide funds for technical assistance and technical and supervision consultancies, due to the Government delays in transferring committed amounts for such purposes, and this has been reflected in amending the categories. (d) Reducing the scope of civil works. As a result of reallocation of loan proceeds of the World Bank financing from works to consulting services and the cancellation of the GoE financing share, the scope of civil works to be carried out under ISSIP2 was reduced, accordingly. This did not affect the PDO, but it has scaled down the targets’ values. (e) Changing institutional arrangements. This came about because the project implementation by two centralized implementing agencies (NOPWASD and HCWW) was found to be complicated and inefficient, due to weak coordination and collaboration, as well as the institutional capacity, which resulted in delays of implementation. Therefore, the project implementation arrangements were modified to streamline implementation and avoid conflicts between the two implementing agencies. This action improved implementation and caused other modifications (for example, change in the disbursement arrangements, implementation schedule, and financial and procurement management, which were modified accordingly). (f) Extension of the project closing date. Two extensions (by a total of two years) were done to compensate for the delays for a variety of reasons: the political instability after the revolution (which weakened decision making and government fiscal capacity), weak implementation capacities11, delay in the availability of land causing delays in subprojects design, long time for the first restructuring process and in handing over to the new implementing agency after the restructuring, slow implementation due to the impact of substantial price increases because of the Egyptian currency devaluation, and the two-month suspension following a fatality incident at the project site. Those extensions were done to allow additional time to finalize the original project activities toward accomplishment of its objectives. (g) Revision and modification of the RF. The revision was necessary to accommodate the changes in the components and reduced scope of work, as well as to correct some indicators’ targets which erroneously reflected the horizon values for 2050. As per paragraph 16, targets for the number of beneficiaries, volume of wastewater treated, and number of the WWTPs were reduced considerably. Other modifications to the RF have occurred due to reduction of the scope of the civil works and reallocation of fund proceeds. 11Until the first restructuring June 2015, the actual accumulative progress was less than 2 percent as reported in the Implementation Completion Report of the PIU. However, when the implementation responsibility was transferred to be the sole responsibility of the PIU at the HCWW, progress has improved, as reported in this report. Page 17 of 59 The World Bank Second Integrated Sanitation and Sewerage Project - EG (P120161) II. OUTCOME A. RELEVANCE OF PDOs Assessment of Relevance of PDOs and Rating 19. The project’s objectives are strongly aligned with the GoE National Rural Sanitation Master Plan, which targets comprehensive sanitation coverage to the populations of all rural Governorates by 2037. Furthermore, the project is in line with the World Bank Group’s Country Partnership Framework (2015–2019) for Egypt,12 in particular Focus Area 3: Social Inclusion, including improvements to water service delivery, water quality, and sanitation services, which stresses the importance of access to basic services, particularly in enhancing access to sanitation and sewage services in rural areas where the combination of high population density among the bottom 40 percent of the population and low coverage rates may propagate economic disparities. The project is also aligned with the ‘renewing the social contract’ pillar of the World Bank Group’s strategy for the Middle East and North Africa Region.13 By providing improved basic services, the project was to help restore social contract between citizens and public service providers and the Government as a whole. 20. Rating. The overall relevance of the project is High. Improving access to sanitation and sewerage services is defined as a priority area to improve the livelihoods and opportunities of the rural areas. B. ACHIEVEMENT OF PDOs (EFFICACY) 21. The PDO consisted of one part: to provide targeted populations in the governorates [of] Menoufia, Sharkeya, Assuit, and Sohag with increased access to improved sanitation and sewerage services. The outcome indicators used to monitor and assess achievement of the PDO were (a) increased number of people in the project areas connected to improved sanitation and sewage services, (b) number of WWTPs meeting Egyptian effluent treatment standards, and (c) volume of wastewater treated. 22. Notwithstanding project restructurings, no split evaluation would be undertaken. The project was restructured twice (in June 2015 and November 2017), which scaled down the PDO-level indicators and several at the intermediate level. This would call for a split evaluation; however, the project has achieved limited results at the PDO level in comparison with its more ambitious targets. Therefore, since the efficacy would be rated negligible for all phases and would not have any effect on the overall rating, no split evaluation would be undertaken. Assessment of Achievement of Each Objective/Outcome 23. Given the start-up and implementation issues mentioned earlier, the project achieved limited results at the PDO level in comparison with project targets which were more ambitious. Overall construction progress for all works was at 84 percent by March 2019 (see figure 2) with varying degrees of completion for different parts of the sewage network, depending on the technical complexity and time required for construction. Thus, none of the planned WWTPs (15 as per the original target and 5 as a revised target) were fully constructed or operational. Their construction progress was at 73 percent on average, ranging between 50 percent and 95 percent (in the Sharkia governorate: Debeg - 85 percent, Qanteer - 50 percent; in Menofia: Dansour - 95 percent; in Assuit: 12Report No. 94554-EG, discussed by the Board on December 17, 2015. 13World Bank Regional Strategy for Middle East and North Africa Region (2015): Economic and Social Inclusion for Peace and Stability in the Middle East and North Africa: A New Strategy for the World Bank Group. Page 18 of 59 The World Bank Second Integrated Sanitation and Sewerage Project - EG (P120161) Al-Nwarah - 56 percent, Shotp - 80 percent). The target date for completion of all the project activities was set for October 2019; however, delays in allocating the funds pose a risk to their timely execution. 24. Since the WWTPs were the keystone to make the whole sewage chain functional, their delayed status has negatively reflected on the other two PDO-level indicators—number of beneficiaries connected and volume of wastewater treated. Thus, the project has constructed 37,782 household connections (HHCs) but the only functional14 ones, with treated wastewater, were the 5,000 (representing 25,000 beneficiaries in the Sohag governorate) that got connected to an existing operational WWTP in Sohag, which was able to absorb additional wastewater volume. Thus, the 25,000 beneficiaries reached compare poorly against the original target of 1,200,000 and revised target of 878,340 and later the target of 285,000 beneficiaries (2.1, 2.9, and 8.8 percent, respectively). The volume of wastewater treated reached 3,260 m3, representing 2.7, 4.4, and 5.9 percent, respectively, against the targets. Table 5. Achievement of the PDO-Level Indicators PDO Indicators Targets Actual Results Share of Achievement Achievement (Results by March 2019 - %) Original Revised Revised By Project By ICR Original Revised Revised June November Closing March June November 2015 2017 December 2019 2015 2017 2018 Increased number of people in the project areas connected to improved sanitation 1,200,000 878,340 285,000 147,810a 25,000 2.1 2.9 8.8 and sewerage services (same as direct project beneficiaries) Number of WWTPs meeting Egyptian 15 5 5 0 0 0 0 0 effluent treatment standards Volume of wastewater 120,000 74,000 55,000 1,176 3,262 2.7 4.4 5.9 treated (m3) Note: a. This number is the reported beneficiaries for whom the HHCs were constructed but not necessarily operational. See paragraph 24 for further explanation of the definitions. 25. Nonetheless, the project made good strides in completing large segments of the sewage network and capacity building. Thus, pumping stations were fully completed (32 vs planned 31) and 330 km (88 percent) of the sewage pipelines laid (out of planned 375 km). It is noteworthy that the capacity-building activities delivered the full range of planned training sessions on the project, contract and supervision management, technical, health and safety, citizen engagement, and World Bank safeguards and fiduciary guidelines. The WSCs have recognized that the capacity building in many disciplines was instrumental for not only the ISSIP2 implementation but also in enhancing the 14‘Functional’ is based on the Joint Monitoring Programme for Water Supply, Sanitation and Hygiene (JMP) definition on improved sanitation as the facilities which are not shared with other HHs, and the excreta produced should either be treated and disposed in situ, stored temporarily, and then emptied and transported to treatment off-site, or transported through a sewer with wastewater and then treated off-site. UNICEF-WHO/JMP, https://washdata.org/monitoring/sanitation. The client ICR calculated the number of people connected to improved sanitation and sewerage services as 188,905. However, those connections reflect 37,782 HHCs that are already constructed, but only 5,000 of them are working (functional). The ICR team understanding is that only the 5,000 HHs are functional and connected to improved sanitation and sewerage services; therefore, the number of beneficiaries connected are 25,000. Page 19 of 59 The World Bank Second Integrated Sanitation and Sewerage Project - EG (P120161) WSC systems and protocols in day-to-day utility management and familiarizing the WSC staff with the best practices that enabled them to apply this knowledge and develop their own improved processes which are applied beyond the scope of the project in daily utility operations. Staff capacity was also built around citizen engagement, which was appreciated by local communities, as evidenced during the ICR mission. Sessions on hygiene promotion and environmental were also part of the community outreach activities. 26. The ICR mission has confirmed a high level of demand for sewage services among beneficiaries, and with the available financing options, which includes payment in monthly installments as part of the monthly utility bill, the HHs are not expected to have issues with payment for the final in-house connection once the whole system becomes operational. In fact, all the HHs reported that the cost of the in-house installation would easily be offset by savings resulting from the costly emptying of the septic tanks. Therefore, the rest of the 32,782 HHCs are ready to become operational once the WWTPs are completed and commissioned, expanding access to 58 percent of the revised targeted HHCs and beneficiaries. As for the WWTPs, with high level of construction progress (84 percent as of March 2019, see figure 2 below) with some WWPTs in 90’s percentile of completion, the GoE has an opportunity to dramatically increase the impact of the project by bringing these systems to operation through continued financing and keeping the construction momentum. Figure 2. Progress of Works - Overall and by Governorate - as of March 2019a Note: a. As reported by the PIU progress report presentation, March 2019. 27. It must be noted that the HH size is higher than 5 people per HH used in calculating beneficiaries and can potentially reach a higher number of beneficiaries. Most of the HHs in rural areas house more than one family, oftentimes including parents, several siblings, and their families with children15. Also, some of the houses were made into multistory apartment buildings comprising about a dozen flats, and there were some high-rise buildings that had 2–3 HHCs for the whole building. So, the actual number of beneficiaries is likely higher than reported but for consistency purposes, the ICR retains the original calculation methodology when reporting on indicators. Also, there were some schools and community buildings (health, religious, and other buildings) connected to the sewage pipeline. Anecdotal evidence reports that school grounds are no longer damp with sewage which was the breeding ground for mosquitos and creating unsanitary conditions on the premises. Availability of working toilets also encouraged girls’ school attendance. 28. The GoE confirmed to the World Bank its commitment to continue financing the remaining contracts from government sources to complete the remaining works by October 2019, although there have been delays in processing the transfers. The HCWW requested a total of EGP 690 million (about US$38 million equivalent) from the GoE to cover the remaining budget gap, of which EGP 283.5 million was committed for the current fiscal year and EGP 145 million was transferred in May 2019 15ICR mission in March 2019 noted that the size of the HHs visited (random sample size of about 20 HHs) ranged between 11–17 people per HH. Page 20 of 59 The World Bank Second Integrated Sanitation and Sewerage Project - EG (P120161) after several months delay. Steps were also taken to ensure that the financing needs are reflected in the budget for the following fiscal year, although no firm commitments have been done. Some of the remaining IBRD funds were reallocated toward works. Also, some of the WSCs were taking a proactive approach and thinking of alternate technical solutions, such as connecting the HHCs to compact units for tertiary treatment and doing the disposal at the local WWTPs, as well as exploring other fundraising opportunities within the Government or covering part of the construction costs from own budget. Continued and predictable financing is crucial to sustain the momentum of construction. At the time of the ICR mission, all the contractors expressed a dire need for funding to be able to continue the works as they were not paid since January 2019 and were showing signs of construction slow down. While efforts are being done to sustain financing, their ad hoc nature and lack of predictability create difficult conditions for the HCWW and WSCs to sustain the construction momentum and put it at higher risk of timely completion by October 2019. It also creates risks that the constructed infrastructure (sewerage mains and networks, HHCs, and so on) may not be connected to fully functional WWTPs, leaving the investments unutilized or utilized in an environmentally unsound manner, along with the reputational risks in not meeting the expectations of beneficiaries. Justification of Overall Efficacy Rating 29. The overall efficacy rating is Negligible since the project targets were only partially achieved as described above. Although the project has completed 84 percent of the construction (see figure 2), the sewage systems need to be fully completed to be operational and to reach the beneficiaries. Thus, the advanced level of construction progress was not proportionally reflected in the achievement of outcome-level indicators. By the time of the ICR preparation, less than 10 percent of the beneficiaries were using the service (based on the latest target). Despite the high level of achievement of construction for some of the sites, unpredictability of funding will likely cause a slowdown in construction, making prospects of full completion by October 2019 modest. Therefore, given the limited achievement of results coupled with modest likelihood of full completion of the project activities by the set deadline, the project efficacy is deemed Negligible. C. EFFICIENCY Assessment of Efficiency and Rating Project Efficiency Rating: Negligible 30. At the appraisal of ISSIP2, it was argued that due to the difficulties in quantifying the economic benefits in a reliable manner, the economic analysis of the project was based on an overall economic justification (a narrative supported by achieving the Millennium Development Goals) and a cost- effectiveness approach, based on cost optimization. The feasibility studies for the proposed clusters confirmed that on-site sanitation is not a feasible option in the project villages due to high population densities and high groundwater levels. 31. A cost-benefit analysis was, however, carried out for ISSIP1 (P094311) and for the PforR (P154112) which estimated returns for both private (HH) and public benefit streams. For this ICR, an ex post economic analysis was carried out using the PforR data as they were more recent. To account for the large discrepancy between the outcome achieved at project completion and the outcome that could be achieved if the GoE completed remaining works, the ICR economic analysis considered two scenarios: (a) Scenario 1. The economic returns based on the number of HHCs actually completed at the time of writing the ICR Page 21 of 59 The World Bank Second Integrated Sanitation and Sewerage Project - EG (P120161) (b) Scenario 2. The potential economic returns should the GoE follow through on its commitment to complete all works and connect 47,878 HHs 32. The cost per connection (US$4,400) observed was high, though this may come down as the works are completed in the post-project phase funded by the GoE, because only 8.7 percent of the targeted population are connected. When all targeted populations are connected, the cost would come down to US$657. 33. The economic rate of return for Scenario 1 was negative and for Scenario 2 was 7.2 percent. Assuming a 6 percent discount rate, the net present value for Scenario 2 was only US$23 million even after assuming a 3 percent annual increase in HH sewer connections. This underscores the importance for the GoE to complete all works and planned HHs’ connections. 34. Given the low tariff levels and poor financial results of the WSCs at appraisal, the project was also not justified on the basis of a financial rate of return. Though all the targeted WSCs continue to make losses, the HH sewage tariff has increased from 35 to 75 percent of the water tariff.16 Working against achieving cost recovery, at least for O&M, is the GoE’s policy of unwinding of electricity subsidies, which led to a 100 percent increase in the input electricity costs for the WSCs from EGP 0.46 per kWh to EGP 0.92 per kWh in 2018—with electricity now accounting for 60 percent of expenditure for the WSC in Assiut. This unwinding of electricity subsidies will require greater attention to the choice of the WWTP technology in future—requiring a reassessment of underlying capital costs versus operational cost drivers (for example, the initial cost of land for lagoon systems versus the operational costs of processing sewage with the Moving Bed Biofilm Reactor (MBBR systems). More details in Annex 4. Justification of Overall Efficiency Rating 35. Without the completion of the WWTPs and the connection of HHs to a fully operational sewage network, the economic impact of the project is negligible. This is because neither the private nor the public benefits are generated without the full operation of the system. Without completion of the WWTPs, HHs will still need to pay for the evacuation and desludging of their cesspits and these will still be emptied by private operators into agricultural drains or canals, causing environmental pollution and the potential for the spread of waterborne diseases. D. JUSTIFICATION OF OVERALL OUTCOME RATING 36. The overall outcome is rated Highly Unsatisfactory. The project remained highly relevant to the GoE strategies and population who attribute high value to sewage services, given that the current septic tank system is faulty, expensive, and polluting the water table, which is quite high in Egypt. Efficacy was rated Negligible since the project met a limited number of its objectives and targets and the likelihood that additional results will be achieved through Government financing is filled with unpredictability. Efficiency was rated as Negligible because both private and public economic benefits are generated with the full operation of the HHCs, the sewer network, and the WWTPs. 16From the 2017 audited financial statements: Menoufia EGP 83 million, Sohag EGP 109 million, Assiut EGP 142 million, Sharkaia EGP 261 million. Page 22 of 59 The World Bank Second Integrated Sanitation and Sewerage Project - EG (P120161) E. OTHER OUTCOMES AND IMPACTS Gender 37. The project focused on increasing access to improved sanitation and sewerage services, which benefitted both men and women. Access to wastewater services has increased slightly so far for both men and women but would increase significantly if the project activities are completed by October 30, 2019. While improved treatment services benefit both men and women and girls and boys, it can be argued that the improvements (when the activities are completed) are more significant for women as they are often the ones affected by the health challenges relating to lack of treatment of wastewater, on a daily basis, especially in rural areas. 38. The project raised awareness among men and women on sanitation- and hygiene-related issues in the project areas. Several community engagement activities have been carried out. The implementation team used many techniques to reach out to people such as 31 door-to-door visits; campaigns at the village level; and 126 sessions of public hearing, awareness raising, and discussions about the project objectives and targets and the social and environmental safeguards, at the villages, where flyers, printed T-shirts, printed hats, and so on, were distributed to the participants and in the communities. Institutional Strengthening 39. Although the project focused mainly on infrastructure development, it provided solid institutional capacity building to the project implementation units (WSCs, PMU, MHUUC, HCWW, and so on). The project provided trainings on the Environmental and Social Management and Monitoring Framework (ESMMF), project management and technical trainings, fiduciary (procurement and financial management) procedures, and M&E mechanisms, as well as occupational health and safety (OHS) and community and citizen engagement. Improving institutional capacity on service delivery was necessary to achieve improvement in the quality of sanitation and sewerage services and management. However, the project focused on infrastructure construction and had less of an opportunity to build the capacity of the WSCs to operate, maintain, and sustain the investments. 40. The WSCs were given a bigger role in the project implementation after restructuring. Decentralization proved to be a good way to implement projects as most project progress happened when one institution (HCWW) became responsible for implementation, which delegated more implementation responsibilities to the WSCs and therefore improved the capacity at the local level to provide better services and help achieving sustainability. Mobilizing Private Sector Financing 41. Not applicable. Poverty Reduction and Shared Prosperity 42. The project could have contributed to improving conditions for poverty reduction if it had achieved its objectives. The project was initiated to increase access by increasing the number of people connected to improved sanitation services and constructing and rehabilitating WWTPs, which could have provided long-term solution for them with significant benefits. The rural HHs are paying a high cost for wastewater evacuation, while they could have paid reasonably less when the services are functional. In this sense, the project aimed at increasing social and economic inclusion in unserved areas. These are all related to decreasing poverty levels and improving conditions under which economic development can take place. Page 23 of 59 The World Bank Second Integrated Sanitation and Sewerage Project - EG (P120161) III. KEY FACTORS THAT AFFECTED IMPLEMENTATION AND OUTCOME A. KEY FACTORS DURING PREPARATION 43. Institutional setup. The project design was modest in terms of clarity and soundness of implementation arrangements, which assigned implementation responsibility to two institutions at the centralized level (that is, HCWW and NOPWASD), using the same model under ISSIP1, which proved to be ineffective. 44. Realistic objectives and RF targets. The project objective was relevant, but the targets were ambitious and based on erroneous calculations, which skewed the monitoring of project results and required a restructuring to scale them down but even then did not reflect the realistic targets. Also, indicators were not defined, which left it open to interpretation by the team on how to calculate them or measure progress. 45. Political instability and macro-economic pressures experienced by the GoE during preparation were later manifested in the GoE’s continued fiscal constraints and inability to follow through on its co-financing commitments. B. KEY FACTORS DURING IMPLEMENTATION 46. Ineffective institutional setup and limited coordination between agencies. There was continuous commitment from the borrower; however, the setup of different institutions (MoHUUC, HCWW, and NOPWASD) was not efficient to address implementation challenges and did not result in smooth coordination, collaboration, and transaction processing (that is, restructuring process, handover and funds transfer, information exchange, and so on). The second restructuring introduced the necessary changes to enhance decentralization by giving more implementation responsibility to the WSCs at the local level and concentrating monitoring and higher management role at one national agency (HCWW) rather than two agencies, which helped improve project implementation, but it has taken away several years of implementation. 47. Political instability and macro-economic factors described earlier also manifested in the major devaluation of the local currency and changes in the value added tax and energy prices, affecting contractors’ financial liquidity, causing further implementation delays. 48. Fatality on the construction site. On December 14, 2016, a fatal incident occurred at one of the construction sites in the Assiut Governorate due to failure in the OHS measures. The GoE was prompt in addressing the incident, leading to suspension which was revoked within 2.5 months due to swift action by team and the GoE at the Prime Minister’s level. The incident also triggered strengthening of the OHS procedures and monitoring. 49. The cancellation of the World Bank funds. It could be argued that if the cancelled amount calculations were done more prudently, they could have included additional funds that could have been utilized for a higher level of completion of the remaining works, given the budgetary deficits within the Government, and considering retendered projects with higher costs due to the devaluation of the Egyptian pound. Having limited funds remaining from the loan hindered the possibility of extending the project once more, which most likely could have improved its performance rating, as there were good achievements after modifying the implementation arrangements. The main obstacle to achieve project objectives now is availability of funds from the GoE. Page 24 of 59 The World Bank Second Integrated Sanitation and Sewerage Project - EG (P120161) 50. Project implementation through the public companies proved to be inefficient due to low capacity and bureaucratic procedures when compared with private sector companies, which was more efficient and responsive. 51. Delays in termination of contracts of unperformed inefficient public contractors. Weak performance of some public contractors caused delays in project implementation and it took the HCWW some time before it was able to take the decision to terminate these contracts. When these projects were retendered to private companies, achievements were significant. 52. Readiness for implementation. One of the political impacts was the delays in meeting project effectiveness conditions, which took 18 months after the signing of the project Financing Agreement. The project procurement started early and mostly was ready by effectiveness. However, delays were caused because of land availability and the second phase subproject design. IV. BANK PERFORMANCE, COMPLIANCE ISSUES, AND RISK TO DEVELOPMENT OUTCOME A. QUALITY OF MONITORING AND EVALUATION (M&E) M&E Design 53. The targets were ambitious, and the indicators were adequate to measure the achievement and were relevant to the objectives. All indicators were not defined to help the team measure them accurately; some indicators were modified twice because they were erroneously calculated. However, both the last ISR and the borrower’s ICR mentioned that the revised targets were still incorrect in providing longer-term projections and should have been with lower values. This indicates that throughout the project life, there were no correct targets to monitor the progress against. 54. The overall M&E framework focused on the construction of the WWTPs and appurtenant infrastructure and relied on indicators that would only be achieved upon completion of the major infrastructure pieces. This limited the ability to duly measure the outcome indicators until all infrastructure pieces were implemented. However, such types of M&E framework are not unusual in large infrastructure projects but could have included indicators to monitor progress in the interim of some of the larger infrastructure pieces, like the WWTPs. M&E Implementation 55. The implementing agencies have identified the M&E staff to carry out data collection, verification and monitoring, analysis, and reporting on the relevant indicators. This process was carried out at different intervals (weekly, bi-weekly, monthly, and quarterly) by different implementing actors depending on the type of indicator and progress on the ground. 56. More confirmation on implementation progress and achievements was done through the social activities and meetings with the public. Public awareness campaign and communication activities continued throughout the project implementation, where people’s complaints were received and processed accordingly. M&E Utilization 57. Although the M&E system informed management and decision making on the project progress, obstacles, and shortfalls, it did not provide accurate calculations for some of the indicators which could have resulted in more optimistic ratings throughout the project. The PMU prepared Page 25 of 59 The World Bank Second Integrated Sanitation and Sewerage Project - EG (P120161) regular quarterly reports and submitted them to the World Bank, where their quality has improved over time. The project has carried out a midterm review (MTR), which evaluated physical progress of the project; assessed relevance of the PDO, fiduciary and safeguards aspects, project costs, and project implementation time; and served as the basis for the restructuring, which has pushed progress forward. 58. Despite slow progress and, among others, procurement and safeguard delays with land acquisition, the project primarily maintained ‘Moderately Satisfactory’ or ‘Satisfactory’ ratings for Implementation Performance and the PDO, as well as for procurement and safeguards. This raises a question about the realism of project M&E and candor in reporting. While the PDO’s positive rating at earlier stages could be explained by enough time to still make progress, achievement levels in relation to the targets should have been looked at with more candor, and other ratings could have reflected the performance more realistically. It was not until the last ISR that ratings were examined more closely, which resulted in the downgrade to a ‘Moderately Unsatisfactory’ rating. 59. Despite the M&E system being designed to support decision making and implementation quality, it failed to monitor the safety procedures to ensure full implementation to avoid shortfalls, which caused a fatality incident. Later, the M&E system was improved during the implementation of the project and closely monitored the safety conditions and procedure. Justification of Overall Rating of Quality of M&E 60. The overall rating of the quality of the M&E system is Modest. There were shortcomings in the M&E design, which failed to provide realistic targets even after the restructuring. There were also moderate shortcomings in the M&E system’s implementation, which was not able to capture the shortfalls in safety procedures and take a more realistic approach with ratings on project parameters. However, the M&E system, as designed and implemented, was generally sufficient to assess the achievement of the objectives and test the links in the results chain and has recommended restructuring of the project to achieve targets. B. ENVIRONMENTAL, SOCIAL, AND FIDUCIARY COMPLIANCE Environment Safeguards 61. Overall, the project activities complied with the World Bank’s safeguard policies. The project was classified as Category B according to OP 4.01, as there were no associated significant, sensitive, diverse, unprecedented, or irreversible impacts. The triggered safeguards policies were OP 4.01 (Environmental Assessment) and OP 4.12 (Involuntary Resettlement). By appraisal the client prepared two Environmental and Social Impact Assessment Frameworks (ESIAFs), for Upper Egypt and for the Delta Governorates, including the ESMMF. The ESIAFs and Environment and Social Impact Assessments (ESIAs) were consulted on and disclosed on the HCWW website and the World Bank’s external website. During implementation, the client prepared site-specific ESIAs for each sanitation cluster, which have been all cleared by the World Bank. The client has assigned environmental and social specialists at the Project Implementation Unit (PIU) and the Regional Support Unit (RSU) levels as required by the ESIAF and they were trained accordingly. 62. On December 14, 2016, a fatal incident occurred at one of the construction sites in Assiut Governorate due to failure in the OHS measures. Following the incident, the World Bank suspended the project and asked for a root cause analysis of the incident and an action plan to improve the OHS measures, which were done and cleared, and, hence, the suspension was lifted on March 26, 2017. After the lifting of the suspension, a dedicated safeguard mission conducted field visits to all Page 26 of 59 The World Bank Second Integrated Sanitation and Sewerage Project - EG (P120161) construction sites to review the actual implementation of the OHS action plan. The mission confirmed compliance with the action plan and noted that the OHS measures have significantly improved. This was also confirmed in subsequent missions until the closure of the project on December 31, 2018. 63. The project closed on December 31, 2018, with a Satisfactory safeguards rating. Social Safeguards 64. Associated consultations with range of stakeholders were conducted as part of the ESIAF and the ESIA preparation. A Resettlement Policy Framework (RPF) and Resettlement Action Plans were prepared in January 2011 and during the project implementation, respectively. Land plots (14 community donations and 7 purchased) were acquired in most of the cases in consultation with community members and with the help of community leaders and local nongovernmental organizations. The World Bank supported the project through a range of capacity-building and hand- holding support to apply due diligence in the social safeguards’ requirement. Qualified staff at the level of the PIU and the WSCs were assigned to manage the social safeguards and the citizen engagement-related issues. 65. Throughout the project implementation, constant community engagement activities were conducted to disseminate project information and get the views of the local stakeholders. A multichannel grievance redress mechanism (GRM) has been established and information and actions were disseminated to the local communities in the various project. The project management received 561 complaints, out of which 82 percent were resolved; those that were not resolved related to issues beyond the project scope. Complaints were handled with thoroughness and the project design was adapted as needed. The project also applied a range of community awareness raising measures, using door-to-door visits, community, and schools’ activities. Information related to the project, including details about the contracts in different projects, was disseminated using reading and visual tools (for example, factsheets and leaflets). 66. During the ICR mission, the community members reflected on the benefits that the project brings to their village. In the Sohag Governorate, the HHs connected to the sanitation network explained that before the project, they had to minimize water consumption drastically to avoid frequent filling of septic tanks and the associated high cost of emptying them. In doing so, communities adopted a range of practices that were harmful to their health and the environment (for example, direct disposal to drainage canals, disposal underground, unsealed septic tanks, and so on). Benefits of the project were multiple: economic benefits, safe structure of buildings, cleaner homes (overflow of waste when septic tanks were full), and health benefits. As the benefits mentioned were numerous, the cost of internal plumbing was not a significant factor in the decision to connect to the sanitation network. Procurement 67. Procurement performance rating was between Moderately Satisfactory to Satisfactory during the project life cycle. All procurement packages included either International Competitive Bidding or National Competitive Bidding works contracts. The PIU established in the HCWW followed up on procurement activities and provided support to the procurement staff at the four WSCs. For prior review contracts, all documents were reviewed and submitted to the World Bank by the PMU. However, there were some delays caused by excessive rebidding due to poor cost estimate, market capacity, and misunderstanding in applying post-qualification requirements. With the support of the World Bank and the PMU, continuous capacity building and on-the-job training were provided, and these have contributed to better procurement implementation. Page 27 of 59 The World Bank Second Integrated Sanitation and Sewerage Project - EG (P120161) 68. Under Component 4 of the project (part D) to support the PMU at the MoHUUC for the National Rural Sanitation Project (NRSP), the main procurement activities included selection of consultants and procurement of goods, which were conducted in a satisfactory manner. Financial Management 69. The MoHUUC managed the financial management (FM) and disbursement of the project through the PIU. The risk was assessed as ‘Moderate’ as the PIU has long experience in implementing World Bank projects and the project was implemented smoothly from the FM perspective. The FM performance ratings were consistently ‘Satisfactory’ over the years of the project. Regular supervision missions confirmed that the project has complied with the obligations of the FM system including budgeting, internal controls, financial reporting, staffing, and auditing. Audit reports and interim financial reports were submitted to the World Bank on time and with minor issues. C. BANK PERFORMANCE Quality at Entry 70. The strategic relevance of the project was well articulated at entry and responded to the immediate need of the people of the four targeted governorates. The project was fully in line with the objectives of the client plans and needs to address the sanitation and sewerage problems in the rural areas. The project objective, component and scope were relevant and in compliance with the sanitation sector master plan. The RF reflected the right indicators to measure progress, but targets were erroneously calculated even after modifications. The project implementation arrangement was designed to have centralized management similar to ISSIP1, which proved to be inefficient, and therefore was modified later in implementation to involve the local-level institutions in the project implementation. 71. Challenges and risks were well identified and discussed up front; however, some of the risks were not anticipated such as the impact of the revolution which affected the macroeconomic situation of the GoE, as well as institutional complexities, accountability, and procurement issues. The financial situation and the currency devaluation were not foreseen even though the team clearly highlighted institutional implementation risks. Nevertheless, the impact of these challenges led to significant project cost increase that affected the implementation efficiency of the project. Since the risk was not anticipated, the consequences in terms of costs were not fully foreseen at the outset. 72. Lessons learned from previous experience do not seem to have been duly reflected in the project design. Anticipating delays due to land acquisition and subproject designs, inefficient implementing agencies were not considered and mitigated, which caused delays again in the ISSIP2 implementation. Several additional risks, such as the revolution and the macroeconomic challenges, which led to significant delays, were realized during the MTR and were captured in the project restructuring. The GoE’s project co-financing was US$110 million amid fiscal constraints. Quality of Supervision 73. The World Bank management remained committed to ISSIP2 and agreed to extend the project closing date for two years to complete all the activities. The World Bank team remained responsive to the changing circumstances during implementation and acted swiftly in responding to requests and questions from the client through restructurings focusing on development impact. The adaptability and flexibility of the World Bank team was high throughout the project, especially toward the last stages of implementation. Page 28 of 59 The World Bank Second Integrated Sanitation and Sewerage Project - EG (P120161) 74. During the restructurings, changes were made to the project. The challenges were addressed to help in facilitating implementation and achieving targets (that is, modification of institutional arrangement, extension of project closing, increasing of the World Bank financing percentage, and so on). The World Bank approved a cancellation of US$90 million from the IBRD funds; however, a need for EGP 690 million (US$38 million equivalent, part of which is for compensation of the currency devaluation not eligible for reimbursement under IBRD) to complete the project, which emerged later, suggests that the financing needs projections may not have been accurate. This amount was only partially budgeted in the GoE national budget and had not been transferred by the March 2019 ICR mission, which puts the project completion at risk. The restructurings were done late in the project, and they helped in improving the performance and achievements. 75. Although the project still had about 20 percent of the remaining works by the revised closing date, another extension was not considered. This was due to several reasons, such as high commitment rate and low remaining funds balance, as well as the portfolio decision, given the long implementation period of the project and slow pace of progress. 76. Supervision on health and safety was improved after the fatality incident. Extensive trainings for the client teams and contractors were conducted and there was close monitoring from all parties. Furthermore, health and safety procedures were improved in the client’s institutions and became an important part of their internal project implementation procedures. 77. Frequent handover of team leaders affects quality of supervision. There were four task team leaders during the project implementation. For complex projects, this presents a significant risk that institutional memory will be lost and can create opportunities for miscommunication with borrowers. There were significant achievements in the last year of implementation, where the World Bank team worked closely with the client to overcome obstacles and support performance, such as activating decentralization through advanced financing to the SWCs, taking proactive actions on the fatality incident, and training the local staff on environmental and social safeguards, which is being carried forward in the client’s own programs. Justification of Overall Rating of Bank Performance 78. Notwithstanding the tremendous efforts exerted by the World Bank teams, the quality of entry and supervision are rated Moderately Unsatisfactory, given the significant shortcomings during project preparation and implementation. There was a high degree of responsiveness to the needs of the client and significant efforts undertaken to address the challenges, which resulted in two restructurings. However, at the design phase the World Bank was optimistic and missed mitigating certain risks and learning from the ISSIP1 lessons. Both restructurings came late and were not able to capture errors in the targets, which were reduced but were not achieved, despite the two extensions. Furthermore, the World Bank agreed to cancel part of its funds, while the project appeared to need about US$38 million equivalent to complete the project activities. Thus, the World Bank performance is rated Moderately Unsatisfactory. D. RISK TO DEVELOPMENT OUTCOME 79. There is a risk that the project targets will not be achieved. The project closed on December 31, 2018, before completing its activities and achieving its development objective targets. Despite the commitment of the GoE to the World Bank that it would continue the project implementation, during the ICR mission in March 2019, the World Bank team noted that the project implementation had slowed down because the contractors had not been paid since the closing date. About EGP 200 million had been already due for payments to the contractors while the funding needs were estimated at EGP Page 29 of 59 The World Bank Second Integrated Sanitation and Sewerage Project - EG (P120161) 345 million until June 30, 2019, and EGP 690 million until end of the project (October 2019). The Government transferred only EGP 145 million (42 percent of needed amount until June) after five months of delays, which may cause further implementation delays if the contractors are not adequately paid. 80. The project may not be sustainable if no actions are taken to improve cost recovery by the local WSCs. The WSCs will depend on national subsidies to maintain the project operations. The technical assistance provided by the project to the WSCs has focused on the ability of the WSCs and other actors to carry out project-related functions. It has not addressed the more fundamental strengthening needs in terms of financing and operations which provide the basis for sustainability of services as well as a stronger basis for the WSCs to assume a prominent role in sectoral investment planning and implementation. V. LESSONS AND RECOMMENDATIONS 81. The lessons relating to project design are described in the following paragraphs. 82. The design of ISSIP2 was insufficiently informed by the emerging lessons of ISSIP1. ISSIP1, which was approved in March 2008, experienced significant delays in disbursement due to its complex institutional setup, which included joint implementation by the NOPWASD and the HCWW. This joint implementation structure obscured accountability, including that for the overall project progress. Although the ICR for ISSIP1 was completed only in June 2016, the problems with the complex institutional setup of ISSIP1 were evident at appraisal of ISSIP2 in January 2011, at which point less than 10 percent of the ISSIP1 funds had been disbursed almost three years after the ISSIP1 approval. There should have been a more robust challenge to the complex implementation arrangements and a greater insistence on simplification in the run-up to appraisal of ISSIP2. Instead the simplification of the implementation structure was not fully addressed until the October 2015 restructuring of ISSIP2 when the HCWW was given the lead implementation role at the central level. 83. Realism of the proposed GoE contribution of US$100 million to ISSIP2. At the time of appraising this project in 2011, Egypt had experienced both global and domestic shocks to economic growth and faced a large fiscal deficit. The 2007–2008 global financial crisis had led to a slowing down of the country’s GDP growth rate from over 7 percent in 2006–2008 to 4.5 percent in 2009. The January 25th Revolution was also expected to pull down economic growth further and Egypt was expected to face a large fiscal deficit in FY2011, in excess of 10 percent of the GDP. Against this backdrop, the proposed GoE contribution of US$100 million to ISSIP2 should have been seen as optimistic at best and unrealistic at worst. To mitigate this risk, it would have been advisable to compartmentalize the risk by ensuring that the project could be scaled down simply should the GoE contribution not be forthcoming. 84. Ensure precision and consensus on the definition of results indicators at appraisal. Over the project lifespan the number of beneficiaries was reduced from 1.2 million to 285,000. Although, in part, this was due to the cancellation of the GoE contribution and then partial cancellation of the World Bank financing, the other reason for the drop was a change in the definition and method of counting beneficiaries. This caused confusion and tension among implementing and supervising teams. A clearer method of defining and measuring beneficiaries should have been developed at appraisal. 85. The lessons relating to project implementation are described in the following paragraphs. Page 30 of 59 The World Bank Second Integrated Sanitation and Sewerage Project - EG (P120161) 86. Adopting decentralized approach for service delivery and local project implementation enhances capacity at the local level and improves service delivery. This was demonstrated following project restructuring that introduced changes to the institutional arrangements to involve local WSCs. Such an approach proved that customer accountability for speed, cost, and quality have notably improved project implementation and increase in disbursement. 87. Strengthen the overall capacity of WSCs and focus on service delivery and sustainability while building infrastructure. In addition to the limited role of the WSCs under the ISSIP2 in the design and construction management of infrastructure, the projects also failed to consider the need to strengthen the overall capacities of the WSCs to operate as water supply and sanitation utilities. At a later stage, important and effective technical training were given to the WSCs’ staff in project management, which has resulted in accelerated implementation and better construction supervision. Furthermore, the project focused mainly on financing and building infrastructure (that is, WWTPs, pumping stations and network extensions, and so on) without a clear focus on accountability for either service improvements to beneficiaries or efficiency or sustainability. 88. Design WWTPs with lower lifecycle costs, particularly in Upper Egypt. Although the sewer collector network designs were well adapted to the Egyptian context, the WWTP technologies chosen were activated-sludge treatment processes for all but one plant. Especially in Upper Egypt where land for more extensive lagoon-type technologies is freely available, greater consideration should be given to the lifecycle costs of technologies as lagoon-type technologies have much lower recurrent electricity costs than activated sludge treatment plants. This is particularly important given that none of the WSCs were able to cover their O&M costs. 89. Streamlining and strengthening the Government’s and the World Bank’s required procedures and keeping them in focus is essential. This can apply to procurement, financial and environment safeguards, and so on, because although the Government agrees formally that donor procurement, FM, and safeguards procedures will take precedence, in practice this means that both national and donor procedures are followed concurrently, resulting in the confusion about the procedures for implementers, delays, and overlaps in processing. For example, under the ISSIPs, approximately 110 days was typically required between appointment of designers and selection of the contractor, and client approvals alone (before construction starts) could take up to one year. There was significant confusion and disagreement on procedures among agencies, particularly regarding the application of Egyptian requirements in areas such as procurement and land acquisition. Furthermore, although the environmental safeguards and contract terms are known, little attention is paid to these terms during implementation, which may have serious implications (that is, fatality incident under ISSP2). Therefore, keeping environment and social safeguards and fiduciary requirements in focus and under close monitoring is important. The private sector proved to be more efficient than many public sector contractors, and the termination of inefficient contractors could be done earlier in the project to save time. 90. Constant, close, and efficient communication, coordination, and information sharing with the involved parties and beneficiaries are very important during project implementation. This includes a locally established GRM, which will allow teams to be more responsive and manage the expectations of community members throughout the project implementation. 91. Project preparation should start as early as possible, especially with regard to safeguard requirements and technical designs. When land acquisition is needed, consultation with communities and involved members should happen early in the process. Also, completing the design of subprojects during project preparation would be instrumental in faster implementation. Page 31 of 59 The World Bank Second Integrated Sanitation and Sewerage Project - EG (P120161) 92. Continuity of project’s historical knowledge during implementation. When the World Bank needs to change the project’s team leader, the outgoing team leader should continue to be involved with the project team for a short period after handing over to the new team leader to provide support and advice based on his/her previous knowledge of the project. 93. Avoid reputational risk. In instances when closed World Bank projects need to be continued to be implemented by the borrower until completion of some activities, the World Bank should work with the borrower to develop a firm and committed completion plan. Such plan should include certain conditions to avoid reputational, environmental, social and other risks due to noncompletion. . Page 32 of 59 The World Bank Second Integrated Sanitation and Sewerage Project - EG (P120161) ANNEX 1. RESULTS FRAMEWORK AND KEY OUTPUTS A. RESULTS INDICATORS A.1 PDO Indicators Objective/Outcome: Provide targeted populations with increased access to improved sanitation and sewerage services. Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Direct project beneficiaries Number 0.00 1200000.00 285000.00 25000.00 06-Jun-2011 30-Jun-2011 01-Mar-2017 01-Mar-2019 Female beneficiaries Percentage 0.00 50.00 50.00 50.00 Comments (achievements against targets): This was added as a core indicator at restructuring. The 5,000 functional HHCs were in the Sohag governorate whereby they got connected to an existing operational WWTP in Sohag. Thus, the 25,000 beneficiaries (formula used: 5 people per HHC) were reached , which compares poorly against the original target of 1,200,000 and revised target of 878,340 and later the target of 285,000 beneficiaries (2.1, 2.9, and 8.8 percent, respectively). 50% of the (25,000) benefited population were females. Page 33 of 59 The World Bank Second Integrated Sanitation and Sewerage Project - EG (P120161) Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Increased number of people Number 0.00 1200000.00 285000.00 25000.00 in the project areas connected to improved 06-Jun-2011 23-Oct-2018 31-Dec-2018 01-Mar-2019 sanitation and sewerage services. Comments (achievements against targets): Same comment as in the "Direct project beneficiaries" whereby only 25,000 beneficiaries (corresponding to 5,000 HHCs) were reached representing 8.8 percent of the reduced target. The project has built 37,781 HHCs/inspection chambers that are ready to be connected to the HHs when the WWTPs become operational, potentially reaching to 188,905 additional beneficiaries (66 percent of the reduced target). Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Number of wastewater Number 0.00 15.00 5.00 0.00 treatment plants meeting Egyptian effluent treatment 06-Jun-2011 23-Oct-2018 31-Dec-2018 01-Mar-2019 standards. Comments (achievements against targets): Page 34 of 59 The World Bank Second Integrated Sanitation and Sewerage Project - EG (P120161) None of the WWTPs have been completed by project closure or by the ICR mission (March 2019). However, several of them are at advanced stages of construction (90+ percent), so with the continued financing from the GoE funds they can be brought to completion. Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Volume of wastewater Cubic 0.00 120000.00 55000.00 3262.00 treated Meter(m3) 06-Jun-2011 30-Jun-2011 31-Dec-2018 01-Mar-2019 Comments (achievements against targets): Because no WWTPs were completed / became functional by project closing, the only treatment of additional wastewater is happening at the exiting WWTP in Sohag for the 5,000 functional HHCs. The volume of wastewater treated reached 3,262 m3, representing 2.7, 4.4, and 5.9 percent, respectively, against the targets. A.2 Intermediate Results Indicators Component: Component 1: Water infrastructure systems in Menoufia and Sharkeya Indicator Name Unit of Measure Baseline Original Target Formally Revised Actual Achieved at Page 35 of 59 The World Bank Second Integrated Sanitation and Sewerage Project - EG (P120161) Target Completion Total number of additional Number 0.00 100.00 5637.00 0.00 working wastewater connections in Sharkeya and 06-Jun-2011 30-Jun-2011 31-Dec-2018 01-Mar-2019 Menoufia Comments (achievements against targets): The original indicator was 100 percent then dropped and replaced as a number. The project has completed 9,139 HHCs/ inspection chambers, which are very close to the households ready to be connected when the WWTPs become functional. No actual achievement is reported for the indicator because beneficiaries are not connected and are not using the constructed chambers. Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Total number of pumping Number 0.00 43.00 8.00 8.00 stations constructed in Sharkeya and Menoufia 06-Jun-2011 23-Oct-2018 31-Dec-2018 01-Mar-2019 Comments (achievements against targets): All of the civil works had been finished for the pumping stations and all the electro-mechanical equipment is stored on the site. Most of the pump stations are ready for commissioning and start-up in both governorates. Achievement rate is 100 percent against the revised target, and 18.6 percent against the original. 100 percent achievement against the revised target, and 18.6 percent of the original. Page 36 of 59 The World Bank Second Integrated Sanitation and Sewerage Project - EG (P120161) Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Number of WWTPs operating Number 0.00 100.00 3.00 0.00 at 2017 design flow rate in Sharkeya and Meoufia 06-Jun-2011 30-Jun-2011 31-Dec-2018 01-Mar-2019 Comments (achievements against targets): The original target was 100 percent then it was dropped and replaces with a number. The three (3) WWTPs financed under the project are still under construction and not yet completed. Interim constrictuion progress as of the ICR mission in March 2019 was: in the Sharkia governorate - Debeg WWTP at 85 percent, Qanteer WWTP - 50 percent; in the Menofia governorate - Dansour WWTP - 95 percent. Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Volume(mass) of BOD Tones/year 0.00 0.00 29.79 0.00 pollution load removed by treatment plant in Sharqui 06-Jun-2011 30-Jun-2011 31-Dec-2018 01-Mar-2019 and Menoufia under the project Comments (achievements against targets): Page 37 of 59 The World Bank Second Integrated Sanitation and Sewerage Project - EG (P120161) No BOD treatment under the new WWTPs is done because they are not constructed and operational in the Menoufia and Sharkia governorates. The original target is zero as this indicator was not part of the original RF. Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Total kms of sewerage Number 0.00 626.00 93.40 89.50 pipelines laid in Sharkeya and Menoufia 06-Jun-2011 23-Oct-2018 31-Dec-2018 01-Mar-2019 Comments (achievements against targets): 96 percent of the revised target and 14 percent of the original target length of the sewerage pipelines were completed. Component: Component 2: Water infrastructure systems in Assiut and Sohag Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Total number of additional Number 0.00 100.00 51285.00 5000.00 working wastewater connections in Assuit and 06-Jun-2011 30-Jun-2011 31-Dec-2018 01-Mar-2019 Sohag Comments (achievements against targets): Page 38 of 59 The World Bank Second Integrated Sanitation and Sewerage Project - EG (P120161) The original target was 100 percent then it was dropped and replaced with a number. The project has constructed 28,643 inspection chambers ready for the HHs to connect, however, only 5,000 HHs were connected to the chambers and then to an existing functioning WWTP through the sewer network in Sohag. 9.75 percent achievement. Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Total number of pumping Number 0.00 38.00 24.00 24.00 stations constructed in Assuit and Sohag 06-Jun-2011 23-Oct-2018 31-Dec-2018 01-Mar-2019 Comments (achievements against targets): Constructed pump stations indicate that 100 percent of the civil works have been finished and all the electro-mechanical equipment is stored on the site. The majority of the pump stations are ready for commissioning and start-up in both governorates. A number of pump stations are already working. 100 Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Total kms of sewerage Number 0.00 549.00 281.80 240.84 pipelines laid in Assuit and Sohag 06-Jun-2011 23-Oct-2018 31-Dec-2018 01-Mar-2019 Page 39 of 59 The World Bank Second Integrated Sanitation and Sewerage Project - EG (P120161) Comments (achievements against targets): 85.5 percent or the revised target and 43.9 percent of the original length of the constructed sewerage pipelines have been achieved. Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Number of WWTPs operating Number 0.00 100.00 2.00 0.00 at 2017 design flow rate in Assuit and Sohag 06-Jun-2011 30-Jun-2011 31-Dec-2018 01-Mar-2019 Comments (achievements against targets): The original target was 100 percent then it was replaced to a number. The two WWTPs financed under the project are still under construction and not yet completed. Status of construction is as follows: Assuit governorate: Al-Nwarah WWTP - 56 percent, Shotp WWTP - 80 percent. Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Volume(mass) of BOD Tones/year 0.00 0.00 39.96 1.80 pollution load removed by treatment plant in Assiut and 06-Jun-2011 30-Jun-2011 31-Dec-2018 01-Mar-2019 Sohag under the project Page 40 of 59 The World Bank Second Integrated Sanitation and Sewerage Project - EG (P120161) Comments (achievements against targets): No treatment under the new wastewater treatment plants is done because the WWTPs are not completed. The only sewage treatment (3,262 m3/d) is happening in Sohag through an existing WWTP, therefore only 4.5 percent of the targeted BOD pollution load is removed through the treatment. Component: Component 3: . Project Management Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion ESMMF training delivered Number 0.00 100.00 14.00 16.00 06-Jun-2011 30-Jun-2011 31-Dec-2018 01-Mar-2019 Comments (achievements against targets): The original target was 100 percent and was replaced with a number. The achievement on the ESMMF training exceeds the set target (114.3 percent). Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Number of construction Number 0.00 4.00 6.00 6.00 supervision contracts signed for treatment plants 06-Jun-2011 23-Oct-2018 31-Dec-2018 01-Mar-2019 Page 41 of 59 The World Bank Second Integrated Sanitation and Sewerage Project - EG (P120161) Comments (achievements against targets): The target was revised from 4 to 6 at the second restructuring for strengthened construction supervision. 100 percent achieved. Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion % of Project Management Percentage 0.00 60.00 100.00 100.00 and Technical Training Courses completed in PIU 06-Jun-2011 30-Jun-2011 31-Dec-2018 01-Mar-2019 and RSUs Comments (achievements against targets): The original target for training courses was as a number, or 60 courses, which was changed to a percentage and was fully achieved. Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Works contracts awarded Number 0.00 90.00 18.00 20.00 06-Jun-2011 23-Oct-2018 31-Dec-2018 01-Mar-2019 Comments (achievements against targets): Page 42 of 59 The World Bank Second Integrated Sanitation and Sewerage Project - EG (P120161) Fully achieved against the revised target. The increase in the contracts signed than the target is due to termination of 2 contracts (1 in Sohag & Assuot each) under phase (2) and splitting it into 4 contracts. The original target of 90 contracts was reduced at restructuring to reflect the scaled down scope and changes in technical specifications. Thus, 22 percent achieved against the original target. Component: Component 4: Support to MoHUUC Project Management Unit Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Project Management Unit Yes/No N Y Y Y created and operational 06-Jun-2011 23-Oct-2018 31-Dec-2018 01-Mar-2019 Comments (achievements against targets): This indicator was not formally added to the documentation at restructuring but the PMU was established and already operating at the MoHUUC. Page 43 of 59 The World Bank Second Integrated Sanitation and Sewerage Project - EG (P120161) B. KEY OUTPUTS BY COMPONENT Objective/Outcome 1: Improved access to sanitation services and facilities 1. Increased number of people connected to Outcome Indicators improved sanitation and sewerage service in the project areas 1.Total number of additional working wastewater connections Intermediate Results Indicators 2. Total number of pumping stations constructed 3. Total kms of sewerage pipelines laid 1. 285,000 wastewater connections Key Outputs by Component 2. 32 pumping stations constructed (linked to the achievement of the Objective/Outcome 1) 3. 420 km of sewerage pipelines laid Objective/Outcome 2: Improved quality of sanitation and sewerage services management 1. Number of wastewater treatment plants meeting Egyptian effluent treatment Outcome Indicators standards 2. Volume of wastewater treated 1. Number of WWTPs operating at 2018 design flow rate Intermediate Results Indicators 2. Volume (mass) BOD pollution load removal by treatment plant under the project (ton) 3. Volume of wastewater treated 1. 5 wastewater treatment plants Key Outputs by Component 2. 39.96 tons of BOD pollution load removed (linked to the achievement of the Objective/Outcome 2) 3. 55,000 m3/day of wastewater treated achieved Page 44 of 59 The World Bank Second Integrated Sanitation and Sewerage Project - EG (P120161) ANNEX 2. BANK LENDING AND IMPLEMENTATION SUPPORT/SUPERVISION A. TASK TEAM MEMBERS Name Role Preparation Parameswaran Iyer Task Team Leader Claire Kfouri Water and Sanitation Specialist T. Mpoy Kamulayi Lead Counsel Danielle Malek Roosa Senior Counsel Brenda Morata Paralegal Augustin Maria Economist Maged Hamed Senior Environmental Specialist Mariana Felicio Social Development Specialist Badr Kamel Senior Procurement Specialist Hyacinth Brown Senior Finance Officer Akram El-Shorbagi Senior Financial Management Specialist Wael Elshabrawy Financial Management Specialist Raja Iyer Operation Adviser/Consultant Luz Maria Gonzalez Financial Analyst Heba Yaken Operations Analyst Zaileen Rahim Engineering Consultant Ahmed Atta Engineering Consultant Zakia Chummun Language Program Assistant Enas Mahmoud Program Assistant Supervision/ICR Mouhamed Fadel Ndaw, Heba Yaken Aref Ahmed Task Team Leader(s) Basheer Ahmad Fahem Sadeq Jaber, Luis R. Prada Procurement Specialist(s) Villalobos Wael Ahmed Elshabrawy Financial Management Specialist Claudine Kader Team Member Enas Shaaban Mahmoud Team Member Layla Mohamed-Kotb Abdel Wahab Team Member Yogita Mumssen Team Member Page 45 of 59 The World Bank Second Integrated Sanitation and Sewerage Project - EG (P120161) Ahmed Mohamed Ali Mahmou Atta Team Member Amal Nabil Faltas Bastorous Social Specialist Mohammad Farouk Ibrahim Kandeel Environmental Specialist Dominick Revel de Waal Senior Economist Elena Gagieva-Petrova Senior Operations Officer B. STAFF TIME AND COST Staff Time and Cost Stage of Project Cycle No. of staff weeks US$ (including travel and consultant costs) Preparation FY10 12.438 102,655.35 FY11 42.443 227,855.29 FY12 6.088 33,537.21 FY16 .550 531.30 Total 61.52 364,579.15 Supervision/ICR FY12 23.460 100,167.14 FY13 19.066 149,209.20 FY14 19.582 124,949.58 FY15 38.438 355,861.35 FY16 35.593 151,476.74 FY17 50.659 221,515.82 FY18 37.047 146,746.32 FY19 37.166 190,001.06 Total 261.01 1,439,927.21 Page 46 of 59 The World Bank Second Integrated Sanitation and Sewerage Project - EG (P120161) ANNEX 3. PROJECT COST BY COMPONENT Actual at Percentage of Amount at Project Closing Approval (US$, Components Approval (US$, millions) millions) (US$, millions) Component 1: Water infrastructure systems 149.75 25.70 17.2 in Menoufia and Sharkeya Component 2: Water infrastructure systems 149.75 79.50 53.1 in Assiut and Sohag Component 3: Project Management 10.00 5.20 52.0 (incuding CS) Support to MoHUUC PMU 0.00 2.60 — Front-end fee 0.50 0.50 100.0 Total 310.00 113.50 36.6 Page 47 of 59 The World Bank Second Integrated Sanitation and Sewerage Project - EG (P120161) ANNEX 4. EFFICIENCY ANALYSIS 1. The cost per connection observed was high, though it may come down as the works are completed in the post-project phase funded by the GoE. Based on the original RF, the cost per capita was estimated at US$167. After the second restructuring, the contracted build costs per capita were US$386. At the time of writing the ICR, at which point only 25,000 people were estimated to be actually connected to improved sanitation and sewerage services, the cost per capita was US$4,400. The GoE has committed to completing all works and connections in a post-project period running to October 2019. This could reduce the cost back to US$657 per capita. This latter per capita cost is within the range of estimates presented in the Egypt Rural Sanitation PforR (P154112) ranging between US$386 and US$765 per capita, with an average of about US$563 per capita. 2. At the appraisal of ISSIP2, it was argued that due to the difficulties in quantifying the economic benefits in a reliable manner, the economic analysis of the project was based on an overall economic justification (a narrative supported by achieving the Millennium Development Goals) and a cost-effectiveness approach, based on cost optimization. This cost-effectiveness approach compared the proposed cluster approach to be used in ISSIP2 with three alternatives: (a) improved on-site sanitation, (b) use of decentralized treatment systems (such as the Deutsche Gesellschaft fur Internationale Zusammenarbeit) “GIZ” model), and (c) construction of conventional sewer networks. 3. It was argued that feasibility studies for the proposed clusters confirmed that on-site sanitation is not a feasible option in the project villages due to high population densities and high groundwater levels. Based on bids received for the GIZ model pilots to be implemented as part of ISSIP, as well as preliminary costing carried out as part of the ISSIP2 feasibility, the GIZ model, which is land intensive due to the anaerobic nature of treatment required, appears to present higher unit costs compared to the proposed cluster approach and has been excluded from the first phase of ISSIP2. Possible use of the GIZ model would be reconsidered for ISSIP2 Phase 2 based on lessons learned during the first phase of implementation. Finally, conventional sewers were not considered a viable option due to the higher investment costs and more complex O&M requirements, as well as the constraint of high water tables in many of the project villages, which would further challenge construction and O&M. 4. A cost-benefit analysis was, however, carried out for ISSIP1 (P094311) and for the PforR (P154112) which estimated returns for both private (HH) and public benefit streams. For this ICR, an ex post economic analysis was carried out using the PforR data as they were more recent. To account for the large discrepancy between the outcome achieved at project completion and the outcome that could be achieved if the GoE completed remaining works, the ICR economic analysis considered two scenarios: (a) Scenario 1. The economic returns based on the number of HHCs actually completed at the time of writing the ICR. (b) Scenario 2. The potential economic returns should the GoE follow through on its commitment to complete all works and connect 47,878 HHs 5. The economic rate of return for Scenario 1 was negative and for Scenario 2 was 7.2 percent. Assuming a 6 percent discount rate, the net present value for Scenario 2 was only US$23 million even after assuming a 3 percent annual increase in HH sewer connections. This underscores the importance for the GoE to complete all works and planned HHs’ connections. Page 48 of 59 The World Bank Second Integrated Sanitation and Sewerage Project - EG (P120161) 6. Given the low tariff levels and poor financial results of the WSCs at appraisal, the project was also not justified on the basis of a financial rate of return. Though all the targeted WSCs continue to make losses, the HH sewage tariff has increased from 35 to 75 percent of the water tariff.17 Working against achieving cost recovery, at least for the O&M, is the GoE’s policy of unwinding of electricity subsidies, which led to a 100 percent increase in the input electricity costs for the WSCs from EGP 0.46 per kWh to EGP 0.92 per kWh in 2018—with electricity now accounting for 60 percent of expenditure for the WSC in Assiut. This unwinding of electricity subsidies will require greater attention to the choice of the WWTP technology in future—requiring a reassessment of underlying capital expenditure costs versus operational expenditure cost drivers (for example, the initial cost of land for lagoon systems versus operational costs of processing sewage with MBBR systems). 17 Fromthe 2017 audited financial statements: Minoufia EGP 83 million, Sohag EGP 109 million, Assiut EGP 142 million, Sharkaia EGP 261 million. Page 49 of 59 The World Bank Second Integrated Sanitation and Sewerage Project - EG (P120161) ANNEX 5. BORROWER, CO-FINANCIER AND OTHER PARTNER/STAKEHOLDER COMMENTS 1. Comments from the PIU, HCWW were received on June 23, 2019 and were incorporated or noted in this ICR. Of special note: i. Datasheet: restructuring section. The difference in the dates for the first restructuring was clarified. The Amendment to the Financing Agreement was countersigned by the borrower on March 24, 2015. However, the restructuring package was approved in the World Bank portal on June 22, 2015. Both dates refer to the same restructuring. It was clarified in the report to avoid confusion. ii. II.E. Clause 39 – Page 22: completion of training sessions. While the World Bank recognizes that different trainings were provided and carried out satisfactorily, it wanted to also stress that the project design could have included more training offerings on the support to O&M and sustainability measures. iii. II.A.43-page 22 On the calculation of beneficiaries. The team highlighted that HHs may have more than 5 persons used as official calculation formula, however, for the consistency of measurement used by the M&E methodology of 5 persons/HH, the same formula was used by the ICR evaluation team. 2. Summary of the Borrower Project Completion Report A. Introduction 1. With almost full coverage of water supply in urban as well as rural areas (in 2008), the safe disposal of wastewater in Egyptian villages now represents a major challenge to the environment and public health. While at least 85 percent of rural HHs have some type of sanitary facility (usually a septic tank), only a limited percentage of villages have facilities for safe collection, conveyance, and treatment of wastewater. In 2010, wastewater was discharged (usually without treatment) to agriculture drains and sometimes to canals. Such water pollution in drains and canals is a grave threat to public health. Further, higher subsurface water levels make most septic tanks an ineffective means of safe disposal of wastewater. B. Second Integrated Sanitation and Sewerage Infrastructure Project (ISSIP 2) 2. The loan effectiveness date was December 16, 2012, with project period of four years. However, the activities were constrained and delayed due to the following challenges: (a) Continuous strikes, political instability, and security volatility related to the January 2011 revolution, with continuous general strikes and complaining villages within project geographic areas; (b) Ceasing of design activities due to non-availability of land required for the project; (c) First project restructuring and exclusion of the NOPWASD from the implementing agency (15 months). (d) Transfer of foreign curency from the NOPWASD account to the HCWW account (5 months). (e) Allocation of local contribution in accordance with the Loan Agreement (9 months). (f) Instability in economic stuation in the Egyptian market (8 months). Page 50 of 59 The World Bank Second Integrated Sanitation and Sewerage Project - EG (P120161) (g) Consequences of Egyptian pound devaluation decree. (h) Partial suspension of disbursment from loan (2 months). 3. In this context, the GoE and the World Bank concluded that the project period was to be extended by two years. Figure 5.1. Project Implementation Timeline: Planning and Implementation Activities, and Challenges Planning Activities Implementation Activities Challenges C. Institutional Arrangements 4. The project institutional setup went through a major change during the first restructuring process, approved and issued in March 24, 2015, as shown in table 5.1. Table 5.1. Change in Project Institutional Setup Original Setup Final Setup 2012 till March 2015 March 2015 till December 2018 Steering Committee (headed by MoHUUC) PIU PIU NOPWASD (to construct WWTP) HCWW (to construct WWTP and sewerage HCWW (to construct sewerage networks) networks) Rural Sanitation Units (RSUs) WSCs (Sharkia, Menofia, Assuit, and Sohag) 5. As per the original Loan Agreement and its amendments, the HCWW ISSIP PIU shall carry out the project (ISSIP2) implementation. Page 51 of 59 The World Bank Second Integrated Sanitation and Sewerage Project - EG (P120161) D. Project Implementation • Figure 5.2 indicates the preliminary and final number of villages constructed under the project. Figure 5.2. Number of Served Villages 40 37 24 24 20 14 9 9 5 3 0 Sharkia Menofia Assuot Sohag Original (2012) Final (2018) Figure 5.3. Results Framework Achievements 18% 35% Equal & Above 100% (6 KPIs) 12% Above 50% (6 KPIs) 35% • Variance between preliminary and final number of villages is due to the following: o Reduction in loan budget for works after restructure and having the HCWW as a sole lead entity o Availability of land required for pumping stations (PS) and the WWTP • Feasibility study, design, and tender documents preparation for the second phase of the project launched by end of 2010 and finished by March 2016. This lengthy time span was due to the following reasons: o Country’s security instability during 2011 through 2014 had a severe negative impact on all fieldworks (that is, geotechnical investigation report, survey works, and so on). o All design activities ceased for 18 months due to nonavailability of land required for the project’s interventions. ENVIROMENTAL AND SOCIAL IMPACT ASSESMENT FRAMEWORK 6. The HCWW financed the consultancy services for preparing the ESIAF in the four governorates. The ESIAF and the RPF were published on the HCWW’s website on January 13, 2011, and February 22, 2011, respectively. Page 52 of 59 The World Bank Second Integrated Sanitation and Sewerage Project - EG (P120161) E. Project Restructuring First Project Restructuring18 (March 2015) 7. Reason for restructuring. Due to slow progress in implementing the project’s activities, the World Bank, in agreement with the GoE, envisaged that it is imperative that (a) more flexible implementation plans need to be adopted and deployed and (b) the viability of the original institutional arrangements of the project is revisited with a twin-headed project implementation structure. Second Project Restructuring19 (November 2017) 8. Reason for restructuring. Due to devaluation of the Egyptian pound in November 2016, nearly half of the loan proceeds allocated for the works will be unused. Consequently, the World Bank mission had visited Egypt (May 25 through June 1, 2017) to revisit the project's financial needs in light of the Egyptian pound devaluation and current and projected works progress. Third Project Restructuring20 (December 2018) 9. Reason for restructuring. Because of the gap between the allocated amount for the Project Management Consultant (PMC) (US$3.8 million) and the PMC contract’s ceiling amount being US$2.4 million + US$0.2 million for individual consultant, the PIU requested that the additional US$1.2 million be considered under category 1 (works). F. Project Budget 10. Figure 5.4 shows the changes in the project’s budget through the different restructuring actions. Figure 5.4. Restructuring Impacts on ISSIP2 Budget (US$, millions) 299.5 400 Original 300 184.5 1st (March 2015) 2nd (November 2017) 99.95 98.75 200 3rd (December 2018) 100 6.97 6.97 3.78 2.58 0.5 0.5 0.5 0.5 8 7 0 0 0 Works PMC PMU in MoHUUC Front End Fee 18 The restructuring process started in October 2013 and finished at the MTR that took place in March 2015 (15 months). 19 The restructuring process started in June 2017 and finished in November 2017 (5 months). 20 The restructuring process started in November 2018 and finished in December 2018 (1 month). The World Bank note: the reallocation done in December 2018 was within the allowed thresholds to be decided by the Task team, and therefore, did not require to go through a restructuring. Page 53 of 59 The World Bank Second Integrated Sanitation and Sewerage Project - EG (P120161) G. Construction of Works Progress of Construction Activities 11. The construction phase of ISSIP2 launched in January 2015 with slow progress due to the finalization of the first restructuring and the handing-over process from the NOPWASD to the HCWW, as shown in figure 5.5. Figure 5.5. Actual Accumulative Work Progress 100% 80% 84% 80% 64% 70% 54% 58% 60% 42% 48% 35% 40% 27% 12% 20% 0% 1% 2% 6% 0% Actual Work Progress % 12. Figure 5.6 depicts the average progress (%) at the governorate level as of the loan closing date, December 31, 2018. Figure 5.6. Average Work Progress per Governorate Progress till Dec. 2018 Progress till Mar. 2019 90% 93% 84% 88% 79% 82% 66% 73% Sharkyia Menofyia Sohag Assuit Page 54 of 59 The World Bank Second Integrated Sanitation and Sewerage Project - EG (P120161) H. ISSIP2 Monitoring & Evaluation System Figure 5.7. M&E System of ISSIP2 I. Disbursement Figure 5.8. Loan Disbursement Curve 120.00 102.50 107.50 100.00 Million USD 80.00 58.70 60.00 35.60 40.00 13.60 20.00 0.00 0.00 2014-2015 2015-2016 2016-2017 2017-2018 2018-2019 2018-2019 Fiscal Year (FY) Accumaltive Loan Disbursement GoE Contribution Planned GoE Budget 13. As per the original Loan Agreement, the GoE allocated US$110 million as follows: (a) US$100 million for works contract. Page 55 of 59 The World Bank Second Integrated Sanitation and Sewerage Project - EG (P120161) (b) US$10 million to support the MoHUUC and the HCWW in project implementation, After the first restructuring, the GoE had downsized its contribution from EGP 110 million to EGP 10 million. Disbursed GoE Budget 14. Table 5.2 indicates the disbursed amounts among the different components. Table 5.2. Disbursed Amounts among Different Components Sl. Item Description Amount (EGP) Status No. 1 Feasibility studies and designs 4 consulting firms 10,723,000 Done 2 ESIA/F studies 3 consulting firms 1,800,238 Done 3 Construction Supervision 3 consulting firms 28,530,397 Ongoing 4 Capacity Building and Training Courses 1,342,704 Done 5 Land acquisition21 Willing buyer-willing seller 2,007,306 Done 6 PIU and RSU staff Salaries (2014–2018) 3,360,000 Ongoing Total 47,763,645 EGP 15. Required GoE budget for completion. After the loan closing (December 2018), the amounts required to complete the works are as shown in table 5.3. Table 5.3. Amounts Required to Complete Works Sl. Time interval Required financing (EGP) Allocated Budget (EGP) No. From To 1 January 1, 2019 June 30, 2019 345,668,740 170,000,000 2 July 1, 2019 October 31, 2019 345,225,483 n.a. J. Social and Community Engagement 16. The PIU supported the RSUs during the project lifetime in the following areas: outreach strategies and action plans, monitoring of community or citizen’s engagement, capacity building and training for the staff, networking and partnership with the projects’ stakeholders, the GRM, and documentation for all activities. Since 2014, the social activities were increased under the new management scheme for the restructured PIU. 17. The social safeguards team (including the World Bank, the PIU, and the RSUs) made huge efforts to reach the following main outputs: • Full community mobilization through their leaders to support the project activities • Increase in women’s engagement in the project’s social activities • Sustainable, effective, and responsive GRM 21 This amount does not include the governmental and/or donated lands by the villagers. Page 56 of 59 The World Bank Second Integrated Sanitation and Sewerage Project - EG (P120161) • Mandatory subcontractor’s labor insurance under all contracts • Strengthening of institutional capacity for the RSU’s social engagement team in four target WSCs 18. The ISSIP2 social team managed to resolve 515 complaints (92 percent) out of the 561 recorded complaints received by the RSUs. K. Capacity Building and Training 19. The HCWW carried out training programs—financed from the GoE contribution—targeting RSUs and involved departments from the WSCs starting from 2014 till 2018 with full coordination between the PIU, the PMC, and the HCWW training department. L. Lesson learned Lessons Learned Recommendations 1. Institutional arrangements One lead entity to act as an implementing agency with clear roles and responsibilities 2. Hiring program’s consultants a) Timely planning for procuring/hiring required consultants is highly recommended to streamline the hiring. b) Start the subject procurement process before initiating the tendering of works contract. 3. Financial arrangements and Loan proceeds to be available and deposited, in advance, at the disbursement cycle assigned implementing entity, subject to audit by concerned governmental entity on a quarterly basis and must be with custodian. The implementing agency should have the required funds in advance based on a cash flow projection on a quarterly basis. 4. Capacity building in applying a) Specialized training (classroom and on the job) courses in the World Bank’s guidelines in procurement management and contract management before and procurement and contracts during implementation management process/policies b) Expanding the implementation of PforR loans 5. Timely preparation of Request a) Lessening time intervals between preparation of RFBs and for Bids (RFB) contract award to minimize risk of changing site conditions and availability of land b) Standardization of RFBs documents 6. Land acquisition a) All land required for the PSs and the WWTPs should be acquired at an early stage before finalizing detailed design. b) Land allocated for the project must be safeguarded and secured formally by the responsible entity and process must be properly documented. c) All the required permits and approval for the PSs and the WWTPs should be finalized during the design phase. 7. Delay in obtaining required a) Inviting the relevant ministries to participate in the Project permits and reduce its cost Steering Committee meetings b) Strong coordination between ministries to expedite permits ’ procedures c) Special fees to be offered for infrastructure projects d) All the required permits and approval for the PSs’ and the WWTPs’ land to be finalized during the design phase 8. Lack of adequate skills a) Improve post qualifications, skills, and relevant experiences regarding qualified requested in the RFBs. construction/contract b) Verify qualifications of prospective bidders through feedback management at construction from other affiliated entities. Page 57 of 59 The World Bank Second Integrated Sanitation and Sewerage Project - EG (P120161) Lessons Learned Recommendations supervision consultants, c) Increase scoring of the staff qualifications in post-qualification contractors, and WSCs requirements. 9. Lines of communication Develop and disseminate a robust communication protocol for all the project stakeholders. 10. Lengthy review and approval Develop and disseminate a professional Project Management Manual process within to be adopted and strictly followed. 11. OHS a) Provide capacity building for the WSC staff, contractors, and construction supervision consultants. b) Enforce HSE plans/activities associated with risk plan and procedures in the contract documents (for example, Site Safety Plan, Daily Reports, and so on). c) Assign a separate line item in the Bill of Quantities of works contract to ensure adopting of all the OHS procedures and motivate contractors in implementing the OHS activities. 12. Monitoring, evaluation, and a) Design and disseminate a robust and comprehensive M&E plan to way forward be followed. b) In light of M&E findings, a corrective actions and/or recovery plan to be developed to secure timely deliverables. 13. Services model contract It is highly recommended to adopt performance-based model contract to secure timely deliverables and consequently achieve PDOs. Page 58 of 59 The World Bank Second Integrated Sanitation and Sewerage Project - EG (P120161) ANNEX 6. SUPPORTING DOCUMENTS Project Papers • Project Appraisal Document (June 2011), Report No: 58890-EG • Restructuring Paper (February 2015), Report No. RES16185 • Restructuring Paper (November 2017), Report No. RES29820 Financing Agreements • Loan Agreement No. 8069-EG (January 2012) • Loan Agreement Amendment (March 2015) • Loan Amendment (October 2017) Additional Documents • Project Implementation Status and Results Reports • Project Safeguards Documents Page 59 of 59