Colombia - Cities Water Supply and Sewerage Projects

Douent of The World Bank FOR OFFICIAL USE ONLY Report No. 6594 PROJECT PERFORMANCE AUDTT REPORT COLOMRTA MEDTIlM-SIZE CITES WATER SUPPLY AND S'7WERAGE PROJECT (LOAN 860-CO) SECOND MI!LTT-CITY WATER SUPPLY AND SEWERAGE rROJECT (LOAN 1072-CO) Ja-uarv 20, 1987 One-rations Fvaliiation nppartmont 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 2ank authorization. FISCAL YEAR January 1 to December 31 MEASURES 1 meter (m) = 3.28 feet (ft) 1 kilometer (km) = 0.62 mile (mi) 1 square meter (m2) = 10.8 square feet (sq ft) 1 cubic meter (m3) = 35.3 cubic feet (cu ft) 1 liter = 0.26 US gallon 1 gallon (gal) = 3.785 liters 1 cubic meter per second = 22.8 million US gallons per day (m3/sec) (mgd) or 35.4 cubic feet per second (ft3/sec) 1 milligram per liter (mg/i = 0.053 Grain per US gallon ABBREVIATIONS AND ACRONYMS ACUAS Departmental Water Supply Companies DNP National Planning Department ECO External Credit Office ir INSFOPAL EMPOS Departmental Water Supply Companies; successors to ACUAS or INSFOPAL's regional offices EPM Municipal Works Companies (Empresas Publicas Municipales) FONADE National Fund for Economic Development INSFOPAL National Institute for Urban Development (Instituto Nacional de Fomento Municipal) INPES Institute for Special Health Programs JNT National Tariff Board PLA Project Loan Agreement USAID United States Agency for International Development rHE WORto BANK FOR OFFICIAL USE ONLY oash.riion DC *04 e January 20, 1987 MEMORANDUM TO THE EXECUTIVE DIRECTORS AND THE PRESIDENT SUBJECT: Project Performance Audit Report on Col,)mbia - Medium-Size Cities Water Supply and Sewerage Project (Loan 860-CO) and Second Multi-City Water Supply and Sewerage Project (Loan 1072-CO) Attached, for information, is a copy of a report entitled "Project Performance Audit Report on Colombia - Medium-Size Cities Water Supply and Sewerage Project (Loan 860-CO) vnd Second Multi-City Water Supply and Sewerage Project (Loan 1072-CO)" prepared by the Operations Evaluation Department. ALtachmen' 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 FOR OFFICIAL USE ONLY PROJECT PERFORMANCE AUDIT REPORT COLOMBIA: MEDIUM-SIZE CITIES WATER SUPPLY AND SEWERAGE PROJECT LOAN 860-CO COLOMBIA: SECOND MULTI-CITY WATER SUPPLY AND SEWERAGE PROJECT LOAN 1072-CO TABLE OF CONTENTS Page No. Preface ........................... ...................... i Basic Data ....................................... ii Evaluation Summary ............................... . viii Introduction .......... . . . . . . . . .I. .......... .. viii Project Objectives .................... . ...... .... ...... viii Project Implementation .................................... viii Project Results ................ ........................ ix Lessons and Findings ..................................... ix PROJECT PERFORMANCE AUDIT MEMORANDUM Introduction .............................................. 1 Project Execution ............................. ........... Project Costs ............................................. 4 Operational Performance .................................. 4 Financial Operations ...................................... 4 Institutional Arrangements ................................ 5 Conclusions ............................................... 6 PROJECT COMPLETION REPORT Introduction .......................... .............. 7 II. Project Preparation and Appraisal ...................... 10 III. Implementation ........................ ........ . .... 3 IV. Operating Performance .................................. 18 V. Institutional Performance and Development ....... .. 20 VI. Project Justification ............................... 21 VII. Bank Performance, Conclusions and Lessons Learned ...... 22 ANNEXES 1. Organizational Structure, December 1974 .. ........ 24 2. Organizational Structure, November 1982 ................. 25 3. Participating Beneficiaries ............................. 26 4. Comparative Project Scope, Loan 860-CO .................. 27 5. Comparative Project Scope, Loan 1072-CO ................. 33 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. TABLE OF CONTENTS (CONTINUED) Page No. ANNEXES 6. Comeliance with Key Loan Covenants, LCAn 860-CO ......... 42 7. Compliance with Key Loan Covenants, Loan 1072-CO ........ 44 8. Cumulative as Percent of Total Project Investments, Loan 860-CO ............... ...**..*********************** 47 9. Cumulative as Percent of Total Project Investments, Loan 1072-CO ...... . 9 ... .. ........... e.....* .... f... 48 10. Comparative Project Cost, Loan 860-CO .................. 49 11. Comparative Project Cost, Loan 1072-CO .........of...... 50 12. Allocation of Benk Funds, Loan 860-CO .................. 51 13. Allocation of Bank Funds, Loan 1072-CO ................. 52 14. Cumulative Schedule of Disbursements. Loan 860 & 1072-CO 53 15. Sources of Financing for Project Investments ........... 54 16. Annual Disbursements of National Counterpart Funds to INSFOPAL ..... ..... ............ ..... ...... 55 17. Compliance with Selected Monitoring Indicators and Financial Covenants, Loan 860-C0 ...................... 56 18. Compliance with Selected Monitoring Indicators and Financial Covenants, Loan 1072-CO ...................... 58 19. Summary of Income and Flow of Funds Statements of INSFOPAL, Loan 1072-CO) ............ ......... ...... 62 20. Comparative Summary Financial Performance, Loan 860-CO . 64 21. Comparative Summary Financial Performance, Loan 1072-CO. 66 22. Letter from INSFOPAL, LOANS 860-CO, 1072-CO ............ 67 MAP - IBRD NO. 19411-PCR PROJECT PERFORMANCE AUDIT REPORT REPUBLIC OF COLOMBIA MEDIUM-SIZE CITIES WATER SUPPLY AND SEWERAGE PROJECT (LOAN 860-CO) SECOND MULTI-CYTY WATER AND SEWERAGE PROJECT (LOAN 1072-CO) PREFACE This report presents the results of a performance audit of the Medium-Size Cities Water Supply and Sewerage Project (Loan 860-CO) and of the Second Multi-City Water Supply and Sewerage Project (Loan 1072-CO). Loan 860- CO for US$9.1 million equivalent was approved in October, 1972. Loan 1072- CO for US$27 million equivalent was approved in January, 1975. Both loans were made to the Instituto Nacion.1 de Fomento Municipal (INSFOPAL) princi- pally to help seven cities (Armenia, Buenaventura, Manizales, Neiva, Pereira, Santa Marta and Tulua) in the case of Loan 860-CO, and eight cities (Barranquilla, Cartagena, Cucuta, Ibague, Pasto, Popayan, Valledupar and Villavicencio) in the case of Loan 1072-CO. This Project Performance Audit Report comprises an Evaluation Summary and a Project Performance Audit Memorandum (PPAM), both prepared by the Operation Evaluation Department (OED); and a Project Completion Report (PCR) prepared by the Latin America and Caribbean Project Department. OED has reviewed the PCR, tl. Bank files and legal documents, the Appraisal and President's Reports and the transcripts of the meetings of the Executive Directors whan the loans were approved. We have also had the benefit of the very helpful views expressed by the Director General of INSFOPAL in his letter to the Bank dated October 28, 1983, which is included as Annex 22 to the PCR. A performance audit mission visited Colombia in August 1986 and discussed the projects with INSFOPAL in Bogota. It also visited seven of the fifteen cities involved (Armenia, F aizales, Pereira, Santa Marta, Cartagena, Pasto and Villavicencio) and had discussions there with the management. The PCR gives a comprehensive account of experience under the projects. The PPAM elaborates on a number of points that may be useful in drawing lessons from the projects. Following standard OED procedures, copies of the draft PPAR were sent to the Government and the Borrower for comments. However, no comments were received. - ii - PROJECT PERFOP"ANCE AUDIT BASIC DATA COLOMBIA: SECOND MULTI-CITY WATER SUPPLY AND SEWERAGE PROJECT LOAN 1072-CO KEY PROJECT DATP Appraisal Item Estimate Actual Total Project Cost (US$ Million)/1 46.32 47.19 Overrun (%) - 2 Loa. Amount (US$ Million) 27.0 24.56 Disbursed 27.0 24.56 Cancelled - 2.44 Repaid as of 06/30/85 3.83 3.63 Date Physical Components Completed 6/79 9/83 Portion Completed as of Above Date (%) 100 98 Portion of Time Overrun (%) - 100 Internal Financial Rates of Return (2) 8-15/2 /3 Financial Performance: INSFOPAL Excellent Poor Beneficiaries Good to Excellent Poor to Good Institutional Performance: INSFOPAL Good Poor Beneficiaries Good Poor to Fair /1 Excluding interest during construction. /2 Range of rates for 8 subprojects. /3 Not recalculated upon completion. - ift - OTHER PROJECT DATA Item Original Plan Revision Actual First Mention in Files 12/07/65 Government Application Negotiations 02/72 N.A. 6/72 Board Approval 04/72 N.As 03/07/73 Effectiveness Date 01/10/73 02/09/73 03/08/73 Closing Date 09/30/76 09/30/78 09/30/80I4 09/30/80 5/31/81/ 5 05, 31/81 Borrower and Executing Agency Instituto Nacional de Fomento Municipal Fiscal Year of Borrower January 1 - December 31 Loan Data Interest Rate 7.25% Committment Fee 0.75% Terma 25 years Grace Period 4 years Amortization 42 semi-annual payments Follow-on Project name: Second Multi-City Water Supply and Sewerage Proj1ect /4For Santa Marta, Neiva, Buenaventura and Manizales. /5~ For Armenia, Pereira and Tulua. - Iv - PROJECT ?ERFORMANCE AUDIT BASIC DATA SHEET COLOMBIA: MEDIUM-CITIES WATER SUPPLY AND SEWERAGE PROJECT LOAN 860-CO KEY PROJECT DATA Appraisal Item Estimate Act;al Total Project Cost (US$ million) /J 15.5 17.4 Overrun (%) - 7 Loa. Amount (US$ million) 9.10 8.18 Disbursed 9.10 8.18 Cancelled - 0.92 Repaid as of 6/30/85 2.36 2.22 Date Physical Components Completed 12/75 05/81 Portion Completed as of above date (2) 100 98 Portion of Time Overrun () - 180 Internal Financial Rates of Return (%) 9-17 /2 13 Financial Performancet INSFOPAL Good Poor Beneficiaries Good Poor Institutional Performance: INSFOPAL Good Poor Beneficiaries Fair to Good Poor to Good /1 Excluding interest during construction. /2 Range of rates for 7 subprojects. /3 Not recalculated upon completion. - v - OTHER PROJECT DATA Original Item Plan Revisions Actual First Mention in Files 5/8/72 Government Application 9/20/73 Negotiation 1/74 3/74 9/74 4/74 5/74 6/74 8/74 Board Approval 9/73 4/74 1/75 6/74 7/74 8/74 9/74 11/74 1/75 2/75 Effectiveness 4/16/75 -- 4/14/75 Closing Date 6/30/80 6/31/81 12/31/81 /4 12/31/82 12/31/82 /3 Borrower and Executing Agency Instituto Nacional de Fomento Municipal Fiscal Year of Borrower January I - December 31 Loan Data Interest Rate 8.00% Ccmmitment Fee 0.75% Term 25 years Grace Period 5 years Amortization 40 years semi-annual payments Follow-oI Project Name Third Medium-Size Cities Water Supply and Sewerage Project (Loan 1726-CO, US$31.0 Million). /4 For Cucuta, bague, Popayan, and Valledupar. /5 For remainder of projpct beneficiaries. - vi - COLOMBIA: MEDIUM-SIZE CITIES WATER SUPPLY AND SE'ERAGE PROJECT (LOAN 860-CO) COLOMBIA! SECOND MULTI-CITY WATER SUPPLY AND SEWERAGE PROJECT (LOAN 1072-CO) MISSION DATA No. of No. of No. of Date of Type of Mission Month/Year Weeks Persons Staffweeks Report Economic 10/65-11/65 4 N.A. N.A. 12/0 * Preappraisal 4/66 1.5 2 3 6/66 * Identification 1/68 3 1 3 3/68 * Preappraisal 2/69 1 1 1 4/69 * Appraisal Preparation 6/69 N.A. 2 N.A. 10/69 * Preappraisal 9/71 .25 2 .5 9/71 * Appraisal 10/71-11/71 3 5 15 12/71 * Post-appraisal 4/72 1 4 4 5/72 * Supervision 6/72 .5 2 1 7/72 * Supervision 8/72 2 4 8 9/72 * Supervision 11/72 .5 3 1.5 11/72 * Limited Supervision 2/73 .25 2 .5 3/73 * Supervision 3/73 1 2 Z 4/73 * Supervision 3/73 1 3 3 4/73 * Supervision 4/73 1 1 1 5/73 * Field Supervision 7/73 - 1 - 7/73 * Field Supervision 10/73 - 1 - 10/73 ** Preappraisal 10/73 1 1 1 10/73 ** Appraisal 11/73 4 3 12 12/73 * Field Supervision 3/74 1 - 3/74 * Field Supervision 9/74 - 1 - 10/74 ** Post-appraisal 11/74 2 2 4 12/74 * Limited Supervision 11/74 .25 2 .5 12/74 *** Supervision 11/74 2 3 6 12/74 ** Supervision 3/75 1 1 1 4/75 *** Field Supervision 7/75 - 1 - 7/75 *** Field Supervision 11/75 - 1 - 11/75 *** Supervision 5/76 1 2 2 6/76 * Supervision 8/76 1 2 2 8/76 * Limited Supervision 9/76 .25 1 .25 10/76 *** Supervision 3/77 1 3 3 5/67 ** Limited Supervision 5/77 1 1 1 6/67 ** Limited Supervision 6/77 1 1 1 6/67 *** Limited Supervision 7/77 1 1 1 8/77 ** Limited Supervision 9/77 .5 1 .5 9/77 *** Limited Supervision 9/77 1 1 1 11/77 * Supe.rvision 2/78 .75 2 1.5 4/78 * Limited Supervision 5/78 1 2 2 6/78 - vii - Staff Input - Loan 860-CO (Man-weeks) Bank FY: 1972 1973 1974 197L 1976 1977 1978 1979 1980 Preappraisal 20 - - - - - - - - Appraisal 157.9 .1 - - - - - - - Negotiation 15.7 18.8 - - - - - - - Supervision 1.7 15.8 4.2 11.3 15.5 10.4 8.6 14.1 16.4 Other 3.4 - - - - - - - .0 Total 193.7 34.7 4.2 11.3 15.5 10.4 8.5 14.1 16.4 1981 1982 1983 1984 1985 1986 Total Preappraisal - - - - - - 20.0 Appraisal - - - - - - 158.0 Negotiations - - - - - - 34.5 Supervision 14.2 1.2 - 6.2 .7 2.9 123.2 Other - .3 - - - - 4.8 Total 14.2 2.6 6.2 .7 2.9 340.5 Staff-Input - Loan 1072-CO (Man-weeks) Bank FY 1972 1973 1974 1975 1976 1977 1978 1979 1980 Preappraisal .8 1.3 8.5 - - - - - - Appraisal - - 57.0 7.3 - - - - - Negotiation - - - 18.3 - - - - - Supervision - 4.1 - 11.4 19.3 33.4 21.1 19.4 21.3 Other - - - - - - - - - Total .8 5.3 65.5 36.9 19.3 33.4 21.1 19.4 21.3 1981 1982 1983 1984 1985 1986 Total Preappraisal - - - - - - 10.6 Appraisal - - - - - - 64.3 Negotiation - - - - - - 18.3 Supervision 15.5 17.1 2.5 5.8 .1 3.3 174.5 Other .1 - - - - - .1 Total 15.6 17.1 2.5 5.8 .1 3.3 267.8 - .viii - PROJECT PERFORMANCE AUDIT REPORT REPUBLIC OF COLOMBIA MEDIUM SIZE CITIES WATER SUPPLY AND SEWERAGE PROJECT LOAN 860-CO SECOND MULTI-CITY WATER SUPPLY AND SEWERAGE PROJECT LOAN 1072-CO EVALUATION SUMMARY Introduction i. These two loans, for US$9.1 million and for US$27 million, were made to the Instituto Nacional de Fomento Municipal (INSFOPAL) for water supply and sewerage services in fifteen cities, all but two of them (Buenaventura and Tulua) capitals of their respective departments. The loan funds were on-lent to the cities by INSFOPAL. Project Objectives ii. In providing improved water supply and sewerage services for these intermediate-size cities, it was also hoped that this better infrastructure would improve living conditions and make these cities more attractive to those migrating from the land, and thus diminish the rate of growth of the big urban centres such as Bogota, Medellin and Cali (PPAM, para. 1-2). iii. Another important objective of the projects was the strengthening of the capacity of INSFOPAL as an intermediary agency. It was also intended that INSFOPAL should withdraw from active involvement on the operational side, and concentrate on planning and financing for the sector (PPAM, para. 1-2). Prolect Implementation iv. The projects involved the construction of works for water services, treatment, pumping, storage, distribution and operation - apart from works relating to sewerage. Approximately 50% of the total cost of both projects was provided by the Bank loans. Project execution took much longer than originally anticipated: the closing date was more than four years later than originally planned for Loan 860-CO, and about two years later for Loan 1072-CO (PPAM, para. 3-7). v. Delays were caused because modifications had to be made to sub- projects where population and demand forecasts were found to be overstated. Delays were also caused by National Counterpart Funds not being made available in time and by cumbersome bidd{ng procedures. Furthermore, some sub-borrowers took excessive time in fulfilling loan conditions (PPAM, pata. 8). - ix - vi. Total project costs, as expressed in US dollars, exceeded the ap- praisal estimates by 12% for Loan 860-CO, and by 2% for Loan 1072-CO. Reflec- ting inflation rates in Colombia, these figures as expressed in pesos were 73% and 29% respectively. The projects were completed in a satisfactory manner from a physical point of view (PPAM, para. 9). Project Results vii. Improved water supply and sewerage services have been made available to the project cities. Problems remain, however, with the levels of unaccoun- ted-for water, illegal connections and uninetered connections (PPAM, para. 12). viii. Financial results did not meet the returns or operating ratios specified in the Project Loan Agreements. Some of the Empresas/Beneficiaries have shown losses consistently; only one of the fifteen has recorded a posi- tive net income every year. This unsatisfactory state of affairs has its roots principally in the inadequacy of the tariffs. Admittedly there were problems with costs rising with inflation, but the necessary tariff increases were not forthcoming (PPAM, paras. 13-15). ix. Man-gement turnovet was excessive. The incumbents of the most senior positions are subject to removal with changes in the political arena. This contributes to inefficiency (PPAM, para. 18). Lessons and Findings x. While the projects made substantial improvements to the water supply and sewerage services in the fifteen intermediate-size cities, the project failed to attain the goal of strengthening the capacity of INSFOPAL so that the sub-borrowers would achieve the required financial returns. Inadequate tariffs were a principal reason for this. xi. The use of an intermediary, such as INSFOPAL, to supervise a multi- plicity of sub-borrcwers is an obvious strategy, and can be efficient - even though the Bank does not have a direct link with the sub-borrowers. In these circumstances much depends on the capacity of the interm,%iary - INSFOPAL, in this case (PPAM, para. 16). xii. In relying on INSFOPAL, the Bank perceived that it needed to be strengthened with technical assistance - which was provided - but INSFOPAL also needed constitutional independence, support from the Government, and some power of discipline and sanction over the sub-borrowers in order to be really effective, especially from a financial point of view. The Bank should pay particular attention to the capacity of its borrowers as intermediaries, where reliance on them is vital to secure fulfilment of loan conditions (PPAM, para. 17 and 19). 1 PROJECT PERFORMANCE AUDIT MEMORANDUM COLOMBIA MEDIUM-SIZE CITIES WATER SUPPLY AND SEWERAGE PROJECT (LOAN 860-CO) SECOND MULTI-CITY WATER SUPPLY AND SEWERAGE PROJECT (LOAN 1072-CO) I. PROJECT BACKGROUND Introduction 1. The Loan 860-CO related project was conceived as furthering the Government's policy of improving services in medium-sized cities, in order to encourage a more balanced urban development and divert migration to them. The needs of the larger cities (Bogota, Cali and Medellin) were already being met by loans from the Bank and the Inter-American Development Bank. The project was also destined to strengthen INSFOPAL as the national agency to provide assistance, administration and finance in the water supply and sewerage sector. INSFOPAL would also administer international and national loan funds in the sector, would become increasingly responsible for effective project preparation and supervision of project execution, and would organize managerial and technical assistance to indiv!.dual cities. 2. The Loan 1072-CO related project was also intended to support Government policy to improve living conditions in intermediate cities by providing them with an adequate infrastructure including water supply services and wastcwater disposal systems. It wds also aimed at strengthening INSFOPAL still further, making it responsible for the administration of the sector in- vestment funds and for effective project preparation and construction supervision. The Board of Executive Directors was told that the principal aim of the loan was to make INSFOPAL into a competent national agency. 3. In the case of Loan 860-CO, the total cost of the seven projects, plus the costs allocated to INSFOPAL for managerial assistance, was US$15.5 million equivalent. The proposed loan was to cover half the cost of con- structing the sever projects (US$7.4 million equivalent), the cost of manager- ial assistance (US$0.5 million equivalent), and financial charges in the Bank loan during construction (US$1.2 million equivalent). Expenditure in local currency for construction was to be financed by the loan to the extent of an estimated US$5.2 million equivalent. The foreign exchange component was estimated to be approximately 17% of the total cost of construction. 2 4. In the case of Loan 1072-CO, the total cost of the project was estimated at US$52.9 million including funds for managerial assistance to INSFOPAL and training of water utilities' staff. About 51% of the project cost was to be financed with the proceeds of the Bank loan, 31% with a Govern- ment grant to INSFOPAL, and the remaining 18% from internal cash generation of the eight beneficiaries. INSFOPAL was to lend the Government funds to the beneficiaries. The Bank loan would cover the foreign exchange component, estimated at US$16.7 million (excluding interest on Bank loan during con- struction), and about 31% of the local expenditures, or US$10.3 million equivalent. 5. The description of the projects in the fifteen cities involves capital expenditure on such items as water supply sources, treatment plants, pump stations, distribution pipes, sewerage works, storage tanks, meters and operating equipment. Cost Estimates 6. The cost estimates in the case of Loan 860-CO were as follows:- Col$ (mil.) US$ (mil.) Local Foreign Total Local Foreign Total Armenia 36.a 6.8 43.t 1.6 0.2 1.8 Manizales 93.4 6.3 99.7 3.6 0.3 3.9 Neiva 41.8 4.9 46.7 1.7 0.2 1.9 Pereira 66.8 24.7 91.5 2.6 1.0 3.6 Tulua 43.3 7.7 51.0 1.7 0.3 2.04 Buenaventura 20.6 2.1 22.7 0.9 0.1 0.99 Santa Marta 14.8 3.3 18.1 0.6 0.2 0.8 INSFOPAL's Costs - 11.4 11.4 - 0.5 0.5 TOTAL COST OF THE PROJECTS 317.5 67.2 384.7 12.7 2.8 15.5 Interest a Bank loan - 31.1 - - 1.2 - during construction Total Foreign Exchange - 98.3 - - 4.0 - 3 7. F.Me cost estimates in the case of Loan 1072-CO were as follows: Col$ (mil.) US$ (mil.) Local Foreign Total Local Foreign Total I. City Subprojects Barranquilla 187.1 70.7 257.8 7.49 2.83 10.32 Cartagena 91.5 53.5 145.0 3.66 2.14 5.80 Cucuta 27.6 12.6 40.2 1.04 0.49 1.53 Ibague 24.3 17.9 42.2 0.98 0.72 1.70 Pasto 18.0 5.8 23.8 0.70 0.23 0.93 Popayan 12.7 8.9 21.6 0.50 0.36 0.86 Valledupar 8.0 6.3 14.3 0.32 0.25 0.57 Villavicencio 9.2 4.9 14.1 0.37 0.20 0.57 II. INSFOPAL's Program 69.5 59.2 128.7 2.78 2.37 5.15 Subtotal 447.9 239.8 687.7 17.84 9.59 27.43 III. Engineering and 44.6 18.2 62.8 1.86 0.74 2.60 Administration IV. Physical Contingencies 67.1 35.9 103.0 2.71 1.44 4.15 V. Price Contingencies 470.4 285.3 755.7 7.19 4.95 12.14 VI. Interest during construction on loans 117.3 119.7 237.0 3.22 3.36 6.58 Total Prolect Co4t 1147.3 698.9 1846.2 32.82 20.08 52.90 Proiect Execution 8. Some modifications occurred during the execution of the projects. It became evident that the scale of the works had to be reduced in some cases, necessitating redesign, because population and demand projections had been overstated - indeed, works were cancelled for these reasons. Poor estimating at the time of appraisal was only one contributory factor to delays in execu- tion. A more serious initial cause related to failure on the part of some ot the municipal authorities - who were sub-borrowers to INSFOPAL and subject to subsidiary loan agreaments - to fulfill various necessary conditions. Other causes of delay were the, at times, cumbersome bidding procedures, and, most importantly, the failure to have provided in time the National Counterpart Funds required to finance the projects. Accordingly, the Closing Date for Loan 860-CO was more than four years later than originAlly planned, while that for Loan 1072-CO was about two years later. The view has been expressed within INSFOPAL that the organizational location of the institution under a Ministry, other than that of Public Health, would enhance its prospects of receiving government funds. 4 Prol3ct Costs 9. Actual total project costs, as expressed in US dollars, exceeded the appraisal estimates by 12% in the case of Loan 860-CO, and 2% in the case of Loan 1072-CO. The figures, as expressed in Colombian pesos, are 73% and 29% respectively. 10. Due to amendments, the final allocation of World Bank funds was US $8.18 million instead of US$9.1 million, as originally provided for in Loan 860-CO, and US, 24.56 million instead of US$27 million f,)r Loan 1720-CO - a reduction in both cases. Operational Performance 11. The beneficiary cities under both loans prepared project completion reports and they were received by the Bank, together with one from INSFOP1L, in November 1983. It was only in June 1986, howpver, that the final version of the Bank's own PCR was received by OED. In almost no case is the oper- ational data it contains more recent than 1982. Some efforts have been made in OED to obtain data up to, and including, 1985. 12. It is evident that the works have been satisfactorily completed, that an ever-increasing quantity of water has been produced and sold, and that a higher percentage of the population in the project cities is being served. Unaccounted-for water, however, has not been reduced to the targets set in the appraisal reports. Total water and sewer connections are up, and so are metered water connections - although the meter program in Villavicencio has been a dismal failure. And illegal connections are still a serious problem in some cities. This type of overoptimistic assumption is the rule rather than the exception for water supply projects in all regions. Financial Operations 13. In Article V on Financial Covenants of the Lo,n Agreements for Loan 860-CO and Loan 1720-CO, it is clearly stated that INSFOPAL shall, promptly as required, take all steps necessary on its pert to enablk the Empresas- /Beneficiaries to set and maintain their tariffs and other charges (for their services) at levels adequate to yield the financial returns or operating ratios specified in their respective Project Loan Agreements. This condition has been fulfilled more in the breach than in the observance. Far from achie- ving the agreed returns or ratios, a majority of the fifteen beneficiaries have shown net losses in recent years. Rising costs in inflationary con- ditions not compensated for with adequate tariffs have been at the heart of the problem. The tortuous procedures in obtaining tariff increases have contributed to render INSFOPAL impotent in delivering on its loan obligations with respect to the financial covenants. 14. Tariff increases are - almost by definition - politically unpopular. In the experience of Colombia, hurdles had to be passed at two level: chat of the local Empresas/Beneficiary, and that at the national level - the Junta Nacional de Tarifas de Servicios Publicos - in Bogota. The state of the relevant local finarces could be affected not only by water and sewerage 5 tariffs, but also by the adequacy - or inadequacy - of tariffs for other services provided by the Empresas/Beneficiary. INSFOPAL, in the middle, does not appear to have had adequate power to insist on the necessary tariffs on its own. The cooperation of the Government, Guarantor of the Loans, would have been essential. 15. Greater financial flexibility for the Empresas/Beneficiaries would have permitted the application of funds to improving and expanding services. Such improvement uould, in turn, have made tariff increases somewhat more accel able to the public. But such policies were thwarted by the lack of financial flexibility. Institutional Arrangements 16. For the World Bank to deal with a multiplicity of beneficiaries in a sector through an untried intermediary is fraught with risk - and requires both sufficient constitutional and managerial strength on the part of the beneficiary coupled with adequate initial supervision, either directly or through consultants, by the Bank. 17. In the first place it should be pointed out that, prior to the second loan (Ln. 1072-CO), the constitution of INSFOPAL was required to be changed so that it would be relieved of operational involvements, and con,-entrate on planning and financing of the sector. This change may have diminished INSFOPAL's direct influence for good on its clients and on their financial and operational performance, although increasing its own role as a pivotal national institution. Another change about this time opened more widely the door to lenient financing terms, whereby in special circumstances it could grant - aid its clients. This may have had the effect of lessenirg financial discipline. What was conceived of as addressing only the special became, in time, the more general case. 18. Another institutional difficulty lies in the fact that senior manag- ement, both in INSFOPAL and in the Empresas/Beneficiaries, Is subject to change to political rather than to strictly professional considerations. While one could accept the political sensitivity of one or two offices in the whole sector, the wholesale changes that take place at frequent intervals throughout the sectQr, down to second levels of management, cannot be justif- ied on professional. manage.ial or efficiency grounds. Reform in this area is obviously one for government policy at national level. 19. While INSFOPAL, notwithstanding its shortcomings, can report achiev- ements in the sector - such as in operational training - its over-all perform- ance has been a disappointment and this is most acutely perceived in its fai3ure to deliver on the financial covenants. Had the Bank taken more time to dievelop and to be sure of the capacity of its chosen intermediary and borrower before lending to it a first time, and then a second, these might have been a more successful experience with INSFOPAL. This consideration has to be set in the context of the initial time delays which would be involved, the supervision provided and the risks perceived. The Bank, in the framework of the proposed Adjustment Program, is now envisaging a developing banking 6 institution rather than INSFOPAL as the financial intermediary for further operations in the sector. Conclusions 20. Preceding paragraphs touch on the findings and lessons of this performance audit. They may be listed in the following manner: a) Water-supply and sewerage services in the 15 pcoject cities have been improved, while leaving scope for better operations performance (PPAM, para. 12). b) Delays in project execution were due to a number of factors, including overstated population and demand projections at the time of appraisal, and the failure to have provided in time the National Counterpart Funds required (PPAM, para. 8). c) Notwithstanding managerial assistance, regular Bank supervision (and the appointment of a Water Supply Resident Specialist for a period), INSFOPAL failed to achieve and sustain the over-all effectiveness expected from it - particularly in financial operations. In its new role, INSFOPAL was unable to impose sufficient financial discipline on the sub-borrowers, and tariffs were inadequate (PPAM, paras. 16 and 17). d) A considerable number of senior appointments were made in the sector for political, rather than for strictly professional, reasons. This has led to excessive management turnover (PPAM, para. 18). e) When the Bank uses an intermediary, as in this case, in order to deal with a multiplicity of sub-borrowers, it had better be sure that the intermediary has, and exercises, the constitutional and other support necessary to fulfil the role expected of it. This does not appear to have been the case with INSFOPAL and, while acknowledging that some risk had to be taken in order to move things forward, the results were far from satisfactory. It must be admitted, nevertheless, that, in general, INSFOPAL is subject to the limitations, and strengths, common to government institutions in Colombia (PPAM, para. 19). - 7 - COLOMBIA LOAN 860-Co MEDIUM-SIZE CITIES WATER SUPPLY AND SEWERAGE PROJECT LOAN 1072-CO SECOND MULTI-CITY WATER SUPPLY AND SEWERAGE PROJECT PROJECT COMPLETION REPORT I. INTRODUCTION 1.01 This report covers two projects: the First and Second Medium Size Cities Water Supply and Sewerage projects (Loans 860-CO and 1072-CO). Their Loan amounts were US$9.1 million and US$27.0 million, respectively. The main objectives of both projects were to increase service levels in wa- ter supply and sewerage in a total of 15 cities (seven under Loan 860-CO and eight under Loan 1072-CO) and to bring about institutional and finan- cial improvements in the beneficiary companies. Both Loans were chanelled to individual operating companies through the National Institute for Urban Development (Instituto Nacional de Fomento Municipal-INSFOPAL). An impor- tant objective of the second Loan was to transform INSFOPAL from an entity with extensive operational responsibilities into an apex institution with sector-wide responsibility for financial intermediation, planning, project preparation, and supervision of and assistance to operating companies. Main Conclusions 1.02 The objectives of increasing service levels were essentially met. The two projects provided adequate water service to about 1.2 million additionrl people and sewage connections to an additional 0.4 million by the time they were completed. The physical components were, with few ex- ceptions, implemented satisfactorily, although in most cases with substan- tial delays and cost overruns. In some cases, major modifications of pro- ject scope and additional financing were required. 1.03 The national sector development objective under Loan 1072-CO was met only partially. INSFOPAL's divestiture of responsibility for direct operation and administration of water and sewerage systems Led to the es- tablishment of more independent operating companies, but the most important - 8 - adjustments in sector policy expected at appraisal did not take place. The Government's continued perception of the sector primarily as an instrument for advancing political interests prevented the establishment of an effec- tive sector planning framework on the national level. INSFOPAL was unable to develop into a strong technical agency and financial intermediary capa- ble of sparking the sector development. The agency remained a largely in- effective bureaucracy with generally poor staff resources. Its lack of powet over tariff setting and excessive dependence on Government budgetary allocations to cover operating costs and provide investinent funds were among the most important obstacles in its ability to shape and control sec- tor policy and development. 1.04 The institutional and financial improvements of individual pro- ject beneficiaries also fell short of expectations. To various degrees, the operational efficiency and management of the beneficiaries remained weak. Chronically poor financial performance continued to force the ben- eficiaries to operate under severe financial constraints. Nevertheless, the projects helped most of the beneficiaries under both loans to attain a level of technical and financial maturity sufficient to sustain opera- tions. Further substantial improvements in efficiency and financial per- formance will be hard to achieve and sustaia unless the Government is pre- pared to adopt sector policies aimed at giving more autonomy to operating companies and removing political interference from their operation and man- agement. Sector Service Levels and Objectives 1.05 When both Loans were appraised (Loan 860-CO in July 1971 and Loan 1072-CO in November 1973), about 75% of Colombia's urban populationl/ had access to water through house connections and about 60% was served by a sewage system. These proportions were much lower for the rural popul- ation. The extent and quality of service were much better in the larger urban areas than in the smaller cities. In the large cities, service was deficient primarily in the rapidly growing poor neighborhoods. To foster more balanced urban development and to reduce migratory pressure on the large cities, the Government's policy was to make living conditions more attractive in the small- and medium-sized towns. Upgrading the infrastruc- ture in these towns, including water supply and sewerage, thus had high priority in the Government's development plans. The long-term goal was to extend adequate water and sewerage services to 80% of the urban population by 1980. Institutional Arrangements 1.06 The Ministry of Health was in charge of the sector and formulated policy in coordination with the National Planning Department (DNP). Re- sponsibility for implementing national policies rested with INSFOPAL for 1/ People living in communities with 2,500 or more inhabitants. -9- urban areas and the Institute of Special Health Programs (INPES) for rural areas. At the time of appraisal, water and sewerage services in urban areas were administered and operated under three different institutional arrangements. Autonomous municipal works companies (Empresas Publicas Municipales-EPMs) provided about 8 million people (about 60% of the total urban population) in Colombia's 21 largest cities with water and sewerage. In many cases, the EPMi also provided such services as telephones, elec- tricity and solid waste collection and disposal. INSFOPAL was directly responsible for the administration and operation of water and sewerage services in about 750 small- and medium-sized communities. The total population of these communities was about 3 million (about 25% of the total urban population). The provision of service to the remaining 2 million inhabitants of urban areas (about 15% to the total urban population) was the responsibility of individual municipalities which had no formal association with regional or national governmental entities. The quality of service was weakest in this segment of the sector. Borrower and Executing Agency 1.07 INSFOPAL, the borrower and executing agency for both Loans, is a decentralized agency under the Ministry of Public Health (see Organization Chart, Annex 1). Its general manager is appointed by the President of the Republic. During the early 1970s, INSFOPAL's principal functions included: (a) preparation of public investment programs in urban water supply and sewerage; (b) formulation and enforcement of design, construction and oper- ating standards; (c) supervision and administration of Government-financed and externally funded investment programs; and (d) administration and oper- ation of water and sewerage systems in medium- and small-sized towns. INSFOPAL administered these systems either directly through its regional offices or through departmental water supply corporations (ACUAS) in which INSFOPAL held the majority of the shares and departments and municipali- ties, the remainc'er. 1.08 At the time the projects were appraised, the Bank was aware of INSFOPAL's major shortcomings. INSFOPAL was viewed as a politicized and bureaucrattc institution, largely unable to effectively discharge its sec- tor-wide responsibilities and with little authority over the EPMs and mu- nicipal water and sewerage departments. Primarily, INSFOPAL acted ac a distributor of Government grants and such other financial resources as it was able to obtain. Cost recovery, financial viability and administrative and operational efficiency took second place to construction of works. - 10 - II. PROJECT PREPARATION AND APPRAISAL Origin, Preparation, Appraisal and Negotiations 2.01 In the late 1960s, the Government and the Bank began discussing the need to devote increased attention to the medium- and small-sized cit- ies to complement already growing efforts to improve services in Colombia's largest cities2/. As a result of these discussions and the review of a considerable number of potential pro ects, a first package of projects in seven small- and medium-sized cities / (Loan 860-CO) was appraised in July 1971. The project beneficiaries were selected on the basis of institution- al maturity, prospects for future development and commitment to improving operational and financial performance. Appraisal was based on feasibility studies prepared mainly by local consultants and financed by the U.S. Agency f,)r International Development (USAID) and the National Fund for Economic Development (FONADE). Unresolved technical and financial issues in several cities made a post-appraisal mission necessary (May 1972). 2.02 There was much deliberation within the Bank on whether the Loan should be made directly to project beneficiary companies or channelled through an intermediary institution. Practical considerations finally led the Bank to select. INSFOPAL as the onlending and supervisory agency. A special unit, the External Credit Office (ECO), was set up in INSFOPAL to handle externally funded projects. 2.03 Negotiations with representatives of INSFOPAL, the GovernmenL and several of the beneficiaries under Loan 860-CO took place from tune 6 through June 14, 1972 in Washington, D.C. The major issue during negotia- Lions was the procedure by which the Government would make funds available to INSFOPAL for onlending to individual beneficiaries. The Colombian dele- gation was opposed to the Bank's proposal of establishing a Special Account in the central Bank with sufficient funds to cover the expected Government contributions. Both parties finally agreed on a side letter which stipu- lated a quarterly disbursement schedule of Government contributions. Board presentation was delayed until October 3, 1972, primarily because the Na- tional Tariff Board (JNT) initially objected to the requirement that tar- iffs be maintained at levels sufficient to meet the annual financial rate of return targets for individual project beneficiaries agreed during nego- tiations. The Loan was signed on October 10, 1982. 2.04 Parallel to the processing of Loan 860-CO, INSFOPAL, its consul- tants and the Bank identified and began preparation of a second operation in eight cities4/ (Loan 1072-CO). A Bank engineer/economist, seconded to 2/ Prior to Loan 860-CO, the Bank had made four loans, totalling US$ 122.5 million to the sector in Colombia, (two to Bogota and one each to Cali and Palmira). 3/ Armenia, Manizales, Netva, Pereira, Tu0ua, Buenaventura and Santa Marta (Annex 3). 4/ Barranquilla, Cirtagena, Curitta, Villaviciencio, Ibague, Pasto, Popayan and Vall"dupar (Annex 3). - 11 - the Resident Mission in May 1972, assumed a leading role in this effort. The project was appraised in November 1973 on the basis of feasibility studies prepared by local consultants and financed by USAID, FONADE and INSFOPAL. At the request of the lovernment, negotiations were held in Bogota. They began in September 1974 and were concluded in December 1974. The Bank was represented mainly by the Resident Mission's engineer/econo- mist, under the direction and with the participation of headquarters staff. The principal issue during negotiations was thL Governmen.t's re- luctance to accept an obligation to cover shortfalls in local funds from the national budget. As under Loan 860-CO, the Bank accepted a side letter in which the Government agreed to an annual disbursement schedule of Gov- ernment funds. The Government also provided assurances that it would sup- plement its contribution to cover any cost overruns. The Loan was present- ed to the Board on January 14, 1975 and signed on January 16, 1975. Principal Objectives 2.05 In support of the Government's policy of improving the urban in- frastructure in small- and medium-sized cities (para. 1.03), the major ob- jective of both projects was to increase water service levels to 90% in the 1.5 project cities. Loan 860-CO was to provide adequate water services to an incremental population of 0.8 million by 1980 and Loan 1072-CO was to supply another 1.0 million people with safe water by 1980. The increase in sewerage service levels to 80% in all cities by 1980 was another objective under Loan 1072-CO. 2.06 Strengthening the operational efficiency and financial perform- ance of beneficiary companies was another important objective. Both pro- jects therefore financed technical assistance programs. Loan 1072-CO in- cluded financing for a major meter purchase and installation program. A major goal was to reduce unaccounted-for water to 20%-25% in all benefi- ciary companies. 2.07 Under Loan 860-CO, the primary institutional concern was the ef- fective scpervision of the seven-ton package through the External Credit Office (ECO). ECO, with technical assistance provided by local consultants and the Pan-American Health Organization (PAHO), was expected to evolve in- to a competent national center for providing assistance in planning, admin- isfration and finance to all sector institutions. Loan 1072-CO took a more ,mbitious and compreh-nsive approach to overall institutional sector ar- rangements and policy. Its primary objective was to free INSFOPAL from any responsibility for the direct administration and operation of systems and to develop the institution into an agency with country-wide responsibili- ties for financial planning and intermediation of all internal and external credit. Tne water utilities owned by INSFOPAL were to be transformed into independent municipal or regional enterprises. - 12 - Project Descriptions5/ 2.08 Loan 860-CO included the execution of investment programs for wa- Ler supply and sewerage in seven medium-3ized cities and a small program of technical assistance and training to improve INSFOPAL's ECO. Loan 1072-CO included similar investments in eight medium-sized cities. It also includ- ed technical assistance and training programs for INSFOPAL and the project beneficiaries, a meter purchase and installation program, and groundwater Ievelopment projects in about 30 smaLl communities. Most of the subpro- jects under both Loans were viewed as first phases of longer term invest- ment programs, with the tacit understanding that follow-up operations would be considered after successful project completion. Conditions and Covenants 6/ 2.09 The Loan Agreement for Loan 860-CO concentrated on the terms and conditions to be included in the Subproje:t Loan Agreements (PLAs) between INSFOPAL and individual beneficiaries. Conditions of effectiveness of the PLAs for all project beneficiaries required inter alia major tariff in- creases ror water (80%-120%) and, in some cases, for other services as we' . Financial convenants i the PLAs specified annual rates of return on revalued fixed assets and debt limitation targets. To prevent cross sub- sidies between services, PLAs also stipulated operating ratios for services other than water supply and sewerage or, in some cases (Manizales, Pereira, Tvu.ua), specific rates of return for electricity and telephone services. 2.10 The conditions and covenants negotiated for Loan 1072-CO rt.flect Lhe new role that INSFOPAL was to play in the sector (para. 2.07). Several covena,ts focused on the divestiture of INSFOPAL's operating responsibili- ties and the development of financial intermediation and sector support funCtions. Dated cov-nants requiring the implementation of a more appro- priate organizational structure, the submission of a training program, com- pletion of a study of personnel needs and establishment of an Liternal au- dit unit underscore the Bank's desire to strengthen INSFOPAL's organization and management. 2.11 The PLAs negotiated under Loan 1072-CG required the eight benefi- ciaries to maintain agreed rates of return on revalued fixed assets and tu obtain operating ratios of less than 0.85 for services other than water supply and sewerage. Alt beneficiaries were required to set up internal audit units. As a condition for effectiveness/first disbursemeili, all pro- Ject beneficiaries had to meet a number of requirements primarily related to institutional and administrative improvements. Among them were major rate increases. The small communities to benefit from grouciwater invest- ments were to generate revenues sufficient to meet operating costs as a condit ion for qualifying for Batik financing. 5/ Det!ailed pruiect descri pt ons are giv e. . i n-x- 4 and 5 6/ Ma i*ur cLd Ii tuns ;Id Loan c-.venatts are givn i) A.,;xes 6I and 7. - 13 - III. IMPLEMENTATION Effectiveness and Start-up 3.01 Loa- 860-CO was declared effective March 7, 1973, about three months later than scheduled. The main reason for the delay was the Govern- ment's failure to provide initial counterpart funds. Most PLAs became ef- fective after significant delays, primarily because both JNT and local au- thorities were reluctant to authorize the large tariff increases which were agreed during negotiations. In some cases, PLAs became effective only af- ter the Bank had agreed to relax the tariff conditions by accepting gradual monthly increases rather than large, one-time adjustments. It was not un- til the end of 1973, more than one year after Loan signature, that all sub- projects became effective and eligible for disbursement. 3.02 After effectiveness, all beneficiaries were slow to begin project execution. The many reasons for the initial delays were often interrelat- ed: frequent changes in management; lack of local and national funds; and the need for INSFOPAL and the beneficiaries to adjust their procurement practices to the Bank's requirements. Another main cause of delay was that preparation of final studies, designs, and specifications took much longer than expected at appraisal. In some cases (Manizales, Neiva), the prepara- tion of studies and designs was further delayed when the results of the 1973 census revealed that the initial demand p-ojections had been based on unrealistically high official population growth forecasts, making it neces- sary to substantially revise project design and scope. As a result, pro- ject execution did not get fully under way until the end of 1973, about one year after Loan signature, and more than two years after appraisal. By the end of 1974, about 20% of total project investments had been completeO, compared to 85% projected a. appraisal. 3.03 There were no special conditions of effectiveness for Loan 1072-CO; the Loan became effective on April 14, 1975. As under Loan 860-CO, the beneficiaries were slow to fulfill the conditions of effective- ness and first disbursement contained in the PLAs. Again, the implementa- tion of large rate increases was one of the main difficulties. The last of the PLAs became effective in September 1976, almost 1.5 years after Loan signature. 3.04 There were additional delays after effectiveness, as project ben- eficiaries were slow to prepare designs and encountered difficulties with procurement. By the end of 1976, two years after Loan signature, only about 7% of the project investment had been completed, compared to 30% pro- jected at appraisal. The start-up of the groundwater component in 30 small communities was also delayed as INSFOPAL was unable to select and prepare - 14 - subprojects. In addition, the beneficiaries selected found it difficult, or were un illing, to increase tariffs to levels high enough to generate revenues to cover operating costs. The first groundwater subproject was not begun until 1981, more than five years after Loan signature. Revisions 3.05 Many of the subprojects under both loans were significantly revised (Annexes 4 and 5). For most subproject2 under Loan 860-CO, ap- praisal demand projections turned out to be unrealistically high (para. 3.02). For this reason, the scope and cost of the subprojects in Manizales and Neiva were reduced. The water components of the sub-projects in Pereira, Tulua and Armenia were completed with only minor changes. Buen- aventura had to obtain additional funds from INSFOPAL and the Departmental Water Supply Company to cover cost overruns. The scope of work and the Loan amount were increased substantially in Santa Marta, to permit the com- pany to execute additional works in an important tourist area for which it assumed responsibility during project implementation. The Bank, INSFOPAL and the project beneficiaries discussed the above revisions at length. It appears that there was general agreement on the necessity of and justifica- tion for the changes, but the project description in the Loan Agreement was not amended urcil August 1977. 3.06 Five of the eight subprojects under Loan 1072-CO underwent major changes. Investments in sewerage were reduced and investments for water treatment, storage and transmission were increased. This was most pro- nounced in Barranquilla where major investments in water production were substituted for a large sewer network extension program. These changes in project. description evolved slowly during the initial years of project im- plementation, as continually changing company managements responded to real or perceived shifts in investment priorities. Although these changes had been accepted by INSFOPAL and were discussed with Bank supervision mis- sions, the Loan Agreement was not amended until June 1982 to reflect the revision of project scopes. Implementation Schedule 3.07 For both projects, the actual implementation schedule lagged far behind appraisal projections (Annexes 8 and 9). By the original completion date for Loan 860-CO (mid-1975), works were only 45% complete. It took five more years to reach the 90% level. The Loan was finally closed in May 1981, with a 180% time overrun. Works in Tulua and Armenia begun under the Loan were not completed until late 1983. - 15 - 3.08 The pace of project execution under Loan 1072-CO was better than under Loan 860-CO. At the time of the original closing date (June 30, 1980), overall degree of project completion was about 60%. It took another 2.5 years for the last subprojects (Barranquilla, Villavicencio) to be com- pleted. The start of the groundwater development program was delayed by more than five years (para. 3.04); in the end, only 13 instead of 30 sub- projects were completed. Procurement problems caused several years of de- lays in the purchase of water meters, the installation of which was the key element in the program to improve the operational efficiency of the bene- ficiaries. 3.09 The reorganization of INSFOPAL, expected to be completed by mid- 1976, was not fully implemented until 1981 as various administrations struggled to overcome legal, administrative and political obstacles. 3.10 Both INSFOPAL and the National Government contributed to the slow implemenLation of both projects in major ways. Most importantly, the Gov- ernment did not provide sufficient counterpart funds in a timely manner. JNT's slowness in authorizing tariff adjustments severely 'ipaired the ben- eficiaries' ability to finance their share of works and thus lengthened construction periods. Because of cumbersome procedures and systems (pro- curement, accounting, reporting) and the lack of experienced staff, INSFOPAL was not able to provide sufficient assistance and guidance to pro- ject beneficiaries. 3.11 On the subproject level, the following main reasons contributed to the overly long implementation periods under both Loans: (a) sl'w pro- ject start up due to delays in the preparation of final designs and changes in scope; (b) lack of management continuity; (c) insufficient funds because of the beneficiaries' poor financial performance; (d) cost overruns; and (e) administrative inefficiency, especially with regard to procurement. Procurement 3.12 The borrower procured all Bank-financed goods and services in ac- cordance with Bank guidelines. In line with appraisal expectations, most contracts for civil works, pipes and consulting services were awarded to local firms. Most equipment was purchased from foreign suppliers. Cumber- some procurement procedures were a major problem under both projects. Be- cause each beneficiary handled its own procurement separately, there were literally hundreds of relatively small contracts which underwent a time consuming three-tier review (beneficiary, INSFOPAL, Bank) at each phase of bidding. Several attempts to streamline this cumbersome process and to make procurement more efficient failed. - 16 - Reporting 3.13 The timing and quality of reports were continuing sources of con- cern. Information provided in progress reports or prepared for supervision missions was often incomplete and inconsistent, making it difficult for the Bank to accurately assess the status of project execution and the opera- tional and financial performaace of project beneficiaries. The main obsta- cles to timely and accurate reporting were inadequate accounting and re- porting systems at INSFOPAL and the beneficiaries. Audit reports for INSFOPAL and the beneficiaries were often prepared and submitted to the Bank after considerable delays. More often than not, auditors detected de- ficiencies in accounting records and material discrepancies in the balance of accounts and were forced to issue disclaimers. Project Cost 3.14 Project costs are detailed in Annexes 10 and 11 and summarized below. Actual and Appraisal Project Cost 1/ 2/ (Current Prices) --Col$ Million--- --US$ Million--- Appraisal Variance Appraisal Variance Component Estimate Actual Col$ % Estimate Actual US$ % Loan 860-CO City Sub- projects 373.3 649.3 276.3 74 15.0 16.9 1.9 13 Technical Assistance 11.4 17.1 5.7 50 0.5 0.5 0 0 Total 384.7 666.4 281.7 73 15.5 17.4 1.9 12 Loan 1072-CO City Sub- projects 1,307.9 1,862.5 562.3 43 37.6 43.0 5.4 14 INSFOPAL Program 301.3 206.7 (102.3) (34) 8.7 4.2 (4.5) (52) Groundwater 94.9 85.6 (9.3) (10) 5.3 1.6 (3.7) (70) Metering 186.5 116.0 (70.5) (38) 2.8 2.5 (0.3) (11) T.A./Training 19.9 5.1 (14.8) (74) 0.6 0.1 (0.5) (83) Total 1,609.2 2,0(9.2 460.0 29 46.3 47.2 0.9 2 1/ Contingencies included and prorated. 2/ Excluding interest during construction. - 17 - There is no significant difference between expected and actual US dollar costs. Actual costs expressed in local currency, however, are considerably higher than the appraisal estimates for both projects. The difference be- tween the two overruns reflects the steady devaluation of the Colombian pe- so against the US dollar during project implementation. The overruns also reflect underestimation of costs at appraisal in some cases. Funds were reallocated several times to reflect the changes in project design and cost (Annexes 12 and 13). An undisbursed balance of US$0.92 million was can- celled from Loan 860-CO at closing (August 1981), and an undisbursed bal- ance of US$2.44 million was cancelled under Loan 1072- O when it was closed (April 1983). Financing and Disbursements 3.15 Because of the delays in project execution, disbursements under both Loans lagged behind appraisal estimates (Annex 14). There were delays of up to nine months between payments to contractors and suppliers and Bank disbursements under both Loans. These delays reflect inefficiency and poor communication between INSFOPAL and individual subborrowers. The establish- ment of a special fund, requested by INSPOPAL on several occasions and men- tioned in its letter (Annex 22), was not a Bank policy at the time. Under Loan 1726-CO, the follow,'up operation to Loan 1072-CO, the establishment of such an account is credited with a substantial acceleration in project exe- cution. 3.16 Most of the beneficiaries, because of their overall poor finan- cial performance, were not able to meet the targets for contribution to in- vestment presented at appraisal (Annex 15). Thus, these companies relied on additional Government loans and/or local contributions to bridge the fi- nancing gap. The disbursement of Government funds to INSFOPAL was much slower than agreed in the side letters (Annex 16). The failure of the Gov- ernment to make these funds available in a timely fashion hindered invest- ment planning and is among the main reasons for slow project implementa- tion. Performance of Consultants, Contractors, and Suppliers 3.17 Performance of contractors and suppliers was generally satis- factory, although a few contracts were rescinded because execution of works was unsatisfactory. The relationship between contractors and project bene- ficiaries often was strained by the beneficiaries' inability to make pro- gress payments on time for lack of funds. In quite a few instances, the lack of funds led to a slowdown or even a complete stoppage of works. In general the engineering consultants performed acceptably, although consult- ing costs tended to be disproportionately high. The main reason for this appears to have been that consultants maintained full staffs for supervi- sion of construction even during prolonged periods of reduced activity. - 18 - 3.18 The beneficiarieq retained technical assistance consultants to improve operational, financial and administrative systems. Judged by the eventual results, these consultancies had only modest success. This was caused to a large extent by the inability or unwillingness of: (a) the pro- ject beneficiaries to implement the drastic measures which would have been required to bring about eubstantive and sustained institutional improve- ment; and (b) INSFOPAL to put sufficient pressure on the beneficiaries to adopt these measures. 3.19 The PAHO technical assistance to INSFOPAL met with little suc- cess. Later on, several local consulting consortia were only marginally successful in strengthening ECO and in developing INSFOPAL into the weli.- managed institution envisioned by the Bank at appraisal. On balance, it appears that the relatively unsuccessful efforts to improve INSFOPAL were less a reflection of the qualifications of the consultants than of resis- tance to change on the part of INSFOPAL's management and the Government. IV. OPERATING PERFORMANCE 4.01 With two exceptions (Tulua, Buenaventura) it is not possible to compare appraisal and actual operating performance indicators connected to population forecasts (number of connections, volume of water produced and sold, etc.) for Loan 860-CO, since population forecasts, originally based on 1971 estimates, had to be substantially reduced after the 1973 census. In terms of percentage of population served, however, all but one of the beneficiaries (Tulua) were able to increase service levels close to ap- praisal targets by 1982 (Annex 17). By that time, project investments had provided water services to an additional 350,000 people in all seven cities combined. 4.02 With the benefit of better census information, the appraisal pop- ulation and demand forecasts for the beneficiaries under Loan 1072-CO were close to actual results. When the projects were completed in 1983, five beneficiaries (Ibague, Pasto, Popayan, Valledupar, Villavicencio) fully met the appraisal targets for water and sewerage service levels and connections and two (Cartagena, Cucuta) almost met their targets. Only Barranquilla did not come close to appraisal targets. Ir total, the number of addition- al people served with water by the project is estimated at about 0.8 mil- lion. About 0.4 million additional people gained access to sewerage. - 19 - 4.03 Under both Woans, efforts to improve the operational efficiency of beneficiary companies were only moderately successful. Overall, unac- counted-for water was reduced slightly, but remained high (35% and above) compared to the unrealistically low appraisal targets (20%-25%). The prop- er operation and maintenance of facilities and equipment at most companies continues to be of concern. Financial Performance 4.04 INSFOPAL did not attain the degree of financial self sufficiency expected under Loan 1072-CO. Over the 1973-1983 period, the institution accumulated operating losses of about US$750 million (Annex 19) because the income generated from interest re.enues and charges for technical and ad- ministrative services rendered to operating companies did not cover sharply increasing operating and personnel costs. INSFOPAL was forced to depend on ever increasing contributions from the national treasury to cover operating costs and to obtain funds for investment. The revolving fund for sector investments never developed into a viable source for investment funds, as most project beneficiary companies did not survice their debt to INSFOPAL in a satisfactory matner. 4.05 Financial results for the beneficiaries under both Loans are sum- marized in Annexes 20 (Loan 860-CO) and 21 (Loan 1072-CO). Because of the major changes in subproject scope, delays in implementation, high inflation and the sometimes doubtful quality of the subborrowers' information, a com- parison of the appraisal estimates and actual results should be regarded as only indicative. The data do show that with few exceptions, the financial performance of the beneficiaries was disappointing. None of the betieficia- ries was able to comply consistently with the financial covenants in the PLAs. Under Loan 860-CO, five beneficiaries (Manizales, Armenia, Pereira, Buenaventura, Santa Marta) were struggling to meet operating costs and had negative financial rates of return throughout most of the project implemen- tation period. Only Tulua and Neiva did ietter; both beneficiaries consis- tently reported positive rates of return. 4.06 Under Loan 1072-CO the financial performance of beneficiaries was better. Four of the companies (Cartagena, Ibague, Valledupar) came close to meeting rate of return targets most of the time, and two (Pasto, Popayan), some of the time. The remaining companies consistenLy faced serious fi- nancial difficulties throughout the project implementation period. 4.07 The main reason for the generally poor financial performance of the beneficiaries was that insufficient and untimely rate increases pre- vented revenues from keeping pace with rapidly rising cosLs. A second fac- tor was the inability of the beneficiaries to streamline their operations and administration to check operating costs. A major problem common to companies prQviding services other than water and sewerage was the use of waLer and sewetaye revenues to finance the operating costs and investments of other services. - 20 - V. INSTITUTIONAL PERFORMANCE AND DEVELOPMENT 5.01 Both projects met with only modest success in achieving their in- stitutional objectives. The divestiture of INSFOPAL's responsibilities for direct administration and operation of water systems did not open the way for the transformation of INSFOPAL into the effective technical and finan- cial intermediary which the Bank sought to develop under Loan 1072-CO. The reasons for this failure are many, but most important was the Government's continued perception of INSFOPAL as a predominantly political instrument for channelling grant funds to sector entities. In this environment, such important sector development principles as cost recovery, long-term plan- ning and management stability took second place to the desire to advance sectoral development programs based primarily on political considerations. INSFOPAL's lack of power over such important issues as tariff setting and its continued dependence on budgetary allocations from the Government made it difficult for the institution to decisively influence sector policy and development. 5.02 The relationship between INSFOPAL and the operating companies was often strained. The companies were uncertain of INSFOPAL's ability to as- sist them effectively and in a timely manner with solving their technical and financial problems. Particularly damaging was INSFOPAL's inability at times to make available the national funds committed under the PLAs. INSFOPAL's ability to supervise the subprojects and to enforce the obliga- tions of the subborrowers under the PLAs was restricted by its inability to counteract political opposition to the implementation of reform measures. 5.03 Nevertheless, most of the companies covered under both loans were able to gain more institutional maturity and improve their operational and administrative efficiency, although the degree of improvement was much smaller than expected at appraisal. These improvements can be attributed to the technical assistance programs financed under the Loans and the ac- tive involvement of the Bank in encouraging INSFOPAL and beneficiaries to carry out these programs. 5.04 At the same time, it appears that the institutional capacity of companies not covered under the Loans improved very little. This is espe- cially noticeable in the case of the Sanitation Works Companies (Empresas de Obras Sanitaria--EMPOS) which Look the place of INSFOPAL's regional or branch offices after the 1976 reorganization. Contrary to appraisal - 21 - expectations, the new institutional set-up transfered control over the EMPOS to often heavily politized Boards composed of INSFOPAL appointees and local nolitical and civic representatives who were unable to provide stable and consistent guidance to the new companies. The reorganization did not provide the basic autonomy which would allow the EMPOS to manage their af- fairs without undue political interference in even their routine opera- tions. The frequent changes of general managers, and often middle manage- ment personnel as well, are among the most visible, and perhaps the most damaging, expressions of excessive political control over sector compa- nies. VI. PROJECT JUSTIFICATION 6.01 The internal financial rate of return (IFRR) used as a proxy for the economic rate of return calculations at appraisal has not been recal- culated. Gathering and processing the necessary data for 15 different com- panies was beyond the capacity of INSFOPAL. Analysis of Lhe information available, however, permits the conclusion that actual IFRRs under both Loans are lower than anticipated at appraisal. 6.02 Nevertheless, the investments under both projects were justified on two counts. First, the social objectives of the project set at apprais- al have been largely met. In terms of service levels, appraisal targets for 13 of the 15 project beneficiaries have been achieved. In total about 1.2 million additional people, a large portion of them belonging to the poor segment of the population, have received water connections and about 400,000 additional people have gained access to sewerage. Secondly, the project helped to develop companies which, in 3pite of the many remaining problems, are equipped to provide and maintain a reasonable level of ser- vice without major outside assistance. To be sure, all of the companies could operate much more efficiently and more effective cost recovery poli- cies would put them on a more solid financial footing. Major improvements in these areas, however, cannot be expected until the Colombian Government adopts sector policies that will allow autonomous companies to operate on the basis of sound technical and commercial principles. - 22 - VII. BANK PERFORMANCE, CONCLUSICNS AND LESSONS LEARNED 7.01 The Bank's decision to finance projects in the medium- and small-cities was consistent with sector needs and with the Government's de- velopment priorities, as were the objective of promoting a major realign- ment of sector institutions and of converting INSFOPAL into a strong tech- nical and financial intermediary. In retrospect, however, sectoral devel- opment objectives, on both the national and local levels, were overly ambi- tious and were established with insufficient appreciation of the political forces influencing sector policy. In particular, the strength of opinion prevailing in many quarters that the Government should support sector in- vestments through grant funding to meet political objectives was underes- timated. The mainstream of political thought at the time did not share the Bank's view on such fundamental sector issues as cost recovery, institu- tional autonomy, etc. In this environment, the Bank's attempt to address systemic problems of predominantely political origin through technical as- sistance failed. 7.02 The Bank overestimated the project implementation capacity and the financial management prospects of both INSFOPAL and the beneficiary companies. The known deficiencies of INSFOPAL and the weaknesses of the subborrowers should have dictated the adoption of much longer implementa- i1on periods. The lack of final designs plus the poor financial position and weak management of most project beneficiaries introduced the likelihood of delays from the very beginning. It might have been advisable for the Bank to have delayed appraisal to obtain firmer estimates of project scope and cost and to press the Government to allow the beneficiaries to attain a more solid financial base through the opportune approval of tariff in- creases. 7.03 During the life of both projects, Bank supervision was quite in- tensive. The presence of a water supply specialist in Bogota from mid-1973 through late 1975 was instrumental in getting execution of the first pro- ject underway and preparing the second project. Supervision missions dili- gently reported the many problems facing INSFOPAL and the beneficiaries. During most of the project implementation period, the Bank appeared to be hesitant to press the Government, INSFOPAL and project beneficiaries to take the drastic actions that would have been needed to turn things around. Bank missions had only limited direct contact with individual pro- ject beneficiaries. 7.04 Relations with the management and staff of INSFOPAL and the bene- ficiaries were cordial throughout the project implementation period. INSFOPAL was prepared to provide the information the Bank requested and to be helpful in any way possible. There was little contact with other Gov- ernment institutions outside the sector. Tn its evaluation letter to - 23 - the Bank (Annex 22), INSFOPAL considers both projects a success from a technical point of view and welcomes the Bank's involvement. It acknowl- edges that some of the project's objectives were not attained and that pro- ject implementation took overly long. In INSFOPAL's view, the main obsta- cles to more successful project execution were: (a) inefficient adminis- trat4ve procedures at INSFOPAL; (b) lack of sufficient funds and the un- timeliness of Government disbursements; (c) frequent changes of management in INSFOPAL and the beneficiaries; (d) inadequate project preparation; and (e) unrealistic institutional objectives and implementation schedules. INSFOPAL suggests three actions which the Bank should have taken to expe- dite project execution: (a) giving INSFOPAL more autonomy in procurement matters; (b) giving Bank missions more authority to make decisions in the field since communications from Bank headquarters took an inordinate amount of time; and (c) establishing a Special Account. These suggestions were taken into account in the design of the follow-up project (Loan 1726-CO). 7.05 Finally, when embarking on similar operations it should be kept in mind that making multi-beneficiary projects work requires an intermedi- ary that is fully committed to the the project's policy goals and that has sufficient authority and the backing from the Government to enforce agreed upon development objectives. Trying to address systemic deficiencies in sector policy through technical assistance to improve systems and proce- dures is likely to be unsuccessful. Above all, the experience with both loans demonstrates clearly that water supply and sewerage companies are not likely to function efficiently without a minimum level of institutional au- tonomy. - 24 - ANNEX 1 COLOMBIA LOANS 860-CO AND 1072-CO MEDIUM CITIES WATER SUPPLY AND SEWERAGE PROJECTS I AND II PROJECT COMPLETION REPORT INSFOPAL - Organizational Structure, December 1974 MINISTRYOF HEALTH BOARD OF DIRECTORS NATIONAL ACCOUNT CENTRAL OFFICE LEGAL PLANNING GENERAL MANAGER PUBLIC RELATIONS BUDGET ADMINISTRATION EXTERNAL CREDIT PROJErIS OPERATIONS OFFICE A PERSONNFL PROJECT DESIGN OPERATIONS & FINANCE PROJECT BIDS & SUPERVISION CONTRACTS INVENTORY LOAN ACONSTRUCTION EMPRESAS ADMINISTRATION ADMINISTRATION DRCCIONcS OFCINAS EPEA ECCACUAS EPEA SECCIONALES SECCIONALES World Bank-8720 ANNIEX 2 22 S i - -26 - ANNEX 3 COLOMBIA LOANS 860-CO AND 1072-CO MEDIUM CITIES WATER SUPPLY AND SEWERAGE PROJECTS I AND 11 PROJECT COMPLETION REPORT Participating Beneficiaries Organizational Services Provided City Form a/ at Appraisal b/ Loan 860-CO Armenia EPM W, S, E, T d/, M, SW, SL Manizales EPM W, S, E d/, T "/, M, SW, SL Neiva EPM W, S, E , T /, M, SW, SL Pereira EPM W, S, E /, T 7/, SW Tulua EPM W, S, T /, M, SW Buenaventura ACUA W Santa Marta ACUA/EMPOS c/ W, S Loan 1072 Barranquilla EPM W, S, M, SW, PM, ZO Cartegena EPM W, S, M, SW, SM, PM Cucuta EPM W, S, M, SW, SL Villavicencio EPM W, S, M, SW, SL Ibague ACUA/EMPOS c/ W, S Pasto ACUA/EMPOS 7/ W, S Popayan ACUA W, S Valledupar ACUA/EMPOS c/ W, 5, SW a/ EPM = Empresas PublAcas Municipales: Autonomous Municipal Public Works Company ACUA = Sociedad de Acueducto y Alcantarillado: Water Supply and Sewerage Corporation with shares held by INSFOPAL, departments, municipalities and others. EMPOS * Empresas de Obras Sanitarias: Sanitary Works Company; decentralized department- or municipality-wide decentralized agency under the Ministry of Health b/ W = Water Supply; S - Sewerage; E = Electric Power; T = Telephone; M = Public Market; SW = Solid Waste; SL = Slaughterhouse; ZO - ZoologLcal Park; SM - Street Maintenance; PM = Park Maintenance. c/ Organizational form changed during project implementation. d/ Service responsibilities were given up later. - 27 - ANNEX 4 Page 1 of 6 COLOMBIA LOAN 860-CO MEDIUM-SIZE CITIES WATER SUPPLY AND SEWERAGE PROJECT PROJECT COMPLETION REPORT Comparative Project Scope Appraisal Scope Actual Scope ParL A Technical assistance to strengthen Several consulting firms and a team External Credit office of Pan American Health Organization provided assistance to ECO and INSFOPAL in the areas of administra- tion, finance and engineering Part B Armenia expansion of raw water transmission intake structure improved and raw facility to about 1500 1/sec water transmission main expanded to 3000 1/sec expansion of existing water treat- purchase and installation of chlor- ment capacity to 800 1/sec ination and floculation equipment and expansion of filtration capacity expansion of water storage capacity two storage tanks (Regivit, to 9000 m3 Corbones) with 9,000 m3 capacity built construction and improvement of 35 km of pipe (3"-24" diameter); 15 water transmission and distribution km of pvc pipe for house connec- pipes about 30 km (diameters tions, ourchase and installation of 3"-24") 4,750 water meters construction of sewage collection none and disposal facilities (no quanti- ties indicated) acquisition of maintenance equip- meter test hench and sewer cleaning ment equipment Manizales expansion of the capacity of not carried out, since water produc- Chinchina Water Treatment Plant to tIon canacity proved to he suffi- 1000 1/sec (construction of third cient after completion of final flocculation/sedimentation unit) 1/ studie,;; some rehabilitation and co- erational improvements done 1/ component deleted per amendment of August 5, 1977. - 28 - ANNEX 4 Page 2 of 6 Appraisal Scope Actual Scope construction of new water intake expansion of raw water transmission and grit chamber for the Chinchina cppacity to 1000 1/sec including new Water Treatment Plant 2/ intake and grit chamber expansion of storage capacity by five tanks with a combined capacity about 50,000 m3 (construction of about 13000 m3 of 8 storage tanks) 3/ major expansion and improvements on about 30 Km of pipes the transmission and distribution network acquisition of maintenance equip- none procured ment extension of the sewerage system about 10 Km of sewer interceptors constructed consulting services consultants hired to prepare of final designs Neiva expansion of new treatment plant after appraisal, original plan capacity to 700 1/sec was given up in favor of rehabilit- ating an older plant. Several improvements (flow control, floccul- ation, chlorination, sedimentation) were carried out at the old plant 2/ component substituted for a) expansion of Chinchina Plant per amendment August 5, 1977 3/ storage capacity reduced to 30,000 m3 per amendment August 5, 1977 ANNEX 4 -29 - Page 3 of 6 Appraisal Scope Actual Scope Neiva construction 5,000 m3 storage tank 5,000 m3 storage tank construction of a pumping station not done; water production scheme was modified construction of transmission mains 62 km of transmission and distrib- and distribution network (total ution pipes lengtn about 60 Km) acquisition of maintenance equip- 2 trucks ment construction of four sewer inter- partial completion of two intercep- ceptors and drains tors consulting services institutional strengthening in plan- ning, internal control, personnel administration, operation and main- tenance, financial administration, supervision of construction Pereira expansion of the Patterson water rehabilitation and operational im- treatment plant to a capacity of provements to expand treatment capa- about 300 1/sec city to 300 1/sec construction of a new water treat- El Pisamo treatment plant with a ment plant with a capacity of about first stage capacity of 600 1/sec 560 1/sec expansion of water storage capacity La Correa storage tank with a 10,000 by about 9,000 m3 m3 capacity construction of a new interceptor Egoya (1.3 Kvr) and Dulceia (0.6 Km) sewer and main collecting sewers interceptors partially constructed and about 5.4 km of main collectors (6"-24" in diameter) built extension of the water distribution 37.5 km of pipes (diameters of system (about 21.3 km with dia- 6"-30") meters 6"-30") acquisition of maintenance equip- sewer cleaning equipment procured ment (meter test bench, leak detec- tion equipment, sewer cleaning equipment) consulting services consultants supervised conf:truction ANNEX 4 - 30 - Page 4 of 6 Appraisal Scope Actual Scope Tulue construction of three new and four new wells drilled and equipped improvement of two existing wells to provide an additional water supply capacity of about 400 1/sec installation of new equipment -- in the water laboratory expansion of water storage capacity 4,000 m3 storage tank by 7,200 m3 additions to the water distribution 44 km of transmission and distribu- network (about 21 Km with pipe tion pipe (diameters of 3"-30") diameters 6"-20") acquisition of maintenance equip- sewer cleaning equipment and four ment vehicles acquired construction of main collecting Parts of El Porvenir and La Quinta sewers and drains (collectors El collectors Porvenir, San Antonio, Morales, La Quinta) consulting services consultants provided technical assistance in administration and supervised construction ANNEX 4 Page 5 of 6 Appraisal Scope Sectoral Scope Buenaventura construction of water transmission partial construction (80%) of tran- and distribution mains and house smission main (completed later with connections (new 15 Km transmission IDB funds); 20 km of distribution main with 24" diameter, and about mains laid; installation of an unde- 24 km of distribution mains with termined number of house connections 3"-20" diameter) some minor repairs made; valves were repair of existing storage facili- not installed ties (installation of valves) acquisition of maintenance equip- two meter test benches ment (meter test bench and leak detection equipment) consulting services consultants hired to supervise con- structaion Santa Marta expansion of water treatment plant the Mamatoco Treatment Plant reha- to a capacity of about 400 I/sec, bilitated and expanded to a capacity or, alternatively construction of of 400 1/sec wells with a combined capacity of 100 1/sec construction of a water storage four tanks with a total capacity of tank with a capacity of about 3000 about 2,100 m3 m3 construction of water transmission construction of: 5.2 km, of trans- (about 7 Km, diameters 18"-24") and mission mains (16"-20" diameter); distribution mains (about 21 K, and about 20 km, (3"-10" diameter) diameters 3"-10") about 3,000 meters installation of about 3,000 water meters leak detection and sewer cleaning acquisition of maintenance equip- equipment, meter test bench, and ment four vehicles procured - 32 - ANNEX 4 Page 6 of 6 Appraisal Scope Actual Scope Santa Marta construction of sewage collection construction of 4.6 Km of sewer col- facilities lectors with diameters 6"-21" study of ground water potential in accomplished the Santa Marta Area construction and equipment of one four new wells with a combined capa- deep well and equipment of one city 125 1/sec constructed existing well 4/ Candeleria and Taganga pumping stations re-equiped construction of a water storage 600 m3 storage tank; pumping station tank and pumping station 4/ 150 1/sec capacity expansion of transmission and dis- 3.2 km pipe (12" diameter), 1.1 km tribution mains, and installation (diameter 3") constructed and 2,000 of new house connections and water meters installed meters 4/ expansion of the sewerage system rehabilitation and reequipment of and construction of a new sewage existing pumping station to 300 pumping station 4/ 1/sec capacity, construction of 4.6 km of collectors, diameters 16"-21" consulting services consultants supervised construction of sewage component 4/ Additional works for the Rodadero/Gaira area reflected in Amendment of August 5, 1977. - 33. ANNFX 5 Page 1 of 9 ODMIA IAN 1072-(D SECOND MJLTI-CITY W SPPLY AND SEERAGE PWIlECr PRaJECT COMPIEION REPORT Compa:rative Project Scope Appraisal Scope AMended Scope l/ Actual Scope PARE A (i) Acquisition and installation Same Acquisition and distribution of of about 30 master meters and a total of about 280,000 water about 100,000 domestic water reters and sae meter test meters in the system operated b benches the Borrower and acquisition of meter testing aid repair equipment (i) Emprovement of the administra- Same Som minor consultancies for tion and operation of the INSFMPAL (census, admirtistra- Borrower and the Beneficiaries tion) by means of advisory services (iii) Training of thp staff of the Same Sore 1,140 sector staff attend- Borrower, the Beneficiaries and ed courses or worksho,ps on ad- other water supply and sew.rage ministration, financial mm Lige- entities in Colombia in admin- rent, economic analysis and op- istrative, technical and opera- eration and maintenance tional matters PART B Eight Investment Projects Not included Expansion of raw water Expansion of raw water produc- intake facilities and tion system, including the con- raw water pumping struction of a pre-sedimenta- tion lagoon and intake, a raw water transmission pipeline and the installation of additional pumping capacity (about 2.7 n3/sec) Not incluied Expansion of water Partial rehabilitation and im- production capacity to provement of three treatment 4.8 m3/sec plants; construction of a new water treatment plant (Planta No. 4) with a I m3/sec capacity 1/ Amended per letter dated June '3, 1.82. 34 ANNEX 5 Page 2 of 9 Appraisal Scope mateid Scope Actual Scope Construction of 1,900 m3 storage tank No chiage Construction of "Carrizal" storage tank with 1900 m3 ca- pacity Construction of two booster pumping Expwnsion of treated Expansion of treated water stations with a capacity of 500 1/sec water puqping capacity puving capacity by 2.1 m3/sec to 4.8 m3/sec to 4.8 ri/sec Installation of about 180 lan of trans- Installation of about Installation of 90 lan of trans- mission and distribution mim 74 km of tranedassion mission pipes 8"-42" and 80 lan and distribution mins of distribution ninf (4"-6") Construction of about 20 kom of sene Construction of a ser- Construction of about 7 Km of interceptors age outfall interceptors (Enrdsarios Final and Simon Bolivar) Construction of 350 lan of sewers Deleted Nonle Increase of the existing seage pump- Itprovement of two Minor improvenants of Puming ing station capacity sewage Pumping sta- Stations I and 2 tions Acquisition and installation of about Acquisition and ir- Installation of 30,000 neters 30,000 water meters stallation of 40,000 supplied by INSOPAL under water teters Part A of the project Acquisition of equipment for ater Acquisition of leak Purchase of meter test bench testing, leak detection and eaer detection and seier and of two seer cleaning unintenance meintenance equipnent trucks (ii) CARIMEN& Expnsion of the rw water pumping ca- No change Increase of raw water produc- pacity to about 1,900 1/sec tion capacity by about 500 1/sec to a total of about 1,200 1/sec through expansion of Dolores punping station and in- take and extension of iblores transmission main - 35 - ANNEX 5 NhmWded LM Actual Scope Page 3 of 9 1 pesion of the existing water treat- No chWge Eqwsion of "BoUquM" plant to ment plant capacity to about 1,000 1000 1/sC 1/sf Construction of the first stage (about No chWe Completed as appraised 600 1/sec) of a new water treatent plant Not iwIded Construction of a Construction of Carvelo tank 5,000 .3 water storage with 5000 3 capacity tank and rehabilita- tion of 10,000 .3 storage tank Iaprovent and expansion of the water No dw e Construction of 7.3 Km of mains distribution network (about 100 krm) (diameters: 8"-28") Acquisition and installation of about No change Completed as appraised 15,000 water meters Construction of about 100 km of sewe Constructiovn of about Construction of about20 Km of interceptors and sewers 35 lan of sewage inter- interceptors financed under the ceptors and saers, project and an additional 114.2 ad two sewage ptMing Km with other financing; con- stations struction of two sewage ming stations (Torices, Crespito) Acquisition of operational equipment No change None procured (iii) CUTrA Construction of a grit chenber with 400 No change Completed as appraised 1/sec capacity Construction of a 3.2 Construction of 3.2 km, 24" km ra, water transmis- pipe between grit chaber and sion main San Pedro -36 - ANNEX 5 Page 4 of 9 Apprai Scope Anded Scope Actual Scope Expesion of water treatment capacity No change Completed as appraised to 1,000 1/sec Contruction of two storage tanks with Construction of three Construction of the San Luis, a total capacity of about 6,700 m3 storage tanks with a Atalaya and Santo RDingo stor- toLal capacity of age tanks with a total capacity about 8,000 m3 of 8,900 m3 Not included Construction of two Construction of three booster booster pumping pmping stations (Zona Occiden- stations tal, Santa Doidngo, Atalaya) Iprovement and extension of the water No change Construction of 10.3 km of pipe distribution network with diameters of 8"-16" Acquisition and installation of about No change Installation of about 10,000 18,000 water meters meters supplied by INFDOPAL under Part A of the project Construction of sewage interceptors and No change Construction of about 4 km of sewers interceptor on left side of main drainage canal Not included Acquisition of main- Acquisition of meter test tenance equi.Tmnt bench, leak detection and sewer cleaning equipment Study of additional sources of water No change Carried out by consultants with supply for Oucuta financing fran FUADE (iv) IBAGUE Not included Improvement of the rw Improvement of raw water intake water intake and con- at Rio Combeima; construction struction of a raw of raw water transmission main water transmission between intake and Planta Neva line - 37 - ANNEX 5 Page 5 of 9 A;asal Scope Amnded Scope Actual Scope Expansion of treatment plants to a Expansion of the water Expansion of Plants Nueva capa- capacity of 950 1/sec treatment plant to a city from 500 1/sec to 1,500 capacity of 1,200 1/sec 1/sec Installation of about 66 km of water Installation of about Installation of 28.6 km of distribution mainm 32 km of water dis- distribution networks tribution networks Construction of collectors sewers No change Construction of 7.5 km of interceptors and 6.8 km of collectors Acquisition and installation of about Acquisition and Installation of about 2000 2000 water meters installation of about meters supplied by MSFOPAL 6000 water neters under Part A of the Project Acquistion of operational equipment No change None procured (v) PAMJ Expansion of raw water channel capacit No change Expansion of Centenario canal to 1,150 1/sec to 1150 1/sec capacity includ- ing the construction of a new intake and grit chamber Not included No change Construction of raw water transmission pipe between Quebrada Chapal and MLjitayo (6.5 Km, 150 1/sec) ANNEX 5 Page 6 of 9 Appraisal Scope Amnded ScMe Actual Sc Expansion of treatment plants to a Expansion of one Expansion of Centenario plant capacity of 450 l/sec treatment plant to a to 700 1/sec capacity capacity of 700 1/sec Construction of a storage tank (5,000 Construction of a Construction of 4 tanks with a m3 capacity) water storage tank comitned capacity of 9,00D 0n with a capacity of about 8,700 donstruction of two treated water No change Completed as appraised transmession pipelines Expansion of the distribution systen None financed under loan 1072-W0; scme expension carried out with funds fron ISCREDIAL and ISPAL Construction of two storm water Deleted collectors Acquisition and installation of about Acquisition and Installation of 6,000 meters 2,000 water eters installation of about supplied by INSMOPAL under Part 6,000 water meters A of the Project Acquisition of operational equiprent No change Purchase of ser cleaning equipment (vi) POPAYAN Expansion of the Tablazo water treat- No change Achieved ment plant to 600 1/sec capacity Not included Construction of a Construction of a storage tank storage tank with a with a capacity of 5,00) 03 capacity of 5,000 m-  39 - ANNEX 5 Page 7 of 9 Appraisal Scope Amnded Scope Actual Scope Installation of water nina and No change Construction of about 7 in of imoprovent of the water distribution transmission and distribution network pipe Laying of sanitary e.wers in lm-incom No change Construction of 16.4 km of areas of the city sewer collectors in the Dean, San Jose and La Sambrilla Construction of sewage interceptors No change Construction of interceptors Santa Ines, Licores, Los Sauces Acquisition and installation of about No change Installation of 4,000 neters 4,000 water neters supplied by INSOPAL under Part A of the Project (vii) VALLEDUPAR Construction of grit chamber No change Achieved Expansion of raw water Iniprovuent of raw water intake intake and tranmsis- sion capacity Construction of 210 to, 16" raw water transmission pipe Construction of three rapid filter Expansion of che water Expension of water treatnent units to increase water treatment caps treatrent plant caps- capacity to 600 1/sec including city to 350 1/sec city to 600 1/sec the construction of 6 filters, additional sediuentation, floc- culation and disinfection facilities and an aduinistra- tion building with laboratory Installation of about 8 Ian of prinary Installation of about Construction 32 km of pipes and about 38 km of secondary water 32 lan of water dis- (3"-16" diaDeter) and the mins tribution networks installation of 51 valves -40 - ANNEX 5 Page 8 of 9 Appraisal Scop Amended Scope Actual Scope Acquisition and installatior of about No change Installation of 14,000 meters 10,000 water meters supplied by DFOPAL under Part A of the Project Not included Not included Construction of 4.5 km of sew- age collectors Acquisition of operational and mainten No change Purchase of 1 truck ance equipment (viii) VIUAVICENCIO Improvement of raw water supply No change Expansion of Guatiquia raw wa- sources ter intake and grit chamber fron 150 1/sec to 600 1/sec Not included Construction of a 5.4 Purchase of 5.4 km of pipe for km raw water transmis- Fuentes Altas - Treatment Plant sion main raw water transmission main; pipeline being installed later since flood destroyed intake and made important repair works necessary Construction of first stage (about 30) No change Construction of water treatment 1/sec) of a water treatment plant plant with 750 1/sec capacity Not included Construction of stor- Construction of storage tank age tank with a cape- (P,OO ml capacity) city of 7,000 m3 Installation of about 18 km of water Deleted None financed under project; distribution mains about 30 km were recently in- stalled with FF1U financing -41 - ANNEX 5 Page 9 of 9 Appraisal Scope Amended Scope Actual Scope Acquisition and installation of about Acquisition and Installation of 2,000 meters 10,000 water meters installation of about supplied by INSF'OPAL under Part 12,000 water nters A of the Project Acquisition of operational and ainai- No change None procured tenance equipment PART C About 30 Investment Projects for water Reduced to 13 towns Construction of wells, pumping supply for about 30 sml1 towns, co- stations and pressure mins in sisting of drilling and equipping 30 the following thirteen sml1 wells, each with an expected average towns: yield of 600 gpm (1) San Juan del Cesar (2) hinichanga (3) Tamalaneque (4) Chiriguana (5) San Martin (6) Puerto Lopez (7) Granada (8) La thion (9) Facatativa (10) Chinu (11) San Andres (12) Cuamal (13) Puerto Boyaca ANNEX 6 -42 - Page 1 of 2 COLOMBIA LOAN 860-CO MEDIUM-SIZE CITIES WATER SUPPLY AND SEWERAGE PROJECT PROJECT COMPLETION REPORT Compliance with Key Loan Covenants Loan Agreement Section Covenant Observations 3.01 Employ consultants satisfactory to In compliance the Bank for carrying out Part A of the project and construction super- vision of subprojects 3.02 (a) INSFOPAL to conclude Project Loan In compliance Agreements (PLA) with subborrowers including a/ Beneficiaries' compliance w/Key Covenants under Section 3.02 (a) (iii) Use of consultants for streng- In compliance thening management, design and construction supervision (V)(2) Piintain tariffs and charges at Not in compliance; levels sufficient to meet annual none of the project rate of return target beneficiaries com- plied consistently; most of them were far off targets (Annex 10) (V)(3) Annual auditing of accounts and In compliance; with financial statement few exceptions audits were produced, but were often of poor quality and were submitted late (V)(4) Annual revision of five-year Not in compliance investment plan (vii) Use of funds generated by water and Not in compliance; sewerage services for these ser- water and sewerage vices exclusively revenues often finan- ced other services ANNEX 6 -43 - Page 2 of 2 3.02 (b) INSFOPAL to exercise rights under Not in compliance; PLA INSFOPAL did not use remedies in PLA's even in the case of gross non-compliance with covenants by project beneficiary. 5.02 Provide independent audit reports In compliance; within four months of the end of reports often were of each year. poor quality and sub- mitted with major delays 5.04 Take steps to enable subborrowers In partial com- to apply tariffs sufficient to meet pliance; INSFOPAL financial covenants in PLAs usually supported tariff requests by beneficiaries, but as tariff matters fall under the jurisdic- tion of an indepen- dent National Tariff Board, INSFOPAL has no influence over tariff matters. -44 - ANNEX 7 Page 1 of 3 COLOMBIA LOAN 1072-CO SECOND MULTI-CITY WATER SUPPLY AND SEWERAGE PROJECT PROJECT COMPLETION REPORT INSFOPAL's Compliance with Key Loan Covenants Loan Agreement Section Covenant Observations 3.01 (b) Employ consultants satisfactory to In c)mpliance; results of the Bank to carry out the technical assistance dissapointing assistance and training programs (c) Send detailed schedule for and In partial compliance; a description'of the training program general program was presente: to the Bank by mid-July 1975 but never implemented 3.03 (a) Conclude a PrGject Loan Agreement In compliance (PLA) with each beneficiary Beneficiaries' compliance with key covenants under Section 3.02 (a) (iii) Use competent consultants for In compliance; all project management technical assistance and beneficiaries used con- for project design, procurement and sultants found acceotable by construction supervision the Bank (V) (2) Keep tariffs and charges at a level Not in cumpliance; None of sufficient to meet rate of return the project beneficiaries wa4 targets able to meet rate of return targets consistently (Annex 21) (V) (4) For services other than water supply Not in compliance. (Annex and sewerage, keep tariffs and 21) charges at a level sufficient to vield an operating ratio satisfactory to INSFOPAL (V) (5) Have independent auditors audit In compliance; with few accounts and prepare financial exceptions audit report were statements each year produced, but were often of poor quality and submitted late (vii) 1se of funds generated by water Not in compliance; in several suonlv and sewerage for these companies (Barranouilla, services exclusively Cartagena) water and sewerage revenues were used extensi- velv to finance other services - 45 -ANM7 ANNEX 7 Page 2 of 3 Loan Covenant Observations Agreement Section 3.03 (b) Obtain Bank Agreeient to selection of In partial compliance; finan- consultants snd changes in financial cial covenant and monitoring covenants, m3nitoring indicators indicators in PLA's were not adjusted formally to reflect changing conditions Not in compliance; INSFOPAL 3.03 (c) Exercise rights under PLA did not use the remedies in the PLA's even in the case of gross non-compliance with important covenants by bene- ficiaries In partially compliance; dis- 3.05 Exchange views with the Bank annually cussions were held but with- on proposed investments in the sector out much success in rational- izing annual investment pro- grams In partial compliance; re- 3.06 Send quarterly reports to the Bank on ports often late and of poor selected monitoring indicators quality, frequency of finan- cial reporting requirements were relaxed in 1977 In compliance; reorganization 4.03 (a) Implement a new organization struc- however, took much more time ture by June 30, 1976 than anticipated and was not fully completed until 1981 In partial compliance; sever- (b) Send to the Bank a personnel study, al general studies were pro- including a program to reduce staff, duced but there was no fol- by mid-July 1975 low-up In compliance; Bank had no (c) Provide the Bank an opportunity to influence in appointment mat- comment on any proposals to modify ters INSFOPAL's organizational structure and personnel appointments 46 ANNEX 7 Page 3 of 3 Loan Covenant Observations Agreement Section 5.02 Send to the Bank by no later than In partial compliance; end-April of each year audited finan- submission of report often cial statements prepared by external late auditors satisfactory to the Bank 5.04 (a) Increase, or cause to be increased Not in compliance (see 5.05) the water supply and sewerage charges of all INSFOPAL -owned or - operated entities by mid-January 1977 to lev- els sufficient to cover water supply and sewerage operating expenses (b) Adjust charges by end-March, from Not in compliance (see 5.05) 1978 on, as required to allow the en- tities to generate sufficient each to cover debt service on all investments made from 1974 on 5.05 Take all steps necessary to enable In partial compliance; the Beneficiaries to set and maintain INSFOPAL not responsible for rates at levels adequate to yield the tariff levels, as tariff financial returns or operating ratios matters are under authority specified in the Project Loan Agree- of the National Tariff Board ment 5.06 Establishment of Internal Audit Sec- In partial compliance, tion by July 16, 1975. Section was established with 4 years delay COLOMBIA LOAN 860-CO MEDIUM4-SIZE CITIES WATER SUPPLY ANL) SEWERAGE PROJECT Iiwr (IOMMl INlMJW Oalative as Percent of Total Project Investments Calowlar Annenia tmizales Neiva Pereira Tulus Iavennra Smta MMrta TOtal Year A Actual Appr. Actual A Actual A Actual A Actual A Actual Apr. Actual jApr. Actual 1972 18 0 8 0 11 0 9 0 0 0 33 0 32 0 12 0 1973 6 I 38 25 74 5 35 2 49 I 100 0 67 0 50 5 - 1974 100 4 68 53 100 27 83 19 85 9 34 100 16 85 22 1975 29 100 84 50 100 50 100 30 66 3D 100 47 1976 40 99 87 64 60 8D 45 66 1977 44 100 97 72 68 94 66 74 1978 45 99 72 80 % S4. 1979 46 100 79 81 99 % 82 1980 62 92 8B 100 10D 90 1981 92 100 98 98 1982 98 100 9 1983 100 100 蓬’&’藝藝寧，｝〔 ：壯：〕〕〔〕〔〕 ::，〕〕〔〕〕〔！ ；。；〕〕〕〕：〕 ，曇“’一〕！〕〕〕．; &s浩巴’‘以“國―霧―基一 巨二〕騰！髒“ ,&&&’館―! S$，呂，日j一―馴 ;,：〕〕〔〔：〕 ;::，。〕〔！::! 。：，。：:：〕〕】！ ．認細鉀•8觔• 49 - ANNX 10 01"IA IDM 86D-M RMIU*-Siz C WA32R SUPPLY AND SIDERAGE FRW= PRW= CHUMON Rmwa CcMerative- Project cost 1/ (In Q=ent Prices) --Gol$ Million - - - - - W$ Million - - Appraisal Variance- - Appraisal Variance - - Estimate Actual r1ol$ % Estimate Actual USS % Armania 43.6 186.5 142.9 328 1.9 3.9 2.1 117 &wwentura 22.7 34.9 12.2 54 1.0 1.1 0.1 10 tu-d7Al P 99.7 %.7 (43.0) (43) 3.9 2.0 (1.9) (49) ,14eiva 46.7 42.3 (4.4) (9) 1.9 1.5 (0.4) (21) Pereira 91.5 162.8 71.3 78 3.6 4.2 0.6 17 Santa Ikrta 18.1 98.4 RM 444 0.8 2.5 1.7 213 Tulua 51.0 67.7 16.7 33 2.0 1.7 (0.3) (15) 'Total Gonstruction 373.3 649.3 276.3 7.4 15.0 16.9 1.9 13 Te&Edcal Assistance to DEMPAL 11.4 17.1 5.7 50 0.5 0.5 0 0 TOTAL OOST 384.7 666.4 ZB1.7 73 15.5 17.4 1.9 12 I/ Ew-luding interest during construction, appraisal estimates include physical and price contingencies. - so - ANNEX 11 COLOMBIA LOAN 1072-CO SECOND HULTI-CITY WATER SUPPLY AND SEWERAGE PROJECT PROJECT COMPLETION REPORT Comparative Project Costs 1/ (Current Prices) ----COL$ ILLIN---- M----US I HLLIOA---- fAPPRS ---WMIKE--- APPEISR --- WIKf--- ESTINTE ATUAL COLI I ESTIATE CTUAL US I I. CiTY SUWioECTS IMMtUILLA 609.4 616.4 207.0 341 17.46 18.44 1.0 6? CMIN 337.8 440.6 102.8 301 9.78 10.61 0.8 It CCUTA 94.9 139.8 44.9 47 2.71 3.05 0.3 131 Im 95.5 117.7 22.2 231 2.82 3.02 0.2 ?1 PSTO 50.7 126.2 75.5 1491 1.54 2,86 1.3 861 POPA" 49.4 81.5 32.1 651 1.45 1.69 0.4 30? UALEDUPM 31.2 58.6 27.4 881 0.95 1.45 0.5 53? UILLMICENl0C 31.3 91.7 50.4 1611 0.94 1.69 0.8 00! SUBTOTAL 1,300.2 1,862.5 562.3 431 37.65 43.01 5.4 141 II. INSFOK PRoil" 309.0 206.7 (102.3) -331 8.67 4.17 (4.5) -521 TOfA 1,609.2 2,069.2 460.0 291 46.32 47.18 0.9 21 .2%82&*v samaaz aagams unangle. 1/ Excluding interest during construction. Appraisal estimates include physical and price contingencies. ANNEX 12 COLOMBIA LOAN 860-CO MEDIUM-SIZE CITIES WATER SUPPLY AND SEWERAGE PROJECT PROJECT COMPLETION REPORT Allocation of Bank Funds (Us$ Million) Amendmeit Original of Final Category Allocation 8/3/1977 Allocation I INSFOPAL 0.48 0.48 0.48 II Armenia 0.89 1.18 1.27 III Buenaventura 0.48 0.66 0.58 IV Manizales 1.93 0.98 0.88 V Neiva 0.98 0.69 0.59 VI Pereira 1.80 1.80 1.46 VII Santa Marta 0.39 1.16 0.99 VIII Tulua 0.99 0.99 0.76 IX Interest during construction 1.16 1.16 1.16 TOTAL 9.10 9.10 8.18 a/ a/ US$0.92 millioa cancelled on April 2, 1981 and UTS$0.47 cancelled on August 20, 1981. - 52 - ANNEX 13 COLOMBIA LOAN 1072-CO SECOND MULTI-CITY WATER SUPPLY AND SEWERAGE PROJECT PROJECT COMPLETION REPORT Allocation of Bank Funds (In US$ Millions) Amendment Original of Final Category Allocation 6/23/82 Allocation I INSFOPAL Program (a) Equipment 1.90 1.90 1.82 (b) Consulting services and training .33 .06 .04 II Eight-City Program (a) Barranquilla 10.06 10.42 10.39 (b) Cartagena 5.71 5.71 5.53 (c) Cucuta 1.58 1.40 1.40 (d) Ibague . 1.58 1.50 1.50 (e) Pasto .88 .88 .88 (f) Popayan .82 .82 .82 (g) Valledupar .55 .47 .47 (h) Villavicencio .54 .81 .81 III Small Towns Program Equipment, pipes materials, supplies and civil works 3.05 1.75 .90 27.00 25.72 a/ 24.56 a/ a/ Became fully disbursed in April 1983. US$1.28 million carielled as of June 23, 1982, US$0.36 million cancelled as of November 23, 1982 and US$0.80 cancelled as of April 7, 1983. - 53 - ANNEX 14 COLOMBIA LOANS 860-CO AND 1072-CO MEDIUM CITIES WATR SUPPLY AND SEWERAGE PROJECTS I AND II PROJECT COMPLETION REPORT Cumulative Schedule of Disbursements (US$ Million) Bank Loan 860-CO Loan 1072-CO Fiscal Appraisal Appraisal Years Estimate Actual Estimate Actual 73 2.2 0.03 74 6.3 0.34 75 8.1 1.97 76 9.1 3.40 3.94 0.30 77 4.90 11.35 3.80 78 5.90 20.62 7.40 79 6.38 27.0 11.01 80 6.54 12.85 81 8.18 a/ 20.25 82 22.68 83 24.56 b/ a/ US$0.92 Million was cancelled. T/ US$2.44 Million was cancelled. - 54 - ANNEX 15 COLOMBIA LOANS 860-Co AND 1072-CO MEDIU. CITIES WATER SUPPLY AND SEWERAGE PROJECTS I AND II PROJECT COMPLETION REPORT Sources of Financing the Project Investments 1/ (Actual, in current US$ Million) Bank INSFOPAL Beneficiaries Total Loan 860-CO Armenia 1.27 1.56 1.07 3.90 Buenaventura 0.58 0.28 0.24 1.10 Manizales 0.88 0.67 0.45 2.00 Neiva 0.59 0.44 0.47 1.50 Pereira 1.46 1.04 1.70 4.20 Santa Marta 0.99 1.13 0.38 2.50 Tulua 0.76 0.77 0.17 1.70 Total 6.53 5.89 4.48 16.90 Loan 1072-CO Barranquilla 10.39 4.33 3.72 18.44 Cartagena 5.53 4.13 0.95 10.61 Cucuta 1.40 1.46 0.19 3.05 Tbague 1.50 1.38 0.14 3.02 Pasto 0.88 1.10 0.88 2.86 Popayan 0.82 0.73 0.34 1.89 Valledupar 0.47 0.80 0.18 1.45 Villavicencio 0.81 0.70 0.18 1.69 Total 21.80 14.63 6.58 43.01 1/ Excluding interest during construction. - 55 - ANNEX 16 COLOMBIA LOANS 860 AND 1072-CO MEDIUM CI"2LES WATER SUPPLY AND SEWERAGE PROJECTS I AND II PROJECT COMPLETION REPORT Annual Disbursements of National Counterpart Funds to INSFOPAL (In C$ '000) Calendar - - -Loan 860-CO- - - - - -Loan 1072-CO- - -- - - - -TOTAL - - - - Year Agreed Actual Agreed. 2/ Actual Agreed Actual 1972 30,400 30,400.0 30,400 30,400.0 1973 50,600 --- 50,600 -- 1974 25,000 14,500.0 25,00 14,500.0 1975 24,000 44,100.0 59,000 5,832.7 83,000 49,932.7 1976 5,000 41,000.0 110,000 103,851.0 115,000 144,851.0 1977 -- 181,000 108,569.5 181,000 108,569.5 1978 --- 161,000 132,124.0 161,000 132,124.0 1979 92,854.7 63,000 43,462.6 63,000 136,317.3 '980 58,700,0 227,091.0 287,791.0 1981 41,419.0 41,419.0 1982 68,800 68,800.0 1983 90,800 90,800.0 135,000 281,554.7 574,000 821,949.8 709,000 1,103,504.5 1/ Supplementary letter to Loan Agreement, signed October 10, 1972. f/ Supplementary letter to Loan Agreement, signed January 16, .975. rL * j aIIL r i i r g a - g i p s.. a.m i 5 LL 3 r - d r r 3 . &- b açã.y a r i a . -' - - - - . -~ - -. - | 4 0 s E-a . -a -a a -o bs .. -b.a sa. .I I I rii - . 4 - -- - -. . F . FFF '_ . r waarr - . b ? .. b a . a s -g-. .sb? b - . .. . I.t 2.. =. - -. b b -- *.. bgs. a - - . s s a - - '-h i ''88 5' s t a I..- s s • . b '' b a- - ' b b? s - e - - a s s-sa a a. li-ii s= . se 州！：露頗〔頸：〕： 你藝：汰頸：〕 仰江：汰叩：: 汗l蒞藝煎革 作江冀煎蘿 你江冀然矓 藝醒，。晝＿藝廈。。邊， 洛l權日召望鳥日叢逐蒼日騙邑乞弓痲’蓬 ;.1:-;!}}；〔！〔〔，.:！〔！〔〕！；〕 詠！ OMAMIA LOAN 1072-M SECOM X&TI-CITY WATER AIPPLY AND SE]WERAGE PROJECT PROJECT COWLETION REPORT Compliance with Selected Monitoring indicators and Financial Covemmonts, (In Cal$ IN I I Ions) - - - - - - - - - - - - - - - BARRANDUILLA V - - - - - - - - - - - - - - - - - - - - - - - - - - CWAOM - - - - - - - - - - - - - - - 1974 1976 1979 1961 1974 1976 is" 191111 AW. AW. Appr. Aw. ow. W - Indicators Estlat. Actual E at IP6 Ac tum I Estint. Actual Actual Estim. Actual Eatim. Actual Ettle. Actual Actual Mwvdw of pal mum t amployess 310 310 336 336 318 YM 346 20D N.A. 20D 20D 20D 240 zm Employee& per 1,000 connections 4.7 4.4 4.4 4.4 4.0 4.0 4.1 8.7 N.A. 8.0 6.4 5.3 GJ Population served-water(X) N.A. 72 N.A. 72 N.A. 79 81 N.A. N.A. Nj- 66 N.A. 67 so water produced (I SON ooom3/ year) .0 76.0 72.5 72.5 81.5 80.5 119.8 23.9 N.A. 29.5 25.9 36.1 Z7.6 37.0 00 %later sold (I 0OQ.0OQm3/ year) 45.3 45.3 49.2 49.2 S9.5 S9.0 73.2 19.1 N.A. 22.8 16.3 28.9 16.6 2S.6 tktaccounted-for water M 40 40 32 32 77 27 39 20 N.0- 20 37 2D 32 31 Total toter connections (1000) 70.4 70.4 76.4 76.4 94.4 94.4 105.0 24.0 N.& 30.0 31.4 40.0 36.2 40.2 Metered water cmmctlons VODO) %.0 56 66.0 66.0 90.0 90 20.4 N.A. 24.0 28.2 S.0 34.0 410.1 Total @star connections VOCO) 47.0 47.0 57.0 57.0 72.0 72.0 80 9.3 N.A. 13.0 16.1 19.0 20.3 23.3 Vftter supply and sowerage: Rate of return M 1/ 6.0 2.6 3.7 2.2 3.0 3.7 8.8 - N.A 4.9 2.2 4.0 3.9 1&2 Operating ratio M 2/ 71 79 71 so 65 83 75 77 N.A. 50 as 4B 76 65 Debt-to-equity ratio 0.18 0.16 0.43 0.25 0.80 0.60 0.68 0.44 N.A. 0.98 53 0.05 0.47 0647 0 Go Debt service coverage V 3.8 N.A. 7.1 N.A. 3.3 N.A. 1&03 1.2 N.A. 2.1 1.75 1.9 1.3 1.1 "h Average rOMMM/101 I I Ion n sold 1.35 1.36 1.74 2.25 2.76 6.65 8.0 1.62 N.A. 3.49 3.Z? 4.04 9.17 17.3 41 Operating *xpensemAnIllion m3 sold 1.72 1.81 2.05 2.69 2.51 7.56 10.95 1.66 N.A. 2.21 4.43 2.41 IO.S7 17.04 Other services- Operating ratio (2) 2/ - 93 60 vO7 65 179 139 - N.A. 103 go 91 104 122 11 Incom before Interest/swerage rate base. Z/ Total operating expenses divided by total operating revenues. 3/ Not Incove divided by debt service. V Dots doubtful. OLASIA LOM 1072-00 ECOI L tiTI-CITY UIR SIPLY IO SEWE PIIJECT PiJECT COWLETION lilr Campi lece with Selected Miltring Indicators and Financial Covenats (In Cos Millions) ~~~~~~ WJA----------------------UIA----**------ ---* ---------*-I E - - -- - - - - 1974 1976 1979 19111 197 1SM 1979 out Appr* Ap. App. Apr. Apr. App. lndlcabr Esti4 Actual ESti. Actual Estia. Actual Actual Esti. Actual Estim. Actual Estim. Actl Actual MWber of permanent eaployees 200 N.A. 200 M05 236 255 20 107 N.A. 111 12 119 131 13 lIployees per 1,000 comnectlons 6.8 N.A. 5.2 6.2 4.1 7.0 6.6 5.1 N.A. 4.9 5.0 5.0 4.4 4.1 Population erved*mter (5)/ N.. 74 N.A. 74 NA. 80 82 N.A. N.A. 83 84 90 7 a I ater produced (I,,000.A/year) 25.0 21.6 25.9 22.1 31.8 26.4 3.7 15. N.A. 18.3 4.9 22.5 17.5 18.9 Mter sold (1,000,0 /fyear) 16.5 13.0 18.3 13.2 22.6 18.5 20.7 10.3 N.A. 12.1 2.98 14.8 11.2 12.8 taccounted-for ater ) 34 40 32 40 29 30 8 35 N.A. 34 35 34 36 2I Total water comections ('000) 31.1 32.4 37.0 33.0 47.0 36.1 42.1 21.0 N.A. 25.2 24.8 30.9 29.7 33.6 latered water comections V*OO) 3.0 23.5 36.0 25.5 45.0 33.3 35.5 17.0 N.A. 23.0 211.8 27.0 3.9 32.9 Total soeer conmections (1000) 24.0 27.3 32.0 29.6 40.0 35.1 39.5 14.0 N.A. 17.3 22.0 20.4 2.6 30.0 Vter aspply and sawerage: Rate of return (2) 2/ 1.3 0.3 3.3 1.1 5.6 (1.3) 1.2 3.1 N.. 5.7 3.7 3.6 9.8 5.7 Operating ratio (2) 3/ 66 75 57 69 46 82 72 71 N.A. .7 7B 53 61 74 Debt-t-oquity ratio 3.3 0.90 2.30 0.71 1.9 0.81 0.70 0.25 N.A. 0.55 0.32 0.73 0.9 0.^ Debt service coverage 4/ 0.9 K.A. 1.3 Hj.. 1.9 N.A. 14.8 - ".A. - - 1.6 - 12.5 Average rvwnusm/mlIlIbon sold 0.77 1.17 1.19 1.83 1.74 3.07 6.17 0.70 N.A. 0.99 4.65 1.R 4.27 7.45 Operating expenseaftlIllon n. sold 0.99 1.46 1.11 2.12 1.22 3.60 6.15 0.70 N.A. 0.81 5.61 0.97 4.07 8.04 Other servicess Operatngratio ( 3/ - 141 92 146 73 114 133 - N.. - - - - - 0 00 1-00 / Awaliable apprelasl setlates for 1981 Ibeque - 905; Paste - 945p Popeyan - 955; Valleduper - 901 VlIlavloanclo - 875. 2/ Incom before Interet/average rate base. / Total operating expenses divided by totmj operating revenues. / Itt Income divided by debt ser sce. 0OLOMIA LOAN 1072-CO SECOM) tJLTI-CITY MTER SIPPLY All) SERAE PROJECT PROJECT COPLETION I EPORT Capliance with Selected Monitoring Indicators and Financial Covenants (In ColS Millions) ----------- ------------------- --PASTO -- -- ------------ ------------ ---PPAYAN------ - --- -- -- -- -- -- 6974 1976 1979 1981 1974 1976 1979 1981 Ap. Appr. Appr. Appr. Appr. Appr. Indicators Estim. Actual Estli. Actual Eatlm. Actual Actual EatIm. Actual Estlm. Actual Estlm. Actual Actmal Number of permanent employees 60 N,A. 62 77 66 81 91 71 N.A. 71 85 71 93 96 Employees per 1,000 connections 4.6 N.A. 4.4 4.6 4.2 4.1 4.0 5.8 N.A. 5.3 6.2 4.7 5.6 5.5 Population served-water (M)I/ N.A. 72 92 82 92 90 92 85 87 73 93 94 92 a% Vter produced (1,000,00m3/year) 12.7 N.A. 11.6 14.6 12.3 14.2 16.2 9.8 N.A. 10.0 10.9 11.0 13.3 17.8 V*t*r sold (1,000,000m3/year) 6.5 N.A. 7.2 7.1 8.6 8.5 9.7 5.4 N.A. 6.5 6.0 7.9 8.8 8.4 Unaccounted-for water (t) 49 N.A. 38 SI 30 40 40 45 N.A. 35 45 2B 34 53 Total water connections ('000) 13.0 N.A. 14.0 16.8 15.8 20.0 22.7 12.2 N.A. 13.3 13.7 15.2 16.6 17.9 Mtered water connections ('000) 11.0 N.A. 12.0 15.9 13.8 19.8 22.2 9.0 N.A. 11.0 10.0 13.0 12.8 14.2 Total sever connections ('000) i0.5 N.A. 11.4 16.3 12.3 19.9 22.6 10.0 N.A. 10.9 12.4 12.5 15.0 16.7 water supply and seweraget Rate of return (Z) 2/ - N.A. 1.9 (2.5) 3.4 0.4 (0.8) 2.0 N.A. 2.9 2.6 3.4 (1.5) (1.3) Ooerating ratio (1) 3/ 90 N.A. 60 96 50 83 86 59 N.A. 49 87 42 92 93 Debt-to-equlty ratio - N.A. 0.26 0.24 0.41 0.9 0.56 0.45 N.A. 0.62 0.12 0.81 0.70 0.75 Debt service coverage 4/ - N.A. - - 1.8 - 7.1 - N.A. - - 2.6 - 1.02 Avorage revenue/million m,3 sold 0.41 N.A. 0.81 0.86 1.54 2.27 3.94 0.55 N.A. 0.94 1.37 1.47 1.61 2.99 Operating expenseaAnlliIon m3 sold 0.37 N.A. 0.76 1.69 1.01 3.15 5.68 0.37 N.A. 0.71 1.80 0.86 2.24 5.93 Other services: O 00 Operating ratio () 3 - - / Available appralsal estimetes for 1981: Ibaque - 901; Pasto - 94X; Popeyan - 951; Valledupar - 901; Villavicenclo - 871. 2/ Incans before Interest/average rate barn. 3/ Total operating expenses divided by total operating revenues. / Not Incone divided by debt service. COLONBIA LOAN 1072-CO SECOI KLTI-CITY VTER SUPPLY AN0 SEVERAGE PROJECT PROJECT COWLETION IEPORT Compliance with Selected Monitoring Indicators and Financial Covenants (In Coi$ MillIons) -- VALLEDPAR---- ----------------V-L-L-E-D -- -------------VILLAVICENClO----------------- 1974 1976 1979 1981 1974 1976 1979 1961 Appr. Appr. Appr. Appr. Appr. Appr. Indicators Estim. Actual Eatim. Actual Estlin. Actual Actual EstIm. Actual Estim. Actual Estim. Actual Actual Number of permanent employees 36 N.A. 38 52 42 70 74 42 N.A. 44 67 48 75 84 Eployees per 1,000 connections 4.8 N.A. 4.5 4.7 4.2 4.5 4.4 4.5 N.A. 4.3 4.8 4.0 4.4 4.4 Population served-vater (1) / N.A. N.A. 73 67 78 83 0 N.A. N.A. 82 97 86 96 99 a% voter produced (1,000,OO,,3/year) 10.2 N.A. 6.3 13.8 7.7 14.8 16.5 6.2 N.A. 7.0 4.4 8.8 9.5 9.4 Vter sold (1,000,00mIJ/year) 6.1 N.A. 4.0 4.82 5.5 8.8 9.6 3.4 N.A. 4.2 2.9 5.9 4.1 5.3 1 Unaccounte--for water (M) 40 N.A. 37 65 29 41 42 45 N.A. 40 35 33 57 40 Total water connections (OOD) 7.5 N.A. 8.4 11.0 10.0 15.5 16.6 11.0 N.A. 12.5 14.0 14.8 17.0 19.1 Motered vater connections ('000) 0.4 N.A. 5.0 3.1 9.5 11.5 12.9 0.25 N.A. 4.0 1.4 10.0 4.2 5.7 Total swer connections ('000) 2.1 N.A. 2.4 3.7 2.8 6.6 7.1 10.3 N.A. 11.3 9.1 12.8 12.6 14.9 Vater supply and sewarages Rate of return () 2/ 0.5 N.A. 2.8 6.0 3.4 0.2 8.0 1.1 N.A. 1.5 1.0 3.9 (1.6) 2.0 Operating ratio (5)3/ 77 N.A. 61 54 54 81 62 69 N.A. 60 76 46 92 71.3 Debt-to-equity ratio 1.82 N.A. 1.74 0.77 1.35 0.9 0.79 0.07 N.A. 0.39 0.12 0.54 0.51 0.53 Debt service coverage 4/ - - - - 4.4 - 7.2 2.6 N.A. 4.8 - 2.1 - 0.5 Average revenue/millon sold 0.13 N.A. 0.76 0.77 1.35 1.64 4.03 0.63 N.A. 0.89 2.20 1.41 3.08 4.50 Operatino expeneanlilllon 3 aold 0.26 N.A. 1.13 1.38 1.16 2.23 4.27 0.79 N.A. 0.91 2.58 1.00 6.64 7.45 Other services: 0O Operating ratio (M3 - - - - - - - 86 N.A. 75 N.A. 73 N.A. N.A. 1/ Avaliable appraisal estinates for 1981t Ibaque - 901; Pasto - 94Z; Popeyen - 951; Valleduper - 905; VIllavIcenclo - 871. 2/ Inces before interest/average rate beaw. / Tetal operating expenses divided by total operating revenues. 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'5.4 54.4 t4.4 4M.4 50.2 5.' 5. 5.4 41.5 5.4 '05.4 .94 '75.1 22.4 193.5 45. 625 1 9.46 ~ 440 514.4 5.0 24.6 "T2.4 4,.5 45 5 51.4 V' M0.4 27,5 4A.A 16 2 v.1 0 90 1 9 Mll 5442 55.5 45,4 .4,5 40. .45 .1.4 '01.3 54. 53.5 5t4 .4 .L5, '3 3 15 .5'.c<4ta 19'4 55.4 '' , L.5 5 4 5< 5' 0 / 1 4 45 2 L. 0. 54 ' 9 5,< 5 50. 4s a 4 , 5454 1.5 2 64 4 5. 14 5 5' 41, 5 §964<0 '393 974 44.6 '14 1.4 L. 5.1 1. .. 7 r B 1' . 55 1' ' '-Yl i0Z 551 . '2 P$ 35 5 . .4 4 T2 .. '40 . 0.9 0. 9 1w; .0 20 99 r: 49 5'. t. 55i 12.' 5 ,.: 145 4 , 1T .5 ' 4 messetto for 194 <4' se'f l e er5 - e .44 <.5'<4' 'er 44w 1 .4<ea 4 2. a.4 a cat ,4 eati easel5 -e . reoos seg.i . 4 '9'1 ANNIX 22 Page 1 of 8 68 Fovember 21, 1983 E-543/84 Spanish (Colombia) LC Projects PS:law Rev. OTS Instituto Nacional de Fomento Municipal (INSFOPAL) Bogoth, Colombia. October 28, 1983 Mr. Guillermo Yepes Acting Chief, 'ater Supply arid Sewerage Division Latin America and Caribbean Regional Office World Bank Washington, D.C. Dear Mr. Yepes: Loan Agreements Ncs. 860-CO and 1072-CO INSFOPAL is the agency responsible for implementing Government policy at the national level regarding water supply and sewerage, slaughterhouses, street cleaning and marketplaces. In the performance of this basic function INSFOPAL coordinates, oversees and finances the entities piovidlng these services that fall within INSFOPAL's administrative jurisdiction, the entities concerned being known generically as EMPOS - Empresas de Obras Senitarias (Sanitation Works Enterprises) or ACUAS * Sociedades de Acueducto y Alcantarillado (Water and Sewerage Companies) Through them INSFOPAL covers all communities that have residential centers with more than 2,500 inhabitants. At the same time and in accordance with Government directives, INSFOPAL serves as a financial intermediary for t)e channeling of funds in commuities that ar, not served directly by ENPOS or ACUAS, but with which it is linked thru:gh the watcr supply a;id acnt atv t es preformed by them (public enterpriseS'. ANNEX 22 Page 2 of 8 - 69 - lackaround For many decades the construction of sanitation infrastructure and provision of the pertinent services were the direct and exclusive responsibility of the municipalities, which, for want of technical, administrative and financial assistance, had to endure extremely poor sanitation conditions, as a result of which the Colombian people wore exposed to disease. Recognizing the need to upgrade sanitation services the Government brought in, through Law 65/36, a set of rules for the "supply of drinking water to the municipalities of the Republic" and ordered the departments to set up a technical office to be responsible for formulating appropriate plans and programs and establishing investment priorities. Then in 1940 Decree No. 503 instituted the "Fondo de Fomento Municipal" (Municipal Development Fund) through which all funds for water supply and sewerage infrastructure, power stations, schools and hospitals were channeled. The Government later abolished the Fund by Decree No. 289/50 and set up the "Instituto de Fomento Municipal," which was organized as a public establishment. This, in its turn, underwent substantial changes by virtue of Decree No. 2604/50, which converted it into the "Instituto Nacional de Fomento Municipal" (National Institute for Municipal Development) and gave it an administrative structure better suited for the performance of its functions. The Institute was later reorganized by Decree 3178/68 and placed under the Ministry of Public Health, being assigned the impox.ant task of preparing the plans and programs to be carried out in the water supply and sewerage sector and seeing to their implementation in towns with more than 2,500 inhabitants. iowever, experience showed that a cvntralized system of administratiou was not appropriate because public services are essentially ANNEX 22 Page 3 if 8 - 70 - loc.1 by nature so it proved necessary to reorganize the Institute, for which purpose Decree No. 703/74 was issued but never entered into effect because of the numerous legal inconsistencies involved. In a significant move to settle the Issue, the Government, exercising the special powers conferred on it by Law 28/74, issued Decree No. 28C4/75 which reorganized INSFOPAL on the basis of a comprehensive approach to administrative decentralization of the services over which it had direct c6ntrol. Under this administrative decentralization the Institute no longer was the executing agency but instead assumed responsibl ity for financing the programs, and for advising, coordinating and overseeing the bodies responsible for the execution of the programs and ensuring compliance with legal requirements for the design, supervision and construction of sanitation facilities and also with the rules governing the operation of water supply and sewerage services, slaughterhouses, street cleaning and marketplaces. Despite the vital importance of the latter, there has been no national agency to provide them with financing or advisory and coordination services. Decree No. 2804 requires that as a general rule the financing provided by the Institute to the different companies or enterprises for the execution of sanitation works shall be in the form of loans; funds may also be made available in the form of grants but only to the executing agencies and for the purpose of strengthening them. This means that agencies may benefit from financial assistance in the form of subsidies or loans only if they are economically salf-supporting. On June 7, 1976 the Government issued Decrce No. 1157 regulating the application of Decree No. 2604/75 and Inying down the rules governing executing agencies. ANNEX 22 Page 4 of 8 - 71 - Project performance The outcome of the projects cannot be said to be fully satisfactory inasmuch as their social impact was impaired by the series of problems encountered during project execution. Some of the factors that impeded their full success were: - The lengthy admiristrative, verificatory and financial procedures required prior to any expenditure. * The requirement that authorization and/or approval be sought for any decision by INSFOPAL-BANK subborrowers. - The absence or inadequacy of the counterpart funds needed for the prompt performance of obligations assumed. Moreover in the case of some subprojects there appears to have been improvisation and ovcr-optimism at the appraisal stage, with the result that performance of social impact fell short of expectations. It should also be kept in mind that problems arose in the handling of the bidding, the contracting of goods and services and with the financial intermediaries, which was not at all surprising considering the large volume of investments involved. With regard to the lack of funds, it should be noted that there were times of real difficulty due to the slow disbursement of counterpart funds by the Government and also financial management problems with INSFOPAL and the executing agincies (primarily because of frequent ranagement chantes) which, combined with the effects of inflation and socioeconomic conditions in the country, had a significant adverse impact on project execution. The constraInts that prevented INSFOPAL from being fully effective between 1972 and 1982 include the following: ANNEX 22 - 72 Page 5 of 8 - The different management criteria of the five different INSFOPAL administrations during this period. Certain of these placed more importance on the technical side of the sector while others gave priority to the administrative 'in the broadest sense of the word) side, while one of them concentrated exclusively on personnel management. Because of these widely diverging approaches there were naturally improvements and decerioriations at any given time, a situation that was not to the advantage of the loan beneficiaries. In view of the foregoing the present management has been particularly determined to improve INSFOPAL's approach to the project goals in its capacity as the national coordinating, advisory and financial agency in the sector comprising water supply, sewerage, slaughterhouses, street cleanirg and marketplaces. - The lack of.vital management tools, such as operations and procedure manuals has also hampered the smooth operation of INSFOPAL. On the subject of Bank-INSFOPAL relations we would like to mention the following points: Positive: - The timely assistance given to INSFOPAL by the Bank, which on several occasions obtained from the Government allocations of funds and the disbursement of counterpart funds provided for in the agreements and needed to finance the water supply and sewerage works in most of the subprojects in question. ANNEX 22 Page 6 of 8 - 73 - The speeding up of certain formalities relating to consultation, approval and/or ratificatio- for emergency requests submitted by some subborrowers as a result of socioeco%omic circumstances and natural disasters. Negative: Certain shortcomings on the part of the Bank have been observed in the performance of its loan supervision and management functions, and can be summarized as follows: - The failure in the case of most of its missions to send work programs in advance to the entity concerned. This has meant that the mission members have asked for a large amount of work to be done on their arrival, and hasty preparation, has then led in many instances to information being given that was unclear and contained errors of various kinds. - The lilited decision powers of mission members has meant that in the case of certain questions put to them in the field it has not been possible to obtain prompt decisions or solutions to issues and -.oncerns raised both formally and informally, making it necessary for the matters in question to be taken to Washington, thereby delaying the taking of appropriate action. GENERAL CONCLUSIONS The foregoing leads us to the following conclusions: - The estimated time needed for project execution was not realistic, since the appraisal undoubtedly failed to allow for significant contingencies such as design errors, problems in project implementition, the protracted bidding, contract awa.d Ind payment process, and lack of capubility or experIence for perforn ng the adm)inistr,tive work t !- d-on by th c superviscrs and Vxerutiig agoncit, as thr poople ad unil: un, prim)ary aid direct ANNEX 22 Page 7 of 8 - 74 - The underestimation of costs at the time of appraisal was also partly responsible for execution taking longer than scheduled and for the mediocre social benefit achieved or provided by the facilities constructed, all of which resulted in substantial cost increases. Special mention must be made of the funding aspect, which was undoubtedly decisive in project execution, since the fact !s that the mechanism established by the Bank for the coverage or financing of local expenditures is neither best or the most appropriate. It was this very question of the vicious circle involved in obtaining these funds that in mid-1976 prompted a formal request to the Bank for an advance of US$2 million to be made &vailable for project works. Draft special regulations were enclosed along with that request and it was assumed that it would take six months for these to be approved. This request did not meet with a favorable response, however, and we were informed that the matter would be put before the Board of Governors of the Bank. We have yet to hear what action was taken on a request we believ to be of some importance, since we consider ourselves to be the mouthpiece for all the borrowers from the developing economies, like our own. It really is inadmissible or absurd for the Bank to require that (except in the case of advances) local expenditures be paid first before proceeding to make available the appropriate percentage, which means external loans have to be obtained because there resources are insufficietit. Finally, we should like to comment on our iidi% idual roles: ANNEX 22 Page 8 of 8 -75- World Bank The Bank should review its policies on involvement at all stage3 of loans, reducing to a minimum the approval and scrutiny procedures for decisions made by authorized personnel both in INSFOPAL and in the Empresas and placing more confidence in their sense of responsibility. honesty and efficiency. The machinery for payments under cofinancing arrangements should be improved, particularly where reimbursements are oncernad. INSFOPAL The procedures for disbursement of counterpart r&ocurces need to be speeded up so that the funds required by subborrowers ."n be made available promptly and delays in drawings can bp avoidr' An apprcpriate balance must be struck between c.cordination, advisory services, supe,.-vision and evaluation of the work performed by the executing agencies, with a view to overcoming the problems that arise in project handling and execution through periodic visits or missions forming part of a comprehensive work program. Enq iries or concerns raised either formally or informally by the Empresas should receive prompter attention. EMPRESAS Their technical, administrative and accounting capabilities need to be strengthened to make their performance more dynamic and efficient. With our sincere appreciation and thanks. c.c. Mr. Melvin Glu.dmin, I1RD Repre'linttiv" in CnlolA)ia l-i ll' 'il'll1 ii 1~, 1 äg4S~ ggl j. r. .. ......... A T A N T/C OCN E ASOUTHAMICA ETAn unRTc0o AlLANTICO 1. A?MGDALENA 5 R R E NORTE \ V E N E Z U E 1 A ORDO BASATNE - SANT ANDE R TbHIS MAPH AS SC EN SPECIFIC AL L YPREPARE D c ~t o FOR THE PROJECT COMPLE T/ON REPOR7 PROJECT DA7A IAS BEEN TAKFN FROM18RD 1109,MAY 1974 AND i8RD 3916 APRIL 1972 A A N r A N D A A - C A - .NC A A A A RE /.H A D A BIUENA.ENTR AAA UAvAE - - - N 4Ak NC 0 A u P IS p Uj u m A yC ECUADOR Co L M Bi A LOANS 860 - CO,1072 - CO, MEDIUM CITIES WATER SUPPLY AND SEWERAGE PROJECT I AND II N vA C, es -ler C t,0s ndel - om R,V5 P E R U