Haiti - Port-au-Prince Water Supply Project

Document of The World Bank FOR OFFICIAL USE ONLY G2Z Z2S2-A94 Report No. P-4982-HA MEMORANDUM AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT OF SDR 15.2 MILLION TO THE REPUBLIC OF HAITI FOR THE PORT-AU-PRINCE WATER SUPPLY PROJECT APRIL 7, 1989 This document has a restricted distribution and may be used by recipients only In the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  CURRENCY EQUIVALENTS Currency Unit - Gourde (G) US$1.00 = G$5.00 G$1.00 = US$0.20 UNITS AND MEASURES Hs = Cubic Meter ABBREVIATIONS AND ACRONYMS CAMEP = Centrale Autonome Metropolitaine d'Eau Potable CCCE - Caisse Centrale de Cooperation Economique GTZ = Gesellschaft fur Technische Zusammenarbeit KfW - Kreditanstalt fur Wiederaufbau MOPW = Ministry of Public Works SNEP - Service Nationale d'Eau Potable FISCAL YEAR October 1 - September 30  FOR OFFICIL USE ONLY HAITI PORT-AU-PRINCE WATER SUPPLY PROJECT CREDIT AND PROJECT SUMMARY Borrower: Republic of Haiti Beneficiary: Centrale Autonome Metropolitaine d'Eau Potable (CAMEP) Amount: SDR 15.2 million (US$20.0 million equivalent) Terms: Standard IDA, with 40 years maturity. OnlendinR Terms: The Republic of Haiti would onlend US$ 19.8 million equivalent of credit funds to CAMEP, to be repaid in 30 years, with five years of grace, at an annual interest rate of 7Z. The Government would bear the foreign exchange risk. Financing Plan: (1) CAMEP US$ 4.6 Government US$ 1.4 CCCE US$ 9.5 IDA US$20.0 TOTAL US$35.5 million Economic Rate of Return: 101 with tariff revenues as a proxy for benefits. Staff Appraisal Report: No. 7613-HA Map: (IBRD 21564) * (1) Includes interest during construction and repayment of an IDA PPF. I This document has a restricted distribution and may be used by recipients only in the performance of their oflicial duties. Its contents may not otherwise be disclosed without World Bank authorizatan.  MEMORANDUM AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT TO THE REPUBLIC OF HAITI FOR A PORT-AU-PRINCE WATER SUPPLY PROJECT 1. The following memorandum and recommendation on a proposed development credit to the Republic of Haiti for SDR 15.2 million (US$20 million equivalent) is submitted for approval. The proposed credit would be on standard IDA terms with 40 years maturity and help finance a water supply project for Port-au-Prince, the capital city. The project would be cofinanced by the Caisse Centrale de Cooperation Economique (CCCE-France) for SDR 7.2 million (US$9.5 million equivalent). 2. Background. With only about 202 of its population having access to piped water, service levels in Haiti are the lowest in the Western Hemisphere. In the country's capital, Port-au-Prince (about 1 million population growing at about 32 p.a.), about 15 of the population is served by house connections; 702 obtain water from neighbors and public standpipes and the remaining 152 through other means. Throughout Haiti, water is severely rationed and often contaminated. The absence of sew-erage and the general lack of adequate excreta and waste water disposal create severe unsanitary conditions, particularly in the densely populated slum areas of the capital. Poor sanitary conditions and the lack of safe water are main causes for high infant mortality (120 deaths per 1,000 live births country-wide; 150 in Port-au-Prince) and contribute to the high morbidity rates throughout the country. Poor water and sanitation services country-wide and the poor health of the population reflect to some extent a low level of sector investments prevalent throughout Haiti's history. 3. Another major factor Is the weakness of the sector's institutions. The Ministry of Public Works (MOPW) is responsible for overall management of the water sector. Two agencies dependent on MOPW are responsible for operating, maintaining and expanding water supply facilities in the country: Service Nationale D'Eau Potable (SNEP) in urban and rural areas except Port-au-Prince; and Centrale Autonome Metropolitaine d'Eau Potable (CAMEP) in the metropolitan area of Port-au- Prince. SNEP was able to complete in 1982 water supply investments in seven medium-size cities under an IDA-financed operation, but failed to meet the objectives of decreasing dependence on the national budget and improving the operation of water systems. CAMEP has been unable so far to adequately operate r and maintain existing facilities and to carry out the system expansions needed to provide a sufficient and safe water supply to the population of Port-au-Prince. The general lack of meters in Port-au-Prince and low water charges particularly for unmetered customers, have encouraged water waste and kept CAMEP short of funds even for minor repairs. In 1985, facing ever deteriorating water supply service conditions in Port-au-Prince, CAMEP and the Government sought assistance from CCCE and IDA. During 1985-1988, with financial assistance from a PPF advance, CAMEP introduced some operational improvements necessary to enable it to undertake the proposed project. CCCE financed additional operational improvements and emergency investments with an US$8.5 million loan. Mainly because MOPW discouraged the installation of meters and slowed down investments by interfering with the management of contracts, CAMEP has made only modest progress in improving operations and rehabilitating facilities. Rer ntly, the Government and CAMEP have proposed a first-stage project of the expans..3n of water supply services in Port- au-Prince.  4. During project processing (mainly from September 1988 to April 1989), the Government and CAMEP have taken substantial actions to improve CAMEP's management and financial performance, as a first step of a medium-term strategy to upgrade the sector country-wide. The Government appointed a professional general manager, who proceeded to hire qualified staff for key positions. In spite of labor unrest throughout Haiti, CAMEP dismissed redundant and underperformirg staff, reducing the staff number per 1,000 connections from 22 to 20. CAMEP, with decisive Government support, introduced a major tariff reform which: (i) made charges to customers relate more closely to income category and quality of service; and (ii) raised average revenues per customer by about 201. CAMEP has still a long way to go to become an operationally efficient and financially viable water utility. These actions, however, have demonstrated Government's and CAMEP's commitment to stai^- the process. The Government, moreover, appears willing to introduce an appropriate framework of sector policies and support the efficient development of SNEP. In this context, Kreditanstalt fur Weideraufbau (KfW) and Gesellschaft fur Technische Zusammenarbeit (GTZ) intend to assist SNEP in developing the capacity to adequately operate and maintain the water systems under its responsibility. KfW's and GTZ's assistance would also include the preparation of investment plans and the formulation of appropriate technical standards and cost recovery policies. 5. Rationale for IDA Involvement. IDA's lending strategy for Haiti gives high priority to operations in the social sectors with a strong impact on improving the living conditions of the p-vor. Within this context, IDA's strategy is to assist projects designed to: (a) improve the infrastructure in support of increased production in urban areas, especially Port-au-Prince, which has the best prospects for growth through industrial production for exports; (b) mobilize internal resources for financing investments and servicss to minimize the need for Government transfers; and (c) improve the efficiency of public enterprises, to contain the cost of services and facilitate cost recovery. The proposed project would closely fit IDA's strategy. Providing safe water would meet a fundamental and unfulfilled need of Port-au-Prince inhabitants, particularly the poor. IDA's assistance to CAMEP is particularly justified, as CAMEP is among the public enterprises most prepared to upgrade its operations and finances. 6. Project Obiectives. The objectives of the proposed project would be to: (a) begin the process of turning CAMEP into an operationally efficient and financially viable entity; (b) improve the supply of water and expand service coverage in Port-au-Prince; (c) develop a plan for improving the sanitary conditions in Port-au-Prince through the introduction of appropriate and affordable waste-water and excreta disposal mechanisms; (d) obtain Government commitment to a plan for more efficient and dynamic development of the water sector in other urban and rural areas; and (e) help Haiti mobilize and coordinate external assistance for water and sanitation. 7. Project Description. The proposed project includes the following main components: (a) an institutional development program, to improve CAMEP's performance; (b) rehabilitation or replacement of obsolete pipe networks; (c) expansion of storage, pumping, transmission and distribution facilities; (d) drilling of wells to increase water production capacity by 20,000 m3 per day; (e) engineering services to complete final designs, supervise construction, and prepare a follow-up project; and (f) preparation of a plan for tve appropriate disposal of waste water and excreta for the Port-au-Prince area. The project, to be carried out over six years, provides funds for: civil works; equipment;  consultancies for engineerin& services, institutional development and technical assistance; and training. The total cost of the project is estimated at US$31.2 million equivalent, with a foreign exchange component of US$22.9 million (73S). IDA and CCCE would cofinance the project. A breakdown of costs and the financial plan for the proposed project are shown in Schedule A. Amounts and methods of procurement ane of disbursements, and the disbursement schedule are shown in Schedule B. A timetable of key project processing events and the status of IDA operations in Haiti are given in Schedules C and D, respectively. A map is attached. The staff appraisal report No. 7613-HA dated April 7, 1989, is also attached. S. Agreed Actions. The Government has agreed to: (a) conduct by June 30 each year a formal review of project performance with IDA, and take or cause CAMEP to take actions needed to remedy any shortcomings; (b) furnish to IDA by mid 1990 a management study of the Cul-de-Sac aquifer (now under uncontrolled exploitation by agricultural enterprises), and implement to the satisfaction of IDA by mid 1991, the measures necessary to rationally allocate water resources, assure CAMEP's access to the aquifer and protect CAMEP's wells from interference from other aquifer users; (c) submit to IDA by mid 1990, on the basis, inter alia, of assistance KfW would provide to SNEP, a plan for improving country-wide water sector development, and start, by mid 1991, actions agreed with IDA for upgrading the capabilities of the sector's institutions; and (d) take by mid 1991 initial actions satisfactory to IDA to implement the recommendations of the sanitation study of Port-au-Prince. 9. CAMEP has agreed to: (a) maintain at all times its key management positions filled with persons whose qualifications and experience are satisfactory to IDA; (b) carry out an institutional strengthening program to meet administrative and operational performance targets; (c) reduce the ratio of costs (excluding depreciation) to revenues from 1.0 in 1988 to 0.50 in 1993 with annual intermediate targets; (d) introduce, by December 15, 1989, a system to automatically adjust tariffs according to inflation on an annual basis, and increase tariffs in real terms by 4X each year during FY1990-FY1993; (e) raise the ratio of customers billed the highest rates by quality of service to total customers from 0.20 in 1989 to 0.65 in 1994 with annual intermediate targets; (f) reduce the number of staff per 1,000 water connections from 22 in 1988 to 13 in 1994 with annual intermediate targets; (g) obtain IDA agreement for any substantial investment other than the project; and (h) propose to IDA by June 30 each year an operational and financial plan for the current and the following five years, and take all actions necessary to meet financial covenants in the current and the following year. 10. The following would be special conditions of effectiveness: (i) approval of loan by CCCE's Board; (ii) signature of on-lending agreement between the Government and CAMEP, in terms satisfactory to IDA; and (iii) passage of a decree granting to CAMEP management and operational autonomy. Contracting of consultants for project supervision and for assisting CAMEP in improving the efficiency of operations would be conditions of first disbursements for civil works. 11. Benefits. The project would provide a safer and more reliable water service to about 425,000 people of Port-au-Prince, most of whom are poor. The internal rate of return (IRR) of the project would be 10X, which is satisfactory considering that tariff revenues are used as to proxy for economic benefits and  - 4 - therefore the IRR does not measure the social and health beneftts and the consumer surplus which will accrue to project beneficiaries. Improving CAMEP's operational efficiency and cost recovery would reduce the need for Government subsidies. 12. Risks. The project faces four major risks, which pertain to CAMEP's and Government's traditional weaknesses. First, CAMEP may fail to attain the capacity to operate efficiently. Second, CAHEP may fail to implement the financial measures needed to maintain a satisfactory financial performance. Third, the Government may preclude CAMEP from implementing these measures. Fourth, CAMEP and the Government may fail to provile counterpart resources for the IDA-assisted components and thus delay projec:. completion. Political uncertainties, like those still prevailing in Haiti, would exacerbate these risks. The actions taken by CAMEP and the Government to put in place an acceptable management team, dismiss some excess staff and carry out a major tariff reform during project processing, in spite of social unrest, have already reduced the aforementioned risks. The project, moreover, includes specific measures to reduce them further. An annual review of the project issues with CAMEP, the Government and CCCE would lead to timely plans of action to remedy identified shortcomings. Considering the major turn-around expected of CAMEP and the pervasive weakness of Haiti's public sector, however, it is likely that not all project objectives will be fully met. Even so, the project would go a long way towards introducing urgently needed improvements in water services in Port-au-Prince, reducing the need for Government transfers to support CAMEP and starting a. process to upgrade the water and sanitation sector throughout Haiti. 13. Recommendation. I am satisfied that the proposed credit would comply with the Articles of Agreement of the Association and recommend that the Executive Directors approve the proposed credit. Barber B. Conable President Attachments Washington, D. C. April 7, 1989  Scheodule A HAITI Port-ou-Prince Watir Supply Proloet Estimated Costs and Financing Plan (US mtltion) Component Local Forelsn Total IDA Financed (a) (a) Construction/Rehabilitation of Distributsi.n Infrastructure 3.2 7.4 19.6 (b) Secondary Networks, Connections and Meters 1.4 8.2 4.6 (e) Equipment and Stocks 9.0 1.0 1.0 (d) Operation and Maintenance Facilities 0.2 0.2 0.4 (a) Strategic Sanitation Study of Port-Au-Prince o.6 0.2 9.2 Base Cost (b) 4.8 12.0 16.0 Physical Contingenclos O.5 1.4 1.9 Price Contingencies O.7 1.9 2.0 Sub-Total 6.0 15.8 21.8 CCCE Financed (f) Well Field and Transmission Pipeline 1.0 8.8 4.8 (g) Technical Assistance and Training 9.1 2.0 2.1 (h) Supervision of Construction 0.2 9.8 1.0 (s) Preparation of Follow-up Project 9.1 9.8 0.4 Base Cost (a) 1.4 6.4 7.0 Physical Contingencies 0.2 0.4 9.8 Prieo Contingeniets 0.8 6.9 1.1 Sub-Total 1.9 7.6 9.5 CAMEP (exclusively) Finaned (j) Purchase of Land 0.4 0.0 0.4 Tot.l Investment Project Base Cost (a) 6.6 16.4 25.0 Physical Contingencies 0.7 1.6 2.5 Price Contingencies 1.9 2.7 8.7 Total Project Cost 8.8 22.9 81.2 Repayment IDA PPF 0.0 9.8 9.8 Interest during Construction 0.0 8.5 8.5 Total Financing Requirod 6.8 27.2 85.5 F;nancing Plann nDA ~ 4.0 16.0 20.9 CCCE 1.6 7.7 9.5 CAMEP 1.1 8.5 4.8 GOVERNMENT 1.4 0.0 1.4 (a) Taxes and duties are Insignificant. (b) In pricOJ of Docember 81, 1988.  HAITI PORT-AU-PRINCE WATER SUPPLY PROJECT ProcurMement (US$ million) PROCUREMENT METHOD CCCE Government IDA Guidelines Guidelines Guidelines TOTAL Project Element MA Other Sub-Total 1. Civil Works (b) 9.5 1.0 10.5 2.5 13.0 (7.6) (0.8) (8.4) 2. Equipmentl 10.2 0.5 10.6 3.5 14.2 materials (b) (10.2) (0.5) (10.6) 3. Consultancies/ - _ 0.9 0.9 3.5 4.4 Training (c) (0.9) (0.9) 4. Land - 0.A 0.4 Total 19.7 1.5 0.9 22.1 9.5 0.4 32.0 (20.0) (a) Figures in parenthesis are the respective amounts financed by IDA. (b) Most purchases of materials will be pipe to be included in pipe-laying contracts awarded under IDA guidelines. 0c (c) Includes US$0.7 already disbursed under a project preparation advance from IDA.Phi  Schedulo a Page 2 of 2 DISBURSEMENTS Ctestotry A~mount Percentate of Cost I Civil Works, 801 of expenditures II Equipment and Materials, 100l of expenditures III Consulting Services, (Strategic Sanitation Study) 1001 of expenditures IV Payment of PPF 100l of Advance ESTDMTED DISBURSiEENTS IDA FISCAL YSAR US S Million 1989 1990 91 2 1993 1994 Annual 0.0 1.1 5.4 7.7 4.5 1.3 Cumulative 0.0 1.1 6.5 14.2 18.7 20.0  Schedulo C HAITI PORT-AU-PRINCE WATER SUPPLY PROJECT Timetable of Xev Pro1ect Processint Events (a) Time taken to prepares Two and a half years (b) Prepared by: CAMEP with assistance from CCCE and IDA tc) First IDA missiont November 1986 (d) Appralsal mission departures November 9, 1988 (e) Date of negotiations: March 1989 (f) Planned date of effectiveneses July 1989 (g) List of relevant PCR'o and PPAR's Provincial Towns Water Supply Project (PCR No. 6875)  Schedule D HAITI PORT-AU-PRINCE WATER SUPPLY PROJLCT Status of Bank Group 2perations In Haiti A. Statesent of Dank Loans and IDA Credits as of Septeber 30) 1988 - - ----- --S N-llion------- Amount Credit fiscal (Less Cancellation) No. Year Borrower Purpose lak IDA Undisbursed One loan nd 16 credits have been fully disbursed 2.6 179.9 1257-HA 1982 Bepublic of haiti forestry 4.0 0.9 fool-HA 1983 Republic of Haiti Urban Development 13.0 11.0 1338-U 1983 Republic of aiiti Urban Developenat 8.0 1.6 1410-HA 1984 Republic of Haiti Rural Developteat II 19.1 2.3 1527-IU 1985 Republic of haiti fourth Pover 22.1 4.3 1592-U 1985 Rehpblic of Haiti fourth Edueation and Training 10.0 7.0 1756-h 1987 Republic of Haiti Trausport III 20.0 12.5 1766-1 1987 Republic of Haiti kconomic Recovery 40.0 21.2 1786-HA 1981 Republic of H1iti Technical Assistance 3.0 0.8 Total 2.6 319.1 61.6 of shich has been paid 2.6 2.0 Total log Outstadins 317.1 Amount Sold 0.4 of which has been repaid 0.4 Total gldisbursed 61.6 B. Statement of IIC Investsents as of September 30 '988 -----5$St hillion------ Ilvestbent fiscal Type of uaber Tear Obligor stilness Loan Equity Total -------- ----- ---- ... .....-----. --- .. .. .. 620-HA 1982 Prouoteurs et Iu estisseuns Integrated Poultry 1.4 0.2 1.5 Assoeies, Si. Total Groas Commituents 1.4 0.2 1.5 Less Repayments, Cancellations, Sales 1.0 - 1.0 Total comuitments now held by IfC 0.4 0.2 0.5 Total Undisbursed 0.0 0.0 0.0  I; , 133RD 2156 CUL DE SAC 71 HAITI (GROUNDWATER) PORT-AU-PRINCE WATER SUPPLY PROJECT Pnofod A'., p-lVO -pcmar4b9l4o- /. WELL?IELD -Of vw,iow eoo dibbo tiO MAIS GATE v1 ,3!!A O w.11. " bn C 3 ./ == ma o: RU.oin obnCo.1&1nstd --R-,,.4m tipo be odo > CITE SOLEILC ---+t T-W-si Pm to be EVpWmR."htwt wI Woi.q ; WEY42|t*W IX -. ,/ / / . - Caribbean Sea , Low. Zm Papw.d by PI) / / M 724 - naol.jBoa.doaw AMVU~~~~~~~~~~ --- .S b * = m ; = / WELFIELD TAPAGE GALETTE 0~ ~ ~ ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ - V \\X5S 15-2 X - i~, 'Y -- --E -. 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