Colombia - Cucuta Water Supply and Sewerage Project

 Cucuta water supply and sewerage project Report No: ; Type: Report/Evaluation Memorandum ; Country: Colombia; Region: Latin America And Caribbean; Sector: Water Supply & Sanitation Adjustment; Major Sector: Water Supply & Sanitation; ProjectID: P006791 Colombia: Cucuta Water Supply and Sewerage Project (Loan 2470-CO) The Implementation Completion Report (ICR) on the Colombia Cucuta Water Supply and Sewerage Project (Loan 2470- CO, approved in FY85), prepared by the Latin America and the Caribbean Regional Office, was reviewed by the Operations Evaluation Department (OED). The Borrower provided substantive comments which are in general agreement with, and have been incorporated into, the final ICR document. The loan of US$18.5 million, was approved on September 11, 1984, and closed on June 30, 1995, three years after the original closing date. A balance of US$0.4 million was canceled. In addition, a local loan of about US$3.5 million was provided by the Territorial Development Financing Agency (FINDETER). The project followed several earlier Bank projects in the water supply and sanitation sector in Colombia and was the first such project in the city of Cucuta, the capital of Norte de Santander and one of the larger municipalities in Colombia. The objectives of the project were: (i) to improve and expand water supply, sewerage and storm drainage services in the city of Cucuta; and (ii) to help strengthen the Cucuta Municipal Company (Empresas Municipales de Cucuta, EMC) as a multiservice entity. The project's physical components included: (i) expansion of the existing system with 43 km of new primary networks, 8,000 m3 of new storage tanks, 120 km of new secondary networks and 10,000 house connections; (ii) a new water supply system from the Zulia River, including a 17 km raw water transmission system, a treatment plant and three regional storage tanks; and (iii) a sewage treatment system to improve the quality of the water in the Pamplonita River (which eventually runs into Venezuela), including 8,200 household connections, 111 km of primary collectors and secondary networks, and a treatment plant consisting of a series of lagoons; and (iv) a storm drainage system upgrading and expansion. The institutional objectives were to be achieved through technical assistance to EMC, including training and upgrading of its maintenance and operation capabilities; consulting services for project implementation; and a feasibility study on integration of municipal services in the Cucuta Municipal Area. The physical objectives were largely met, although implementation was delayed due to the EMC's lack of managerial capacity and its financial weakness; as a result, both water supply and sewerage services coverage increased to 90 percent from the pre-project levels of 80 percent and 72 percent, respectively. Water system expansion particularly benefited low-income people but two of the three regional storage tanks still need to be completed to maximize the benefits of the new system. The waste water lagoons were not constructed, however, due to the lack of clear design criteria and subsequent unrealistically low costing at appraisal. The shortage of counterpart funding caused the drainage system to be dropped from the project. While some of the planned studies were carried out, the goal of institutional strengthening of the EMC was not achieved because of the lack of political commitment and frequent management changes. The Bank suspended disbursements for 15 months (at the beginning of 1991_in the seventh year of project implementation) mainly because of non-compliance with financial covenants and poor managerial performance by EMC on counterpart funding, contract delays, and waste water treatment plant. The suspension was lifted when the Bank approved corrective actions taken by EMC, including a 20 percent tariff increase. The appraisal estimate of the economic rate of return was 12 percent, but it was negative as recalculated in the ICR, largely due to delayed benefits and EMC's poor performance in raising tariffs and in lowering the level of unaccounted-for water. OED rates project outcome as unsatisfactory, lower than the ICR's marginally satisfactory, primarily because the objective of strengthening the EMC was largely disregarded during project implementation. The institutional development impact is rated as negligible and the sustainability of benefits as uncertain, due to continuing problems with unaccounted-for water, weak finances, and lack of managerial and administrative stability. Bank performance is rated as satisfactory, largely due to its decisive actions taken during supervision, although with some reservations due to the poor handling of sewage treatment plant design and costing issues during project appraisal. These latter ratings are consistent with those of the ICR. This project demonstrates that it may be necessary to undertake crucial capacity building actions and policy reforms before implementing a major investment project, rather than attempting to accomplish both simultaneously, if these institutional reforms are essential for benefit sustainability. In addition, the size of this project, coupled with its ambitious objectives and complex scope, was out of proportion to the executing agency's capacity to implement a large number of demanding, interrelated physical works, and to provide the additional resources needed to complete the project while carrying out its normal day-to-day activities. In this case, staging of implementation through a succession of projects might have led to a more sustainable outcome. In general, the ICR is of good quality. It presents a comprehensive analysis of the problems faced in project implementation. The plan for future operations gives a general framework for how the sector organizations are expected to operate in Colombia, but does not present the necessary operational details and indicators for the systems built under the project. No audit is planned at this time.