Turkmenistan - Water Supply and Sanitation Project

Document of The World Bank Report No. 16142-TM STAFF APPRAISAL REPORT TURbKMENISTAN Water Supply and Sanitation Project April 24, 1997 Human Resources Division Country Department III Europe and Central Asia Region  CURRENCY EQUIVALENTS Currency Unit =Manat AVERAGE EXCHANGE RATES Manat per US$1 Parallel Official Commercial Market 1993 (end) 2 2 1994 (end) 75 - 200 1995 (end) 200 2484 2,500 1996(end,estimate) 4,070 5194 5,200 WEIGHTS AND MEASURES Metric System TURKMENISTAN - FISCAL YEAR January I - December 31 Vice President: Johannes Linn, ECAVP Director: Yukon Huang, EC3DR Division Chief: Robert Liebenthal, EC3HR Task Team: Rita Klees (Task Manager), Betty Hanan, Joana Godinho, Evelyn Villatoro, Ronald Venezia, Mona Malhotra (EC3HR), Zoe Kolovou (LEGEC), Subash Chandra (LOAEL), Donald Cullivan, Ian Walker, Michael Blackburn (Consultants).  LIST OF ACRONYMS ASP - Aral Sea Program TOR - Terms of Reference ASPERA - Aral Sea Project for TGC - Turkmen Geology Committee Environmental and Regional UFW - Unaccounted for Water Assistance UNDP - United Nations Development ATTA - Assistance to the Turkmenistan Program Area UNEP - United Nations Environment CC - Component Coordinator Program COM - Cabinet of Ministers UNICEF - United Nations Children'sFund DRWASA - Dashkhovuz Regional Water and USAID - United States Agency for Sanitation Authority International Development FSU - Former Soviet Union WHO - World Health Organization GDP - Gross Domestic Product g/l - Grams per liter GoT - Government of Turkmenistan GOST - Russian Standards HCS - Housing and Communal Services IBRD - International Bank of Reconstruction and Development ICB - International Competitive Bidding lIP - Immediate Impact Project IMF - International Monetary Fund IS - International Shopping IMR - Infant Mortality Rate KAP - Knowledge, Attitudes and Practices KWH - Kilowatts per hour Mcm - Millions of cubic meters Mid - Millions of liters a day MMR - Maternal Mortality Ratio MOA - Ministry of Agriculture MOE - Ministry of Education MOH - Ministry of Health and Medical Industries MWR - Ministry of Land Reclamation and Water Management NA - Needs Assessment NCB - National Competitive Bidding NGO - Non Governmental Organization NS - National Shopping O&M - Operation and Maintenance PCC - Project Coordination Committee PA - Project Account PHRD - Japanese Policy and Human Resource Development grant PIU - Project Implementing Unit PPF - Project Preparation Facility RCC - Regional Component Coordinator RWSD - Rural Water SupplyDepartment SA - Special Account SES - Sanitary Epidemiological Services SOE - Statement of Expenditures   STAFF APPRAISAL REPORT TURKMENISTAN Water Supply and Sanitation Project CONTENTS LOAN AND PROJECT SUMMARY I. BACKGROUND ........................1.......................... A. Country Context ............................................ 1 B Regional Context ............................................ 2 C. Sectoral Context and Institutional Setting ............................. 5 D. The Government's Objectives and Strategy ........................... 7 E. The Bank's Strategy .......................................... 8 F. Bank Experience in the Sector .................................... 8 G. Donor Coordination ........................................... 9 1I. WATER SUPPLY AND SANITATION IN DASHKHOVUZ .................... 11 A. Water Supply ............................................. 11 B. Sanitation ................................................ 15 C. Health .................................................. 16 III. THE PROJECT ....... .............. ........................... 18 A. Project Origin and Formulation .................................. 18 B. Objectives .............. ............................... 19 C. Description ............................................... 19 D. Estimated Costs ............................................ 23 E. Project Financing .......................................... 24 F. Environmental Impact ........................................ 25 IV. PROJECT MANAGEMENT AND IMPLEMENTATION ....... .. ............ 27 A. Overall Project Management . ................................. 27 B. Component Coordination ...................................... 28 C. Project Reporting .......................................... 29 D. Project Monitoring ......................................... 30 E. Bank Supervision ........................................... 30 F. Procurement .............................................. 30 G. Disbursements ............................................ 34 H. Project Accounts, Budgets and Audits ............................. 37 V. FINANCIAL AND ECONOMIC ANALYSIS ........... .................. 38 A. Scope of Analysis .......................................... 38 B. Financial Analysis .......................................... 38 C. Fiscal Impact and Cost Recovery ................................. 39 D. Economic Analysis ......................................... 39  E. Affordability ....................... 40 VI. PROJECT BENEFITS AND RISKS .............. ............... 42 A. Project Benefits .......................................... 42 B. Risks ............. 42 VII. AGREEMENTS AND RECOMMENDATION ........... .. ............... 43 A. Agreements Reached ......................................... 43 B. Recommendation ........................................... 44 ANNEXES A: Presidential Decree and Policy Letter ............... I ................ 45 A-1: Policy Letter ............................. 45 A-2: Presidential Decree .47 B: Executive Summary Social Needs Assessment .48 C: Institutional Assessment .54 D: Water Quality Data .62 E: Cost Recovery Considerations for Dashkhovuz Velayet .63 F: Review of the Tuyamuyun and Lebat Regional Water Supply Schemes .67 G: Health Data ..71 H: Demonstration Projects .75 1: Dashkhovuz Regional Water and Sanitation Authority: Proposed Organizational Structure and Action Plan .78 J: Project Implementation Plan ...................................... 81 K: Detailed Cost Tables .87 L: Environmental Analysis .90 M: Project Implementation Unit .94 N: Supervision Plan .101 0: Performance Monitoring Indicators .103 P: Procurement Arrangements .105 Q: Disbursement Arrangements .108 R: Financial & Economic analysis .109 S: Terms of References (TORs) .146 T: Project Documents in File .186 MAP IBRD No. 28390 TABLES Table 3.1 - Estimated Project Costs .23 Table 3.2 - Financing Plan .24 Table 4.1 - Summnary of Proposed Procurement Arrangements .33 Table 4.2 - Proceeds of the Loan .35 Table 4.3 - Annual and Cumulative Disbursements .36 CHART Chart 4.1 - Annual and Cumulative Disbursements (World Bank Fiscal Years) .35 Annex M - Organizational Chart for Project Management and Implementation .100  TURKMENISTAN Water Supply and Sanitation Project LOAN AND PROJECT SUMMARY Borrower: Turkmenistan Implementing Agency: Ministry of Land Reclamation and Water Management (MWR) Beneficiaries: Ministry of Land Reclamation and Water Management (MWR) Ministry of Health and Medical Industries (MOH) Poverty: Program of Targeted Interventions Amount: US$ 30.3 million Terms: Payable in twenty (20) years, including five (5) years of grace at the Bank's standard interest rate for LIBOR-based US dollars single currency loans. Commnitment Fee: 0.75 % on undisbursed loan balances, beginning 60 days after signing, less any waiver. Onlending Terms: Not Applicable Financing Plan: See para. 3.15. Rate of Return: 22.2% IERR for urban and 10.6% for rural water supply systems Staff Appraisal Report: 16142-TM Map: IBRD 28390 Project ID Number: TM-PE-8867   TURKMENISTAN Water Supply and Sanitation Project I. BACKGROUND A. Country Context 1.1 Country Profile. Turkmenistan, the southernmost republic of the Former Soviet Union (FSU), is bordered to the west by the Caspian Sea, to the south by Iran and Afghanistan, to the east by Tajikistan and to the north and northeast by Kazakhstan and Uzbekistan. The country gained its independence on October 27, 1991. Turkmenistan lies in the midst of two of the largest deserts in the world, the Karakum and Kyzyl Kum, and 90% of its land is considered arid. With an area of 488,000 kmi2, it is the fourth largest country of the FSU. 1.2 Turkmenistan is one of the least urbanized of the FSU countries with 45 % of the total population in urban areas. The country's small population of 4.5 million people is concentrated in a thin strip of land along the foothills of the South and in areas where the land is irrigated. The nation's capital, Ashgabat, is the largest urban center with an estimated population of 500,000. Compared to other countries of the FSU, Turkmenistan's health indicators are poor. Life expectancy is the lowest (62 for males and 69 for females); the infant mortality rate (IMR) is the highest (46/1,000); maternal mortality is the fifth highest; fertility rates are relatively high; rates of cardiovascular diseases are extremely high and increasing; and respiratory, digestive, infectious and parasitic disease are also among the highest of any FSU countries. 1.3 Turkmenistan's economy is dominated by energy and agriculture. It has 1.3 trillion cubic meters of proven and probable natural gas reserves and is the world's fourth largest natural gas producer. It also has 1. 1 billion tons of oil reserves. Despite these energy reserves, the economy is still predominantly agricultural. Cotton, grains, fruits and vegetables are the major crops. At present, agriculture is experiencing low earnings, low yields, low efficiency of water use, and problems of soil quality. Nearly 50 percent of all irrigated land is defined as suffering problems of high water table, salinity, or both. 1.4 Water Resources. Turkmenistan is a desert country with average annual rainfall varying between 90 nmm in Dashkhovuz (the project target area) to nearly 400 mm in the southwest highlands. Agriculture is entirely dependent on irrigation and most of Turkmenistan's limited water is used for irrigation. Of nearly 25 km3 of water delivered in 1993, about 98 percent was used for irrigated agriculture (this includes losses estimated at approximately 50 percent) and the rest for domestic and industrial purposes. About 99.5 percent of the water supplied was from surface sources. Reuse in irrigation of drainage water from irrigated agriculture and reclaimed municipal wastewater is not practiced in Turkmenistan. 1.5 Four rivers provide surface water in Turkmenistan. The Amu Darya River, which supplies 90 percent of the water for all sectors, is the major source of water supplies. Within the country, water is further distributed by an extensive network of irrigation canals totalling more than 30,000 km in length, the majority of which are open and unlined. Groundwater resources cannot be fully utilized since most of the aquifers are relatively deep and remote from the main agricultural consumption areas making the  Page 2 Turkmenistan: Water Supply and Sanitation Project costs of extraction and conveyance prohibitive. The amount of groundwater presently utilized is very low. 1.6 Agriculture, a vital component of the Turkmen economy, is constrained by the availability of water. Declining soils and water quality/quantity will have significant implication for future agricultural development possibly thwarting plans to diversify the agricultural base from one almost entirely dependent on cotton to one that will enable the country's food requirements to be met. Agricultural regions lying close to the Aral Sea will be particularly affected. Improved management of water resources will be needed if agriculture is to grow on a sustainable basis' and would include a policy to improve the efficiency of water use. Currently there is no appropriate pricing policy for water for any sector. A draft Water Law is currently under consideration that would provide the legal basis for charging for water. In addition, under the Aral Sea Program-Project 1. 1 (see paras 1.10 and 1. 11) a draft National Water Management Strategy has been developed which proposes water pricing for all purposes. Turkmenistan has issued a water sector policy letter (Annex A-I) indicating a commitment to water charging for beneficiaries of the proposed project. The policy strategy has been further advanced by a Presidential Decree (Annex A-2) indicating water charges will be initiated as the project's water supply systems come on line. 1.7 Macroeconomic setting. At independence in 1991, based on expectations of an impending natural gas export bonanza, the Government put adjustment and transition issues on hold and launched a plan to modernize the capital city. In addition to free health and education, it proclaimed an extensive subsidy and entitlement program and strengthened centralized controls. It maintained distorted trade and foreign exchange regimes and retained state orders and price controls on many items. Results have been disappointing and over 1993-95 real GDP fell by more than 30 percent, gas production declined by three- fifths, and real minimum monthly wages by an estimated 80 percent. By the end of 1995, annual inflation exceeded 1000 percent and per capita income (US$ 920 in 1995 according to the modified Atlas Method) was significantly below the FSU average. However, a serious stabilization initiative was pursued during much of 1996 and this made substantial inroads in reducing inflation. There were also a number or positive developments in structural and sectoral policies, especially in agriculture. Over the last year, the Government has outlined some of the main elements of a reform strategy in a concept document issued by the President. It has implemented a number of sectoral reforms and has stated its intention to accelerate efforts aimed at macroeconomic stabilization and structural adjustment. B. Regional Context 1.8 The Aral Sea Basin. The Aral Sea basin covers an area of 690,000 km2 and is occupied by five Central Asian republics, Turkmenistan, Kazakhstan, the Kyrgyz Republic, Uzbekistan and Tajikistan and parts of northern Afghanistan and northeastern Iran. All of Turkmenistan lies in the Aral Sea Basin. The Aral Sea, an inland lake fed by the Syr and Amu Darya Rivers, lies between Kazakhstan and Uzbekistan and was once the fourth largest inland lake in the world. Over the past 35 years, intensive cotton farming and agricultural development have diverted so much water from the two rivers which feed the Aral Sea that its shore line has retreated by more than 120 kilometers; the sea level has fallen more than 16 meters; the surface area has decreased by nearly 50%; the volume diminished more than 70%; and salinity has risen to over 30 grams per liter. "'Turkmenistan Review of the Agrarian Sector" The World Bank, May, 1996  Turkmenistan: Water Supply and Sanitation Project Page 3 1.9 The quality of ground and surface water resources in the Aral Sea Basin has deteriorated as a result of these intensive agricultural water withdrawals combined with industrial and agricultural wastewater discharges; soil salinity; and erosion. The ecosystems of the Basin's deltas have suffered from spreading desertification, diminishing stream and groundwater levels, and increasing soil salinity. Once the location of successful commercial fishing, hunting, navigational and recreational activities, today the region in the immediate vicinity of the Aral Sea, including portions of Turkmenistan, is considered an environmental disaster zone and all traditional economic activities associated with the Aral Sea are terminated. 1.10 Aral Sea Program. In response to requests for assistance from the five Aral Sea Basin states, the World Bank first visited the environmental disaster region of the Aral Sea Basin in September, 1992. In partnership with local representatives, the Bank analyzed a range of sectoral problems in the region including environmental, economic, agricultural, and health. The five Aral Sea states have worked in cooperation with the United Nations Development Program (UNDP), the United Nations Environment Program (UNEP), and the World Bank to develop a plan of action, the Aral Sea Basin Program, to address the problems in the Aral Sea basin. The Bank has taken a leading role in the development and implementation of the Program, including donor coordination, technical assistance to all projects, and capacity building assistance to regional institutions. One of the three objectives of the Aral Sea Program is to ameliorate the conditions for the population in the disaster zone with a focus on the provision of improved drinking water supplies. 1.11 At a meeting of the Heads of Government of the five Aral Sea Basin states in February, 1994, it was decided to include the Turkmenistan Water Supply and Sanitation project in the Aral Sea Program. Three Water Supply and Sanitation projects for Turkmenistan, Uzbekistan and Kazakhstan, respectively, were presented to, and accepted by, the Heads of the Governments of the five Aral Sea States in Paris, June, 1994. At this meeting it was decided that the World Bank would take the lead in identifying and preparing a water supply and sanitation project focusing on the region of Turkmenistan most affected by the Aral Sea disaster, Dashkhovuz Velayet. Additional projects under the Aral Sea Program particularly the regional water resource management project were designed to identify the means and mechanisms of combining Basin states' development goals/interests with long term water resource and environmental management objectives. 1.12 Dashkhovuz Velayet. Turkmenistan is divided into five administrative regions, "velayet" one of which, Dashkhovuz, comprises the Turkmen portion of the Aral Sea disaster zone. The Velayet has an average annual rainfall of only 107 mm. As a consequence of its location on the lowest reaches of the Amu Darya River in Turkmenistan, the area is the most affected by conditions related to the Aral Sea Basin degradation. Dashkhovuz velayet has a population of 951,000 (1996) of whom 300,000 (32%) are classified as urban and 651,000 (68%) as rural. The region is characterized by families larger than the national average and high population densities. Approximately 50 percent are women and children under the age of 14. 1.13 Dashkhovuz velayet has a capital city, Dashkhovuz City, with a population 154,000, and eight administrative zones called "etraps. " The urban population of Dashkhovuz live in the capital and in eight etrap centers, "city-type" settlements which are small cities of 10,000 - 32,000 population. Most of the rural population live in an estimated 104 collective farms. The farms are further divided into rural settlements or villages. There are an estimated 520 villages, or roughly five per collective farm. The average collective farm population is about 6,000 and the largest is about 16,000. The average village has a population of 1,200. In terms of water supply and sanitation characteristics, only a proportion of  Page 4 Turkmenistan: Water Supplv and Sanitation Project the inhabitants of Dashkhovuz can be classified as urban. The etrap urban centers and collective arms both have similar levels of service which are effectively rural in nature. 1.14 Health Indicators. Health status in Turkmenistan is poor, as compared with other FSU countries and health status is poorer in Dashkhovuz velayet than in the rest of the country. The poor and declining health is attributed to degradation of the environment; qualitative and quantitative deterioration of the drinking water supply; poor sanitation and hygiene practices; protein and vitamin deficiency; and inadequate and declining health care services.2 1.15 The birth rate is higher in Dashkhovuz than in the country, and has been decreasing at a lower rate than the rest of the country. The infant mortality rate (IMR) in Dashkhovuz is the highest of any etrap in the country (47.5/1,000 live births). Maternal mortality is reported to be more than twice as high in Dashkhovuz (96.3/100,000 live births) than in the rest of the country. Malnutrition, anemia and goiter are common problems in Dashkhovuz. Local health authorities report that 100 percent of pregnant women and 80 percent of women have anemia although no specific studies of malnutrition and anemia have been conducted. 1.16 There is a high incidence of communicable diseases, and particularly water and sanitation related diseases such as diarrheal diseases and hepatitis A. Children below age 14 account for about 80 percent of registered cases of diarrhea, and 50 to 70 percent of hepatitis A cases. Data about salmonella and food poisoning indicate that food-borne diarrhea may be a greater problem than water-borne diarrhea. 1.17 Socio-economic conditions. Project preparation included a Social Needs Assessment to ensure that objectives and interventions would address the actual needs of the affected population and would be acceptable to all beneficiaries, especially the poor. The Social Needs Assessment, which was carried out in collaboration with local social science experts, included a community profile on overall socio-economic conditions in the project area; a survey of 790 households in all project etrap centers and fourteen collective farms; and a study of water supply and sanitation facilities in schools, health facilities, and enterprises. These activities were conducted in April-May, 1995. Results of the social needs assessment were used to: (i) provide baseline information on socio-economic conditions, water supply services, hygiene and sanitation practices; (ii) to help identify suitable community based demonstration projects and their location; and (iii) to guide project design. The community profile showed that the velayet as a whole can be characterized as predominantly rural. The main ethnic group is Turkmens, followed closely by Uzbeks, with very small populations of Kazakhs and Russians. 1.18 The needs assessment revealed that the major concern of the population in the project area is the lack of basic food products. Overall both rural and urban households spend about 85 percent of their earnings on food. Concerns about the quality of water ranked second as a household concern. Hygiene and sanitation related needs are not reported to be priorities. Close to 40 percent of households describe the general state of health of their family members as "not very healthy." Average annual household income was reported to be $356 ($376 rural and $336 urban) and consists of various components: salaries earned by working persons, unemployment benefits, extra earnings from participation in the cotton harvest, earnings from the sales of home garden products and privately owned livestock, and income from other informal activities. The assessment revealed the importance of income from secondary and informal 2 World Bank Turkmenistan Health Sector Review, 1995  Turkmenistan: Water Supply and Sanitation Proiect Page 5 sources to Dashkhovuz households, especially to rural families. In collective farms part of annual income is paid in monthly installments, and the rest is paid as an annual bonus at the end of the fiscal year. For many rural families, this income system results in considerable uncertainty and financial vulnerability. Often monthly salaries are several months in arrears. Because of inflation and fluctuating prices for agricultural goods, especially cotton, it is difficult for many households to forecast the amount they can expect to be paid by farm management and to plan investments accordingly. Annex B provides more information on the needs assessment. C. Sectoral Context and Institutional Setting 1.19 Institutional Setting: Water Supply and Sanitation. Responsibility for the water supply and sanitation sectors is shared amongst over nine national organizations (Ministries of Water Resources, Agriculture, Environment, Health; Turkmen Geology comrnmittee; Institutes of Design, Chemistry; and Housing and Communal Services, Desert Research Institute); regional organizations including the Rural Water Department and city departments; and etrap level water and sanitation authorities. Annex C provides an institutional assessment including details of sector responsibilities. 1.20 With some relatively minor differences, Turkmenistan has followed the model of the FSU in providing water, wastewater, sanitation and health services to its people. The FSU model was based on strong control from Moscow (after independence, Ashgabat) in matters such as policies, planning and allocation of financial and other resources; with very limited input from the end-users of the services in the villages, towns and cities. The present water and sanitation institutional setting has the following weaknesses: (i) allocation of responsibility for the sector among too many government agencies; (ii) a wide range of responsibilities other than water and sanitation assigned to the principal agency charged with providing water supply; (iii) lack of technical and management skills throughout the sector; (iv) the absence of a coherent program for the effective operation and maintenance of water and sanitation facilities; (v) inadequate focus on the importance of providing effective means of excreta disposal; (vi) inadequacy of funding for both capital construction of new and replacement facilities, and for operation and maintenance of existing facilities; and (vii) a national policy which provides water services at no cost to the users. Organizational Weaknesses 1.21 Lack of Focus on Sector Responsibilities Housing and Communal Services (HCS), before it was disbanded as a ministry, was responsible for the provision of water supply to the people of Turkmenistan. Since disbandment, that responsibility has not been represented at the ministerial level. The Ministry of Land Reclamation and Water Management (MWR) has the important responsibility of serving as the adjudicator of how the country's scarce water resources are to be allocated and it is presently the ministry most closely associated with the provision of public water supply. However, MWR has no department with responsibility for the public water supply sector. At the velayet level, HCS is responsible for public water supply and for wastewater collection and disposal. However, HCS has many other responsibilities, and water and wastewater is just one of many communal services in its portfolio. 1.22. Gaps in Responsibilities The most obvious gap in sector responsibilities is that for the provision of safe and convenient means of excreta disposal. Current analyses of health studies indicate that hygienic disposal of human excreta is one of the most critical requirements to assure the health of the people. The Housing and Communal Services department is responsible for the provision of piped sewerage systems for the disposal of wastewater, but there is only one such system in the entire velayet,  Page 6 Turkmenistan: Water Supplv and Sanitation Project in Dashkhovuz City. As no other urban settlement has any significant levels of interior plumbing, there is currently no need for other piped sewer systems. HCS also has the responsibility for pumping out public latrines, but this is a very limited effort. There are no safe and economic means presently available for the sanitary removal and disposal of household excreta wastes. The great majority of the people in Dashkhovuz utilize very simple but unhygienic pit latrines, and no organization has responsibility for the design, construction or promulgation of adequate latrines, or programs for the education of the people in the importance and hygienic use of latrines. 1.23 Overlapping Responsibilities Some 68% of the population of Dashkhovuz live in rural areas, yet less than half of these people are served by the Rural Water Supply (RWS) department. In other velayets, MWR has responsibility for rural water supply. Even in Dashkhovuz, MWR has the responsibility for the construction of rural water systems, while RWS only has operational responsibilities. The water systems that RWS operates are very similar to those in the urban settlements, yet RWS and H4CS, which operates the urban systems, function independently. 1.24 National Sector Policy Problems One of the problems with national policy is its failure to assign clear responsibility for the water, wastewater and sanitation sector. Another problem is the existing law preventing sector utilities from collecting fees for the services they perform. The lack of long term planning for the sector is one of the consequences of failure to assign overall sector responsibility to a specific government agency. The inadequacies of the existing systems and the large numbers of people without adequate water or sanitation services have several causes, but inadequate funding is one of the principal ones. National pricing policies and lack of focussed responsibility are among the principal causes of the lack of funding. Operational Weaknesses 1.25 Planning and Management There is little evidence of long term planning to overcome existing deficiencies. Even the current crisis of providing water only a few hours per day appears to be accepted with resignation, though there is evidence that water is being wasted under present procedures in volumes which considerably exceed the amounts required to meet the needs of the people 24 hours per day. In many tables of organization, far too many departments report to the head of the organization. Systems for the accurate collection of financial and technical operating data, and for the distribution of this information to managers are inadequate. Realistic budgeting and cost estimating are not practiced at the water supply utility level. 1.26 Operation and Maintenance The current financial difficulties contribute to severe operational problems. Critical parts and supplies are rarely available. Equipment is often cannibalized, and any but the simplest of repairs usually must be made in Dashkhovuz City or, more commonly, back in Ashgabat. Procurement procedures are centralized and complicated, and operators have little control over obtaining the equipment and supplies they require. There is little preventive maintenance, or the tools with which to accomplish it. On the other hand, there is often no budget for grease, pump packing , tools or other materials and supplies. Operators rarely have copies of the plans and specifications for the works under their responsibility, and no operating manuals or guidelines. Almost all the piped water systems in Dashkhovuz Velayet utilize water from shallow wells adjacent to irrigation canals. Some problems with degraded water quality from these wells result from operation of the wells in a manner that does not comply with recommendations from the authorities of the Turkmen Geology Committee's (TGC) hydrogeological companies.  Turkmenistan: Water Supply and Sanitation Project Pame 7 1.27 Human Resources Salaries of employees in the water, sanitation and health sectors in Dashkhovuz Velayet are extremely low, particularly in relation to the Capital. For instance, employees of the carpet factory in Ashgabat earn twice the pay of a senior engineer in most departments in Dashkhovuz, where typical salaries at the senior levels are in the order of less than US$ 20 per month. Working conditions are poor, with inadequate vehicles for transport, poor communications and sparsely equipped and furnished offices. Training programs are few and generally inappropriate. Training (most of it dating back to pre-independence) often seemed to focus on design and advanced technologies rather than meeting actual needs. 1.28 Institutional Setting: Sanitary, Epidemiological, Health Education. The Sanitary and Epidemiological Services (SES) of the Ministry of Health and Medical Industries (MOH) are responsible for drinking water quality monitoring for supplies from municipal water supply systems; and for sanitation and hygiene surveillance. The SES have major centers in Ashgabat and in the capital cities of the five Velayets including Dashkhovuz City, and stations in all etrap centers. SES has the responsibility for testing drinking water quality. Water samples are taken from public systems at the point of supply, the distribution systems, and selected users, including schools and homes. The frequency and number of tests depends upon the size of the system being monitored. Sampling is said to take place once or twice a month, on average. SES follow the Russian (GOST) drinking water standards developed by the FSU which cover about 28 constituents. SES normally only test for a few of these constituents particularly E-coli, salinity, hardness, taste and odor. SES has the authority to levy fines against communities which fail to chlorinate and to shut down systems which fail bacteriological tests. Officials whose systems frequently fail to meet the standards are subject to criminal prosecution. It appears these sanctions are rarely imposed. In Dashkhovuz, the SES have three laboratories in the capital (regional bacteriological laboratory, regional chemical laboratory, and city laboratory) and one bacteriological laboratory in each etrap center. Annex D provides limited water quality data. 1.29 The SES have scarce resources. Receiving only 3 percent of the total MOH budget, SES is seriously underfunded. As a result of severe budget limitations, SES suffers from buildings of limited size and poor quality; shortage of operable vehicles; and laboratories with failing equipment and inadequate supplies of chemicals. 1.30 The Center of Health is a Department of the MOH with branches in each Velayet. With responsibility for health promotion and health and hygiene education, they cover a wide range of topic in all kinds of institutions (schools, enterprises, polyclinics, hospitals) with the main educational method being the lecture. Although Turkmenistan has a strong tradition of health education, presently the activities conducted in the country and within Dashkhovuz are very limited due to financial constraints. The Dashkhovuz Center of Health is poorly equipped, lacks the most basic supplies such as paper and cartridges for a copying machine, and the staff need to be trained in modern methods of health promotion and health education. 1.31 Intersectoral Action and Donor Coordination. Cooperation between the water supply, sanitation, health and education sectors is not developed in Dashkhovuz, and, at the national level, the donor efforts in the sectors need to be coordinated. An interagency working group was formed on the national level to guide project preparation. D. The Government's Objectives and Strategy 1.32 The Government has indicated its intention to advance the development of the water and sanitation  Page 8 Turkmenistan: Water Supply and Sanitation Project sector (Annex A-1) through achieving the following objectives: (i) increased access to potable water and improved sanitation facilities in particular those groups living in the most disadvantaged areas; (ii) development of the institutions in charge of production and distribution of potable water and sanitation services and improvement of their technical and financial capacities; (iii) protection of the environment and of public health; and (iv) protection of water resources and their optimum utilization. Key elements of the strategy to accomplish these objectives include: (i) restructuring of the institutions charged with the delivery of water and sanitation services; (ii) increasing the responsibility and accountability of the management of the water sector: (iii) initiation of cost recovery mechanisms including a tariff setting policy whereby revenues would cover the full cost of operation, variations in working capital requirement and regular preventive measures. The Government intends to initiate the institutional and cost recovery reforms in the water sector on a regional level first, followed, depending on progress, by reforms on the national water sector level with the objective of improving the effectiveness of the sector throughout the country. E. The Bank's Strategy 1.33 The Banks' program has developed slowly but steadily reflecting the limited but growing Bank- Government dialogue on development issues and approaches. A Country Economic Memorandum was issued May 31, 1994. The first loan was approved by the Board for the Institutional Building/Technical Assistance (IB/TA) project in FY95 and the IB/TA loan is now in implementation. A Country Assistance Strategy has been prepared, at the request of the Government, for discussion by the Board on May 27, 1997, together with this project and with the proposed Urban Transport project. As described in the CAS, the Bank's strategy is to proceed in phases based on the evolution of the Government's reform effort. The Bank's efforts would emphasize analytical work, technical assistance and policy dialogue to assist the Government to remove remaining distortions which could constitute barriers to the transition, and to the efficient development of its designed priority sectors which are agriculture, oil and gas, social sectors, and infrastructure. 1.34 The Bank's role in the potable water and sanitation sector is to support the Government efforts to improve the water supplies and sanitation facilities in the part of the country most severely affected by the consequences of the Aral Sea crisis and which are the most poorly serviced with regard to water supply and sanitation; and to strengthen the institutional and policy framework for potable water supply and sanitation services. The Bank has responded with the Water Supply and Sanitation Project, as agreed during the June 1994 donor conference in Paris. F. Bank Experience in the Sector 1.35 Lessons learned from Bank experience in Turkmenistan, other FSU projects, and the Bank's water supply and sanitation portfolio have been incorporated in the design of the Project. 1.36 Turkmenistan and the FSU. The IB/TA project, only project in implementation in Turkmenistan, experienced initial delays but currently ratings for development objectives, implementation progress and project management are satisfactory. Lessons learned from other FSU projects include (i) the need to identify a consistent counterpart team with sufficient authority to move the project forward; (ii) the difficulty of coordinating among interested parties, (iii) the importance of early detailed attention to procurement and other implementation issues; and (iv) the importance of including local institutes in project preparation and design.  Turkmenistan: Water Supply and Sanitation Project Page 9 1.37 Water Supply and Sanitation Sector. Major lessons learned from the Bank's past water supply and sanitation projects indicate that projects should include the following3: (i) an adequate regulatory framework and, linked to it, appropriate tariff levels and billing and collection mechanisms to generate the funds needed for financial autonomy and to signal the real cost of water to the consumers; (ii) reversal of the preference of decision-makers for new capital expenditure over proper operation and maintenance (iii) clear measures to reduce unaccounted-for-water, and (iv) user involvement in the setting of priorities to improve ownership and cost-sharing of operation and maintenance functions. 1.38 The project reflects concern for learning from past experience and reduction of risks. The proposed project has been developed through close collaboration with the Turkmen authorities at the national and velayet level and concerned sectoral ministries and institutes which will be involved in implementation. An interagency working group was formed at project identification and it has been involved in project preparation and design. Local social scientists were trained and engaged to conduct the Social Needs Assessment. To ensure that the Government assumes greater responsibility for the project and develops a sense of ownership and capacity for implementation, the Government fully executed the PHRD grant which funded project preparation. All preparation missions have conducted workshops for the Government and other stakeholders on Bank operations. The project includes close Bank supervision and monitoring and sustained assistance to authorities throughout implementation. A Project Implementation Unit (PIU) will be established using a Project Preparation Facility prior to appraisal and includes technical assistance. The PIU will include component coordinators representing the water supply, sanitation and health implementing agencies, respectively. User involvement has been extensive during preparation (para 3.2) and would continue into implementation. 1.39 One of the project's main components is institutional strengthening of the water and wastewater sector. The establishment of a specialized autonomous regional water and wastewater authority is one of the major outputs of the Project and capacity building of the water and health sectors at the regional level is a primary objective of the Project. The proposed project will assist in training and information dissemination through the national institutional strengthening component. The project's physical works concentrate on rehabilitation, the minimization of physical and commercial water losses and the correction of deferred maintenance as a means of improving efficiency. The project would emphasize strengthening of operation and maintenance capacities. The project will initiate water charges in Turkmenistan and, through the institutional strengthening component, assist in the development of appropriate tariff levels while strengthening the institutional capacity to establish and collect tariffs. Rehabilitation of the supply systems, redesigning of the faucets to provide automatic shut-off; and consumer education will reduce unaccounted for water. G. Donor Coordination 1.40 The project has been developed in close coordination with other donor activities in the region, particularly UNICEF, USAID, and UNDP. To ensure collaborative efforts which build on one another's activities, the project identification mission included representatives of UNICEF and USAID. Preparation of the project includes a school sanitation demonstration project which was developed by UNICEF staff to ensure similarity of strategy and approach. The project's sanitation and health component was 3References for this section included: I . Water Supply and Sanitation Projects. The Bank's Experience, 1967-1989, OED, June, 1992 2. Annual Review of Portfolio Performance (ARPP) FY 93, Water and Sanitation Sector, TWURD, April, 1994. 3. World Bank Policy Paper on Water Resources, 1993  PaRe 10 Turkmenistan: Water Supply and Sanitation Proiect designed to build on the activities of UNICEF's Aral Sea Project for Environmental and Regional Assistance (ASPERA) now in implementation in Dashkhovuz. USAID provided assistance during project identification on water quality data analysis and laboratory assessment. USAID has a water supply and sanitation project in one of the eight etraps in Dashkhovuz. The project chose the other seven etraps as project sites to avoid duplication. The World Bank has assisted the USAID project by supplying water tankers through the Immediate Impact Project (IIP). UNDP is implementing a small-scale pilot urban water supply project in Ashgabat.  Turkmenistan: Water Supply and Sanitation Project Page 11 II. WATER SUPPLY AND SANITATION IN DASHKHOVUZ A. Water Supply 2.1 Water Service Levels: Urban Areas.4 All of the etrap centers have a piped water supply which delivers water to communal street standpipes. Some households have individual yard taps but this varies widely amongst the centers from less than 10 percent to as much as two thirds. Very few residences have household connections. The piped systems theoretically serve approximately 108,000 people (75 percent of the total population in the seven etrap centers included in the project). However, the existence of these systems does not mean actual delivery of safe drinking water. Due to the enormous losses within the systems and the deteriorated conditions of the wells and pumping facilities, the piped system is unable to achieve the design pressures and supply volumes. Low pressure in the system leads to the deliberate removal of faucets from street standpipes in an effort to facilitate access to the small amount of water which arrives. Over pumping of the wells in an effort to compensate for losses in the system leads to increased salinity and accelerated depreciation of the pumps. Thus water is delivered only 3-4 hours per day, at very low pressures and is not disinfected. Focus group discussions determined that spending two hours per day in obtaining water from the piped systems was not uncommon for many families. Those who do not depend upon piped water supplies as their primary drinking water source resort to hand dug wells (12 percent) and bored wells with hand pumps (7 percent). About 9 percent of urban households use water purchased from a vendor as their primary source of drinking water. Approximately 60% of the urban schools have a piped drinking water supply. Hand dug wells are the second most common source of drinking water (24%). 2.2 Water Service Levels: Rural Areas. The most important source of drinking water in rural households is wells, often in a neighbor's yard (51 percent hand dug; 35 percent bored). Overall, about 20 - 30 percent of rural households have access to a functioning piped water system. Water vending is non-existent. Currently, only 20,000 people (24% of the total population in the villages of the nine kolkhoses in the project) have even limited access to piped supplies. There are virtually no house connections in the rural areas. The number of yard connections is unknown. Water delivery is similar to that of the etrap centers. There is no inventory of handpumps which are locally made. Based on field visits, it was concluded that due to the poor design of the handpump components, the water is unlikely to meet bacteriological water quality standards. In some collective farms, surface water (irrigation canals, ponds, rivers) is the primary source of drinking water. Household boiling of drinking water for disinfection purposes is generally not practiced. Piped water is generally unavailable to rural schools with wells being the most conmu-on source of drinking water (51 %) followed by surface water sources (20%) usually irrigation ditches. Boiling of school water supplies is practiced sporadically. 2.3 Water usage for drinking, other domestic purposes, livestock watering and irrigation of vegetable 4 Information on household water supply and sanitation service levels and use comes from the "Turkmenistan Water Supply and Sanitation Needs Assessment" (NA) November, 1995. The household survey included 790 households. All of the etrap centers included in the project were in the household survey whereas 14 percent of the velayet's 104 collective farms were surveyed. The term "urban" refers to the etrap centers and is used to distinguish the centers from the collective farms which are classified as "rural." The etrap centers, however. do not show "urban" features and can be considered "rural" in nature.  Page 12 Turkmenistan: Water Supplv and Sanitation Project gardens is determined by the user in accordance with the amount required and relative requirements for water quality for each purpose. In general, households switch from piped water and hand pumps to wells and surface water bodies to draw water for washing and cleaning. To water their home gardens, households use mainly water from surface water sources. However, water for livestock is usually drawn from the same source that supplies households with drinking water. In all etrap centers, piped water is the main source of water for livestock. The major water quality issue for most consumers appears to be the salinity. 2.4 Piped Systems. The piped water supply systems for both the etrap centers and the kolkhoses use shallow wells adjacent to, and hydraulically linked with, an irrigation canal as the water source. These wells are typically 10 to 25 m deep, and between 4 and 12 are provided for each system, depending on the size of the settlement and the well performance. The water is pumped to a nearby ground reservoir where chlorine is intended to be added, but rarely is because of lack of funds or equipment failure. The distribution pump station then draws water from the reservoir and pumps directly into the distribution system. Quality of the groundwater is highly dependent on the quality of water in the irrigation canals, and the principal effect of the shallow aquifer is limited to filtering out suspended solids. This type of piped water supply infrastructure is appropriate for the area but is in extremely poor condition. This is a consequence partly of inferior construction techniques, and partly of chronic low investment in maintenance. 2.5 Quality of the Water Source. Since much of the irrigation water abstracted from the Amu Darya River is returned as drainage water, surface water quality reflects the usage of pesticides and fertilizers. Water quality data prior to 1989 indicated excessively high concentrations of pesticide and fertilizer residues. However, since independence, the usage of these chemicals has subsided dramatically and significant improvement has been documented in water quality. Bacteriologically however the water quality continues to be very poor. In 1994, 54 percent of some 6,000 Dashkhovuz water samples failed to meet the bacteriological limits of 2 coliform/100 ml. Field investigations conducted during project identification found coliforms as high as 60/100 ml reported in SES laboratory records. Salinity is an area of potential concern. At present, salinity levels are generally below I g/l (the WHO guideline concentration and National Standard), but if the current trends continue, the salinity in some areas may reach 1.5 g/l by the year 2000. It should be noted, that the WHO guidelines on salinity are based on aesthetic (taste) considerations and not health and there is no epidemiological data indicating a direct impact on health for salinities in this range. However the taste may drive users to alternate, less-safe (bacteriologically) supplies. Annex D provides water quality data for Dashkhovuz. (Detailed water quality data and analysis of water quality laboratories can be found in Project Documents - "Project Identification Mission: Background Note, Appendix A Chapters B and C, Assessment of Water Quality and Laboratories.) 2.6 Maintenance Problems. Maintenance of the systems is unsatisfactory. This is a result of a combination of factors, including lack of spare parts and chemicals; inadequate funding for vehicles, repair tools and equipment; and substandard training. Very few of the systems have operating chlorination systems, with the result that water is delivered to users with no disinfection. Pumps and pump station pipework is usually a mixture of different sizes and types of equipment, much of it inoperable, which leads to frequent supply failures. In most towns, water is provided to users only two or three times a day, for a total of between 3 to 5 hours per day, and sometimes even less. Often this limited supply does not reach consumers at the extremities of the distribution systems. 2.7 Distribution Piping. The distribution piping systems are also in a poor state of repair, with high  Turkmenistan: Water Supply and Sanitation Project Page 13 leakage rates and frequent breaks. A mixture of pipe materials are used, depending on availability, which again gives problems for the operators. The majority of the population are supplied through street standpipes, although households with yard taps are not uncommnon. In Dashkhovuz city there are a limited number of house connections. Because system operation is usually limited to less than 6 hours per day, the street standpipes are either broken or missing, so that a large proportion of the water supplied by the system runs to waste. Similarly, yard taps are often left on, and water collected in containers, or left to run into gardens. Freezing is sufficiently severe that little water is provided on an average of 20 days during colder winter months. The results of a demonstration project in Gubadagh, carried out as part of the project preparation, showed that when suitable taps are installed and maintained, pressures in other parts of the system increase, improving the overall system performance. 2.8 Distribution Storage. Storage capacity within the systems is extremely limited. In urban systems there is usually no storage apart from the balancing reservoirs provided at the site of the wells and pump station. All water is pumped directly into the distribution piping network. The rural systems frequently have very small elevated storage tanks in the system, but this usually serves to limit pumping pressures only, and provides no useful storage to balance diurnal demand variations, or provide water during interruptions in supply. 2.9 Unaccounted for Water. The level of losses in the urban distribution systems is very high. Officials report providing 100-200 liters per capita per day (Ipcd) while observed and reported consumption is 15-25 Ipcd. Project preparation consultants estimate only 15% to 25% of the water pumped into the systems reaches the users. Much of this extremely high proportion of unaccounted for water is believed to result from losses at the standpipes. Since they are not fitted with shut-off valves (taps or faucets), they run continuously when the distribution system pumps are operated. Even if the taps were repaired, the resulting increases in pressure would likely increase breaks in the distribution piping. A significant amount of system rehabilitation as well as new standpipes will be required before pumping pressures can be increased to a level which would provide a normal minimum pressure of about ten meters in the distribution system. For those users who have yard taps, the intermittent nature of the system operation results in the taps often being left open in order to maximize the amount of water they receive, and to determine when the water has been turned on. This results in high levels of wastage which could only be addressed by providing a continuous supply, and possibly by installing meters. 2.10 Charges for Water. Neither urban nor rural consumers are charged for water, as a result of a Presidential decree which states that water, gas and electricity5 should be provided by the state free of charge. There is. therefore, no incentive for those with yard taps or house connections to conserve water, or for the remainder of the population to reduce wastage from the street standpipes. Given the present inadequacies of the water systems, it would be very difficult to justify any charges at this time but the project will initiate cost recovery of operation and maintenance costs as is discussed further in Annex E. 2.11 Groundwater Sources Within the Velayet of Dashkhovuz. Extensive exploration and research has been carried out to determine the availability of groundwater resources for use by the Velayet. There are ample groundwater resources in the project area. The restriction to groundwater use is the quality of the water, which by different processes and to varying degrees is mineralized and/or polluted. The confirmed estimate of availability of good quality (< I g/l salinity) water from the Quartenary alluvium is 280.000 m3/day. There are three aquifer levels in the Velayet. One is a shallow aquifer that in some 5 Up to KWH per month per family member is free, and a very small charge is made for usage above that amount.  Page 14 Turkmenistan: Water Supply and Sanitation Project areas is suitable for use for potable supplies. For the most part, the two deeper aquifers are highly mineralized (salinities between 34 and 60 g/l) and unsuitable for use without desalination. The shallow aquifer generally is hydraulically linked to the irrigation canals, and in these areas the water, while relatively saline, is suitable for use as potable supplies without treatment other than disinfection. Some use is made of groundwater from the shallow aquifer in areas remote from the canals, but the quality is poor (salinity over 15 g/l), and only limited quantities are available 2.12 Consideration of Alternative Water Sources. The deterioration in quality of the Amu Darya River water in the 1960s and, after independence, political considerations related to the fact that the river flows through Uzbekistan at times, resulted in the study and development of alternative water sources for the Velayet. Two regional schemes for augmenting water supply sources have been proposed by technical organization within the Government as solutions for the water supply problems of the Velayet. The schemes are the Tuyamuyun reservoir surface water scheme, and the Balqui aquifer groundwater source in the Velayet of Lebat. Extensive investigations have been carried out on both these schemes by local organizations, and construction began several years ago on the Tuyamuyun supply scheme. As part of the project preparation activities, a detailed review of the two schemes has been carried out and is summarized in Annex F. 2.13 Tuyamuyen Reservoir. The adopted scheme was based on the use of waters from the Tuyamuyun and associated reservoirs, which are located within Turkmenistan. Two options considered included (1) the use of water directly from Tuyamuyen reservoir, or (2) the use of waters from the Kaparas reservoirs, which would then be restricted for potable use only. In either case, a water treatment plant would be required which would pump water through a 180 km long pipe line to a storage reservoir near the city of Dashkhovuz. Other pump stations and transmission mains would be required to provide water for the etrap cities. Work began about 1989. About 90% of the un-lined, un-wrapped steel pipeline has been installed, and about 50% of the civil works for the treatment plant has been completed. A lack of funds has brought a virtual halt to construction since 1993. There are serious questions about the expected life of the completed pipeline, and the quality of civil works completed to date is poor. The estimated cost to complete the scheme as originally planned for all urban areas in the Velayet is $515 million. The cost just to complete the works needed to supply the city of Dashkhovuz is $215 million. Completion of the Tuyamuyen scheme, even if it were within the financial limitations of the proposed project, would not meet the objectives of the project in providing improved supplies in both urban and rural areas. The majority of the new water would go to Dashkhovuz City, at the expense of the etrap centers. The feasibility study concluded that the costs of the scheme are not justified by the improvement in quality. 2.14 Lebat Balqui Aquifer. There is a major groundwater resource in the neighboring Velayet of Lebat, although this would require a pipeline 250 km long to convey the water to Dashkhovuz. Further exploration is needed to define the yield of the source, but work carried out to date indicates that only a small proportion of this resource has salinity levels of less that 1.5 g/l, considered the maximum concentration for a marginally acceptable water supply. The combination of a limited volume of marginally acceptable water with the very high cost of transporting it to Dashkhovuz indicates that this cannot be considered as a viable source. The estimated cost to transport the water to the city of Dashkhovuz is $85 million if the Tuyamuyun-Dashkhovuz pipeline is utilized, or $240 million if the water is to be pumped independently to Dashkhovuz. The project feasibility study concluded this is not a viable option for the Velayet.  Turkmenistan: Water Supply and Sanitation Project Page 15 B. Sanitation 2.15 Sanitation Service Levels: Urban Areas. Sanitation, as used in the project, refers to the safe disposal of excreta. Only Dashkhovuz city has a waterborne sewerage system, and this serves mostly high-rise residential housing units, industries and commercial developments that use large volumes of water. In the etrap centers, the sole method of sanitation is the basic pit latrine. Temporary latrines are those with a temporary hand dug sub-structure (unlined pits 1-2 meters deep) and a temporary super- structure. When the pit is full it is closed with soil and the super-structure is shifted. Permanent latrines are elevated pit latrines with a permanent super-structure and substructure which can be emptied either manually or by truck. The evacuation of the private latrines is the responsibility of the homeowners, and generally it is not done. Both types of pit latrines are used in public areas such as schools, markets and public buildings, and also in private homes. In urban areas outside of Dashkhovuz City, i.e. the etrap centers, 90 percent of urban households have a latrine (37 percent are permanent) typically used by 6-7 people; the other 10 percent of households rely on public latrines. Emptying public latrines is the responsibility of the Department of Housing and Conmmunal Services in the Velayet. To carry out this task, they are equipped with pump trucks, tractor trailers, dumpers, and workers. At present, most of the required equipment is in disrepair. There is no independent budgetary provision for excreta disposal and expenditure is incurred for this purpose from the general budget of street cleaning works. Individual home owners either pay privately for emptying their latrines, or else the owner digs a new pit and moves the latrine superstructure to the new location. Whether public or private, the latrines are usually poorly constructed, most are highly unsanitary, most are without handwashing facilities adjacent to or even near the latrine, and soap is not available. All etrap center schools have pit latrines, generally permanent latrines, with approximately 100 students/latrine. Observation finds that the latrines are usually very dirty and no hand washing facilities are apparent. 2.16 Sanitation Service Levels: Rural Areas. The situation is similar for the rural areas, apart from the fact that there is no authority responsible for emptying the pit latrines. In rural areas 95 percent of households have pit latrines: 72 percent of households have temporary latrines, 23 percent have permanent latrines. Five percent use communal latrines. For those with "permanent" latrines (those with substantial buildings housing the latrine), it is usually the householder's responsibility to arrange for the collective farm's transport authority to transport the contents of the pit latrine to designated disposal areas, although there appears to be no formal obligation for the collective farms to assist in this way. Owners with temporary latrines fill in old pits when they are full, then dig a new pit and move the latrine's above-ground enclosure. This is done about once or twice a year. Rural schools are equipped with latrines, usually of the permanent type with about 50 students/latrine. Reported hand washing facilities are less common than in urban schools, and again, observation finds the latrines to be very dirty. 2.17 Disposal of Latrine Wastes. Reuse of human waste is not practiced in the region. There are no facilities for the proper treatment and disposal of wastes removed from latrines. As there is practically no use of flush toilets outside Dashkhovuz Velayet, the wastes to be disposed of are not liquid septage but relatively solid material. The present practice is to dispose of such wastes in areas on the fringes of the communities where most solid wastes and trash is taken for disposal. Neither the latrine wastes nor the solid wastes are covered. There is no effective regulation of this method of disposal of latrine wastes. 2.18 Disposal of Wastewater. Wastewater is generated only in Dashkhovuz city, which is not a part of this project. The collected wastewater is pumped to a location on the edge of the desert, some 10 km southwest of the city. About 1980 the wastewater was provided with primary treatment, but that plant was abandoned in 1985 after only five years of operation. The wastewater now is pumped to the former  Page 16 Turkmenistan: Water Supply and Sanitation Project sludge drying beds, which serve as heavily loaded anaerobic lagoons. Flow is believed to be in the order of 15,000 m3/day, and any overflow from the rough earth lagoons either seeps into the ground or evaporates in the desert. 2.19 On the household level, most households (78%) pour wastewater into a waste pit in their yard or in the vicinity of the house. Some (10%) use sullage to water their garden but sullage is never used to water animals. The rest (12%) pour sullage into surface water sources or only streets to reduce dust. 2.20 Monitoring/Regulation of Sanitation and Hygiene. Hygiene in the project is defined as the practice of keeping oneself and one's surroundings clean. The Sanitary-Epidemiological Services (SES) of the Ministry of Health (MOH) is responsible for sanitation and hygiene surveillance, but this function seems to have a low priority compared with monitoring water quality. No institution is responsible for construction and maintenance of handwashing facilities at public latrines, and SES does not require the construction of washing facilities adjacent to latrines. C. Health 2.21 Although much data exists on health conditions in Turkmenistan and in Dashkhovuz velayet, health data collection, analysis and reporting are unreliable. Most diagnoses are purely clinical, and are not confirmed by laboratory or other tests; autopsies are rarely performed; all data handling is done manually, accounting for many errors and data inconsistencies; data is not collected by gender and, as for age, only two groups are considered, the under and above 14 years of age. Therefore, data about all diseases needs to be interpreted and used cautiously. Results of the Needs Assessment were used to check correlation between child (age 0-15) diseases (reported in the survey) and primary source of drinking water. Statistically significant correlation was found between (i) intestinal parasites and hand pumps as primary drinking water source, and (ii) hepatitis A and surface water as primary drinking water source. Like official health data, these results need to be used cautiously. What is certain is that water supply, sanitation and hygiene are all very poor in the Velayet and these are factors commonly associated with poor health. Annex G provides relevant national and local health data. 2.22 Factors Contributing to Poor Public Health. Cost effective interventions with an impact on health including water quality monitoring and disinfection, breastfeeding, immunization, and treatment of diarrheal disease could significantly reduce the burden of communicable diseases in Dashkhovuz Velayet but the health services responsible for these interventions have not been able to perform an adequate job. An imbalance exists between preventive and curative services. While access to health care is universal, the concern for prevention appears to be low. Health promotion and health education are very limited. Neither the general populace nor the local health officials make an association between sanitation (proper excreta disposal) and personal hygiene with health. Nor do they consider diarrhea an important health problem. The general population and health authorities blame environmental factors, particularly the physical and chemical quality of the drinking water, as the most important cause of poor health. Interest in water quality far exceeds interest in sanitation and hygiene, and concern with water hardness and salinity exceeds concern with the bacteriological quality of water, which is extremely poor. 2.23 Health Education. The Centers of Health are responsible for health education activities. The Ministry of Health (MOH) is developing some health education activities, and is collaborating with the Ministry of Education in implementing a new health education curriculum that includes sanitation and hygiene The MOH and UNICEF have been using health education materials developed by ATTA (Assistance to Turkmenistan Association), a local NGO with external support, and some of these concern  Turkmenistan: Water Supply and Sanitation Project Page 17 hygiene and sanitation. The Centers of Health, however, are severely constrained due to lack of supplies and equipment; and training and the impact of their activities is very limited. 2.24 Constraints to Water and Sanitation Sector Development. Progress in improvements to the water and sanitation sector may be limited by the following constraints: (i) the absence of a focussed responsibility for the sector at the national level; (ii) the weak enforcement abilities of MOH/SES in monitoring the acceptability of water quality, and of the Ministry of Environment in monitoring the acceptability of disposal of wastewater, septage and latrine wastes; (iii) most rudimentary requirements for a well-managed sector utility are missing; and (iv) the national policy of free drinking water. In the absence of the ability to charge users for the services performed, the sector utilities are dependent upon grants from the national budget for both capital and operating costs. Since independence, the only significant expenditure for new water facilities in Dashkhovuz Velayet has been for the Tuyamuyun water transfer project. That project is incomplete and no additional funds have been made available for about three years. More critically, funds for operating and maintaining the existing works have been acutely inadequate for several years, resulting in the premature loss of benefits from previous investments.  Page 18 Turkmenistan: Water Supply and Sanitation Proiect III. THE PROJECT A. Project Origin and Formulation 3.1 This proposed project forms Component 5.2 of the Aral Sea Program drawn up to address the environmental impacts of the Aral Sea crisis. The project was specifically intended to improve the health of the population in the region most affected by the Aral Sea disaster by investing in water and sanitation infrastructure. The project would be the first infrastructure investment operation in Turkmenistan, therefore it was designed to be focused and simple to implement both technically and administratively. Project identification and preparation determined that piped water systems, already in place in many parts of the region although in a state of disrepair, were appropriate for the region and the service of choice. Since the loan amount could not rehabilitate and expand the piped water system for the entire velayet, it was decided that the project would focus, in an equitable fashion across the etraps, on under-served areas with particular attention to the rural population. Noting significant sector institutional weaknesses on the national and regional level, the project was designed to include institutional restructuring and strengthening. 3.2 Participatory Approach. The proposed project incorporates an extensive amount of participation by stakeholders at all levels. During Project preparation, nine workshops were held with project stakeholders to discuss the project concept and design, and key project issues including cost recovery, reorganization of the water and wastewater sector, community participation components, and project implementation arrangements. In these workshops, stakeholders endorsed the project concept and design and agreed upon the approaches taken within the project design to address the key issues. Beneficiaries indicated willingness to participate on a household and community level in operation and maintenance of the water systems and sanitation activities. A Rapid Needs Assessment was conducted during project identification followed by a Social Needs Assessment which included 790 household surveys; inventories of communal water supply and sanitation facilities; and fourteen focus group discussions. Results were used to provide baseline information and guide project development and were presented at Stakeholder Workshops. During preparation additional focus group discussions were used routinely to guide two demonstration projects conducted under preparation and to provide additional background information. Additionally, a local NGO has been actively engaged in project preparation and implemented the community components of the two demonstration projects. The demonstration projects successfully utilized community based approaches to water supply systems and sanitation and these approaches have been incorporated into the project. 3.3 Project Preparation. The Ministry of Water Resources has undertaken project preparation with technical assistance from Electrowatt Engineering. Feasibility work has been financed by a PHRD grant of Yen 85.6 million (about US$800,000). The feasibility work included two demonstration projects: the installation of effective taps on street standpipes in Gubadagh; and the construction of improved latrines and handwashing facilities at a school in Boldumsaz. Results of the street standpipe demonstration form the basis for the standpipe rehabilitation component and the development of community involvement in operation and maintenance. The results of the sanitation project were used to design the community- based school sanitation component, as well as the hygiene and health education activities. Annex H describes the demonstration projects in detail.  Turkmenistan: Water Supply and Sanitation Project Page 19 B. Objectives 3.4 The objectives of the proposed project would be to: (i) improve water supply and sanitation in seven etrap centers and nine collective farms in Dashkhovuz velayet; and (ii) initiate institutional changes in the water and sanitation sector to ensure that the project is financially and technically sustainable. C. Description 3.5 Project Components. The proposed project comprises four main components: (a) water supply improvements; (b) sanitation and health; (c) institutional strengthening; and (d) project management and construction supervision. The components and their estimated costs are described in the following sections. 3.6 Water Supply Improvements (US$ 20.1 million, or 70 percent of project base cost.) The aim of this component is to rehabilitate and expand water systems to seven etrap centers and nine collective farms (spread out amongst the etraps), and to provide a supply of spare parts and repair materials to assist in operating these systems for the first year after completion. Project identification and preparation determined that the piped water systems already in place, although in a state of disrepair, were appropriate for the region and the least cost solution for improving drinking water supplies. The household survey revealed that piped water systems were the service of choice. Furthermore, from a public health perspective the piped water systems offer the best quality water and the opportunity to disinfect the public water supply. During project identification it was determined that improvements to Dashkhovuz City water supply system would 1) be of such magnitude that there would be little financing available for the rural areas; and 2) require major rehabilitation of the wastewater collection and treatment facilities. Since the major needs for access to a safe water supply are found outside the capital city, it was determined to focus the project on the secondary cities, etrap centers, and rural farms The three subcomponents of the water supply improvements include: a. Urban Water Supply System Improvements Rehabilitation of water facilities in urban towns (US$ 8.7 million). This subcomponent will rehabilitate the water supply systems in seven etrap centers in the Velayet (Akdepe, Boldumsaz, Gubadagh, Kune-Urgench, Niyazovsk, Tagta and Yilanly) from the water source to public street standpipes. No yard or household connections would be included. The project would repair existing street standpipes and provide new taps as required to provide spacing of about 70 m between taps, which was the Soviet standard. This amounts approximately to 3-5 households per standpipe. The project will include the rehabilitation of 26 km of transmission mains with diameters ranging from 400 mm to 250 mm, and 211 km of distribution pipework between 300 mm and 100 mm in diameter. The existing wellfields will be rehabilitated and new borehole pumps and controls installed. The water distribution centers will be renovated, and new electrical systems, mechanical plant, and appropriate chlorination equipment will be installed. The present street standpipes will be replaced with an improved design that will reduce wastage and freezing during winter months. This subcomponent will reduce water losses, reduce operation and maintenance costs, improve water quality by reducing the risk of groundwater infiltration to the system, as well as providing extended hours of supplying water under pressure to the towns. These improvements will allow chlorinated water to be supplied to 108,000 consumers throughout the daytime hours (at least 15 hours per day, with the goal of 24 hrs/day) instead of the few hours per day that unchlorinated water is now available. The component would finance civil works and technical assistance.  Page 20 Turkmenistan: Water Supply and Sanitation Project b. Rural Water Supply System Improvements Rehabilitation and expansion of water supply systems in collective farms (US$ 10.4 million). This subcomponent will rehabilitate and expand the water supply systems in 47 villages in nine collective farms (Ersarieva, On Yil Abandanlik, Bereket (Gubadagh etrap), Maslahat, Shodlik, Magtimguli, Andalip, Kirk-Giz, and Darjalik), distributed amongst the seven etraps. Delivery will be through public street standpipes. It will include rehabilitation of 64 boreholes in nine wellfields, including installation of new pumps and control equipment. A total of 94 km of transmission main will be rehabilitated, and 31 km of new mains installed. The seven water distribution centers will be renovated and new mechanical and electrical equipment installed. In the distribution systems, 125 km of new mains will be constructed, and 2,025 km rehabilitated, along with upgrading of 1,800 existing street standpipes and installation of 3,400 new standpipes. This subcomponent will reduce water losses, reduce operation and maintenance costs, improve water quality by reducing the risk of groundwater infiltration to the system, as well as providing extended hours of supplying water under pressure to the collective farms. These improvements will allow chlorinated water to be supplied to 82,000 people (including 62,000 not previously served by a piped water system) throughout the daytime hours (at least 15 hours per day, with the goal of 24 hrs/day) instead of the few hours per day that unchlorinated water is now available to only 20,000 people in these collective farms. c. Operational Support Provision of supplies to operate and maintain the water systems (US$ 1.0 million). This subcomponent will provide additional spare parts (beyond those provided by manufacturers of equipment), tools, chemicals and other equipment which are essential for operation and maintenance of the systems. The items provided will include pipe tapping equipment, spare pipes and fittings, repair clamps and other spares. Chemicals for two years operation will also be provided. This subcomponent will protect the investment in the water supply systems by allowing the operators to maintain the systems using the stocks provided until normal purchasing channels can be arranged with neighboring countries. 3.7 Sanitation and Health (US$ 3.4 million or 12% of project base cost). The objective of this component is to optimize the project's health benefits by improving sanitation facilities and hygiene practices; health promotion and hygiene education; water quality monitoring; and hygiene surveillance. The component will utilize the community based approaches to the provision of basic sanitary services developed under the school sanitation demonstration project. Since preparation results found low demand on the household level for improved sanitation but very poor sanitation and hygiene conditions, this component was designed to target under-served, communal facilities and to demonstrate, and educate, with strong community participation, to larger audiences the benefits of improved sanitation facilities. It will rehabilitate and construct latrines and install handwashing basins in rural schools and markets in the areas covered by the project. The three subcomponents include: a. Improvement of Sanitation, Hygiene and Water Supply Facilities Utilizing Communitv- Based Approaches (US$ 0.8 million). The objective of this subcomponent is to improve sanitation and hygiene. This subcomponent will finance the rehabilitation of latrines and installation of hand- washing basins in about 35 schools in the nine collective farms for which water supply improvements are being provided, and in one market in each of the etrap centers included in the water supply component. The community involvement model developed during the school sanitation project will be utilized in the sanitation and hygiene school program. The community involvement model developed during the community water supply demonstration project will be utilized and further expanded to include community activities in the operation and maintenance of the new systems. The subcomponent will be managed by the Department of Housing and  Turkmenistan: Water Supply and Sanitation Project Page 21 Communal Services assisted by local and foreign sanitation engineers and community development specialists. . The component would finance the purchase of one vehicle and equipment for each etrap, workshops and local study tours. b. Health Promotion and Hygiene Education in Rural Areas (US$ 0.7 million). This subcomponent aims at changing knowledge, attitudes and practices related to water, sanitation and health. Health promotion and hygiene education will be carried out in the schools and markets covered by subcomponent (a) above, and also in other rural areas. This subcomponent includes the rehabilitation of the Dashkhovuz Center of Health. provision of equipment, training of trainers, workshops and a study tour. c. Water Quality, Sanitation. Hygiene and Health Services in the Dashkhovuz Velayet (US$ 1.9 million). This subcomponent aims at improving SES capabilities to test water quality , to survey sanitation and hygiene conditions, and to conduct environmental epidemiological studies. It would improve the performance of the Sanitary and Epidemiological Services (SES) division of the Ministry of Health in the Velayet through purchase of equipment and supplies, technical assistance, and training. This subcomponent will: (i) Improve water quality monitoring system and sanitation and hygiene surveillance systems. Responsibility for this activity would rest with the Dashkhovuz Velayet SES, with assistance from local and foreign specialists. This item includes purchase of vehicles and equipment, as well as workshops for SES staff. (ii) Upgrade SES laboratories in Dashkhovuz Velayet. The existing 8 SES laboratories, one per etrap, will be refurbished and equipment for bacteriological and chemical analysis purchased. This subcomponent would finance workshops, training, and local and foreign technical assistance. (iii) Improve data collection, analysis and reporting; and conduct epidemiological studies. Training will be provided to SES staff in data collection and analysis methods. Reporting procedures will be revised. Equipment will be furnished to improve data analysis. Technical assistance and training in environmental epidemiology will be provided. Epidemiological studies will be conducted as a training vehicle as well as to investigate linkages between water and sanitation and health, and to document impacts of the project's interventions. This subcomponent would finance technical assistance and training from local and foreign epidemiologists and statisticians, workshop training, a study tour, and one epidemiological study per year for 5 years. 3.8 Institutional Strengthening (US$ 2.4 million, or 8% of project base cost.) The objective of this component is to improve the effectiveness of the delivery of water and sanitation services to the population of Dashkhovuz Velayet. The component is designed to address the principle sector weaknesses which are: (1) allocation of responsibility for the sector among too many governmental agencies, (2) the wide range of responsibilities other than water and sanitation assigned to the principal agency charged with providing water supply, (3) lack of technical and management skills throughout the sector, (4) the absence of a coherent program for the effective operation and maintenance of water and sanitation facilities, (5) inadequate focus on the importance of providing effective means of excreta disposal, (6) inadequacy of funding for both capital construction of new and replacement facilities, and for operation and maintenance of existing facilities, (7) inadequate communication between management and consumers, and (7) a  Page 22 Turkmenistan: Water Supply and Sanitation Project national policy which provides water and sanitation services at no cost to the users. The Institutional development component of the project will finance a two-year program of technical assistance, training and equipment to strengthen the capacity of the government to manage, operate and maintain the facilities which provide water and sanitation services to the people of Dashkhovuz. The centerpiece of this component is the establishment of a Dashkhovuz Regional Water and Wastewater authority (DRWASA). Four sub-components for building capacity for the effective provisions of water and sanitation services are: (I) identification of national sector reforms; (2) reorganization of the water and wastewater sector in Dashkhovuz velayet; (3) strengthening of the newly established DRWASA; and (4) a public awareness campaign. Annex C describes these activities in detail. a. National Sector Reform Study. (US$ 0.2 million) The objective of this sub-component is to recommend improvements and develop an action plan to strengthen, on the national level. the capacity in Turkmenistan to provide water and wastewater services. Technical assistance will be provided to conduct a study which will identify the most serious constraints at the national level, recommend legislative or other reforms where the national constraints are the most serious and recommend a plan of action for transferring responsibility for the sector from the national level to Dashkhovuz velayet. b. Establishment of the Dashkhovuz Regional Water and Sanitation Authority. (US$ 1.0 million) The objective of this sub-component is to establish a specialized regional water supply and wastewater authority under the jurisdiction of the Dashkhovuz velayet, which would be granted the responsibility and powers to provide sector services to all the people of the Velayet. A provisional table of organization for the new regional authority is presented in Annex 1. Results of the National Sector Reform study are expected to guide development of the Authority. Technical assistance and equipment would be financed to develop: (I) reporting relationships between the Authority, Dashkhovuz velayet, and the national government; (2) the legal form of the authority (3) transfer procedures for personnel, equipment and responsibilities of the existing sector organization to the Authority, (4) new laws and regulations to strengthen the sector; (5) sector planning; and (6) a program for strengthening the Authority (to be conducted under the following sub-component). c. Institutional strengthening of the Regional Authority. (US$ 1.1 million) The objective of this sub-component is to strengthen the capability of the newly established water and wastewater authority to meet its responsibilities. The regional and local organizations that would be included under the new regional organization have few of the skills or resources required to develop an effective utility, e.g. operation and maintenance of facilities; management; collection and dissemination of information; finance; administration; personnel; customer relations. This sub- component will support the Government in analyzing options for cost recovery and in reaching a decision on which option is most suitable. This sub-component would finance technical assistance, training, equipment and supplies. d. Public Awareness Campaign. (US$ 0.1 million) This subcomponent will carry out a public awareness campaign to inform the population in the project area about improvements in service provision and cost-recovery, as well as to educate the general population about water conservation; safe practices for water collection and storage; linkages between water, sanitation and health; and the role of the household and community in properly operating and maintaining the systems. This last item will be linked with the community development activities for community participation in water supply and sanitation systems. Feedback from numerous  Turkmenistan: Water Supply and Sanitation Project Page 23 community focus groups and stakeholder workshops has found that beneficiaries want more public education regarding the new systems so that they can identify specific and appropriate mechanisms for their participation. 3.9 Project Management and Construction Supervision (US$ 3.0 million or 10% of project base cost). This component will cover the costs of project management (US$1.9 million) and supervision of construction of the water supply improvements (US$1.2 million). Overall project management will be provided by personnel in a Project Implementation Unit (PIU), which will have personnel in both Ashgabat and Dashkhovuz. The construction supervision team will be based in Dashkhovuz. It will consist of two full time expatriate foreign construction supervisors for about 20 months, short-term construction specialists, about 12 full-time local construction supervisors, and local support staff. The details of the Project Management portion of this component are presented in Chapter IV. The project implementation plan is presented in Annex J. D. Estimated Costs 3.10 The total cost of the Project is estimated at US$33.7 million equivalent. The estimated cost and foreign exchange by components are shown in Table 3.1. Detailed cost estimates by type of expenditure are contained in Annex K. Table 3.1: Estimated Project Costs (US$ Million) Local Foreign Tolal % Foreign % Total Exchange Base Costs' Water Supply 4.78 15.36 :20.14 76% 70% Sanitation and Health 1.27 2.17 1-44. 63% 12% Institutional Strengthening 0.69 1.74 2.43 72% 8% Project Management and 0.81 2.22 3.O3 73% 10% Construction Supervision Total Base Costs 7.55 21.49 29.04 74% 100% Physical Contingencies 0.80 2.45 1:25 75% Price Contingencies 0.11 1.30 1: 41 92% TOTAL PROJECT COST 8.46 25.24 33.70 75% a/ Base cost date April, 1997 3.11 Basis of Cost Estimates. Project costs have been estimated in US dollars. Civil works and equipment costs have been derived from a detailed feasibility study delivered in November, 1996 during preparation of the Project. Cost for consulting services have been derived on the basis of recent cost estimates for comparable services in other Bank financed projects in Turkmenistan including training (both local and overseas). The costs of consulting services would include, fees, recruitment/relocation costs,  Page 24 Turkmenistan: Water Supply and Sanitation Project housing, subsistence, and overheads. 3.12 Foreign Exchange Component. The foreign exchange component has been estimated as follows: (a) civil works (75%); (b) goods consisting of water supply and sanitation equipment, vehicles, educational materials and chemicals (100%), furniture (80%) and local supplies (70%); (c) international consultants and studies (100%); (d) overseas training (100%); (e) local consultants (0%); and (1) local training (30%). These percentages have been determined assuming that basically all goods (equipment and related supplies) would be imported, and that international consultants would be recruited internationally. Including contingencies, the resulting foreign exchange component is estimated at US$ 25.2 or 83% of total project costs. 3.13 Contingency Allowances. Price contingencies, representing about 3.6% of the total project cost, are based on estimated inflation rates of 2.2% for 1998, 2.6% for 1999, 2.8% for 2000, 2.6% for 2001, and 2.5% for 2002. Price contingencies on local costs (expressed in US dollars) are therefore based on the same international inflation rates. Physical contingencies were estimated at 15% of civil works and equipment, 10% of training and 5% of supplies and materials. 3.14 Taxes and Duties. All Goods (equipment and related supplies) specifically imported for the Project would be exempt from custom duties and taxes. International consultants would be exempt from the Government's personal income tax. Civil work contracts would be subject to all applicable local taxes which will be paid by the Government as part of their contribution. E. Project Financing 3.15 The total project cost is estimated at US$33.7 million with a foreign exchange component of US$25.2 million. The financing plan is shown in Table 3.2 below. The proposed Loan of US$30.3 million would finance 100 percent of the foreign exchange costs and about 60 percent of local costs excluding taxes. The proposed Loan of US$30.3 million would finance about 90% of total project costs and the Government would contribute US$3.4 million equivalent or about 10% of total project costs. Table 3.2: Financing Plan (US$ Million) Local Foreign Tbtal 1 % Foreign % Total Project Exchange Costs Government of 3.40 0 3.4&t 0% 10% Turkmenistan Bank 5.06 25.24 23O.3: 83% 90% TOTAL PROJECT COST 8.46 25.24 ;3 .7Q 75% 100% 3.16 Operating Costs. Operating costs for the PIU, rental of offices, office supplies, and miscellaneous  Turkmenistan: Water Supply and Sanitation Project Page 25 operating costs have been included in the project. Operating costs for operation and maintenance of the water systems are discussed in the Economic and Financial Analysis, Annex R. The institutional strengthening component will include technical assistance to develop a tariff structure sufficient to recover operation and maintenance costs of the new systems, as has been agreed with the Government (Annex A- 2). 3.17 The total Government contribution is estimated at US$3.4 million. During negotiations, assurances were obtained that the Borrower would deposit its counterpart funds for the Project annually and in advance in the project account, establishment of which in a commercial bank is a condition of effectiveness. F. Environmental Impact 3.18 Requirements for Environmental Review. For the purposes of the Bank's guideline OD.4.01, the project is classified as Category B, which requires only a limited environmental review to determine potential negative environmental impacts and suggest mitigation measures as required to overcome any identified negative impacts. The required limited review was initiated during project preparation and concluded by the preparation team and Bank consultants. The review concluded that the project would generate significant environmental benefits with no negative impacts of consequence anticipated. 3.19 Environmental Consequences of the Project. The project is expected to have a positive impact on public health while maintaining or improving quality and quantity of regional water resources. Rehabilitation of disinfection systems; leak repair; improved sanitation facilities; and increased water delivery periods would reduce levels of bacteriological contamination in the drinking water supplies. Currently, operation of well fields often does not follow well field rules (due to malfunctioning equipment). Such operation may lead to disruption in the design flow regime and increases the chance of drawing water of relatively poor quality. By improving the well field equipment and operation, the project would ensure that the highest quality water is delivered. Technical improvements to the distribution system including leak repair and the provision of automatic shut-off valves on public standpipes combined with public awareness and education efforts would promote water conservation. 3.20 The project would have no adverse environmental impacts. No resettlement, international waterways or property rights issues are involved since the project focuses on rehabilitation of existing facilities. All works would be executed either within the premises of existing facilities, existing public streets or publicly owned property. The project will not affect any archeological or historical sites. Contractors will be responsible for notification to authorities of the discovery of any previously unknown archeological or historic sites, and the suspension of work until decisions are taken concerning necessary steps to protect such sites. 3.21 Under the terms of the bidding documents, the contractors would be responsible for keeping worksites pollution free, returning sites to their original condition, and minimizing dust, noise or other work-related nuisances, and for utilizing environmentally sound practices when handling materials and chemicals. Water soluble hypochlorite will be used for the water disinfection systems. The two year supply of hypochlorite provided under the project will be packaged in non-hazardous small packages and containerized as appropriate. The construction contractor shall conform with the manufacturers recommendations for safe storage and handling of the chemicals. The project includes training in the safe handling and storage of chlorination equipment and chemicals.  Page 26 Turkmenistan: Water Supply and Sanitation Project 3.22 The project recognizes that water pollution control of the region's waterways is key to water resource management and the sustainability of the drinking water supplies. It is beyond the scope of the project to address the causes of water pollution but the public education program will include information regarding water pollution control at the household and community levels. Furthermore, it is envisioned that future environmental dialogue with the Government will include discussions on water pollution control. A National Environmental Action Plan has been discussed and would provide an excellent opportunity to advance water pollution control initiatives.  Turkmenistan: Water Supply and Sanitation Project Page 27 IV. PROJECT MANAGEMENT AND IMPLEMENTATION A. Overall Project Management 4.1 Responsibilities for Project Implementation and Management Responsibility for the implementation of the three major components of the project would rest with the specific implementing agencies: the Ministry of Health (MOH) for the Sanitation and Health component, and the Ministry of Water Resources (MWR) for the Water Supply and Institutional Strengthening components. The local authorities in Dashkhovuz Velayet and the participating etraps will also be assigned responsibilities for specific components of the project as appropriate. Overall responsibility for project management would rest with a Project Implementation Unit (PIU) which has been established within the MWR. Details of the PIU are presented in Annex M. In addition to overall coordination, the PIU would be responsible for implementation functions such as project accounting, procurement, disbursements, consolidation of quarterly and annual progress reports, annual work programs and budgets. The PIU will also provide training and technical assistance coordination, project supervision, and assistance to the Component Coordinators (CCs). 4.2 Organization of the PIU. The PIU will report to the Deputy Minister of the MWR responsible for Construction and Operations. The PIU will be staffed with a director (local), an economist/planning specialist (local), an accountant/disbursement specialist (local), an interpreter/translator (local), a secretary (local), a project management specialist (foreign), and a procurement specialist (foreign). In addition, the project will provide a limited number of short-term foreign consultants, including a financial specialist. Annex M presents the organization of the PIU. 4.3 Role of the Foreign Project Management Specialist. The lead foreign specialist will provide overall project management support and guidance to the PIU. The specialist's tasks will include an emphasis on capacity building, as well as coordination of long-term and short-term technical assistance, consolidation of quarterly and annual progress reports, work programs, budgets, and project accounts. Contracting of consulting firms to assist with the implementation of the project will be coordinated by the PIU and initiated under financing of a Project Preparation Facility (PPF). 4.4 Assurances were obtained at negotiations that as a condition of Loan Effectiveness, the Borrower would have employed consultants to provide the technical assistance services to the PIU for project management and construction supervision. Assurances were obtained at negotiations that the PIU will be maintained throughout the project implementation period with staffing, funds, facilities, and other resources in a manner satisfactory to the Bank. 4.5 Preparation of a Project Implementation Manual. A Project Implementation Manual (PIM) will be required in order to facilitate the management and implementation of the project. The PIM will summarize procedures for monitoring project implementation, processing of withdrawal applications under the loan, various methods of procurement to be followed according to the Procurement Schedule in the Loan Agreement, use of Statement of Expenditures and overall project funds, procedures for replenishment of project special and project accounts. The PIM will be prepared by the foreign project management and procurement specialists in the PIU, and will be translated into Russian. The PIU's foreign specialists will be required to organize training for the PIU's local staff, and the Component Coordinators, in order to ensure an understanding of the procedures specified in the PIM. Submission of a satisfactory draft of the PIM to the Bank is a condition of Loan Effectiveness. The Borrower would adopt the PIM by December 31, 1997. Between effectiveness and the adoption of the PIM, the Borrower  Page 28 Turkmenistan: Water Supply and Sanitation Project adopt the PIM by December 31, 1997. Between effectiveness and the adoption of the PIM, the Borrower would implement the project in accordance with the draft PIM. 4.6 Project Coordination Committee. The PIU will be supported by a Project Coordination Committee (PCC), already established, whose main task will be to oversee project implementation. The PCC will be an inter-ministerial committee to provide policy guidance for the implementation of the project. The PCC is chaired by a senior management official in the Cabinet of Ministers (COM). Membership in the PCC will include high-level representatives from the COM, the Ministries of Finance and Economy, Water Resources, Health, Education, Environment and velayet authorities. The PCC would be expected to meet quarterly, or more frequently if necessary. CCs will be invited to participate in these meetings and the PIU will serve as the Secretariat of the PCC. The PCC will review and help resolve all issues raised during project implementation that cannot be resolved by the responsible implementing agencies or the PIU. Assurances were obtained at loan negotiations that the PCC will be maintained for the duration of the project. B. Component Coordination 4.7 Appointment and Purpose of Component Coordinators. The implementing agencies have appointed Component Coordinators (CCs) at the velayet level to assist the in managing the project. The CCs will work under the direction of a Regional Component Coordinator (RCC), who will also be linked to the Dashkhovuz Velayet. The RCC and the CC responsible for coordinating construction supervision of the water supply component of the project have been appointed by the MWR. The two CCs responsible for coordinating the health and sanitation component of the project will be appointed by the MOH, specifically the Sanitary and Epidemiological Services and Center of Health divisions of the MOH. In addition to directing the work of all the component coordinators, the RCC will be responsible for coordinating the institutional strengthening component of the project. The relationships between the CCs and the PIU, and to each other, are shown in the organization chart in Annex M. Assurances were obtained at loan negotiations that the RCC and CCs will be maintained with resources and under Terms of Reference satisfactory to the Bank for the duration of the project. 4.8 Overall Role and Training of Component Coordinators. The CCs will be the focal points for all project activities related to their components. The CCs will be the first point of contact between their respective implementing ministries, the PIU, and the PCC. These arrangements will remove the need to create separate structures within each implementing ministry. A project launch workshop with the participation of all CCs and key officials of the member ministries of the PCC, to ensure a clear understanding of the project, proposed implementation arrangements, and the Bank's procedures and practices will be organized immediately after Board Presentation. 4.9 Duties of the Component Coordinators. With support from technical assistance financed under the project, all CCs will be responsible for coordinating the planning and implementation of project activities in their respective components. Specifically, the CCs would be responsible for the preparation of the annual work programs and budgets, ensure that project accounts and records are maintained, and that supporting documentation is kept in an organized manner for the preparation of funding requests from the Special Account. In addition, they will be responsible for the preparation of quarterly and annual progress reports. The CCs also would be responsible for coordinating the planning and implementation of project activities at the etrap level, consolidating the annual work programs and budgets and ensuring that the project financing requirements are incorporated in the velayat budgets before they are sent to the PIU, and subsequently to the MOF, during the annual budget preparation  Turkmenistan: Water Supply and Sanitation Project Page 29 process. They will also review and consolidate the annual programs and annual reports before they are sent to the PIU. C. Project Reporting 4. 10 Work Programs (WPs). Implementation of the project will require the preparation of annual work programs and budgets. Separate work programs would be prepared for the components under the two implementing ministries. WPs would also be prepared for each participating etrap. The first draft WPs would cover the period July through December 1997. Subsequent WPs would be prepared and submitted to the Bank by October 31 of each year to coincide with the normal Government budget cycle. The draft WPs would be submitted to the Etrap Council as part of the etrap budget for approval. In the budget proposals, project activities would be clearly identified and set aside for any follow-up. The WPs would be forwarded to the Velayet Administration through the Velayet CCs, who would consolidate all the WPs from the etraps. The Velayat Council would then approve the consolidated WPs and forward them to the PIU through the CCs. 4.11 Contents, Submission and Review of Work Programs. The WPs would include the following: (1) a statement of the objectives to be pursued for the coming year; (2) an up-dated inventory of all works/services to be undertaken during the period; (3) total costs for the budget year for rehabilitation, equipment, supplies, and recurrent costs; and (4) conclusions and recommendations of the work program. The details of the investment costs included in the work programs would be clearly identified. The PIU would review and consolidate the WPs received from the velayet (and etraps) through the MOH and MWR CCs. The PIU would be responsible for submitting the consolidated report on WPs and budgets to the Ministry of Finance for inclusion in the national budget to ensure that appropriate allocations are made for the financing of the share of project recurrent costs that is the responsibility of the velayat/etraps. The WPs would be submitted to the Bank for review and comments at the same time they are submitted to the PIU. The Bank would review the WP report and make comments and suggestions as appropriate. The consolidated WP would form the basis for the implementation of project activities in any given year. 4.12 Quarterly Progress Reports. Quarterly progress reports must be prepared by the PIU and presented to the Bank and the PCC. The first report would be issued three months after Loan Effectiveness. The reports would include: (1) a summary of project activities by component; (2) a description of the main achievements against agreed implementation targets and disbursement schedules, and the problems encountered; (3) recommendations on how to solve problems and comments on progress in implementing previous recommendations; (4) a description of component activities; (5) a presentation of the financial situation of the project in terms of actual versus budget for the major expenditure categories and the financing of these categories; and (6) a presentation of the financial situation of each component. Each implementing ministry would prepare an annual implementation progress report by February 15, 1998 and by the same date each subsequent year, which would then be made available to the Bank through the PIU. The quarterly and annual reports would be prepared by the CCs in each implementing agency. The reports would be prepared for each etrap, including the etrap city and the kolkhos, and would include a summary describing the major achievements and problems. These reports would be consolidated by the CCs before being submitted to the PIU for final clearance. The reports cleared by the PIU would be forwarded to the Bank. Assurances were obtained during the Loan Negotiations that, within one month from the end of each quarter, each implementing ministry would prepare such quarterly reports.  Page 30 Turkmenistan: Water Supply and Sanitation Project 4.13 Mid-Term Review. At the time of the estimated mid-point completion of the project, the Borrower would be required to undertake a mid-term review of the implementation of the project. This review would be undertaken in consultation with, and in a manner satisfactory to, the Bank. By March 31, 2000, the Borrower would prepare and furnish to the Bank a report regarding the results of the mid- term review, including progress achieved in the implementation of the project and measures recommended to ensure the achievement of the project's operational and development objectives during the remainder of the project life. By July 31, 2000, the Borrower shall review this report with the Bank. D. Project Monitoring 4.14 Project Monitoring. Project Monitoring would be carried out in five main areas: (1) the procurement and physical delivery of goods; (2) the physical implementation of project activities; (3) the impact on service delivery; (4) the financial management and control of project funds; and (5) the capacity building under the project. A continuous assessment of these activities would be carried out under the context of the Project Implementation Plan described in Annex J, and, more specifically, the annual work programs. Project implementation programs and the effective utilization of project resources would be monitored through well defined Performance Monitoring Indicators similar to those listed in Annex 0. E. Bank Supervision 4.15 Bank Supervision. Intensive supervision by the Bank would be required for the first year following Loan Effectiveness, principally because the implementing agencies and other responsible government agencies lack experience, not only with the Bank, but also with project management and procurement methods. Initially, supervision would focus on project management, procurement, project financing, Bank disbursement procedures, and methods of payment and reporting. In the second year, attention would focus on the institutional and financial aspects of the project. The Supervision Plan in Annex N estimates a requirement of 37 staff weeks for the first year of the project (PYI), spread over three missions, and 72 staff weeks for eight additional supervision missions, two missions for each subsequent year. The Bank's Liaison Officer would participate in important meetings during missions and would facilitate day-to-day communications with the PIU. The Performance Monitoring Indicators (Annex 0) would be used for measuring progress in project implementation by the Bank's supervision missions. Electronic mail would be installed at the PIU to facilitate communication with the Bank in Washington. F. Procurement 4.16 Summary of Procurement Procedures. The Project Implementation Unit would be responsible for managing procurement for overall project management and coordination. Specialized Procurement Consultants would assist the PIU in development of technical specifications. Procurement of civil works, goods and services would be in accordance with the World Bank's "Guidelines, Procurement under IBRD Loans and IDA Credits" dated January 1995 and Revised January and August 1996 and "Guidelines for the Use of Consultants by World Bank Borrowers and by the World Bank as Executing Agency" dated August 1981. Standard Bidding Documents and Form of Contracts issued by the Bank would be used as appropriate for the Civil Works, Goods and Services to be procuired. Both works and goods would be grouped in the most efficient manner possible and the proposed packaging would be reviewed by the  Turkmenistan: Water Supply and Sanitation Project Page 31 Bank. Table 4.1 summarizes the proposed procurement arrangements. Detailed procurement arrangements indicating the number of procurement packages, their value and method is presented in Annex P. 4.17 Procurement of Civil Works (US$24.8 million). Civil works are for the rehabilitation and upgrading of facilities (7 etrap centers and 9 collective farms) as well as sanitation facilities and testing laboratories in the eight etrap centers. The contractor will supply all necessary equipment. The following methods of procurement would be followed: (a) International Competitive Bidding (ICB) procedures would be used for contracts estimated to cost more than US$ 300,000. Approximately $24.0 million will be procured under international competitive bidding. The Government will contribute approximately US$2.5 million. Given the size of the contract, the contract will be based upon unit costs and the contractor will supply all necessary goods. Given the size of the contract and the complexity of works, prequalification will be required. (b) Procurement of Small Works procedures would be used for contracts estimated to cost less than US$ 50,000. Approximately $0.5 million for small scale civil works (pit latrines) will be procured under lump sum, fixed price contracts awarded on the basis of quotations obtained from three qualified domestic contractors in response to a written invitation. The Borrower shall use bidding documents developed in the ECA region. The invitation shall include a detailed description of the works, including basic specifications, the required completion date, and relevant drawings where applicable. Short letters of invitation and a brief standard form of contract will be developed and reviewed and accepted by the Bank (sample invitation and contract will be included in the PIM). The award shall be made to the contractor who offers the lowest price quotation for the required work, and who has the experience and resources to successfully complete the contract. 4.18 Procurement of Goods (US$2.6 million) consisting of water supply and sanitation equipment and related supplies, furniture, and vehicles would be grouped to the extent practical to encourage competitive bidding. The following methods of procurement would be followed: (a) International Competitive Bidding (ICB) procedures would be used for goods estimated to cost US$0.8 million related to contracts estimated to cost more than US$300,000 equivalent each; (b) International Shopping procedures (IS) would be used for the procurement of goods that cannot be grouped in packages above US$300,000. Quotations from at least three suppliers from at least two different eligible countries would be required for contracts estimated to cost less than US$300,000 and more than US$50,000. An aggregate limit of US$1.5 million worth of goods would be procured through IS; and, (c) National Shopping (NS) procedures for contracts up to US$50,000 each would be used for locally available, off-the-shelf equipment and furniture items of small value and standard specifications up to an aggregate amount of US$0.3 million; three quotations would be required.  Page 32 Turkmenistan: Water Supply and Sanitation Proiect 4.19 Preference for Domestically Manufactured Goods. For contracts for goods, to be awarded on the basis of ICB, the Borrower may grant a margin of preference of 15% or the amount of applicable customs duties, whichever is lower, to qualified domestic manufacturers of goods in accordance with World Bank Procurement Guidelines (January 1995 and Revised January and August 1996). 4.20 Procurement of Consulting Services (US$4.7 million). Specialists and/or consulting firms financed under the Project would be hired in accordance with the "Guidelines for the Use of Consultants by World Bank Borrowers and by the World Bank as Executing Agency" dated August., 1981. Consultants will be sought for the sanitation and health component ($1.7 million), the institutional strengthening component ($1.7 million), and project management ($1 .3 million - of which $0.3 is technical assistance under the PPF). Most of the consultants contracts shall be awarded on the basis of shortlist of firms. 4.21 Training (US$0.4 million). For local and overseas training and study tours financed under the Project, the qualifications of candidates along with their course of study, and proposed training institutions and costs, and in-country local training courses would be subject to prior review and approval by the Bank. Candidates would be selected on the basis of established criteria, to be agreed upon with the Bank as part of the annual reviews. 4.22 Operating Costs (US$1.2 million) will comprise sanitation facilities maintenance, PIU staff salaries, utilities, office rent and office operating costs including supplies and equipment. The Bank will finance 28% of operating costs and the Government will finance 72% of operating costs over the life of the Project. 4.23 Notification of Business Opportunities. A General Procurement Notice was published in the February 16, 1997 edition of the UN publication Development Butsiness and, as appropriate, would be updated and published annually thereafter. For goods to be obtained by ICB, individual bidding opportunities would be advertised in Development Business and in a major local newspaper 30 days prior to availability of bidding documents and transmitted to potential bidders who expressed interest in bidding in response to the published General Procurement Notice. The local advertisement procedure would be repeated for all bidding packages utilizing ICB. These advertisements would be in the English language. 4.24 Project Preparation Facility (PPF). PPF P-3120-TM in the amount of US$0.43 million was signed on November 4, 1996 to help finance the establishment of the PIU. Work includes consulting services to the PIU for the preparation of procurement arrangements. Study tours, local training and a limited amount of equipment and supplies are also eligible expenses. Procurement of consultants will follow Bank Guidelines. 4.25 Prior Review By the Bank of Procurement Decisions. The documentation for all procurement transactions not subject to prior review by the Bank would be subject to ex-post review during the Bank's periodic project supervision missions. To ensure compliance with the World Bank's Procurement Guidelines, the following procurement actions would be subject to prior Bank review: (a) with respect to each contract under international competitive bidding for goods or works estimated to cost the equivalent of $300,000 or more; (b) the first two contracts for small works awarded under procurement of small works estimated to cost the equivalent of $20,000 or more; and (c) for the first three contracts for goods awarded under international shopping, the procedures set forth in paragraphs 2 and 3 of Appendix I to the Guidelines shall apply. The PIM prepared by the PIU (para 4.5) will be submitted to the Bank for prior review.  Turkmenistan: Water Supply and Sanitation Proiect Page 33 Table 4.1: Detailed Procurement Arrangements (in US$ million) Procurement Method In- ...tiol C-nmp-Nti .1i ...I Co.pel,i. Other Not Bank Total Cost Riddi.. Biddi.n Financed 1. Works 1.1 Rehabilitation 23.13 1.64' 24.77 (20.85) (1.50) (22.35) 2. Goods 2.1 Equipment 1 .03"' 1.03 (1.03) (1.03) 2.2 Vehicles 0.33G' 0.33 (0.33) (0.33) 2.3 Supplies 0.83 0.23"' 1.06 (0.83) (0.23) (1.06) 3. Consultant Services 3.1 Technical Assistance 4.40' 4.40 (4.40) (4.40) 3.2 Training 0.43" 0.43 (0.30) (0.30) 4. Operating Costs 1.249' 1.24 (0.40) (0.40) 5. PPF 0.43h" 0.43 (0.43) (0.43) Total 23.96 9.74 33.70 (21.68) (8.62) (30.30) Figures may not total due to rounding. Figures in parentheses are the respective amounts financed by the Bank. a/ Includes Sanitation Civil Works $0.46 million to be procured by National Shopping and Construction Supervision Staff $1.1 8 million to be procured per Guidelines for the use of Consultants, August, 1981. b/ Includes Water Supply and Sanitation equipment $0.75 million and office equipment $0.28 million to be procured by International Shopping c/ Vehicles to be procured by Intemational Shopping d/ Includes furniture of $0.02 million and other supplies of $0.02 million to be procured by National Shopping and Laboratory Furniture $0.13 million and water supply and sanitation supplies $0.06 million to be procured by International Shopping. e/ Includes Local TA of $0.88 million and Foreign TA of $3.52 million to be procured per Guidelines for the use of Consultants. August, 1981. f/ Includes workshops/seminars $0.29 million and study tours $0.14 million to be procured per Guidelines for the use of Consultants, August, 1981. g/ Includes office rent to be financed by the government $0.79 million; PIU personnel salaries after effectiveness $0.25 million procured per Guidelines for the use ofConsultants, August, 1981; and office operation. maintenance and conimunication costs $0.08 million and miscellaneous expenses $0.12 million to be procured by National Shopping. h/ Includes phase I of PIU consulting contract $350.000; local consultants $35,000: office equipment (National Shopping) $30,000; training $10,000; and recurrent costs $5,000.  Page 34 Turkmenistan: Water Supply and Sanitation Project (a) Civil Works: Civil works (including repairs to existing facilities and installation of equipment) shall be procured using the Standard Bidding Documents, Procurement of Works, January, 1995. All prequalifications, bidding documents, evaluation reports, awards and contracts will be subject to prior Bank review. For the sanitation rehabilitations (pit latrines) the PIU will use a simplified version of the standard bidding documents, developed by ECA region, which would be based on a simplified bill of quantities including, inter alia, the method of payment and a form of contract. The PIU would be responsible for the evaluation and recommendation of award of contracts. Technical verification of the work carried out would also be the responsibility of the PIU in cooperation with the MOH. Prior to award the Bank would review the first two rehabilitation contracts for works on sanitation facilities (see para 4.25 above) and monitor other awards and works on a selective basis during project supervision. (b) Goods: In general, pre-identified master lists of goods, indicating grouping, along with estimates of cost and proposed method of procurement would be pre-reviewed by the Bank. Items would be grouped to the extent practical to encourage competitive bidding and to permit bulk procurement. Bidding documents, evaluations and recommendations of awards for goods procured under ICB and first two contracts under IS would be subject to prior review by the Bank. (c) Consultants: The selection of consultant firms and individuals would be in accordance with the World Bank Guidelines for Use of Consultants (August, 1981). Terms of Reference for all consulting assignments would be subject to prior review by the Bank. Terms and conditions of contracts for all technical assistance assignments, invitation packages and evaluation reports of assignments costing more than US$100,000 each for firms, and US$50,000 each for individual consultants would be subject to prior review by the Bank. 4.26 After award, should any material modifications or waiver of the terms and conditions of a contract result in an increase above 15% of the original price, the Bank would reserve the right of prior review of such modifications (included would be modifications in contracts for consulting services). 4.27 General Review: The Bank would monitor procurement activities, contract management, and project record-keeping during supervision missions. The Bank would undertake a focussed project launch workshop in July, 1997 and a comprehensive mid-term review of project progress; both activities would place special emphasis on implementation including procurement matters. 4.28 Procurement Monitoring and Reporting. The PIU would be responsible for establishing and maintaining a computerized procurement monitoring and reporting system acceptable to the Bank. Status reports from this system would accompany the PIU's regular quarterly project progress reports sent to the Bank. 4.29 Country Procurement Assessment Report (CPAR). There are no plans for a Country Procurement Assessment Report (CPAR) for Turkmenistan. A quick review will be done under the public procurement reform initiative under a recently approved IDF grant which is expected to be implemented during 1997. In general experience with competitive bidding is limited and close supervision by the Bank and the consultants will be exercised. G. Disbursements 4.30 Schedule. The proposed Loan would be disbursed over about six years which includes six months for the finalization of accounts and submission of withdrawal applications and other reports. No standard  Turkmenistan: Water Supply and Sanitation Project Page 35 Chart 4.1 Annual and Cumulative Disbursements (World Bank Fiscal Years) 14 35 12 30 C10 25 0 8 ~~~~~~~~~~~~~~20 c~Annual 6 6 15 E --Cumulatihe w 4 10 n) 02 E7 5 1 0 0 FY98 FY99 FYOO FYO1 FY02 FY03 Bank Fiscal Years disbursement profile exists for Turkmenistan. The Project is expected to be completed by August, 2003 with a Loan Closing Date of February, 2004. 4.31 Disbursement Percentages.The proceeds of the Loan would be disbursed as shown in Table 4.2: Table 4.2 Proceeds of the Loan Amount Percentage of Expenditures to Category (US $ millions) be Financed I. Works 19.00 90% 2. Goods 2.40 100% of foreign expenditures, 100% of local expenditures (ex- factory costs), and 75% of local expenditures for other items procured locally 3. Consultants"' 4.40 100% 4. Training 0.30 100% 5. Operating Costs 0.40 100% 6. Re-financing of PPF 0.43 Amount due pursuant to Section 2.02 (c) of the Loan Agreement 7. Unallocated 3.37 Total 30.30 a/ Includes Foreign Technical Assistance ($3.52m) and Local Technical Assistance ($0.88m).  Page 36 Turkmenistan: Water Supplv and Sanitation Project Table 4.3: Annual and Cumulative Disbursements (US$ Millions) Bank Fiscal Year FY98 FY99 FY00 FY01 FY02 FY03 Annual 2.0 5.0 8.0 8.0 5.0 2.3 Cumulative 2.0 7.0 15.0 23.0 28.0 30.3 4.32 The standard disbursement profile for water supply and sanitation project requires approximately 32 quarters or 8 years to disburse a Loan. However, since the only major contract which will be executed is for four years, the disbursement forecast is based on the ECA disbursements profile. Annex Q shows a detailed disbursement forecast of the Loan. Funds disbursed under the PPF would be repaid from the proposed Loan Funds after effectiveness. A six year period is shown above as it is expected that the Loan will become effective in the first quarter of FY98. The last year of disbursement anticipates final disbursements in mid-FY03. The Project's administrative arrangements are already in place and operating under the PPF. Procurement actions for civil works have been prepared under the PPF and would be ready to initiate upon Loan effectiveness. The disbursement schedule in Table 4.3 allows for some lag time in actual disbursements to account for normal delays in preparation and presentation of documentation. 4.33 Statements of Expenditure. Reimbursements would be made on the basis of Statements of Expenditures (SOEs) for expenditures relating to (1) contracts for goods valued at less than US$ 300,000 equivalent each with the exception of the first three contracts for goods, awarded on the basis of international shopping procedures, and (2) contracts for works individually valued at less than US$ 50,000 equivalent each with the exception of the first two contracts for small works costing the equivalent of $20,000 or more. The documentation to support these expenditures would be retained by the PIU, the MOH, and the Dashkhovuz Velayat for the respective project activities for at least one year after receipt by the Bank of the audit report for the year in which the last disbursement is made. This documentation would be made available for review by the external auditors and Bank supervision missions. Disbursements for all other items would be made against full documentation and in accordance with procurement guidelines. Supervision missions would review documentation retained by the borrower in the field. If ineligible expenditures are presented, including those that are not justified by the evidence furnished, or amounts in excess of agreed disbursement percentages as financed from the Special Account (described in paragraph 4.36), the Bank would have the right to withhold further deposits in the Special Account. The Bank may exercise this right until the Borrower has: (1) refunded the amounts involved, or (b) if the Bank agrees, submitted evidence of other eligible expenditures that the Bank can use to offset the ineligible amounts. The minimum application size for payment directly from the Loan Account or for issuance of Special Commitments is 20% of the current Special Account authorized allocation. 4.34 Certification of Statements of Expenditures. The etrap accountant would submit SOEs to the CCs for presentation to the Chief Accountant at the Dashkhovuz Velayat Administration. The latter would consolidate the SOEs from the etraps and have them certified by the Hakim of the Etrap Administration before they are forwarded to the Hakim of Dashkhovuz Velayat for transmission to the PIU. The PIU would provide the official certification for the Bank when requesting the replenishment of the Special Account.  Turkmenistan: Water Supply and Sanitation Project Page 37 4.35 Special Account. To facilitate timely project implementation, the borrower has opened under conditions acceptable to the Bank, a Special Account in US dollars in the Central Bank in Ashgabat. During the early stage of the project, the initial allocation of the Special Account would be limited to US$ 200,000. However, when the aggregate disbursement under the Loan have reached the level of US$ 3.0 million, the initial allocation may be increased up to the authorized allocation of US$ 500.000 by submitting the relevant Application for Withdrawal. Replenishment applications should be submitted at least every three months, and must include reconciled bank statements as well as other appropriate supporting documents. 4.36 Administration of the Special Account. The Special Account has been established in the name of the Borrower and would be administered by authorized staff of the PIU. 4.37 Requirements of the Bank for Local Banking Capacity. The pre-appraisal mission confirmed that the Central Bank is capable of meeting the requirements of the Bank with respect to operating and maintaining the SA. The Central Bank (1) is financially sound as demonstrated by its latest accounts, as audited by an internationally recognized auditing firm; (2) has a significant foreign correspondence network covering all major currencies; (3) has reasonable capacity and experience for issuing letters of credit, for making direct foreign payments and other international transactions with appropriate arrangements for the training and development of its staff; (4) is capable of performing a wide range of local banking services, including cash payments, transfers to other domestic banks, issuance of debit notes, application of conversion rates from foreign currencies, and maintenance of adequate accounts for the SA; (5) is a member of Swift and uses or plans to use this facility to expedite payment transfers; (6) is willing to issue a Comfort Letter to assure the amounts deposited in the SA would not be set off or otherwise seized or attached to satisfy amounts due to the Bank by the Borrower; (7) is willing to maintain adequate accounts as required by the Bank and to provide to the Bank monthly bank statements and any other information considered necessary by the Bank (copies of all transactions would be routinely submitted to the implementing agencies); and (8) is willing to charge reasonable rates for its services and pay reasonable interest on balances held from time to time. H. Project Accounts, Budgets and Audits 4.38 Project Accounts and Budgets. Financing of project activities would proceed through a Project Account (PA) to be opened by the PIU, through which project funds would be channeled. 4.39 Accounts and Audits. The Borrower would be responsible for the appropriate accounting of the funds provided by the Bank under the Loan, for reporting on the use of these funds, and for ensuring that audits of the financial statements or reports are submitted to the Bank. The project accountant in the PIU would maintain consolidated accounts for the Project and would prepare quarterly financial reports. The accounts would be maintained for all project funds, i.e. Loan funds and local contribution. 4.40 All project records and accounts, including those for the SOEs, the SA, and PA would be audited annually in accordance with the "World Bank Guidelines for Financial Reporting and Auditing of Projects Financed by the World Bank," (March 1982). An international auditing firm would be appointed to perform project audits. The Bank would be provided within six months of the end of each fiscal year with an audit report of such scope and detail as the Bank may reasonably request, including a separate opinion by the auditor on disbursements against certified statement of expenditures.  Page 38 Turkmenistan: Water Supply and Sanitation Project V. FINANCIAL AND ECONOMIC ANALYSIS A. Scope of Analysis 5.1 Introduction. This chapter summarizes the results of the financial and economic analysis of the project, which is presented in Annex R. The analysis is divided into four sections: financial analysis; fiscal impact and cost recovery; economic analysis; and affordability. These analyses are limited to the water supply component, which represents about 70% of the basic project cost. For the purposes of this analysis, the water supply project is desegregated into the component for upgrading water supply in the seven etrap cities and that for the nine collective farms selected for the project. The analysis considers these two groups of beneficiaries separately. 5.2 With and Without Project Scenarios. The analyses in Annex R are based on a comparison of "with project" and "without project" scenarios for the costs and revenues of the water supply services in the two groups of beneficiaries. The "without project" scenario supposes that existing inefficiencies would continue. The summary of Annex R in this chapter only discusses the "with project" situation. B. Financial Analysis 5.3 System Inefficiency and the Current Cost of Delivered Water. All aspects of the water systems are in very poor condition. In the existing water systems in the etrap cities and kolkhoses to be included in the project, only about 20% of the water produced is utilized by the customers. The water estimated to be currently delivered to consumers amounts to only 12 liters per capita per day (Ipcd). The resulting operational cost per cubic meter (CM) delivered to customers is $0.59 in the etrap cities and $1.03 in the kolkhoses. 5.4 Inefficient Use of Electricity. The systems use electricity very inefficiently. In the etrap cities, a reported 1.43 KWH are used for every cubic meter of water produced. In efficient systems, electricity use is in the order of 0.4 KWH/CM. This inefficiency does not result in a financial burden to the water utilities because the electricity price is heavily subsidized. However, the real economic cost of these wasted resources is considerable. 5.5 Financial Analysis of Improvements for the Etrap Cities. With the completion of the proposed improvements for the etrap cities, delivery of water to customers is expected to rise by a factor of 4.5 to about 2.9 million m3/year by the year 2000. By the year 2017, consumption is expected to reach about 6.6 million m3/year. However, operating costs are expected to be reduced by 7% between 1997-2000, in spite of the nearly six-fold increase of the volume of water delivered to clients. The average tariff necessary fully to cover the total financial costs of the system, or "full cost tariff" is estimated at US$ 0.42 per cubic meter. This is a relatively high rate, largely because of the small size of the etrap cities, which makes economies of scale elusive in both production and distribution systems. The cost of water is also affected by the high estimated capital costs expected because of difficulties of attracting contractors to execute projects in Turkmenistan. A tariff sufficient to cover the full cost of operations and maintenance ("O&M Tariff") is US$ 0.14 per cubic meter. This is much lower than the full cost tariff, once more pointing out the disproportionate weight of capital costs compared to O&M costs, in the full cost tariff. 5.6 Consideration of Least Cost Alternatives. The proposed plan represents the least-cost solution for improving water supply in the seven etrap cities. All other possible plans would still require the  Turkmenistan: Water Supply and Sanitation Proiect Page 39 improvements to the disinfection, storage, transmission, distribution and delivery components of the project, which represent about 90% of the total capital cost of the improvements. Any other alternative to the proposed supply of water by improving the existing well system would be more costly by a factor ranging from the hundreds to the thousands. The proposed principal means of delivery is by street faucets, which is also less expensive than providing yard taps or direct house connections. 5.7 Financial Analysis of Improvements for the Collective Farms. With the completion of the proposed improvements for the nine collective farms, piped water would be delivered to a total of 82,000 people compared to the 20,000 now served. The volume of water expected to be delivered to users would be about 1.6 million m3/year in the year 2000. By the year 2017 annual consumption is expected to reach about 4.0 million m3/year. The "full cost tariff" for the collective farms is US $0.74 per cubic meter. The cost of water is higher than that for the etrap cities because of the lower density of the populations. The tariff needed to cover operations and maintenance ("O&M Tariff") for the kolkhos component of the project is US$ 0.16 per cubic meter, the same figure reported for the etrap cities. Again, the differences between the two projects' costs lie in their capital cost requirements, not in unit operating costs. As with the etrap cities, the proposed plan represents the least-cost solution for improving water supply in the nine collective farms. C. Fiscal Impact and Cost Recovery 5.8 Fiscal Impact. The fiscal impact of the project would depend on the cost recovery mechanisms adopted. If the government applies a full cost tariff the fiscal impact of the project would be zero for the government. (Potential impact on users is discussed in the section on Affordability.) That is, the users would bear the entire burden of the project costs. If an O&M tariff is applied, the net present value of the implicit subsidy (the cost of repaying the loan) for the etrap cities would be US $6.4 million over the life of the project. For the collective farms, it would be US $7.26 million. 5.9 Cost Recovery. The institutional strengthening component of the project would support the government in analyzing options for cost recovery, and reaching a decision on which option is most suitable for Turkmenistan at this stage. The following cost recovery options could be considered: (a) a flat rate user fee (or tax) for all beneficiaries; (b) user fees differentiated between households with and without yard taps; and (c) a program to introduce metering for households with yard taps. In the initial stage, a metering program is not recommended because of the cost and organizational complexity of this basis for a tariff system. D. Economic Analysis 5.10 Types of Benefits Estimated. The analysis concentrates on the private benefits to be derived from increased water delivered, improved water quality, and improved reliability of the water supply. No attempt is made to quantify possible externalities such as health benefits and increased output due to a healthier population. The analysis is based on an estimate of the increase in consumer surplus to be derived by households as a result of the reduction in the time they spend carrying water and as a result of the increase in their future consumption of water, due to the improved supply. For each type of consumer, the average welfare gain was calculated per cubic meter of water consumed . 5.11 Estimate of Benefits. Separate estimates were made for the gains in welfare from improved water supplies for the users of street faucets, yard taps and direct household connections. In each case, a linear demand curve was estimated, based on the average amount of time spent per household at present  Page 40 Turkmenistan: Water Supply and Sanitation Project carrying water, and the average volume carried; the estimated average consumption of unrationed households facing a zero marginal price for water with, respectively: a household connection; a yard tap; and a street faucet. The analysis reports an economic internal rate of return of 22.2 % for the etrap cities project component and 10.6% for the collective farm project component. The latter is below that of the etrap city project component because of the higher unit costs of production. 5.12 Sensitivity Analysis. The results of the financial and economic analysis did not vary significantly throughout the probable range of values of the main independent variables. E. Affordability 5.13 Income and Impact of User Fees. According to the government statistical agency, Goskomstat, the average household monthly disposable income in Dashkhovuz Velayet in 1995 was 13,600 manats, or about $68 per month. The dollar equivalent, however, was based on the then rate of exchange of 200 manats per dollar, but the current rate (September 1996) is about 4,800 manats per dollar. Incomes certainly have not kept pace with this difference in dollar exchange rates, so the $68 per month income is not considered realistic in comparisons with late 1996 equivalent dollar income levels. According to the Bank's Social Assessment, average household income was under $30 per month in November 1995. It is likely that the very rapid depreciation of the exchange rate during 1996 has resulted in a further reduction in the dollar value of household incomes, perhaps to about $20 per month. A tariff sufficient to cover operations and maintenance costs for a household consuming 9 cubic meters per month (which represents a consumption level of about 50 lpcd) would be $1.35. This represents 4.5 % of an income of $30/month and 6.8% of an income level of $20/month. These levels are not far removed from the rule of thumb indicator that spending about 5-6% of household income on water is generally considered affordable. 5.14 Other Factors Affecting Incomes and Impacts of User Fees. As a first step, it is proposed that water charges be levied only against those with yard taps or direct connections to houses and buildings. Households with yard taps appear to be more prosperous than families that must depend on street faucets or wells for their water, and logic supports that conclusion. Accordingly, the impact on the yard-tap households of fees in the order of those described above may be considerably less than indicated. In addition, with electricity, health and other typical costs either free or highly subsidized, households should be able to spend a higher portion of their disposable income for water than households that must pay the full burden of the benefits currently being provided by the government of Turkmenistan. 5.15 Gross Domestic Product (GDP) and Household Income. The proportion of GDP received as household disposable incomes is very low. The official data for household income imply a per capita annual disposable income which is about 20% of per capita GDP. It appears that most of the GDP is retained by the public sector and is used to finance state-controlled investments and to subsidize the provision of some food items and free public services (including electricity, gas and water). This in turn reflects the slow progress on economic reform and privatization registered since independence. In cases where the state retains some 80% of GDP and households dispose of only 20%, there is likely to be resistance to paying for public services. 5.16 Share of GDP Relative to Affordability of Water. In this context, the issue of the affordability of water assumes a much broader significance. Policy dialogue with the authorities would emphasize the potential efficiency gains to be had from linking the incomes of the bodies responsible for producing services to their delivery. The dialogue would also emphasize that the result of privatization would be  Turkmenistan: Water Supply and Sanitation Project Page 41 to increase the proportion of total income received by private individuals and lower the proportion received by the state. While these issues clearly go well beyond the water sector, in the interim, the institutional strengthening component of the project should also aim to show that even with the collection of a limited user fee sufficient to contribute to pay for operation and maintenance costs, the efficiency of the system's operation can be greatly increased, compared with systems which depend on state budget allowances for all their operating revenues.  Page 42 Turkmenistan: Water Supply and Sanitation Project VI. PROJECT BENEFITS AND RISKS A. Project Benefits 6.1 Direct Benefits. The direct benefits of the project would be to provide a safe, reliable water supply to 108,000 people in the seven etrap cities and to 82,000 in 47 villages in nine collective farms. 62,000 people in these collective farms would be receiving water from a piped system for the first time. Other direct beneficiaries would be the children in 35 schools in the nine collective farms and people who attend the markets in the seven etrap cities that would be provided with new latrines as part of a demonstration project. 6.2 Indirect Benefits. The people of Dashkhovuz would benefit from improvements to the Dashkhovuz Center of Health and the health and hygiene education programs to be funded by the project. They would also benefit from improvements to enhance the capabilities of the Dashkhovuz office of the MOH/SES in such areas as water quality monitoring, and sanitation and hygiene surveillance. The country and the velayet would benefit from the demonstration of how to improve water and sanitation services, and be able to apply these lessons to serve the remaining people outside the project area. Both nationally and regionally, the project would strengthen the water and sanitation sector through reconmmendations for reorganization and internal strengthening of the Dashkhovuz Regional Water and Sanitation Authority. Finally, the country would benefit from the skills acquired in the management of large development projects through the establishment of the project implementation unit. B. Risks 6.3 Categories of Risks. The various categories of risks include (a) the willingness of the national government to commnit itself to sector reform, including adoption of recommendations for institutional reorganization and strengthening, and of a policy of cost recovery for the provision of sector services, (b) completion of the project facilities on time and within budget, (c) the establishment of a water and sanitation sector utility in Dashkhovuz capable of operating and maintaining the facilities for which they are responsible, and (d) the success of changing water users attitudes toward conservation of water and willingness to pay for the improved services being provided. 6.4 Consequences of Risks. Failure to overcome one or two of these risks would threaten the success of the project. Should three or four of these risks occur, the project would almost certainly fail. The project has several safeguards to mitigate these risks. Dialogue between the government and the Bank is ongoing to encourage the government's commitment to sector reform, and the loan agreement incorporates specific actions to be accomplished to affirm this commitment. Strong project management, which would include a blend of knowledgeable local expertise with the support of experience foreign consultants, would be in place at the start of the project. Technicai assistance would be provided to assist the government in implementing needed reforms and in strengthening the capability of the regional water and sanitation sector organizations in carrying out their responsibilities. This support would be made available to both the utility providing the services and the organization responsible for ensuring that the services provided meet the government's quality standards. Finally, the project would incorporate public education programs to encourage improved water and sanitation practices.  Turkmenistan: Water Supply and Sanitation Project Page 43 VII. AGREEMENTS AND RECOMMENDATION A. Agreements Reached 7.1 At negotiations, the Government: (a) Confirmed that Presidential Decree No. 3006 had been issued (February 4, 1997, Annex A- 2). The Decree indicates that once the Water Supply and Sanitation Project's water supply systems become operational, water charges will be imposed on beneficiaries towards full cost recovery of operation and maintenance expenses. The Decree further confirms that the Government will establish a Dashkhovuz Regional Water Supply and Sanitation Authority no later than December, 1998. (b) Confirmed that the Director of Project Implementation Unit (PIU) has been appointed and has submitted to the Bank a list of candidates for the economist/planning specialist; accountant/disbursement specialist; and health specialist for Bank review. (c) Confirmed that the Project Coordination Committee (PCC) has been established and the Component Coordinators (CCs) have been appointed. (d) Confirmed that the import of equipment and materials is exempted from custom duties and taxes. (e) Agreed that the project would be implemented with reliance on annual work programs and budgets (WP) with the first WP to cover the period July-December, 1997. The PIU would consolidate the etrap and velayet level annual WP into one WP and would submit the WP to the Bank and the Government by October 31 of each subsequent Project year to coincide with the normal Government budget cycle. (f) Agreed that within one month from the end of each quarter each implementing ministry would prepare quarterly reports for submission to the Bank through the PIU (g) Agreed that by March 31, 2000, the Borrower would prepare, under terms of reference satisfactory to the Bank, and furnish to the Bank, a mid-term review report integrating the results of the monitoring and evaluation activities performed, the progress achieved in carrying out of the Project during the period preceding the date of the said report and setting out the measures recommended to ensure efficient carrying out of the Project and the achievement of the objectives thereof during the period following such date and that by July 31, 2000 the Borrower shall review with the Bank said report. (h) Agreed that the PIU will be maintained throughout the project implementation period with staffing, funds, facilities, and other resources in a manner satisfactory to the Bank. (i) Agreed that the PCC, CCs and Regional Component Coordinator will be maintained with resources and under Terms of Reference (TOR) satisfactory to the Bank until completion of the Project. (j) Agreed to adopt the Project Implementation Manual (the draft of which is a condition of Loan  Page 44 Turkmenistan: Water Supply and Sanitation Project Effectiveness) by December 31, 1997. (k) Agreed to employ by December 31, 1997, consultants with experience and TOR satisfactory to the Bank to prepare the National Sector Reform Study under the project. (1) Agreed to prepare and discuss with the Bank the National Sector Reform Study by December 31, 1998, and prepare an Action Plan satisfactory to the Bank. (m) Agreed to prepare and discuss with the Bank by June 30, 1998, the draft legal instrument for the establishment of the Dashkhovuz Regional Water and Sanitation Authority. (n) Agreed to establish and begin operation of the Dashkhovuz Regional Water and Sanitation Authority no later than December 31, 1998. (o) Agreed to maintain in manat the Project Account for its counterpart contribution to the financing of the project in a commercial Bank on terms and conditions satisfactory to the Bank and replenish said account by depositing additional amounts equivalent to: (i) $300,000 on July 1, 1998; (ii) $600,000 on July 1, 1999; (iii) $600,000 on July 1. 2000; (iv) $600,000 on July 1, 2001; and (v) $312,000 on July 1, 2002. (p) Agreed that the Dashkhovuz Regional Water and Sanitation Authority will begin to charge tariffs for water supply services provided under the project's new water supply systems in each participating etrap when the new systems become operational. (q) Agreed to the performance monitoring indicators of the proposed project (Annex 0). (r) Agreed that Disbursements for operating costs shall not exceed $80,000 equivalent during any calendar year during the period of project implementation. 7.2 Conditions of Loan Effectiveness would be: (a) The Borrower has employed consultants with qualifications, experience and terms of reference satisfactory to the Bank, to assist the PIU in carrying out the activities under the Project. (b) That the Borrower has submitted a draft Project Implementation Manual satisfactory to the Bank. (c) That the Borrower has opened a Project Account in a Commercial Bank acceptable to the Bank and has deposited $200,000 equivalent in the Account. B. Recommendation 7.3 Subject to these agreements and conditions, the proposed project would be suitable for a Bank Loan of US$ 30.3 million.  Turkmenistan: Water Supply and Sanitation Project Page 45 ANNEX A: PRESIDENTIAL DECREE AND POLICY LETTER ANNEX A-1: POLICY LETTER December 5, 1996 Mr. James Wolfensohn President International Bank for Reconstruction and Development 1818 H Street, N.W. Washington, D.C. Dear Mr. President: The Government of Turkmenistan is negotiating with the World Bank a loan in support of a water supply and sanitation project designed to improve the living conditions of the population living in the area of Turkmenistan most severely impacted by the Aral Sea disaster. Despite its desert climate, Turkmenistan has a long history of agriculture and settlement and thus the provision of water in adequate supply and good quality has been a major concern from the time of our ancestors until the present day. Large irrigation systems of the country most notably the 1400 km Kara Kum Canal are indicative of this objective. The negative environmental impacts which Turkmenistan is now experiencing as a result of the Aral Sea Basin degradation, have challenged our ability to provide adequate and safe drinking water. Therefore, the Government of Turkmenistan has decided to implement a potable water supply and sanitation project in the Aral Sea disaster zone of Turkmenistan, Dashkhovuz Velayet. The Government finds it necessary to increase water supply coverage and water quality and to ensure sustainability of the systems servicing our people living in small towns and collective farms. We intend to maximize the health benefits associated with improved water supplies by integrating water, sanitation and hygiene education interventions. The Government intends to advance the development of the water and sanitation sector through achieving the following objectives: Increased access to potable water and improved sanitation facilities in particular those groups living in the most disadvantaged areas Development of the institutions in charge of production and distribution of potable water and sanitation services and improvement of their technical and financial capacities Protection of the environment and of public health Protection of water resources and their optimum utilization With regard to the proposed project, our principal goals in their regional context can be summarized as follows: Restructuring of the institutions charged with the delivery of water and sanitation services by creating a regional specialized water and wastewater authority for Dashkhovuz Velayet  Page 46 Turkmenistan: Water Supply and Sanitation Project Increasing the responsibility and accountability of the management of the water sector Initiation of cost recovery mechanisms including a tariff setting policy whereby revenues would cover the full cost of operation, variations in working capital requirements and regular preventive maintenance. In order to achieve these goals, we commit ourselves to the following: Institutional Restructurinp Program The Government is prepared to establish a specialized Dashkhovuz Regional Water and Wastewater Authority by merging the responsibilities of the numerous organizations currently responsible for parts of the sector delivery system. Our ultimate goal is to put into place a system whereby the water utilities would be independent and operate in a transparent system of regulation and control. Tariff Policy Initiating the Project the Government of Turkmenistan is aware that one of the requirements regarding water supply projects supported by the Bank, is implementation of cost-recovery mechanisms. The Government of Turkmenistan undertakes to allow for the introduction of charges to beneficiaries of the new and rehabilitate water systems. While the water supply systems are being constructed, the institutional mechanisms needed to implement operation and maintenance cost recovery will be established within the newly formed Dashkhovuz Regional Water and Wastewater Authority. When the newly renovated water supply systems are operational, we will take all necessary steps to ensure the collection of fees to cover operation and maintenance costs. We will begin by targeting those beneficiaries who have chosen to receive higher levels of service, i.e yard standpipes. Furthermore, we shall see to it that the agencies involved in the production and distribution of this costly water will take all steps necessary so that costs are minimized. The combination of water pricing and technical improvements to the water supply systems is expected to significantly reduce wastage of water and lead to increased water conservation efforts. In closing we would like to mention that the aforementioned institutional reforms are being carried out on a regional level in order to gain experience. Depending on progress, reforms can be carried out in other regions of the country with the overriding objective of improving the effectiveness of the sector throughout the country. Sincerely, Mr. Ilaman Shikhiev Deputy Head of Government Cabinet of Ministers Turkmenistan  Turkmenistan: Water Supply and Sanitation Proiect Page 47 ANNEX A-2: PRESIDENTIAL DECREE President of Turkmenistan Decree No. 3006 of February 4, 1997 Water Supply and Sanitation Improvement in the Dashkhovuz Velayet In order to improve living standards of the residents of the Dashkhovuz Velayet which suffered severely from the Aral Sea ecological disaster and in order to improve water supply and sanitation, I hereby decree: 1. The Loan Agreement prepared by the Cabinet of Ministers of Turkmenistan on the loan with 20 year maturity including a 5 year grace period to be provided by the International Bank of Reconstruction and Development for the implementation of the Water Supply and Sanitation Project in the Dashkhovuz Velayet in the amount of 31 million dollars and to be repaid out of the Government budget shall be approved. 2. The Turkmenistan Central Bank shall provide account services for the loan in item I of the Decree. 3. The Turkmenistan Government shall assume an unconditional and irrevocable obligation to repay the loan including accrued interest, commitment charges and insurance premiums. 4. In 1997 - 2000, the Ministry of Economy and Finance of Turkmenistan shall allocate budget funds for the implementation of the Water Supply and Sanitation Project in the amount equivalent to 10 percent of the project cost. 5. The Khyakimlik of the Dashkhovuz Velayet: - shall create in the city of Dashkhovuz no later than December 1998 the Water and Sanitation Administration of the Dashkhovuz Velayet which will unite all water supply and sanitation organizations on the territory of the Velayet; and - upon the completion of new and reconstructed water systems under the Water Supply and Sanitation Project, shall jointly with the Ministry of Economy and Finance of Turkmenistan determine procedures for paying user charges for the use of water of improved quality and begin collecting these fees in order to achieve full cost recovery for the operation and maintenance of the systems. Saparmurat Turkmenbashi President of Turkmenistan  Page 48 Turkmenistan: Water Supply and Sanitation Project ANNEX B. EXECUTIVE SUMMARY: NEEDS ASSESSMENT 1. In 1994, the Government of the Republic of Turkmenistan requested World Bank assistance for improving water supply and sanitation in the velayet of Dashkhovuz, the part of the country most affected by the Aral Sea crisis. In preparing an investment to respond to this need, the project designers recognized the importance of ensuring that its objectives and interventions would address the actual needs of the affected population and would be acceptable to all beneficiaries, especially the poor. As a result, the World Bank collaborated closely during the early project preparation activities with local experts to carry out a needs assessment, as part of a broader social assessment. Country Background 2. Turkmenistan is the southernmost Republic situated in the Aral Sea basin. About 90 percent of the country's territory consists of sand deserts characterized by an arid climate with very hot summers and drastic changes in temperature during the winter. The total population as of January, 1995 was 4.4 million people of which 45 percent is urban and 55 percent is rural. The infant mortality rate is the highest among FSU countries (46/1000) and life expectancy is the lowest (66 years). Agriculture is the predominant economic activity accounting for 42 percent of employment. 3. The main source of water for Turkmenistan is the Amu Darya River. Diversion of the Amu Darya River from its inflow to the Aral Sea for expansion of an irrigated cotton monoculture in the Aral Sea Basin over 30 years has resulted in severe hydrological and ecological impacts, including ground water depletion, soil erosion, soil salinization, and ground and surface water pollution. Located at the downstream reaches of the river, Turkmenistan is amongst the hardest hit of the Aral Sea Basin countries by accumulation of contaminants in the river. 4. The largest of the five administrative regions or provinces of the country ("Velayets") is Dashkhovuz, located in the lower reaches of the Amu Darya. Dashkhovuz, which is largely a cotton growing agricultural area, has a population of 907,636 (as of January 1995), of which 70 percent is classified as rural. The velayet is divided into eight districts (etraps), each of which has a district center, a small city of 10,000 to 30,000 inhabitants. The velayet capital is Dashkhovuz City, with a population of 140,000. 5. Dashkhovuz is characterized by high population growth (two-three percent), and high infant mortality (55/1000). Of all the velayets in Turkmenistan, Dashkhovuz is the most directly and severely impacted by the Aral Sea ecological disaster. Environmental degradation, insufficient access to safe drinking water, poor sanitation practices and poorly functioning health care facilities have contributed to a substantial increase of respiratory and infectious diseases in the last 15 years, and a general degradation of public health in the area. Currently, piped water coverage (mostly through public standpipes and yard pipes) is about 73 percent in urban and 15 percent in rural areas (see Table 4.12). Other water sources used by the population are tankers, dug wells and boreholes equipped with hand and electric pumps, and surface water. Water collected from infiltration wells constructed adjacent to the canals is frequently contaminated and is distributed without treatment. Intermittent supply further adds to this contamination. Excessive water losses occur as a result of inadequate maintenance of pipe systems at both the household and community levels. Sanitation coverage is even lower than pipe water coverage, and unhygienic disposal of human waste is a major contributor to the high incidence of mortality and morbidity.  Turkmenistan: Water SuppIy and Sanitation Project Page 49 Needs Assessment: Objectives and Methodology 6. The importance of considering the needs of populations either directly or indirectly affected by a project is increasingly recognized as a general strategy in social development. The basic premise of this strategy is that interventions should satisfy the needs and priorities as expressed by the project population. Advocates of the needs approach further maintain that project success is determined by: the involvement of those it intends to serve in identifying their interests, needs, and priorities; and the extent to which a project recognizes, accepts, and is responsive to people's expressed needs. Moreover, there is solid evidence demonstrating that no matter who initiates a project, its sustainability is greatly enhanced when local needs are addressed and existing social groups and structures are mobilized for implementation. 7. The overall objectives of the needs assessment for the Turkmenistan Water Supply and Sanitation Project were to (I) provide baseline information on socio-economic conditions, water supply, hygiene and sanitation practices in the area for consultants engaged in other preparatory research work for the project, (2) to help identify suitable locations for planned pilot projects on sanitation methods in schools and for standpipe repair, and (3) to help identify the most critical interventions to be undertaken immediately to improve the water supply and sanitation situation in the project area. 8. The needs assessment was conducted in seven of the eight etraps (districts) of Dashkhovuz velayet (velayet). The eighth etrap, Turkmenbashi, was excluded because it is receiving US$ three million in assistance for water supply and sanitation from USAID. In each etrap, data was collected in the etrap center and in two collective farms. The needs assessment consisted of the following activities: A community profile study focusing on overall socio-economic conditions in and around the selected communities. Data for this part of the survey was supplied by local administrative bodies and management units of collective farms. * A household survey, including 790 households from the 7 etrap centers and the 14 collective farms. Local specialists collected household data on demography, income, housing, economic activities, problems and needs, water supply, sanitation, and health. * A study of water supply and sanitation facilities ("Institutional Analysis"), in schools, health facilities, and enterprises. A team of ten local scientists collected data in all schools (128) and health facilities (97) and selected enterprises (74) in the 7 etrap centers and 14 collective farms. 9. The needs assessment was the first stage of a broader social assessment, which in addition to the activities mentioned above, also included focus group discussions and a stakeholder seminar. Main Findings of the Needs Assessment 10. The needs assessment revealed clearly that the major concern of the population in the project area is the lack of basic food products. Concerns about the quality of water rank second, and water supply improvements are considered by many households as a major step towards an improvement of their living conditions. Hygiene and sanitation related needs are generally not reported to be priorities by the households included in the sample. However, from the limited amount of informnation that could be gathered regarding household hygiene and sanitation practices, coupled with observations from the project identification mission and surveyors, it appears that hygiene and sanitation practices in the project area are rather unsafe. Although this area warrants more study, improvement measures in this sector, such as the construction of safe latrines and hand washing facilities are highly recommended.  Page 50 Turkmenistan: Water Supply and Sanitation Project Socio-economic Information 11. A household's income in Dashkhovuz typically consists of various components: salaries earned by working persons, unemployment benefits, extra earnings from participation in the annual cotton harvest, earnings from the sales of home garden products and privately owned livestock, and income from other informal activities, including trade. While earnings from unemployment benefits and home produce sales contribute only to a very small extent to total annual income, income from the sales of livestock constitutes a substantial share of total annual income for both urban and rural households. Adding earnings from all sources, rural households actually earn 12 percent more per year than urban families, who receive, on average, higher salaries. Overall, the assessment revealed the importance of income from secondary and informal sources to Dashkhovuz households, especially to rural families. 12. In rural communities based on the collective farmn system, part of annual income is paid in monthly installments, and the rest is paid as an annual "bonus" at the end of the fiscal year. For many rural families, this income system results in considerable uncertainty and financial vulnerability. In many cases, monthly salaries are several months in arrears, resulting in a loss of real income due to inflation. Also, because of the fluctuating prices for many agricultural goods, especially cotton, it is difficult for houselholds to forecast the amount they can expect to be paid by the farm management at the end of the year, and plan their investments accordingly. 13. Overall, households spent close to 85 percent of their earnings on food, with little difference between urban and rural areas. The high share of income spent on food by households living in the surveyed communities is a clear indicator of high food prices and severe and widespread poverty in the project area. Water Supply and Water Use 14. Around 40-45 percent of all interviewed households have access to piped water. This percentage is much lower for rural households than for urban families (10 percent versus 70 percent). In rural communities, piped water is available mainly through communal stand pipes, while in etrap centers, most households receive piped water through yard pipes. Indoor pipe connections are available to only six percent of urban and one percent of rural families. Wells constitute the second most common source of drinking water, supplying between 27 and 31 percent of households. The third most common source are hand pumps, which are used by 20-21 percent of families. Water vendors and surface water sources play only a minor role as drinking water sources. In rural communities, stand pipes are used by over twice as many households in summer as in winter. This fact is a result of technical break downs of many rural pipe systems during the cold period of the year. 15. In general, households switch from piped water and hand pumps to wells and surface water bodies to draw water for washing and cleaning. To water their home gardens, households use mainly water from surface water sources, such as irrigation canals, rivers, and ponds. On the contrary, water for livestock is in most cases drawn from the same source that supplies households with drinking water. In all etrap centers, piped water is the main source of water for livestock. Although the measurement of the exact amount of water consumed by individual households' livestock was beyond the scope of this study, it can be assumed that livestock water consumption increases the average household's water supply needs substantially. 16. Respondents, in general, consider neither the reliability of their drinking water source nor the quality of their drinking water to be better than barely satisfactory. Hand pumps and wells, the most common sources of drinking water in rural communities, received slightly higher reliability and water  Turkmenistan: Water Supply and Sanitation Project Page 51 quality ratings than pipe systems and other drinking water sources. While higher reliability ratings for non-pipe sources are mainly based on better water availability in hours/day compared to pipe systems, higher quality ratings for water from wells and pumps are most likely based on perceived lower saltiness of water from these sources, since saltiness is the drinking water feature that most households find the least desirable. Only 1.3 percent of all respondents are more worried about bacteria or other carriers of illnesses that may be present in their drinking water source than about other undesirable water features. 17. Piped water is available for roughly four hours/day to both urban and rural households with pipe water access. In comparison, administrative bodies claim that pipe water is supplied for five-seven hours/day. This shows either the unreliability of official data on water supply issues or the unawareness of water agencies that real water availability is curtailed by substantial water losses in the system. Furthernore, less than half of the respondents reported to have received pipe water every day in the last month. Both figures indicate clearly the unreliability and intermittency of piped water supply in the project area. To increase water availability, all families included in the survey and with access to a pipe water system have water storage facilities, with an average storage capacity of 2m3. 18. An indoor pipe connection, combined with a waste water facility, is for the majority of households (75 percent) the most desirable water system, regardless of the type of water source they are currently using. On average, households would be willing to pay a one-time fee of $17, or 5 percent of total annual income ($355) for the installation or construction of the water supply system of their choice. In addition, they would be willing to pay a monthly fee of 50 cents, or one-twxo percent of their monthly income ($30). for the usage of the new system. 19. A households' willingness to pay for an improved water supply system is directly related to its income. The wealthiest quartile of households included in the sample is willing to pay the highest absolute one-time installation fee ($20), but in terms of percentage of annual income, the poorest segment of households is willing to pay the most, close to 10 percent of total annual income, compared to 3 percent of total income in the highest income group. Given the widespread poverty among the population in the project area, people's willingness to pay for the water supply system of their choice, which in most cases is an indoor pipe connection, is remarkably high. [his indicates again the high level of dissatisfaction with current water sources, as well as very high expectations regarding the improvement of water supply and quality by means of a pipe connection. HTygiene, Sanitation and Health 20. In both urban and rural communities, the most common place for household members to wash themselves, is a makeshift shower facility in the yard. One fifth of households were found to have indoor washing facilities, while 15 percent of families rely on public bath houses for personal hygiene. While most households have access to washing facilities, the frequency of taking a shower or bathing is alarmingly low for both adults and children, especially in rural areas. Bath houses are only visited one- four times per month, even though an alternative washing facility may not be available. In over 15 percent of families, children are washed less frequently than once a week in winter. In 15 percent of urban and 30 percent of rural households, no soap was found near the washing facility. 21. Most households (93 percent) use unventilated, unlined outside latrines; close to 5 percent of households, all of them living in etrap centers, use public latrines. Only around 2 percent of respondents claim to have a latrine inside their home. Yard (outside) latrines are permanent constructions in only 25 percent of households that use this kind of excreta disposal system. In all other cases, latrines need to be moved when the pit is full, in most cases once a year. In many cases the level of ground water determines the capacity of a latrine pit and thereby the frequency with which the location of a latrine must  Page 52 Turkmenistan: Water Supplv and Sanitation Project be changed. In most cases, latrines are cleaned only once a week or less frequently. These observations stand in stark contrast with the fact that adequate sanitation is considered a major problem by less than one percent of respondents. 22. Based on both observed facts and people's own perception, the state of health of Dashkhovuz residents must give reason for concern. Close to 40 percent of households describe the general state of health of their members as "not very healthy", or "in poor health". In 34 percent of all households with children six years old or younger, a child had been ill during the week preceding the survey. The flu was reported to be the most common illness among children. Cases of diarrhea and intestinal parasites were reported more frequently in rural than in urban areas. 23. While no statistically significant correlation between child diseases and hygiene and sanitation related behavior in families (frequency of washing children, frequency of cleaning latrine, etc.) was found for the survey sample, the type of water source for drinking water used by individual families seems to have an influence on the occurrence of certain diseases among children. Diseases related to intestinal parasites, for example, are more common in households that use water from hand pumps, while the occurrence of hepatitis A among children is higher in families that use water from surface water sources. Subsequent studies during the preparation of the proposed project will be necessary to further explore and explain these correlations. Policy Implications 24. Although etrap centers and rural communities centered around collective farms show very similar characteristics with regard to infrastructure, architecture and lifestyle, they differ significantly with regard to water supply and water use. Rural households are especially disadvantaged with respect to piped water access and availability. It is therefore recommended that the first stage of the planned project focus on the rehabilitation and expansion of existing piped systems in rural areas. 25. An improvement of piped water systems already in place must be accompanied by the revitalization or construction of chlorination facilities. As established in the report, only a third of existing rural pipe networks are equipped with a chlorination facility, and in both urban and rural areas, only 31 percent of chlorination devices actually function. Adequate water chlorination would not only reduce the risk of the population's exposure to water borne diseases, but also help save energy necessary to boil water, a commonly used disinfection method in households and public institutions. 26. Most households do not know which agency is responsible for the installation, operation and maintenance of piped water systems in their community. Also, people generally have no idea about the costs attached to these activities. Proper repair and maintenance services of public utilities are, however, closely linked to the customers' (end users') possibility to report damage and address complaints to a clearly visible, transparent institution. It is, therefore, important to accompany actual technical improvements of piped systems in individual communities with the provision of better customer service and outreach by the responsible local water agency. 27. As established above, people's willingness to pay for the water supply system of their choice, as expressed in percentage of annual income, is surprisingly high. However, given the irregularity of salary payments, and a family's high reliance on uncertain secondary income sources, it is doubtful that such fees could actually be collected. The project should therefore build on in-kind contributions based on labor for installation and maintenance of system components, rather than cash payments. However, a reasonable annual fee should be collected to promote among the population the concept of resource pricing and to enhance water conservation.  Turkmenistan: Water Supplv and Sanitation Proiect Page 53 28. The hygiene behavior of the population in the project area, as described by the existence of washing facilities, the frequency of washing children, the presence of a hand washing facility near latrines and other indicators, must give reason for concern in the whole region. Consequently, a campaign on the importance of personal hygiene and sound sanitary facilities should be launched. Such an outreach effort should focus strongly on institutions, where many people share cafeterias and sanitation facilities, and the risk of transmission of diseases through unsafe hygienic behavior is especially high. 29. The most common excreta disposal system used by over 65 percent of households in the communities included in the survey is an unventilated pit latrine in the yard. Only a fourth of these latrines were found to be permanent constructions that can be emptied and used for an unlimited period of time. However, the construction or installation of better sanitation facilities ranks very low on households' list of problems and needs therefore any technical efforts to improve sanitation facilities in the project area must be accompanied by a public awareness campaign on sanitation, hygiene, and health in order to create a demand for improved services. Alternative, low cost latrine designs should be considered. 30. Project preparation includes a demonstration sanitation activity in schools. Most of the visited institutions could benefit from such a demonstration. From the greatest need-based perspective, the pilot project should be implemented in one of the schools in rural Boldumsaz, where the worst sanitary conditions were encountered. 3 1. An attempt was made throughout the needs assessment to find links between water consumption, sanitation behavior and health. The findings presented in this report, such as the higher occurrence of specific diseases among users of certain drinking water sources, and the more pessimistic self evaluation regarding health by residents of specific etraps, should be further discussed during focus group meetings, and, if possible, scientifically tested. Also, further research will be necessary to collect more information on water treatment and water storage in order to gain a better picture of the risk of water contamination incurred by households in the project area.  Paze 54 Turkmenistan: Water Supply and Sanitation Project ANNEX C: INSTITUTIONAL ASSESSMENT6 A. Existing Organizational Framework 1. Central Government Institutions With Sector Responsibilities a. Introduction This section presents a broad overview of the principal institutions within the Government of Turkmenistan with responsibilities for water, sanitation and health. These organizations are briefly described below, with their areas of interest in the sector noted. b. Comments on Names of Organizations The English versions of the names of government organizations often seem strained when literally translated from Russian. Simplified translations have been used in these notes to indicate the essence of the duties of the organizations, with titles more commonly understood in English. Approximations of the literal Russian translation of the various organizations described below appear in parentheses following the simplified name. c. Ministry of Water Resources (MWR) This ministry has control over the allocation of the country's water sources. Any "enterprise" (agricultural farms, industries, communities or others) wishing to extract water (from surface or ground sources), or to discharge used or wastewater, must obtain written authorization from this ministry to do so. Other entities also are involved in the application and review process, but ultimate approval lies with the ministry. MWR also has a construction division, which is responsible for constructing the major works for augmenting water supply to Dashkhovuz. d. Ministry of Agriculture (MOA) This ministry is the principal user of the country's water resources in the form of irrigation. As such, it has a major impact on potable water supply because much of the municipal water supply in Dashkhovuz is taken from shallow wells which are hydraulically linked to the irrigation canals. As a consequence, while the amounts removed for potable water are inconsequential relative to irrigation usage, the quality of the irrigation water directly impacts that of the potable water. e. Ministry of Environment (MOE) (Ministry of Nature and Ecology) This ministry has broad statutory powers to approve applications for use of waters and disposal of wastewaters, but ultimately the MWR appears to have the final say in such matters. The MOE was only established in 1989, and had very little authority until 1992. Like similar ministries in other countries of the FSU, their legal powers appear to be greater than their actual powers. They also have broad responsibilities over a wide range of environmental issues, including use of pesticides, fertilizers and defoliants. They set standards for air quality and wastewater treatment, and are currently following the GOST standards established by the Soviet Union. They maintain a Department of Control and Inspection, with branches in all five regions and the Caspian Sea, which is responsible for enforcing standards and compliance with agreements reached for extraction of water, the quantity and quality of wastewater discharges, and air quality. Unfortunately, this ministry does not have enforcement capabilities to match its legal powers. f. Ministry of Health (Sanitary and Epidemiological Services) (MOH/SES). SES is the division of the MOH of most importance to the water, sanitation and health sectors. SES maintains a total of 67 "stations". There is a station in the capital city district of Ashgabat, each of the five velayets, all of the 6The information on which this is assessment was based comes from the project identification mission and background notes, Feebruary, 1995. Since Turkmenistan has been moving forward with reforms and reorganizations in several sectors, some of the information under "Existing Organizational Framework" may have changed.  Turkmenistan: Water Supply and Sanitation Proiect Page 55 etraps, and additional stations for inspecting ships and planes. In Dashkhovuz, for example, there are stations in the city and Velayet of Dashkhovuz and in each of the etraps, for a total of 10 stations. SES maintains 9 laboratories in Dashkhovuz. One serves both the city and velayet, and there are laboratories in each of the etraps. The principal responsibilities of MOH/SES include: (1) monitor (collect samples periodically and analyze the samples in their labs) the quality of potable water in public water systems to ensure compliance with current standards (they use GOST standards), (2) collect and record information on illnesses and diseases, and (3) investigate factors that could be harmful to the water, air, ground and food environments. g. Turkmen Geology Committee (TGC) The structure of the Geology function is that of a Committee, headed by a General Director, and is not a ministry. It may be a "State" Committee, in that it reports directly to the Cabinet of Ministers rather than through another ministry. A state committee has most of the autonomy of a ministry, but ranks just below a ministry in importance. There are two major divisions in the TGC. The Water Division is headed by a Chief Hydrogeologist, and the Mineral Division is headed by a Chief Geologist. The Water Division has offices in all five velayets. These branch offices can be either "Expeditions", which perform projects using only budgeted government funds, or "Concerns", which work either with budgeted funds or under contract to other parties. At the national level, the principal responsibility of the Water Division is to conduct research and carry out investigations and planning to locate fresh water sources. Dashkhovuz has a "Concern", the South Aral Hydrogeology Company (SAHC). Responsibilities at the velayet level are to conduct studies, drill wells, monitor groundwater levels, advise "enterprises" of the availability of groundwater resources and approve licenses for the extraction of groundwaters (which the enterprises need to obtain further permits from the MOE and MWR to use those waters), and give advice to enterprises about the proper operation of wells drilled by the TGC. h. Institute of Design (IOD) (State Scientific Research, Design and Investigation Institute) IOD is subordinate to the Ministry of Water Resources. Although there are other small design institutes conducting minor projects, IOD is the only institute with the capability of undertaking planning and design for major projects. Among its other duties, the IOD serves as a the technical planning entity for studies and designs of water and wastewater projects. IOD is also said to supervise the construction of works that they designed. If so, this is unusual in FSU practice, where construction supervision is rarely practiced. They receive assignments from various governmental organizations at the national and regional (velayet) levels. IOD became involved in the Dashkhovuz water supply schemes (source augmentation) at the invitation of GOSTROI, the former soviet construction institute. IOD is also responsible for the plan to ensure that all potable water is supplied by groundwater rather than from surface supplies. This plan was developed in support of the recent Presidential Decree that established this as official policy. i. Institute of Chemistry (IOC) (Institute of Chemistry of the Academy of Sciences) Among its other duties, the IOC maintains the only laboratory in Turkmenistan that has the capability of performing water quality testing at the level of internationally acceptable standards. The IOC acts as an advisor to various government organizations in matters of water quality. j. Housing and Communal Services (HCS) Up to about 1991, the HCS was a ministry. The duties and responsibilities of HCS are now delegated to the velayet level, but a small group of advisors at the Cabinet of Ministers serves to coordinate the HCS activities at the regional level. This national group appears to have no executive powers or responsibilities. HCS is discussed in more detail in the following sections on organizations at the regional level, where it appears to operate as a "trust". As part of the old ministry establishment, there was a national Communal Design Institute (Communproyect). This institute was responsible for the design of many of the water and wastewater systems in the country. The  Page 56 Turkmenistan: Water Supplv and Sanitation Project institute still exists, and now serves as a quasi-private consulting firm, specializing in water and wastewater projects. k. Desert Research Institute (DRI) Some 80% of the country is desert. The DRI is said to be one of some ten similar institutes in the world, and is linked to the UN agency ESCAP. DRI has been involved in a project for producing small, portable water filters. They have also proposed a study of the environmental impact of irrigation and drainage as it effects desert lands, but this has not been approved by the Government. DRI publishes bi-monthly scientific journals, which are available in English. The next issue will discuss water and sanitation conditions in Turkmenistan, and is based on the conference on this subject held in Ashgabat in September 1994. Officials report that nomads obtain water for themselves and their livestock from dug wells as deep as 30 meters. 2. Dashkhovuz Velayet Organizations with Sector Responsibilities a. Hakimlik of Dashkhovuz Velavet The five velayets or regions of Turkmenistan have considerable authority, and the powers in the Velayet are vested in the Hakimlik. The term Hakimlik is roughly translated as "the office of the leader". The leader of the Hakimlik is the Hakim, or governor. Each etrap, or sub-region, is also headed by a Hakim. The etrap Hakims are responsible to the Velayet Hakim. Etrap cities and collective farm are headed by an Archin. There are typically about four Vice-Hakims which report to the Hakim. Allocation of duties varies, but broad categories include (1) transport, construction, communications, housing and communal services, and rural water supply, (2) agriculture, (3) commerce, business, legislation and administration, and (4) health, sanitation, culture and women's issues. Petroleum may supplant agriculture in some velayets. Housing and communal services includes public housing, central heating, water supply and piped wastewater collection and disposal (rare), but not latrines, except for pumping out public latrines. Sanitation includes food handling in markets and restaurants, and water quality. b. City of Dashkhovuz In a manner somewhat comparable to Ashgabat, the City of Dashkhovuz has its own organizations, including a separate department of Housing and Communal Services. This department is responsible for water supply and piped wastewater collection and disposal in the city. This responsibility is vested in the Dashkhovuz Vodocanal (water and sewer utility). c. City of Kuneurgench Dashkhovuz and Kuneurgench are the only officially designated "cities" of the Velayet. The urban capitals of the other etraps are called "city-type settlements" (or etrap centers). Like Dashkhovuz, Kuneurgench has responsibility for its own water supply, and has its own Vodocanal. d. Regional Offices of National Organizations Most ministries have local representatives at the velayet level. There appears to be a dual relationship to the parent ministry and the Hakimlik of the Velayet. HCS, no longer a ministry, operates as a "trust" at the Velayet Hakimlik, but, at the etrap level, HCS appears to be subordinated to the Vice-Hakims of the etrap Hakimliks. The significance of operating as a trust is not clear. There does not appear to be a regional branch of the Institutes for Design and Chemistry. The Expeditions or Concerns of the TGC appear to be independent of the Hakimlik. e. Rural Water Supplv Department (RWSD) The responsibilities for the provision of potable water in Dashkhovuz Velayet are widely scattered. As noted, Dashkhovuz and Kuneurgench have their own Vodocanals, which report to HCS at the velayet level. Water supply in the etrap centers is the responsibility of a Vice Hakim who has links to the housing and communal services department at the Velayet level, but is directly responsible to the etrap Hakim. However, some 69% of the velayet population lives in rural areas. Primary responsibility for serving these people with potable water is  Turkmenistan: Water Supplv and Sanitation Proiect Page 57 assigned to the Rural Water Supply Department of the Hakimlik of Dashkhovuz. This arrangement appears to be peculiar to Dashkhovuz. In other velayets, the MWR has this responsibility. Even in Dashkhovuz, MWR arranges for the construction of the works, which are then turned over to RWSD for operation. The great majority of the rural population live on collective farms. RWSD currently maintains water systems in less than half the 104 collective farms in the velayet. Based on experiences in other countries of the FSU, the Ministry of Agriculture was probably responsible for providing drinking water to the farms, but this appears to be no longer the case. RWSD operates some 48 rural water systems. Most other collectives have either no system or inoperative systems. In those cases, the Archins or managers of the collective farms are said to have responsibility for water supply. In practice, most people meet their own water needs, largely through dug or drilled wells with handpumps. 5. Etrap Sector Responsibilities Hakimliks of the Etraps As noted, there are eight developed etraps in Dashkhovuz Velayet. Of these, one (Turkmenbashi) has no settlement capital, and Dashkhovuz etrap has a settlement that is not a capital (Niyazovsck). The etraps have structures similar to those of Dashkhovuz Velayet, with a Hakim and several (usually four) Vice-Hakims. The MOH/SES and HCS organizations have local staffs in the etraps, under Vice-Hakims, for water, sanitation and health. These responsibilities appear to be limited to the settlement cities for water supply, but the health services may be extended to the rural areas within the etraps. HCS offices appear to have responsibility for pumping out public latrines in the cities and settlements, but not in rural areas. No organization appears to have responsibility for the design, construction, and promulgation of latrines, nor in the education of people as to their use and the importance of such use to their health. B. Institutional Assessment 1. Organizational Weaknesses a. Lack of Focus on Sector Responsibilities Housing and Comnmunal Services (HCS), before it was disbanded as a ministry, was responsible for the provision of water supply to the people of Turkmenistan. Since disbandment, that responsibility has not been represented at the ministerial level. The Ministry of Water Resources has the important responsibility of serving as the adjudicator of how the country's scarce water resources are to be allocated and it is presently the ministry most closely associated with the provision of public water supply. However, MWR has no department with responsibility for the public water supply sector. At the velayet level, HCS is responsible for public water supply and for wastewater collection and disposal. However, HCS has many other responsibilities, and water and wastewater is just one of many communal services in its portfolio. b. Gaps in Responsibilities The most obvious gap in sector responsibilities is that for the provision of safe and convenient means of excreta disposal. Current analyses of health studies indicate that hygienic disposal of human excreta is one of the most critical requirements to assure the health of the people. The Housing and Communal Services department is responsible for the provision of piped sewerage systems for the disposal of wastewater, but there is only one such system in the entire velayet, in Dashkhovuz City. As no other urban settlement has any significant levels of interior plumbing, there is currently no need for other piped sewer systems. HCS also has the responsibility for pumping out public latrines, but this is a very limited effort. There are no safe and economic means presently available for the sanitary removal and disposal of household excreta wastes. The great majority of the people in Dashkhovuz utilize very simple but unhygienic pit latrines, and no organization appears to have responsibility for the design, construction or promulgation of adequate latrines, or programs for the education of the people in the importance and hygienic use of latrines.  Page 58 Turkmenistan: Water Supply and Sanitation Project c. Overlapping Responsibilities Some 69% of the population of Dashkhovuz live in rural areas, yet less than half of these people are served by the Rural Water Supply department. In other velayets, MWR has reponsibility for rural water supply. Even in Dashkhovuz, MWR has the responsibility for the construction of rural water systems, while RWS only has operational responsibilities. The water systems that RWS operates are very similar to those in the urban settlements, yet RWS and HCS, which operates the urban systems, function independently. e. National Sector Policy Problems One of the problems with national policy is its failure to assign clear responsibility for the water, wastewater and sanitation sector. Another problem is the existing law preventing sector utilities from collecting fees for the services they perform. The lack of long term planning for the sector is one of the consequences of failure to assign overall sector responsibility to a specific government agency. The inadequacies of the existing systems and the large numbers of people without adequate water or sanitation services have several causes, but inadequate funding is one of the principal ones. National pricing policies and lack of focussed responsibility are among the principal causes of the lack of funding. 2. Operational Weaknesses a. Planning and Management There is little evidence of long term planning to overcome existing deficiencies. Even the current crisis of providing water only a few hours per day appears to be accepted with resignation, though there is evidence that water is being wasted under present procedures in volumes which considerably exceed the amounts required to meet the needs of the people 24 hours per day. In many tables of organization, far too many departments report to the head of the organization. There was little evidence of any systems for the accurate collection of financial and technical operating data, and for the distribution of this information to managers. Except for antiquated personal computers (286 units, with 1 MB of RAM and 40 MB hard disk was typical) at the Geology Committee and Institute of Chemistry, no computers were observed at the offices visited. Realistic budgeting and cost estimating are not practiced at the water supply utility level. b. Operation and Maintenance The current financial difficulties contribute to severe operational problems. Critical parts and supplies are rarely available. Equipment is often cannibalized, and any but the simplest of repairs usually must be made in Dashkhovuz City or, more commonly, back in Ashgabat. Procurement procedures are centralized and complicated, and operators have little control over obtaining the equipment and supplies they require. There was little evidence of preventive maintenance, or the tools with which to accomplish it. On the other hand, there is often no budget for grease, pump packing I tools or other materials and supplies. Operators rarely have copies of the plans and specifications for the works under their responsibility, and no operating manuals or guidelines were noted. Almost all the piped water systems in Dashkhovuz Velayet utilize water from shallow wells adjacent to irrigation canals. It appears that some of the problems with degraded water quality from these wells results from operation of the wells in a manner that does not comply with recommendations from the authorities of the TGC's hydrogeological companies. Given the importance of these wells, consideration should be given to providing TGC a stronger role in ensuring the proper operation of these wells. c. Human Resources Salaries of employees in the water, sanitation and health sectors in Dashkhovuz Velayet are extremely low, particularly in relation to the Capital. For instance, employees of the carpet factory in Ashgabat earn twice the pay of a senior engineer in most departments in Dashkhovuz, where typical salaries at the senior levels are in the order of less than US$ 20 per month. Working conditions are poor, with inadequate vehicles for transport, poor communications and sparsely equipped and furnished offices. Training programs are few and generally inappropriate. Training (most  Turkmenistan: Water Supplv and Sanitation Proiect Page 59 of it dating back to pre-independence) often seemed to focus on design and advanced technologies rather than meeting actual needs. 3. Summary of the Existing Institutional Situation of the Sector The principal weaknesses of the sector include (1) allocation of responsibility for the sector among too many governmental agencies, (2) the wide range of responsibilities other than water and sanitation assigned to HCS, the principal agency charged with providing water supply, (3) lack of technical and management skills throughout the sector, (4) the absence of a coherent program for the effective operation and maintenance of water and sanitation facilities, (5) inadequate focus on the importance of providing effective means of excreta disposal, (6) inadequacy of funding for both capital construction of new and replacement facilities, and for operation and maintenance of existing facilities, and (7) a national policy which provides water and sanitation services at no cost to the users. C. Institutional Strengthening 1. Proposed Approach to Sector Reform There are three components of the proposed approach for building capacity for the effective provision of water and sanitation services in Dashkhovuz: (1) reform of the sector at the national level, (2) reorganization of the sector at the velayet level, and (3) internal strengthening of the velayet sector organizations. 2. Sector Reform Needs at the National Level a. Assignment and Clarification of Responsibilities The various laws and regulations of the country should be reviewed and revised to clarify responsibilities for the water, wastewater and sanitation sector. The following general principles are suggested for adoption: (1) Primary Responsibility to the Velayets Assign primary responsibility for providing water, wastewater and sanitation services (the sector) for the people of Turkmenistan to the five velayets, or regions (2) Regulatory and Support Role for the National Government Retain the responsibility and improve the capacity for regulation, policy setting and broad sectoral planning; and provide sector support such as training of facility operation and maintenance staff (3) Inter-Ministerial Coordination Clarify the relationships and responsibilities among all ministries to ensure that (a) the regulatory functions of MOH, MOE, MOF and MWR (for water quality and health; wastewater and septage disposal and environmental concerns; budgeting, finance and personnel policies; and priority allocation of water resources) are appropriate and clear, and (b) that the planning, design, construction, operation and maintenance of sector facilities are reserved to the velayet sector organizations, and not by any other ministry. b. Required Actions at the National Level In order to achieve these reforms, the actions to be taken include: (1) Obtain national approval of the proposed program for institutional development of the  Page 60 Turkmenistan: Water Supply and Sanitation Project water, wastewater and sanitation sector (the sector) (2) Appoint the Ministry of Water Resources, or such other national ministerial level body as the government may decide, to assume sector responsibilities for broad national planning, adoption of national policies and the provision of support as appropriate (3) Draft legislation which will (a) set forth and assign the national sector responsibilities described above, (b) assigns responsibility for the planning, design, construction, operation and maintenance of the sector to new "Regional Water and Sanitation Authorities" at the velayet level, and (c) grants autonomy to the velayets in such important matters as control over personnel, setting tariff levels, controlling finances, and planning and execution of projects. (Note: Until such time as the velayet water and sanitation organizations are financially self-supporting, the central government should provide adequate funds for the construction and replacement of needed facilities, and for the operation and maintenance of existing facilities) 3. Reorganization of the Sector in Dashkhovuz Velayet a. Identification of Existing Sector Responsibilities and Needs in Dashkhovuz The first step toward reorganization would be to identify existing responsibilities and needs. It appears that responsibility for water supply and wastewater collection in urban centers, and for institutional sanitation in both urban and rural areas is vested in the department of Housing and Communal Services (HCS). Responsibility for water supply in rural areas is vested in the Rural Water Supply department of the velayet, but many rural areas have little or no public water service. No organization has responsibility for excreta disposal or sanitation services for homes or other private interests. While this may represent a general outline of the sector in Dashkhovuz, full understanding will be required before the sector can be reorganized. b. Suggested Regional Sector Reorganization The proposed name of the new organization is the "Dashkhovuz Regional Water Supply and Sanitation Authority" (Dashkhovuz Velayet Vodocanal). The Authority could report to a new "Division of Water Supply and Sanitation" within the Ministry of Water Resources, or some other arrangement as may be determined. The Authority would be governed by a seven person Board of Directors and headed by a Managing Director. The Authority would have three basic operating divisions: the Dashkhovuz Vodocanal (for facilities in the velayet capital), the Etrap Centers Vodocanal (for facilities in all the etrap centers and the city of Niayozovsk), and the Kolkhos or Rural Vodocanal (for facilities in the remaining areas of the Velayet). The Authority would also contain five support divisions: Finance and Administration, Personnel, Engineering, Quality Control and Customer Services. In addition, three functions would report directly to the office of the Managing Director: Internal Audit, Legal and Public Relations. A provisional organization chart for the new regional authority is presented as Annex 1. The basic duties of each of the support divisions is listed on the chart. 4. Strengthening the New Regional Organization a. Source of Personnel and Equipment for the New Organization The new organization would draw heavily on the various sector organizations that already are functioning in the velayet. The operating personnel for Dashkhovuz city now exist in the water and wastewater divisions of the Dashkhovuz Vodocanal. The etrap Vice Hakims and their staffs, and the staff of the Rural Water Supply department would become the core personnel for the operating divisions of the Etrap and Rural divisions, respectively. All three groups would contribute personnel to be assigned to the support divisions,  Turkmenistan: Water Supply and Sanitation Proiect Page 61 according to their skills. However, the component organizations that would become a part of the new regional organization have inadequate skills and limited resources compared to what would be required to develop an effective water and sanitation utility. Some of these skills include operation and maintenance of facilities, management, collection and dissemination of critical information, finance, administration and personnel. To build capacity in these areas would require training and the provision of equipment and supplies.  Page 62 Turkmenistan: Water SupplV and Sanitation Project ANNEX D: WATER QUALITY DATA Selected 1994 analyses of Irrigation Waters and Extracted Groundwaters in Dashkhovuz Velayet "Salinity" Pesticides Volatile Lead Cadmium Nitrates Oil TDS Lindane Phenols Pb Cd mg/l N03 Products gram/I ug/l ug/l mg/l mg/l mg/I Boldumsaz (Canal) 0.6 0.320 14.0 0.04 0.002 5 0.07 Boldumsaz (Storage) 1.4 TR 5.4 0.05 0.005 8 0.08 Tagta (Canal) 0.6 0.007 57.0 0.04 0.006 4 0.03 Tagta (Storage) 1.4 0.006 5.5 0.28 0.002 7 0.08 Yilanly (Canal) 0.6 0.006 1.5 0.02 0.006 3 0.06 Yilanly (Storage) 1.3 0.007 1.3 0.04 0.002 15 0.07 Ackedepe (Canal) 0.7 0.008 1.4 0.04 0.005 4 0.29 Ackdepe (Storage) 1.6 TR 1.0 0.04 0.002 8 0.06 Gubadagh (Canal) 0.6 1.149 1.7 0.02 ND 4 0.11 Gubadagh (Storage) 1.1 TR 13.7 0.04 0.002 4 0.04 Niyazavosk (Canal) 0.6 0.017 1.0 0.02 0.005 4 1.62 Niyazavosk (Storage) 1.7 0.006 12.7 0.01 TR 14 0.01 Turkmenbashi (Canal) 0.7 0.031 1.4 0.03 0.006 3 0.19 Turkmenbashi (Stor.) 1.2 0.007 1.0 0.04 0.001 5 0.06 Kuneurgench (Canal) 0.6 0.037 1.5 0.02 ND 4 0.59 Kuneurgench (Stor.) 1.2 0.007 22.0 0.04 0.002 6 0.07 Dashkhovuz (Canal) 0.8 0.006 1.5 0.03 0.006 3 0.22 Dashkhovuz (Storage) 1.7 0.006 1.0 0.04 0.001 9 0.17 USEPA Standards 0.5 0.200 2.0 0.015 0.005 45 0.10 EU Standards NA NA 0.5 0.05 0.005 50 NA Notes: NA: Not Available, TR: Trace, TDS: Total Dissolved Solids, Oil Products: Aliphatic Hydrocarbons. Canal samples were taken from the irrigation canal in the city indicated. Storage samples were taken from the ground storage reservoirs of extracted groundwaters beside the canal. All samples taken and analyzed by the Institute of Chemistry, Ashgabat.  Turkmenistan: Water Supply and Sanitation Project Page 63 ANNEX E: COST RECOVERY CONSIDERATIONS FOR DASHKHOVUZ VELAYET A. World Bank Experience and Policy on Cost Recovery for Water Projects The World Bank has over twenty years' experience with water supply and sanitation projects worldwide, and has closely examined the results of these investments. In the past, many projects have experienced implementation and operational problems. Analysis of the Bank's water and sanitation portfolio has shown that, underlying these problems, is a vicious cycle of poor water quality and unreliable service delivery that results in consumer's reduced willingness-to-pay, which, in turn, generates inadequate operating funds and a further deterioration in services. Experience has proven that water must be recognized as an economic good, and that most of the financing must come from users in order for investments in water supply projects to be sustainable. These results from the World Bank investment projects in water supply and sanitation have led to the adoption of the Bank's policy that water pricing and cost recovery are essential to project sustainability and must be included in all projects. The World Bank policy states that cost recovery should be sufficient to pay both for operation and maintenance, as well as a fair return on capital investment. User fees not only address the financial sustainability of water supply systems but they also serve to conserve scarce water and thus contribute to the environmental sustainability of World Bank funded projects. B. Financial Analysis of the Current Project 1. Tariff Rates Required to Recover all Proiect Costs The Turkmenistan Water Supply and Sanitation project preparation has included an economic and financial analysis which is summarized in the Bank's Staff Appraisal Report. The analysis calculated the average tariff necessary to fully cover the total financial costs of the project, including (1) the cost to operate and maintain the new and rehabilitated water system (O&M costs), and (2) the cost to repay the loan required to finance the project. The tariffs required to finance the water systems in the etrap cities is about $0. 53 per cubic meter, and the tariff rate required to recover all the costs for the collective farm systems is about $0.63 per cubic meter. These values may change somewhat as final adjustments are made to the project. 2. Tariff Rates Required to Recover O&M Costs While the Bank policy proposes full cost recovery, this may be unrealistic at this time under the conditions which exist in Turkinenistan. As a consequence, the financial analysis also considered the tariff rates required to recover only the O&M component of the total project costs. The analysis determined that a tariff rate of about $0.15 per cubic meter would be sufficient to recover this component of project costs for water supply system improvements in both the etrap cities and the collective farms. 3. Rule-of-Thumb for Determining Affordability Experience in developing countries has indicated that people can afford and generally are willing to pay from 4 to 6% of their monthly income for a dependable supply of safe drinking water. Household income data for Dashkhovuz are difficult to determine with accuracy, but average monthly income for households with yard connections (which tend to be more affluent than households served by street faucets) are in the order of $25 per month. Applying the above "affordability" test, households with yard connections should be able to afford from $1.00 to $1.50 per month to pay for a dependable supply of water. At current (mid-January 1997) rates of exchange, this amounts to about 5,500 to 8,000 manats per month. As described in paragraph 5 of Section D, the estimated cost to households with yard connections would be about 7,000 manats, or 5.4% of household income. Such a charge appears to be affordable.  Page 64 Turkmenistan: Water Supply and Sanitation Project C. Common Methods of Charging for Water Provided to Customers 1. Introduction Whether water utilities are owned by the government or a private company, almost without exception, these utilities charge their customers for the water which is delivered to them. With some variations, the water is charged to the user in one of the following four ways: 2. Metering The most common means of determining the amount to be charged is to provide a metering device on the pipe that delivers the water to the customer. This system requires that each customer (household) has its own water connection. It also requires the cost of installing and reading the meter, sending out the bills, and collecting the amounts due. It is the most expensive and complex system, but it is also the fairest, since the user pays directly for the amount of water received. It has the added advantage of encouraging users to conserve water and minimize waste. 3. Flat Rate Charging This system is much simpler and much less expensive to administer. All customers are billed a flat or equal charge each month, regardless of usage. The biggest disadvantage is that the system is not fair, since large and small users pay the same. The system encourages waste and discourages conservation. 4. Component of Real Estate (Housing) Tax In communities where municipal taxes are charged to owners of homes or apartment buildings, it is possible to add a surcharge to the real estate or housing tax bill to allow for the cost of delivering water to these buildings. In this way, the home owner pays for his water indirectly, and the apartment renter also pays indirectly for his water as a component of his monthly rent. Some municipal or other governmental agencies object to acting as the "bill collector" for the water utility. In addition, this system does not discourage water waste habits as the charge for water is hidden in the tax bill. 5. Charges Based on Household Size or Plumbing Fixtures Some water utilities base the charge for water use on the number of square meters in the house or apartment (this was common in the former Soviet Union) or the number and type of water-using plumbing fixtures in the house or apartment. These systems are difficult to administer because of problems in measurement of living space, or changes in the number and type of plumbing units. This system also does little to discourage water waste habits as the charge for water is not related to the amounts used. 6. Conditions in Dashkhovuz Which Affect Water Pricing The systems of charging for water described above are based largely on systems under which water is delivered directly to each household. In Dashkhovuz, most people receive their water through public street faucets (sometimes called standpipes), and some by yard connections. Billing for water delivered by street faucets (or yard connections) is more difficult, but has been done in other locations. Strategies for charging for water in Dashkhovuz are discussed in the following section. D. Strategies for Charging for Water in Dashkhovuz 1. Background There are several impediments to levying charges for water in Dashkhovuz. One is the current national policy that water is considered to be a benefit to be provided to the people without cost. Another is the relative poverty of the people in the area. Other impediments include the very poor quality of the water service currently being provided, and the sense of being treated fairly. "Why should I pay if others don't have to?" is a question that deserves a reasonable answer. 2. Strategy No. 1 The first strategy is to make it clear to everyone that no one should be asked to pay for water until there is a demonstrable improvement in the quality of the service being provided.  Turkmenistan: Water Supply and Sanitation Project Page 65 Only those users who receive water from the new or rehabilitated water supply systems in their communities will be asked to pay for the water they receive from the systems. 3. Strategy No. 2 The next strategy is to start now to inform the people of the intentions of the new water supply improvement scheme; which is to provide safe, disinfected, water under pressure to their neighborhood street faucet or their yard connection for most hours during the day. At the same time, the people will be advised that it will cost money to maintain this new, improved level of service, and that this level cannot be maintained without the financial support of the users. The answer to their question as to why they should have to pay when others don't, is that the others aren't getting this better level of service. A public education program should be prepared and conducted to introduce these concepts, the need for water conservation, and to demonstrate that water is a valuable commodity worth paying for. 4. Strategy No. 3 The third strategy is to provide differential levels of payment for those who have to carry their water from street faucets and those who have it delivered to their yards by a direct piped connection. As the service improves, it is expected that there will be an increased demand by more people for yard connections. The Social Needs Assessment clearly demonstrated that yard connections are greatly preferred over the use of public street faucets. Households will have to pay the cost of making this connection to the system to pipe water to their yards. They will then have to make larger monthly payments to the water utility once the connection is completed, further increasing the revenues to the utility. People with yard connections should be expected to pay two to three times as much for their service as those who have to carry their water, and the tariff structure should provide for this. 5. Strategy No. 4 The initial stage of cost recovery would be based on charging fees for water used by those with yard connections at a level which provides for the full recovery of the estimated operation and maintenance (O&M) cost component of the water used. In the absence of water meters, charges would be based on their estimated water usage. The convenience of direct yard connections will increase the amounts of water used, so it was assumed that water usage by those with connections would amount to 50 liters per capita per day (Ipcd). Assuming six persons per household, a typical household would use nine cubic meters per month. The estimated cost of the O&M component of the total cost of water is $0.15 per cubic meter. For nine cubic meters per month, this represents a cost of $1.35 per household per month. At current exchange rates, this amounts to about 7,000 manats per household per month, or about 5.4% of estimated monthly household income. The charge to those receiving water from street faucets could be in the order of 2,000 to 3,000 manat per month per household, and could vary (below or above this range) depending on the number of persons per household. 6. Strategy No. 5 In order to collect information about actual water usage, it is recommended that some of the yard connection customers be provided with water meters. A pilot program of installing meters on about 20% of all yard connections is suggested. These customers would be billed on the same estimated rate as other yard connection customers, not on the basis of the metered water use. At some future date, the water utility may wish to install meters on all yard connections and bill for actual water used, but this probably should not be done initially. Water metering is currently being studied in a pilot program in Ashgabat under a UNDP-funded program, and the results of that study may be applied to future programs in Dashkhovuz. 7.. Strategy No. 6 An early decision should be made on the method of charging for water in Dashkhovuz, and a system for collecting the amounts charged. The system of charging and collection should be in place and operational as soon as the improvements to the water system are available to the people. Prior to implementation, this system should be fully explained by means of a public information program. Through gradual tariff increases in unit charges for water and increased use of yard  Page 66 Turkmnenistan: Water Supply and Sanitation Project connections in place of street faucets, the full costs of operation and maintenance to support the new water systems should be recovered by the time the project is implemented. E. Summary and Future Considerations This paper has described some of the various systems used to recover the costs of water supply systems, and has suggested a specific set of strategies to consider to implement cost recovery in Dashkhovuz. Even though the system described in this paper will not result in full cost recovery, it will generate a substantial flow of funds to contribute to the costs of operating and maintaining the new water supply systems. Equally important, it will begin the process of educating people to the economic value of this valuable resource, and the importance of paying for this service. The project will support the Government in identifying, selecting and implementing a system of cost recovery which is best suited for the conditions in Turkmenistan.  Turkmenistan: Water Supply and Sanitation Project Page 67 ANNEX F: REVIEW OF THE TUYAMUYUN AND LEBAT REGIONAL WATER SUPPLY SCHEMES 1. Introduction. Two regional water supply schemes have been proposed by technical organisations within the Government of Turkmenistan as solutions for the water supply problems of the Velayet of Dashkhovuz. These are the Tuyamuyun surface water scheme, and the Lebat groundwater source. Extensive investigations have been carried out on both these schemes by local organisations, and construction has conmmenced on the Tuyamuyun supply scheme. As part of the project preparation activities, a review of the two schemes has been carried out, and this annex summarises this work. The Tuyamuyun Scheme 2. Background. Water supplies for the velayet have historically been obtained from the irrigation canal system, which is fed chiefly from the Shavat Canal. As the quality of this water deteriorated significantly during the 1970s and 1980s, as a result of excessive use of agro-chemicals in the irrigated areas upstream, alternative sources were sought to try to guarantee water of reasonable quality for the velayet. The only source with a large enough yield is the Tuyamuyun reservoir on the Amu Darya, some 190 km upstream of Dashkhovuz, and this was selected for development. At the time the Government of Uzbekistan was planning its own schemes based on the reservoir as a source. The reservoir, although geographically within Turkmenistan, is jointly owned by Uzbekistan and Turkmenistan. 3. The Tuyamuyun Reservoir. The reservoir has a retained volume of 2,340 million cubic metres, and although largely used for hydropower and irrigation, is also used as a source of potable water for two regions of Uzbekistan. The withdrawals for potable water (400,000 cubic metres per day for the Uzbek schemes) are negligible in comparison to both the reservoir capacity and the water requirement for irrigation. There are three other reservoirs, Kaparas, Sultan Sandjiran and Kozbulat, which are linked to Tuyamuyun, and are at present used for irrigation storage, although there are plans to reserve the Kaparas reservoir for use as a potable water source. 4. The Kaparas Scheme. The Kaparas scheme was planned as a means of optimising the quality of raw water available to the region for potable supplies. Water would be admitted to the reservoir between April and July, when the snow melt from the headwaters of the Amu Darya results in improvements in water quality. This water would then be abstracted for potable use when the water quality in the Tuyamuyun reservoir deteriorated in the autumn and winter. Work was put in hand in 1990 by the Government of Uzbekistan to isolate the reservoir from the Tuyamuyun reservoir, and to construct the intake arrangements and transfer pipelines needed for the Uzbek water supply schemes. 5. Following the independence of Uzbekistan and Turkmenistan, the use of agro-chemicals fell dramatically, and one consequence was that river water quality improved, to the extent that agro-chemical residues and heavy metals are no longer an important water quality issue in the Amu Darya. The most significant quality issue is now water salinity, and despite extensive studies in Uzbekistan there are still conflicting opinions on whether or not the water from a Kaparas scheme will be of significantly better quality than water from the existing Tuyamuyun reservoir. The need for the Kaparas scheme, and justification for the cost needed to complete it, is still unproven. In the meantime construction of the isolating structures, and intake arrangements for the Uzbek schemes, is proceeding slowly. The cost of construction of the additional intake needed for Turkmenistan, together with the transfer pipelines, is estimated as US$ 82 million: this assumes that the isolating structures are completed by the Uzbeks.  Page 68 Turkmenistan: Water Supply and Sanitation Project 6. The present scheme. The intake for the present scheme for Turkmenistan is located on the Pitnyak-Arna canal, immediately downstream of the Tuyamuyun barrage. This will pump the raw water 10 km to a treatment plant, from where the treated water will be pumped a further 175 km to a main distribution center near Dashkhovuz. Five pumping mains, with a total length of 292 km, will carry the water from this distribution center to the etrap centers, including Dashkhovuz. Storage reservoirs would be provided at each of the etrap centers, along with rechlorination facilities. There are no plans to supply the collective farms from this system. 7. The scheme has been planned in two phases: Phase 1, which is partially completed, would supply 109 Mid by 1995 , whilst Phase 2 would increase the scheme capacity to 337 Mid and was planned to be completed in 2010. Work on Phase 1 commenced in 1989, but following the independence of Turkmenistan, funding for construction became increasingly scarce, and work is now at a virtual standstill. During the project identification mission the scheme was reviewed and it was considered that the it represented a sufficient level of investment by the Government of Turkmnenistan to warrant examining in detail the feasibility and costs of completing the first stage of the scheme, and determining whether this could form part of this project. 8. The design and concept of the scheme is in general appropriate although the pipeline sizing is such that high operating costs will be incurred at the design flows. This may be because power at the time of design was cheap, and it was advantageous to reduce the capital costs by installing smaller pipe diameters. The treatment process is sophisticated and it may be possible to simplify this without compromising the effectiveness of the treatment. 9. At the present time, the civil engineering works on the intake and water treatment plant are around 50% complete. The workmanship is not to usual international standards, although it is customary in the region that extensive remedial works are carried out to most structures prior to their being put into service. No mechanical and electrical equipment has been purchased to date. About 8.5 km of the raw water pipeline has been laid, and 167 km of the treated water pipeline to Dashkhovuz. A small length (20 km out of 292 km) of the pipelines from the distribution center near Dashkhovuz have been laid, though work has not started on any of the pumping stations and reservoirs needed within the velayet. 10. Costs to completion. The cost of completing Phase 1 of the scheme has been estimated as US$ 514.5 million, as shown in Table x. 1: to provide a supply to Dashkhovuz alone will require an investment of US$ 215 million. One of the major elements essential for completion of any variant of the original scheme is the laying of the final sections of the raw and treated water pipelines, and lining of the existing mains to prevent corrosion. The total cost of this work is estimated as US$ 150 million. Table 1: Costs to complete Tuyamuyun Scheme Item Cost (US$ million) Intake and pumping station 1.5 Raw water main 34.2 Treatment plant civil works 28.7 Treatment works mechanical and electrical equipment 40.0 Main pipeline 115.5 Dashkhovuz distribution center 12.0 Secondary trunk mains and pumping stations 282.6 Total 514.5  Turkmenistan: Water Supply and Sanitation Project Page 69 11. A revised scheme has been proposed in the consultant's feasibility report that would supply 75 Mld at a cost of US$ 322 million. The cost savings have been made by limiting the output, thus reducing the size of the pumps and other scheme components that have not yet been built, and omitting some treatment processes which are not considered to be needed following the improvement in quality of the Tuyamuyun water. The scheme will then have the capacity to supply the etraps of Dashkhovuz, Niyazovsk, Yilanly, Akdepe and Tagta, including the rural areas, although the cost estimate does not include the cost of the pipelines to the rural centers. 12. Conclusions. The Tuyamuyun scheme as presently conceived would supply only the etrap centres, including Dashkhovuz. Completion of the scheme, even if it were within the financial limitations of the proposed project, would not meet the objectives of the project in providing improvements to supplies in both urban and rural areas across the velayet; indeed, it is probable that the majority of the water from the new scheme would go to Dashkhovuz, at the expense of the etrap centres. The revised scheme proposed by the consultants is an improvement in this regard, but the fact remains that whilst the local sources remain viable in terms of water quality, the additional capital and operating costs (up to $ 0.46/cu.m) of the scheme are not justified by the improvement in quality. 13. There are doubts about the long term sustainability of the scheme, because of the reliance on imported chemicals to treat the surface water, the durability, given the poor quality of construction apparent in the works constructed to date, and the current lack of a suitable organisation to operate and maintain the scheme. It is critical for such a large investment that an adequate operation and maintenance organisation is set up well before the scheme is completed, and at the present time there is no clear picture of where such an organisation will be developed from. 14. The cost of completing the scheme, even at the reduced output proposed by the consultant, is far in excess of the maximum loan amount envisaged for this project, or indeed any loan contemplated by the Bank for the country in the near future. 15. For the above reasons, it is concluded that it is not appropriate for the Bank to consider supporting continued construction of the scheme at the present time. The viability of the scheme in the longer term is dependent on the relative water quality in the irrigation canals in the velayet, and the Tuyamuyun reservoir: if the canal water quality remains as at present, then there is no clear case for expenditure on such a scale for a marginal improvement in water quality. However, the quality of both waters needs to be closely monitored in the short term to detect any deterioration as early as possible. The Lebat Groundwater Scheme 16. This scheme would use the Balqui aquifer in the northern Kara-Kum desert, some 60 km south of the Tuyamuyun canal and 220 km from Dashkhovuz. The aquifer is formed from alluvial sands, possibly deposited by the Amu Darya in the period when it flowed to the Caspian Sea, and the water resoures within the aquifer are essentially fossil water: some recharge from rainfall (annual average is 80 to 110 mm) and condensation does occur, but this is thought to be small compared to any likely exploitation. 17. Exploration of the aquifer has been carried out by the South Aral Hydrogelogical Expedition (SAHE), who have determined that the aquifer is between 100 and 200 m thick, with the water table between 19 and 38 m below ground level. The water in the aquifer varies in salinity, becoming more saline with depth, and also as the alluvium becomes thinner at the edges of the aquifer. SAHE have determined that the 1.5 g/l iso-salinity line (deemed to be the maximum salinty exploitable for potable supplies) lies between 15 and 45 m below the water table for an area of 240 sq km. Total fresh  Page 70 Turkmenistan: Water Supply and Sanitation Project groundwater reserves are estimated to be 210 million cu.m. 18. In order to abstract only fresh water, it would be necessary to install doublet wells, with one deep well (average depth 83 m) to draw the saline water away from the shallower (average 38 m deep) freshwater well. The manageable yield with this configuration is estimated to be 8,640 cu.m/day, and it is estimated that 100 doublet wells would be required. At this rate of abstraction the aquifer life would be 66 years. To put the yield into context, the water demand for the seven etrap centers and seven kolkhozes in the present project is 12,000 cu.m/day. The water wold be collected into a single transmission main and pumped 60 km to the Tuyamuyun-Dashkhovuz pipeline, where it would be blended with the Tuyamuyun water. As the Tuyamuyun-Dashkhovuz main is limited in capacity, the wellfield would not therefore provide an additional resource, but would partially replace Tuyamuyun water. 19. As a consequence of the method of abstraction, there will be 29,000 cu.m of saline water per day to be disposed of at the peripheries of the aquifer. As well as adding to the cost, the environmental consequences of these discharges would need to be assessed. The less saline water could be used for agriculture, but this would require the establishment of farms in the area, and in such a manner that the freshwater reserves were not compromised. 20. The costs of the scheme have been estimated as US$ 84.5 million, assuming that the water would be pumped to the Tuyamuyun-Dashkhovuz pipeline, then blended with the Tuyamuyun water. However, if the scheme was constructed as an independent scheme (thus providing an additional resource for the velayet) with a pipeline direct to Dashkhovuz, the cost would be US$ 240 million. 21. As an independent source, the scheme would provide a small amount of water at a high capital cost: in addition the supply of this water in itself would not meet the aim of the project, that is to direct water supply improvements to as wide a population as possible. For these reasons it is considered that the scheme is not appropriate for inclusion in this project, and also that it is not a viable source for Dashkhovuz velayet.  Turkmenistan: Water Supplv and Sanitation Project Page 71 ANNEX G: HEALTH DATA Table 1: Health Status in Central Asian Countries (1992/1993) Indicator Kazakstan Uzbekistan Turkmenistan Kyrgyz. Tajikistan Republic Total Fertility Rate 2.7 4.1 4.2 3.7 5.1 Life Expectancy 68.0 69.0 66.0 66.0 69.0 Infant Mortality Rate 31.0 42.0 46.0 37.0 49.0 Maternal Mortality 63.0 43.0 105 - 114 43.0 39.0 Ratio Source:WDR 1996 Table 2: Health Status in the Aral Sea Disaster Areas (1994) (per 100,000 inhabitants) Aral Sea Disaster Infant Mortality Rate Maternal Mortality Rate Areas Kzyl-Orda 28.0 25.0 Kazakstan Dashkhovuz Velayet 52.0 96.0 Turkmenistan Karakalpakstan 35.8 70.2 Uzbekistan Source: WDR 1996 Table 3: Birth Rate (per 1,000 inhabitants) Birth Rate 1990_ 1991 1992 1993 1994 Turkmenistan 34.2 33.6 34.0 33.1 32.0 Dashkhovuz Velayet 37.1 j 37.3 j 37.3 j 36.0 - Source: CIS Statistical Comr nittee 1995, Radzinsky et al 1994, UNIC]CF 1995, 1SAID 1995, and Consultant Report  Page 72 Turkmenistan: Water Supply and Sanitation Project Table 4: Infant Mortality Rate (per 1,000 inhabitants) IMR 1990 1991 1992 1993 1994 1995 Turkmenistan 45.1 47.0 43.6 45.9 46.4 42.2 Dashkhovuz Velayet 55.6 57.7 52.6 52.1 51.8 47.5 Dashkhovuz City 48.7 41.9 38.8 37.5 38.7 Dashkhovuz Etrap 43 40.1 49 60.1 42.7 Akdepe 65.3 53.1 52.7 51.0 49.5 Boldumsaz 61.5 51.1 58.8 49.3 43.6 Gubadagh 54.1 69.5 51.9 55.3 51.2 Kune-Urgench 56.0 54.0 52.9 51.5 47.2 Turkmenbashi 50.2 48.6 50.6 50.0 47.5 Tagta 67.4 59.6 54.5 55.4 50 Yilanly ____ 77.2 62.4 57.3 155.1 47.2 'ource.CIS Statistical Conunittee 19915, Radzinskyet al 1994, UNICEF 1995.USI19nd Consultant Report Table 5: Maternal Mortality (per 100,000 births) MMR 1990 1991 1992 1993 1994 1995 Turkmenistan 42.3 58.8 44.4 Dashkhovuz Velayet 125.9 96.3 Dashkhovuz City Dashkhovuz Etrap Akdepe 74.5 37.4 118.3 40.3 Boldumsaz 51.1 97.9 28.2 197.1 202.0 Gubadagh 254.1 305.8 101.5 Kune-Urgench 143.1 123.9 152.9 150.1 82.1 Turkmenbashi 108.8 31.2 51.0 58.0 34.7 Tagta 26.3 64.1 62.8 143.5 Yilanly 126.4 132.8 35.5 28.9 31.9 Source.CIS Statistical Committee 1995, Radzinsky et al 1994, -UNIEF195 r3CSAI 195, ndonsultant keport  Turkmenistan: Water Supply and Sanitation Project Page 73 Table 6: Diarrhea without Known Pathogen - Total Population (per 100,000 inhabitants) 1989 1990 1991 1992 1993 1994 Turkmenistan 490.4 451.4 463.5 375.1 444.1 Dashkhovuz Velayet 420.5 401.4 371.9 254.7 285.1 236.6 Dashkhovuz City 367.9 314.9 291.8 234.1 282.2 285.1 Dashkhovuz Etrap 265.9 343.2 247 227.3 245.2 410.8 Akdepe 435.5 444.9 423.5 290.4 415.8 263.2 Boldumsaz 293.9 417.7 326.1 144.1 206.7 40.8 Gubadagh 194.0 275.2 328.1 246.7 99.7 24.9 Kune-Urgench 422.1 601.4 336.7 294.5 408.2 233.7 Turkmenbashi 683.9 456.1 489.8 229.8 239.5 231.4 Tagta 542.1 426.6 448.6 294.4 339.2 196.1 Yilanly 526.4 379.4 490.4 310.3 323.4 307 Source.CIS Statistical Comrnittee I995, Radzinsky et al 1994, UNICEF 1995, UJSAID 1995, and Consultant Report Table 7: Hepatitis A - Total Population (per 100,000 inhabitants) 1989 1990 1991 1992 1993 1994 Turkmenistan 632.6 279.5 508.8 242.9 434.6 Dashkhovuz Velayet 558.9 224.3 416.4 208.2 282.4 153.3 Dashkhovuz City 686.6 166.1 629.4 179.3 496.9 161.4 Dashkhovuz Etrap 442.0 138.1 181.7 80.4 148.9 113.4 Akdepe 740.3 372.6 349.4 341.3 431.8 271.7 Boldumsaz 710.2 196.1 352.2 206.7 290.0 109.4 Gubadagh 716.4 291.2 424.9 216.3 185.9 137.3 Kune-Urgench 394.8 275.4 287.6 313.3 239.4 137.9 Turkmenbashi 524.6 257.5 208.6 136.3 136.3 65.3 Tagta 598.6 301.6 630.3 242.3 348.9 299.9 'ilanly 319.5 109.2 1369. 121.9 n 223.9 116.2 Source.-CIS Statistical Committee 99~5. Radzinsky et at 1994. UN[C_EF 1995. UJSAID 1995, and Consultant Report  Page 74 Turkmenistan: Water Supply and Sanitation Project Table 8: Hepatitis A - Children Below Age of 14 (per 100,000 inhabitants) 1989 1990 1991 1992 1993 1994 Turkmenistan 74.5 56.2 74.6 54.3 69.9 Dashkhovuz Velayet 70.4 44.8 70.9 58.2 70.9 56.3 Dashkhovuz City 82.0 50.9 83.0 61.0 83.6 50.0 Dashkhovuz Etrap 69.9 50.7 77.5 34.5 65.3 65.9 Akdepe 62.0 46.8 55.4 51.2 61.1 56.5 Boldumsaz 81.0 48.0 77.7 70.5 72.2 65.6 Gubadagh 72.0 35.0 73.6 68.5 65.3 60.3 Kune-Urgench 52.3 36.1 41.8 60.9 51.1 56.4 Turkmenbashi 42.5 43.5 35.2 34.6 59.8 20.6 Tagta 84.4 50.4 76.4 63.5 84.7 72.3 Yilanly 76.2 45.5 71.1 61.5 56.9 30.0 ource:CIS Statistical Committee 195 Radzinsky t al 1994 IC 995, USAID 1995, a eport Table 9: Incidence of Tuberculosis (per 100,000 inhabitants) 1991 1992 1993 1994 1995 Turkmenistan 60.7 53.7 55.4 48.6 43.3 Dashkhovuz Velayet 102.4 87.4 97.1 75.9 63.6 Source.-CIS Statistical Cornittee 1995, Radzinsky et al 1994, UNICEF 1995. USAID 1995, and Consultant Ileport  Turkmenistan: Water Supply and Sanitation Proiect Page 75 ANNEX H: DEMONSTRATION PROJECTS A. Background 1. Three demonstration projects were designed during project identification and included in the nine month project preparation consultancy (March 1996 - December 1996): (1) a school sanitation, hygiene and health education project; (2) a community water supply system demonstration, and (3) an artificial recharge demonstration project.demonstrate and health. Projects #1 and #2 demonstrated community based approaches to water supply and sanitation. Project #3 was a technical project to demonstrate artificial recharge of a well field to increase the volume of fresh water available. 2. Project #3 was dropped from the project preparation consultancy due to lack of interest on the Government's part - which largely resulted from the recognition that the nine month timeframe was not sufficient to realize useful results. The Bank agreed with this decision. 3. The two remaining demonstration projects were carried out from March, 1996 to December, 1996, under the project preparation consultancy with Electrowatt Engineering. Electrowatt sub-contracted a local NOG, Assistance to Turkmenistan Area (ATTA), for the non-engineering components of the demonstration projects. Local contractors were engaged for construction. B. Results 4. The demonstration projects provided an opportunity to introduce new, community-based approaches to water supply and sanitation; to assess unforeseen problems in implementing aspects of the overall Water Supply and Sanitation project (WS&S); to identify of consumer demand, design parameters, operation and maintenance of the water supply and sanitation systems; to develop community participation activities for the WS&S systems; to assess needs in health and hygiene education and develop appropriate education materials; and initiate interaction between water and health sector staff as well as between the community and local officials. The demonstration projects were designed and conducted in close collaboration with the work of other NGOs and donors in the water supply and sanitation sector. In particular, the school sanitation demonstration was developed by UNICEF staff participating in the project identification mission and was coordinated with the UNICEF ASPERA school water supply and sanitation project in Dashkhovuz. Thus the school sanitation project served to bring together those working in WS&S, including ATTA, and to build on one another's efforts. 5. The demonstration projects were dynamic in nature. Results were evaluated by the community and stakeholders throughout the project preparation period and adaptations made in the projects. Results were presented during preparation in several workshops. The workshops served the added purpose of providing a forum for participatory planning. Final results of the school sanitation and community water supply system have guided the design of the sanitation and health component and the water supply and institutional strengthening components of the project, respectively. Additional benefits of the projects include the strengthening of skills and capabilities of a local NGO, ATTA, which was engaged in execution of the projects. NGOs are rare in Turkmenistan, and ATTA's involvement in the project preparation increased its visibility and scope of work. 6. A brief summary of the demonstration projects is given below. Detailed project descriptions, health materials produced, and technical drawings can be found in the Projects Documents File, "Turkmenistan Water Supply and Sanitation Project: Report on Demonstration Projects: Annex to the Main Feasibility Study Report" December, 1996.  Page 76 Turkmenistan: Water Supply and Sanitation Project C. School Sanitation Project (SSP) 7. The SSP was implemented in one school in the project area, Boldumsaz School #15. The local community was involved in the school site selection. A project committee was established and included representatives from local government; local water and health offices; school administration; teachers; students; and parents. The project committee along with community representatives and local administrators attended workshops to learn about school sanitation options and to choose the option most appropriate for their school. The group chose to substantially rehabilitate and expand a communal pit latrine. Local competitive bidding was used to select a local contractor for the construction work. The existing facility was converted into a Ventilated Pit Latrine (VIP) with provision for future conversion to pour-flush toils. Hand washing basins were installed. Construction was carried out during the summer montsh when school was not in session. The project committee developed and O&M program for the new facilities. 8. The SSP project was designed in a school in order to provide hygiene and health education to the most receptive audience, children. The Social Needs Assessment, focus group discussions and observation had made clear that there is no demand for improved sanitation in the region despite the deplorable (to outsiders) conditions of sanitation facilities. Furthermore, it was clear that both the health professionals and general population were largely unaware of the linkages between sanitation, hygiene and health. Therefore, the SSP project was designed to include improved hygiene and health education activities. Questionnaires were provided to students to assess hygiene and sanitation practices at school and at home. Based on these results and discussions with health professionals, over summer months, lessons on san sanitation hygiene and disease transmission were prepared with ATTA staff, teachers, and health professionals. When school began, a five session teacher training program began to train the teachers in the hygiene and health curriculum. The new curriculum has now been introduced and will be part of the 1996-1997 school program. The health education program was closely linked to the new sanitation facilities. D. Community Water Supply System: 9. Few, if any, of the public standpipes in the project area have functioning taps, with the result that water runs freely from almost every connection during the service periods. Besides the huge wastage of water, this practice also results in a decrease in pressure and thus a decrease in the service delivery area. In many places the taps have been broken off. The demonstration project was designed to show the benefits of strong, durable taps on standpipes with automatic shut-off valves as well as the convenience of customer access to public standpipes. The technical components were coupled with a public education program on appropriate use and maintenance of the public standpipes and a community based program of site selection, standpipe design, and operation and maintenance. Since success of the technical components of this demonstration rests with the community's safe use and protection of public standpipes, a health education program was incorporated to present the benefits of safe water gathering and storage and clean standpipes. 10. The first step in the demonstration was the assess the water supply system in an etrap center. Gubadag was chosen by local administrators. A community workshop was conducted in March, 1996, and included administrators, local water and health officials, teachers, small enterprises, and community members. The demonstration project concept was presented. It was determined that fourteen new public standpipes would installed in a concentrated area somewhere in the city to demonstrate the aforementioned benefits. Electrowatt staff worked with the participants to design an appropriate standpipe with a tap and automatic shut-off. The participants chose a three block section of town for the site. The need for a  Turkmenistan: Water Supply and Sanitation Project Page 77 community survey on current water use practices was raised ; and a survey agreed upon and conducted in May, 1996. The benefits of an increased water supply (due to the increased pressure and water conservation) were quickly identified. Public housing residents said there would be less work carrying water, more time available for other work, and improved personal hygiene. Single story families identified the most important benefit as increased property value, improved personal hygiene and a reduction in illness. 11. Local competitive bidding was used to engage a local contractor to do the work. Design and manufacture of the standpipes was done locally with local materials. Selection of the standpipe sites was done by the residents of the city blocks involved. Construction of the standpipes were completed in July, 1996, and performance evaluation began immediately. Almost immediately residents on the blocks involved saw improvements in service delivery. The use of the shut-off valves increased pressure in the pipes sufficiently to provide water at points not previously functional. The new design, with modifications made based on experience, was user friendly. The users of the standpipes evaluated the performance with forms they had developed. 12. The project developed health education materials (brochures) with comnmunity input on disease transmission; use and care of public standpipes; water conservation measures; hygiene practices, e.g. handwashing. These materials were distributed at all community meetings on the project; during the survey. Health materials were given to the local public health services and to teachers. Teacher training was conducted on use and care of standpipes and hygiene education. 13. Results of performance evaluation were used to modify the design of the standpipes. Overall results of the project have been incorporated into the design of the water supply component as well. Health education materials continue to be reproduced and distributed in the commnunity. Results of the health education activities were used to design the health promotion sub-component of the project.  Level __ _ LevelMinistry of Health - Ministry of Water Resources Natonal ,Ministry of Environment iNational _ on4 Division of Water Supply and Sanitation 0Sr Plan0nIn R"ulatiNaonmntUi MO 'ntong Training Center Regional Dashkhovuz Regional Water Supply and Sanitation Authority - |oard0f__ Ircto 0 ______________________ ~~~~~~~~~~~Ml st ro ftWatrn Res,N I____ Minister ot Finance Managing Director |akim,Dasl*iiovuz Lea Audi [ePublic Relations vAya -~ Nf - Retional Appointee -2 _ | ,~~~~~~~~~~~II RegionalAppolnteeV-02 . I _____ 1 _ l ~~~~~~~~~~~~~~Mainaging Director - ?0 or Local Dashkhovuz Etrap Ctrs Kolkhoz I Operational Vodocanal Vodocanal Vodocanal r : 3 Seweragel IEtrap Ctrs| t ~~~~~~~Etraps (8)| %X _~~~~~~~ . _1 Csoe I Local &Peso uau m Engineering Q [alit Support sn-- I ___ _______ _____c Futons of Support - _____ c -Acconting - Employment - Basic Design - Laboratories Complaints . i- Billing - Records - Planning - Environmental - Communications F -inance -Training - Construction Concerns S Stores Managemnent - Quality Control 0 - Purihasing -O&M Support - Admin > n- Iformation systems -Vehicles . 0 O { 1- ~Transprt CCe Budget Provisional Organization Chart for Dashkhovuz Regional Water Supply I and Sanitation Authority  Turkmenistan: Water Supply and Sanitation Project Page 79 ACTION PLAN FOR ESTABLISHING THE DASKHOVUZ REGIONAL WATER AND SANITATION AUTHORITY (DRWASA) I. Components of DRWASA Strengthening The Institutional Strengthening component of the project will assist in the establishment of the DRWASA and includes the following sub-components. A. Conduct a National Sector Reform Study The first sub-component is to conduct a study, make recommendations and develop an action plan for making improvements at the national level to strengthen the capacity in Turkmenistan to provide water and wastewater services more effectively to the country's 4.8 million people. This study is intended to provide the support necessary to accomplish the second component, the establishment of a regional sector utility in Dashkhovuz. B. Assist the GOT in Establishing a New Regional Sector Organization The second sub-component is to evaluate existing sector capabilities within the velayet, to provide specific commendations and necessary legislation for the creation of a new regional water and sanitation authority in Dashkhovuz Velayet, and to assist the government in establishing the new authority. C. Strengthen the New Regional Sector Organization The third sub-component will provide institutional strengthening of the new authority in order to develop the skills and capabililities within the authority to meet its responsibilities. II. Action Category A: Consultant Selection A consultant will be selected to perform the duties required to achieve the objectives described in the three categories of institutional strengthening described in Section I, above. The specific tasks, estimated time schedule and responsibility for engaging a consultant to perform these duties are described below: No. Action Date Responsibility 1. Complete TOR 30 Jan 1997 Bank 2. Prepare Long List 1 March 1997 PIU 3. Prepare Short List 1 May 1997 PIU 4. No Objection from Bank 15 May 1997 Bank 5. Complete RFP 1 June 1997 PIU 6. No Objection from Bank 15 June 1997 Bank 7. Send RFP to Short-Listed Firms 1 July 1997 PIU 8. Receive Proposals 1 September 1997 Consultants 9. Evaluate/Select Best Proposal 1 October 1997 PIU 10. No Objection from Bank 15 October 1997 Bank 11. Complete Negotiations 15 November 1997 PIU/Consultant 12. Sign Contract 1 December 1997 PIU/Consultant 13. No Objection from Bank 15 December 1997 Bank 14. Consultant Start Date 1 January 1998 Consultant III. Action Category B: Decisions and Actions by the Govermnent of Turkmenistan Decisions and actions required by the GOT with reference to the establishment of a new regional sector authority, referred to below as the Dashkhovuz Regional Water and Sanitation Authority (DRWASA),  Page 80 Turkmenistan: Water Supply and Sanitation Project are described as follows: No. Action Date Responsibility 1. Agree in principle to establishment February 1997 GOT of the DRWASA and later approval of a legal charter for the organization 2. Determine whether DRWASA is to February 1997 GOT report to the Velayet or a Ministry 3. Approve Dashkhovuz Velayet as the GOT February 1997 GOT agency to whom the Bank loan is to be made, if the Velayet is the proposed supervising agency 4. Agree to provide financial support February 1997 GOT for DRWASA 5. Approve the charter of duties, powers June 1998 GOT/Velayet and responsibilities of DRWASA as recommended by the consultant 6. Approve the recommendations of August 1998 GOT the consultant relative to national sector reform required to permit the establishment and support of the new regional authority 7. Provide office space for DRWASA September 1998 GOT/Velayet 8. Reassign organizations and personnel October 1998 GOT/Velayet to DRWASA as proposed in the consultant's report Action 1 is expected to be incorporated in principle as an agreement to the obligations of the GOT relative to the establishment of the new regional sector authority under the Loan Agreement. This agreement will assume the intent of the GOT to take the necessary steps required to comply with the other actions described above. IV. Action Category C: National Sector Reform Study The specific tasks required under the national sector reform study component of the institutional strengthening part of the project are described in the terms of reference. The major tasks and estimated time schedules to complete them are described as follows: Dates Task No. Task Description Start End A. Determine, Describe and Evalute Existing Sector 1/1/98 1/4/98  Turkmenistan: Water Supply and Sanitation Proiect Page 81 Conditions organizations, conditions, laws, financial and regulatory activities and other factors which effect the sector at the national level) B. Recommend Changes for Sector Strengthening 1/4/98 1/6/98 (with emphasis on required support for a new regional sector authority in Dashkhovuz) C. Prepare Action Plan for National Sector Reform 1/6/98 1/7/98 V. Action Category D: Establish Regional Sector Authority The specific tasks required under the component of the institutional strengthening part of the project which relates to the establishment of a new regional sector authority are described in the terms of reference. The major tasks and estimated time schedules to complete them are described as follows: Dates Task No. Task Description Start End A. Determine, Describe and Evalute Existing Sector Conditions 1/1/98 1/4/98 (organizations, conditions, laws, financial and regulatory activities and other factors which effect the sector at the Dashkhovuz Velayet level) B. Draft Legislation to Create the New Regional Sector Authority 1/2/98 1/4/98 C. Prepare Action Plan for Implementation 1/4/98 1/7/98 (describe specific steps required to transform the existing sector organizations in Dashkhovuz into the proposed new regional sector organization, DRWASA) D. Provide Assistance to the GOT/Velayet in Implementation 1/7/98 1/1/99 (work with national and local authorities to implement the activities described in the Action Plan) VI. Action Category E: Strengthen Regional Sector Authority The specific tasks required under the component of the institutional strengthening part of the project which relates to the strengthening of the newly established regional sector authority are described in the terms of reference. The major tasks and estimated time schedules to complete them are described as follows: Dates Task No. Task Description Start End A. Strengthen Administration & Management Capabilities 1/1/99 1/1/00 B. Strengthen Technical & O&M Capabilities 1/4/99 1/9/99 C. Strengthen Finance and Revenue Generation Capabilities 1/5/99 1/1/00 D. Strengthen Personnel Management Capabilities 1/6/99 1/1/00 E. Strengthen Quality Control Capabilities 1/7/99 1/1/00  ANNEX J: PROJECT IMPLEMENTATION PLAN 1997 1998 1 1999 2000 2001 [ 2002 ID Task Name Q4 Q1Q2IQ3IQ4 [QiQQ2 Q3 Q4 Qi02 03 0401 4Q|Q34Q3 Q4 Ql Q2 Q3 1 TURKMENISTAN WATER SUPPLY AND SANITATION PROJECT I I I 2 PIU ACTIVITIES 3 Establishment and operation of PIU under PPF 4 Operation of PIU under project loan 5 Appointment of RCC and CCs 6 Appointment of PCC 7 Calls for bids, evaluation & award of PIU consultancy 8 Mobilisation of Consultants and Implementation ___ 9 Preparaton of Project Implementation Manual 10 Mid term review 11 LOAN APPROVAL PROCEDURES 12 Negotabon of Project 13 JBBadPeetto n Loan Approval 14 Loan Effectiveness Date: Wed 4/16/97 Task Milestone Summary E Intermittent task Page 1  ANNEX J: PROJECT IMPLEMENTATION PLAN 11997 1998 1999 2000 2001 2002 ID Task Name Q4 Qi Q Q2 030 401020341 Q2 0304 |Q Q23 Q4 01 Q2 03040102 Q3 15 URBAN AND RURAL WATER SUPPLY COMPONENT i_ 16 Procurement of Contract 17 Issue prequalification procurement notice 18 Prepare prequalification package 19 Issue prequalification package 20 Prequalification period 21 Prequalify contractors 22 Bank approval of prequalification 23 Issue tender documents for ICB 24 Tender perod 25 Tender evaluation 26 Bank approval of evaluation 27 Contract finalization and signature 28 Mobilisatlon 29 Construction 30 Defects liability period Date: Wed 4/16/97 Task __ Milestone Summary Intermittent task i Page: 2  ANNEX J: PROJECT IMPLEMENTATION PLAN 1997 1998 1999 2000 2001 2002 ID Task Name Q4 Q1 I Q2 Q31 Q4 1 Q2 03 Q4Q1 Q2 I Q3 4 Q Q2 0 Q3 | Q4 Q1 | Q2 | Q3 04| Q4 Q1 Q2 | 3 31 SANITATION AND HEALTH COMPONENT _ : 32 Prepare tender documents 33 Call for bids, evaluate, award and sign consultancy contract 34 Training 35 Improvement of Rural Sanitation and Hygiene 36 Foreign technical assistance 37 Local technical assistance _ _____ 38 Prepare tender documents 39 Call for bids, evaluate, award and sign contract 40 Rehab latrines and install of handwashing basins 41 Defects liability perod 42 Vacuum pits 43 Study tours 44 Heaith Promotion and Hvqiene EducaUon 45 Foreign technical assistance 46_ _ __Local technical assistance ---- - 47 Prepare tender documents 48 Call for bids, evaluate, award and sign contract 49 Rehabilitation of Dashkhovuz Cene f H 50 Defects liability period 51 Study tour 52 Water Quality Monitoring. Sanitation and Hygiene Surveillance- 53 Improve Water Quality Monitorng Svs. & Sanitabon and Hygiene 54 Foreign technical assistance Date: Wed 4/16/97 Task Milestone Summary Intermittent task Page: 3  ANNEX J: PROJECT IMPLEMENTATION PLAN 1997 1998 1999 2000 2001 2002 ID Task Name Q4 Q10Q20Q3|Q4 010Q2Q030Q4 1Q2|Q3|04 01 Q2 03 Q4 I01Q20Q3 Q4 Q1 Q2 Q3 55 Local technical assistance ._ _ _ _ __:_ _ 56 Upgrade SES Laboratones. 57 Foreign technical assistance 68 Local technical assistance ___._._ _ 59 Prepare tender documents 60 Call for bids, evaluate, award and sign contract 61 Rehabilitation of laboratories 62 Defects liability period 63 Improve data collection etc and Conduct Epidemiological Studies 64 Foreign technical assistance 65 Local technical assistance __._ : _:1 66 Study tour 67 INSTITUTIONAL STRENGTHENING COMPONENT . 68 Prepare tender documents 69 Call for bids, evaluation, award and sign contract 70 National Sector Reform Study 71 Determine, describe and evaluate existing sector conditons 72 Recommend changes for sector strengthening 73 Prepare acion plan for nabonal sector reform 74 Establishmrent of the Dashkhovuz Reuional Water and Sanitation A 75 Determine, describe and evaluate existing sector conditions 76 Draft legislation to create the new Regional Sector Authority 77 Prepare action plan for implementation 78 Provide assistance to the GOT in implementation activities Date: Wed 4/16/97 Task Milestone Summary Intermittent task Page: 4  ANNEX J: PROJECT IMPLEMENTATION PLAN 1997 1998 1999 2000 2001 2002 ID Task Name Q4 I Q 02|304Q1 Q2 Q3 |Q4 Q 2 Q3 Q3 Q2 3 |Q4 010Q2|03 79 institutional Strencithening of the Regional Authority 80 Strengthen administration and management capabilities __.____ 81 Strengthen technical and O&M capabilities - 82 Strengthen finance and revenue generation capabilities 83 Strengthen quality controi capabilities - 84 Public Awareness Propgram _ Date: Wed 4/16/97 Task Milestone Summary Intermittent task Page: 5  ANNEX K DETAILED COST TABLES Table 1 Expe-dtore Accounts by Components - Total Costs Invctd,ng Cort,brgenctes (USS 000) Sanitation and Health Health ater Supply and Distribution Dashkhovo Improve Rural Promotion ater Qity. Monitoring & Hygiene surveillance Institutional Development to Improve delivery of Project Rehabilitation,upgrading Sanitation & and Improve Water & Sanitation Management & and entension Assistance Hygiene Education monitor Establish Implementation to Rehabilitation Health system for Upgrade SES Improve data National Regional Institutional Urban operation of Latrnes & Promotion mater qlty.& laboraton.s colleofion,analysis Sector Water & Strengthenng Public Establish centers (7 Rural Farms of install in Rural hygiene in Tashau. & reporting; Reform Sanitation of Regional Communication Project dtraps) (9 Kolkoses) facilities handsinks Amas surveillance Velayet Epidem. studies studies Authonty Authority Program Managemt Unit Total I. Investment Costs A. Civil Works Rehab Water Supply 10.353 12,773 - - - 1,178 24,304 Rehab Saitation - - 169 59 236 - 464 Subtotal Civil Works 10,353 12,773 - 169 59 236 1 178 24.768 B. Equipment Watersupply&Sandtato,sEquipme,t - 313 66 382 . - - - 752 Other Equipment - - 25 16 28 10 17 12 35 30 4 134 312 Subtotfa Equipment 313 25 75 28 391 17 12 35 30 4 134 1,064 C. Fumiture - - - 23 - 129 - - - 152 D Vehicles - - 18 41 159 - 41 53 - 23 335 E. EducationalMaterlal 7 14 11 - 20 - - 58 F. Technical Assistance Formgn Consultants 225 166 143 123 82 184 408 962 83 1.276 3.650 Local Conaultants - 180 192 240 120 72 35 35 10 - 884 Ssdes - - - 161 - - - 161 Subtotal Technical Assistance - 405 358 383 243 315 184 444 997 92 1,276 4.696 G. Training WorkshopslSeminar - - 115 101 21 15 12 - - - 33 298 Studyours/Felloshp _ 16 34 - - 34 56 139 SubtOtl Tnining - 130 135 21 15 46 - - - - 89 437 H. Supplies WS&Sanitabton chem.cais.supples and tools - - 835 57 - - 6891 OtSleruSpplies - - - - 20 - - - - 20 Subtotal Supplies - - 835 57 20 - - 911 Total lInvestmentCosts 10,353 12773 1.147 810 724 602 1.014 398 196 520 1080 102 2,701 32,421 II. Recurrent Cots A. Facilies Maintenance - - 2 - - - - - - - 2 B. Pesonnel Higher Ivel staff - - 87 87 Mkddle evel staff - - - 166 166 Suppml levet staff _ 27 27 Subtotal Paron l-- - - - - - - - 282 282 C Ofrcespace&operhbons - - - 60 20 55 28 20 11 527 3 149 874 0 Miscellanous - - - - - 6 46 - 16 122 Total Recumrnt Costs - - 62 20 55 28 20 17 581 46 3 447 1.280 Tota PROJECTCOSTS 10.353 12,773 1 147 872 744 858 1041 418 212 1,101 1,126 105 3,148 33,701 Taves 1,035 1,277 - 17 6 e 24 - -. 2 359 Foreign Exchange 7,822 98,91 1.147 511 438 348 800 318 197 485 1,054 93 2.328 25.232 Page 87  ANNEX K DETAILED COST TABLES Table 2 EXerid-ure Acco_nts by Components - Base Costs (USS$000) Sanrittion and Health i1Cr Supply and Distribuion ahkhovo Improw Rural Prmotnion at.r Qlty. Monitonng & Hygiene urooillance Institolional Dewlopment to Improe delivery of Project Rehabilitation,upgrading Sanitation 11 and Improw Water & Sanitation Management A and eltnsion A.Sistina. Hygiene Eduration monitor Establish Impltnbation to Rehabilitation Health system for Upgrde SES Improv data National Regiona1 Institutional Urban opernion of Latine & Promotion water qty abolrbories coltltion.analymio Sector Waler Strengthening Public Egublish Physical cantara f7 Rural Fre-S of inelall in Rural hygiene in Tash t- & reporting; Refonm Snitation o0 Regional Conmmnicatlon Project Contingencies etrapeL (S Kolkoen) facilitie. hand.ink. Amn. sur,eillance VLbyet Epidem. tdiec studies Authority Authority Program Mnaganit Uni Total % Amunt 1. Invlnnt Co A. Civil Works RehabWalerSupply 8,173 10,463 1 1.134 20,270 142 2,870 RehabSanitation , - 142 i0 , 200 - - - 392 15.0 59 Subtota Civill Wo0ks 8.873 10,463 - 142 50 , 200 - 1,134 20.it2 14.2 2.929 B. Equipetnt Waler supply & Sanitalon Equipment - 250 - 49 325 - 024 15.0 94 Other Eq,opment 21 15 24 8 is 10 30 20 4 112 265 100 40 Subtotal Equipma n 250 21 04 24 333 Is 10 30 26 4 113 890 15.0 133 C Futnitune - 0 - 110 - - , 130 15.0 20 D Vehices - - 35 135 3S 45 - 20 285 10.0 43 E.Edadt A ultl 6 12 10 is 3 20 51 5.0 3 F. Techn"l Asilance F-nignConsualaots 220 1i00 140 120 s0 180 400 920 80 1,240 3,540 LoeaItConsultants O 180 1'2 240 120 72 - 35 35 10 . 884 Studies - - . - - - - 150 - - - - iWO - Subtoble Technical Assiance - 400 352 380 240 302 180 435 59S 90 E.240 4.574 G. Training Wotknhops/Semtnar 102 90 19 13 11 - 30 265 100 27 Study Tootr./Felloeship 14 30 30 50 124 10.0 12 Sub4toe Tramining 116 1io 19 13 41 80 389 10.0 329 H. Supplis WS&SAeinattini chleeici.K.oPplien and boB -s 750 55 - - D00 50 40 SubtoalSuppan . 750 50 1s -18 s0 1 ToW alluilmnent Cost 8,673 10.443 1,000 751 671 008 896 37b 190 500 1.026 99 2,587 27799 11.5 3.207 H. Recurrent Coale A FaditesMaintenne 2 - .tenr.- - - 2 s. 0 B. Peneonn.i H.Qaer byel Sbf f 0 7 87 mit krie staff , 168 168 S.ppotleie al gf . . 27 27 Solilolel Paroonnal . . 202 202~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~28 5 C Office space S perabons 58 1S 53 20 19 11 502 3 142 832 50 42 DbMisellaneous SS; 5 52 43 15 115 54 6 Tn.W Racoo'enCoal .