Mozambique - Water Services and Institutional Support Project

Page 1 PROJECT INFORMATION DOCUMENT (PID) CONCEPT STAGE Report No.: AB2760 Project Name Water Sector Services and Institutional Support Project Region AFRICA Sector Water supply (100%) Project ID P104566 Borrower(s) Mozambique Implementing Agency Fundo de Investimento e Patrimonio do Abastecimento de Agua (FIPAG)/ DNA Departmento do Agua Environment Category [ ] A [X] B [ ] C [ ] FI [ ] TBD (to be determined) Date PID Prepared December 12, 2006 Estimated Date of Appraisal Authorization March 15, 2007 Estimated Date of Board Approval June, 2007 1. Key development issues and rationale for Bank involvement Progress on hard to reach Millennium Development Goal (MDG): . Meeting the MDGs is a challenge as the coverage levels would have to almost double for all categories by year 2015. Cholera is endemic in major urban areas mainly due to lack of adequate sanitation and sewerage services, compounded by poor water supply services. This and other health impacts caused by poor sanitation coverage even risks meeting the MDG target of reducing infant mortality. It is estimated 1 that Mozambique would need to at least double its sector investments in the next ten years in order to meet the MDG goal for water and sanitation. Specific sector objectives for PARPA II 2 (inclusive of MDG's) are: Increased Coverage Urban Water Urban Sanitation Rural Water Rural Sanitation 2005 Actual 37% 38% 41% 35% 2009 Target 60% 55% 55% 40% 2015 Target 70% 80% 70% 50% Comprehensive Water Sector Strategy is incomplete. The results of the 1994 National Water Policy and subsequent reform in Mozambique are mixed. The sector has made significant progress, both institutionally and on the ground, in larger cities with the policy of delegated management coupled with a robust regulatory framework. FIPAG and CRA (National Regulatory Authority) are working well and achieving results. For the rural areas, characterized by small piped village systems and point source (boreholes with hand pumps), a policy of demand driven community managed model was developed in the early 2000s and was piloted in a number of communities. The pilots have been successful however over 70% of the unserved population live in rural areas and the challenge is still enormous. A neglected area of sector strategy is addressing the needs of smaller cities and towns. There are over 33 municipalities in Mozambique and the urban growth rate on average is approaching 4 percent indicating that the pressure on these developing urban areas will increase significantly. 1 Source: Country Economic Memorandum 2005 and other sector documents. 2 The official estimates of DNA are based on 500 people per borehole and include only officially regulated house connections and standposts. Figures published by the National Statistical Institute differ quite significantly due to the differences in the definition of urban and rural population given by the two institutions and differences in the definition of access. Page 2 Weak institutional capacity leads to poor performance and weak absorptive capacity : DNA (the National Department of Water) has limited institutional capacity. The consequences include a fragmented approach to rural water supply (villages and point source) and small towns. At present projects are undertaken by various donors with inadequate coordination provided by DNA. Further systems that are built suffer from inadequate implementation and aftercare support as up to 35 percent of rural systems are not working and in need of repair at any one time. Limited institutional capacity leads to weak absorptive capacity as donor funded projects have generally experienced under spending as a result of DNA's internal procurement and financial management skills. This is further exacerbated with payment difficulties with respect to counterpart funds, taxes, and value added tax (VAT). The GoM and sector donors have recognized these shortcomings and DNA and the major donors 3 have recently agreed to move towards a comprehensive Sector Wide Approach (SWAp) for the rural water sector. This approach harmonizes sector planning and monitoring, and provides for more effective aid modalities, in line with the Paris Declaration. Inadequate attention to sewerage and sanitation : Sanitation and sewerage remain issues that are not yet dealt with comprehensively in Mozambique. For example, in urban areas the assets and operation of sewerage systems and sanitation facilities are institutionally the responsibility of the municipalities and of the Ministry of State Administration (MAE). Water utilities cooperate on the design of sewerage and sanitation facilities however revenue systems and economic regulation are separate. While strategic sanitation plans have been developed for major cities under DNA, the implementation of investments is adhoc and institutional arrangements are unsatisfactory. Little work has been done at the town level. Rural sanitation, like rural water supply, is also woefully inadequate given the large rural population Building on Bank Experience in Mozambique and the Region: The proposed project is in line with the latest draft of the Water Supply and Sanitation Flagship for the Africa Action Plan. The lessons learned in the last two decades have been instrumental in identifying the ingredients for sustainable water supply and sanitation. This experience, based on a number of examples in the region, provides practical ways to reach the MDGs. In summary, sustainable village water supplies depend upon decentralized, demand- responsive, community-managed approaches. Town and city water supplies need autonomous water boards and professional operators. For sanitation, villages and towns need their own sanitation plans those community members prepare and enforce, and urban centers need practical strategic sanitation plans that can be implemented. Experience has shown that the Bank's most important role is in facilitating dialogue on sector reform and building national programs that donors can support via SWAps. The Bank's strategy for the water supply and sanitation sector is set out in Box 1. BOX 1 World Bank Water Sector Strategy in Mozambique Urban Water Supply: