Turkey - Istanbul Water Supply and Sewerage Project

Document of The World Bank FOR OFFICIAL USE ONLY I-N #2rf-7L) Report No. 6985-TU STAFF APPRAISAL REPORT REPUBLIC OF TURKEY ISTANBUL WATER SUPPLY AND SEWERAGE PROJECT November 2, 1987 Country Department I Europe, Middle East and North Africa Region This document has a resticted distibution and may be used by recipiens only In the performance of their official duties. Its contents may not otherwise be disclosed without World Bank autorization.  CURRENCY EQUIVALENTS Currency Unit = Turkish Lira (TL) TL850 = US$1.00 (June 30, 1987) FISCAL YEAR January 1 - December 31 WEIGHTS AND MEASURES km = Kilometer (0.621 miles) 1 = Liter (0.264 US gallons) m3 = Cubic meter (264 US gallons) m3/sec = Cubic meter per second (22.8 Mgd) PRINCIPAL ABBREVIATIONS AND ACRONYMS USED DSI = State Hydraulic Works GDRS = General Directorate of Rural Services IB = Iller Bank (Bank of the Provinces) ISKI = Istanbul Water Supply and Sewerage General Directorate MAFRA = Ministry of Agriculture, Forestry and Village Affairs RWS = Rural Water Supply Department SPO = State Planning Organization  FOR OMCIAL USE ONLY REPUBLIC OF TURKEY ISTANBUL WATER SUPPLY AND SEWERAGE PROJECT STAFF APPRAISAL REPORT Table of Contents Page No. LOAN AND PROJECT SUMMARY ... .. ................................ . i-i I . INTRODUCTION ............................................... II. SECTORAL CONTEXT ............................................. 1 Country Background ...... ................................. ......... . 1 Water Supply Service Levels .................................................... . 1 Sewerage Service Levels ......................... - .......... ..... 3 Future Demand for Water and Sewerage .............*# ........... 3 Sector Organization and Development ............ ......a........ 0 ....O......... 4 Investments in the Sector ...................................... . 5 Constraints to Development .................................................... . 6 Previous World Bank Involvement in the Sector ................... 6 World Bank Lending Justification .......................... ...... 7 III. THE BORROWER ......................... .... ....... 7 Introduction ............................................................. 7 Organization and Staffing ....................................... 8 Training . . . . . . . . . . . .. . . . . . . . . . . ...... . . . .#. .. . . . . . .. . 8 Accounting and Auditing .................. ... .............. 9 Billing and Collection .......................................... 10 Industrial Waste Management ...................... .............. 10 Insurance ..... . . . . . . . . . . . . ... . ................... 11 IV. SECTOR SERVICES, DEMAND, AND PROPOSED INVESTMENTS ....6........... 11 Project Area ..................................................... 11 Sector Services ..................................... 11 Demand for Water ........................ .. ......... ..*... 13 Demand for Sewerage ............................................. 15 ISKI's Investment Program.................. ...........# 15 This report was prepared by Mr. Paul J. Bowron, Financial Analyst; Mr. Richard A. MacEwen, Engineer; Mr. David A. Henley, Engineer; and Mrs. Marjory-Anne Bromhead, Economist. This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  Table of Content3 (Cont'd) Page No. V. THE PROJECT .................... 16 Introduction .................... ....t...e. . 16 Project Objectives ........... ................. 16 Project Description ............................ 16 Project Cost and Financing . ............. 19 Project Implementation ........................ 21 Procurement ........................ 22 Disbursements .................................. 25 Monitoring and Evaluation ... ..... ......... .... 26 VL.FNNE............ 26 Past Performance and Current Financial Position ................. 26 Financing Plan ............................. 27 Future Finances .................................... 28 Tariff Structure and Special Charges ............................ 29 Financial Reotn .........................30 VII. ECONOMIC EVALUATION AND RISKS ......... ..... ........ .. 30 Benefits .............................................. 30 Rate of Return .............................................. 31 Affordability of Services .......... ......... .. 31 poverty Impact ........................... 32 Environmental Impact ...................................... ..... 32 Risks R..C.... ... 33 VIII. AGREEMENTS REACHED AND RECOKMdEATIONS ............................ 33  Table of Contents (Cont'd) LIST OF ANNEXES Page No. 1 - ISKI Organization Chart ..................................... 35 2 - Black Sea Disposal of Sewage ............................. 36 3 - Historical and Projected Water Production and Related Iniaos...............................37 4 - Historical and Projected Sewerage Connections and Related Indicators ....... ........ 38 5 - ISKI Investment ............. ............................ 39 6 - Project Cost Estimates ........... ......................... . 44 7 - Contract Procurement Schedule ............................. 51 8 - Project Implementation Schedule .......................... 52 9 - Allocation of Loan Proceeds. .....,..., .. ...... 53 10 - Loan Disbursement Schedule ...........................,... 54 11 - Monitoring Indicators .................................... *. 55 12 - Income Statements, 1985-94................................. 56 13 - Sources and Applications of Funds Statements, 1985-94 ..... 57 14 - Balance Sheets, 1985-94... ........................... 58 15 - Incremental Cost and Benefit Streams for Internal Rate of Return .............................. 60 16 - Selected Documents and Data in the Project File ............... ........ 61 MAPS IBRD Nos. 20401 and 20405  f#A~~~~~ el V441k~~ 4 f$  REPUBL1C OF TURKEY ISTANBUL WATER SUPP'LY AND SEWERAGE PROJECT Loan and Project Sum nm Borrower: Istanbul Water Supply and Sewerage General Directorate (ISKI). Guarantor: Republic of Turkey. Loan Amount: US$218 million equivalent. Terms: Seventeen years, including 4 years grace, at the standard variable interest rate. Project The Project consists of high priority components in Description: ISKI's 1987-94 investment pregram. The objectives of the Project are: (a) to improve and extend sewerage service to 70 of the population of Istanbul by the end of 1994; (b) to provide for appropriate disposal of sewage to protect the waters and shorelines of the Sea of Marmara and the Bosphorus; (c) to reduce unaccounted-for water; (d) to strengthen ISKI's operation and maintenance and industrial waste management capabilities. The Project includes rehabilitation of parts of the water distribution system; installation of a system for water supply monitoring and control; and construction of sewage collection and sewage treatment facilities. A technical assistance component of the Project would provide advice and training to strengthen ISKI institutionally. Benefits The proposed loan will finance 90% of the estimated and Risks: foreign exchange cost of the Project. Project components not to be financed by the loan include land acquisition, local staff engineering, sewer networks and sewer connections. The beneficiaries of the Project would be: (a) 2.3 million people who would receive sewerage service; (b) 1.0 million people already connected to the water distribution system who would receive improved service; and (c) residents and visitors who now encounter polluted waters and shorelines along the Sea of Marmara and the Bosphorus. The Project's financial risk that ISKI would not adjust its tariffs to compensate for inflation is small since ISKI has shown willingness to raise tariffs when needed in the past. The Project's environmental risk is associated with the Black Sea disposal method planned for approximately half of Istanbul's sewage. The method uses the bottom current of the Bosphorus to transport partly treated sewage to the Black Sea, where it will be dispersed and treated naturally. Although the method is untried, it is theoretically sound and the risk is considered to be insignificant. If the method should not prove to be fully satisfactory, ISKI would be expected to take corrective measures.  - ii - Estimated Ptolect Cost: Local ForeiRn Total - - ~US, million Water Distribution 28.8 44.8 73.6 Sewage Collection and Treatment 252.5 155.9 408.4 Institutional Strengthening 3.3 9.8 13.1 Base Cost 284.6 210.5 495.1 Physical Contingencies 26.6 19.5 46.1 Price Contingencies 17.3 11.4 28.7 Total Project Cost /a L1 5fi2 Financing Plan Sources: IBRD Loan - 218.0 218.0 ISKI Revenue from Sales 264.3 1.6 265.9 Customer Contributions 64.2 21.8 86.0 Total Financing 322..2 Estimated Lplsbw,sements: World Bank Fiscal Year 1988 1989 1990 1991 1992 1993 1994 1995 1996 - - -US$ million- Annual 24.4 21.8 34.8 39.2 39.2 30.4 16.2 8.8 3.2 Cumulative 24.4 46.2 81.0 120.2 159.4 189.8 206.0 214.8 218.0 Economic Rate of Retum 13.6S. /b a/ Figures include an estimated US$59.9 million equivalent in value added taxes. b/ The internal financial rate of return for ISKI's investment program.  REPUBLIC OF TURKEY ISTANBUL WATER SUPPLY AND SEWERAGE PROJECT STAFF APPRAISAL REPORT L iNTRODUCTION 1.01 The proposed project is for the Istanbul Metropolitan Municipality, which has a population of 5.7 million growing 4.3S per year. Istanbul is Turkey's principal commercial and cultural center and its most active port. It is also the gateway to Turkey and the center of Turkey's growing tourist industry. 1.02 The Project includes rehabilitation of water distribution facilities, and construction of new sewerage facilities needed to keep pace with Istanbul's rapid growth and to provide for the safe and environmentally sound disposal of its wastewater. The sewerage components of the Project would con- tinue the pollution abatement program initiated under the first Istanbul Sewerage Project (Loan 2159-TU). The water components would eliminate water shortages now affecting 18X of the population. Approximately 2.3 million pre- sent and future residents of Istanbul are expected to benefit directly from the Project. In addition, the population at large should benefit from an improved quality of life resulting from a cleaner environment. 1.03 Preparation of the Project began during 1985 and expanded during 1986 with engineering financed in part by Loan 2159-TU. The field appraisal began with a mission in March 1987 which was interrupted by work on another project; it was completed during a missl-4i in May 1987. IL SECTORAL CONTEXT Country Bd 2.01 The population of Turkey at the end of 1986 was 52 million, with 53 percent living in urban areas. The population growth rate averaged 2.5 per- cent per annum during 1981-1985 (4 percent for urban and 0.9 percent for rural areas). The rate is expected to decrease gradually, and the population by the year 2000 to reach about 66 million. Turkey is a middle income country with per capita GNP of approximately US$1,200. Following economic difficulties in the late 1970s, measures were introduced to liberalize the economy. The economy recovered, GDP growth averaged 5 percent per annum in the 1980-85 period, exports grew at an annual rate of 23 percent, and inflation has been reduced. Despite these favorable trends, inflationary pressures persist, and, while exports declined by about 8 percent in 1986, largely due to reduced market demand in the Middle East, export performance in 1987 has been satisfactory. Also, the debt burden remains high. Nevertheless, with careful economic management, GDP is expected to continue to grow at about 5 percent per annum through 1990. Water SUPPlY Service Levels 2.02 Nationwide water and sewerage figures for urban areas in 1983 are summarized in Table 2.1. Although approximately 80 percent of urban  households had piped water connections, a substantial proportion of them did not have reliable service because of inadequacies in water production, treat- ment and distribution systems. Water losses were estimated at 36 percent. Daily per capita consumption for connected urban households was 85 liters for domestic users, or 122 liters including commercial and industrial consumption. Although adequate to meet minimum health requirements, these consumption levels are substantially below those in richer industrialized countries-' and are below potential demand, which is suppressed by system inadequacies. In the Istanbul metropolitan area, 93 percent of the population had house and apartment connections, but only two thirds of those served had adequate supply. The most serious problem was, and still is, that inadequate and aging distribution systems lead to low pressure and intermittent supply in elevated and fringe areas. Table 2.1: 1983 Water and Sewerage Sector in Urban Areas Nationwide Service Levels (% served) Urban Istanbul Total Population ('000) 24,600 5,038 Piped Water 80 93 Public Sewer Connection 56 54 Cesspit 24 22 Other/Unknown/None 20 24 Water Production and Consumption Number of Connections ('000) 4,565 779 Persons per Connection 4.3 6.0 Quantity of Water Produced (million m3) 1,380 332 Quantity of Water Sold (million m3) 877 200 Losses (%) 36 40 Water Sold per Connection (m3) 192 264 Per Capita Sales including Industrial and Commercial (liters/day) 122 120 Estimate of per Capita Daily Domestic Consumption (liters/day) 85 84 Municipal Water and Sewerage Establishments Total Number of Municipal Water Establishments 850 1 Employees 19,600 4,660 Wages and Salaries (TL million) 11,700 3,545 "I to it (US$ million) (52) (15.7) Goods & Services Purchased (TL million) 6,485 3,807 "q of of to (US$ million) (28.8) (16.9) Sources: State Institute of Statistics: Gas and Water Statistics 1983, Popu- lation Census 1985, Census of Buildings 1984, ISKI Statistics. Per capita consv.nption is over twice this level in EEC countries. 2a Since 1983, new *-onnections have not kept pace with population growth in the Istanbul ared so that now the estimated population served is only 89 percent.  -3 Sewerage Service Levels 2.03 Ac-ording to the 1984 Buildings Census, 56 percent of urban dwellings have a sewer pipe. This figure may, however, be misleading since many sewer pipes connected to buildings discharge into a nearby creek or open drain. None of the sewerage systems include treatment, and only a few have adequate disposal facilities, Precarious sanitary conditions prevail, parti ]Jarly in high density, low income urban areas. The insufficiency of sewerage and the indiscriminate disposal of domestic and industrial wastes have caused deteri- oration of rivers and coastal waters, and have increased the danger of contam- inating drinking water supplies. According to ISKI's figures, only about 54 percent of Istanbul's population is connected to the public sewerage system, much of which is archaic and leaking. Discharge of sewage into the Golden Horn will soon Le controlled as a result of the first Istanbul Sewerage Project (L n 2159-TU), but untreated sewage is still discharged into the Bosphorus d.id Sea of Marmara, causing severe pollution in some areas. Future Demand for Water and Sewerage 2.04 It is estimated that 6 million of the present urban population of approximat%ly 28 million do not have piped water, and 12 million do not have adequate sewerage. Substantial investment will be necessary to make up for these deficiencieg. Furthermore, with the continuing urban growth accompany- ing Turkey's rapid economic development and industrialization, there will be even greater demand for water and sewerage infrastruzture. The urban popula- tion is expected to increase from 28 million in 1986 to about 45 million by the year 2000. 2.05 Water supply and sewerage objectives formulated by the Government in 1978 were: (i) by 1990, the total urban and rural population should have ade- quate water supplies; (ii) by 1990, the total rural population should have satisfactory exereta disposal facilities; and (iii) by 2000, the total urban population should have satisfactory sewerage and sewage disposal facilities. It is now expected that more time will be needed to achieve these goals, and that by the year 2000, perhaps 90 percent of the population will have adequate water and 75 percent of the urban population will have sewerage. This will require provision of water for an additional 26 million people-i-', and sewer- age for 19 million people. Water production for urban areas would have to increase to 3.5 billion m3/year!/ (compared to 1.4 billion m3/year in 1983), with corresponding increases in treatment and distribution facilities, in sewerage networks, and in sewage treatment and disposal facilities. T- 18 million urban and 8 million rural inhabitants; about 63 perce.at of rural households have access to a piped water system. t' Assuming that unaccounted-for water will be reduced from 36 percent to 20 percent; that the serviced urban population will be 40.5 million; and that overall consumption will increase from 120 1/cd to 190 1/cd.  - 4- Sector OrEanization and Development 2.06 With the exception only of certain major water source operations, the provision of public water supply and sewerage services in Turkey is a respon- sibility of municipalities and village councils. Local financial resources and technical capabilities, however, have not been sufficient to support sys- tem development (except recently in the cases of Istanbul and Izmir). Planning, design, and construction of new systems, therefore, have been, and are being carried out by three central government organizations, except for projects in the largest municipalities. The three organizations are: (a) The State Hydraulic Works (DSI) under the Ministry of Public Works, responsible for national water recources management, major water source development and operation, and water supply development for the larger towns, but excluding the four largest municipalities. DSI has its headquarters in Ankara and operates 21 regional offices. (b) The Iller Bank (IB, meaning Bank of the Provinces), a semi- autonomous Government corporation responsible for water supply development for towns with a population of less than 100,000, and for major sewerage development in all urban areas except Istanbul and Izmir. IB has its headquarters in Ankara and operates 16 regional offices. Its shareholders are the municipalities. (c) The General Directorate of Rural Services (GDRS) under the Ministry of Agriculture, Forestry and Village Affairs (MAFRA). There are two departments within GDRS dealing with rural water supply programs, the Rural Water Supply Department (RWS) and the Research and Planning Department. The RWS has 17 regional offices which supervise 67 provincial offices. 2.07 In all but the four largest municipalities, responsibility for municipal water and sewerage operations is embedded within operating depart- ments which carry out a variety of other functions as well (e.g., transporta- tion, gas service). The first of the four exceptions is the Istanbul Municipality. In 1981, the Istanbul Water Supply and Sewerage General Directorate (ISKI) was created by Law No. 2560 as an autonomous entity respon- sible for the planning, design, construction, operation and maintenance of all water supply and sewerage facilities in Greater Istanbul. This was intended to strengthen the sector's organization, and to enable an increasing share of the sector's investment for Istanbul to be financed with internally generated funds. The experience has been successful, and Law No. 3305 of June 5, 1986 has amended the first ISKI law (No. 2560) to authorize the establishment of similar organizations in Izmir, Ankara and Adana. Also, national legislation in 1981 defined Greater Municipal Areas, by which administrative responsibili- ties and organizations for water supply and sewerage services of many smaller municipalities could be taken over by a nearby large urban center. In the case of Istanbul, 24 water supply organizations were merged into ISKI.  -5- Investments in the Sector 2.08 In 1985-86, the total of all public investment grew about 15 percent per year in real terms, with the energy and transport sectors and expenditures by municipalities accounting for the majority of the increase. This rate of growth has been considered excessive, but at the same time it has been recog- nized that increases in municipal expenditures may be appropriate in many cases to make up for service deficiencies that developed as a result of under- funding in previous years. Accordingly, it has been the Government's objec- tive to have investment in water and sanitation increase from 5 percent of total public investment in 1984 to an average of 9 percent over 1985-89, within a public investment total increasing at an average rate of about 42 per year. The World Bank supported this in its March 1987 Public Investment Review with the Government. 2.09 The 1987 public investment budget for the Greater Istanbul metropoli- tan area may be summarized as follows: Table 2.2: Budgeted Public Investment in 1987 for the Greater Istanbul Area, by Source of Financing TL billion Metropolitan Municipal Budget 251 Local Municipality Budgets 174 Foreign Borrowing 130 Build, Operate, and Transfer Investments (BOT) 80 ISKI 101 i Public Enterprises and Central Government Departments 195 Other 5 Total 936 ' Includes foreign borrowing by ISKI. Investments financed in the municipal budget are planned to continue at about the 1987 level in real terms through the rest of the 1980s. It is planned that foreign borrowing will decline from TL 130 billion equivalent in 1987 to TL 80 billion in 1988, and to lower amounts later. Major projects to be financed in part with future foreign borrowing include the Golden Horn Improvement Project, a third Bosphorus Bridge, and an urban road artery, together costing an estimated US$400 million; and a first stage rapid transit system costing US$300 million. Build, Operate, and Transfer (BOT) Projects under consideration include four hotels, a car park, a lorry park, a Disneyland and, possibly, a hospital. A principal reason for growing interest in this form of development is its minimal impact on the Municipality's budget. 2.10 ISKI's 1987 budgeted investment expenditures represent about 11% of the Istanbul total. They will grow rapidly during the next few years, but will be financed mainly (88X) by revenue from sales (para 6.08), the balance being obtained through borrowing, and with no requirement for a budgetary provision from the Municipality or the Government.  -6- Constraints to Development 2.11 Except in Istanbul and, in the near future, in Izmir, Ankara and Adana, responsibility for the construction of municipal water supply and sew- erage systems has been held by DSI and IB. This has had several conse- quences. Firstly, central agency supervision of construction of widely scattered projects has not always been adequate. Secondly, lobbying by munic- ipalities for water supply and sewerage systems has put central organizations under pressure to start projects when funds may not have been available to proceed at an efficient pace. Thirdly, municipalities responsible for many other services' in addition to water, have not always operated and maintained systems satisfactorily, and have set charges at too low a level to provide for sufficient maintenance. The situation is, however, expected to improve given the Government's decentralization policy (para. 2.07) ana the example of the positive experience with ISKI. Previous World Bank Involvement in the Sector 2.12 The Bank made a US$37 million loan to the Government in 1972 for the Istanbul Water Supply Project (Loan 844-TU), which was completed in 1981. The Project included expansions of water treatment, transmission, pumping and dis- tribution systems for the Istanbul metropolitan area. The Project Performance Audit Report (No. 4853, issued in 1983), concluded that the main oroject objectives were achieved: water production was increased to the levels antic- ipated at the time of appraisal, and a reorganization of the sector was achieved through the creation of the Istanbul Water Supply and Sewerage General Directorate. In 1982, a loan of US$88.1 million was made by the Bank for the Istanbul Sewerage Project (Loan 2159-TU) to improve sewage disposal facilities and to increase the proportion of the City's population to be served by sewerage. Project implementation is proceeding satisfactorily, with 81 percent of the loan disbursed as of October 1987. The Project will eliminate discharges into the Golden Horn today amounting to about 30 percent of Istanbul's effluent, and an industrial pollution control program already has been put into operation. 2.13 Loan 2818-TU or US$184 million was approved in May 1987 for a water and sewerage project for Izmir (estimated total cost of US$522 million). An authority similar to .SKI has been established to implement the Project and manage water and seweiage operations. An engineering loan of US$9.2 million, including funds for water supply and sewerage studies for the Cukurova Region (Loan 2537-TU), was approved in 1985. This was followed in May 1987 by Loan 2819-TU of US$120 million for a municipal infrastructure project for the Cukurova Region (estimated cost of US$467 million), 47 percent of which would be for water and sewerage. An authority similar to ISKI has been established for the largest city involved, Adana, and operationally autonomous water departments are to be established in four other towns in the Region. The Cukurova Project also aims to build up the capacity of Iller Bank as a finan- cial intermediary. A unit is to be established within Iller Bank to appraise and monitor municipal infrastructure projects and investment programs in the Cukurova area. Total lending for the urban and water sector under ongoing loans is US$401 million.  -7 World Bank Lending Justification 2.14 The Bank's strategy for the sector is to continue to support the Government's objective of reducing inadequacies in water and sewerage infra- structure in the most cost-effective and environmentally sound way possible. The strategy is also to support the decentralization and cost recovery poli- cies of the Government through assistance in the near and medium term to the new autonomous water and sewerage organizations in the municipalities. In addition, the Bank would begin lending for projects in medium-size cities, where considerable potential lies for improving service levels and achieving efficiency improvements and full cost recovery and autonomy. Lending by the Bank for medium-size cities may be accomplished best through an intermediary, specifically the Iller Bank if it can be further strengthened for the purpose. 2.15 Addi.ional financial assistance from the World Bank for water and sewerage development in Istanbul is justified for the following reasons: (i) Istanbul is the industrial center and largest city of Turkey, with a rapily growing population and a need for substantial further expansion in water and sewerage capacity to meet expanding industrial and domestic requirements; (ii) the proposed assistance would further strengthen institutionally the autonomous water and sewerage organization of Istanbul, which already is recongized as a successiful model for sector organization in Turkey's municipalities; (iii) the Project would contribute to badly needed environmental improvement t :h in the city and in its surrounding waters; and (iv) support for Istanbul's strong cost recovery policy for the sector would be reaffirmed^ III. THE BORROWER Introduction 3.01 The proposed borrower, implementing agency, and operating organiza- tion for the Project is the Istanbul Water Supply and Sewerage General Directorate (ISKI) of the Istanbul Metropolitan Municipality. ISKI was formed by combining water supply and sewerage staff and assets from existing service organizations within the Greater Municipal Area into a separate, autonomous, administratively self-sufficient organization specified by Law No. 2560 approved by the Turkish Parliament November 20, 1981, and amended by Law No. 3009, May 23, 1984. 3.02 ISKI is responsible for the development and operation of all public water supply and sewerage for the metropolitan area except its water sources outside the area which are developed and in some cases operated by DSI. ISKI operates surface water reservoirs and well fields with a safe yield of 1.06 million m3 per day. In 1986, it distributed water through 835,000 connections to approximately 5.1 million persons in an area totalling about 600 km2, and handled the collection and disposal of sewage from 520,000 connections.  -8- Organization and Stafing 3.03 ISXI is administered by: (i) a General Assembly consisting of the Metropolitan Municipal Council; (ii) a full-time, six-member Board of Directors with the Mayor as Chairman, which reports to the General Assembly; and (iii) a General Director who is the Board's Vice Chairman and the chief executive officer responsible for day-to-day operations. The General Director is supported by Assistant General Directors for Operations (water transmission, water and sewage treatment, and electrical and mechanical operations); Networks (all water distribution and sewage collection); Planning and Construction; and Finance and Administration. He also has a staff of advisors and small, specialized departments (e.g., Legal Department; Annex 1). 3.04 The General Assembly approves ISKI's investment plans and annual bud- gets, staffing, tariffs and borrowings. The Board of Directors approves operating principles and regulations, matters to be submitted for final approval by the General Assembly, and appointments of senior officials and staff other than the General Director and Assistant General Directors. The General Director is appointed by the Central Government (Ministry of Interior) upon nomination by the Mayor. The Assistant General Directors are appointed by the General Director. 3.05 Board Members, the General Director, and the Assistants are required under the ISKI Law to have professional qualifications and experience in their fields. One of the most significant developments realized in the formation of ISKI as an independent entity has been the strengthening of its management, which now is a model for the sector in Turkey. 3.06 ISKI's 5,680 employees include 159 management and senior advisory staff, 364 engineers and technicians, 759 accounting and commercial operations staff, 245 other office workers, and 4,153 unskilled and semi-skilled service and maintenance workers. The total number of employees gives ratios of approximately 7 employees per 1,000 water connections (one employee for every 890 persons served), and 11 employees per 1,000 sewerage connections.l/ These ratios are satisfactory for public utility organizations of this type. The number of employees has risen by about 200 per year since 1982, and fur- ther growth at kbout the same rate will be necessary as the networks expand. Staffing plans Are prepared annually, and recruitment procedures are satis- factory. Turnover is low. 3.07 ISKI provides training for its employees in operations and mainte- nance, more advanced technical subjects, management and administration, and a variety of other subjects. The program is satisfactory. Among areas