Malawi - National Water Development Project

Document of The World Bank FOR OFFICIAL USE ONLY Report No. P-6551-MAI MEMORANDUM AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT IN THE AMOUNT EQUIVALENT TO US$79.2 MILLION TO THE REPUBLIC OF MALAWI FOR A NATIONAL WATER DEVELOPMENT PROJECT JUNE 1, 1995 Energy and Infrastructure Operations Division Southern Africa Department This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  CURRENCY EQUIVALENT (as of December 31 1994) Currency Unit = Malawi Kwacha (MK) US$1.00 = MK 15.4 FISCAL YEAR (FY) April 1 to March 31 WEIGHTS AND MEASURES 1 meter (m) = 3.281 feet (ft) kilometer (km) = 0.621 miles (mi) 1 square kilometer (km2) = 0.386 square miles(sq mi) 1 cubic meter (m3) = 264.2 U.S. gallons GLOSSARY OF ABBREVIATIONS BWB = Blantyre Water Board CAS = Country Assistance Strategy ESCOM = Electricity Supply Comrnmission of Malawi GDP = Gross Domestic Product GIS = Geographic Information System GOM = Government of Malawi ICB = International Competitive Bidding IDA = International Development Association KfW = Kreditanstalt fur Wiederaufbau (Germany) LWB = Lilongwe Water Board MASAP = Malawi Social Action Project MIM = Malawi Institute of Management MIWD = Ministry of Irrigation and Water Development MLGRD = Ministry of Local Governrent and Rural Development MOEP&D = Ministry of Economic Planning & Development MOF = Ministry of Finance MOREA = Ministry of Research & Environmental Affairs MSC = Ministry of Statutory Corporations MWS = Ministry of Works and Supplies NCB = National Competitive Bidding NDF = Nordic Development Fund NEAP = National Environmental Action Plan NWDP = National Water Development Project O&M = Operation and Maintenance ODA = Overseas Development Administration (U.K) OPC = Office of the President and Cabinet PPF = Project Preparation Facility PSIP = Public Sector Investment Program PU = Project Unit RWB = Regional Water Board (Northern, Central & Southern) SOE = Statement of Expenditure TA = Technical Assistance TOR = Terms of Reference UNDP = United Nations Development Program USAID = United States Agency for International Development WB = Water Board WD = Water Department WRB = Water Resources Board WRMPS = Water Resources Management Policy & Strategies  FOR OFFICIAL USE ONLY MALAWI NATIONAL WATER DEVELOPMENT PROJECT CREDIT AND PROJECT SUMMARY Borrower: Republic of Malawi Beneficiaries: Ministry of Irrigation and Water Development, Lilongwe Water Board and three Regional Water Boards. Poverty Category: The project would contribute to poverty reduction by improving access to safe water and thus reducing the incidence of water-borne disease and increasing productivity by reducing the time and effort expended on fetching water. Amount: SDR 50.3 million (US$79.2 million equivalent). Terms: Standard IDA terms with a maturity of 40 years including a 10-year grace period. On-Lending Terms: To the Lilongwe and Regional Water Boards using a combination of commercial debt and equity contribution. Interest Rate on the debt would be 2% above prevailing inflationi; Repayment of principal over 25 years including a 5-year grace period. Financing Plan: IDA - US$79.2 million; NDF - US$5.3 million; GOM - US$9.6 million Economic Rate of Return: Average of 25 % estimiiated for candidate urban schemes Staff Appraisal Report: No. 13 t89-MAI Map: IBRD 26497 Project identification Nuniber MW-PA-. 667 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.  I  MEMORANDUM AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT TO THE REPUBLIC OF MALAWI FOR A NATIONAL WATER DEVELOPMENT PROJECT 1. I submit for your approval the following memorandum and recommendation for a proposed development credit to the Republic of Malawi for SDR 50.3 million, the equivalent of US$79.2 million, on standard International Development Association (IDA) terms with a maturity of 40 years, including 10 years of grace. The credit will help to finance implementation of the water resources management policy and strategies recently adopted by the Government of Malawi (GOM) as its framework for the reform of the sector, together with capacity development to ensure sustainable improvements in the sector, and investments to rehabilitate degraded infrastructure and significantly increase access to safe water. US$35.4 million of the proceeds of the IDA credit will be on-lent to the three new Regional Water Boards (RWBs) and Lilongwe Water Board (LWB) at a market rate of interest set at approximately 2% above inflation as indicated by the National Composite Retail Price Index. A further US$23.6 million of the credit will be passed to the Water Boards as part of the GOM's equity contribution. 2. Background. Malawi is a relatively small country with a surface area of 199,140 kM2, of which Lake Malawi occupies about 20%. The topography varies widely and related to this are wide ranges in temperature and rainfall. The average rainfall is about 1,100 mm per year with variations from 700 min in the dry areas of the Lower Shire Valley to about 2,000 mm on the Mulanje Massif and Zomba (Southern Region) and Nyika (Northern Region) plateaus depending on the topography. The 1992 population of Malawi was approximately 9 million, including about 1 million Mozambican refugees, with an estimated 88% living in the rural areas. The average population growth rate is 3.3% per annum. 3. Malawi, one of the poorest countries in Sub-Saharan Africa, has recently completed a peaceful political transition from almost 30 years under a single party system, to a multi-party democracy. Subsequent events, however, have continued to demonstrate the vulnerability of its primarily agricultural economy. Abnormally low rainfall in both 1994 and 1995 have cut the production of food and export commodities, and have caused power outages in urban areas and water shortages throughout the country. As a result of these developments, the gross domestic product contracted by about 9 % in 1994. Excessive GOM expenditures, borrowing in the first few months of the fiscal year, and a sharply depreciating exchange rate, significantly increased inflationary pressures resulting in an annual inflation rate through 1994 of 34.7%. This contributed to further difficulties in sustaining essential services. Although the new GOM continued its commitment to the economic stabilization process and its attack on the country's pervasive poverty problem, its credibility will be tested by its response to the drought in terms of the maintenance of food supplies, and its ability to show progress in the alleviation of poverty, including the provision of more widespread and assured access to safe water supplies. 4. Apart from the lakes, the availability of water in Malawi depends to a great extent on the seasonal rainfall which varies widely. This marked seasonal variation seriously limits the potential of many streams and rivers as reliable raw water sources unless storage is provided. Groundwater resources are widespread throughout the country, although generally at very low yields. These sources are exploited by some 9,700 boreholes and 5,600 shallow wells equipped with handpumps. With an estimated mean annual runoff of 51 million m3/d, there appears to be ample water resources available. However, as a result of high levels of use relative to development, inadequate sanitation, ineffective  - 2 - and inappropriate treatment and disposal of sewage and solid wastes, and high sediment loads due to the increasing cultivation of steep slopes and on the banks of streams, Malawi's water resources are coming under serious pressure in some areas. 5. Other than in the two urban areas supplied by the Blantyre and Lilongwe Water Boards (BWB and LWB), water supply services are provided by the Water Department (WD) of the Ministry of Irrigation and Water Development (MIWD). Sewerage services are provided to limited areas of the two cities and two of the towns by local governmrent. Neither the water supply services provided by the WD, nor the sewerage services, are adequately maintained, and many are operated poorly. Many of the piped water supply and sewerage systems are falling into disrepair, some are already partly inoperable, and most will need to be replaced or undergo major rehabilitation. Some of the borehole installations will also require rehabilitation or replacement. The condition of many of these assets is, however, such that early action will preserve much of what is currently operational. The sector, other than the water supply services in Lilongwe and Blantyre, is characterized by a lack of sustainability, contributed to by institutional arrangements which are poorly matched to the tasks with which the institutions are faced, low levels of human and institutional capacity, inadequate financial management, and until recently, the almost complete absence of a policy framework for the sector. In addition, only about 60% of the population have access to water supply services (69% urban and 58% rural) and water borne sanitation services reach about 15% of the urban population. Recognizing these issues, the Government, in May 1994, adopted a comprehensive statement of directions for the sector entitled "Water Resources Management Policy and Strategies" (WRMPS) to (a) guide the management and use of water for conservation and environmental protection; (b) provide strategies for institutional reform and development including the establishment of three RWBs, and for capacity building; and (c) establish a consistent framework of policies for the allocation of water and investment funds, the provision of services in a manner that involves stakeholders, and pricing and recovery of the costs of supplying water. The WRMPS constitutes an important first step towards sustainability, effectiveness and increased coverage. Its widespread acceptance has created good conditions for the implementation of its objectives. The proposed project will assist to put in train the implementation of the strategies of the WRMPS. 6. Project Objectives. The primary objectives of the proposed project are (a) to initiate implementation of a strategy for reform of the sector to ensure sustainability, responsiveness to the needs of the community, and efficiency and effectiveness in service provision and the management of water resources; and (b) to implement a program of investments to (i) ensure convenient access to safe water for a progressively larger fraction of the population; (ii) provide water infrastructure capable of underpinning economic development; and (iii) protect and develop water resources, in particular to assure the protection and enhancement of aquatic and riparian environments. 7. Project Description. The project would consist of: (a) Institutional Reform and Studies (about US$13.8 million or 20% of base costs), comprising: (i) institutional restructuring, and capacity building, (ii) consultancy services for project preparation and implementation support, and (iii) studies of water resources and environmental management; (b) Physical Works (about US$49.7 million or 68% of base costs) including (i) rehabilitation of water supply schemes, (ii) water resources protection and management including catchment revegetation (iii) extensions of existing systems including a dam and water supply system expansion for the town of Zomba; and (iv) new schemes for water supply and sewerage and sludge disposal sites; and (c) Goods and Equipment (about US$9.0 million or 12% of base costs) including stores, workshops, spares, mechanical and electrical plant for the Lilongwe water treatment plant, laboratories and offices, laboratory, office, field testing and telecommunication equipment, meters, meter testing and repair equipment, together with tools, vehicles, and GIS required for implementation. A mid-term review would be undertaken following the initial two years of the five-year implementation period to reassess project objectives, implementation capacity and progress to  - 3 - date. Based on the results of this review, the project would be restructured according to the lessons learned and reviewed and recalibrated as necessary annually for the remainder of the project duration. A summary of the project costs and financing plan is provided in Schedule A. Procurement arrangements and the disbursements schedule are summarized in Schedule B. A timetable of key processing steps and the status of Bank group operations in Malawi are provided in Schedule C and Schedule D respectively. Staff appraisal report No. 13189-MAI and Map IBRD 26497 are attached. 8. Project Implementation. Project preparation has been managed by the Ministry of Works and Supplies (MWS) (formerly the parent ministry of the WD) with assistance from a Project Steering Committee (PSC) comprising members from all involved agencies. With the recent transfer of the WD to the new ministry, MIWD, the overall project will now be managed by this Ministry through a Program Leader supported by a small Project Unit within the WD. The PSC will continue in operation, under the chairnanship of the Principal Secretary, MIWD. GOM has appointed the Program Leader and terms of reference have been agreed. The investment components will be managed by the new RWBs now being established, LWB and the WD as line functions. The performance monitoring unit of the WD will provide to the Program Leader management information on the performance of investments and processes implemented under the project. 9. Project Sustainability. Achieving sustainability is a key focus of the project. The following specific steps are incorporated to establish sustainability: (i) the reconstitution of the Water Resources Board (WRB) into a high level multi-sectoral body responsible for providing policy advice to the Minister, and able to address nationally important water resources issues more effectively; (ii) the establishment of three new commercially-oriented RWBs to take over the roles of provision of urban water supply and water borne sanitation services currently allocated to the WD and local government; (iii) the introduction into the WD of a more community-driven approach to the planning and implementation of rural water supply services; (iv) capacity building in the WD, the three RWBs and LWB; (v) the calibration of investments against the pace of institutional reform and cost recovery as measured against agreed performance targets; and (vi) the provision for a mid-program assessment of performance, with the opportunity to reset targets and investment programs, together with annual adjustments of investments against progress with reform initiatives. 10. Lessons from Previous Bank Involvement. This is the fifth IDA operation in the water sector. The previous four included one with BWB (1977), two with LWB (1982 and 1987) and one with the WD (1989). The first three built the capacity of the city water boards with relatively good success in commercialization of operations and human resource development. These have resulted in increased financial self sufficiency and decision-making autonomy balanced by increased accountability through the setting of performance targets, monitoring and reporting as well as the indigenization of all senior management positions within both water boards and a substantial reduction in dependency on TA. The BWB and LWB are, therefore, viewed by GOM and the WD as role models whose success should be emulated by the rest of the sector. Accordingly, GOM has incorporated in the WRMPS the same principles that have contributed to the improved performance of the city water boards. GOM now seeks to address issues that have become apparent through experience, among which the principal ones are the legislative relationship between the water boards and the Minister as the strategic directing authority, and improved processes for approval of tariff increases. The proposed project is designed to assist it to achieve these improvements. 11. Rationale for IDA Involvement. IDA's previous incremental approach made important strides in the sector in particular in introducing in the cities of Lilongwe and Blantyre institutional arrangements, policies and human resources development that have resulted in the introduction of sustainable commercial and technical practices. If this success is to be consolidated and extended to water resources management and water service delivery throughout Malawi, a sector-wide policy-based  -4 - approach is necessary. The involvement of IDA in the implementation of this approach is appropriate because: (i) IDA has had a long prior involvement in, knowledge of and experience with the sector in Malawi; (ii) IDA played a central role in assisting GOM to develop the framework of policy and strategies, and the action plan for implementation; (iii) successful implementation will require that all initiatives in the sector, whether investment or sectoral reform in nature, be coordinated and integrated, and IDA is best placed to assist GOM in this; and (iv) the proposed Malawi Social Action Project (MASAP) will have important links with this project, and close coordination of the two is best achieved if IDA is involved in both. 12. Link to the Country Assistance Strategy. The project is consistent with the Bank's Country Assistance Strategy in Malawi, presented to the Board June 9, 1994 (Report No. P6236-MAI). The overarching objective of the CAS is sustainable poverty reduction through economic growth with equity. The institutional restructuring and capacity building component will contribute to the improvement of efficiency and capacity of the public sector. The investments in infrastructure and the proposed commercialization of the sector through the creation of the three TWMs, will, as already demonstrated in the cases of BWB and LWB, create new opportunities for the private sector in a range of construction and service contracting. This will help achieve economic diversification, capacity building and broad based private sector participation that are priorities of the CAS. The program will also improve water resources management and access to safe water for domestic use for a larger proportion of the population and thus reduce the incidence of water borne disease, and improve the lot of women by reducing the time and effort spent in fetching water. 13. Actions Agreed. The conditions of credit effectiveness include completing the legal steps necessary for the establishment of the RWBs, staffing key positions of the PU, selecting and nominating the Chairmen and Chief Executives of the RWBs, and completing the project implementation manual. Before any disbursements are made on water resources works, the water resources legislation will have to have been reformed, and before any disbursements to the RWBs, the financing agreements between each of them and GOM will have to have been executed, and the RWBs vested with the necessary assets, and in receipt of the necessary funds and staff to enable effective operations. Before any disbursements are made to the WD for rural water supply works, a study on strengthening, restructuring and funding of the WD will have to be underway, and key staff appointed. A loan from another donor for the parts of Third Lilongwe Water Project not assisted under the NWDP will have to be declared effective as a prerequisite to disbursements to the LWB. Agreement has also been reached on establishment of performance targets and other provisions regarding the compatibility of the RWBs' operations with the WRMPS; arrangements for stakeholder involvement; the provision of water supplies to rural communities; procedures for the implementation of monitoring; and terms of reference for technical assistance. 14. Environmiental Impact. Substantially improved water resources management, including improved monitoring of allocations and abstractions and control of wastewater discharges together with revegetation of heavily eroded catchments to arrest the degradation of water quality and of aquatic environments, is an important aspect of the project. EnvironDmental impacts will therefore essentially be positive and beneficial. In addition to these impacts, most individual projects will have temporary impacts related to the construction phase. At negotiations, criteria and procedures to identify and mitigate significant impacts were agreed and are consistent with IDA guidelines. An environmental assessment report for the proposed dam to increase the supply of water to the town of Zomba and environs, has been completed, reviewed and accepted by the Bank and is available on the project files. In accordance with the recommendations of this report a site was chosen for the dam downstream of other alternatives. The dam is to be located so as to abut the downstream face of the existing dam, and the effect will be as if the existing dam was raised. No resettlement would be required. GOM is constituting a panel of experts in the fields of hydrology, geotechnical investigations, dam engineering  - 5 - and environment to ensure that the proposed dam continues to meet the Bank's directives on dam safety and environmental assessment. The proposed environmental classification for the project is B. 15. Riparian Rights. The proposed Zomba dam is to be constructed on the Mulunguzi River which empties into Lake Chilwa bordered by Malawi and Mozambique. The dam was originally included in the Infrastructure Project (Cr. 2069-MAI) and the Government of Mozambique, after having been duly notified by Malawi, gave its no objection to the project. As a result of the withdrawal of financial support by a number of external support agencies for Malawi in the early 1990s, the dam was never constructed. The dam is now included in the proposed NWDP and GOM has again notified Mozambique of its intent to increase the capacity of the reservoir on the Mulunguzi River. Besides the Zomba dam, some of the other water supplies proposed in the NWDP would abstract raw water from international waterways that Malawi shares with Mozambique and Tanzania. GOM accordingly notified these riparians of the project, providing relevant hydrological and water quality data . The Governments of Tanzania and Mozambique have given their no objection to the project. The Government of Mozambique, in its response, requested that it be kept advised of the sewerage and sewage treatment schemes and their effect on water quality. The Government of Malawi has agreed to comply with this request. 16. Project Objective Categories. Revegetation of areas of heavy erosion in key catchments would improve natural resource management. The improved access to safe water would reduce the incidence of water related diseases and free up time, mostly women's, for economically and socially more beneficial pursuits. Pricing and cost recovery strategies would contribute to economic management by reducing central government contributions to the sector as sector entities contribute a greater share of operation and maintenance requirements. 17. Participatory Approach. The project has been designed and developed to ensure that the institutional arrangements maximize the incentives for all those who provide services to ensure that those who are to receive a service are involved in planning it and shaping its delivery. New community driven processes have been developed and are to be used in the planning and implementation of rural water supplies. The commercially-oriented structuring of the RWBs is aimed at encouraging effective two-way communication between each organization and its customers, as is a developing characteristic of the two existing city water boards on which the RWBs are modelled. Similarly the restructuring of arrangements and processes for water resources management recognizes that sustainable improvements in poor land use practices that are contributing to degraded water quality, can only be achieved with the involvement and commitment of the farmers themselves, and the involvement of all relevant sectors and disciplines; project resources are earmarked to stimulate this involvement. 18. Project Benefits. The justification for this credit derives from the economic, social and environmental benefits which will accrue to the economy, the people of Malawi, and the natural resource base of the country. These benefits include: (i) the provision of infrastructure that will underpin private sector development and economic diversification, accompanied by measures aimed at achieving sustainability, efficiency, and responsiveness to demand; (ii) increasing the proportion of people with convenient access to safe water for domestic use, in a manner that supports community choice, promotes a sense of ownership and conserves scarce fiscal resources, thus conferring benefits by improving the lot of women and the health status of the community, and alleviating one of the factors contributing to the pervasiveness of poverty; and (iii) protecting and enhancing the quality of water resources and associated aquatic and terrestrial environments. 19. Project Risks. The major risks are associated with (a) the institutional changes required to establish and operate the RWBs as demand-based, commercially-oriented entities and to restructure the  - 6 - rural programs to facilitate local choice and acceptable cost-sharing arrangements; (b) development by the RWBs of sufficient capacity to effectively operate the program; and (c) putting the rural water supply program on a sound demand-driven footing so its operations and maintenance can become sustainable. Most of the activities needed to establish the urban institutions and restructure the rural programs will have been done by the time of credit effectiveness. This will minimize the start-up risks. The operational risks will be mitigated by the establishment of an on-going annual review process pacing investment with capacity through annual reviews, emphasis on capacity building and carefully constructed training and support programs and by Bank supervision which can result, if necessary, in mid-course corrections. Two additional factors are present in Malawi which support the view that the risks will not prove to be unmanageable. The first is the fact that the GOM has developed and adopted a WRMPS aimed at achievement of the institutional and operational restructuring described above. The second is that Malawi has had positive experience with autonomous, commercially-oriented water boards in Blantyre and Lilongwe, from which the new boards can learn. 20. Recommendation. I am satisfied that the proposed credit would comply with the Articles of Agreement of the Association and recommend that the Executive Directors approve it. James D. Wolfensohn President Attachments Washington, DC June 1, 1995  -7 - Schedule A Page 1 of 1 MALAWI NATIONAL WATER DEVELOPMENT PROJECT Project Costs and Financing Plan (US$ Million) % % Total Foreign Base Local Foreign Total Exchange Costs A. Institutional Reform, Technical Assistance, and Studies 1. Institutional Development 1.5 2.0 3.5 57 5 2. Implementation Support - National Water Dev. Project 1.6 3.9 5.5 71 8 3. Implementation Support- LWB - 1.4 1.4 100 2 4. Studies 0.2 1.8 1.9 92 3 Subtotal Institutional Reform, Technical Assistance, and Studies 3.3 9.1 12.3 74 17 B. Rehabilitation of Existing Systems 1. Urban Water 0.2 0.7 0.9 75 1 2. Rural Gravity-Piped Water 0.5 1.4 1.8 75 3 3. Borehole 1.2 2.4 3.6 66 5 4. Protection of Catchment Areas 1.0 0.6 1.6 37 2 Subtotal Rehabilitation of Existing Systems 2.9 5.1 8.0 63 11 C. New Schemes 1. Urban Water 0.3 0.9 1.2 75 2 2. Sewerage 0.7 1.3 1.9 66 3 3. Boreholes 1.1 3.4 4.6 75 6 4. Sludge Disposal 0.1 0.1 0.2 36 - 5. Gravity Fed Rural 0.8 2.3 3.1 75 4 Subtotal New Schemes 2.9 7.9 10.9 73 15 D. Extension of Existing Schemes 1. Zomba Dam 3.4 6.1 9.4 64 13 2. Zomba Water Supply 1.9 5.9 7.9 75 11 3. Urban Water (29 Schemes) 2.9 8.9 11.9 75 16 4. City Water (LWB) 0.6 1.1 1.6 64 2 Subtotal Extension of Existing Schemes 8.8 21.9 30.8 71 42 E. Equipment 1. Lab. and Office Equipment - 1.5 1.5 100 2 2. Vehicles & Motorcycles 0.0 0.3 0.3 92 - 3. Spares, Pipes and Trmt. Plant Equipment (LWB) 0.7 5.0 5.7 87 8 4. Measuring Equipment 0.1 1.5 1.6 92 2 Subtotal Equipment 0.9 8.1 9.0 90 12 F. PPF Refinancing - 1.5 1.5 100 2 Total BASELINE COSTS 18.8 53.7 72.5 74 100 Physical Contingencies 1.7 4.8 6.5 73 9 Price Contingencies 10.8 4.4 15.2 29 21 Total PROJECT COSTS 31.3 62.8 94.1 67 130 Estimated Financing Plan US$M % IDA 79.2 84 NDF 5.3 6 Government 9.6 10 TOTAL 94.1 100  -8 - Schedule B Page 1 of 2 MALAWI NATIONAL WATER DEVELOPMENT PROJECT Procurement and Disbursements A. Procurement Procurement Method - USS Millions International National Competitive Competitive National Consulting Bidding Bidding Shopping Services N.B.F. Total A. Civil Works 1. Extenstion of Existing Schemes Zomba Water Supply 10.2 - - - - 10.2 (9.6) (9.6) Zomba Dam 14.5 - - - - 14.5 (13.1) (13.1) Urban Water 11.9 3.0 - - - 14.9 (11.2) (2.8) (14.0) City Water 2.3 - - - - 2.3 (2.1) (2.1) 2. Rehabilitation of Existing Systems Urban Water - 1.2 - - - 1.2 (1. 1) (1. 1) Rural Gravity-Piped Water 1.9 0.5 - - - 2.3 (1.8) (0.4) (2.2) Borehole 4.7 7- 4.7 (4.2) (4.2) Protection of Catchment Areas 1.7 0.5 - - - 2.3 (1.3) (0.4) (1.7) 3. New Schemes Urban Water - 1.5 - - - 1.5 (1.4) (1.4) Sewage 2.6 - - - - 2.6 (2.4) (2.4) Boreholes 5.8 - - - 5.8 (5.4) (5.4) Sludge Disposal - 0.3 - - - 0.3 (0.2) (0.2) Gravity Fed Rural 3.1 0.8 - - - 3.9 (2.9) (0.7) (3.6) B. Goods and Equipment 1. Lab. and Office Equipment - 0.4 - - 1.3 1.7 (0.4) (0.4) 2. Vehicles & Motorcycles 0.3 - - - - 0.3 (0.3) (0.3) 3. Pipes and Trmt. Plant Equipment 7.1 - - - - 7.1 (5.7) (5.7) 4. Measuring Equipment - - 0.2 - 1.7 1.9 (0.2) (0.2) C. Technical Assistance - - - 12.8 2.3 15.0 (9. 9) (9.9) D. PPF Refunding - - - 1.5 - 1.5 (1.5) (1.5) Total 66.2 8.1 0.2 14.3 5.3 94.1 (60.0) (7.6) (0.2) (11.4) - (79.2) Note: Figures in parenthesis are the respective amounts financed by IDA  9- Schedule B Page 2 of 2 MALAWI NATIONAL WATER DEVELOPMENT PROJECT Procurement and Disbursements B. Disbursement CATEGORY CREDIT AMOUNT % EXPENDITURE TO BE FINANCED US$ Millions 1. Civil Works 55.7 100% foreign +80% local 2. Goods and Equipment 6.1 100% foreign +80% local 3. Technical Assistance 9.3 100% foreign + 80% local 4. Operating Expenditures 1.0 60% through Dec. 31, 1996 4. Operating Expenditures 1.0 30% in calendar year 1997 10% in calendar year 1998 5. PPF Refinancing 1.5 As disbursed 6. Unallocated 5.6 As disbursed TOTAL 79.2 Estimated IDA Disbursements Fiscal Year Ending June 30 (US$ million) Year 1996 1997 1998 1999 2000 2001 2002 2003 Annual 5.5 8.2 15.1 15.2 18.1 9.2 6.1 1.8 Cumulative 5.5 13.7 28.8 44.0 62.1 71.3 77.4 79.2 % ofloan 7 17 36 56 78 90 98 100  - 10- Schedule C Page 1 of 1 MALAWI NATIONAL WATER DEVELOPMENT PROJECT Timetable of Key Project Processing Events Identification September 1992 Preparation February 1994 Appraisal June 1994 Negotiations May 1995 Planned Board Date June 1995 Planned Date of Effectiveness October 1995 This report is based on the findings of a Bank appraisal mission which visited Malawi in June/July 1994, comprising Mr. E. Aikins-Afful (Senior Sanitary Engineer and Mission Leader), Mr. K. John Shepherd (Water Resources Management Specialist), Mr. H.A. Garn (Economic Advisor), Ms. N.D. Nikoi (Operations Officer), Mr. Ivor Beasley (Financial Analyst Consultant), and Ms. Nga Nguyen (Sr. Staff Assistant). Ms. Nga Nguyen and Ms. Robin Harris (Staff Assistant) provided administrative support in the preparation of the project. Mr. Randolph A. Andersen and Mr. Walter Stottmann were the peer reviewers. Mr. Jeffrey Racki and Ms. Katherine Marshall are the Managing Division Chief and Department Director, respectively.  -1l- Schedule D Page 1 of 3 MALAWI NATIONAL WATER DEVELOPMENT PROJECT Status of Bank Group Operations in Malawi Summary Statement of IDA Credits (as at May, 95) Amount in US$Million. Loan or Fiscal Borrower Purpose (less cancellations) Undis Closing Credit No. Year Bank IDA bursed Date Credits 52 Credits closed 877.98 .64 C18790-MW 1988 Malawi Transportl 13.40 1.12 C19660-MW 1989 Malawi Agri. Marketing & Est. 18.30 2.38 C19900-MW 1989 Malawi Energy 1 46.70 9.37 02/28/96(R) C20360-MW 1989 Malawi Instit. Dev. 11.30 1.66 06/30/95(R) C20690-MW 1990 Malawi Infrastructure 1 28.80 6.65 12/31/95 C20830-MW 1990 Malawi Educ. Sec. ll 36.90 25.18 06/30/96 C22200-MW 1991 Malawi PHN Sector Credit 55.50 49.52 06/30/97 C22210-MW 1991 Malawi Financial & Enterprise 32.00 16.75 06/30/97 C22250-MW 1991 Malawi Fisheries Dev. 8.80 7.51 06/30/99 C23790-MW 1992 Malawi Local Govt. 24.00 23.62 12/31/99 C23860-MW 1992 Malawi Power V 55.00 55.46 C25130-MW 1993 Malawi Rural Fin. Services 25.00 26.34 12/31/96 C25140-MW 1993 Malawi Agric. Services 45.80 46.35 09/30/99 C26240-MW 1994 Malawi Instit. Dev. 11 22.60 24.83 06/30/00 C23963-MW(S) 1995 Malawi Entrepreneur Dev.& D 40.00 11.57 06/30/95 C23964-MW(S) 1995 Malawi Entrepreneur Dev & D 4.60 5.04 C26960-MW 1995 Malawi Malawi Railways Rest 16.16 17.65 12/31/98 TOTAL number Credits = 17 Credits 484.86 331.02 Loans 10 Loan(s) closed 104.52 All closed for MALAWI TOTAL number Loans = 0 TOTAL*** 104.52 1,362.84 of which repaid 5843 35.19 TOTAL held by Bank and IDA 46.08 1,327.65 Amount sold of which repaid TOTAL Undisbursed 331.66 Notes: * Not yet effective. * e Not yet signed. * * * Total Approved, Repayments, and Outstanding balance represent both active and inactive Loans and Credits. (R) Indicates formally revised Closing Date. (S) Indicates SAL/SECAL Loans and Credits. The Net Approved and Bank Repayments are historical value, all others are market value. The Signing, Effective, and Closing dates are based upon the Loan Department official data and are not taken from the Task Budget file.  - 12 - Schedule D Page 2 of 3 MALAWI NATIONAL WATER DEVELOPMENT PROJECT Statement of IFC Investments as of December 31, 1993 (US$ Million) FY Type of Obligor Business Loan Equity Total 1987 Viphya Plywood Plywood 3.9 0.5 4.4 1986 Leasing & Fin. Co Money/Capital Markets 0.7 0.2 0.9 1982 Ethanol Co. Ltd. Chem/Petrochem 2.3 0.2 2.5 1980/84 Malawi Hotel Ltd. Tourism 2.1 - 2.1 1979 Indebank Development - 0.6 0.6 1977/81 Dwanga Sugar Corp. Sugar 11.3 - 11.3 1982 D. Whitehead & Son Textiles 10.8 - 10.8 Total Gross Commitments 31.1 1.5 32.6 LESS: Cancellations, Exchange, Adjustments, Repayments Write-offs & Syndicate Sales 26.1 1.1 27.2 TOTAL IFC COMMITMENTS 5.0 0.4 5.4  -13 - Schedule D Page 3 of 3 MALAWI NATIONAL WATER DEVELOPMENT PROJECT Disbursement Performance The Bank's portfolio in Malawi is fairly large and includes 17 ongoing operations. While some improvement in project implementation has been recorded, the Government's limited capacity to implement projects remains the major issue. One of the issues observed in project implementation is slow disbursement, i.e., slower than originally anticipated in the SAR. The overall disbursements (as of May 25, 1995) were about 32% of the approved credits. The major generic problems in disbursements are (a) procedures; (b) frequent turnover of disbursement staff in implementing agencies; (c) lack of counterpart funds; and (d) lack of staff incentives. On the Bank's side, disbursements are slowed by: (b) staff delays in procurement approval; and (c) project budget issues not resolved at project negotiations. To remedy the problems, a number of disbursements workshops have been carried out. In addition, the following actions were taken in FY93 and FY94: (i) two disbursement workshops were conducted in Malawi (and will continue to be held yearly) for disbursement officers working in Government and in parastatals; (ii) Bank disbursement officers have visited Malawi periodically to assist various ministries/agencies in resolving pending disbursement issues and clearing the backlog; and (iii) departmental procurement specialists have been providing significant assistance to local procurement authorities to speed up the procurement process.   IBRI) '1J,4V I,, > . f \MALAWVI The bomndatioes coansd 9 NATIONAL WATER DEVELOPMENT PROJECT dernfonamtions soa n on y y Locationl Map on nthe mop do not W Vater Resotirces Unit Boundaries impy on the yoru of The World Bank Group, any judgment on the legal i' ': I ,I \II N, states of any territory, 1 7 or a,y endorsemennt or acceptance of such. i . Q