Burkina Faso - Ouagadougou Water Supply Engineering Credit Project

Document of The World Bank FOR OFFICIAL USE ONLY Report No: 19043 IMPLEMENTATION COMPLETION REPORT BURKINA FASO OUAGADOUGOU WATER SUPPLY ENGINEERING CREDIT (CREDIT 2519-BUR) March 12, 1999 Water and Urban 2 Country Department 15 Africa Region 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 EQUIVALENTS Currency unit = CFAF (CFA Franc) 1993: 1 US dollar CFAF 280 (Appraisal, April 1993) 1998: 1 US dollar = CFAF 550 (Closing date, March31, 1998) WEIGHTS AND MEASURES Metric System FISCAL YEAR January 1 - December 31 ABBREVIATIONS AND ACRONYMS AFD Agence Fran,caise de Developpement (French Aid Agency) BAD African Development Bank BEI European Investnent Bank BIMP Biophysical Impacts Mitigation Plan BPZ Ziga Project Office CFD Caisse Fran,caise de Developpement (now AFD) DANIDA Danish Cooperation EPIC Etablissemen ai Caractere Industriel et Commercial (Public Enterprise) GTZ German Cooperation for Training and Technical Assistance IDA International Development Association KfW Kreditanstalt fur Wiederaujbau (German Cooperation) LCD Liters per Capita per Day MOZ Maitrise d'Ouvrage de Ziga (Ziga Project Unit) ONEA Office National de I 'Eau et de I 'Assainissement (Water Company) OWSP Ouagadougou Water Supply Project RAP Resettlement Action Plan SAR Staff Appraisal Report SE State Entelprise Vice President: Jean-Louis Sarbib, AFR Country Director: Hasan Tuluy, AFC15 Sector Manager: Letitia A. Obeng, AFTU2 Team Leader: Yao Badjo, AFTU2  FOR OFFICIAL USE ONLY IMPLEMENTATION COMPLETION REPORT BURKINA FASO OUAGADOUGOU WATER SUPPLY ENGINEERING CREDIT (CR 2519-BUR) TABLE OF CONTENTS PREFACE ......................................................................I EVALUATION SUMMARY .......................................... .......I PART I: PROJECT IMPLEMENTATION ASSESSMENT ...................1.......................I A. INTRODUCTION .................................................................1 B. STATEMENT/EVALUATION OF OBJECTIVES ................................................................ 1 C. ACHIEVEMENT OF OBJECTIVES ................................................................2 D. MAJOR FACTORS AFFECTING THE PROJECT ................................................................4 E. PROJECT SUSTAINABILITY ................................................................5 F. BANK PERFORMANCE . ............................................................... 5 H. ASSESSMENT OF OUTCOME ................6................................................. 6 I. FUTURE OPERATION .................................................................6 J. FINDINGS AND KEY LESSONS LEARNED ......................................................7......... 7 PART 1I: STATISTICAL TABLES TABLE 1 - SUMMARY OF ASSESSMENTS ....................................................................... 9 TABLE 2 - RELATED BANK LOANS/CREDITS .................................................................... 1 0 TABLE 3 - PROJECT TIMETABLE .............................. ....................................... 10 TABLE 4 - CREDIT DISBURSEMENTS .1.................................................................... 1 TABLE 5 - KEY INDICATORS FOR PROJECT IMPLEMENTATION ................ .......................... 1 1 TABLE 6 - STUDIES INCLUDED IN THE PROJECT ................................................................ 12 TABLE 7A - PROJECT COSTS (INCLUDING CONTINGENCIES) .............................................. 12 TABLE 7B - PROJECT FINANCING ..................................................................... 13 TABLE 7C - CREDIT ALLOCATIONS PER CATEGORY ........................................................ 13 TABLE 8 - ECONOMIC COSTS AND BENEFITS .................................................................. 14 TABLE 9 - STATUS OF LEGAL COVENANTS ...................................................................... 14 TABLE 1 0 - BANK RESOURCES: STAFF INPUTS ............................................................... 1 5 TABLE 11 - BANK RESOURCES: MISSIONS ..................................................................... 15 ANNEXES ANNEX 1 - AIDE-MEMOIRE OF COMPLETION MISSION ANNEX 2 - BORROWER'S CONTRIBUTION MAP - IBRD No. 28673 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.  IMPLEMENTATION COMPLETION REPORT IBURKINA FASO OUAGADOUGOU WATER SUPPLY ENGINEERING CREDIT (CR 2519-BUR) PREFACE The Implementation Completion Report (ICR) for the Ouagadougou Water Supply Engineering Project (Credit 2519-BUR) was approved on June 22, 1993, in the amount of SDR 3.0 million (US$ 4.25 million equivalent) and declared effective on April 12, 1994. Co- financing was provided by the Agence Frangaise de Developpement (AFD) for an amount of FF 15.0 million (about US$ 2.9 million). The Credit 2519-BUR was closed on March 31, 1998, after two extensions of 12 and 9 months. The final disbursement took place on July 30, 1998 with a balance of SDR 0.1 million left for cancellation. This ICR was prepared by Yao Badjo, Senior Sanitary Engineer (AFTU2) and Gerard Tenaille, Consultant, and reviewed at a meeting dated September 21, 1998 chaired by Mr. Hasan Tuluy, Country Director for Burkina Faso. Preparation of this ICR began during a final supervision/completion mission to Burkina Faso in April 1998. The ICR is based on materials in the project files, correspondence, the Staff Appraisal Report, and the Credit Agreement. The Borrower contributed to the preparation of the ICR with their own project implementation report and comments on the draft Bank ICR. Comments were received from the co-financier, AFD.  IMPLEMENTATION COMPLETION REPORT BURKINA FASO OUAGADOUGOU WATER SUPPLY ENGINEERING CREDIT (CR 2519-BUR) EVALUATION SUMMARY Introduction i. This Implementation Completion Report evaluates the Ouagadougou Water Supply Engineering Credit implemented by the Office National de P'Eau et de /'Assainissement (ONEA). This was the Bank's first investment in the urban water supply sector aimed at laying the foundation for a major future investment operation. Project Objectives ii. The objectives of the Ouagadougou Water Supply Engineering Credit were to: (i) finance studies and technical assistance needed for preparation of the future Ouagadougou Water Supply Project (OWSP); (ii) lay the groundwork to improve the quality at entry of this project and for its successful implementation; and (iii) test the commitment and ownership of the Government and the capacity of Office National de 1'Eau et de l'Assainissement (ONEA) to improve water sector management before making further substantial investments. iii. The components designed to meet these objectives consisted of: Studies (a) final design and preparation of bidding documents for the OWSP; (b) assessment of the future environmental impact of the OWSP comprising a mitigation plan, a resettlement plan, and a review of riparian issues related to dam construction; Institutional Strengthening (a) establishment of a project unit within ONEA; and (b) provision of technical assistance, training, office equipment and vehicles to strengthen ONEA's capacity in project design and management. However, it should be noted that the bulk of the assistance in terms of broader capacity building of ONEA was provided by bilateral donors. Implementation Experience and Results iv. Studies. The engineering credit largely achieved the criteria established for preparation of the OWSP within the expected three-year timeframe. It laid the groundwork for improvement of quality at entry, and successful implementation, through the preparation of final design studies, bidding documents, an environmental assessment, and a resettlement plan. Even though the studies started late, they were successfully carried out and completed by 1997.  ii v. ONEA's Institutional Strengthening. The Institutional Strengthening objective to test the commitment and ownership of the Government and the capacity of ONEA to improve water sector management before making further substantial investmnent, was not met. Evaluation of the technical assistance provided by GTZ during the past few years has confirmed the shortfalls of the current assistance strategy. It is now expected that the managerial capacity of ONEA would be supported and improved with continued support from donors and with private sector involvement. vi. Project Costs. Actual costs amounted to SDR 4,700,866, compared to the SDR 4,760,173 estimated at appraisal. vii. Major Factors affecting the Project. In 1996 the Government altered the structure of the project implementation unit and created a new project unit under direct technical supervision of the Ministry of Water and financial supervision of the Finance Ministry. This was contrary to the terms of the project. This situation was eventually reversed after two years of discussion, and the project unit was put again within ONEA's control. It contributed to the postponement of the OWSP appraisal mission, scheduled for December 1996, and a deterioration of the relationship between the Government and the donors. Project Sustainability viii. Studies. Project sustainability is likely with respect to the studies. The engineering design studies were well done and provide a solid basis for future implementation of the OWSP. Dam construction has already started, financed with Arab Funds. The Resettlement Action Plan and the Biophysical Impacts Mitigation Plan will address the long term environmental sustainability of this project. All efforts have been made to maximize the economic benefits and minimize the economic costs. ix. Institutional Strengthening. Evaluation of the technical assistance provided by GTZ has confirmed the shortfalls of the current assistance strategy. It is expected that the managerial capacity of ONEA would improve with continued joint support from the donors through private operator involvement in the sector. Project sustainability is unlikely with respect to institutional strengthening, unless steps are taken to support management with some form of private sector participation. Bank and Borrower Performance x. The project was prepared in a relatively short time having benefited from preparatory work financed by donors already in the sector --identification in March 1993, appraisal in April, negotiations in May, and board presentation in June 1993. Although institutional strengthening was an objective of the project, its achievement was mainly dependent on parallel financing from other donors. Achievement of this objective was not satisfactory. Supervision missions were adequately staffed. At the same time, however, the Bank failed to take corrective action when it became apparent that the Government was in default of specific clauses of the DCA (para 21). The Bank's performance is rated unsatisfactory.  iii xi. The Government created a new project unit that not only disrupted the project's implementation, but also went against the project's objectives to give ONEA full responsibility for project implementation. In addition, by delaying the necessary tariff increases in 1996 and 1997, the Government contributed to a deterioration in ONEA's financial performance. Therefore, the performance of the Borrower is considered unsatisfactory. Project Outcome xii. Engineering designs and studies related to construction of the dam (viz. environmental assessment, resettlement action plan and biophysical impacts mitigation plan) were successfully completed and a committee was set up to deal with riparian issues. This work provides the basis for the multi-donor support for the future operation. Although this is a positive outcome, planned capacity building was not achieved. Overall, therefore, the outcome is not considered fully satisfactory. Future Operation xiii. Engineering studies financed by the Credit formed the basis for a future operation, OWSP. The future project has 13 partners and, it is expected that during the project, a strategic framework for sector development will be agreed upon. We recommend that through the future operation an agreement be reached with the Government on a private operator involvement in the sector in the form of a lease contract (affermage). Discussions with the Govemment are ongoing with respect to the OWSP, and appraisal is planned for FY2000. The new project with a cost of approximately US$ 200 million, is expected to satisfy water demand in Ouagadougou through 2010. Summary Findings and Key Lessons Learned xiv. The findings from the Credit suggest that: * The use of an engineering credit is an appropriate vehicle for financing preparatory studies leading to a complex future operation; * It is possible to have an integrated environmental assessment done well ahead of project start-up that effectively addresses the requirements for a large infrastructure project and to have it financed through an engineering credit; and * Long-term technical assistance does not necessarily guarantee long-term institutional strengthening of a public water supply company. In retrospect, if the Bank had been fully involved in the institutional strengthening, the lessons of the recent past learned from other countries could have been applied to preparation of the new project, that is, to engage the Borrower in major sector restructuring leading to the introduction of private sector participation.  iv xv. The key lessons are: (i) when making a significant sector investment, the Bank should pay closer attention to sector management and not just engineering; (ii) when several donors are involved in a sector, donor coordination, including definition of roles and responsibilities should be clarified well ahead of project startup; and (iii) the Bank must not set project objectives that are not matched by components. In this case, broad capacity building was an objective, but this was left to bilateral donors to achieve, and there was no clear coordinated sector strategy with the donors. The future Ouagadougou Water Supply project would ensure that ONEA's operating, commercial and financial capabilities are adequately addressed through a sound institutional arrangement to be set up with private operator involvement.  IMPLEMENTATION COMPLETION REPORT BURKINA FASO OUAGADOUGOU WATER SUPPLY ENGINEERING CREDIT (CR 2519- BUR) PART I: PROJECT IMPLEMENTATION ASSESSMENT A. INTODUCTION 1. A sector wide investment program for Burkina Faso was prepared with the support of bilateral donors. In preparation for an investment operation, the Bank agreed to finance an engineering credit in order to adequately prepare and cost the proposed investment. This was the Bank's first intervention in the urban water supply sector in Burkina Faso. B. STATEMENT/EVALUATION OF OBJECTIVES 2. The objectives of the Ouagadougou Water Supply Engineering Credit were to: (i) finance studies and technical assistance needed for the preparation of the future Ouagadougou Water Supply Project (OWSP); (ii) lay the groundwork to improve the quality at entry of this project and for its successful implementation; and (iii) test the commitment and ownership of the Government and the capacity of OfficeNational de I 'Eau et de I 'Assainissement (ONEA) to improve water sector management before making further massive investments. 3. These objectives were in line with the Government's goal of ensuring sustained sector development through strengthening ONEA, enabling it to administer the sector more effectively, achieving financial discipline, and accomplishing financial self-sufficiency of the urban water supply sub-sector. The first two objectives were clear and realistic. The third objective was not clearly articulated and the project was not designed to support its full achievement. Project Description 4. The following components were designed to meet the above objectives: Part A: Studies 0 designing and preparing final bidding documents for the OWSP;  2 assessing the future environmental impact of the OWSP, comprising a mitigation plan, a resettlement plan, and a review of riparian issues related to the dam construction. Part B: Institutional Strengthening * establishing a project unit within ONEA responsible for implementation of water supply projects; * providing technical assistance, training, office equipment and vehicles to strengthen ONEA's capacity in project design and management. 5. The Credit financed most of Part A except for treatment plant and distribution network studies which were financed by AFD; financing of part B by the Credit was limited. The broader capacity building, described in para. 2 (iii), was jointly financed by KfW, DANIDA and AFD. C. AcHEvEMENT OF OBJECTWES Studies 6. Implementation of the engineering credit started very slowly because ONEA staff were not familiar with Bank procedures, both for studies and procurement, which resulted in a one-year delay. Nevertheless, even with the initial delay, the engineering studies were satisfactorily completed in 1997 and resulted in the following outputs: (i) final design and bidding documents for the dam and transmission main; (ii) final design and bidding documents for the water treatment plant and the water distribution network (financed by AFD); and (iii) an environmental assessment and resettlement plan for the 2,500 people to be displaced as well as a mitigation plan. The outputs are being used to prepare the new project, for which appraisal is planned for FY2000 (para. 24). 7. The Environmental Assessment of the future dam formed the basis for development of the Resettlement Action Plan (RAP) and the Biophysical Impacts Mitigation Plan (BIMP). Both the RAP and the BIMP fully met their objectives in that they were prepared in a participatory manner and addressed the critical issues of relevance to the affected population with respect to: (i) The RAP: the required socioeconomic infrastructure for human development; financial resources for agricultural intensification on the replacement fields; market gardening activities in the draw-down areas of the dam; small-scale credits of the social fund type for micro-projects and rural economic equipment; road and community infrastructure in the host communities; fishing activities compatible with the functional objectives of the lake; livestock sustaining measures for the herders; a support program for women's activities to improve the quality of life in the project impacted area;  3 * literacy and bookkeeping classes for the local communities; and * target job creation during project implementation to benefit the PAPs and host communities. Socioeconomic surveys and stakeholder analyses were undertaken to provide credible benchmarks for monitoring and follow-up of the RAP. (ii) BIlV * changes in bidding documents to minimize conflicts that could arise during the works; * land use measures around areas that could potentially flood in the future; * monitoring indicators of the main project impacts on the biophysical environment. 8. The BIIVP would help to ensure the project's long term environmental sustainability for the benefit of the local population who use these natural resources. The Government has agreed to take appropriate actions to maximize the economic benefits and minimize the economic costs of this Mitigation Plan. 9. With respect to riparian issues, a technical committee was set up to oversee these issues as they affect both Burkina Faso and the Republic of Ghana. There are no outstanding difficulties. Institutional Strengthening 10. The Institutional Strengthening objective to test the commitment and ownership of the Government and the capacity of ONEA to improve water sector management before making further substantial investment, was not achieved. (a) Government Commitment 11. Prior to project appraisal (between 1983 and 1991), the water tariffs had not been adjusted, resulting in huge financial losses. A tariff study, financed by KfW in 1990, recommended annual tariff increases to gradually reduce the losses and increasingly cover costs as follows: 64% of costs in 1991, 69% in 1992, 76% in 1993, 90% in 1994 and 100% in 1995. Following these recommendations, tariffs were annually increased through end-1994 which influenced the Bank and donor decision to support further institutional strengthening rather than restructure with private participation (which the Government did not support). Adherence to a performance contract was made a condition of effectiveness. 12. Starting in 1995, however, the Government failed to honor the performance contract which led to a decline in ONEA's financial situation. ONEA proposed tariff increases to the Govemment in July 1996 for the period 1997-2000. However, the increase approved by Government was below the initial request, and implementation was delayed to December 1, 1997. Due to a continued decline in revenue generation, the Bank and donors involved in the sector requested ONEA to carry out a tariff study aimed at restoring financial equilibrium in ONEA. This study is underway. It will determine the long-term cost of water and propose the stepwise introduction of tariff adjustments for  4 meeting the target of full cost recovery. The new tariff policy will most likely increase the monthly account maintenance charge which has not changed since 1991, further increase tariffs among the different consumer categories, and eliminate cross-subsidy for non-household water consumption. (b) ONEA's Management Capacity 13. ONEA's management, particularly their financial operation, continues to be weak. This weakness could increase in the coming years when the country embarks on implementation of new water projects to increase access to safe water services in major urban centers. The evaluation of the technical assistance provided by GTZ over the previous years has confirmed the shortfalls of the current assistance strategy. In addition, the 1997 audit was heavily qualified and revealed serious deficiencies in ONEA's systems and processes. We recommend that the future Ouagadougou Water Supply project ensures that ONEA's operating, commercial and financial capabilities are adequately addressed through a sound institutional arrangement to be set up with private operator involvement. (c) Project Unit's Capacity 14. The limited objective to establish and strengthen capacity of the project unit to implement the future OWSP was achieved. The project unit, Bureau du Projet Ziga (BPZ), composed of three engineers with expertise in hydraulics, dam hydrology and environment, was established and managed by ONEA's technical director. BPZ was located in ONEA's office space and supported by a technical assistant from January 1995 to February 1997. BPZ's activities were financed by the Credit. All BPZ members attended seminars abroad to strengthen their knowledge of project design and management. On the whole, BPZ performed well and supervised the consulting firms that carried out final design and environmental assessments. 15. Problems arose when the Government decided in April 1996 to create a new project unit called Maitrise d'Ouvrage de Ziga (MOZ) to replace the BPZ, under direct technical supervision of the Ministry of Water and financial supervision of the Finance Ministry, without Bank's concurrence. Even though the Bank insisted that this went against the project objectives, the Government formalized its decision with Decree No. 96-346 of September 24, 1996. This decision was one of the reasons why the OWSP's appraisal mission, originally scheduled for December 1996, was postponed and the relationship between Government and the main donors deteriorated. Finally, after lengthy and difficult discussions, a ministerial Decision No. 97-015 was issued on December 9, 1997 reorganizing MOZ within ONEA. D. MAJOR FACTORS AFFECTING THE PROJECT 16. Factors generally subject to government control: Terms of the Performance Contract (PC) as specified in the Development Credit Agreement were not fulfilled by the Government. ONEA was bound to the PC, but was not given the necessary support to apply the terms of the contract. Specific items which were affected include: (i) delay in approving recommended tariff increases; and (ii) delay in implementing an action plan based on good accounting procedures to restore  5 ONEA's financial management, including the replacement of the financial director who was recruited in September 1995. 17. Another factor affecting the project was the Government's decision, in 1996, to create a new project unit (MOZ) under the direct, technical supervision of the Ministry of Water and financial supervision of the Ministry of Finance (see para. 15), without the Bank's agreement. This also contributed to delaying progress toward appraisal of the OWSP. 18. The devaluation of the CFA Franc, vis-a-vis the SDR, in January 1994 had a positive impact at the beginning of the project. It led to an increase in available funds/resources. E. PROJECT SUSTAINABILrrY 19. Sustainability of the engineering credit can be considered likely for the following reasons: (i) Studies. The engineering studies have been well prepared and constitute a satisfactory basis for the OWSP to be fully implemented. Dam construction has already started with financing from Arab Funds. The Resettlement Action Plan and the Biophysical Impacts Mitigation Plan will help ensure the long-term environmental sustainability of the follow-on OWSP. (ii) Institutional Strengthening. The Institutional Strengthening objective to test the commitment and ownership of the Government and the capacity of ONEA to improve water sector management before making further substantial investment, was not achieved. F. BANK PERFORMANCE 20. At the beginning of the project, the Bank responded relatively quickly as confirmed by the short preparation time: identification in March 1993, appraisal in April, negotiations in May, and board presentation in June 1993. This was helped by the availability of preliminary work carried out by donors in the sector. However, the Bank did not pay adequate attention to broad capacity building issues. Strengthening of sector capacity within ONEA was left to the donors while the Bank narrowly focussed on MOZ. This is a design shortcoming which is not intended to be repeated in the proposed follow-on project. 21. With respect to supervision, there were 7 missions in a 4-year period which were adequately staffed to handle project issues. During the period of difficult relations with the Government, the Bank was able to maintain close cooperation with the other cofinanciers. At the same time, however, the Bank failed to take corrective action when the Government remained in default on the DCA clauses with respect to the Performance Contract. There are procedures in the DCA which could have been invoked. The Bank's performance is rated unsatisfactory.  6 G. Borrower Performance 22. In 1996, Government created a new project unit under direct, technical supervision of the Ministry of Water which disrupted the pace of project implementation and also contradicted the project's objectives to give ONEA full responsibility for project implementation. It took twenty months of discussions to reverse this action. According to the Borrower's Contribution (Annex 2), "If the institutional recovery of ONEA has not been accomplished, that is because the process is still underway and requires a certain time. In our opinion the project is satisfactory." On the financial side, the Government defaulted on the terms of the Performance Contract and delayed approval of required annual tariff increases (1996 and 1997). ONEA was unable to provide timely and unqualified financial statements. For these reasons, the Borrower's performance is rated unsatisfactory. H. ASSESSMENT OF OurcoME 23. The outcome of the project can be considered unsatisfactory. Although engineering designs and studies related to the dam construction (viz. environmental assessment, resettlement action plan and biophysical impacts mitigation plan) were successfully completed and a committee was set up to deal with riparian issues. The key institutional strengthening objective was not fully achieved. I. FUTuRE OPERATION 24. The engineering studies financed by the Credit formed the basis for a future operation. The future project has 13 partners and it is expected that during the project a strategic framework for further investments in the sector will be agreed upon. The success of the future project will depend on the extent to which all partners collaborate and support sustainable institutional arrangements. ONEA's management, particularly its financial operations, continues to be weak. This weakness could increase in the coming years when the country embarks on implementing this new water project worth $200 million. Discussions with the Government are ongoing with respect to the OWSP and appraisal is planned for FY2000. The new project is expected to satisfy water demand in Ouagadougou through 2010. 25. The evaluation of the TA, provided by GTZ over the previous years has confirmed the shortfalls of the current assistance strategy. It is recommended that, through the future operation, an agreement be reached with the Government on private operator involvement in the sector perhaps in the form of a lease contract (affermage). Such an agreement would have the best chance of turning ONEA's operations around and also ensure ONEA's financial performance improvement so that the envisaged self-financing portion of the project would materialize. Under such a scheme, ONEA would retain title to all fixed assets and debt servicing and an operation company would be set-up with private/public ownership. This should alleviate ONEA's and Government's concern on issues of sovereignty of the proprietor company. The operator would be selected on a competitive basis and remunerated on performance. Such an arrangement should also reduce the risk of ONEA's poor management performance to an acceptable level. The responsibilities involved would include: meeting the debt service and implementing the project with MOZ on behalf of the Government of  7 Burkina Faso. The financial arrangements between these two companies would, inter alia, ensure that the owning company is remunerated in time to meet the debt service requirements. J. FINDINGS AND KEY LESSONS LEARNED 26. The findings from the Credit suggest that: * The use of an engineering credit is an appropriate vehicle for financing preparatory studies leading to a complex future operation; * It is possible to have an integrated environmental assessment done well ahead of project start-up that effectively addresses the requirements for a large infrastructure project and to have it financed through an engineering credit; and * Long-term technical assistance does not necessarily guarantee long-term institutional strengthening of a public water supply company. In retrospect, if the Bank had been more involved in technical assistance, the lessons from past experienced could have been applied to preparation of the new project, that is, to engage the Borrower in major sector restructuring leading to introduction of private sector participation. 27. The key lessons are: (i) when making a significant sector investment, the Bank should pay closer attention to sector management and not just engineering; (ii) when several donors are involved in a sector, donor coordination, including definition of roles and responsibilities should be clarified well ahead of project startup; and (iii) the Bank must not set project objectives that are not matched by components. In this case, broad capacity building was an objective, but this was primarily left to bilateral donors to achieve, and there was no clear, coordinated sector strategy with the donors. The future Ouagadougou Water Supply project would ensure that ONEA's operating, commercial and financial capabilities are adequately addressed through a sound institutional arrangement to be set up with private operator involvement.  8 PART H: STATISTICAL TABLES TABLE 1 - SUMMARY OF ASSESSMENTS TABLE 2 - RELATED BANK LOANS/CREDITS TABLE 3 - PROJECT TIMETABLE TABLE 4 - CREDIT DISBURSEMENTS TABLE 5 - KEY INDICATORS FOR PROJECT IMPLENENTATION TABLE 6 - STIDES INCLUDED IN THE PROJECT TABLE 7A - PROJECT COSTS (INCLUDING CONTINGENCIES) TABLE 7B - PROJECT FINANCING TABLE 7C - CREDIT ALLOCATIONS PER CATEGORY TABLE 8 - ECONOMIc COSTS AND BENEFITS TABLE 9 - STATUS OF LEGAL COVENANTS TABLE 10 - BANK RESOURCES: STAFF INPUTS TABLE I I - BANK RESOuRCES: MIssioN  9 TABLE 1 - SUMMARY OF ASSESSMENTS A. Achievement of Objectives Substantial Partial Negligible Not applicable Macro policies L [fl Sector policies Financial objectives [II Institutional development Physical objectives Poverty reduction Gender issues Other social objectives LI] Environmental objectives Public sector management Private sector development Other (capacity building) [Z B. Project sustainability Unlikely Uncertain (1) (1) (1) C. Bank performance Highly satisfactory Satisfactory Deficient (1) (/) (/) Identification Preparation assistance Appraisal [7] Supervision [ f D. Borrower performance Highly satisfactory Satisfactory Deficient (/) (1) (1) Preparation Implementation [I] Covenant compliance [ ] Operation (if applicable) E. Assessment of Outcome Highly Highly satisfactory Satisfactory Unsatisfactory unsatisfactory O O m ]  B? TABLE 2 - RELATED BANK LoANs/CREDrrs Pre dmg Operations 766-BUR - First Urban Pr t Progrn of areas rehabilitation (438 ha) and 1978 Closed in 1985 ofnew plots development (4500 plots) in Oiuagadougou and Bobo Dioulasso. 2282-BUR - Public Works and Rehabilitation of urban infrastructure by 1991 Completed in 1996 lEmployment Project creating jobs in local firma (labor intensive l . I-ll~~~~~~uethods.l 2067-BUiR - Second Ufrban Rehabilitation of urban infrastructure in 1989 Completed in 1997 Development Project (PDT-...) Ouagadougou and Bobo Dioulasso and institutional strengthening. Following operationsl 2728-BUR - Urban Improvement of urban living conditions in 1995 Under Implementation Environment Project (PACVU) Ouagadougou and Bobo Dioulasso. Public Works and Continuation of actions financed by Credit Under Preparation Decentralization Project 2282-BUR in Ouagadougou and other cities. Ouagadougou Water Supply Expansion of water supply systems in Under Preparation Project (OWSP) Ouagoudougou TABLE 3 - PROJECT TIMETABLE Identification (Executive Project Summary) March 1993 Preparation 1993 Pre-Appraisal /Appraisal April 1993 Negotiations May 1993 Board Presentation June 22, 1993 Signing July 15, 1993 Effectiveness October 14, 1993 April 12, 1994 Project Completion December 31, 1995 December 31, 1997 Loan Closing June 30, 1996 March 31, 199S  11 TABLE 4 - CREDIT DISBURSEMENTS (in US$ Millions) December 31, 1993 0.00 0.80 0 June 30, 1994 0.13 2.00 6.64 December31, 1994 0.56 3.30 16.99 June 30 1995 1.24 3.95 38.97 December 31 1995 1.89 4.25 54.38 June30, 1996 2.78 65.51 December 31, 1996 3.10 73.07 I June 30, 1997 3.35 78.85 December 31, 1997 3.50 82.37 June 30, 1998 4.01 94.39 July31, 1998 L 4.19 L _ 96.41 TABLE 5 - KEY INDICATORS FOR PROJECT IMPLEMENTATION . .............~~~~~~~~~~~~~~~~. . . . . . . .. . . i...Y:::: ....Y. ApprAisi Tidctn -S- , . .a ..... tt g . V. . . I,,~9 Raw water volume in m3 22,565,423 22,429,232 23,373,676 25,018,755 25,813,242 Water billed in m3 18,112,000 16,821,924 17,686,582 19,321,984 21,222,608 Global Efficiency 80.26 75.00 75.67 77.23 82.22 Number of boreholes 127 122 126 170 205 Number of private connections 36,387 39,366 43,255 43,226 44,151 Number of standpipes 1,102 1,238 1,244 1,248 1,248 Number of meters out of service 4,000 6,819 216 375 286 Number of connections per agent 74 80 80 91 82 Kms of network per agent 2.22 2.59 2.80 3.00 2.96 Personnel cost ratio 23% 17% 13% 15% 16% Operation expenses ratio 74% 76% 68% 91% 74% Private receivables in months 5.40 5.00 3.26 5.50 5.30 Financial rate of return in percent 1.60 4.70 0.00 -8.00 -0.90 I........ ....... , ,::........ .... ... . ..... ........ W-:-trTafflg,s F p eK Implementation Date: 06/O0 193 01/01/94 01/01/95 12/01/97 Increase Increase Inecrease Increas e (a) Standpipes 127 18.90% 151 15.23% 147 2.30% 178 0.79% (b) Water Points 64 18.75% 76 14.47% 87 2.30% 89 0.79% (c) Connections Oto IOm3 134 9.70% 147 11.56% 164 2.44% 168 0.84% 11 to 25 m3 209 32.06% 276 15.94% 320 5.63% 338 1.93% 26 to 50 m3 390 24.62% 486 64.61% 800 7.50% 860 2.57% 51 to 100 m3 441 17.23% 517 62.48% 840 2.38% 860 0.82% Above 100 m3 461 14.75% 529 58.79% 840 2.38% 860 0.82% (d)Raw Water, without limit 202 4.46% 211 1 57.82% 1 333 1 7.51% 1 358 1 2.57%  12 TABLE 6 - S TuDiES INCLUDED IN THE PROJECT 1. Environmental Assessment Assess the impact of the Completed Mitigation plans were project on the enviromnent, made available for particularly the dam, and protection of affected prepare Mitigation Plans population. 2. Final design of dam and transmission Prepare relevant component of Completed Satisfactory main and bidding documents follow-on OWSP Bidding docuaents ready 3. Final design treatment plant and Prepare relevant component of Completed Satisfactory distribution network, and bidding follow-on OWSP ready. documents (CFD) TABLE 7A - PROJECT COSTS (INCLUDING CONTINGENCIES) CFAF CFAF inSDR...... .. .. .. Environmental Assessment 279,450 726,744 521,704 631,327 242,254 (95,417) Final Design and Bid Documents 1,291,059 3,357,558 1,964,282 3,350,651 673,223 (6,907) Office Construction 16,767 43,604 40,273 22,051 23,506 (21,553) Office Equipment, Vehicles 33,564 87,209 95,704 86,158 62,170 (1,051) Technical Assistance 139,725 363,372 398,248 425,836 258,523 62,464 Training for ONEA Staff 13,973 36,337 21,583 28,616 7,160 (7,721) Incremental Operating Expenses 55,890 145,349 197,432 156,227 141,542 10,878 Total Cost of the Project 1,830,398 4,760,173 3,239,226 4,700,866 1,408,828 (59,307)  13 TABLE 7B - PROJECT FINANCING se0 IDA 4,195,097 AFD 2,900,000 TOTAL: 7,095,097 TABLE 7C - CREDIT ALLOCATIONS PER CATEGORY (in SDR) 1. Studies 1,963,354 2,100,000 136,646 2. Civil Works 43,984 50,000 6,017 3. Vehicles and Equipment 90,201 100,000 9,799 4. Technical Assistance 498,646 300,000 (198,646) 5. Training 28,619 50,000 21,381 6. Operating Costs 270,327 150,000 (120,327) 7. Unallocated 0 250,000 250,000 8. Special Account (2,686) 2,686 TOTAL: 2,892,444 3,000,000 107,556  14 TABLE 8 - ECONOMIC COSTS AND BENEFITS Not Applicable TABLE 9 - STATUS OF LEGAL COVENANTS Credit 3.01 C Borrower declares its commitment to Project objectives Complied with Credit 3.02(a) C Borrower to pass on proceeds of Creditto ONEA Complied with Credit 3.02(b) C Borrower to enter into a 3-year Performance Contract Signed on 12/15/95 Credit 3.02(c) C Borrower to exercise its rights to protect interests of Complied with Borrower and IDA Credit 3.04(a) C Borrower to have EA prepared and have report sent to Complied with IDA not later than 60 days after it is received Credit 3.04(b) C Concerning EA, affected groups will be provided with Complied with information and consulted Credit 3.05 CD Borrower will have resettlement plan prepared in close Complied with some delay consultation with affected groups Credit 3.06 NC Borrower to submit quarterly and annual reports on Not complied with Project progress & status of Performance Contract l Credit 4.01(b)(i) C ONEA will have its records, accounts and financial Complied with statements audited Credit 4.01 (b)(ii) CD ONEAto furnishto IDA an audit report no later than 6 Complied with some delay months after the close of fmancial year Credit 4.01(b)(iii) CD ONEA to furnish such other information as requested Complied with delay by IDA Credit 4.01(c) With regard to SOEs ONEA shall: Complied with (i) C . maintain records and accounts (ii) C retain all documentation for at least 1 year after audit report for the fiscal year of last withdrawal (iii) C enable IDA to examine such records (iv) C . ensure that such accounts are included in annual audit, which shall contain a separate opinion by said auditors whether SOEs can be relied upon to support withdrawals Credit 5.01(a) C ONEA to take appropriate insurance Complied with Credit 5.01(b) C ONEA to canry on its operations with sound practices Complied with Credit 5.01(c) C ONEA to operate and maintain correctly its equipment. Complied with  15 TABLE 10- BANK RESOURCES: STAFF INPUTS .. T'hrough Appraisal __ _ _ __ _ _ _ __ _ _ __ _ _ _ _ _6__ _ _ _ __ __2_ _ _ _ Appraisal-Board 1.9 6.1 Board-Effectiveness Supervision 51.6 205.1 Completion 8.0 25.0 Total 63.3 242.4 TABLE 11 - BANK RESOURCES: MISSIONS Identification 03/93 1 11 I n/a n/a Appraisal 04193 2 7 I, F n/a n/a Supervision 11/93 3 4 F I I 1 1 None Supervision 01/95 1 13 I HS HS None Supervision 04/95 3 11 I I, En HS HS None Supervision 10/95 3 12 I,I, I HS HS None Supervision 01/96 6 11 1, I, F, En, En, P HS HS Financial Supervision 04/96 3 5 1, I, F HS HS Financial Supervision 04/97 4 10 I, L F, P S S Institutional Completion 04/98 2 8 I, I S U Institutional I- Engineer I - Minor Problem E - Economist 2 - Moderate Problem F - FinancialAnalyst 3 - Major Problem P - Private Sector Specialist HS - Highly Satisfactory En- Environmental Specialist S - Satisfactory D - Division Chief U - Unsatisfactory  16 Annex 1 BURKINA FASO OUAGADOUGOU WATER SUPPLY PROJECT Aide-memoire Introduction 1. A World Bank mission, consisting of Yao Badjo (Task Manager) and Gerard Tenaille (consultant), visited Burkina Faso from April 5-13, 1998 to prepare the completion report for Credit 2519-BUR and to prepare the Ouagadougou Water Supply Project segment starting at the Ziga dam. The mission wishes to thank the Government of Burkina Faso, in particular, the Office of the Director General of ONEA, for its welcome and cooperation. This aide-memoire summarizes the discussions held and conclusions reached during the mission. It will be confirmed by the World Bank in the near future. Purpose of the Mission 2. The mission's purpose was twofold: (a) to gather information needed to prepare the completion report for Credit 2519-BUR; and (b) to review the status of preparations for the Ziga project with the Government and determine what obstacles must be overcome before moving ahead with plans for the appraisal mission. Meetings 3. The mission and the Resident Representative of the World Bank were received by His Excellency Soma Baro, Deputy Minister of Water, and worked in close cooperation with Mamadou Lamine Kouate, Director General of ONEA; Idrissa Ouedraogo, Director of MOZ; and Mr. Soalla, Technical Director. The mission was also joined by Athanase Compaore, Hydraulics Manager in the Ministry of Water and President of ONEA, as well as by the GTZ mission currently in Ouagadougou in connection with the study on capacity building in ONEA. The mission also met with Mr. Chahinian and Mr. Berton, CFD officials in Ouagadougou. Technical Visits 4. On April 11, 1998 the mission, accompanied by Idrissa Ouedraogo and Florent Ouedraogo, visited Ziga and the sites proposed for the Boudtenga treatment plant and storage facility. It also visited the sites of the main installations planned for the area north of Ouagadougou, particularly storage facilities RA and RB.  17 Project Costs 5. The mission updated the project costs, calculating the cost of each component as of January 1, 1998, taking into account actual market figures for bid components already awarded, i.e., the dam and its ancillary works, as well as supervision. A 5 percent physical contingency factor was included for the dam and ancillary works to allow for the risks inherent in such projects. A breakdown of estimated costs has been annexed to this aide-memoire showing, on the left, base costs as of I/1/98, and, on the right, final costs, including contingencies and revised costs. The resulting final total is CFAF 112 billion (not including phase 2 of PGIAE). The mission would like to receive MOZ's own estimate of project costs as well as its comments on the above figures. Financing Plan 6. A financing plan dated December 15, 1997 was submitted to the mission. It includes two important items for which the Government and ONEA are responsible: (a) Package 2, CFAF 2.541 billion, for water supply lines. The mission would like ONEA to note that these funds must be provided in foreign exchange during the first year of the project; and (b) Training, initially funded by UNDP, is now the responsibility of ONEA, and will cost CFAF 1.374 billion. ONEA is advised to determine whether one of the donors already involved in the project would be willing to finance this training. The mission believes that the World Bank would respond favorably to such a request. 7. The mission drew up a financing plan (attached hereto) in which training is financed by IDA, with actual costs arrayed on the right side of the table. The calculations of IDA financing are based on actual costs. Since contributions from other donors were not changed, there is a funding gap of CFAF 1.374 billion. ONEA should negotiate a reduction of the gap with each donor for each component. Like the cost estimates, this financing table does not include phase 2 of PGAIE, to cost CFAF 2 billion, with funding from UNDP and Belgium. The mission would appreciate receiving an official financing plan showing the amounts approved by the donors. Package 2 8. It was previously agreed that IDA would finance the discharge main and KfW would fund the Boudtenga storage facility and gravity lines, the two subpackages costing CFAF 7.5 billion and CFAF 12 billion, respectively. It is now proposed that KfW should pay for the gravity lines and associated installations and IDA should finance the laying of pipes and construction of the Boudtenga storage facility. The two subpackages will now cost CFAF 14.2 billion (KfW) and CFAF 5.35 billion (IDA). These new arrangements prompt the following observations:  18 (a) The bidder prequalification process resulted in the selection only of construction contractors, for both the KfW and the IDA subpackages. This list of contractors cannot be used to select the supplier. MOZ, working with KfW, should draw up a list of suitable manufacturers for this purpose; and (b) When the bidding documents were first drawn up, the consultants were asked to consider the use of either cast iron or concrete pipes. MOZ appears to have forgotten this latter alternative. The mission believes it is essential to invite bids for concrete pipes in order to encourage more competition. North Branch 9. On November 17, 1997 the consulting firm SEURECA provided a new analysis of the distribution networks dependent on the North Branch (the new RA and RB storage facilities). The distribution networks had been designed to accommodate maximum daily flow on the year's day of maximum use, which is 2.6 times higher than average flow on the maximum day. This new analysis (variants V2A and V2B) was based on average flow on day of maximum consumption, the installation of two booster pumps, and reinforcement of the lines running from Paspanga. 10. Simulations show that pressure throughout will exceed 15 m until the year 2010, except at three locations in zone A, where it is predicted that pressures will drop to 14.86 m, 13.36 m, and 14.39 m. US$15 million in overall savings are expected. Since this component will be financed at 6.55 percent over 15 years, its impact on the internal rate of return will be considerable. The mission is interested in receiving the comments of MOZ and its reasoned decision. Electric Power Line 11. There is only partial justification for including a power line in the project, and for some time the Bank has been calling for an agreement between ONEA and SONABEL in this regard. ONEA cannot pay for the line when it is first installed and then again amortize the cost through tariffs. The mission would like the results of discussions with SONABEL to be forwarded to the Bank, along with a copy of the signed agreement. Technical Assistance to MOZ 12. As a matter of urgency, bids should be invited for securing technical assistance for MOZ. This will be financed by CFD. It was proposed at the Round Table that the technical assistance finance specialist should take on financial monitoring and auditing tasks, and this would appear to be a good solution. The mission would like to receive the terms of reference approved by CFD. 13. A Manual of Procedures for MOZ is needed urgently. The firm Mazars et Guerard, which prepared an organizational study of MOZ in 1996, could be asked to help with this.  19 Institutional Strengthening of ONEA 14. The institutional strengthening of MOZ is currently the major obstacle to planning the Bank's appraisal mission. The mission attended a presentation by the GTZ exploratory mission, which envisaged a number of possible options. Unfortunately, its conclusions were somewhat vague and the consultants' recommendations will not be available until their final report is ready in a few weeks. As soon as it is received the Bank will examine it thoroughly and convey its observations to ONEA and the other donors. Tariff Study 15. A new tariff schedule has been in effect since December 1, 1997. The increase over previous tariffs was deemed inadequate by a number of donors. In particular, the tariff for the lowest service level and standpipes rose only 2.5 percent, or CFAF 4, a figure far below the inflation rate for January 1995-1998, which was approximately 20 percent. In addition, the second service level, for delivery of between 11 m3 and 25 m3, increased from CFAF 320 to 338, still far below cost, which is around CFAF 400. Given that the vast majority of subscribers consume less than 25 m3/month, the gap between the water tariff and the cost of water is obviously widening. 16. The audit report on the project's interim accounts status as of June 30, 1997 clearly illustrates the gravity of the situation, with sales totaling CFAF 4.5 billion and operating costs of CFAF 8.9 billion. A balance was restored only by drawing upon reserves, mainly the reserves for covering exchange risk, a measure that cannot be resorted to year after year. 17. The mission went to see some of the standpipes and concluded that it is pointless to attempt to favor low-income persons by applying very low standpipe tariffs (CFAF 178/ m3). On-site inquiries indicated that water supply attendants sell water for CFA 5 per 20-liter container to individuals and CFAF 50 per 200-liter barrel to resellers, who then sell the water to their own customers for over CFAF 1000/ m3. 18. It is also paradoxical that users with private connections who consume the lowest volumes (0 to 10 m3/month) pay less than standpipe customers, i.e., CFAF 168/ m3 compared to CFAF 178/ m3. The next time tariffs are adjusted, charges for the lowest service level should be raised to very close to the actual cost and charges for the next level of service. However, the rate for the highest level of service (currently CFAF 860) should be decreased once Ziga is in operation in order to encourage customers to consume what will then be an abundant supply of water. 19. A thorough tariff study is needed immediately to clarify all these issues and enable the Government to take the required decisions as quickly as possible. CFD is likely to be willing to finance the study from its unspent credit balance. The mission wishes to be consulted regarding the terms of reference and would like the study to lead to automatic annual tariff increases based on reliable published data. This will require a decision of the Government, and such a decision will undoubtedly be a condition of effectiveness of the IDA credit.  20 20. Clearly, tariff increases will be acceptable only if the utility's productivity also rises. In this connection, the mission wishes to recall earlier missions' suggestions that were never followed up: (a) other firms should be permitted to install connections; (b) water meters should be read quarterly but monthly billing should continue; and (c) Chlorine gas should be used for sterilization at Ziga instead of calcium hypochlorite, which is twice as expensive. Economic Study 21. In 1996/97, the firm ICEA prepared an excellent economic study. Since this firm is currently updating the financial projections, it would be a good idea to have it update the economic study as well. This study will be essential for project appraisal. Conclusion 22. The mission would like to receive the study on the institutional strengthening of ONEA as soon as it is available. Once the study has been reviewed, in consultation with ONEA and the other donors, a date can be fixed for the appraisal mission. Since July and August are fast approaching and it will be difficult to mobilize all the personnel needed for the appraisal, the mission cannot be scheduled before September or October 1998. For the Bank: April 13, 1998 Yao Badjo Senior Sanitation Engineer  21 Annex 2 BORROWER'S CONTRIBUTION MINISTRY OF THE ENVIRONMENT BUIRKINA FASO AND WATER OFFICE NATIONAL DE L'EA U ET DEL 'ASSAINISSEMENT (ONEA) MAITRISE D'OUVRAGE DE ZIGA WATER SUPPLY PROJECT FOR THE CITY OF OUAGADOUGOU BASED ON SUPPLY FROM ZIGA ENGINEERING PROJECT COMPLETION REPORT SUNEMARY I. PROJECT OBJECTIVES The objectives of the project are to execute detailed studies and other activities with a view to increasing drinking water production and distribution capacities for the city of Ouagadougou in order to meet the population's basic needs and to strengthen and improve ONEA's capacity by means of: - The preparation of detailed preliminary engineering designs and bidding documents for the Ouagadougou water supply project. - The making of an environmental impact assessment of the project, including a plan for mitigating undesirable impacts and a plan for resettling the project-affected people, together with a review of all the riparian issues raised by the construction of the dam on the Nakambe river. - The establishment in ONEA of a unit to be responsible for the coordination and execution of the project.  22 - The setting up of technical assistance, personnel training and equipment procurement so as to strengthen ONEA's management capability and its capacity for implementing major projects. 2. EXPERIENCE AND RESULTS Engineering Project Management Unit A project office was set up in ONEA in 1994, made up of supervisory staff seconded from ONEA (3) and executive personnel (3) recruited by the project. It has received support from a technical assistant experienced in the management of large-scale projects. New equipped premises were placed at its disposal. From March 1994 to September 1996 this office supervised the consultants responsible for the construction plans and the studies of the environmental impact. Detailed preliminary engineering and bidding documents The detailed preliminary engineering and bidding documents have been prepared and are available for the following packages: - Package No. 1: Dam and ancillary works - Package No. 2: Transmission main - Package No. 3: Treatment station - Package No. 4: Primary system - Package No. 5: Pumping and distribution - Packages Nos. 6 & 7: Distribution system - Package No. 8: Power line Environmental impact assessment An environmental impact assessment was made in 1994/95, which constituted an excellent basis for the preparation of the Governmental Plan for Mitigating Environmental Impacts (Plan Gouvememental d'Attenuation des Impacts sur l'Environnement - PGAIE), which will be the first plan of its type to be put into effect in conjunction with the execution of a large-scale project. Performance contract A performance contract governing the relations between the State and ONEA was signed in 1993, which served to clarify the company's relationship with the State. Technical assistance Technical assistance was set up in 1995 with the aim of providing support for the project management in the technical, administrative and financial spheres. This technical assistance was found to be particularly valuable in the technical and administrative fields. Training The training program for the project office staff focused on: pressure surges; project management and control; accounting and contract award procedures;  23 initiation in use of accounting and management software. The training given was profitable for the staff: it accomplished its objectives. Institutional strengthening This component, which consisted of technical assistance, training and procurement of equipment utilizing Credit 2519-BUR with the aim of strengthening ONEA's project management and execution capacities, was completed in full. The "System Management Study" component setting out the main thrusts of ONEA's future development to enable it to assume responsibility for the new facilities is still in progress. The national party is not in agreement with privatization, because some clear examples demonstrate that ONEA is performing better than many privatized companies. Moreover, ONEA is being restructured to make it an efficient, modern and thriving company able to honor all its commitments to all its partners. 3. IMPORTANT FACTORS THAT HAVE AFFECTED THE PROJECT Studies Some new and unforeseen studies have been made during the course of the project (additional economic studies, additional geotechnical studies, financial analyses, network models, revisions of the preliminary engineering and bidding documents...), which have increased the real cost of the studies originally planned. Taken overall, the studies are of excellent quality. Dam safety A panel of independent experts commissioned by the Government has given its opinion on the safety of the dam. The panel's recommendations have been conveyed to the consultant who has incorporated them into the bidding documents. This has delayed the starting of the dam works, but the outcome has been that the safety of the dam has been enhanced. The North Branch of the primary system The World Bank has suggested on several occasions that the implementation of the North Branch be deferred because demand is low in that area. The national party differs strongly on this point because it views the area as a potential development zone. The financing for that part of the system has moreover already been obtained from the West African Development Bank. The Governmental Plan for Mitigating Environmental Impacts (PGAIE) The Government drew up the PGAIE on the basis of the environmental impact assessment. In the course of the 1995 and 1996 supervision missions the Bank drew attention to the need to prepare the plan, stressing that the matter should be approached with the greatest care because it was the most sensitive point of the project and could reopen the entire question. The PGAIE was prepared between May and October 1996 and was submitted to the donors before the December  24 1996 missions. It has been enriched on the basis of the different partners' comments and the final version is currently available. Its implementation is a good thing and all the parties involved have high expectations of it. Integrated management of the Nakambe watershed The donors require that an integrated management system for the Nakambe watershed be set in place. The Government is in agreement with the principle of integrated management of the watershed and has already taken steps to mobilize resources for the purpose by submitting a request to DANIDA. The final documents for this project are currently available. Contractor preselection The procedure was started as of July 1996 and the results were communicated to the donors during the December 1996 missions. Some conflicts with certain donors, mainly the Bank, have prevented publication of the results so far, though this may be done in 1998. Works supervision The procedure for consultant selection was started as of September 1996, which was when the preselection required by the Bank was organized. The committee selected nine consultants, but the Bank had the number reduced to four. After rejecting the report and requiring that additional analysis be made the Bank, after a protracted exchange of correspondence, did not allow the procedure which led to the choice of the consultant after the opening of the financial bids to go forward until September 1997. Financing of the project The financing terms and conditions of the different donors directly affected the retumr on the project. While the most favorable loan conditions are obviously desirable, actual conditions and rates proposed are not always the most concessional. In addition, certain financial packages which need to be mobilized swiftly could well be permanently lost if matters continue to drag as they have been doing. This would seriously impact the project's feasibility. Tariff-setting It has not always been possible for tariffs to be raised as recommended by the tariff study. The last tariff increase went into effect on December 1, 1997. The Bank considers that these increases are well below the required levels and cannot enable ONEA to achieve financial equilibrium. Performance contract The second ONEA/State performance contract has been in effect since September 1997. Some significant changes have been introduced compared with the first performance contract, so that the roles of each partner are more clearly defined. This will further facilitate the implementation of the project.  25 Maitrise d'Ouvrage de Ziga The Maftrise d'Ouvrage de Ziga (MOZ) was created by decree of the Council of Ministers of September 24, 1996 (after the draft version of the decree had been amended by CFD), and a director was appointed to head the structure set up at the same time. A study was made of the organization and operation of the MOZ. The national party has followed the recommendations of the study and of the donors, but certain donors, including the Bank, have not yet expressed their final opinions regarding this structure. Accounting and financial management (audit and certification of accounts) The donors, headed by the World Bank, consider thdt ONEA's performance as regards financial management and accounting is not of the best. Efforts are underway to remedy this, but results are slow in materializing. 4. SUSTAINABILITY OF THE PROJECT The studies financed by the World Bank (Engineering Credit 2519-BUR) and AFD (former CFD) have resulted in the preparation of the preliminary engineering and the bidding documents for seven packages of works, one package of supplies and two packages of services. The package No. 1 works were started with financing from Arab Funds in April 1998. The feasibility of the project is now recognized by all. 5. PERFORMANCE OF THE BANK AND OF ONEA As long as the working climate was unruffled, the Bank was most responsive to all our requests. It supervised the project by means of missions made up of several persons who came out to us regularly every three months on project business (ten missions in all). Subsequently, however, matters took the form of a constant battle because even questions we had thought settled were re- examined all over again by the Bank and the project suffered every time. The start of work on package No. 1 financed by Arab Funds confirms our impression that the Bank had not really seen to the heart of the matter. Aside from the tariff increases which, as noted, could not be put into effect, the borrower made itself available in all circumstances and gave attentive consideration to all reasonable recommendations. The performance of the two parties can be considered acceptable but no more, since only one package has been started.  26 6. GLOBAL EVALUATION OF THE CREDIT The project only achieved a part of its objectives. If the institutional recovery of ONEA has not been accomplished, that is because the process is still underway and requires a certain time. In our opinion the project is satisfactory. 7. FUTURE OPERATIONS We have already been informed three times that the Bank is ready to appraise the project, but this has been deferred three times. Two conditions remain to be met: sector reform and training. There are conditions with extensive and undetermined ramifications. We, too, are accordingly also entitled to ask questions, this time once again about observance of the appraisal date. Technically, the project has been ready since 1996. 8. KEY LESSON In overall terms, the type of credit (engineering credit) has by its nature enabled us to accomplish the essentials of the objectives assigned to the project. It must be borne in mind, however, that for the smooth running of a project of this scale it is necessary to establish frank partnership relations which ought to enable each party to contribute on the basis of its experience to accomplishment of the project objectives. This has not always been the case. One hopes that the implementation of the future project will take place in a much more tranquil climate. The actions undertaken by the national party recently are aimed in this direction and should clear the way for appraisal of the project by the World Bank. Mamadou Lamine Kouate, Idrissa Mohamed Ouedraogo General Manager Director of MOZ ONEA  MAP SECTION  MAURITANIA BURKINA FASO MALI NATIONAL CAPITAL / r - A U A I CA PITALE D'ETAT BURKIA FSdOugu RIVERES j i ODAN\~ GUINEA _ PROVINCE BOUNDARIES ' Gorom-Gorom ) GUINEA < ,5 I 'GZANI| LIMITES DES PROVINCES - *~ 0 *" CTE ,GHANA '~8I - - INTERNATIONAL BOUNDARIES L OJ IBERIA30IOE FRONTIERES INTERNATIONALES ,- *'N1 - M _14' 0 50 100 150 200 LOiU SENO KILOMETERS /KILOMETRES Y E A 2r ,e., \ Ouahigouya * BAM j X>, , SOUROU ~ >b} \,,oongou ( SANMATENGA a 3N E ( S~~~~~~~~OLIROUg ,' G NIGE R M A L I C Nouna N AYAuA n - \K a ( ' GNAGRI Go R 5 S / ?-G EvaEe 0) K4D/OGONDJA \Br-and BANWA SANGU1dUE \ '40 MOLIHOLJN SANGIJI ~~~~BOULKIEM~ ' t- - G JRM TAPOA 12' r'',', 6.,- . issiri0 6- * Fada-N'Gounn,a .