Nepal - Urban Water & Sanitation Rehabilitation Project

 ICRR 10686 Report Number : ICRR10686 ICR Review Operations Evaluation Department 1. Project Data : Date Posted : 07/27/2000 PROJ ID : P010370 OEDID: OEDID : C2239 Appraisal Actual Project Name : Urban Water & US$M ) Project Costs (US$M) 71.0 22.8 Sanitation Rehabilitation Project Country : Nepal Loan /Credit (US$M) Loan/ US$M ) 60.0 16.1 Sector, Major Sect .: Urban Water Supply , US$M ) Cofinancing (US$M) 3.4 4.9 Water Supply & Sanitation L/C Number : C2239 FY ) Board Approval (FY) 91 Partners involved : Closing Date 03/31/1999 03/31/1999 Prepared by : Reviewed by : Group Manager : Group : Klas B. Ringskog Alain A. Barbu Ridley Nelson OEDST 2. Project Objectives and Components a. Objectives (1) To strengthen the technical, managerial, financial, and operations /maintenance capability of the implementing agency, the Nepal Water Supply Corporation (NWSC); (2) To increase utilization of existing systems through rehabilitation and extensions; and (3) To improve public health through (i) consumer education programs; and (ii) improved quality and increased quantity of water to consumers . b. Components (1) For NWSC management support, training, project design and supervision assistance, totaling $ 10.1 million; (2) For three Kathmandu Valley Towns works totaling $ 51.9 million, comprising (i) new source detailed design ($3.9 million); water supply rehabilitation ($24.3 million); ground water treatment ($11.0 million); rehabilitation of sewer system, sewer connections, and sanitation ($ 9.2 million), and central facilities and plant ($3.5 million); and (3) For nine Towns Outside Kathmandu Valley works totaling $ 8.8 million, comprising (i) water supply rehabilitation ($5.8 million); (ii) sanitation ($ 1.6 million), and facilities and plant ($ 1.4 million). c. Comments on Project Cost, Financing and Dates At the Mid Term Review the original project components were reduced in size and two small components, funded by bilateral grants, were added. As a result, the original project cost of $ 71.0 million was reduced to $ 22.8 million and was funded by the IDA credit in an amount of $ 16.1 million, by Japanese bilateral grants of $ 2.2 million, a Norwegian bilateral grant of $2.0 million, a French bilateral grant of $ 0.7 million, and by the Government with $ 1.8 million. Although the original closing date of March 30, 1999 was respected the original project scope was much reduced at the Mid Term Review. 3. Achievement of Relevant Objectives : No project objectives were met in full . Specifically: (1) NWSC emerged only marginally stronger, and the belated, laudable attempt to bring in a Management Contractor has yet to be accomplished; (2) Of the Kathmandu Valley physical works only the rehabilitation of existing wells and construction of new wells were completed which meant that only $ 8.5 million of the originally estimated $ 52.1 million was spent. The number of hours of water service decreased from an average 6 hours daily at the beginning of the project to 4.5 hours of completion, and water quality continued to be unsafe; Of the works outside the Kathmandu Valley only some minor rehabilitation was completed, accounting for $ 2.0 million of the originally appraised $ 8.8 million. As a result, the objective of increased utilization of existing systems proved elusive; (3) The consumer education program was completed but the quantity and quality of water to consumers did not improve as expected. As a result, the objective of improved public health was not achieved in the least 4. Significant Outcomes /Impacts : The consumer education program was successfully completed as were a pilot program of reducing unaccounted water (UW) and a pilot program of computerizing billings . None of these successful programs were scaled up to yield their full potential benefits. 5. Significant Shortcomings (including non -compliance with safeguard policies ): The project was the fourth Bank water supply project to Nepal, following three projects approved in 1974, 1977, and 1980, respectively. The sector deficiencies were well known, yet the wrong kind of project was designed and appraised. Only some 32% of the estimated project cost was eventually spent, leaving the population in a worse situation than prior to the project . 6. Ratings : ICR OED Review Reason for Disagreement /Comments Outcome : Unsatisfactory Highly Unsatisfactory The service situation is worse than prior to the project and ten years have been lost in the effort to provide beneficiaries with continuous service of safe water . Institutional Dev .: Negligible Negligible Sustainability : Unlikely Unlikely Bank Performance : Deficient Unsatisfactory The Bank failed to act on the lessons learnt during three previous projects and failed to apply in time the emerging experience of alternative private sector arrangements. The Bank performance improved during implementation but this proved too late to make a real difference . Borrower Perf .: Deficient Highly Unsatisfactory The Borrower failed to provide the stable environment that would have made real reform of the enabling environment possible. Financial improvements and tariff policies were not implemented as needed and financial covenants were frequently breached. Quality of ICR : Satisfactory 7. Lessons of Broad Applicability : Most of the lessons are trite and have been known since the mid -1970s. Once again it should be recalled that : (1) In the face of general agreement of what had gone wrong in the past ( under three previous Bank-financed water supply projects) it was a fallacy to expect that half -measures that failed to radically change the legal /regulatory framework and the incentives would produce any better results than in the past; (2) Politicization of tariff increases, staff recruitment, and of other administrative and financial matters will destroy the best-intentioned project and the costs will ultimately be borne by the consumers in the form of poor and unsafe service; 8. Audit Recommended? Yes No 9. Comments on Quality of ICR : The ICR should be commended for being brutally honest in telling a sad story . Had it been written more tightly, it would have been rated exemplary .