Turkey - Bursa Water and Sanitation Project

Document of The World Bank FOR OFFICIAL USE ONLY Report No: 23350 IMPLEMENTATION COMPLETION REPORT (CPL-35650; SCL-3565A; SCPD-3565S; CPL-35660; SCL-3566A; SCPD-3566S; TF-20465) ON A LOAN IN THE AMOUNT OF US$108 MILLION TO TURKEY FOR A BURSA WATER & SANITATION PROJECT December 21, 2001 Infrastructure and Energy Services Unit Turkey Country Unit Europe and Central Asia Region This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  CURRENCY EQUIVALENTS (Exchange Rate Effective July 2001) Currency Unit = Turkish Lira (TL) TL 1,000 = US$ 0.000756 US$ 1 = TL 1,321,554 2000 - US$ 1 = TL 625,219; 1999 - US$ 1 = TL 418,783; 1998 - US$ I = TL 260,724; 1997 - US$ 1 = 151,865; 1996 - US$ 1 = 81,405; 1995 - US$ I = 45,845; 1994 - US$ 1 = 29,609; 1993 - US$1 = 10,985 FISCAL YEAR January I December 31 ABBREVIATIONS AND ACRONYMS BMM Bursa Metropolitan Municipality BUSKI Bursa Water and Sanitation Company EIB European Investment Bank ERR Economic Rate of Return FRR Financial Rate of Retum lpcd Liters Per Capita Per Day u/s Liters per second mm3 Million cubic meters NPV Net Present Value SAR Staff Appraisal Report UFW Unaccounted-for-Water WWTP Wastewater Treatment Plant PMU Project Management Unit Vice President: Johannes Linn, ECAVP Country Manager/Director: Ajay Chhibber, ECCO6 Sector Manager/Director: Motoo Konishi/Hossein Razavi, ECSIE Task Team Leader/Task Manager: Sudipto Sarkar/Alptekin Orhon, ECSIE  FOR OFFICIAL USE ONLY TURKEY BURSA WATER & SANITATION PROJECT CONTENTS Page No. 1. Project Data 1 2. Principal Performance Ratings 1 3. Assessment of Development Objective and Design, and of Quality at Entry 2 4. Achievement of Objective and Outputs 5 5. Major Factors Affecting Implementation and Outcome 8 6. Sustainability 9 7. Bank and Borrower Performance 9 8. Lessons Learned 11 9. Partner Comments I 1 10. Additional Information 22 Annex 1. Key Performance Indicators/Log Frame Matrix 23 Annex 2. Project Costs and Financing 27 Annex 3. Economic Costs and Benefits 29 Annex 4. Bank Inputs 31 Annex 5. Ratings for Achievement of Objectives/Outputs of Components 33 Annex 6. Ratings of Bank and Borrower Performance 34 Annex 7. List of Supporting Documents 35 Annex 8. Project Outputs By Components 36 Annex 9. Project Implementation Schedule 40 Annex 10. Key Indicators of Project Operation 46 Annex 11. BUSKI - Financial Statements 47 Annex 12. Borrowers' Contribution 49 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.   Project ID: P009065 Project Name: BURSA WATER & SANITATION Team Leader: Alptekin Orhon TL Unit: ECSIE ICR Type: Core IC.R Report Date: December 21, 2001 1. Project Data Name: BURSA WATER & SANITATION LI/CTFNuinber: CPL-35650; SCL-3565A; SCPD-3565S; CPL-35660; SCL-3566A; SCPD-3566S; TF-20465 Countny/Department: TURKEY Region: Europe and Central Asia Region Sector/subsector: US - Urban Environment; WS - Sewerage; WU - Urban Water Supply KEY DATES Original Revised/Actual PCD: 03/31/91 Effective: 05/31/93 08/23/93 Appraisal: 06/25/92 MTR: Approval: 03/11/93 Closing: 06/30/2001 06/30/2001 Borrower/lmplemneniting Agency: BURSA WATER & SANITATION COMPANY (BUSKI)/BURSA METROPOLITAN MUNICIPALITY (BMM) Other Partners: STAFF Current At Appraisal Vice President: Johannes Linn Wilfried Thalwitz Countiy) Manager: Ajay Chhibber Michael Wiehen Sector Manager: Motoo Konishi Ricardo Halperin Team Leader at ICR: Alptekin Orhon Daniel Coyaud ICR Primary Author: Kishore Nadkami 2. Principal Performance Ratings (HS=Highly Satisfactory, S=Satisfactory, U=Unsatisfactory, HL=Highly Likely, L=Likely, UN=Unlikely, HUN=Highly Unlikely, HU=Highly Unsatisfactory, H=High, SU=Substantial, M=Modest, N=Negligible) Outcomne: S Sustainability: L Institutional Developmenit Impact: M Bank Performance: S Borrower Performnance: S QAG (if available) ICR Quality at Entry: S Project at Risk at Any Tim7e: No There was no review by QAG for the project at entry or during supervision.  3. Assessment of Development Objective and Design, and of Quality at Entry 3.1 Original Objective: Objectives: The development objectives of the project were to: a. improve environmental conditions and reduce health hazards in Greater Bursa caused by: (i) inadequate collection, and lack of treatment of municipal and industrial sewage; (ii) seasonal flooding in some areas because of poor stormwater drainage; and (iii) inadequate domestic solid waste disposal, and lack of hazardous solid waste management; b. improve the institutional arrangements regarding the management of municipal water supply, sewer services, and of domestic and hazardous solid waste; c. meet the demand for water supply, sewerage, flood protection and solid waste services, including the demand from the poor living on the fringes of the city; d. postpone the need to develop new water resources by improving the efficiency of water usage by reducing the volume of non-revenue water from the high level of 63%; and e. implement appropriate cost recovery policies. Assessment: The objectives were clear, realistic and important for the country given the prevailing context in which they were defined. Consistent with the overall country assistance strategy, the sector strategy for water and sanitation sought to: (i) improve the standards of living of the population, particularly low-income, by provision of adequate water and sanitation services; (ii) alleviate environmental degradation from sewage, and from domestic and industrial wastes; and (iii) pursue institutional reform in the sector by continuing to support the commercialization of newly created municipal water utilities such as BUSKI that had been separated from their parent municipal departments. The choice of Bursa for assistance was justified since Greater Bursa was one of the largest urban areas in Turkey with a population of about 840,000 in 1990; about 23 percent of the city's households were classified as low-income; water service coverage, though relatively high at 90 percent, was in need of improvement, including extension to under-served areas; sewerage coverage was only 70 percent, and municipal and industrial wastewater was being discharged untreated, mainly into the Nilufer River where water quality was rated in the lowest class (Class IV); the high and growing pollution in the Sea of Marmara to which Bursa was contributing; and the rising incidence of water-borne disease. While the investments under the project were substantial, they were not unusually complex or risky, or unduly demanding in regard to the implementation capacities of the Borrowers, Bursa Water and Sanitation Company (BUSKI) and Bursa Metropolitan Municipality (BMM) which were to be augmented by suitable technical assistance. 3.2 Revised Objective: The original objectives were not revised. -2 -  3.3 Original Components: Components: The original components of the project were the following: (A) Water supply works and equipment needed to: (i) renovate existing springs to improve their production from 12.7 million m3 (mm3) per year to their estimated capacity level of about 19.7 mm3 per year; a total of 35 km of new pipelines were to be laid on the mountain side; (ii) rehabilitate existing distribution networks by replacing each year, for three years, about 3.5 percent (1,000 km of pipes) of the most unsatisfactory sections of the existing network; (iii) increase the production of well-fields by about 32 mm3 per year by constructing 10 new wells and improvements in pumping stations; (iv) construct a distribution reservoir of 30,000 m3 capacity to provide storage capacity needed for the increased water demand; and (v) construct main pipelines (70 km) to extend the supply to new distribution networks and improve the supply in existing networks; and extend existing distribution networks to supply new consumers in new areas covering 810 hectares (ha). (B) Sewerage works and equipment needed to: (i) extend the existing collection networks by constructing: new collectors totalling 5.4 km and collection networks to serve 140 ha in the industrial north of the city; new networks covering 660 ha in areas to be served by existing collectors, the existing networks being converted into stormwater drainage networks; and new sewer connections in the above mentioned areas covering 660 ha; and (ii) treat and dispose sewage flows collected by the sewerage networks by two-phased construction of wastewater treatment plants in East and West Bursa. The first phase for each plant was to include pre-treatment works and anaerobic ponds of 134,000 m3 per day and 46,000 per day capacity. The second phase was to add secondary treatment of 161,000 m3 per day and 74,000 m3 per day respectively, and sludge treatment facilities. (C) Stormwater drainage works and equipment needed to: (i) rehabilitate the existing networks covering 4,582 ha including completion of the network, replacement of damaged pipes, constructing proper catchment areas and manholes, and cleaning of the pipes; (ii) construct three open channel interceptors of a total length 9 km in the southem part of the city to avoid clogging of the stormwater drainage system; and (iii) extend the collection system by laying about 14.2 km of collectors and construction of networks in new areas covering about 337 ha. (D) Technical assistance to B USKI for: (i) project implementation including: detailed design and construction supervision; survey and investigations needed for proper mapping of the water supply and sewerage systems; and staffing of a Project Management Unit (PMU); and (ii) institutional development including: (a) a twinning arrangement with a reputable water supply and sewerage operator to assist BUSKI in designing and implementing an Action Plan consisting of training for staff and management; increasing the volume of water billed; an Asset and Capital Investment Management System; a Management Information System; and a new tariff schedule that would help promote water conservation, control water pollution, and ensure BUSKI's financial viability; and (b) a consultant study to determine the feasibility of a contractual arrangement between BUSKI and a private operator. -3-  (E) Solid waste works and equipment needed to: (i) rehabilitate the existing unregulated disposal area including fire controls, stream diversion, bund construction, control of leachate, regrading and planting, collection ditches, and venting of landfill gas; (ii) develop a new landfill site of 10 ha in Hamiltler Valley X; (iii) construct a waste transfer station for 600 tons per day including tipping halls, weighbridges, mobile grab, loader and tractors; (iv) provide collection vehicles for municipal waste and industrial waste; and (v) provide facilities for two clinical waste incinerators of 0.5 tons per hour unit capacity; one incinerator would be installed under the project. (F) Technical Assistance to BMM for: (i) Project implementation including design and construction supervision, including detailed design of the next phase of the new landfill site, and staffing of a PMU; and (ii) institutional development including: strengthening the municipal organizational arrangements for solid waste management through implementation of an Action Plan to: (a) increase transparency in financing, expose the solid waste management service to competition, and become more accountable and responsive to citizens' needs; (b) creation of a regulatory body within the municipality for overseeing solid waste services; and (c) creation of a municipal operational corporation to take on solid waste services. 3.4 Revised Components: There were no major changes or restructuring in the project during implementation. However, the Bank and the Borrowers agreed to the following changes within the original components: In the sewerage component, it was decided to exclude the second phase of the wastewater treatment plants from the Bank loan and an amount of US$20 million equivalent was cancelled. In the solid waste component: (i) since municipal waste collection services were contracted out to a private contractor, the purchase of collection vehicles was excluded from the project and the amount reallocated to purchase of additional equipment for the new landfill site; and (ii) the waste transfer station and clinical incinerators were excluded from the project and the funds reallocated to construction of a sorting station/recycling plant, installation of air quality monitoring equipment, design and construction of a leachate treatment plant, and digitization of cadastral maps. Assessment of Project Design and Components: Project design correctly identified and addressed the main constraints to improvement and further development of the water supply, sewerage, stormwater and solid waste systems. The Bursa project was the Bank's seventh operation in the water and sanitation sector in Turkey and drew upon the lessons from the earlier projects, particularly the need for institutional strengthening of the water and wastewater utility through greater autonomy and commercialization. Although there were growing doubts within the Bank as to the effectiveness of twinning-type technical assistance arrangements, the jury was still out at the time, and the Bank agreed to accept this instrument of institutional development. In retrospect, the Bank's cumulative experience has by now shown that this type of arrangement has generally not been successful. A provision had also been made under the Bank loan to explore the possibilities for contracting out BUSKI' services, in part or in whole, to a private operator. For the solid waste services, institutional strengthening was to include creation of an operational corporation to take over the provision of the services, with the possibility of contracting out services to private contractors, and a regulatory body within the municipality to establish policies and ensure compliance. -4 -  Project components were well designed and defined to achieve the specific physical and institutional objectives to which they were related. However, greater attention could have been paid to developing, from the outset, a project monitoring and evaluation system that would have permitted progressive monitoring of achievement of the larger impacts expected from the project, e.g. the reduction in pollution from the Nilufer River to help reclassify its water quality status from Class IV to Class III; the reduction in pollution in the Sea of Marmara; the extension of coverage and improvement of service to the lower-income sections; the reduction in water-bome disease in the area; and the number of new customers and areas served. 3.5 Qualitv at Entiy: The project objectives were consistent with the Government's priorities and with the Bank's overall and sector assistance strategies for Turkey. The project appropriately took into account the Bank's safeguard policies applicable at the time. Quality at entry was satisfactory in terms of technical evaluation of the components of the project. Appraisal was based on an advanced status of preparation in regard to availability of final designs and land acquisition although there were some exceptions as in the case of the KI open channel interceptor which was later abandoned on account of the presence of illegal settlements. Quality at entry was also satisfactory for the institutional strengthening components based on the Bank's approach and experience in the water and sanitation sector at the time although it is clear that, judged by current standards, the appropriateness of a twinning-type of arrangement would be seriously questioned given the Bank's cumulative experience on this matter. In the case of the wastewater investments, the analysis at appraisal did not include a separate financial and economic evaluation of the extension of the treatment process to the secondary stage whereas the Bank's experience has shown that such investments may not necessarily be viable, and need to be carefully examined on a case by case basis. The main risks to project implementation and achievement of objectives were appropriately identified as those arising from (i) the institutional weaknesses of the Borrowers and (ii) the willingness and ability of the local authorities to enable the necessary resource mobilization and cost-recovery for the utilities. The Staff Appraisal Report (SAR) also identified the risk to institutional performance posed by the central government's regulations concerning the personnel regime but no specific safeguards were introduced in the case of the project. Experience proved that these constraints continued to adversely affect both BUSKI and BMM operations, and were one of the contributing causes to abandoning of the twinning contract for BUSKI. 4. Achievement of Objective and Outputs 4.1 Ozutco,ne/achieveinent of objective: The overall outcome is assessed as satisfactory since the project has largely met its main physical, and to a modest extent, its institutional objectives. Although quantification of the project's larger expected impacts (e.g. reduction of pollution in the Nilufer River; reduction of pollution in the Sea of Marmara; extension of services to lower income groups; reduction in water-borne diseases) is rendered difficult by the weaknesses in the project monitoring and evaluation system, the degree of achievement (and in many cases, over-achievement) of the physical targets and the modest improvements in institutional performance in BUSKI and BMM provide substantial assurance that the larger impacts have been positive. Thus, the objective of improvement in environmental conditions and reduction of health hazards in Greater Bursa has likely been achieved with completion and putting into operation of the targeted: (i) collection systems and networks; (ii) wastewater treatment plants where an estimated 80 percent of the wastewater now receives pre-treatment in anaerobic ponds; (iii) stormwater drainage rehabilitation works; (iv) improved solid waste collection and disposal services, including the closing of the old unregulated disposal site commissioning of - 5 -  the new landfill site, and introducing recycling; and (v) installation of an air quality monitoring system. The objective of improvement in institutional arrangements regarding the management of municipal water supply, sewer services, and domestic and hazardous waste services has been met to a more modest extent than expected. Although the envisaged twinning contract for BUSKI did not succeed, BUSKI nevertheless was able to make significant progress on its own, including satisfactory performance in the project's physical implementation, where most physical targets were met or exceeded, worker productivity per connection increased, and in meeting its financial obligations under the project, including self-financing of part of the investment program. To improve the organizational arrangements for solid waste services, BMM contracted out the waste collection and landfill operation services to private contractors, and these are operating satisfactorily. The objective of meeting the demand for water supply, sewerage, flood protection and solid waste services, including the demand from the poor living on the fringes of the city has also been met with the very significant extension in the number of water and sewerage connections (where the actual achievements substantially exceeded targets); the achievement of the targeted stormwater rehabilitation works; and the expansion of solid waste services. However, given the weaknesses of the monitoring and evaluation system, it is difficult to quantify the extent to which services have been extended to low-income and previously under-served groups. The objective of postponing the need to develop new water resources by improving the efficiency of water usage and reducing the volume of non-revenue water has been achieved since the share of non-revenue water has been reduced, albeit more slowly than expected, to the targeted levels. Finally, the objective of implementation of appropriate cost recovery policies has been met since BUSKI has successfully maintained tariffs at levels sufficient to meet its financial obligations, including project financing, and BMM has maintained the share of solid waste expenditures in its total expenditures. 4.2 Outputs by components: Details of outputs by components are given in Annex 8 and summarized in this section. In water supply, most physical targets were met or exceeded including rehabilitation of springs, rehabilitation of existing networks, construction of new wells, and construction of transmission mains. In the case of distribution reservoirs against the planned target capacity of 30,000m3, a total capacity of 52,500m3 has been completed, of which 30,000m3 were constructed by the DSI and the remaining 22,500m3 constructed by BUSKI. In addition to the above capacity, a reservoir with a capacity of 3,500m3 is under construction, and two other reservoirs have been designed, each having a capacity of 30,000m3, to be constructed in 2002 and 2003. In sewerage, the construction of collectors and extension of the network exceeded the planned targets. As regards wastewater treatment, while the two wastewater treatment plants in East and West Bursa were constructed, the facilities installed are restricted to Phase 1 of the planned investment, covering pre-treatment and anaerobic ponds. At BUSKI's request, Phase 2 of the construction, involving extension to secondary treatment has been postponed and will now be covered under a new operation being financed by the European Investment Bank (EIB). In stormwater drainage, targets were met in rehabilitation of existing networks and in extension of the collection system, but construction of the three planned open channel interceptors was postponed. In the case of one (KI), it was discovered during detailed design that illegal settlements would prevent construction. The other two are expected to be covered under the EIB operation. In regard to technical assistance for BUSKI, intemational consultants were utilized for design and construction supervision until 1995. Thereafter, with the exception of the sewage treatment plant, design was undertaken by local institutes and construction supervision by BUSKI staff. The survey, investigations and mapping studies were carried out as envisaged. For institutional development, BUSKI entered into a twinning contract with a UK consortium in March 1994, but discontinued the contract in early 1995 (discussed later in Section 4.5 below). As a result, BUSKI could achieve only to a limited extent the improvements that were to have been introduced with the help of the twinning agency. The feasibility study for contracting out services to a private operator was carried out in - 6 -  1995 and the selection process for a private operator was started, but later abandoned (as discussed in Section 5.3 below). In solid waste, rehabilitation of the existing unregulated disposal area was carried out as envisaged. BMM also contracted with a private contractor to build and operate a plant to produce electric power utilizing the methane gas from the landfill. The new landfill was developed as envisaged and its operation has been contracted to a private contractor. Since BMM contracted out solid waste collection services to private contractors, the planned purchase of collection vehicles was not undertaken, and the funds were reallocated to purchase additional equipment for the new landfill site. BMM decided not to construct the new waste transfer station since the district municipalities privatized the collection services and, under the new arrangements, it was not considered necessary to have the transfer station. BMM also decided not to proceed with the clinical incinerators because of delays in starting work by the contractor and impending changes in the relevant national-level environmental guidelines. The funds allocated for these purposes were re-allocated to other solid waste related needs including a new sorting/recycling plant, air quality monitoring equipment, a new leachate treatment plant, and digitization of cadastral maps. These have been completed with the exception of the leachate treatment plant where designs have been completed but the construction is expected to be taken up under a new EIB-financed project. Technical assistancefor BMM was provided as planned for design and construction supervision but the institutional development assistance was suspended after the termination of the twinning contract. 4.3 Net Present Value/Econoinic rate of return: At appraisal, the economic rate of return (ERR) on the water and sewerage investments (excluding stormwater and solid waste investments, the benefits of which were judged to be unquantifiable) was estimated at 8.2 percent using the incremental water and sewerage revenues as a proxy for the benefits attributable to the investments. This did not include the unquantifiable health, environmental and social benefits of these investments. The re-estimated ERR for the project is 9 percent (details in Annex 3). As at appraisal, this does not take into account the unquantifiable benefits mentioned earlier. 4.4 Financial rate of return: A financial rate of return was not estimated at appraisal, and has not been estimated for the ICR. 4 5 Institutionail development imnpact: The project's institutional development impact has been modest. In the case of BUSKI, the institutional strengthening was expected to be achieved through the twinning contract with a reputable water and sewerage utility operator. The contract was signed in March 1994 but, from the outset, there were interaction problems between BUSKI and the consultant due to the lack of counterpart staff who could speak English. The situation was worsened by the hiring freeze imposed by the central government in public and municipal enterprises. In early 1995, BUSKI and the City Council decided to terminate the twinning contract and to pursue instead the possibility of contracting out operations to a private operator which itself was deferred in 2000 to beyond the completion of the project. With the discontinuation of the twinning arrangement and the non-realization of the private operator alternative, the expected institutional strengthening outputs did not develop as planned, particularly in regard to training of BUSKI staff and management, and development of asset management and management information systems. Nevertheless, BUSKI was able to make creditable progress in regard to other important aspects, notably in improving worker productivity per connection, reducing the ratio of non-revenue water (and unaccounted-for-water or UFW) to water production, improving the bill collection ratio, and satisfactorily meeting its financial obligations, including project financing requirements and debt service. With the contracting out of waste - 7-  collection and landfill operation services to private contractors, BMM made a major organizational improvement in its solid waste department. 5. Major Factors Affecting Implementation and Outcome 5.1 Factors outside the control of government or implementing agency: Construction of civil works, particularly for the sewage treatment plants, was affected by the financial difficulties of the local contractors which were beyond the control of the Government or implementing agency. 5.2 Factors genierally subject to government control: Although not entirely within the control of the Government, the macroeconomic conditions deteriorated in the early part of the implementation of the project, leading to high rates of inflation and devaluation of the local currency. This affected the project in two ways - (i) the constant pressure to increase tariffs to compensate for rising costs, and (ii) constraints in hiring personnel due to the austerity measures and hiring freezes in public and municipal enterprises. 5,3 Factors generally subject to implementing agency conitrol: BUSKI and BMM, overall, carried out the project well in terms of meeting most physical targets and achieving some institutional improvements, but the performance could have been enhanced further with timely addressing of certain shortcomings. Stajjing of PMU: In BUSKI, there were initial delays in adequate staffing of the PMU but these were resolved after a qualified consultant was hired to function as the head of the PMU. Although the abandonment of the twinning contract was at least to some extent due to external constraints in hiring appropriate counterpart personnel, a more proactive approach on the part of BUSKI may have helped to resolve the issue. Twinning/Privatization: Similarly, while hiring of a private operator was not a requirement under the project, once BUSKI and the City Council decided in 1995 to pursue the possibility, they could have shown greater commitment to bringing it to fruition. In the event, even after five years, a decision had not been taken on whether to proceed with inviting bids from the pre-qualified firms. Use of Technical Assistance: BUSKI also did not fully utilize the possibilities for other technical assistance provided under the project, including for design and construction supervision, which contributed to implementation delays in some components. For example, in the case of the sewage treatment plants, BUSKI wished to utilize local consultants and its own staff for design and construction supervision, but was persuaded by the Bank, after an extensive discussion, to engage qualified consultants with the appropriate experience. Operational Improvements: While BUSKI made notable progress in improving operating and financial efficiency, including worker productivity, tariff adequacy, and effective bill collection, it was relatively slow in coming to grips with the issue of the high level of non-revenue water (including UFW). Indicators in this respect actually deteriorated in the early years of project implementation, but starting in 1996, BUSKI made a concerted effort to address the issue, which led to sustained improvements. Consequently, BUSKI was able to meet the stipulated targets since 1998. Over the course of implementation, BUSKI has been able to reduce the level of non-revenue water from 63 percent in 1993 to an estimated 45 percent in - 8 -  2000, thus meeting the target level of 47 percent. BUSKI has further reported that, in September 2001, UFW was decreased to about 35 percent, and the estimate for 2001 as a whole is 38 percent. BUSKI attributes the sharp decline in UFW to the rehabilitation work which started recently in the very old networks in the older districts of Bursa where the population is very dense. Nevertheless, further progress is needed in this area. 5.4 Costs anldfinanicing: Costs: Total project cost up to completion of the project is now estimated at US$193.2 million compared to the appraisal estimate of US$258.3 million. Out of a difference of about US$65 million, US$55 million is on account of the postponement of the second phase of BUSKI's wastewater treatment plants (which will now be taken up under an EIB-financed project). Areas where total costs were lower than anticipated were in technical assistance for BUSKI (by US$11 million) reflecting in part the discontinuance of the twinning contract; stornwater works (by about US$5 million) due to the postponement of the three open channel interceptors; sewerage civil works (by US$5 million); and solid waste equipment (by US$7 million) due to the changes in the description of the project. Costs were higher than projected in water supply civil works (by US$8.4 million) and in land acquisition by BUSKI (by US$6.6 million). Financing: The final amount of the Bank loan to BUSKI is US$93.3 million (after cancellation of US$20 million at BUSKI's request in 1998). The final amount of the Bank loan to BMM was US$10.7 million after cancellation of an amount of US$1.8 million at BMM's request in 2001. The BUSKI component of the project (US$174.8 million) was financed by the Bank loan of US$93.3 million and a BUSKI contribution of US$81.5 million. The BMM component of the project (US$16.2 million) was financed by the Bank loan of US$10.7 million and a BMM contribution of US$5.5 million. 6. Sustainability 6.1 Rationtale for sustainability rating: The project components are likely to be sustainable. BUSKI is one of the better managed municipal water and sewerage utilities in Turkey. Under the project, it has demonstrated the ability to implement major investments successfully, and to achieve significant improvements in operating and financial performance. The achievements under the project are likely to be sustained through the successor project that is being financed by the EIB. The EIB project will include those parts of the Bank project that were postponed, (e.g. the second phase of the wastewater treatment plants, open channel interceptors and the leachate treatment plant) while continuing the institutional development initiated under the Bank project. BMM has made substantial organizational improvements in its solid waste operations where collection and landfill operations have been contracted out to private contractors. These arrangements are working successfully and are expected to be sustainable. 6.2 Transition arrangemnent to regutlar operations: The project investments were implemented by the existing operating entities and are subsumed into their regular, ongoing operations. Consequently, no special transition arrangements are required. 7. Bank and Borrower Performance Bank 7.1 Lending: Bank performance was satisfactory in the lending phase. During project identification and preparation, the Bank was substantially involved in assisting the Borrowers in the design and implementation of the project. - 9-  The Bank's safeguard policies in effect at the time were appropriately taken into account. In hindsight, the Bank's support for a twinning-type technical assistance contract may now be questioned, given the evidence that is currently available Bank-wide in regard to the relative inefficacy of this kind of arrangement. However, at the time the project was designed, the Bank's position in this regard was by no means clear and the jury was still out as to the desirability or otherwise of twinning or other technical assistance arrangements. As discussed earlier (Section 3.4), one area where the Bank could have done more during preparation was in ensuring that the project monitoring and evaluation system would enable evaluation of the larger impacts that were being pursued under the project. 7.2 Su7pervision: Bank performance was satisfactory during the supervision phase. The Bank carried out a total of 12 missions in the field, usually staffed by a sanitary engineer and a financial analyst. Barring changes due to retirement of Bank staff, there was continuity in the staff assigned to supervision. Starting in 1998, supervision was carried out entirely by staff stationed in the Bank's field office in Ankara which also promoted more frequent interaction between the Borrowers and the Bank. The Bank was responsive and flexible in making adjustments within components where justified by changing circumstances, e.g. introduction of the air quality monitoring system, sorting station/recycling plant under the solid waste component. The Bank was also persistent in its monitoring and follow-up of BUSKI's progress in maintaining adequacy of tariffs and in improvement in the ratio of non-revenue water to water produced. In regard to pursuing the objective of institutional development, in retrospect, it could be questioned whether the Bank was sufficiently energetic and persuasive in getting BUSKI and the City Council to adopt the private operator option. Given the larger benefits of private sector involvement, the Bank could possibly have pursued this option more when the twinning arrangement stopped. To introduce the private sector, the City Council would have had to pass a resolution which was politically difficult. Also, while the Bank was diligent in its supervision of project progress in terms of the specific physical and institutional components, an area where greater attention could have been paid was in the setting up of suitable arrangements for evaluating the broader, overall impacts of the project (as discussed in Section 3.4). 7.3 Overall Bank peiforinance: The overall Bank performance is rated satisfactory, although it could have been enhanced in some aspects as discussed above. Borrower 7.4 Preparation: The performance of the two Borrowers, BUSKI and BMM, was satisfactory during preparation. Both Borrowers collaborated well with Bank staff in project design and development. 7.5 Government implementationi peiforinance: The Central Government had a limited role in the project with no participation in project financing and implementation. Its performance was satisfactory. 7.6 Inipleinentting Agency: The performance of both implementing agencies, BUSKI and BMM, was satisfactory although it could have been enhanced in some respects as discussed above. - 10 -  7. 7 Overall Borrowerperformance: On balance, the overall Borrower performance is rated as satisfactory although it could have been enhanced in some respects as discussed above. 8. Lessons Learned The main lessons learned from the design and implementation of the project are the following: (i) Particular care needs to be given to the design and implementation of technical assistance arrangements for institutional strengthening. In the case of the project, the growing doubts within the Bank in regard to the efficacy of twinning-type technical assistance contracts warranted that special attention should have been given during project preparation to establishing Borrower commitment and anticipating possible disruptive factors such as the lack of appropriate counterpart staff; (ii) The Bank needs to stay focussed on institutional development objectives; once it is clear that the planned arrangements are not likely to be successful, as in the case of the twinning contract, the Bank should pursue altemative options, e.g. the engagement of a private operator, with conviction and vigor; (iii) The Bank needs to be mindful of the broader objectives and impacts of the project when helping the Borrowers to set up monitoring and evaluation systems; in the case of the project, while physical and institutional progress indicators were well developed, the system did not provide for evaluating progress in achieving the larger objectives; (iv) A high degree of Borrower commitment and a well-defined action program are necessary for a successful program of reduction in non-revenue and unaccounted-for-water; progress in the case of BUSKI became evident only after persistent efforts at addressing the problem; and (v) Special attention needs to be given to establishing the technical and financial viability of local civil works contractors; in the case of BUSKI, local contractors' financial difficulties led to significant delays in major components, e.g. the sewage treatment plants. - 11 -  9. Partner Comments (a) Borrower/implementing agency. R.T. RURISA M"WfWOLIAN tIMIPNICALrJ NO Y.01. .53 - 1242.1 i49-(q4 No o Stbj c Rkw of iCR Mr Alpt* ORHON Tiy TOudoi1fi UAur MUMCU Cod No: W Ref Your It d*d Novanba 5S 2001 De Mr. O1UON, We 1m heviowcd &o Bfan ICR documaw and we have noed two posbl iwus: 1. to Seedgn 5.4, tbe sowid teOwpmt wa umpltd st an ovel cos of 16 millin US uwd of d 23 miI1 at sp" l e 7 mb . t is5 o d bto culto of bashr steim mid trapt veiles, wadiad waste iemcr. 2. Ia th. Projec Fuausin bbh ape 17, the amnt dbuse Scm the Ik 7hcL1 be 10.53 iater d 10,43. The dwiam bha awisen beue Wo nal ang co* i moltcy pFy=J usoui toI 100 0O0 US S wm n wblded in do dsbum DisX eWwb In Vh rojt Cost ad Flnnig Tabl on pq 16, Cowu S* ai Ev&inee wigl almo be&472 iWded of 6,62. (44aI Late Etimle ) 3. Te p ded Am edx8showJdi dbu!hs KJI prject a wel3 Ie -&wiug _t may be aMdd to *e a e of dh pmpab h rax wwitl uis,albmlofBMMs solid vast o smlitonon p28. "To cand d beae wA to -Wn cfhection ottIn ofc tx, EMM SW s ib*oxte cu ad pkmig i*=Wst to de ama CiS syskm, devekd ftoe wit SUSKL 4 In Amr=9 9. hp* s_$e .ed die atahod ables of Soid Waste We r cmie pkesed with terest nofeb rspat reprxd to solid wate ocmpw_it 1 d 2 t - 12 -  SOLID WASTE COMPONENT (3566-TU) Loan / Credit Disburments: Cumulative Estimated and Actual (US$ millions) Fiscal Year Appraisal Estimat Actual Actual as % of Estimate FY 92 FY 93 0.400 0.188 47.0 FY 94 1.316 1.079 82.0 FY 9s 1.112 1.350 121.4 FY 96 1.708 1.041 60.9 FY 97 2.236 1.158 51.8 FY 98 1.752 1.897 108.3 FY 99 3.108 2.424 78.0 FY00 0.776 1.182 152.3 -13-  BURSA WATER AND SANITATION PROJECT SOLID WASTE COMPONENT (3566- TU Status of Completion Con Contract Title Contract Contract Scheduled Extended Actual No: Signed Price Completion Completion Completion $ Date Date Date World Bank Financed Components __ _ _ Rehabilitation at Demirtas 07/27/94 784,474 05/26/95 12/30/95 12/30/95 ____ Access Road + Junction 03/21/97 410,422 September 97 Landfill hamitler X,T 07/21/93 2,520,000 9/8/1993 12/30/95 12/30/95 Landfill Hamitler M. Valley 11/21/97 1,750,000 12/23/97 11/30/99 11/30/99 Compactor 11/25/94 156,000 March 95 Motor Grayder 01/12/94 110,000 April 95 Backhoe Excavator 01/16/94 100,000 April 94 Front End Wheel Loader 01/12/94 93,000 May-95 Lab equipment 38,000 _ Dozer-I 12/21/95 164,000 June 96 Dozer-2 05/13/96 142,000 July 96 Cylinder 05/13/96 70,000 Sept. 96 Sorting Plant (Equipment) 07/03/98 178,000 11/3/1999 Clinical Waste Truck-I 10/18/94 41,000 March 95 Clinical Waste Truck-2 05/02/97 50,000 August 97 _ HDPE Geomembrane 07/14/99 68,000 August 99 Other Equip. (Air Qua. Monit.) 06/12/00 224,000 . August 01 Design Superv. Valley X 07/21/92 142,000 January 95 =__ Cons. Rehab. Exist. Dump. 07/21/93 600,000 October 94 Consult. T. S. &Valley Y,Z 06/08/95 147,000 December 97 Consult Leachate Treat. 09/14/00 117,758 06/30/01 =__ Superv. (Haluk Dogu) 09/21/94 50,000 06/30/01 Twinnning _ 43,000 Training 74,000 = Lab equipment&Air Qua. Mon. 12/29/94 38,000 August 95 ___ Leasing (Comp& Roller) 01/16/96 711,000 Oct. 96 Mic & Sound Equip. Feb.96 23,000 March 96 Digit. Cadast. Maps KDI 11/14/96 5,120,000 _ 06/30/01 - 14 -  BURSA WATER AND SANITATION PROJECT SOLID WASTE COMPONENT (3566-TU) Project Implementation Schedule - Cumulative Physical Completion(%) Con 1992 1993 1994 1995 1996 1997 1998 1999 2000 No: Actual Actual Actual Actual Actual Actual Actual Actual Actual WB LOAN 1 Existing Site Rehabilitation Rehabilitation at Demirtas 5 63 97 100 2 Access Road Access Road + Junction _ 100 3 New Waste Disposal Site Landfill Hamitler X,T 1 0 53 98 100 Landfill Haniitler Main Valley 43 100 4 Waste Collection and Transport = Compactor = = = 100 Motor Grayder 100 Backhoe Excavator 100 Front End Wheel Loader 100 Lab equipment 100 ____ Dozer-I 100 Dozer-2 100 Cylinder 100 Sorting Plant (Equipment) 100 Clinical Waste Truck-I 100 Clinical Waste Truck-2 100 HDPE GeoTnembrane 100 Air Quality Monotoring 100 5 Consultant Services =___ Design Superv. Valley X 50 100 Cons. Rehab. Exist. Dump. 9 100 ____ Consult. T. S. &Valley Y,Z 25 69 100 Consult Leachate Treat. 100 Supervision (Haluk Dogu) 100 Twinnning 100 Training Lab equipment&Air Qua. Mon. 100 - Leasing (Comp& Roller) 72 100 Mic & Sound Equip. 100 Digit. Cadast. Maps KDI 1 13 40 78 100 6 Land Acquisition 20 41 43 62 75 95 98 100 - 15-  BURSA WATER AND SANITATION PROJECT SOLID WASTE COMPONENT (3566-TU) Project Cost by Component and Source of Funds (US$ million) PROJECT COMPONENTS World Bank BMM Total Cost Amount Amount SAR Actual SAR Actual SAR Actual A. CIVIL WORKS Existing Site Rehabilitation 0.62 0.90 0.68 0.98 1.30 1.88 Access Road 0.67 0.16 0.73 0.17 1.40 0.34 New Waste Disposal Site 1.78 2.07 1.92 2.24 3.70 4.30 Waste Transfer Station (1) 0.58 0.00 0.62 0.00 1.20 0.00 Sub Total :Civil Works 3.65 3.13 3.95 3.39 7.60 6.52 EQUIPMENT Waste Disposal & Waste Collect 2.97 0.58 3.22 0.62 6.20 1.20 Air Quality Monotoring (Aimet) (2 0.00 0.11 0.00 0.12 0.00 0.22 Clinical Waste Incinerator (1) 1.58 0.00 1.72 0.00 3.30 0.00 Sub Total: Equipment 4.55 0.68 4.94 0.74 9.50 1.42 CONSULTANT SERVICES & ENGINEERING 3.90 6.72 3.90 6.72 PPFAdvance for Solid Waste 0.40 0.00 0.40 0.00 Sub Total: Consult. Ser & Eng. 4.30 6.72 4.30 6.72 LAND ACQUISITION 1.60 1.40 1.60 1.40 Sub Total: Land Acquisition 1.60 1.40 1.60 1.40 TOTAL PROJECT COST 12.501 10.531 10.50 5.53 23.00 16.06 (1) Clinical waste incinerator and transfer station are excluded from the project during implementation. (2) Not included in the original scope of the project. Project Financing Source Total Cost %of total cost SAR Actual (Actual) IBRD Loan 12.50 10.53 84.00 BMM 10.50 5.53 53.00 Total Financing 23.00 16.06 1 -16 -  1USA OUYOyB KHiR 5!LEei01Si a3usKi BUfsA SU vrx KwAtiZAnYONH rOASWsi SUSKI BURSA WATER AND SMTATION PROJECT Waer Su%ppy "a Saeerag Novtsber-=001 No: o2/21 I Subje^t: BUSKI's ICR Comnents Mr. Alpteiwe ORHOlI The World Bank Residn M dsn Utur Mume Cal. NMss G.O.P. I ANKARA R.4 Your Nov.5, 201 Leter Dear Mr. ORBONi, 'We hav meviewed tbe B.k's ICR Rcpatt and ws would like to errest scret m sceptiona and amplify som observations Our specific commaes ame detsaed ia our ateach repord Our report identifies vuoutis small corrections xqwred in tbc ICR a weL as certai letgal met astutionai biditaps which UUSKA Mananrvent caAnot change or amend. Therefor BUSKI adireem oudired below context of these handicrap in te become nmoe vatbla and aust be asesssed accor&t4yr a f1)wISial Development i. BnU81's t,bilky to tuisc tb ineal fiidt required for investincats and timlny paymet of the principal debt and financ;ng crges, especially in view of Owe defantiz of the similar ntities in the Turksb sh5er, ii Morn effective use of the loan realized by c4noeUing the excess portion of the loan at the expir5 of te grace period, and iii. Ncgodgion fi: the amendnwcrt of the loan disbuntertnt; b. Institutional Development: - 17 -  i. SUSKI has manged to peifonm the procuement and implmentaion (with intenaw supervision) of all p*kyskal aMt nouhysicai componanb of te Fnoject with reladtiy limited extenal tecbial assistxace; ii. As elaborated in the BUSKI ICR, the reduction of UFW by BUSKt. without extal speciaist asSisnCe. should be commended, as an obvious poo of instititonal deveiopmenm. iii. It is especially noteworthy tha BUSKI forcsaw the unaoilablc failum in 'twvnmnin and took tocaVUttemai measures for li5tu[tiol development The impact of this approach on sustainability shoal not be ipgored. In view of the above and in spite of the R:R aumhor's asusinmcru of physical er-achievement" (Section 4.1 of ICR) and credilable progress in instituional strenitning". the ratings of satisfactory for physical .n e:ivirotwal achievemerts and, especially, 'inadost for finacal and institutional devckpncnts' sam unftai. Tho asscsments becume inaprupriaeimpeopet. particularly in comparison with the achievemes in te other Bank proccs, which are either completed recentiy or ae presently underway. Based on our version of ie ICR Report and the comments we have genemutd now, the Bank ratins shuld be reconsidered both in the context cf the othcl 11ank projects in the Tikish water sector and with respect to the Biank's tigid operadonal procedures w6ch need t be addresSed by iba Bank to impove project inplermneations. Sincemely Bh1 SBOL I. Gcn. Man. General Mnager - 18 -  CRMITQUES REGARDING THE BANI'S ICR ., In Section 3.1 of the ICR. in pusS sectioriWl irstizonal refom, the decelopment of separate water uiilities like BIUSKI wese aessed to be "opeptirg as eommeciid entitia