Mozambique - National Water 1

 ICRR 12426 Report Number : ICRR12426 IEG ICR Review Independent Evaluation Group 1. Project Data: Date Posted : 06/28/2006 PROJ ID :P039015 Appraisal Actual Project Name :National Water 1 Project Costs 56.9 51.0 US$M ) (US$M) Country :Mozambique Loan/ US$M ) Loan /Credit (US$M) 36.0 37.2 Sector (s):Board: ): WS - Water supply US$M ) Cofinancing (US$M) 18.4 11.0 (60%), Central government administration (23%), Sanitation (14%), Sub-national government administration (3%) L/C Number :C3039 FY ) Board Approval (FY) 98 Partners involved : NDF, CIDA, SDC, SIDA Closing Date 10/31/2003 10/30/2005 Evaluator : Panel Reviewer : Division Manager : Division : Keith Robert A. Kris Hallberg Alain A. Barbu IEGSG Oblitas 2. Project Objectives and Components a. Objectives 1. Reorient the institutions of the sector in line with the strategic vision set out in the National Water Policy and increase their capacities. 2. Prepare for the private sector management of the urban water supply systems of the cities Maputo, Beira, Quelimane, Nampula and Pemba ("the five cities"). 3. Reorient and reform the management and implementation of rural water supply and sanitation, so that sector organizations can provide sustainable water supply and sanitation services to an increasing proportion of the community. 4. Improve the management of Mozambique's water resources . b. Components (or Key Conditions in the case of Adjustment Loans ): (a) Institution building and policy development (Expected cost at appraisal US$ 6.2 million ; actual cost at completion US$8.5 million): Comprising capacity building in planning and management, particularly in finance; developing a regulatory and monitoring framework; and studies for development of water sector policy . (b) Preparation for private sector management of urban water supply (Expected cost US$8.5 million; actual cost US$2.8 million): Comprising technical support for the bidding process; design and construction of emergency headworks to ensure secure operations of city water supply; and preparation of a strategy and plans for provision of sanitation services in the project cities . (c) Rural Water Supply and Sanitation (RWSS)RWSS ) (Expected cost US$18.2million; actual cost US$13.7 million): Comprising reorientation and reform of the management and implementation of rural water supply and sanitation (RWSS) services, and capacity building at central and provincial levels; a pilot RWSS system and preparation for future RWSS investment. (d) Water Resources Management (WRM) WRM ) (Expected cost US$14.6 million; actual cost US$16.4 million): Comprising capacity strengthening of the national water department, the office of international rivers and one regional water resources administration; development of a national water resources management strategy; studies of options for development and management of key international rivers; and safety related works and designs for one dam. (e) Human resources development (Expected cost US$5.2 million; actual cost US$2.2 million): Comprising training with initial emphasis on management skills . (f) Project management (Expected cost US$4.2 million; actual cost US$5.3 million) (g) Emergency water rehabilitation (This component was added after project commencement . Its cost at completion was US$2.1 million): Comprising technical advisory services to build capacity in flood management, and rehabilitation works for water supply and sanitation services damaged by the floods . c. Comments on Project Cost, Financing, Borrower Contribution, and Dates The project closure date was extended by two years, resulting in a total project period of 7.6 years. This was primarily due to the project's weak quality at entry (the Project Implementation Plan and Project Implementation Manual were only finalized in March 2001, three years after project Approval ). Additionally, major floods in 2000 and 2001 caused temporary interruption in project implementation . Project Development Objectives were not changed, but in April 2003 (two and a half years before the extended project closure date ), an additional Flood Emergency Response component was added and part of component (b) (design and construction of emergency headworks for two cities ) was dropped and financed instead under a second project - the Second National Water Development Project NWDP-II - which covered the urban water sector . The IDA Credit was fully disbursed . The Credit's value in US$ terms increased by US$1.2 million due to depreciation of the dollar against the SDR . Four cofinancers provided significant resources for the project : the Nordic Development Fund (US$6.9 million disbursed); the Canadian International Development Agency (US$2.0 million disbursed); the Swiss Development Corporation (US$1.5 million disbursed); and the Swedish International Development Authority (US$0.6 million disbursed). Part of the disbursement took place after the project period . 3. Relevance of Objectives & Design : The project's overall Relevance was Substantial . The project objectives were Highly relevant. The need for improved water resources management (WRM) was highlighted in the CAS. More specifically, the targeting of a package of policy and institutional changes to build Mozambique's capacity in WRM (objectives 1 and 4) was strategically important. Mozambique is a water scarce country heavily dependent on upstream riparian countries, and capability to plan and manage its water resources, as well as to effectively dialogue and monitor water use by other riparians is essential . Objectives 2 and 3 were also relevant as they were to pave the way for private sector management of urban water supply and sanitation (UWSS), and for a new demand-led approach for rural water supply and sanitation (RWSS). Project design was Substantially relevant overall, but with some reservation : the project components were well conceptualized to implement the project objectives, but a more questionable matter is the complexity of the project and the number of sub-components and activities within the sub -components. Already, the project was difficult in its WRM features which were new to Mozambique, and the reforms in the rural and urban water sectors were also treading new ground. It would have been even more complex had the originally intended project, also including a large UWSS program, been implemented, but shortly before Board presentation the project was spit in two and the investments in UWSS put under a second project : the Second National Water Development Project (NWDP 2). Nevertheless, other activities such as constructing rehabilitation works for water schemes supplying some of the NWDP-2 cities, and some dam safety works, remained in NWDP -1 and could have been excluded . (Both the Bank and Government ICRs comment on the complexity of the project, and some of the initial "extras" were later transferred to the NWDP-2.) 4. Achievement of Objectives (Efficacy) : The Efficacy of the project was Substantial . While, as discussed above, the project design was more complex than it might have been, the project objectives were largely achieved . This is a remarkable achievement - for both the Government and the Bank teams - given that the project's detailed features were incompletely prepared during project preperation, and, hence, the project got off to a poor start . 1. Objective I - to reorient and strengthen the country's water sector institutions - was Substantially achieved. The National Directorate of Water was significantly strengthened, providing the improved capacity needed to implement the project. 2. Objective 2 - to prepare for private sector management of water supply in five cities - had High efficacy. An asset holding company and a regulatory agency were established and water supply management was privatized for all five cities: a lease contract for one city and management contracts for the other four cities . Also, strategic sanitation plans were prepared for 7 cities, followed by feasibility studies and detailed design . 3. Objective 3 - to reorient and reform the rural water supply and sanitation sector (through piloting a new demand-led approach to RWSS) had High efficacy. The demand-driven approach - which had been sceptically viewed by the Government - was successfully piloted and has now become the model for RWSS investment and management in a scaled-up program being financed by CIDA and the African Development Bank . 4. Objective 4 - to improve the management of Mozambique's water resources - had Substantial efficacy. The institutional base for water resources planning and management was established through strengthening of the Water Resources Management Department and creating an International Rivers Office . The latter provided Mozambique with greatly improved technical capacity to assess water resources and basin plans, enabling it to have stronger technical ability for dialogue with other countries on riparian rights and basin management . 5. Efficiency : Efficiency was Substantial : Notwithstanding the project's slow start, subsequent implementation of the project's multiple array of components and sub-components was expeditious; actual costs were under the appraisal estimates (90 percent of appraisal estimates) and the Credit was fully disbursed (there was a slight reduction in the cofinancing ). (NB: The project was primarily an institution building and policy related program, and on these grounds the appraisal report and the ICR did not calculate ERRs (other than for one of the city water supply systems). More could have been done; the rural water supply system would have been amenable to an ERR calculation based on an expected typical scheme, and cost effectiveness analysis could have been used for the water resources components.) 6. M&E Design, Implementation, & Utilization: (Information on M&E is sparse in both the PAD and ICR; the commentary below also uses information obtained from interviewing the task team.) A MIS system was planned for the project and is reported in the ICR's performance indicators to have become fully operational with regular reporting. FIPEG and the regulator for the private operators running the urban water and sanitation schemes (under NWDP-2) is reported to be obtaining the information needed to monitor operations and results and regulate the sector . For most of the project, monitoring was limited to MIS, and appears to have been adequate for project management purposes . The rural water supply component had an in -built M&E system and this served the important purpose of underpinning evaluation of the pilot program's success, a basis for the major roll -out of the new demand-led RWSS program subsequent to the pilot . For the National Directorate of Water, however, the ICR comments that a comprehensive M&E system was not established . 7. Other (Safeguards, Fiduciary, Unintended Impacts--Positive & Negative): The ICR does not report any safeguard, fiduciary or other issues . The water resources management component has potential environmental impact (positive or negative) resulting from the management of the international rivers, but this is not discussed. 8. Ratings : ICR ICR Review Reason for Disagreement /Comments Outcome : Satisfactory Satisfactory Institutional Dev .: Substantial Substantial Strong achievement in establishing the new institutions and capacity building generally; although this was helped by a large consultant contingent . Sustainability : Likely Likely The new institutions are still learning their roles and qualified staff are limited in number making the institutions potentially vulnerable to staff departures for more remunerative activities. However, Government commitment is strong, donor support is continuing, and further IDA involvement through AAA activities will help guide the sector. Bank Performance : Satisfactory Satisfactory A weak quality at entry and very slow start was subsequently turned around by a strong task team. Excellent performance helped enable the project to substantially achieve its objectives. Borrower Perf .: Satisfactory Satisfactory The Government's commitment was tentative at first, but progressively picked up because otf the project's positive experience. Government commitment  became strong and a highly competent project manager was appointed. Quality of ICR : Satisfactory NOTES: NOTES - When insufficient information is provided by the Bank for IEG to arrive at a clear rating, IEG will downgrade the relevant ratings as warranted beginning July 1, 2006. - ICR rating values flagged with ' * ' don't comply with OP/BP 13.55, but are listed for completeness . 9. Lessons: 1. Divest all non -essential features from a complex project : For a complex project in particular, the design should support the core thrust(s) of the project, and not add any components, sub -components or activities that are not central to achieving the objectives . This was a highly complex project involving major institution building and innovation in three demanding areas : water resources management, rural water supply and sanitation, and privatization of urban water supply . The project contained a number of sub -elements under various components, usually for infrastructure, which were not needed . (Recognizing this, the Bank team and Government took several such sub-elements out of the project during implementation .) 2. Successfully piloting a new approach, even on a small scale, can have major impact : The Rural Water Supply and Sanitation component constructed only 130 point source and 3 piped scheme water supply facilities to pilot a demand-driven approach which was entirely new to Mozambique . The Government and a number of development agencies were sceptical initially, but became strong supporters as they witnessed success . The new approach is now fully espoused by the Government and has attracted large donor support for a major scale -up - US$35 million from various donor agencies and a commitment of US$ 100 million from the African Development Bank. Designing and supervising the pilot required substantial Bank staff expertise and time, but the pay -off has been large. 3. Mozambique's largely successful project experience in : (i ( i) developing capacity for planning and monitoring ii) privatizing urban water supply, and (iii) water resources management for international rivers; (ii) iii ) introducing a demand -driven rural water supply program, could be of interest to other countries, especially in Africa . 10. Assessment Recommended? Yes No Why? Together with the partly overlapping Second National Water Development Project scheduled to be completed in October 2007, a broad spectrum of activities in Mozambique's water sector would be covered (NWDP-2 adds coverage of the urban water supply and sanitation sector ).. 11. Comments on Quality of ICR: . The report presents a candid assessment, including of areas where The quality of the ICR is Satisfactory overall. performance was less strong, and the project issues are thoughtfully discussed . The report is well structured and systematically covers the project development objectives and components . Areas where further evaluation might have been helpful are : (i) the project's monitoring and evaluation systems and economic analysis could have been further elaborated; (ii) more specific examples of project impact could have been provided: for instance, information on the financial viability of the private companies managing the urban water supply schemes, and any already apparent water availability gains or potential gains from the strengthened WRM and river basin analysis capabilities .