Mali - Rural Water Supply Project

Dnomea of The World Bank FOR OMCIL USE ONLY * e, No. P-3673--LI r ~o MD 1 _ PR1S T OF TM IllTENWlON DVBONT ASSOITO TO THE EZE:DTVE DIRE1=ORS OK praposE) CREDIrS or SDR 4.4 N1=T N PEl IDA ND SDR 6.3 MILLMOC PK THE IDA SPEIAL PUND TO THE RE PC P or FOR A RtRAL WATER SUPPLY PRWOJET November 17, 1983 rce bu * uidgibbUIiW my be _ b Piim I dhe pfu | thi gUcI dIm lb muub my ndhewl be db_un wIIht - We Buk a_hu,Iu.  NA RURAL VA SUPPLY PROJECT CURNcr EQI S Carrency Unit = alian Frsac (IF) I/ US$1.00 = 1746 IF 1.00 = USSO.00134 IF 1,000 U USI1.34 US$1.00 SDR 0.946 VEIGHTS AID MEASURES 1 meter (m) = 3.28 feet 1 kilometer (km) = 0.62 miles I liter (1) = 0.26 US gallons I cubic meter (=3,= 264 US gallons 1 cubic meter/second (=3/s) = 31.5 m'llion cubic meters per year or 22.8 ;illion US gallons per day I liter per capita per day (lcd) = 0.26 US gallons per capita per day ABBREVIATIONS AD ACROBM AfDB African Development %snk CCE Caisse Centrale de CoopGration Economique DNAPLA Direction Nationale de l'Alphabitisation Fonctionnelle et de la Linguistique Appliquee DRME Direction Nationale de lE'lydrauligqe et de l'Ezergie FAC Fonds d'Aide et de Coopgration ICB International Competitive Bidding JICA Japan International Cooperation Agency ODIPAC Office de D6veloppement Itegre des Productions Arachidieres et Ceriali-res 0&K Operation and Naintenance OP Operation Piits PPF Project Preparation Facility Rvs Rural Vater Eipply SADW Saudi Arabian Developnent Fund UNDP United Nations Development Program UNICEF United Nations Children's Fund FISCAL YEaR January 1 - December 31 I/ The NaliaT Franc is tied to the French Franc in the ratio of 1 French Franc to MF 100. The French Franc is currently floating.  FOR OMCIAL USE ONLY MALI RURAL WATER SUPPLY PROJECT CREDIT AND PROJECT SUNMARY Borrower: Government of Nali Amount: SDR 4.4 million (US$4.6 million equivalent) from TDA SDR 6.0 million (USS6.3 million equivalent) from the IDA Special Fund Terms: Standard Project The proposed project would assist the Government to improve Description: living and sanitary conditions in the project area in Western Mali. About 230 villages would be beneficiaries of boreholes equipped with handpumps. The project would 3tress villagers' direct participation from siting of boreholes th-iough construction of waterpoints to operation and mainte- nance. Assmption by villagers of responsibilities for maintenance would be a key ingredient to the success of the project. The project would strengthen Government's capability to identify, prepare and manage this type of project. The project includes: (a) provision of about 340 productive boreholes in Western Nali, (b) supply and installation of haudpumps and necessary spare parts, (c) technical assistance, consultancy services and a training program, and Jd) studies to prepare for a follow-up project. Benefit The main benefits of the project would be the increased and Risks: availability of safe drinking water to the population to satisfy their basic water needs all year round including the dry season. The main risks pertain to the sustained maintenance of boreholes and handpumps. To minimise these risks the project would emphasize village promotion and training activities. Thi docmnent has a resticted ditbution and may be used by reipients only in dt peformance ' thei ofrici dutis. Its conents may not otherwi be dsosed without World BankauthriJ  - ii - Estimated Costs (Excluding Import Duties) -------US$ million------- Local Foreign Total (a) Drilling of boreholes and site preparation 0.6 3.8 4.4 (b) Supply and installation of handpumps 0.1 0.5 0.6 (c) Technical assistance, studies, project management 0.5 2.3 2.8 b/ (d) Additional water points and/or equipments and/or consultants services - 0.6 0.6 Base cost 1.2 a/ 7.2 8.4 b/ Physical Contingencies 0.2 0.8 1.0 Price contingencies 0.6 1.9 2.5 Total Project Cost 1.9 a/ 10.0 11.9 Financing Plan ------- US$ million- Local Foreign Total % IDA 0.4 4.2 4.6 39 IDA Special Fund 0.5 5.8 6.3 53 Government of Mali 0.9 - 0.9 7 Beneficiaries 0.1 - 0.1 1 Total Financing 1.9 10.0 11.9 100 Economic Rate of Return: Not quantified. The main benefits of the project would be the increased availability of safe drinking water to the population to satisfy their basic water needs all year round including the dry season. The project would initiate important community development activities. Staff Appraisal Report: No. 4402-MLI, dated November 17, 1983 !Nap. IBRD No. 17119 a/ Of which US$0.4 million in fuel taxes. b/ Includes US$1.0 million PPF advance.  - iii - Estimtd P184 FB5 FE16 FYT F B FM9 190 FM F 192 Awnml DSk 1.1 0.4 0.6 0.7 0.5 0.5 0.4 0.2 0.2 ID LSpecinl 3xd 0.1 0.7 1.2 1.0 1.0 0.8 0.6 0.5 0.4- nmuatve DI 1.1 1.5 2.1 2.8 3.3 3.8 4.2 4.4 4.' M1Seci.al Mmd 0.1 0.8 2.0 3.0 4.0 4.8 5.4 5.9 6.3 Total 1.2 2.3 4.1 5.8 7.3 8.6 9.6 10.3 10.9  INTERNATIONAL DEVELOPMN T ASSOCIATION REPORT AJD RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON PROPOSED DEVELOPMENT AND SPECIAL FUND CREDITS TO THE REPUBLIC OF MALI FOR A RURAL WATER SUPPLY PROJECT 1. I submit the following report and recommendation on a proposed Devel- opment Credit of SDR 4.4 million (US$4.6 million equivalent) and a proposed Credit from the IDA Special Fund of SDR 6..O million (US$6.3 million equiva- lent) on standard IDA terms to the Republic of Mali to help finance a proposed Rural Water Supply Project. PART I - THE ECONOMY I/ 2. Two reports entitled "Economic Memorandum on Mali" (3200-MLI) and "Mali-Special Economic Study-Planning Institutions and the 1974-78 Plan" (3333-MLI) were distributed to the Executive Directors on June 30, 1981. The following paragraphs are based on these reports and the findings of recent World Bank and IMF economic missions. Annex I gives country data. Economic Resources and Constraints 3. Mali has a population of over 7 million inhabitants, in an area of 1.24 million square kilometers in the middle of sub-Saharan West Africa. In 1982, GNP per capita was only US$180. By almost any measure,. Mali is one of the least developed countries in the world, with a subsistence-oriented econ- omy (85 percent of the population depends on the primary sector), dependence on a few commodity exports, an extremely low rate of domestic savings (minus 2.7 percent of GDP in 1982), a high population growth rate (2.8 percent), a low level of education (less than 10 percent adult literacy and a 27 percent primary enrollment rate), and difficult living conditions that give a life expectancy at birth of only 45 years. 4. Poor physical and underdeveloped human resources, as well as inade- quate economic and social infrastructure, constrain economic growth in Mali in the short and medium term. Potential for agricultural production is limited by uncertain rainfall, fragile soils prone to exhaustion and erosion, and lew- yielding, traditional crop and livestock technologies with little scope for intensification. Mineral and energy resources are limited and difficult to exploit. Human resources are underdeveloped, in part because access to basic amenities like clean water, better health care, and educational opportunities remains quite limited. There are shortages of skilled workers and experienced 1/ This part has been updated for the President's Report for the Second Mali Sud Rural Development Project which was distributed to the Executive Directors on September 15, 1983.  -2- managers. Transportation and communication are extremely expensive by world standards, because Mali is landlocked and internal distances are vast. The above factors result in low incomes, small domestic markets, and limited potential for industrial development. Finally, Mali is a small open economy, with trade concentrated in a few commodities. Imports and exports together amount to more than half of GDP. Cotton and livestock comprise four-fifths of exports, and petroleum and foodstuffs, one-third of imports. Thus, the coun- try is extremely vulnerable to changes in world prices and declining terms of trade. 5. Although economic development will be difficult in the short and medium term, Mali has economic potential that can be developed over the long term. Malian farmers are among the most proficient in West Africa. Rainfed maize production could be significantly expanded in the south. Mali has more irrigated rice land than any other Sahelian country, as well as the largest physical scope for expanding irrigation. Hydroelectric generating potential on the Niger and Senegal rivers is significant. Although mineral resources remain largely unexplored and unexploited (except for gold), they may offer longer-term opportunities. Economic Performance 1960-82 6. The Malian Government has attempted since independence to promote economic growth while trying to improve social equity and raise consumption from very low levels. During 1960-82, annual growth of GNP per capita averaged 1.1 percent in constant prices, although annual variations were large. The economic structure has shifted as the agricultural sector has become less important while the services sector has become more so. Although this tend- ency is normal for developing economies, in Mali it also reflects the effect of policies that have shifted resources to the urban sector and to public consumption. At the same time, the industrial sector has stagnated despite government efforts to create a modern industrial base. Because of drought and declining terms of trade, as well as continuing mistakes in economic manage- ment and poor allocation of public resources, there have been since indepen- dence consistently large and worsening imbalances in public finances and on foreign accounts, with declining domestic savings and growing foreign indebt- edness. While economic and social objectives have been partially achieved, the process has led to severe financial and economic disequilibria that have been sustained only by dependence on foreign borrowing and the accumulation of arrears. 7. Mali's economic history can be divided into four periods (1960-67, 1967-74, 1974-80, and 1980-82) based roughly on changes in economic and poli- tical conditions. The changes in economic and financial structure during these four periods are indicated in the following tabulation:  - 3 - 1960 1967 1974 1980 1982 (est) GDP (US$ millions, current) 273 241 414 1,325 1,028 Agriculture (percent GDP) 55 50 35 42 43 Industry (percent GDP) 10 13 16 10 10 Services (percent GDP) 35 37 49 48 47 Terms of trade index 100 73 58 64 57 Gross domestic savings (percent GDP) 9.5 1.3 -19.2 -3.6 -2.7 Budget deficit (percent GDP) .. 5.3 3.5 4.0 1.5 Resource gap (percent GDP) -4 -16 -33 -20 -20 Net foreign assets (US$ millions) 2 1/ -56 -139 -279 -235 Long-term foreign debt (US$ millions) .. 269 441 853 1,260 Constant GNP growth rate (percent p.a.) 2/ .. 3.4 2.5 8.2 0.4 These figures (as well as the economic indicators in Annex I) illustrate some of the major trends in the Malian economy. 8. Post-independence, 1960-67. The first post-colonial government undertook a major program of modernization that included an independent mone- tary system, an ambitious five-year development plan, a program of industria- lization based on state enterprises, and a welfare orientation intended to keep prices down and to assure consumers an adequate supply of basic commodi- ties. During this period, GDP growth was high in part because of favorable climatic conditions, but public pricing and investment policies created finan- cial imbalances that could not be sustained. Government budgetary deficits often exceeded 5 percent of GDP. By 1967 the resource gap had quadrupled (as a percent of GDP), net foreign assets had turned negative, and the debt ser- vice ratio had risen to 19 percent. The economic crisis led to the signature of monetary accords with France in early 1967, followed by a 50 percent deval- uation in mid-1967 and reintegration with the franc zone in early 1968. At that time, the French Treasury opened an Operations Account for Mali to pro- vide overdraft facilities to support the convertibility of the Mali franc. 9. Economic Reform, the Sahelian Drought, and the Energy Crisis, 1967-74. In late 1968, a new government launched an ambitious but pragmatic reform program that proposed to increase official commodity prices and liber- alize private trade--especially in cereals. But the shock of the severe Sahelian drought (1968-73), followed by a quintupling of petroleum prices during 1972-74, caused economic performance during 1967-74 to be poor, leading to a decline in the primary sector output and real per capita income. These shocks also prevented the new government from carrying out reforms, and eco- nomic policies remained inadequate. For example, low official prices and restrictive marketing regulations discouraged agricultural production and led to increased food imports. Recourse to bank credit to finance the mounting 1/ 1962. 2/ Rate is for the period that preceeds the year under which the figure is given.  - 4 - losses of state enterprises led to increased external debt. By 1974, the economic imbalances--already large 7 years earlier--had either deteriorated or not improved. Domestic dissaving was greater, net foreign assets had fallen by over 100 percent, and public external debt more than doubled. The resource gap was also larger although this reflects partly the large inflow of foreign aid to sustain consumption after the 1968-73 drought. 10. Uneven recovery, 1974-80. Compared to the drought years, the sub- sequent period was favored by generally better weather and more foreign aid. There was more rapid growth of GDP, led by agriculture recovering from the drought. But the severe disequilibria in public finances and external accounts inherited from earlier periods were not corrected. Inflation in- creased. Domestic dissavings and the resource gap remained high. The need to finance increasingly large Government Treasury deficits and growing losses in state enterprises caused short-term foreign liabilities to double. Borrowings to finance the 1974-78 Development Plan caused external long-term public debt to double as well. Despite a few abortive efforts late in the period, the Goverment did not develop and carry out reforms. Continuing external shocks, like a second jump in petroleum prices, hampered reform efforts, but the availability of substantial foreign resources also made the imbalances more manageable and relieved some of the pressures to change policies. 11. New orientations, 1980-82. Faced with both worsening financial disequilibria and a more restrictive central bank credit policy, the Malian Government at the end of 1980 requested technical and financial assistance from both the Bank and the IMF to help it formulate and carry out a program of economic reform and adjustment. IDA responded to this request with a US$10.4 million Economic Management and Training (EMT) project (Credit No. 1307-MLI). The first assistance was in the field by mid-1981 under Project Preparation Facility financing, and the project was approved in December 1982. The IMF prepared a one-year Standby Program, which was approved for SDR 30.4 million in May 1982, and a second, 18-month Standby Program is under negotiation. In conjunction with this assistance, the Government has carried out numerous reforms in the areas of public finances, government employment, education, agriculture, and state enterprises. 12. In public finances, Government has more than halved the budget defi- cit, while also significantly reducing arrears, by increasing receipts faster than expenditures. Regarding public employment, Government has reduced re- cruitments and stopped automatic hiring of graduates. The education budget has been reallocated in favor of basic education. In agriculture, Government has both liberalized markets for coarse grains and groundnuts and substan- tially increased official producer prices. Distortions in retail grains markets have been reduced, as have the financial losses of the state marketing board. The record for state enterprises is less positive, in part because of difficulties in reducing excess employment, but the Government *s exploring major restructuring options.  -5- Development Policies 13. 1981-85 Development Plan. This Plan continues to give priority: to water development for the -ural population, livestock, and irrigation; to agricultural and livestock production for achieving food self-sufficiency, for supplying an expanded agro-industrial sector, and for increasing commodity exports; to energy development; and to conservation of natural resources-- especially forests and pastures. More importantly, the new Plan emphasizes for the first time the need for policy reforms to re-establish fundamental financial and economic equilibria, notably by balancing the government budget, reducing the balance of payments deficit, reducing the losses of the state enterprises, reorienting education, controlling recruitment for the Civil Service, and increasing local private participation in investments. Develop- ment expenditures propooed by the new Plan are estimated at US$2.2 billion of which US$1.7 billion would be required during the five-year planning period. Foreign sources will be expected to provide over 85 percent of the financing. At the end of 1982, the Government hosted, with UNDP assistance, a Donors Roundtable Conference to solicit firm donor commitments for Plan financing. Although unsuccessful as a pledging session, the Conference gave the Govern- ment a forum to demonstrate its new receptivity to greater aid coordination and to reiterate its request for non-incremental recurrent cost financing, estimated at about US$300 million per year to help support policy reforms. 14. Although the stated objectives of the Plan focus fairly well on the major constraints to economic development in Mali, the link between investment and objectives is weak. The document is essentially a cataloging of projects rather than allocation plan for scarce domestic and foreign resources. As a result, planned investments often appear to be too capital-intensive, unduly focused on the secondary sector, and oriented towards now projects rather than rehabilitation of existing assets. The Plan is also overly ambitious; the implied annual investment level is about 50 percent greater than the planned level for the 1974-80 period, which was itself only half realized. Implemen- tation already appears to be far behind schedule. As in the past, the poor performance and delays are caused by irsufficient project preparation, poor project management, inadequate Government counterpart financing, and poor supporting policies, as well as unrealistic expectations. These problems are likely to persist, although the Government is increasingly open to a dialogue with IDA and the IMF on improved resource allocation and investment budgeting. 15. Foreign Aid. Foreign aid finances practically all public investment in Mali and is therefore critical for promoting future growth. More than half of this aid is in the form of grants, and almost all the rest is loaned on highly concessional terms by official aid agencies. Multilateral agencies provide about two-fifths of long-term loans. IDA is by far the largest multi- lateral lender, accounting for over half the multilateral loans and for 19 percent of total debt committed and outstanding at the end of 1982. Long- term external public debt (about three-fourths of which is disbursed) has increased substantially over the last 10 years, although debt levels per capita and as a share of GDP have declined, reflecting the increase in offi- cial grant aid and continued recourse to short-term liabilities drawn on the Operations Account. Actual debt service payments on long-term debt have been quite modest in the past, and in 1980-81 the debt-service ratio was lower than  in the late 1960s and the early 19703. The debt-service ratio could rise significantly in the mid to late 1980s, but the Government is in the process of rescheduling several loans. It is expected that this and other measures (converting loans to grants and obtaining special balance of payment financ- ing) will keep the debt-service ratio within manageable proportions. PART II - WORLD BANK GROUP OPERATIONS IN MALI 16. The proposed credit would be the Association's thirtieth credit ex- tended to Mali (:.ncluding two supplementary credits), which would bring total commitments of IDA funds to US$292.2 million equivalent. Of the twenty-nine operations already approved, eleven have been for agriculture and related industries, eight for transport, two for education, two for telecommunica- tions, two for energy, one each for smallscale industries, urban development, power and water supply, and technical assistance. Agriculture and transporta- tion represent the largest share of past commitments, with 37 and 28 percent, respectively of total commitments. The experience with ongoing operations has been mixed. In general, project implementation has been hampered by Mali's difficult public finance situation, although the disbursement profile through 1981 for Mali is slightly more rapid than for both the West Africa Region and all IDA countries. In addition, the International Finance Corporation has made two investments for a total of US$3.2 million, one in a company manu- facturing bleach and plastic products, and the other in a company processing sheanut butter for export. 17. The Bank Group's strategy in Mali is governed by the constraints and potentials set out in Part I. The principal objectives of Bank Group assis- tance are to help improve the country's economic policies, to finance produc- tive investments, and to help develop institutions to implement policies and projects effectively. The scope and pace of IDA's program depends on an on- going assessment of the country's economic management; particularly upon the willingness and ability of the government to address policy issues and under- take reforms where they are needed. 18. In response to the changed policy climate over the past two years (para. 11), we are devising a flexible program of financial and technical assistance. While our interventions will continue to be in the form of indi- vidual projects, they will increasingly help promote reform in support of the Government's efforts. Already, an economic management and training project, begun last year, provides institutional support and detailed policy analysis on which long-term structural reform can be based. The future lending program includes investment projects in the rural sector, in general and social infra- structure (transport, power, water supply, health, education) that directly address policy and institutional issues--agricultural pricing and marketing, public enterprise reform and public employment policies. Where possible, projects will be closely related, as is the case with the proposed project and a health development project--both cover the same general region and both support each others' activities.  - 7 - PART III - THE RURAL WATER SUPPLY SUB-SECTOR The I.ural Water Supply (RWS) Sub-sector Situation 19. The principal source of water supply in the rural areas in Mali is groundwater which is generally found in small and discontinuous aquifers, and is generally of good quality and in sufficient quantity to satisfy the needs of individual villages. Annual rainfall ranges from 250 mm to 1,300 mm, and is quite unevenly distributed. In the Sahelian zone, it is common to have a e dry season of close to 9 months, during which period the traditional dug wells tend to dry up, forcing the villagers to rely on the few remaining contami- nated surface sources (ponds, and small rivers), which ofton involve distances of several kilometers. 20. Overall, the rural population is highly dispersed, with more than 80 percent of the approximately 10,000 villages counting less than 600 resi- dents. About 25 percent of the villages or only about 18 percent of the entire oural population have access to safe water from modern water points, while more than 7,000 villages still have to rely on contaminated water from the above mentioned traditional sources. Water consumption estimates are difficult to establish; it is likely that per capita consumption in the rural areas of Mali is at the same level as in the general Sahelian context, that is between 15-30 liters per capita per day (lcd). RSW - Sub-sector Organization 21. The main sub-sectoral institution is the Direction Nationale de l'Hydraulique et de l'Energie (DNHE) under the State Minister in charge of Industry and Equipment, which is responsible for establishing sector policies, investment programs, preparation and execution, as well as supervision of rural water supply (RWS) projects. 22. A second department within the Ministry in the sector is the Direc- tion Nationale de l'Operation Puits, (OP), the Government agency for open well construction. This department, which is not involved in sector policy, is active in 17 scattered geographical areas, with a staffing of around 350. OP's programs are financed by the African Development Bank (AfDB), and by several donors under RWS components of rural development ojects. 23. The RWS sub-sector, and in particular the borehole programs, have been developed almost exclusively with external assistance both as HWS pro- jects and as part of rural development projects. The major programs have been financed by UNDP/UNICEF, HELVETAS (Switzerland), CCCE (France), SADF (Saudi- Arabia), JICA (Japan) and various non-governmental agencies. Each donor agency has, in principle, been assigned its own geographical area, and sepa- rate executing mechanisms under the supervision of DNHE have been set-up. From the mid 1970s, when these programs started following the drought, invest- ments in the order of US$5.5 million per annum have been nxecuted, resulting in approximately 1,600 productive boreholes by mid-I982. New programs under preparation would increase the drilling activities from currently 700 to about 1,000 boreholes per annum. While this would represent a major expansion over  ac-tual levels, it would still be far from sufficient to correspond to the iaceds* Investments of an estix.rited US$150 million (in 1982 prices) or 3 to 4 times the present levels over the next 7-8 years in the form of accelerated drilling programs would be required to achieve the International Drinking Water Supply and Sanitation Decade goals of supplying water to the entire rural population. It would appear more realistic to expect meeting these goals with a delay of at least 5 to 10 years. RWS Sub-sector Issues 24. Throughout its recent development, the principal issues the sub- sector faced can be summarized as follcws: (i) lack of rational medium and long-term planning for a coherent overall sector development strategy; (ii) lack of organizational discipline and coordination between DIHE and OP; (iii) inadequate budget provisions for planning, construction and super- vision, and for maintenance; (iv) shortage of qualified national technical personnel; and (v) insufficient experience in designing RWS projects demonstrated by gt) an absence of promotional campaigns to encourage active village participation including contribution to construction, decisions as to technical and financial aspects of investments and maLintenance; and (2) absence of cross-sectoral linkages with he.Ilth and general de-"el- opment services. Sub-sector Policies 25. The lessons from past and ongoing projects have not gone unnoticed by the Nalian Government and by the donors active in this sub-sector. DNHE, in view of its expanding activities in the RWS sub-sector, has with increasing support by the donors, started to cope with the above issues and adopted the following new policy orientation: (i) Regionalization of programs by limiting the zone of action for each drilling unit in order to reduce the cost per well. This policy has been successful and resulted in almost doubling the output of the UNDP/UNICEF projects; (ii) Financial participation by villagers for both purchase and mainte- nance of handpumps to promote the ownership concept, thus encouraging the population to actively assume maintenance responsibilities of their own investments. Positive results are being gained under the ongoing 3 major RWS projects; (iii) Increased importance of training at the village level to achieve self-sufficiency in maintenance by the villages in the RIS sub- sector;  - 9 - (iv) Decentralization of DMHE's RYS project management and improved coor- dination of programs to ensurp flexibility of execution locally and enhance coherent and standardizea approaches to sector and project issues; and (v) Closer linkage of water and health aspects in the design and imple- mentation of RWS projects to maximize the synergistic effects. 26. These policies deserve full support by IDA, more so as they refle*-t the state of art of the RWS situation in the Sahelian countries. Bank's Lending 27. The RWS sub-sector receives relatively plentiful external assistance, essentially for the development of rural groundwater sources. The proposed project represents IDA's first free-standing RWS project for Kali, and reflects the Association's lending strategy in the sub-sector which is, over and beyond past involvement in this sub-sector through components of rural development projects, focussed on- national strategy development and institu- tion building through (i) promotion of appropriate organizational improvements in project design, execution, and subsequent operations; and (ii) support of sub-sector policies, in particular with respect to technical design, benefi- ciaries' participation and cross-sectoral linkages with health. The proposed project has been pre,ared in close coordination writh a health development project, and it includes direct support to that project (para. 29(i)). The Association is assisting in the development of the urban water supply sub- sector through the water supply component of the llali Power/Water Project (Cr. No. 1282-ltLI) which focuses on the utility's sound institutional development. PAT IV - THE PROJECT Background 28. The proposed project was identified in 1980 in parallel with the pro- posed health development project. In October 1980 an advance of USSO.44 million was granted under the Project Preparation Facility (PPF) for preparatory studies. A further advance of USS$O.5r million was granted in August 1983, to finance construction of a project base, necessary to accelerate project imple- mentation and for advance training of national staff. The project was appraised in October/November, 1982. Negotiations were held in Washington, in October 1983. The Government delegation was headed by the Director of DNEE. A Credit and Project summary is given at the beginning of this report and a Staff Appraisal Report, No. 4402-LIl, dated November 17, 1983, is being circulated separately to the Executive Directors. A supplementary project data sheet is presented in Annex III. Project Objectives and Description 29. Together with the proposed health development project, the project aims at improving living and sanitary conditions in the proj".ct area. The proposed project's main goals are to:  - 20 - (i) supply water for basic human needs in about 215 villages in the district of Kita and 15 villages in the districts of Bafoulabe and Kenieba where health centers would be built under the proposed health development project; (ii) set-up an operation and maintenance (0&N) system of the water points to ensure availability of spare parts and emphasize maximum self- reliance by villagers; and (iii) strengthen the capability of DMKE to identify, prepare and manage RiS projects, as well as provide technical assistance to villagers for maintenance of the handpumps. 30. The project consists of: (i) provision of about 325 productive boreholes in the district of Kita during a four-year drilling campaign, and provision of about 15 productive boreholes during the first campaign in the villages in the districts of Bafoulabe and Kenieba where health centers would be built; (ii) installation of about 340 handpunps and supply of necessary replace- ments and spare narts; (iii) management of the project including: (a) consultant services for project preparation (financed under the PPF), (b) construction of Project Nanagement offices, garage and warehouse "Base de Kita - (financed under the PPF), and (c) technical assistance to DNHE for Project Management including geophysical survey for well siting, promotional activities at the village level as well as supply and operation of the necessary equipments and vehicles for the DuKE's field team; Civ) consultant services for a mid-project revi-zv (para. 33) and preparation of a second project in the districts of Bafoulabe ant K-enilba; and (v) construction of additional water points and/or supply and installa- tion of additional equipments and/or additional consultant services, activities to be defined at the time of a mid-project review to be carried out during the third drilling campaign by an independent consultant, to take advantage of opportunities emerging during the first years of implementation. Project Cost and Financing 31. Total project cost is US$11.9 million including US$0.4 million in fuel taxes. US$10.0 million is in foreign exchange. This excludes import duties, which are not applicable. Project costs have been calculated after a detailed analysis of each component based on cost data from similarly orga- nized RWS projects in Sahelian countries, compared with quotations obtained for similar works recently tendered in the West African region and take into account the estimated low success rate of drillings in the project area (50  - 11 - percent). Base cost is calculated as of end 1982. The average cost of techni- cal assistance (including salary, social charges, international travel, local allowances and company overhead) has been estimated at US$ 7,300 per month. Allowances for physical contingencies on construction works and consultant services at average rates of 15 percent are provided, and price contingencies have been included at a rate of 8 percent in 1983, 7.5 percent in 1984, 7 percent in 1985, and 6 percent thereafter for foreign exchange components and at a rate of 15 percent in 1983, 12 percent in 1984, and 10 percent thereafter for local cost components. 32. The proposed IDA Credit of SDR 4.4 million (USS4.6 million) and Credit from the IDA Special Fund of SDR 6.0 million (US$6.3 million) would finance 92 percent of project cost, or 95 percent of project costs net of taxes. The remaining project costs of US$1.0 million would be covered by Xalian counterpart funds, of which US$0.1 million are estimated to be contrib- uted directly from the project beneficiaries. Project Implementaation 33. DNHE, under the State Ninister in charge of Industry and Equipment, would be responsible for the implementation of the project. Detailed designs and tender documents financed uiLder the PPF, are being .prepared. They will be ready by December 1983. For bid evaluation, contract preparation and construc- tion supervision, DME will be assisted by an engineering consultant selected in accordance with Bank guidelines. The signature of the contract with the consultants would be a condition of effectiveness (Development Credit Agree- ment (DCA) Section 6.01(c) and Special Fund Credit Agreement (SFCA) Section 6.01(d)). It would be important that actual drilling activities start by October 1984; the project activities would extend to end 1989. During the third drilling campaign, DME will employ a qualified and independent con- sultant to carry out a mid-project review and an evaluation of the activities to be included in the fourth drilling campaign (DCA and SFCA, Sections 3.09). For training and promotional activities at the village level, DNHE would be supported by the Office de Developpement Integre des Productions Arachidieres et Cerealiares (ODIPAC), an IDA-supported rural extension agency, and the Direction Nationale de l'Alphab&tisation Fonctionnelle et de la Lingaistique Appliqu6e (DNAFLA), the national functional literacy agency. To this end, DNHE will enter into arrangements with ODIPAC and DNAFLA for this support no later than 1 April 1984 (DCA and SFCA Sections 3.07). Timing of implementa- tion with the proposed health development project will be closely monitored, in particular the drilling of boreholes for the health centers. Procurement and Disbursement 34. The contract for the drilling of boreholes would be awarded through ICB procedures in accordance with the IDA Special Fund guidelines. The con- tract for supply and installation of handpumps, as well as other contracts for possible additional work or equipment would be awarded through ICL procedures in accordance with IDA guidelines. For the technical assistance and studies, consulting firms would be selected in accordance with procedures acceptable to IDA. The technical assistance contract would cover 95 man-months, and also the supply and operation of related vehicles and equipment. No domestic  - 12 - preference will apply in contract award, because of the absence of qualified local contractors and/or suppliers. 35. The proposed Credits would be disbursed as follows: ID& Credit MD Special Fbnd QCdit %-f % of Ammmt Edime Aount Eendituxe Cabego US$ millixm FirSnced DM millim ed (i) civil uads (Dzllirg of boeboles) - - 5.4 92 (ii) Blipurs(m*u*s ansd other eiuvpimt) 0.7 100 - - (iii) n^zbsserwices and studies 2.2 100 - - (iv) ReEinng:iiW of the PFFF 1.0 100 - - (v) Uni1located 0.7 - 0.9 - Tol1 _4.6 6.3 36. The Government contribution will be paid to a Project Account in six installments. Allocation by the Government for its 1984 fiscal year of MF 110 million (USS147,500 equivalent) for the project, establishment of the Project Account, and payment of the first installment of MF 20 million (US$26,500 equivalent) would be conditions of effectiveness of the Credits. (DCA Sections 3.01(b) and 6.01(a) and (b) and SFCA Sections 3.01(b) and 6.01(a) and (c)). Further installments of NF 90 million, MF 110 million, MP 150 million, MF 190 million and MY 90 million (US$121,000 US$S147,500, USS200,000, US$255,000, and US$S121,000 equivalent) would be paid before the beginning of each drilling campaign not later than August 31, 1984, 1985, 1986, 1987 and 1988 respec- tively (DCA and SFCA - Sections 3.01(c)); proceeds of the villagers' contri- bution will also be paid to the Project Account (DCA and SFCA Sections 3.01(c)). This account will be managed by the Project Nanager, supervised by the Director of DNHE, and subject to regular review by Bank staff and an annual external audit (DCA and SFCA Sections 4.01 (b)). Funds will be used for payment of the portion of the drilling contract not covered by the IDA Special Lund Credit, for purchase of cement required for site preparation, spare parts for vehicles as well as some office supplies on the basis of a budget established for each drilling campaign. The budget would be prepared three months before the beginning of each drilling campaign and reviewed by IDA (DCA and SFCA Sections 3.06). Affordability and Cost Recovery 37. An important parameter in project design has been the emphasis on minimizing the financial burden on the DNHE's budget. Hence, beneficiaries will assume the cost of regular pump maintenance, including purchase of spare parts and of repair interventions by the DNHE, estimated at MF 26,500 per waterpoint in 1982 prices, or almost 45 percent of expected annual operation and maintenance costs.- By project completion, total annual recurrent costs are estimated to be MF 21.5 million per annum in 1982 constant prices, of which DNEE would provide NF 12 million per annum or 9 percent of its 1982 RWS  - 13 - sub-sector budget. Annual Government counterpart contributions to project implementation should serve as an adequate "primer" for budgeting allocations to DNEE in post-project years. During negotiations the Government gave assur- ances that, after the project implementation period, adequate resources re- flecting these estimated annual maintenance requirements would be provided for in DNHE's annual budget (DCA and SFCA Sections 4.02). 38. Full recovery of capital costs by beneficiaries is not feasible for RWS projects in the Sahelian zone. However, in line with recent Government policy to encourage rural communities to participate to the extent possible in the financing of handpumps and to assume greater responsibility in the opera- tion of the subsector, the project aims at partial recovery for handpumps. Thus, prior to installation of the handpump, the villages will be asked to pay to the Project Account a contribution of KF 270,000 (US$360), representing about one-third of the purchase price of the pump and the full cost of the cement necessary for site preparation in 1982 prices. The amount, together with the contribution to operation and maintenance costs, is within the affordability range of the beneficiaries, and surveys have shown that the willingness to assure this contribution as well as the necessary expenditures for subsequent maintenance is very high among the target population. DNHE will enter into arrangements with each participating village setting out the responsibilities of each village, including the financial and physical con- tribution in construction, operation and maintenance of water points (DCA and SFCA Sections 3.08). Project Benefits and Risks 39. The main benefits of the project would be the increased availability of safe drinking water in the project area year round. This is expected to result, in conjunction with the proposed health development project in improved health among the affected rural population. As a further benefit the project would promote initiatives of community organization by institu- tionalizing water and health related activities at the village level, thus serving as a vehicle towards further community development. By attempting to mnaxmize the responsibilities of the beneficiaries themselves in organization and management, and in the financial aspects of those activities, the project would also reduce the incremental burden of the nazional budget of DNHE. 40. A major benefit at the regional level will be the installation of a nucleus field team of DNHE in the First Administrative Region within the framework of the decentralization policies of the Government for the R1S sub- sector. This field office would remain in place after project completion to continue supervision of 0& of the water points, and the execution of future generation RWS projects in that region. 41. The main risks pertain to the sustained maintenance of boreholes and handpumps. The Sahelian experience has shown that the most promising results are reached when a sense of ownership of communal wells is fostered in vill- agers and the responsibility for their maintenance is given to the rural community. However, given the relative early stages of the RYS sector devel- op=ent and recent adoption of this orientation, many questions related to sustained community motivation to use and maintain the investments, and to the  - 14 - real impact on health and living conditions remain and can be answered only during actual project implementation. The project consequently emphasizes village promotion and training activities. Also, to further reduce this risk, the concept of a "contract' between the Government and the rural communities, will be applied in the project following positive experience from other similar rural water supply projects in Mali (para. 38). Still, the rural communities would not be able to solve all their maintenance and repair prob- lems, but will need a viable outside support structure. This will be provided by DNHE with the assistance of ODIPAC and DNAFLA as these agencies have already established a presence in the project area and are accepted by the rural communities. 42. On the technical side, it is possible that the projected success rate of 50 percent might not be attained, leading to higher cost per productive borehole. However, this success rate is conservative in comparison with countrywide estimates, which are in the 60 percent range. Meticulous applica- tion of geophysical works prior to drilling as well as improved knowledge of hydrogeological characteristics during project execution should ensure more positive results. As to water quality, while an unknown factor at present, this is unlikely to prove of major concern, based on experiences in adjacent RWS program zones with similar geological formations. PART V - LEGAL INSTRUMENTS AND AUTHORITY 43. tie Development and Special Fund Credit Agreements between the Repub- lic of Mali and the Association, and the Recommendation of the Committee provided for in Article V, Section 1(d) of the Articles of Agreement of the Association are being distributed to the Executire Directors separately. 44. Special conditions of the project including conditions of effective- ness are listed in Section III of Annex III. 45. I am satisfied that the proposed Development and Special Fund Credits will comply with the Articles of Agreement of the Association. PART VI - RECOMMENDATION 46. I recommend that the Executive Directors approve the proposed Development and Special Fund Credits. A. W. Clausen President Attachments Washingzon D. C., November 17, 1983  BEST COPY AVAILABLE - 15 - r A B L E 3A PA;E I KAU - SUCLAL LEIIClATOBS DATA SHEET ALL IIUFC ;RUUUS (aLGWND AVURAEs) in Y?OS? (051 RI CENT ESTIMIAT) lb 19,jolb 7RETEl EdICI ZItIUIJCTCOL-K 196*,/h 1970/b ESTLAY-/ AFRICA S. Ui' SAHARAA AFICA S. UF SAHIAA DA EuauSAmS. gQ 2) IUTAL 1240.0 40. 240.0 AGMICUilLtulRAL 317.6 317.5 320.5 CEf PM CUPM (CM) 50.0 80.0 190.u 254.6 1L47.9 (KILOGgAS OF COAL EQUIVALENT) 10.0 23.0 31.0 79.8 724.2 POOLAIIO AID VITAL STATISTICS POPULATION .NID-YEmR (TIoSASDS) 4040.0 5162.0 6881.0 URBAN POPULATICO C: OF TOTAL) 11.0 14.9 18.0 19.5 2U.5 POPULATION PROJECTLONS POPULATION 1S YEW 2000 (mtLLL) 12.1 STATIONARY POPULATION (HILL) 44.4 YEAR srATIoARY POP. REACIED 2155 POPULATlON UESlITY PER sq. S. 3.3 4.Z 5.4 29.5 56.5 MEt Sq. 51. ACKI. LUO 12.7 16.3 20.5 94.1 131.J POPULAT1ON ACE STRUCTURE (C) 0-14 YiS 41.7 44.7 46.7 45.U 45.9 15-6S YES 53.7 5Z.b 50.6 52.1 51.2 bS AMD ABOVE Z.b 2.7 2.7 Z.9 2.6 POPULATILCK GaOUWIIStArE (Z) TOTAL Z.1 Z.5 2.6 2.d 2.8 URBA 5.2 5.4 4.6 6.Z 5.3 CRUDE BIRDS RATE (PER TIDUS) 49.8 49.1 48.5 47.9 47.b CRtUDE DEALd RATE (PER 1U0US) 26.6 23.8 21.4 19.Z 15.2 GROSS REPRODUCTLON RATE 3.3 3.2 3.2 3.2 3.2 FASILY PLANNING ACCEPTORS ANNUAL (T1OUS) .. .. UsaS (: OF IAfRRIED bWlOn) .. .. FOD A4D ImlRITIO INDEX OF FOOD PROD. PER CAPITA (1969-71-100) 103.0 100.0 90.0 87.8 95.7 PER CAPITA SUPPLY OF CALORIES (I OF REQUIRENERTS) 91.0 89.0 85.0 8W.0 97.1 rAUTEINS (GRAMS PER DAY) 59.0 57.0 55.0 51.2 5b.0 OF wIaC ANIMAL AND PULSE 16.0 16.0 14.0/c 18.1 17.2 GULLD (AGES 1-4) DEATd RATE 45.8 39.8 33.2 25.7 23.6 LIFE EXPECt. AT BIRTH (YEARS) 37.2 40.3 44.6 47.4 51.9 ISFANST OT. RATE (PER THOOS) 194.7 174.5 152.1 126.5 117.6 ACCESS 10 SAFE WATER (MPOP) TOTAL .. .. 9.0/d 24.7 25.4 URBAN .. 29.0 42.07;i 56.8 70.5 RUUAL .. .. 3.0/d 18.3 12.3 ACCCSS TO SZCR DISPOSAL (E OF POPULATON) TOTAL .. 8.0 .. 28.1 URBAN .. 63.0 .. 65.7 RURAL .. .. .. 21.9 POPULATION PER PRYSICIAN 64130.0 42660.0 22130.0/. 27420.6 12181.6 POP. PER NURSING PERSO 471O.O/f.g 2740.0 2380.07W 3456.2 Z292.0 POP. PER HOSPITAL BED TOTAL 1390.0/h 1420.01h 1760.0/c h 1l83.2 1075.4 URBS 350.M7A z6uo.d7Th 570.0ol? 360.6 O0.3 RURAL 2520.aOf i5&o.dh .. 3177.5 3926.7 ADMI5SSIONS PER HOSPITAL EE ., 27.3 30.5/c AVERAGE SIZ OF HOUSEHOLD WITAL .. .. 4.8/d URBAN .. .. RURAL .. .. AVERSGE NO. OF PERSONS/RDClt TOTAL .. .. URBAN .. .. RURAL .. .. ACCESS roI ELECT. (2 OF DUELLINGS) TOTAL .. .. RURAL .. ..  Ld WCOPY AVAILABLE - 16 - T A 5 L t 3h PAC 2 hIAL.L - SUCIA6 TOR DATA SHUT NSFIMSMZ UNOURF(YL,GUMM AMWRA.1-) ~0ST ra(4ST %E= 8TraUu) lb 1-96O~. 191,Jb LOi.w t=Cn HIPLE1 UK 1960 IStl5 ESIUU .I7-CA S. OV SAIASA AfICA S. OF SALAA I00CATZ* 6. ADJUSTD 4N3U=:.r RATIOS PaIiT;Y: trl 20.0 26.0J 3.9 97.2 LUt