Cambodia - Water Supply and Sanitation

Report No. PIC4468 Project Name Cambodia-Water Supply Project Region East Asia and Pacific Sector Water Supply and Pacific Project ID KHPA45629 Borrower Government of Cambodia Implementing Agencies Phnom Penh Water Supply Authority (PPWSA) Ministry of Industry Mines and Energy (MIME) Contact: Mr. Ek Sonn Chan, Director, PPWSA Address: North of Cambodia Railway Station, Phnom Penh Phone/Fax: (855) 234-28969 Tentative Appraisal Date December 1996 Board Date February 1997 Date this PID Prepared September 1996 Country/Sector Background. Cambodia is one of the poorest countries in the world, and has unique difficulties to overcome as a result of decades of internal conflict and genocide. As the government tries to rebuild the country, one of its major tasks is to rehabilitate infrastructure and to develop a cadre of people to run institutions and utilities. The water sector and sanitation sector requires urgent attention. The institutional arrangements in the sector are complex. Water supply in Phnom Penh is the responsibility of Phnom Penh Water Supply Authority (PPWSA), currently a municipal department and thus under the Ministry of the Interior. Piped water supply for Cambodia's provincial cities is the responsibility of the Unit of Potable Water Supply (UPWS) in the Ministry of Industry, Mines and Energy (MIME). Rural water supply and sanitation come under the Ministry of Rural Development. Sanitation in Phnom Penh is the responsibility of the department of public works of the municipality, whereas the Ministry of Public Works oversees sanitation in provincial cities. The department of Hydrology of the Ministry of Agriculture collects hydrological data, but no authority currently takes overall charge of managing the country's water resources. The water supply system in Phnom Penh has around 29,000 connections, about half of which are metered. This is clearly inadequate for a city with a population over one million. Unaccounted for water is around 65 percent of production, mostly non-physical losses. PPWSA has made substantial progress managing its operations over the last three years and now needs to become operationally and financially independent of the municipality. The proposed project will help the authority make that transition.  In provincial towns, the situation is substantially less advanced. The largest piped water supply system is in Sihanoukville, which a water supply authority (SWSA) with 750 connections supplying water to only 10- 15 percent of the city's domestic consumers. Forty percent of production is sold to a single industrial consumer. The system is severely constrained by lack of raw water resources. Since MIME took responsibility for provincial water, in February 1994, it has effected some institutional changes, but there is still considerable room for improvement. Project Objectives. The proposed project aims to enable the government to develop equitable policies and efficient institutions for the water sector and to increase water supply in the country's two largest cities. Project Description. The proposed project will have three key components focusing on: (a) policy and institutional development; (b) water supply facilities in Phnom Penh; and (c) water storage, supply and distribution facilities in Sihanoukville. Project Costs and Financing. Total project costs, including contingencies, is estimated at US$34.5 million. The project will be financed from three main sources. An IDA Credit of US$30 million is projected to cover 100 percent of the estimated foreign exchange of investment costs plus 100 percent of local costs for consultants. Bilateral grant funds will cover some proportion of project costs. Government contributions will be limited to five percent of project cost. The Standard IDA conditions will apply to the Bank's credit of US$30 million. Project Implementation. The detailed elements of the organization and management of the proposed project will be set out in a project implementation plan. A Project Steering Committee will be established to coordinate the activities of the key agencies involved. A project implementation unit, reporting to the steering committee, will manage procurement, supervise implementation and monitor progress. Project Benefits and Sustainability. The benefits from the project in both Phnom Penh and Sihanoukville will be substantial. Water supply in Phnom Penh is estimated to increase from the current 110,000 m3 per day to 175,000 m3 per day in 2000. This will allow increases in total connections during the period, and make supplies to existing connections more reliable. An estimated additional 260,000 people in Phnom Penh will receive adequate safe drinking water. In Sihanoukville, the total available water supply will increase from 2,300 m3/day to 6,000 m3/day, and ,000 additional people will receive safe water supplies. This implies important and substantial public health benefits, through both improved water quality and increased consumption. Reliable water supply will also remove a constraint to industrial development. There are thus clear direct economic benefits. In addition, the proposed project will improve management of the country's water institutions, and therefore allow them to manage existing assets sustainably and make future investments to expand services. Lessons of Experience. IDA experience in Cambodia is still limited. This project is the first in the water supply sector, as the portfolio -2 -  is in an early stage of development. However, based on experiences with the Emergency Rehabilitation Project (Credit 50-KH), several potential problem areas can be identified: (a) government procedures on procurement are not transparent and implementing agencies are unfamiliar with Bank guidelines; (b) insufficient allocations of counterpart funds; and (c) implementation difficulties related to security problems in the country. The proposed project will include specific measures and/or covenants to address (a) and (b). The security situation will be closely monitored as part of project processing. Environmental and Social Aspects. The proposed project has a ' B environmental rating. The project's principal environmental impact will the increased volume of sewage resulting from the increase in water supply. The project will include a study on appropriate actions to manage sanitation both in the capital and in provincial cities. The main social issue is the displacement and resettlement of a few households currently living on land and structures belonging to the PPWSA. The Borrower has completed and submitted a satisfactory acquisition, compensation and rehabilitation plan for this component of the project consistent with Bank guidelines. No resettlement is anticipated in the Sihanoukville component. Project Risk. The proposed project involves some risks that will need to be minimized. Perhaps the greatest relates to the viability of both PPWSA and SWSA and their ability to raise necessary working capital. The financial analysis highlighted significant problems for PPWSA particularly high rates of unaccounted for water and poor billing efficiency. These two problems have the potential to cause serious financial difficulties particularly in view of the high levels of debt that PPWSA will take on under the proposed project. Both PPWSA and SWSA could suffer financial problems if they fail to set tariffs high enough to recover costs. Both ADB and the Bank are reviewing these financial risks to ensure that appropriate provisions and covenants are included in the respective projects. Lack of trained staff with experience in externally funded projects is a concern for this operation. This is a first project of its kind for the agencies involved, so there is a risk that without sufficient technical assistance, the project implementation unit may be unable to perform its functions. In the early stages of the project, procurement and general project management related issues may slow down the progress specifically due to the limited understanding of Bank procedures by the implementing agencies. For these reasons, the project includes capacity building, technical assistance and training. Contact Point: Public Information Center The World Bank 1818 H Street N.W. Washington D.C. 20433 Telephone No.: (202)458-5454 Fax No.: (202)522-1500 Note: This is information on an evolving project. Certain components may not necessarily be included in the final project. -3 -  Processed by The Public Information Center week ending November 22, 1996. - 4 -