Algeria - Second National Water Supply and Sewerage Project

Document of The World Bank FOR OFFICIAL USE ONLY Report No. 17707 IMPLEMENTATION COMPLETION REPORT DEMOCRATIC AND POPULAR REPUBLIC OF ALGERIA SECOND NATIONAL WATER SUPPLY AND SEWERAGE PROJECT (LOAN 2821-AL) APRIL 20, 1998 Infrastructure Development Group Middle East and North Africa Regional Office 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 Currency Unit: Algerian Dinar (DA) End of Period Dinars/US Dollar 1987 4.85 1988 6.73 1989 8.03 1990 12.19 1991 21.39 1992 21.84 1993 23.34 1994 35.06 1995 47.66 1996 54.68 1997 (June) 56.95 FISCAL YEAR: January 1 to December 31 ABBREVIATIONS ft foot m = meter ha hectare mm = millimeter km = kilometer Mm3 = million of cubic meter inh = inhabitant m3 /sec= cubic meter per second lcd = liters per capita per day I /sec = liter per second ACRONYMS AGEP = Agence National de I 'Eau Potable et Industrielle et de l 'Assainissement GOA = Government of Algeria ME Ministere de l'Equipement Vice President: Kemal Dervi~ Country Director: Christian Delvoie Sector Director: Jean-Claude Villiard Responsible Staff: Alexander Velderman, Charles Sterling, and Ahmed El-Hamri  FOR OFFICIAL USE ONLY TABLE OF CONTENTS Page PREFACE i PART I: PROJECT IMPLEMENTATION ASSESSMENT A. Statement and Evaluation of Objectives 1 1. Introduction 1 2. Project Objectives and Design 1 3. Loan Amendments 4 4. Implementation Record 4 B. Achievement of Project Objectives 6 C. Project Sustainability 6 D. Bank Performance 6 E. Borrower Performance 7 F. Future Operations 7 G. Lessons Learned 8 PART II: STATISTICAL TABLES 1: Summary of Assessment 11 2: Related Bank Loans 12 3: Project Timetable 13 4: Cumulative Disbursements, Estimated vs. Actual 14 5: Studies Included in the Project 15 6: Project Costs: Estimated vs. Actual 16 7: Project Financing: Estimated vs. Actual 16 8: Status of Legal Covenants 17 9: Bank Resources: Staff Weeks 18 10: Bank Resources: Missions 19 ANNEX: Borrower's Comments and Completion Report 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.  i IMPLEMENTATION COMPLETION REPORT DEMOCRATIC AND POPULAR REPUBLIC OF ALGERIA SECOND NATIONAL WATER SUPPLY AND SEWERAGE PROJECT (LOAN 2821-AL) PREFACE This is the Implementation Completion Report (ICR) for the Second National Water Supply and Sewerage Project funded by Loan 2821-AL in the total amount of US$ 250 million. The project was appraised in July 1986. The loan was approved by the Board on May 5, 1987, signed on June 24, 1987, amended in December 4, 1987 to take into account a restructuring of Algeria's water sector utilities, and it became effective on March 2, 1988. The amended loan agreement of December 1987 was amended several more times during project implementation to adjust to changing water sector requirements. An additional US$20 million B loan, financed by commercial banks, was approved on January 29, 1988, bringing the total financing package to US$270 million. However, the B loan was contingent on a riparian agreement with Tunisia, which was never implemented. The original closing date for the project, December 31, 1993, was extended four times, and the loan finally closed on April 30, 1997. The last disbursement was made on August 25, 1997. The undisbursed balance of US$ 25,767,900 was canceled. The need to reorganize the water sector and consequently redefine the project was identified in late 1989/early 1990, and a loan-financed study to restructure the sector was launched in 1990. After completion of the study, an amendment to finance additional technical assistance was signed in July 1993. Shortly thereafter, the recommended reorganization of the water sector became the objective of another loan, Loan 3743-AL, for US$ 110 million, approved on June 16, 1994. The latter loan aimed at rationalizing arrangements in the urban water sector and making the utilities self sustaining (see SAR for Loan 3743-AL, dated May 5, 1994). Because of the difficult security situation in Algeria from 1993 onward, the project was not supervised in the field after 1993 and an ICR mission was not carried out. This Completion Report has been prepared on the basis of available data in the Bank's project files. The objectives and components of the amended Loan 2821-AL are, from the project documentation, basically the same as those of the original loan, except that one of the four regional water supply subprojects was dropped because of the inability to reach an agreement with Tunisia on riparian rights. This ICR was prepared as a desk study by the Infrastructure Development Group, Middle East and North Africa Region (MNSID), with the assistance of Charles Sterling (financial analyst), Ahmed El-Hamri (economist), Alexander Velderman (sanitary engineer), and Deborah Davis (operations analyst and editor). The report was reviewed by Jean-Claude Villiard, Director, MNSID; Amir Al-Khafaji, Lead Operations Specialist, MNSID; and Marisa Fernandez-Palacios, MNCMG. Since July 1997, ICR missions were scheduled and rescheduled five times. The Borrower's Completion Report was submitted in March 1998 and is included as an annex. The Borrower's comments on the ICR are also included in the annex. Due to the lack of information, this ICR contains no economic analysis. Also, due to the short length of the ICR, no Evaluation Summary is provided.  IMPLEMENTATION COMPLETION REPORT DEMOCRATIC AND POPULAR REPUBLIC OF ALGERIA SECOND NATIONAL WATER SUPPLY AND SEWERAGE PROJECT (LOANS 2821-AL) PART I. PROJECT IMPLEMENTATION ASSESSMENT A. Statement and Evaluation of Objectives Introduction 1. The Second National Water Supply and Sewerage Project (Loan 2821-AL) was approved by the Board on May 5, 1987. The project, the fifth in the water supply sector, was considered an essential part of the Bank's strategy to address continuing problems in Algeria's water supply and sewerage sector, including inadequate and deteriorating quality of water supply and sewerage facilities in cities and towns during a time of rapid population expansion. The Bank's strategy toward Algeria at that time was to support the expansion of infrastructure and assist the Algerian Government in developing a strong institutional framework. The aim was to create the capacity for sound investment programming, improve operational efficiency of the regional water utilities, and ultimately improve and expand consumer services. 2 To achieve these objectives, the project was designed to support the Government's strategy for the sector as defined in its Second Five-Year Plan (1985-89), which included investments of US$ 2.2 billion to increase water supply and provide sewerage and sewage treatment facilities to major, intermediate, and small-sized cities and towns nationwide. The Bank reviewed the Plan's overall investment program and considered it well formulated and technically sound. However, the Government's financial resources fell short of requirements and it requested the Bank's assistance to fill the financing gap. This project was the Bank's response to that request. 3. The project was appraised in 1986 and negotiated in early 1987; the Loan Agreement was signed on June 24, 1987. About five months later an Agreement Amending the Loan Agreement was signed to take into account a reorganization of the water supply and sewerage sector utilities, whereby the responsibility for carrying out the project was transferred to the national water supply and sewerage organization (Agence Nationale de / 'Eau Potable, AGEP). Project objectives and design 4. The project objectives defined in the Agreement Amending the Loan Agreement, signed on December 4, 1987, were as follows: (a) increase water production through development of new water sources to meet present demand and future requirements in the areas served by the water companies; (b) expand the distribution networks of the water companies; (c) increase the waste water treatment capacity of several water companies to protect the  2 Borrower's water resources and environment; (d) financially strengthen AGEP and the water companies; and (e) improve the efficiency of the Borrower's construction industry in the water supply and sewerage sector. 5. The project included the following physical components: (a) four regional water supply subprojects, including water productioni, treatment, and transmission works: * Ain Dalia - Souk Ahras - Ouenza Subproject. A multipurpose dam on Oued Medjerda near the Tunisian border was under construction at the time of appraisal to serve the cities of Souk Ahras, Ouenza and El Aouinet and some minor towns located in the Guelma and Tebessa provinces. The dam, along with a treatment plant to be constructed under this component, was expected to raise total production capacity from 7,100 m3 /day to 119,000 m 3/day -- enough to satisfy demand in those cities and the northern region of Tebessa province until 2010; X In Am2uel - Tamanrasset Subproiect. This subproject vvas designed to alleviate the severe water shortage in the city of Tamanrasset, in the Sahara Desert, by pumping water from a wellfield that was the city's closest available water source, 131 kms away. This subproject was expected to increase production from 700 m3/day to 5,900 m3/day, sufficient to meet demand until the year 2000; * Ain Skhouna - Saida Subproject. This subproject was similar to the one above. A wellfield at Ain Skhouna, 106 km from Saida, was planned to raise production capacity from 12,500m3/day to 47,000 m3/day and satisfy demand until 1997; * Mexenna - Annaba Subproiect. This subproject was intended to serve the counties of Annaba and Drean. The Mexenna Dam on Oued El Kebir was under construction at the time of appraisal; water from the reservoir formed by this dam was to be treated in two newly constructed water treatment plants with a combined capacity of 1.5m3/s. Water production was expected to increase from 85,000 m3/day to 216,000 m3/day, to meet demand until 1995; (b) three Sewage Treatment Works (STW) subprojects: * Tlemcen STW Subproiect. This subproject was designed to treat the waste water from Tlemcen, a city of 110,000 inhabitants, and discharge its effluent into the Oued Chabet El Horrah, a tributary of the Oued Tafna, which is an important raw water source for the city of Oran. The treatment works were to have a capacity of 30,000 m3/day, sufficient to meet the need tntil 2005;  3 * Maghnia STW Subproject. This subproject was designed to treat the sewage from the 55,000 inhabitants of the city of Maghnia, through construction of treatment works with a capacity of 14,500 m3/day, sufficient to meet treatment needs until 1989. A second phase, not part of this project, was scheduled to begin in 1989; * Setif STW Subproject. This subproject involved construction of treatment works for Setif, a city of 177,000 inhabitants. The works were to discharge the effluent into the Oued Bou Sellam, which had already been dammed 25 km downstream to provide raw water for the city of Setif and the surrounding region. The works had a planned capacity of 44,000 m3/day, sufficient to meet treatment needs until 1990. (c) construction of water production and treatment facilities and installations, and expansion of the distribution networks of all thirteen regional water utilities through the provision of some 1,500 km of new water supply networks, representing about 63,000 tons of ductile iron pipes and fittings; (d) training of managers from AGEP and the thirteen regional companies in the management of water and sewerage installations; (e) a study of the construction industry in the water supply and sewerage sector; (f) studies of four potential water transfer systems for the northern areas of Algeria: * from the Taksebt Dam to Algiers and Tizi Ouzou; * from the Oued Cheliff to Mostaganem and Oran; * from the Beni Haroun Dam to Mila, Constantine, and Batna; and * from the Koudiat Affren Dam to Bouria. (g) development and implementation of organizational, managerial and financial structures for water companies. Evaluation of project objectives and risks 6. The project was judged at appraisal to be well conceived from a technical standpoint, with the exception of the controversial decision (taken jointly by the Bank and the Borrower) to have civil works carried out by national contractors. This assessment turned out to be overly optimistic. The project was too broad and ambitious considering the adverse socioeconomic climate in Algeria, the institutional and managerial inadequacies, and the degree of resistance to reform. Another problem was that no key development outcomes were set for the project's institutional objectives. In addition, the experience gatheredfrom three previous Algeria water supply loans, Loan 1545-AL, Loan 2461-AL, and Loan 2591-AL, was not adequately taken into account in formulating the project. Although the lessons leamed from these projects were not put into formal reports until after 2821-AL had started, the difficulties encountered were well known and could have been incorporated into the project design. In particular: * as noted in the Project Performance Audit Report dated June 21, 1990 for the Bank's  4 first project in the Algeria water sector, 1545-AL, the Algerian Government lacked the will to implement necessary restructuring of the sector and to increase cost recovery. Also, the country lacked the sanitary engineers and other technical personnel necessary to handle large and complex projects; * as noted in the Project Completion Report for 2461-AL dated June 14, 1995, the water sector was characterized by weak institutional linkages and there was a bias against investment in maintenance, and reluctance to rely on external assistance. Bank supervision missions for 2461-Al were unable to convince authorities at the ministerial and enterprise levels that carrying out maintenance, leak detection and repair was as important as investing in new water works; * a project should not be designed on the basis of project summaries; the details of project design and the bidding documents should be available at the time of appraisal. In addition, to avoid coordination problems between the civil works contractor and the supplier of equipment, contracts for civil works and the related supply of equipment should be awarded to a single contractor responsible for implementation of the entire works. Loan amendments 7. In addition to the Agreement Amending the Loan Agreement of 1987, several other loan amendments were agreed upon during project implementation to reallocate loan funds and to take account of organizational changes in the water supply and sewerage sector, of which the most important was the Amendment of February 1993, which took several years to implement. 8. The amended project included the following additional components: (a) organizational studies, earlier launched in April 1990; (b) a national survey of the water sector; (c) additional supplies, operational equipment and water supply infrastructure projects, compensating for the elimination of the controversial Ain Dalia-Souk Ahras-Ouenza subproject; and (d) additional water transfer studies, technical assistance, and training. Implementation record 9. From the beginning, project implementation was undermined by the failure to proceed with the civil works as planned, and by the weak institutional capacity of the Borrower to carry out procurement according to the Bank's procurement guidelines. This weak institutional capacity resulted in the preparation of incomplete bidding documents, unsatisfactory evaluation reports, and sometimes misprocurement of goods under reserved procurement practices, which did not involve open bidding and therefore could not be monitored. The largest misprocurement was related to the supply of water meters, where the contract was awarded to a local company at about US$ 10 million, when the lowest qualified bidder offered about US$4 million. 10. These weak procedures caused unacceptable procurement delays and generated extensive correspondence between the Borrower and the Bank to allow for appropriate review of the procurement process. The loan amendment of February 1993 included an increase of US$11 million for the civil works component, but this amount was never disbursed because the  5 Borrower preferred to have the civil works built by local contractors not subject to the Bank's competitive bidding procedures. However, the local contractors did not complete the civil works, resulting in costly treatnent equipment that was delivered to the construction site not being installed for several years. One exception to the above was the timely procurement of about 1500 km of steel pipes by the national steel company, SIDER. The procurement division of this company prepared satisfactory bid and evaluation documents and played a proactive role in obtaining no objections to proposed contracts from the Bank. 11. Although the original loan agreement included US$ 3 million for construction supervision, no consulting engineers were financed under this component. This was not the case for the training and study component, where the original loan amount of US$ 6 million was increased to US$ 27 million ( reduced to US$ 18.6 million by amendment of July 95) to finance studies related to organizational, water supply and water transfer studies needed to improve water supply sector performance. Only about US$ 13 million had been disbursed for this component. The reports prepared by the consultants charged with the organizational studies, which carried out their study in a satisfactory manner, are available on file. It is remarkable that no other reports are available on file at the Bank on the output of consultants in other assignments financed under the loan. As with the procurement of works and goods, the selection and supervision of consultants was not carried out diligently. Repeatedly the Borrower prepared shortlists of more than six consulting firms, often causing a low number of proposals, although the Bank's guidelines strongly recommend a maximum of six firms. In many cases the Borrower did not prepare a Letter of Invitation (LOI) but prepared documents based on the Bank's Sample Bidding Documents for Goods. According to information received from the Borrower, some of the studies financed under Loan 2821-AL experienced excessive delays, as demonstrated by a list of studies contracted in the period 1990-1994 that were expected to be completed after loan closing in 1997. 12. The construction industry in the water supply sector consisted of seventeen specialized firms that built dams, treatment plants, pipelines, etc. Construction costs for these firms were higher than those of international companies and implementation periods were longer. Because (a) the construction industry was weak in all sectors; and (b) the Borrower had delayed the selection of consultants for the original study, the Bank and the Borrower agreed to carry out a construction industry study for all sectors. The loan was accordingly amended in June 1989. 13. The aim of the National Construction Industry Study was to determine the availability of management personnel, technical staff, labor, materials, equipment, housing and other facilities; review regulations, practices, and procedures affecting the industry in order to identify constraints in its operations; and to compare the performance of foreign firms operating in Algeria with that of the local firms. This study was never carried out. Part of the planned technical assistance dealing with the sector survey was not implemented, and the training component of the loan also was not fully carried out. 14. Financial reporting was weak and only in March 1993 did the Bank receive the first audit and financial reports from most of the participating water companies covering financial exercises since fiscal year 1990. Since then only the Annaba and Oran Utilities have submitted their reports on a regular basis. Project account audits are up to date. Because the Bank did not define any performance indicators, no technical reports of the project's performance were submitted by the Borrower.  6 B. Achievement of Project Objectives 15. Project implementation started in mid 1987 and was expected to be completed by end 1993. At the request of the Government of Algeria, all civil works including pipe laying were to have been carried out by national contractors and were therefore excluded from Bank financing. The project as originally designed and as amended did not achieve its stated objectives. Implementation was undermined by: (a) weak institutional setup, with an overly centralized role for AGEP and lack of capacity for operation and maintenance of Bank-financed infrastructure; (b) the security situation in Algeria, which limited Bank supervision; (c) the Government's refusal to increase tariffs after the 1987 tariff study, in contravention of the loan conditions' (such an increase was necessary to achieve financial viability of the water companies); (d) the Government's failure to comply with resettlement covenants and to reach an agreement with Tunisia on the Ain Dalia-Souk Ahras-Ouenza project; (e) excessive implementation delays caused by inadequate procurement; (f) excessive delays in carrying out civil works by national contractors; (g) excessive delays in completing studies; (h) failure to launch the training program; and (i) repeated reorganization to address the general weaknesses of the water supply and sewerage sector and its operators, which were identified during project implementation. 16. Because of the security situation in Algeria it has not been possible to verify in the field whether implementation of the civil works and the laying of pipes were completed to allow the timely installation of treatment equipment and supplied pipes. In the absence of progress reports from the Borrower on the implementation of project components, the achievement of the physical objectives of the project is therefore not known. C. Project Sustainability 17. The Government's massive effort to build water supply and sewerage facilities to meet increasing demand can only be sustainable if proper operation and maintenance is ensured. Project sustainability is seriously threatened by the lack of proper operation and maintenance as well as the weak institutional structure of the urban water supply sector. Although the ongoing Loan 3743-AL aims at institutional reforms to improve the efficiency of water and sewerage utilities, the Bank should intensify its dialogue with the Govermnent by advising on steps to be taken to dramatically improve the operation and maintenance of the water and sewerage sector infrastructure and most likely to eventually restructure tariffs and privatize operation and maintenance. D. Bank Performance 18. The Bank's role in assisting the Algerian water sector to strengthen its capacity for project planning, implementation and operation is unsatisfactory. Although all previous Bank loans to the sector, as well as Loan 2821-AL, aimed at reinforcing the water supply and sewerage sector's performance by assisting the Algerian Government in implementing needed infrastructure investments and organizational restructuring of the sector's institutions, it seems that the benefits of such assistance did not materialize. The Bank did not explicitly require, as a ' Tariffs were increased in 1994, too late to affect the project. Potable water tariffs were increased at that time from DA I to DA 3.60 per cubic meter.. In 1 996,The Goverment conducted a study which determined the necessity of implementing a regional tariff structure.  7 condition for lending, any reform of sector organizations or the granting of more autonomy to sector institutions to enable them to provide better consumer services. Therefore, proposed reforms were not fully followed up or not implemented at all. In particular, policies on cost recovery were only partially implemented after considerable delays. According to the project files, the Bank did not pay appropriate attention to the need for training managerial and operational staff in the water and sewerage sector. The delays which held up the implementation process, the amendmeints to the loan agreement, the subsequent changes and cancellation of some components (water meters) and the inability to monitor the project on the field simply confirm the unsatisfactory quality of the Bank's performance in its supervision function. Supervision was undermined by poor project design which lacked the essential perfornance indicators needed for effective monitoring. It also is clear that the deteriorating security situation contributed to weakening the Bank's performance in carrying out its fiduciary obligations. E. Borrower Performance 19. From 1970 to 1997, Algeria invested about US$ 20 billion in developing the water supply and sewerage sector. Although this huge effort resulted in a satisfactory mobilization of water resources from construction of impounding dams and large water transfer schemes, the maintenance and operation of the water distribution and sewerage facilities were weak, leading to a deterioration of consumer services. The high degree of centralization in operating the sector, the lack of financial resources and shortage of qualified personnel contributed to lack of reporting on the progress of works, and to excessive delays in the implementation of works and studies. The water enterprises lacked the capacity to translate into operational terms what they needed to do to achieve project objectives. These enterprises were unable to generate the necessary cash to cover their operations and maintenance; their internal self-financing ratio was well below the covenanted 15 percent, and tariff increases (in 1994) were not adequate to cover the internal cash generation objectives. There are no records on the supervision of the works carried out by AGEP and the water companies. F. Future Operations 20. Future operations in the sector require the implementation of a regional tariff policy (as outlined by the project tariff study). Such a policy is a necessary step for reaching the objectives of operational efficiency of the water enterprises. Furthermore, a sectoral institutional reform and a strengthening of the managerial capacities of water enterprises are needed before the physical components can be used effectively. Large-scale urban water supply projects, such as Gargar- Oran (the country's seventh water sector project), which was appraised by the Bank in FY 1997, require an enabling institutional environment in order to be successful. In fact, further processing of that project has been suspended, however, pending the Borrower's compliance with conditionalities of the ongoing project (Loan 3743-AL). Gargar-Oran would include mainly the construction of a 200 km transmission pipeline with related pumping and treatment facilities, to convey water from the existing Gargar dam to the city of Oran. In addition, the project would aim at a further restructuring of the water supply and sewerage sector being carried out under the current Loan 3743-AL; that loan introduced a leasing system under which the water utilities were reorganized as public water companies, and were supposed to pay leasing fees for utilization of state-owned facilities. Until now no satisfactory progress has been made by the Algerian Government in applying the agreed-upon restructuring measures or in granting the water companies increased autonomy.  8 21. In light of the outcome of this Implementation Completion Report, it is recommended that there be an in-depth review of the institutional and legal framework needed for integrated, systematic management and use of water resources. Before providing additional assistance in the water supply and sewerage sector, the Bank and the Algerian Government should explicitly agree on a national urban water sector strategy aiming at self reliance of the sector and improved operation and maintenance of existing and new facilities. G. Lessons Learned 22. The outcome of this project suggests that the design was flawed from the beginning (in view of the changes that occurred during implementation). The components were too large and complex, and too difficult to implement and manage given the institutional capacity in the country. In addition, Algeria's attempts at sector reform lacked political will at the time of project implementation. In the future, necessary sector reforms should be in place before projects are approved and implemented. 23. Urban water supply projects should not be supported by the Bank without proper commitment of the Borrower to carry out their objectives within a clear strategic framework for sector development. Therefore, future lending in the sector should be directly linked to the implementation performance of ongoing projects. 24. Although the original project concept was to finance a three-year slice of Algeria's five- year sector investment program, the Bank decided to reduce the risk by making the loan on the basis of individually appraised projects, and therefore identified and appraised the individual water companies and their proposed projects. Although this reduced the risk of unexpected delays caused by inadequate project preparation, it did not address the need for appropriate project management by experienced technical staff. 25. The Bank should not have accepted reserved procurement for the civil works. The weakness of the construction industry identified during appraisal was reflected in the slow implementation of civil works. In particular, to avoid coordination problems between the civil works contractor and the equipment supplier, contracts for water and wastewater plants should normally be awarded to a single source (single contractor or joint venture of contractor and supplier). If this is not possible, the Borrower should be assisted by qualified consultants to coordinate the operations of civil works and equipment, and to carry out construction and installation design. Project implementation was seriously hampered by poor procurement procedures and by lack of coordination between the supply of equipment and construction of civil works. 26. The Bank should be proactive in problem solving as part of its supervision, and should mobilize teams with a high level of expertise and experience to assist the Borrower with difficult issues. When appropriate, these issues should receive active input from Bank management. The availability of such resources and commitment by the Bank will help the Borrower to achieve much-needed success in projects in this sector. 27. The Bank should not lend to national water agencies with weak project management capacity, without insisting on the creation of a Project Implementation Unit with experienced staff, assisted if needed by consultants. To increase ownership, whenever possible the Bank  9 should lend directly to beneficiary water companies, which should be held accountable for project implementation. 28. The Bank should insist on appropriate project performance indicators related to implementation and sustainability to ensure effective project monitoring and evaluation. 29. The Bank should provide assistance in project management and procurement to Borrowers lacking experience and insist on appropriate reporting on project implementation.  10 IMPLEMENTATION COMPLETION REPORT DEMOCRATIC AND POPULAR REPUBLIC OF ALGERIA SECOND NATIONAL WATER SUPPLY AND SEWERAGE PROJECT (LOAN 2821-AL) PART II. STATISTICAL TABLES  11 IMPLEMENTATION COMPLETION REPORT DEMOCRATIC ANDPOPULAR REPUBLIC OF ALGERIA SECOND NATIONAL WATER SUPPLY AND SEWERAGE PROJECT (LOAN 2821-AL) Table 1. Summary Asueummeuts A. Achievement of Objectivs Substatlal Partial Negligible Not Applicable Macroeconomic I Sector policies__ _ _ _ _ _ _ _ __ _ _ _ _ _ _ _ _ _ _ _ _ Financial objectives _ Institutional development / Physical objectives __ Poverty reduction _ Gender concerns r _ I Other social objectives _ Environmental objectives _ _ _ Public sector management I Private sector development __ Other (indicate) Likely Unlikely Uncertain B. Project Sustalnability yI C. Bank Performance Highly Satisfactry Satisfatory Deficient Identification _ Preparation Appraisal / Supervision _ _ D. Borrower Performance Higly Satisfactory Satisfactory Deficient Preparation _ Implementation / Compliance with covenants / Highly Satisfactory Satisfactory Umtisfctory E. Assesment of Outcome I  12 IMPLEMENTATION COMPLETION REPORT DEMOCRATIC ANDPOPULAR REPUBLIC OF ALGERIA SECOND NATIONAL WATER SUPPLY AND SEWERAGE PROJECT (LOAN 2821-AL) Table 2. Related Bank Loans/Credits Loan/Credit Objective Date of Status Approval Preceding Operations _ -__ 1545-AL: Algiers Sewerage Help finance construction of sewer interceptors and a 414/78 Closed on Project (US$82 million) sewage treatment plan tin Greater Algiers, and 12/31/87 management and engineering studies in Algiers, (US$80.2 million Constantine and Oran. disbursed) 2461 -AL: Algiers Regional Construct new water supply system for Greater Algiers; 9/26/84 Closed on Water Supply Project (US$290 reorganize water supply and sewerage sector. 12/31/93 million) (US$279.5 million disbursed) 2591-AL: National Water Improve water supply and sewerage services in 6/20/85 Closed on Supply Project and Sewerage metropolitan areas of Oran and Constantine. 12/31/94 Project (US$262 million) (US$250.8 million disbursed) Subsequent Operations 3743-AL: Water Supply and Rationalize institutional arrangements in urban water 6/16/94 Scheduled to Sewerage Rehabilitation Project sector with view to achieving full cost recovery by close on 12/31/01 (US$110 million) autonomous, self-financing utilities. (US$10 million disbursed) Proposed project: Algeria Urban Increase efficiency in provision of urban water supply Expected Appraised in 1996 Water Supply Restructuring and sewerage in intermediate and large cities by putting FY 1999 (US$118 million) in place needed institutional and managerial tools.  13 IMPLEMENTATION COMPLETION REPORT DEMOCRATIC ANDPOPULAR REPUBLIC OF ALGERIA SECOND NATIONAL WATER SUPPLY AND SEWERAGE PROJECT (LOAN 2821-AL) Table 3. Project Timetable Stage of Project Cycle Planned Date* Revised Date/Estimate* Identification January 1986 January 1986 Preparation 1986 1986 Appraisal July 1986 July 1986 Negotiation March 1987 March 1987 Board presentation 5/26/87 5/26/87 Signing 6/24/87 6/24/87 Effectiveness August/87 3/2/88 Loan closing 12/31/93 4/30/97 *Loan Agreement was amended in December 1987 and in June 1993.  Implementation Completion Report- Algeria Second national water Supply and Sewerage Project Loan 2821- AL Table 4: Cumulative Disbursements by fiscal year (1988-1998) in US $ millions Disbursements 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 Estimated Annual 40.30 50.00 59.40 52.30 33.00 15.00 .....I/ ..... I ..... ..... /I ...../ Estimated Cumulative (EC) 40.30 90.30 149.70 202.00 235.00 250.00 ..... / ..... 1 .....1 ..... 1 ..... Actual 20.00 0.00 12.68 35.49 41.43 24.93 19.09 20.48 25.56 24.74 -0.180023 Actual Cumulative (AC) 20.00 20.00 32.68 68.18 109.61 134.54 153.63 174.11 199.67 224.41 224.23 Percent Disbursed (AC/EC) 49.63 22.15 21.83 33.75 46.64 53.82 61.45 69.64 79.86 89.76 89.69 - - -- - - -- - - Graph: Cumulative Disbursements, Actual vs Estimated in US $ millions 250.00 - : 150.00 : AcuCumulative 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998  15 IMPLEMENTATION COMPLETION REPORT DEMOCRATIC AND POPULAR REPUBLIC OF ALGERIA SECOND NATIONAL WATER SUPPLY AND SEWERAGE PROJECT (LOAN 2821-AL) Table 5. Studies Included in the Project Study Purpose Status Impact Study of procedures and Improve efficiency and Not completed. activities of water supply competitiveness of and sewerage sector of construction industry. construction industry. Four water transfer studies Determine feasibility of Not completed. for northem areas of transferring water from: Algeria. - Taksebt Dam to Algiers and Tizi Ouzou - Oued Cheliff to Mostaganem and Oran - Beni Haroun Dam to Mila, Constantine, and Batna - Koudiat Affren Dam to Bouira. Tariff study. Determine revision of tariffs Completed end of 1987. Negative. Study to make water utilities more recommended 2-5 year self-sustaining. freeze on tariffs in contravention of loan conditions. As part ofproject restructuring in 1990: Organizational study Determine altemate Tariff component (deferred from Loan institutional arrangements completed June 1990, 2591), including tariff for the sector, reassess tariff entire study completed in study. issue based on new data. 1993 Source: SAR and project monitoring reports.  16 Implementation Completion Report- Algeria Second national water Supply and Sewerage Project Loan 2821- AL Table 6: Proiect Costs (in US S millions) Appraisal Estimate Actual Percent Category Local Foreign Total Local Foreign Total of Appraisal Water Supply Ain Dalia- Souk Ahras 54.1 58.3 112.4 100.7 21.3 122.0 In Amgel-Tamanrasset 9.5 28 37.5 42.9 4.6 47.5 Ain Skhouna-Saida 22.9 73.6 96.5 28.0 12.0 40.0 Mexenna-Annaba 21.9 45.4 67.3 0.0 0.0 0.0 Sub Total 108.4 205.3 313.7 171.0 37.9 108.5 34.6 Seweragrel Tlemcen Treatment Plant 5.7 8.2 13.9 5.7 2.8 8.5 Maghnia Treatment Plant 4.5 6.1 10.6 15.7 2.6 18.3 Setif Treatment Plant 10.6 12.8 23.4 8.3 4.6 12.9 Sub Total 20.8 27.1 47.9 29.7 10.0 39.7 82.9 Distribution Pipes 86.5 51.1 137.6 17.7 44.26 61.96 45.0 T. A. Studies 0.6 0.7 1.3 4.3 2.5 6.8 Inter-Basin Transfer Studies 4.9 5.3 10.2 9.7 5.3 15 Managment Training 0.1 0.1 0.2 0.1 1 1.1 Construction Supervision 14.0 3.3 17.3 n/a n/a 1.13 Total Base cost 235.3 292.9 528.2 n/a n/a n/a Physical & Price Contingencies 64.6 37.7 102.3 Total Cost 299.9 330.6 630.5 232.5 101.0 233.1 37.0 Actual cost figures are extracted from Borrower Completion report which is not complete. Bank Disbursement Data is to be used as reference for cost figures: in US $ millions Category Amount Disbursed Mechanical & Electrical Equip 67.42 ipes-Hydromechanical Equip 142.04 raining, Studies and Consulting Services 13.652 ivil Works 1.13 Total 224.242 The differential between Disbursement and Borrower figures ( in terms of total) might be due to exchange rate variations (in 1997: 1 USD=DA 57.00; in 1998, March l USD-= DA 61.00) Table 7: Financing Plan (in US $ millions) Appraisal Estimate Actual Local Foreign Total Local Foreign Total Regional Companies' Cash Generation 94.6 0.0 94.6 n/a n/a n/a Syndicated Loan 119.4 80.6 200.0 Proposed Bank Loan 0.0 250.0 250.0 Govemment Equity Contributions 85.9 0.0 85.9 _ Total 299.9 330.6 1 630.5 It is our assessment that Borrower financing, in terms of regional enterprises' cash generation, was practically inexistant. Bank financing ,for some components (such as Water meters), was cancelled due to reserved procurement practices  17 IMPLEMENTATION COMPLETION REPORT DEMOCRATIC AND POPULAR REPUBLIC OF ALGERIA SECOND NATIONAL WATER SUPPLY AND SEWERAGE PROJECT (LOAN 2821-AL) Table 8. Status of Legal Covenants Loan Ref. Covenant type Present Fulfillment Description Comments Status Date 2821- 3.02 General and CP 8/3/94. (a) Transfer of facilities built under Investment should be AL institutional the project to water companies. recorded in water conditions (b) Reimbursement agreement with companies' fixed assets. Water companies. Reimbursement agreement were not implemented. 3.06 Monitoring and C 2/10/95 Subproject selection as Part A. l. Defined in amended reporting agreement. 3.08 Monitoring and CP 6/5/95 Submission of studies to the Bank. Some Studies submitted. reporting while others have not been completed. (mission c has not been completed) 4.01 Account/audit NC 11/22/95 Audit. 199 1-1993 audit reports received from most of the water companies. Audits for 1994-1996 only received from two companies. 4.02 Financial CP 1/29/97 Water companies' financial Increased tariffs effective in performance performance. 1/1/94. However, increase not adequate to cover water enterprises operational cost. Self -Financing ratio is still below the covenanted 15 percent. Covenant Class: I. Account/audit 2. Financial performance 3. Management aspects of the project 4. Special conditions relating to the implementation of strategies, criteria, and procedures 5. General and institutional conditions Status: C = Complied with CD = Compliance after delay CP = Complied with partially NC = Not complied with  18 IMPLEMENTATION COMPLETION REPORT DEMOCRATIC AND POPULAR REPUBLIC OF ALGERIA SECOND NATIONAL WATER SUPPLY AND SEWERAGE PROJECT (LOAN 2821-AL) Table 9. Bank Resources - Staff Stage of Project Cycle Planned Actual Planned Actual (staff weeks) (staff weeks) (US$000) (US$000) Preparation n/a 5.2 n/a 13.0 Appraisal n/a 60.2 n/a 151.5 Negotiation through Board Approval n/a 35.7 n/a 91.7 Supervision n/a 138.1 n/a 429.3 Completion/Closing n/a 7.9 n/a 12.6 TOTAL 247.1 698.1  19 IMPLEMENTATION COMPLETION REPORT DEMOCRATIC AND POPULAR REPUBLIC OF ALGERIA SECOND NATIONAL WATER SUPPLY AND SEWERAGE PROJECT (LOAN 2821-AL) Table 10. Bank Resources -- Missions Performance Rating Stage of Month/ No. of Staff- Specialized Staff Implementation Development Type of Problem Project Cycle Year Persons Weeks Skills Represented status objectives in Field Through Appraise and design Appraisal 1986 2 4 Financial Analyst n.a. n.a project. Sanitary Engineer Appraisal Financial Analyst Design and financing of through 1987; n.a. n.a Economist n.a. project, redesign of some Board Sanitary Engineer components. Approval project Transport Engineer restructured Division Chief 1990; Senior Loan Officer Consultants loan restructured 1994 Supervision April 1986 1 2 Sanitary Engineer 2 1 Review project preparation. October 2 4 Financial Analyst 2 1 Financial appraisal and 1986 Financial Analyst preparation of financial projections for 5 of the 8 proposed beneficiaries. Nov 1986 2 4 Div. Chief EM2DB 2 1 Discuss Cofinancing (Economist) using B loan scheme and Economist B loan facility from commercial banks. Feb 1987 2 1 Senior Loan Officer 2 1 Discuss B loan Financing Specialist financing, changes in project components, procurement and labor issues. May 1987 2 6 Div. Chief EM2DB 2 1 Discuss Cofinancing (Economist) with commercial banks, Financing Specialist operational issues, resettlement. June-July 2 4 Task Manager 2 1 Discuss preparation of 1987 (Financial Analyst) project preparation Sanitary Engineer report. Sept 1987 2 2.4 Div. Chief EM2IN 2 1 Discuss impact of water (Transport Engineer) supply sector on other Sanitary Engineer ongoing projects. Jan 1988 1 2 Sanitary Engineer 3 3 Discuss delays in training program and Government's failure to implement covenanted tariff increases.  20 April 1988 2 3 Financial Analyst 3 3 Discuss delays in Sanitary Engineer training program, Government's unwillingness to increase tariffs, riparian rights, and failure to comply with resettlement covenants. July 1988 2 3 Financial Analyst 2 2 Discuss increasing tariff Sanitary Engineer and restart of training program, review Government documents on riparian rights vis-A- vis Tunisia and resettlement issues. Oct 1988 1 1 Financial Analyst 2 2 Follow up on tariff issue. Dec 1988 2 3 Sanitary Engineer 2 2 Discuss conducting new Financial Analyst tariff, training program restart in Feb 89, riparian rights, resettlement issues. Feb 1989 1 1 Training Specialist 2 2. Review project document prepared by Government. Feb 1989 2 3 Water Resources 3 3 Discuss conducting new Engineer tariff study, training Financial Analyst program restart in May 89, Government's refusal to send improved documents to solve riparian rights and resettlement issues. May 1989 1 I Sanitary Engineer 3 3 Discuss update of tariff study using latest data, financial analysis of sector to define other actions needed for sector development and self- sufficiency, organizational study of sector scheduled to begin June 1989, client's desire to modify project because of inability to resolve riparian rights issue. Oct 1989 I I Training Specialist 2 2 Discuss restart of training program by Nov 1989. Oct 1989 2 2 Financial Analyst 3 3 Discuss modifications to Sanitary Engineer project agreed to by Ministry of Economy and Bank, inclusion of tariff reassessment in (delayed) organizational study. April-May 1 2.5 Financial Analyst 2 2 Discuss modifications to 1990 project, launch of organizational study in Dec 1989, auditing, submission of updated tariff proposal by June 1990.  21 July-Aug 3 3 Financial Analyst 2 2 Discuss redefined 1990 Sanitary Engineer project, Government's Anthropologist proposals on resettlement. Nov 1990 2 4 Financial Analyst 2 2 Discuss Government's Sanitary Engineer final approval of redefined project, coordination of resettlement with another project in the same area. April-May 2 4 Financial Analyst 2 2 Discuss delay in audit 1991 Sanitary Engineer reports, progress of organizational study that began in April 1991, still unresolved resettlement issue, Government's final approval of restructured project. Oct 1991 2 1 Financial Analyst 2 2 Discuss delay in audit Sanitary Engineer reports, satisfactory progress of organizational study, resettlement issues, first draft of sector strategy paper. Nov 1992 2 2 Sanitary Engineer 2 2 Discuss Government's approval of 100 percent tariff increase scheduled to become effective January 1, 1993, soon-to- be-completed organizational study, problems with sector's finance function and audit process. May 1993 2 3 Sanitary Engineer 2 2 Discuss delay in tariff Financial Analyst increase, now to take effect Jan 1994; final contracts to be financed under the restructured project; extension of closing date to end 1995 (two years past original closing date).  22 Jan 1995 1 1 Sanitary Engineer 2 2 Discuss slow progress of sewerage construction in Constantine; inability of utilities to finance part of their investments, as envisaged in project agreements; need for Government to finance project with own funds after April 1995. Oct 1995 1 1 Sanitary Engineer 2 2 Discuss rebidding of some contracts not carried out because of security situation, postponement of closing to end 1996. Completion/ April 30, Closing 1997 Performance Ratings: 1- Satisfactory. 2--Moderate problems. 3--Major problems. U--Unsatisfactory.  IMPLEMENTATION COMPLETION REPORT DEMOCRATIC AND POPULAR REPUBLIC OF ALGERIA SECOND NATIONAL WATER SUPPLY AND SEWERAGE PROJECT (LOAN 2821-AL) ANNEX BORROWER'S COMMENTS AND COMPLETION REPORT  w8..2.MsS___ v 1___________ a._________, B3ANQIJE MONDIA.Y, GsROUIPE DE IW)'VFI.OPPEM.Nl' DFP TIJNFRA.STRUI T.TUlRF. IULG,IOT nM3OYI.I OPEJTT 1;' ACDTQTTr nTM NrCnP WASHINGT'ON. OBJET!: Rapport d'achbvemcnt du pret 29.21 'AT. R E /: Votre envoi du 12.03.1998. J'ai t'honneur de vous faire part dc nos commentaires suir le rapport d'achcvement du pr8t 28 21 /AJ, o deuxicmc Projet National d'Alimentation cn Eau Potablc et d'Assainissement >). - Prefacc, 7 L, mcnimjij d-IiCt CV7 4%A I. c.:, dCIO 1 ON MIE-nn io. dollarzT aU liou de 170 Millions de dollars S. - Les derniires missions de supervisions ne remontent pas a 1993. Eflel sc sont poursuivies jusqu'a fin 1996. T P. rior1rt A'Ac-Hvemcent 6tsnbli nar 1 A(;I.P vouIs a 6t6 transmis nar le iMinistre des Finances, par 1'AGEP (envoi D)111.) uine copie a ete remise & la mission de la ]3anque debut Mars I 99 a Alaer. - Evaluation de 1exes:ution du proict: point 6 : 1a r6alisation des genics civils par des cntreprises nntionales avail reu 1'accord de la Banque Mondiale. En matiere de bilan pour cel aspect, on petut noter que - Lv IAIUII wat otifai.aQn* pcur.! ~tP-dc gTDo tesst-1'cadduotion '>n.'wf>:a (Ain Aniguel) Lc bilan est insatisfaisant pour la S'T'EP dc Tlcmcen et Maghnia cn raison notumment des problmes de choix de tcrrain.  Les exprcssions << climal politique n6gatif du pays )> ct < rcsistance :i la reformce sont a retirer du rapport. point 9: L'expression (m(cthodes douteuses de marches riserv6s 5 est inaccepLable.Elle constitue une accusation grave a 1'encontre de P'Administration Alg6rienne. Nous sornmes fortement etonii6s que Ic contrat de fturniture dc compteurs, soit rnitm> iim' in p1a.Y4Uaa FXl255'; wt\ ,,. Nous confirmons qu'aucune irr6gularit6. de quelquc nature que cc soit n a cte commise dans ce dossier. 11 y a licu dc rappeler que les cahiers des charpes, le rapport d'analyse cst lc choix du foumisseur ont ete approuv6es par la Banque, puis confirrnds lors de l'augmentation de 20% dcs quantitds. Par contre nous vous demandons dc notcr quc le rcvirement de la Banque a cause un prejudice au Tresor Plihlic. AlaAr;- n qui a au d d6bourm.r caI