Annual GSO&EUWI EECCA WG meeting

Costing MDGs on Water Supply and

Sanitation in the Kyrgyz Republic and

Selecting a “Preferred” Scenario through

a National Policy Dialogue

-– Bucharest, 24-25 November 2009 –

Nurmamat Mullakeldiev, Head, Dept. of Rural Water Supplies,

deputy Chairman of Coordination Council

EAP Task Force

Contents

Organisation of the National Policy Dialogue (NPD)

Key features of the Kyrgyz Republic and the WSS sector

Challenges faced by the WSS sector

Interpretation of MDGs for WSS in the context of Kyrgyzstan

and Baseline scenario

Costing alternative targets and selecting a “preferred”

scenario

Key financial measures to close the financing gap

Next steps

EAP Task Force

Organisation of the National Policy Dialogue

Mutual understanding has been reached with key partners

on main objectives and organization of the NPD

To develop a financing strategy for urban and rural WSS with water-

related MDGs as target

Membership of a Coordination Council (CC) to guide the

process and provide a platform for the dialogue and

Regulation on CC were approved

(decree of the Prime-Minister of the KR dated 22.07.08 № 377-р);

Consultant was mobilised to inform and facilitate the dialogue

Five National Policy Dialogue meetings so far

EAP Task Force

Kyrgyz Republic – Key Features

Low-income country (2007 GDP: some 750 USD per capita)

High proportion of people living in poverty (some 42%)

Present financial and economic crisis and uncertain marco-economic outlook

Small population (some 5.2 million) with low population density

Rural population almost two-thirds of the total population, almost one-third of villages with less than 750 people

25 urban settlements with WSS managed by vodokanals; 1/3 of villages with centralised (piped) water supply

Plentiful water resources but glaciers shrinking

Harsh climate (from +45oC to -30oC) and high seismic activity threaten sustainability of WSS infrastructure

Rocky ground, plenty of distant villages in high lands – impact on unit costs

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Challenges for WSS in Kyrgyzstan

Lack of accurate information on water production and use

Urban access – 98% to improved water sources, 56% to piped water; 51% to improved sanitation and 49% to basic

Rural access – 81% to improved water sources, 50-56% to piped water through street-posts; universal access to basic sanitation (0% to improved sanitation)

85% of old water supply systems use groundwater but use of surface water rising – problems with pollution and health

Poor condition of existing infrastructure and poor level of service (reliability, predictability, water quality)

Unwillingness to pay for poor level of service

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Impacts on Health and Environment

20% water supply systems do not comply with sanitary norms with many lacking sanitary protection zones, water treatment plants and disinfection systems (SES, 2008)

Waste water treatment plants either don’t work at all (in villages), or don’t provide required level of treatment and waste sewerages into the rivers

Hence - problems with environmental pollution and population health: 485 cases of water-born diseases per 100,000 people in 2007

Children’s mortality from acute water-born enteric infections remains high. Typhoid and paratyphoid morbidity caused by poor drinking water quality remains a big problem

EAP Task Force

Financial Challenges in the WSS Sector

Low levels of cost recovery - low tariffs and collection rates. Payment for WSS is from 0% to 0.9% (Bishkek) of HH income. Overall collection rate in KR is about 40%

Cross-subsidisation of population by industry/commercial enterprises

Low level of public budget contributions for WSS (0.3% of public expenditure), complicated by the exclusion of Dept. for Rural WS from the Medium-Term Budgetary Framework (MTBF)

Effectiveness of external lending is extremely variable

Objective factors:

- uncertain macroeconomic outlook on national and international levels

- harsh climate and seismic conditions (increasing costs)

EAP Task Force

Institutional Challenges

Lack of coordinating and regulatory bodies for the WSS sector as a whole, lack of policy for the whole WSS sector

Lack of coordination between the Country development Strategy (CDS), water sector development objectives and policies for other sectors (e.g. Regional development and Housing)

Over-fragmentation and decentralisation of the water sector

meaning a lack of economies of scale and too much diversity in unit

costs (many villages with low HH income and high unit costs)

Lack of capacity at local level for service delivery and financing

Lack of database and Management Information System (MIS) for

sound decision making

Over-reliance on Soviet consumption norms restricting realistic

target definition

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Interpretation of MDGs on WSS consistent with

National Policies

Preserving the present situation is not an acceptable policy option,

even if financially feasible, because MDGs on WSS not fully achieved

Interpretation of MDGs on WSS in Kyrgyzstan agreed through

NPD and consistent with national socio-economic policies:

- universal access to piped water supplies via street post or in-house tap, min 35 lcd, < 100 m from dwelling (already achieved in urban areas and in 34 big villages)

- universal access to improved sanitation (sewerage, septic tanks or hygienic pit latrines for all)

consistent with the Country Development Strategy (CDS) ; and

consistent with, but more ambitious than official UN/WSSD definitions of MDGs on WSS (5 lcd no farther than 1 km, basic sanitation)

EAP Task Force

Costing Alternative Development Scenarios

EAP Task Force

Name and key assumptions on service level Financial costs over 2007-2027,

million KGS

Financing gap over 2007-2027,

million KGS *

1 - Basic Improvements Urban: improved management of existing services

Rural: - universal access to piped water supplies via street

posts, min 35 lcd, < 100 m

– improved school sanitation, but for many households

– still basic sanitation

52,988 42,488

2 - Millennium Development Goals on WSS - universal access to piped water supplies via street post

or in-house tap, min 35 lcd, < 100 m

- universal access to improved sanitation

56,994 46,494

3 - Maximum Coverage Water supply:

- 100% access to piped WSS via in-house tap for urban

- 50% home/50% street-post access in rural areas

Sanitation: same as Scenario 2

84,822 74,322

* - assuming that financing of the WSS sector will stay at the base year (2007) level

Key Financial Measures Recommended

for Closing the Financing Gap

Domestic tariffs gradually increased to 2.5% household income with a

maximum of 5% of household income for any income group (the

maximum level of affordability) from current levels of <0.5%. Maximum

level of affordability achieved after 20 years and supported by targeted

support to the poor via strengthened social support system

Increased collection rates from current low levels (<25% in rural areas and

<50% in urban areas, at present) to 60% in rural areas and 85% in urban

areas, in 5 years

Increase public budget expenditure on WSS from current levels of about

0.3% of total budget to 2% of public budget (still less than some EECCA

countries) after 20 years. The present 0.3% includes repayments of IFI

loans and WSS contributions for budgetary organisations

Additional external financing (over and above existing commitments):

Basic Improvements - €6 million; MDGs - €22 million, Maximal - €270 million

EAP Task Force

Results of Scenario Assessment

Scenario 1 does not fully comply with MDGs and national policies (CDS)

re: sanitation and improving the quality of life

Scenario 3 requires unrealistically high level of external financing (€270

million), exceeding also the absorptive capacity of Kyrgyzstan

Scenario 2:

the Coordination council were agreed that Scenario 2 represents

the best balance of achieving the required improvements in WSS

services for the Kyrgyz Republic (meeting Millennium Development

Goals) but with a realistic requirement for additional external funding

assistance (1 billion KGS or EUR 22 million)

This scenario focuses on extensions of piped water supplies and

improving sanitation in rural areas, as well as on significant improvements

in the quality of service within the existing piped networks in urban areas

EAP Task Force

Financing the Preferred Development

Scenario 2 with Policy Measures in Place

EAP Task Force

-

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027

'000s of KGS

Operation and maintenance Reinvestment

ADB/WB interest & loan repayment Additional loan repayments

Service extension - anticipated funding Service extension - additional loans

Total finance with all policy measures

Next steps

Develop a sound National Policy for the whole WSS to provide

clarification on policy objectives, roles and responsibilities,

resources etc. and integrate the Financing Strategy

Mobilise sufficient resources and implement the MDG scenario

and associated Financing strategy, as part of the National policy

for WSS. GoKR should maintain dialogue with donors

Assistance to the Kyrgyz Republic from donors, OECD/EAP

Task Force and other international organisations in developing

the National policy document, as well as the capacity of the co-

ordination body and at local level (water utilities and local self-

government) is needed and would be highly appreciated!

Thank you!

EAP Task Force