Document o f The World Bank

FOR OFFICIAL USE ONLY

Report No: 391 19-ET

PROJECT APPRAISAL DOCUMENT

ON A

PROPOSED CREDIT

IN THE AMOUNT OF SDR 43 -70 MILLION (US$65 MILLION EQUIVALENT)

AND A

PROPOSED GRANT

IN THE AMOUNT OF SDR 23.50 MILLION (US$35 MILLION EQUIVALENT)

TO THE

FEDERAL. DEMOCRATIC REPUBLIC OF ETHIOPIA

FOR AN

URBAN WATER SUPPLY AND SANITATION PROJECT

March 29, 2007

Water and Urban Unit 1 Ethiopia Country Department Africa Region

This document has a restricted distribution and may be used by recipients only in the performance o f their official duties. I t s contents may not otherwise be disclosed without World Bank authorization.

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CURRENCY EQUIVALENTS (Exchange Rate Effective February 28,2007)

AfDB A A W S A BADEA DFID EBA EIA E S M F FA FMR ICB IDA IFC JBAR GOE GPN GPOBA MDG M&E MOFED MWR NCB P F M PMU QCBS RPF PASDEP PEFA WRDF RWB uwss

Currency Unit = Ethiopian Birr (ETB) ETB 1 = US$0.12

US$1.49 = SDR 1

F ISCAL YEAR July 8 - July 7

ABBREVIATIONS AND ACRONYMS Afr ican Development Bank Addis Ababa Water and Sewerage Authority Arab Bank for Economic Development in Afr ica Department For International Development Environmental Baseline Assessment Environmental Impact Assessment Environmental and Social Management Framework Fiduciary Assessment Financial Monitoring Report International Competitive bidding International Development Association International Finance Cooperation Joint Budget and Aid Review Government o f Ethiopia General Procurement Notice Global Partnerships for Output Based Aid Mi l lennium Development Goals Monitoring and Evaluation Ministry o f Finance and Economic Development Ministry o f Water Resources National Competitive Bidding Public Financial Management Project Management Unit Quality and Coast Based Selection Resettlement Policy Framework Plan for Accelerated and Sustained Development to End Poverty Public Expenditure and Financial Accountability Water Resource Development Fund Regional Water Bureau Urban Water Supply and Sanitation

Act ing Vice President: Hartwig Schafer Country Director: Ishac D iwan

Sector Manager: Jaime Biderman Task Team Leader: Yitbarek Tessema

FOR OFFICIAL USE ONLY ETHIOPIA

Urban Water Supply And Sanitation Project

CONTENTS

Page

STRATEGIC CONTEXT AND RATIONALE ....................................................................... 3 A . 1 . 2 .

Country and Sector Issues .......................................................................................................... 3

Rationale for Bank Involvement ................................................................................................ 5

3 . Higher level objectives to which the project contributes ........................................................... 6

B . PROJECT DESCRIPTION ....................................................................................................... 6 1. Lending Instrument .................................................................................................................... 6

2 . Project development objective and key indicators ..................................................................... 6

3. Project components .................................................................................................................... 7

Alternatives considered and reasons for rejection ................................................................... 11 4 . 5 .

Lessons learned and reflected in the project design ................................................................ -10

C . IMPLEMENTATION .............................................................................................................. 12 1 . 2 . 3 . Monitoring and evaluation o f outcomesh-esults ....................................................................... 13

4 . Sustainability ............................................................................................................................ 14

5 . Critical r isks and possible controversial aspects ...................................................................... 14

6 . Loadcredit conditions and covenants ...................................................................................... 15

Partnership arrangements ......................................................................................................... 12

Institutional and implementation arrangements., .................................................................... -12

. . .

D . APPRAISAL SUMMARY ....................................................................................................... 15 1 . Economic and financial analyses ................................................................................. ........... 15 2 . Technical .................................................................................................................................. 15

3 . Fiduciary .................................................................................................................................. 16

4 . Social ........................................................................................................................................ 17

5 . Environment ............................................................................................................................. -17

6 . Safeguard Policies (Revised) ................................................................................................... 18

E . POLICY EXCEPTIONS AND READINESS ........................................................................ 20

This document has a restricted distribution and may be used by recipients only in the performance o f their off icial duties . I t s contents may not be otherwise disclosed without Wor ld Bank authorization .

Annex 1: Country and Sector or Program Background ............................................................... 21

Annex 2: Major Related Projects Financed by the Bank and/or other Agencies ....................... 23

Annex 3: Results Framework and Monitoring .............................................................................. 24

Annex 4: Detailed Project Description ............................................................................................ 29

Annex 5: Project Costs ..................................................................................................................... 41

Annex 6: Implementation Arrangements ....................................................................................... 49

Annex 7: Financial Management and Disbursement Arrangements ........................................... 52

Annex 8: Procurement Arrangements ............................................................................................ 61

Annex 9: Economic and Financial Analysis ................................................................................... 69

Annex 10: Safeguard Policies ........................................................................................................... 71

Annex 11: Project Preparation and Supervision ........................................................................... 74

Annex 12: Documents in the Project File ....................................................................................... 75

Annex 13: Statement of Loans and Credits .................................................................................... 76

Annex 14: Country at a Glance ....................................................................................................... 77

Annex 15: MAP IBRD 35400 ............................................................................................................ 80

ETHIOPIA

Urban Water Supply And Sanitation Project

PROJECT APPRAISAL DOCUMENT

DATA SHEET

Date: March 29, 2007 Country Director: Ishac D iwan Sector Manager/Director: Jaime M. Biderman Project I D : P101473

Lending Instrument: Specific Investment Loan

Team Leader: Yitbarek Tessema Sectors: Water supply (85%);Sanitation (15%) Themes: Access to urban services and housing (P) Environmental screening category: Partial Assessment

For LoandCredi t s/O thers : Total Bank financing (US$m.): 65.00 IDA Credit and 35.00 IDA Grant

Borrower: FEDERAL DEMOCRATIC REPUBLIC OF ETHIOPIA Addis Ababa Ethiopia Responsible Agency: Ministry o f Water Resources Addis Ababa Water and Sewerage Authority Provincial Water and Sewer Authorities

1

[ ]Yes [XI N o

[ ]Yes [x] N o

[ ]Yes [XI N o

[x]Yes [ 3 N o

[x]Yes [ ] N o

Does the project depart f rom the CAS in content or other significant respects? Ref: PAD A.3 Does the project require any exceptions f rom Bank policies? Ref: PAD D. 7

I s approval for any pol icy exception sought f rom the Board? Does the project include any critical r isks rated “substantial” or “high”? Re$ PAD C.5 Does the project meet the Regional criteria for readiness for implementation? Ref: PAD D. 7

Have these been approved by Bank management? [ ]Yes [ IN0

Project development objective Re$ PAD B.2, Technical Annex 3 The Development Objective o f the Urban Water Supply and Sanitation Project i s “increased access to sustainable water supply and sanitation services in Addis Ababa and four secondary cities”. Project description Re$ PAD B.3.a, Technical Annex 4 The project i s designed (i) to produce and distribute more water to reduce the alarming gap between the supply and demand for water in Addis Ababa and four other secondary cities; (ii) to improve operational efficiency in al l five cities by reducing non-revenue water, and improving financial management, billing and collection, and customer management; and (iii) to improve governance by the water boards and to introduce performance incentives for operators.

Component 1: Addis Ababa Water Supply and Sanitation (US$85 million). Funding wil l be provided to Addis Ababa City to: (i) produce and distribute more water and improve sanitation services; (ii) improve operational efficiency by reducing non revenue water, and improving financial management, billing and collection, and customer management; and (iii) to improve governance by the water boards and to introduce performance incentives for operators.

Component 2: Secondary Cities Water Supply and Sanitation (US$33 million). Funding will be provided to the secondary cities to: (i) produce and distribute more water and improve sanitation services; (ii) improve operational efficiency by reducing non revenue water, and improving financial management, billing and collection, and customer management; and (iii) to improve.governance by the water boards and to introduce performance incentives for operators.

Component 3: Program Management and M&E (US$lmillion). Funding would be provided for costs associated with project implementation, to synthesize existing water and sanitation access data to determine baseline figures and to monitor progress under this project. T h i s component also includes training, workshops and other capacity building measures and support for environmental and social management , Which safeguard policies are triggered, if any? Ref: PAD D. 6, Technical Annex 10

I The safeguard screening category i s S2, and the environmental screening category i s B. The project has triggered OP 4.0 1 Environmental Assessment, OP 4.1 1 Physical Cultural Resources, OP 4.12 Involuntary Resettlement, OP 4.37 Safety o f Dams, and OP 7.50 Projects on International Waterways. Significant, non-standard conditions, if any, for: Re$ PAD C. 7 Board presentation: None Loadcredi t effectiveness: None

I Covenants applicable to project implementation: None

2

A. STRATEGIC CONTEXT AND RATIONALE

1. Country and Sector Issues

1. Accelerated and Sustained Development to End Poverty (PASDEP) covering the period 2005-20 10. The main thrust o f PASDEP i s ensuring accelerated growth through a multi-faceted approach o f tackling interlinked poverty traps, including the very l o w level o f infrastructure, including water supply and sanitation.

Ethiopia i s in i t s second cycle o f developing a Poverty Reduction Strategic Plan (PRSP) - i t s Plan for

2. improved sanitation by 20 15. In the year 2000 approximately 7 o f the 50 mi l l ion people in rural areas (1 3%) and 8 o f 11 mi l l ion people in urban areas (73%) had access to safe drinking water. Access to basic sanitation in the same year was 6% for rural and 62% for urban. The Government has also prepared an ambitious Universal Access Plan (UAP) targeting to provide universal access to safe water supply and sanitation by the year 2012.

The MDG targets for Ethiopia are achieving 63% access to safe water supply and 58% access to

3. The major issues for water supply and sanitation development in the country include:

Low service levels: Water supply and sanitation coverage in Ethiopia i s the lowest in sub- Saharan countries with only 42% and 28% for water supply and sanitation respectively.

Limitedjnancing for expansion and improvement of service: Current investment in the WSS i s wel l below what’s required to achieve the targets. The annual cost o f achieving the government plan i s estimated to be US$350- 450 mi l l ion in the f i rst few years and fall ing to US$200 mi l l ion in the later years. A five fo ld increase in the current US$lOO mi l l ion per year rate o f investment (including this project) would be needed to achieve these targets. Also, user fees for services are often too l o w to provide for adequate maintenance o f existing facilities.

Decentralization and capacity constraints: With further decentralization, much more autonomy i s devolved to the woredas, towns and rural communities to plan and manage their watersupply schemes. Government i s in the process o f institutionalizing a sector support system that involves local private sector and other partners in providing the goods, works and services needed to plan, construct and maintain water supply and sanitation facilities, by providing business opportunities and increasing their capacity. However, the approach i s new so the process needs time to internalize and institutionalize, so capacity remains a major issue.

Stakeholder participation: T o date stakeholder participation in the sector has been very limited. However, a trend i s being set under the ongoing water supply and sanitation program, towards consultative process and participatory planning. Participation o f the private sector i s also growing. Though there i s awareness o n the efficiency and service improvement the private sector could bring about, progress i s slow. As part o f the EUWI country dialogue, a multi stake holder forum that brought the key stake holders together in one hal l to discuss on the water supply sanitation and hygiene sector coordination and agree o n the way forward.

4. fifteen years the population has grown f i o m 2 mi l l ion to about 4 mill ion, and the administrative area has increased from 220 to 540 square kilometers. This has put heavy pressure on the Addis City Administration and the Addis Ababa Water and Sewerage Authority to extend public services. Meanwhile, in the last 15 years l itt le was invested o n capital investments. As a result, demand far exceeds supply by about 50% and the distribution network reaches only about 55% o f the service area. About half the population has less than 12

Addis Ababa Water Supply and Sanitation: Addis Ababa i s the capital c i ty o f Ethiopia. In the last

3

hours per day o f water service, and a quarter have n o service at all. Mos t un-served people l ive in low- income areas at the periphery o f the city, which has been incorporated into the city administrative area in recent years.

5. the Legadadi, Di re and Gafersa dams, and 40,000 m3/day f rom the Akaki ground water field. This corresponds to 50 liters per capita per day or 35 lpcd taking account 35% water losses. In comparison, most comparable cities in Afr ica are provided with at least 100 lpcd. With a 3.5% population growth rate by 2012 water production must increase by 150,000 m3/day to provide 75 lpcd.

At present, Addis Ababa i s served with 210,000 m3/day, o f which 170,000 m3/day i s supplied f rom

6. The Addis Ababa Water and Sewerage Authority (AAWSA) i s the sole entity responsible for providing water supply to the city. I t was established as an autonomous body by order No. 68/1971 issued in 197 1. I t has since been re-organized in 1995 and 2003. I t i s n o w entrusted to: (i) supply safe and adequate water within the limits o f Addis Ababa City; (ii) provide wastewatedsludge collection and disposal; (iii) ensure that water resources are protected and conserved, (iv) determine the quantity o f water to be supplied and wastewater to be disposed; and (v) ensue that water quality conforms to standards. T o operate efficiently, A A W S A requires financial, procurement and human resources autonomy. At present these are delegated to A A W S A by the City, but not legislated.

7. representatives f rom MoFED, Addis Ababa City Government, Oromia region, as wel l as labour union representative. AAWSA’s internal management team comprises a General Manager and three Deputy General Managers (technical, business development, and resource management) appointed by the Board who oversee eight departments, f ive services and eight branch offices.

AAWSA’s Management Board i s chaired by the Minister o f Water Resources and includes

8. Based o n available statistics, about 12% o f households in Addis Ababa have flush toilets that discharge to sewers or septic tanks, 63% o f households use individual or shared pit latrines, and 25% do not have access to sanitation facilities. The occurrences o f diseases are highest in densely populated areas where water supply, sanitation, and nutrit ion are inadequate.

9. and set out sewer alignments and located stabilization ponds in each, one at Kal i ty where the existing treatment facilities are located, and the others at Kotebe and Akaki o n the eastern and southern sides o f the city. There are 30 km o f trunk sewers and 100 lun o f secondary sewers and laterals in the Kal i ty catchment. The sewerage system was designed on the basis o f an average water consumption o f 150 l i ters per capita per day to serve an equivalent population o f 200,000. Some 3000 connections discharge about 6000-7000 m3/day into the sewer system corresponding to 4.8% percent o f volume o f b i l led water. The sanitation master plan also recognizes on site septic tanks and pit latrines, and calls for sludge to be collected by vacuum trucks and taken to drying beds, disposed in sanitary landfills, injected into the sewer network at selected sites, or applied to forestry lands.

A waste water master plan o f the city was updated in 2002. I t divided the ci ty into three catchments

10. 7,600m3/day f l ow and 3,500 kg/day biochemical oxygen demand. Treatment consists o f inlet screens and grit chambers, two settling cambers, and two parallel pond systems, each made up o f a facultative pond, a maturation pond and two polishing ponds. Sludge lagoons and drying beds were constructed in 1999 with treatment capacity o f 110,000 m3/year o f sludge. T h e new Kotebe sludge treatment facility i s located about 4 km southeast o f the Bole International Airport. It has 10 sludge lagoons and 20 drying beds. With four cycles per year the sludge drying beds treat approximately 5,000 m3/year.

The Ka l i t i wastewater treatment plant was commissioned in 1981 with a design capacity o f

11. which are in a similar situation when i t comes to water supply and sanitation. Of these Awassa in the Southern Region, Jimma in Oromia Region, Gondor in Amhara Region, and Mekele in Tirgay Region with an

Secondary cities: In Ethiopia there are 10 secondary cities with populations above 100,000, al l o f

4

average population o f 200,000 have been provisionally selected to participate in the Urban WSS Project. Final eligibil i ty check will be made on the basis o f completion o f individual business plans that demonstrate that their performance, investment plan and tar i f f structure will result in financially viable utilities. In the event that any one o f the selected cities fails to meet eligibil i ty criteria, and as the project time permits, the project will consider replacement with another c i ty selected following the selection criteria.

12. to five households share each residential connection, and the duration o f supply i s about 12 hours per day. All connections are metered, with several thousand new ones added each year.

Typical conditions in the four towns show that only 75% o f households are served by the utility, two

13. Water production i s at 30 liters per capita per day, but with more than 30% non-revenue water, actual consumption i s only about 20 liters per capita per day. This i s less than ha l f what most Afr ican cities o f similar size require. Since 30% o f the volume produced i s not billed, and 25% o f what’s bi l led i s not paid, the utilities are collecting tariffs on only ha l f the volume o f water produced. This combined with l o w tariffs (3 o f 4 cities with $0.25 per m3) results in operating revenues covering only about 75% o f operating expenses, falling short o f the Government’s full cost recovery policy, that i s recovery o f recurrent, renewalheplacement o f short l i fe assets, and debt service.

14. sewerage i s needed in the high-density, commercial centers o f these cities and wastewater stabilization ponds are needed to treat their wastewater before it i s discharged to surface sources.

Sanitation services are l imited to on site septic tanks and pit latrines in the secondary cities, Piped

2. Rationale for Bank involvement

15. investments. The Wor ld Bank i s the largest international development institution n o w active in the urban water sector. Other development partners, such as AfD, BADEA, the European Union, the European Investment Bank, and the African Development Bank together make a major contribution to the urban water sector, but look to the Wor ld Bank to lead the assistance effort. In particular the Bank has a large staff with significant experience/expertise in water engineering, regulation, commercial operation, stakeholder involvement, and services in low-income areas. It also has sufficient resources to permit engagement in the sector over a prolonged period, helping to ensure consistent policies and investments. Finally, urban water utilities will need substantial financing f rom private sources, and the Bank i s perhaps uniquely positioned in terms o f expertise and knowledge to assist the government in establishing the necessary conditions and environment to make this possible. The Wor ld Bank i s wel l positioned to support the urban water supply in general and Addis Ababa in particular due to i t s long engagement in the sector in Ethiopia, including assistance with the development o f a sector strategy for rural communities, towns and urban centers, and in assisting Addis to develop i t s current water tar i f f structure and billing system.

Sector reform, particularly for urban water supply and sanitation requires time, expertise and large

16. Mengist) in Ethiopia, and the Wor ld Bank i s financing business planning, capacity building, and physical improvement in several others. AfD has appraised a €14m project to expand treatment capacity and reduce non-revenue water in Addis Ababa, but requires the City or another donor to finance half. IDA contribution will cover co financing.

Currently, AfDB and BADEA are financing water works in two large cities (Harar and Kibre

17. The Wor ld Bank group i s also able to offer Ethiopia a wide range o f products that will contribute to developing the sector. The I F C i s interested to finance private sector investors in Addis Ababa water supply and l ikely this requires a partial r isk guarantee.

18. mi l l ion to the project for work in l o w income areas. Involvement will be subject to further approval by GPOBA panel o f experts and donors.

The Global Partnership for Output Based Aid has indicated i t s interest to contribute between US$5-10

5

3. Higher level objectives to which the project contributes

19. The recent guiding strategic framework for the five-year period 2005-2010, Plan for Accelerated and Sustained Development to End Poverty (PASDEP), puts much accelerated growth as i ts main thrust to break out o f the self-perpetuating poverty traps. For al l reasons, a major push on growth i s at the centre o f the PASDEP for the coming five-year period.

20. The Interim Country Assistance Strategy (ICAS) (May 1,2006, Report number 35 142-ET) covering FY 06-07, sees contribution to the country’s growth agenda as one o f the central underpinnings o f Bank’s support to the country. Improved access to safe water supply and sanitation i s the core o f government’s plan and Bank assistance to strengthen the urban agenda and improve the urban infrastructure coverage level. The government plan i s to double the current water supply access rate o f 42% in 2005 to 84% by 2010.

2 1, This UWSSP i s designed to support operationalization o f the broader growth strategy, interpretation o f the countries Integrated Water Resources Management policy, and contributing to the achievement o f the MDG and interim country goals such as the UAP.

B. PROJECT D E S C R I P T I O N

1. Lending instrument

22. f rom the Global Partnership for Output Based Aid. An Adaptable Program Loan instrument i s not proposed because o f the uncertainty in the long term institutional arrangements in Addis Ababa and the scope and timing o f system expansion there.

Sector investment loan i s proposed, with an additional grant o f between US$S and US$10 mi l l ion

2. Project development objective and key indicators

23. The Development Objective o f the Urban Water Supply and Sanitation Project i s “increased access to sustainable water supply and sanitation services in Addis Ababa and four secondary cities”. Accordingly, the project i s designed to:

Produce more water for a l l customers and extend the distribution network to unserved areas. Improve the operational efficiency o f the participating water utilities by reducing nonrevenue water and improving financial management. Strengthen the autonomy o f existing water boards and utilities and introduce performance based contracts with utilities. Outsource selected activities to private sector providers to increase capacity and attract more investment. Construct public sanitation facilities in l o w income areas, finance priority elements o f municipal sanitation plans, and promote improved hygiene and sanitation practices.

The following outcome indicators will be used to track project implementation:

Volume o f water produced. Number o f new connections. Number o f rehabilitated connections. Hours per day o f supply. Ratio o f operating revenues to operating expenses. Number o f people with access to improved water supply and sanitation in low-income areas.

6

25. In achieving these outcomes and objectives, labor intensive construction methods for small diameter distribution piping throughout the c i ty and improved sanitation services in low-income areas will be adopted.

26. where the project i s implemented will have increased access to potable water, and households in low-income areas will have improved sanitation facilities. In Addis Ababa water production i s 50 liters per capita per day, o f which only 35 lpcd reach consumers due to water losses. In secondary cities only 20 o f the 30 lpcd produced reach consumers. Production should be at least 100 lpcd in Addis Ababa and 50 lpcd in secondary cities. The project aims (i) to increase water availability through source development, treatment expansion, and network extension and service connections; and (ii) to improve efficiency by reducing non-revenue water, improving financial and customer management, protecting catchments, and instilling awareness o f water conservation in i t s customers.

A s a result o f the proposed project, up to 4 mi l l ion urban residents in Addis and four other cities

27. residents. In so doing, the project will improve drainage to avoid un-controlled sullage water discharges to streets and paths resulting f i om cooking, cleaning and bathing.

The project will increase access to improved sanitation facilities, mainly for l o w income urban

3. Project components

28. between the supply and demand for water in Addis Ababa and four other secondary cities; (ii) to improve operational efficiency in al l five cities by reducing non-revenue water, and improving financial management, billing and collection, and customer management; and (iii) to improve governance by the water boards and to introduce performance incentives for operators.

The project i s designed (i) to produce and distribute more water in order to reduce the alarming gap

29. The project i s an interim intervention to reduce the gap between supply and demand for water in Addis and other cities. The situation in Addis i s such that the interim solution would only halve, but not eliminate, the supply-demand gap during the next f ive years at most. A A W S A has designed a long term water supply investment program estimated to cost US$550 mill ion. Mobil ization o f such financing will require a consortium o f donors including the private sector. T o this end, the project will finance transaction consultants to design a private sector intervention that IFC and other private investors could finance, possibly with the support o f MIGA. In the short term this would be a modest investment o f US$20-40 mi l l ion for a private contractor to further develop and manage one or more wel l fields and possibly manage water distribution in a portion o f Addis Ababa. The intention i s to introduce private sector participation o n a relatively small scale to enable both the Government and the private sector to gain experience in private sector participation process in the water sector in Ethiopia, build confidence in one another as business partners, and pave the way for a larger investment in the future.

30. The fol lowing table sets out the costed components for the Project.

Component Category

1. Addis Ababa WSS 1A. Increased access to water goods, works, consultants 1B. Improved operational efficiency goods, works, consultants 1 C. Institutional reform goods, consultants 1D. Project Management consultants, goods,

training, operations Sub-Total

Cost A!D GPOBA IDA US$m US%m US$m financing

US$m

52.30 2.00 6.00 44.30 23.08 4.05 0.00 19.03

1.15 0.00 0.00 1.15 1.60 0.20 0.00 1.40

78.13 6.25 6.00 65.88

7

Component

2. Secondary City WSS 2A. Increased access to water

2B. Improved operational efficiency

2C. Institutional reform 2D. Project Management

Sub-Total 3. Program Management

Sub-Total 4. Unallocated

Total * Unallocated for AAWSA

Category

goods, works, consultants

goods, works, consultants

goods, consultants consultants, goods, training, operations

consultants, goods, training, operations

cost US$m

29.40

3.07

0.21 0.28

32.95 1 .oo

1.00 6.93

119.00

AfD US%m

0.00

0.00

0.00 0.00

0.00 0.00

0.00 2.75" 9.00

GPOBA US$m

4.00

0.00

0.00 0.00

4.00 0.00

0.00 0.00 10.00

IDA financing

US$m

25.40

3.07

0.21 0.28

28.95 1 .oo

1.00 4.18

100.00

Component 1: Addis Ababa Water Supply and Sanitation (US%SS million)

1A. Increased access to water supply and sanitation

3 1. f rom 210,000 to at least 360,000 m3/day, bringing production up to 75 liters per capita per day. This component will finance capacity expansion at the Legadadi reservoir and water treatment plant, deep boreholes at selected sites within Addis Ababa, and the start o f a new wel l field to the northeast or northwest o f the City. Project funds will be used to increase production by 100,000 m3/day, and A A W S A and the Municipality will use their own revenues to construct sufficient boreholes to produce an extra 50,000 m3/day. The Project will also finance the extension o f the distribution network to unserved areas o f the cities and connect more customers. Special attention will be given to low-income areas by involv ing communities in the planning process and improving drainage to control septage flows. The sewer system in the Kal i te catchment will be extended, and public sanitation facilities, managed by local service providers who charge a user fee, wil l be constructed.

T o meet basic services in Addis Ababa over the next five years, water production must be increased

1B. Improved operational efficiency and demand management

32. operational efficiency must be improved and water conservation must be instilled in consumers. Improved financial management, billing and collection, and customer management are also essential in establishing a financially viable water company that can pay the high cost o f expansion needed later for Water 111. Financing under this sub-component will establish pressure zones within the distribution network and repair leaks at service connections and in distribution piping. AAWSA's financial management, billing/collection, and customer-management system wil l also be improved, and awareness for water conservation will be created. Catchment protection measures will be taken at the c i ty reservoirs.

Given the high marginal cost o f water in Addis Ababa and non-revenue water exceeding 35%,

1C. Institutional support

33. Funding would be provided for operational pol icy development and revisions in the legal and an institutional framework for water supply, developing polices and measures for enhanced private sector participation and financing in this sector, and improving utility governance and efficiency. Stakeholder consultation measures are also included in this component.

8

1D. Project management

34. EMS, monitoring and evaluation, project management support, financial audits and capacity building.

Funding would be provided to A A W S A for project management activities including for conducting

Component 2: Secondary City Water Supply and Sanitation (US$33 million)

2A. Increased access to water supply and sanitation

35. lpcd actually reaches consumers. In comparison, water production in cities o f this size in other countries in Afr ica i s about 75 lpcd. On average, water production should be doubled in these cities. This component will finance increased water production as wel l as the extension o f the distribution network and new connections, particularly in unserved areas. Selected low-income areas will receive special attention by involving the beneficiary communities in the planning process for the provision o f water Supply and public sanitation facilities. Financing will also be available for the construction/expansion o f wastewater treatment ponds and piped sewerage in higher density commercial areas.

Water production in the four secondary cities i s about 30 liters per capita per day, o f which about 25

2B. Improved operational efficiency

36. The water utilities in the four participating cities perform reasonably well, but operational efficiency could be improved by reducing non-revenue water and improving financial management, billing and collection, customer management. Under this sub-component the materials, equipment and costs associated with establishing pressure zones will be provided, as will leak repairs in the distribution network and at service connections. Financial management, billing/collection, and customer-management will also be improved.

2C. Institutional support

37. Boards and to develop procedures and codes o f conduct. Operator contracts with performance targets and performance incentives would also be developed and tested.

Funding will be provided to refine enabling legislation to provide more autonomy to the Water

2D. Project management

38. conducting EIAs, monitoring and evaluation, project management support, financial audits and capacity building.

Funding would be provided to the four utilities for project management activities including for

39. treatmenthollection; add new service connections for water and wastewater; create pressure zones within the distribution network; repair leaks in distribution piping and at service connections; replace o ld meters; improve financial management, billing/collection and customer-management systems; create public awareness for water conservation; and implement a catchments management plan. Consultant services for design and supervision o f the c i v i l works, financial management, and water conservation will also be provided.

K e y Inputs for components 1 and 2: Expand water productioddistribution and wastewater

40. with improved water supply - water production, distribution, and connections will be increased to 90 percent o f households; 24 hour per day service will be provided to al l areas within the city; and sanitation plans will implemented. To improve operational efficiency and manage demand non-revenue water will be reduced by 10 percent, and 80 percent o f costs will be recovered through tari f fs (i.e. recurrent, renewalheplacement of

Key OutDuts for components 1 and 2: T o improved access - that is, increase the number o f people

9

short l i fe assets, and expansion excepting distributiodconnections for low-income households). To establish better performing utilities, autonomous water boards, with operators working under performance based contracts will be established.

Component 3: Project Management and Monitoring and Evaluation (US$2 million) 41. The project management will involve sector institutions at federal and regional levels, c i ty administrations and utilities. Funding would be provided for costs associated with project implementation, to synthesize existing water and sanitation access data to determine baseline figures and to monitor progress under this project and in meeting the overall water supply and improved sanitation access goals under the MDGs. This component also includes training, workshops and other capacity building measures and support for environmental and social management.

42. K e v Inputs for component 3: will include technical assistance, goods, operation support, and training for effective project implementation and improved monitoring o f performance towards achievement o f MDG goals.

43. monitoring and implementation o f the project and i t s contribution for the broader sector MDG goals.

K e y outDuts for component 3: will include improved system and enhanced capacity for effective

4, Lessons learned and reflected in the project design

44. I t s involvement has helped to build a wealth o f experience that have been fed back into producing national implementation strategy and guidelines.

The Wor ld Bank has been the major financer o f urban WSS sector projects in the country and region.

45. The Water Supply Development and Rehabilitation Project WSDRP supported the practical implementation o f GOE’s water resources management pol icy and i t s subsequent strategy and programs, in the context o f the decentralization, through capacity building and p i lo t projects in 25 towns.

46. projects. I t was designed on the basis o f decentralized, demand driven and performance based implementation with capacity building for both in the public and private sector. T o ensure sustainability and financial viabil ity o f urban utilities, a stepped approach was institutionalized in the sector such that towns progress through the project cycle as they build their capacity to plan and manage their facilities and demonstrate that they can maintain them.

The fol low on Water Supply and Sanitation Project builds o n the lessons learned from previous

47. and sector performance reviews conducted. Building on this foundation, the key lessons learned and reflected in the project are:

In the process several studies have been conducted and implementation o f Bank supported projects

Decentralization and corresponding capacity: Decentralizing responsibility for service delivery can improve the effectiveness and sustainability o f water supply for both urban and rural areas. It, however, requires adequate capacity and systems at a l l levels to be responsive to community needs and be accountable for policies, actions, and use o f funds.

Coordination amongpublic institutions: WSS by i t s nature i s a decentralized cross cutting service that requires the clear definition o f roles and responsibilities between different tiers o f government and horizontally among public institutions. International and country experience showed h o w private and informal sectors can increase efficiency and improve sustainability in a decentralized environment.

10

Stake holder consultation and involvement: Local service delivery can be sustained, i f it i s built on consultation with stakeholders and clearly defined roles and responsibilities.

Recognizing autonomy that goes with decentralized responsibility: Regional proclamations provide urban uti l i t ies with administrative and financial autonomy. In practice, however, municipalities need to respect the decision making by the Water Boards when it comes to business plans, acquiring competent staff and professional support, ring fenced accounts, and procurement.

Ful l cost recovery as a goal: In Ethiopia urban utilities are required to fully cover their cost and be self sufficient. This however requires a process o f expanding the system to achieve a sufficient revenue base to professionally operate it, and building capacity to efficiently operate it. A stepped approach in which utilities are required to gradually improve their technical, financial, and operational capacity and promote themselves towards full cost recovery has demonstrated itself to be a viable strategy.

Use of existing government structures: Using existing Government institutional structures for program implementation i s essential to ensure ownership and achieve long term sustainability objectives. However, adequate capacity and incentive systems need to be institutionalized in the public sector and complementary program support assistance needs to be arranged through contracted staff and acquiring short term professional support for specific s h l l areas. Local town support groups established under the ongoing WSSP have demonstrated that the key to build utilities capacity i s to provide o n the j o b and practical training. Establishing a net work o f practitioners and facilitating exchange o f best practice can serve a l o t in improving sector performance.

M&E and communication strategy; Information sharing i s not much practiced in Ethiopia. As a result the availability and accessibility o f information i s a serious bottleneck for the development o f the water sector. A concerted, wel l financed, effort i s needed to implement and refine the proposed monitoring and evaluation system

Donor coordination and sector program: Major financing and complementary implementation capacity i s needed to achieve sector targets. The growing donor support for the government’s sector program i s key to minimizing transaction costs by supporting a single capacity building effort and national implementation strategy.

5. Alternatives considered and reasons for rejection

A stand alone urban water supply and sanitation project for Addis Ababa only.

48. nature o f the situation, a stand alone water project for Addis was given consideration. This would have permitted more resources to be dedicated to the urban water and sanitation sector and could be prepared quickly. Due to the interest o f the GOE to address a few other cities in a similar situation and use the project as a vehicle for experience sharing among the bigger cities, this option was not used. At appraisal a final decision was made to invite Awassa f rom southern, Gondar f rom Amhara, Jimma f rom Oromia and Mekelle f rom Tigray regions. Capital investment will be contingent on the selected cities meeting the conditions for “Step 4” (see annex 4) investments within one year o f project effectiveness.

Given the alarming gap between the supply and demand for water in Addis Ababa and the emergency

Including a water component in a larger national urban development project.

49. financing mechanism in line with the government fiscal decentralization. The urgency attached to the WSS situation o f Addis Ababa city and the early stage o f preparation o f the UD operation l ed to dropping o f this option with a consideration o f ensuring linkage between the two operations in the U W S S project design and as the UD project develops.

The Bank i s preparing a national urban Development Operation which aims at designing a municipal

11

C. IMPLEMENTATION

1. Partnership arrangements

50. €7 mi l l ion investment to increase production and reduce unaccounted for water in Addis Ababa. AfD will primarily finance consultants to help manage the unaccounted-for-water program and IDA will finance a large part o f the goods and works needed to implement it. I t ’ s expected that the UWSSP will have sufficient funds to finance al l the four cities that have been identified by government.

The project has been prepared in consultation with AfD, which has already appraised and approved a

5 1. ways o f introducing private sector participation in the sector, with a v iew towards later securing the $550 mil l ion investment required to finance Water 111. IFC will prepare an options study and seek private sector partners to finance a private intervention. It i s expected that IFC wil l mobil ize up to US$40 mi l l ion.

During project identification and pre appraisal the IFC and the Bank team worked together to identify

52. Development Bank which i s currently investing $60m in rural water supply and sanitation. JICA i s supporting rural water supply in two regions, DFID has pre-appraised a & l o o m project for rural and town water supply and sanitation. The Netherlands, through UNICEF, may contribute up to $1 OOm for rural water supply and sanitation. The EU and EIB are providing €33.2m to improve water supply services in 15 medium sized towns. All are expected to fo l low the implementation arrangements set out in the MWR’s National WSS Program as agreed for the IDA-financed WSSP.

Other donors are supporting the water and sanitation sector in Ethiopia. These include the African

2. Institutional and implementation arrangements

53. This UWSSP will fo l low the implementation arrangement that was introduced by the WSSP and adopted by other donors. Implementation manuals for the overall project and for each region have been developed, which spell out institutional and implementation arrangements for the project and outline the ru les o f engagement for planning, appraisal, contracting, and implementation. In addition, standard operating procedures and terms o f reference for consultants to streamline implementation have been prepared. A stepped approach to implementation will be followed for urban water supply and sanitation, as described in Annex 4.

54. The following institutions wil l be involved in project implementation:

Ministry of Water Resources (MWR): The MWR will be responsible for overall coordination and monitoring and evaluation o f the program, facilitation o f capacity building and pol icy formulation. I t s Water Resources Development ‘Fund ’ will be responsible for coordinating and monitoring the Federal Government’s on-lending program for urban WSS sub-projects.

Regional Water Resources Development Bureaus (R WBs): The RWBs are responsible for overall program planning, management, coordination and capacity building at the regional level. The RWBs play an important role in arranging technical assistance for towns and cities to qualify for grantshredits to improve their water supply facilities, and in appraising town/city business plans and designs.

Water Boards (WBS): Water Boards are responsible for planning and managing town and ci ty water supply systems. Water Boards enter into a performance agreements or contracts with a utility, who handles routine operations and maintenance and secures supplemental professional services to assist them to improve efficiency and expand the system over time.

Water Utilities: Water utilities are accountable to their Water Board under a performance agreement or contract for the operation and maintenance o f a water supply system.

0

0

0

12

55. UWSSP. The approach to capacity building will be learning by doing through project implementation. For water supply in the secondary cities, capacity building will be incorporated into technical assistance contracts to plan, design, supervise and improving operational efficiency.

Capacity Building. Like the existing WSSP, capacity building i s embedded in the design o f the

56. exchange experiences and lessons learned to improve services in participating cities. The Wor ld Bank institute (WBI) wil l facilitate a number o f these workshops, and others will be led by consultants and town representatives involved in project implementation. For urban water supply practitioner specialty areas will include Water Board development, business planning and cost effective design, water supply operations l ike billing and collection and non-revenue water reduction.

T o this end MWR i s organizing practitioner specialist groups which can periodically meet to

57. cities and by A A W S A . The MWR will be responsible for consolidated accounting and reporting on the secondary cities. Annex 8 sets out disbursement arrangements, including the table o f allocation o f credit proceeds by expenditure category and financing percentage. The traditional SOE disbursement method will be followed, which uses a Special Account, SOE procedures and direct payment procedures. Annex 7 also sets out the uses o f SOE and requirements for the special account, counterpart fund account and documentation. For GPOBA fund f low arrangement see Annex 4.

Fundsflow and accountabilities. Special accounts will be maintained by the MWR for secondary

58. Procurement and contracting. Consistent with the Government’s pol icy o f decentralization, procurement and contracting urban water supply individual Water Boards will manage and directly contract for the goods, works and consultants needed to implement their part o f the project. Standard bid documents for goods and works and requests for proposals for consultant services will be utilized.

59. procurement plan for the secondary cities based o n those prepared by ci ty consultants. A A W S A and the MWR submitted a procurement plan as part o f the implementation manual showing detailed process and budget for the f irst eighteen months and indicative activities and budget for the project life.

A A W S A will prepare a procurement plan for i t s part o f the project, and the MWR will maintain a

60. Management Framework (ESMF) and the Resettlement Policy Framework (RPF). Towards this end, the ministry will recruit a Capacity Building Consultant who will be located in the National Project Coordination Unit (NPCU). This consultant wil l be responsible for implementing the provisions o f the ESMF and RPF and will coordinate these activities with the relevant personnel o f the regional city administrations. H e will coordinate the preparation o f the environmental and social sections o f the Annual Report with A A W S A .

The Ministry o f Water Resources will oversee the implementation o f the Environmental and Social

3. Monitoring and evaluation o f outcomedresults

61. approach used in project implementation. Information on intermediate results, indicators, and arrangements for results monitoring are given in Annex 3. Responsibilities for M&E are held at various levels. The MWR and Regional Water Bureaus have staff who are responsible for the coordination o f M&E activities, including environmental monitoring and evaluation activities.

The Monitor ing and Evaluation (M&E) system will complement the performance-based, stepped

62. i s planned. Baseline and performance monitoring will be carried out by individual water boards, their utility operators and planning consultants.

Under the WSSP these staff have received init ial training in M&E and, follow-up, on-the-job training

63. complete over time as measuring equipment i s installed and operators are trained.

M&E information i s the same for planning, baseline and performance monitoring, but becomes more

13

Baseline Information: Util i t ies f rom a l l the five cities have provided this information based on available records. However, the information needs to be updated regularly and reconfirmed when the utilities are equipped with the required equipment and establish the monitoring system. In addition, household surveys will be conducted at the beginning and end o f the project in the five participating cities to estimate the number o f people who have obtained improved water supply and sanitation services as a result o f the project. Performance monitoring: The ci ty utility operator will collect performance information o n a regular basis. The city water board should submit semi-annual reports to MoWR and the Wor ld Bank with al l information updated.

4. Sustainability

64. The Government has committed considerable resources in recent years to establishment o f an enabling environment for sectoral development. The Water Resources Policy, developed with broad stakeholder participation, i s rather bo ld in i t s pronouncements, for example, on decentralization, cost recovery, involvement o f a l l stakeholders including the private sector, and coordinated planning for water supply and sanitation. The Water Sector Strategy and Water Sector Development Program have been developed based o n the Policy.

65. Sector Development Program. In addition, they have implemented legislative reforms to improve the institutional arrangements - by establishing autonomous Water Boards, staffing water supply service units and reforming tariffs.

Regional governments have taken an active role in the development o f the Policy, Strategy, and

66. (i) demand responsive, approach to selecting cities; (ii) performance based, stepped approach to receiving assistance so that funding i s provided f irst to put in place appropriate institutional arrangements, plan affordable systems with stakeholder consultation and build capacity for implementation and finally for investments; (iii) effective systems for monitoring and evaluation; (iv) adequately trained staff at a l l levels; (v) autonomy o f service providers; (vi) performance agreements or contracts between service providers and water boards; and (vii) involvement o f the private sector.

Recognizing that sustainability i s a process, the key elements for sustainability o f project benefits are:

5. Critical risks and possible controversial aspects

Description of Risk Slow pace o f creating conducive environment and facilitation for the establishment o f efficient, sustainable urban water supply services. These include (i) lack o f autonomy o f the utility in financial, procurement and staffing matters; and (ii) poor commercial practices including effective customer management and use o f the private sector.

L imited commercial practices affecting the establishment o f a financially viable utility operating on full cost recovery.

Probability H

Mitigation (i) significant work o n sector pol icy development; (ii) utility, institutional and legal framework reform; and (iii) measures to install modern commercial and financial practices and measures.

M The U W S S project would strengthen them to: (i) improve their financial and customer management, (ii) reduce non-revenue water; and (iii) better serve low-income areas.

14

' 3 Advance funds have been provided to expand the groundwater investigation and begin the development o f one or more well fields.

Description of Risk Probability I Mitigation While the ongoing groundwater investigation o f M a deep aquifer i s very promising, actual aquifer yields may be substantially lower than projected.

6. Loadcredit conditions and covenants

FNPV (Birr Million)

136

67. Effectiveness: The following events are conditions to the effectiveness o f the Financing Agreement.

FIRR (Yo) ENPV EIRR (Yo) (Birr Million)

15 217 20

A A W S A and MWR have adopted Project Implementation Manuals in fo rm and substance satisfactory to the Association.

MWR has employed a P C U Project Coordinator, a procurement specialist, and an additional accountant, a l l having experience and qualifications satisfactory to the Association.

0

(Birr Million) -15.3

MOFED has entered into Subsidiary Agreements with A A W S A for the purpose o f Project implementation, in form and substance satisfactory to the Association.

(Birr Million) 3 10.4 15

D. APPRAISAL SUMMARY

1. Economic and financial analyses

68. fo l lowing table for the A A W S A investments o f the Project.

AAWSA: Estimated (rounded) results o f the financial and economic modeling are shown in the

69. the following table for a typical secondary c i ty o f the Project.

Secondarv Ci tv: Estimated (rounded) results o f the financial and economic modeling are shown in

Results o f Financial and Economic Analyses-Secondary City FNPV I FIRR(Yo) I ENPV I EIRR(Yo) I

70. AAWSA, are contained in Annex 9.

Complete details concerning the analysis, including methodology, assumptions and sensitivity for

2. Technical

7 1. secondary cities, the success o f the project i s predicated on the production o f more water. A A W S A must increase i t s production f rom 210,000 to 360,000 m3/day to provide basic water service for the residential, commercial and industrial needs o f a c i ty this size in Africa, and the secondary cities must nearly double their production f rom 30 to at least 50 lpcd. Twenty five percent o f households in a l l f ive cities are not currently

Given the increasing gap between the supply and demand for water in Addis Ababa and the

15

served by the utilities, and those that are served, get water an average o f 12 hours per day. Accordingly, system expansion, pressure zoning, and non-revenue water reduction are important.

72. demand for technical expertise in other sectors, the Project’s design rationale i s to emphasize o n simple and known designs and to avoid expensive to operate or technically sophisticated solutions. Therefore, the Project involves water supply treatment and distribution c iv i l works and goods that employ standard techniques and installations and that are wel l established in the country and the industry. A A W S A and the Regional Util i t ies are accustomed to these standards and designs and have executed previous projects with a similar level o f complexity. They are considered by the Wor ld Bank, and international engineering experts employed by the Borrower to help prepare the Project, to represent an appropriate level o f technology for Ethiopia.

Given Ethiopia’s level o f income limiting people’s abil ity to pay high water tariffs, and the high

3. Fiduciary

73. have the required capacity to use the proceeds o f the grant for the intended purpose. The existing accounting and reporting system o f A A W S A i s capable o f producing accurate and reliable information regarding project resources and expenditures. The system will provide reliable records and reports on al l assets and liabilities and financial transactions o f the project, and sufficient financial information for managing and monitoring activities. The four cities water utilities prepare simple regular financial reports consisting o f receipts and payments. M o W R will provide technical assistance to further strengthen the four cities water utilities. M o W R wil l consolidate the financial reports f rom the four cities water utilities with i t s records and produce consolidated reports.

The financial management assessment for this project shows that the Project Implementing Entities

74. Standards o n Auditing and the audited financial statements will be submitted to the Bank six months after the end o f each fiscal year.

An independent external auditor wi l l perform the annual audits in accordance with International

75. Detailed financial management assessment for the project i s included in Annex 7.

76. evaluation o f procurement activities under the project. Procurement activities for component 1 would be carried out by the A A W S A . The Water Utilities ( W v s ) at Awassa, Jimma, Gonder and Mekele would be responsible for handling their procurements in the respective Regions.

The Ministry Water Resources (MWR) will be responsible for overall coordination, monitoring and

77. An assessment o f the procurement capacity o f the Implementing Agency that included the organizational structure and the interaction o f staff responsible for procurement at A A W S A and the water utilities at the four towns was carried out.

78. addition the procurement procedures being followed by A A W S A were not f i l ly consistent with the Bank guidelines and the staff o f A A W S A do not have sufficient training o n procurement. The Water Util i t ies in Awassa, Jimma, Gonder and Mekele also have very l imited experience only o n handling small value procurements.

The A A W S A has l imi ted capacity in handling donor financed contracts and large scale contracts. In

79. in the four cities:

The fol lowing actions have been agreed to build the capacity o f the A A W S A and the Water Util i t ies

0 One qualified consultant procurement specialist would be employed at the Ministry o f Water Resource before effectiveness.

16

A procurement orientation workshop will be conducted for staff at A A W S A and the four W U s that are involved in the procurement decision-making process including tender committee members, Div is ion Heads, Department Heads. Each o f the W U s would review their institutional setup and restructure their internal procurement management system as required. Each o f the Water Utility Operators would assigdemploy a procurement staff with at least a basic degree preferably in Engineering with sufficient knowledge on procurement whose primary responsibility would be to handle the procurements under the project. The Project Implementation manual that was developed under the Water Supply and Sanitation Project would be adopted for the project to ensure that i t adequately meets the specific needs o f the Project. The PIM would include a description o f a procurement monitoring and reporting system based o n which the MWR would regularly review the procurement activities in each o f the cities.

80. Detailed procurement management assessment for the project i s included in Annex 8.

4. Social

8 1. including community participation and labor intensive works. Furthermore, component 3 will fund the development o f stakeholder consultation measures to ensure general public support o f the project during implementation. Potential social issues resulting f rom land acquisition will be addressed in the context of the Resettlement Policy Framework (RPF) below.

The project design will take into account the employment needs o f people living in low-income areas

5. Environment

82. The proposed investments are l ikely to incur some adverse environmental and social impacts requiring mitigation (i.e. soil erosion, soil and water pollution, a potential increase in malaria, loss of vegetation, traffic accidents and air pollution) due to the project’s construction and rehabilitation activities under components 1 and 2. Since the potential adverse environmental and social impacts o f future investments could not be identified pr ior to appraisal, the Borrower has prepared an Environmental and Social Management Framework (ESMF), including an Environmental and Social Management Plan (ESMP) for the project and Environmental Guidelines for Contractors to be included in the bidding documents.

83. The ESMF outlines the steps o f the environmental and social screening process (environmental and social screening form; assignment o f the appropriate environmental category to the sub-project; carrying out the appropriate level o f environmental work based o n the screening results; public consultations process; procedures for review and clearance o f the environmental and social screening results as wel l as separate EIA reports; and environmental monitoring and evaluation),

84. Consultant to be located in the National Project Coordination Unit (NPCU) o f the Ministry o f Water Resources. The Capacity Building consultant will be responsible for carrying out environmental training relevant to the implementation o f the ESMF and assisting c i ty administration staff and utility staff in the regions as wel l as A A W S A staff in Addis Ababa in this regard; draft terms o f reference are being prepared.

To ensure effective implementation o f the ESMF and ESMP, the project will hire a Capacity Building

85. Environmental monitoring activities will be incorporated into the project’s M&E System; monitoring indicators are included in the ESMP. Annual environmental monitoring reports will be prepared by AAWSA. These reports will provide summaries o f (i) environmental screening forms; (ii) EIAs carried out in the course o f the year; and (iii) a summary o f the environmental monitoring carried out on systems at both construction and operation phases. The annual reports will be reviewed by the E P A and the Ministry o f Water Resources, and copies will be sent to the Wor ld Bank.

17

6. Safeguard Policies

86. OP 4.12 Involuntary Resettlement, OP 4.37 Safety o f Dams, and OP 7.50 Projects o n International Waterways due to the planned investments under components 1 and 2. The safeguard screening category i s S2, and the environmental screening category i s B. The key safeguard pol icy issues raised by the project are (i) potential adverse environmental impacts such as soil and water pollution, loss o f vegetation, and soil erosion due to the planned construction and rehabilitation activities; (ii) potential adverse social impacts that might result f rom the need for land acquisition and/or the loss o f access to economic assets and livelihoods due to planned rehabilitation and investment activities; and (iii) an increase in water abstraction due the extension o f piped water in some urban areas. In recognition o f the need to identify, assess, mitigate, and monitor potential adverse environmental and social impacts o f future investments, the Borrower has taken the fol lowing measures.

The project has triggered OP 4.01 Environmental Assessment, OP 4.11 Physical Cultural Resources,

87. OP 4.01: Consistent with OP 4.01, the Borrower has prepared an Environmental and Social Management Framework (draft ESMF) because the exact locations and potential negative localized environmental and social impacts o f the future investments could not be identified pr ior to appraisal. The E S M F includes (i) an Environmental and Social Management Plan (ESMP) which outlines the institutional arrangements for the implementation and monitoring o f mitigation measures, cost estimates and time horizons. The ESMP will be included in the Project Implementation Manual; and (ii) Environmental Guidelines for Contractors to be attached to the bidding documents to ensure that the construction and rehabilitation activities are carried out in an environmentally and socially sustainable manner.

88. o f Jinima and Awassa, two secondary cities that could potentially benefit f rom the UWSSP, with the Environmental Protection Agency (federal level), and the Wor ld Bank country office. Staff involved in the operation o f water systems in Addis Ababa, Awassa, and Jimma have also been interviewed. The ESMF was disclosed on February 14,2007, in Ethiopia and at the Bank’s Infoshop.

The ESMF was prepared in consultation with A A W S A in Addis Ababa, with the Town Water Boards

89. The National Project Coordination Unit (NPCU) o f the Ministry o f Water Resources will be responsible for the implementation o f the ESMF. Towards this end, the NPCU will hire a Capacity Building Consultant who will be responsible for carrying out training o f local project implementers in environmental and social screening, init ial review o f the screening results and EL4 Reports, review and update provisions of the ESMP and the Environmental Guidelines for Contractors in light o f actual developments under sub- projects. The Capacity Building Consultant will assist c i ty administration staff as wel l as utility staff in the regions and A A W S A staff in Addis Ababa in the environmental and social screening activities, oversee the implementation o f the ESMP, and arrange for appropriate environmental training. The federal Environmental Protection Agency (EPA) wil l monitor the implementation o f the ESMP.

90. rehabilitation activities. Any potential chance finds will be identified and dealt with in the context o f the ESMF, appendix 3.

OP 4.11: This policy has been triggered due to the possibility o f chance finds during construction and

91. (RPF). The RPF identifies the future investments that are l ikely to entail land acquisition such as wells, water distribution networks including pipelines, public stand tabs, public water kiosks and other distribution-related facilities. The document outlines the resettlement and compensation principles outlining, for example: (a) the general framework within which any impact o f the project on land andor people (land acquisition, resettlement, and livelihood restoration o f affected people) will be addressed; (b) the minimization o f displacement through design procedures; (c) the establishment o f a cut-off-date and eligibil i ty criteria for each sub-project under the project; (d) livelihood restoration; (e) compensation; and ( f ) consultation and grievance mechanism as wel l as the processes, entitlements and other provisions related to monitoring and evaluation;

OP 4.12: Consistent with OP 4.12, the Borrower has prepared a Resettlement Policy Framework

18

grievance mechanisms; assistance to vulnerable people; implementation arrangements, and responsibilities for the different tasks involved in the implementation o f the RPF. The RPF was disclosed on February 14,2007, in Ethiopia and at the Bank’s Infoshop.

92. Consultant to be located in the NPCU) with assistance from Social Consultants. The Capacity Building Consultant will also support the towns in the organization o f resettlement planning (valuation commissions, censuses, payment o f compensation); select consultants to develop appropriate resettlement action plans; participate in monitoring and evaluation (possibly through consultants for the most significant resettlement activities, if any). The Social Div is ion o f the federal Environmental Protection Agency (EPA) will monitor compliance o f resettlement activities with the RPF, Ethiopian law, and OP 4.12.

Implementation o f the RPF in Addis Ababa will be the responsibility o f the Capacity Building

93. December 18,2006, covering the Legedadi Dam, Gafarsa Dams, and Di re Dam. For security reasons, this report has not been disclosed to the public. The report’s main finding i s that, overall, the dams are in good condition. The report recommends that the Act ion Plan should include, as a minimum: (i) a spillway operation plan at Legedadi, including community training in f lood emergency preparedness; (ii) establishing a monitoring program at al l the three dams based on the priority elements identified during the workshop; the program should be based on a set o f new “baseline” data (dam movements, deformations, seepage rates etc.); and (iii) collecting, or re-doing if necessary, as build drawings o f the works. The implementation o f this action plan will be supported under project component 1A. This Act ion Plan i s expected to include institutional arrangements at the local level in cases o f emergencies.

OP 4.37: Consistent with OP 4.37, the Borrower has prepared a D a m Safety Assessment Report dated

94. Ababa. I t i s recommended that as part o f the capacity expansion at the existing Legedadi reservoir and treatment plant under component 1 A, this component also finance (a) an environmental and social assessment o f the current activities around the reservoir (agricultural production, livestock grazing, sanitation, waste water and waste generation by the surrounding population) because the high levels o f water turbidity due to fertilizer use, sanitation problems, and siltation at the dam have led to a fourfold increase in the water treatment costs over the last ten years; and (b) selected priorities o f ASSWA’s catchment management plant. T o the extent that catchment management activities involve infrastructure investments such as small dual- purpose s i l t trap reservoirs or buffer strip works, environmental and social assessments will need to be completed and disclosed prior to the commencement o f construction. The Bank will receive copies o f these reports for review and clearance. The project may also want to consider treating the sludge at the water treatment plant pr ior to returning it to the river.

Catchment management: The appraisal mission visited D i re D a m and Legedadi D a m near Addis

95. Republic o f Ethiopia, notif ied al l the downstream riparians in accordance with OP/BP 7.50, concerning the proposed project. No unfavorable responses were received f rom any o f the riparians based o n international waterways issues.

OP 7.50 (International Waterways): The Bank, o n behalf o f the Government o f Federal Democratic

96. The Bank staff have considered those aspects o f the Project that might have an affect on the downstream riparians and are satisfied that the Project wil l not cause appreciable harm to the other riparians and will not be appreciably harmed by the other riparians’ possible water use.

19

Safeguard Policies Triggered by the Project Yes No Environmental Assessment (OPBP 4.01) d Natural Habitats (OPBP 4.04) J Pest Management (OP 4.09) d Physical Cultural Resources (OPBP 4.11) J Involuntary Resettlement (OPBP 4.12) d Indigenous Peoples (OPBP 4.10) d Forests (OPE3P 4.36) d Safety o f Dams (OPBP 4.37) d Projects in Disputed Areas (OPBP 7.60)* J Projects on International Waterways (OPBP 7.50) d

E. POLICY EXCEPTIONS AND READINESS

97. The Project does not require any exceptions to Bank policies.

98. During preparation o f the existing Water Supply and Sanitation Project a national policy framework for urban water supply was established. All regions in the country have had two years o f experience in implementing the program, so are well acquainted with the implementation arrangements and conditions for obtaining investment grantdloans. Both the MWR and RWBs have taken ownership o f the program and use it for all investments in the sector including their own.

99. underway.

The PIU in AAWSA has been established and mostly staffed, and a number o f preparation studies are

* By supporting theproposedproject. the Bank does not intend to prejudice the f inal determination of the parties' claims on the disputed areas

20

Annex 1: Country and Sector or Program Background

ETHIOPIA: Urban Water Supply and Sanitation Project

Country and sector issues

1. Accelerated and Sustained Development to End Poverty (PASDEP) covering the period 2005-2010 i s being finalized. The main thrust o f this plan (PASDEP) i s ensuring much accelerated growth through a multi faceted approach towards tackling the interlinked poverty traps. L o w level o f Infrastructure provision, with in which, water supply and sanitation i s identified as key, among these traps.

Ethiopia i s in i ts second cycle o f developing poverty reduction strategic plan (PRSP), A Plan for

2. achieving 84% access to safe water supply by 2010 from the 42% in 2005. Access to improved sanitation i s as l o w as 28% in 2005 and the government plan i s to achieve 80% in 2010. In a big country l ike Ethiopia this means that 32 mi l l ion more people had access to safe water supply and 39 mi l l ion more people had access to improved sanitation by 2010. A plan that goes much more beyond the MDG target with in a shorter time period.

Cognizant o f the role improved WSS plays for economic growth, the plan sets ambitious targets o f

3. the 1994 national census, and i s expected to double in the next 15 to 20 years.

The country’s urban population in the year 2005 i s estimated to 12 m i l l i on (1 6%) as projected from

4. The major issues for water supply and sanitation development in the country include:

Low service levels: Water supply and sanitation coverage in Ethiopia i s the lowest in sub-Saharan countries with only 42% and 28% for water supply and sanitation consecutively.

Limitedfinancing for expansion and improvement of service: Current investment in the WSS i s too low as compared to what i s planned. The annual cost o f achieving government plan i s estimated to US$350- 450 mi l l ion in the first few years and fall ing to US$200 m i l l i on in the later years. The rate o f investment in the sector including this project i s about US$lOO mi l l i on per year, requiring a four to five fo ld increase in investment. User fees for services are often too l o w to provide for adequate maintenance o f existing facilities.

Decentralization and capacity constraints: With further deepening o f the government decentralization, much more autonomy i s devolved to the woredas, town utilities, and communities to plan and manage their water supply schemes. Government i s in the process o f institutionalizing a sector support system that involves local private sector and other partners in capacity building, and assisting in implementation o f water supply and sanitation service improvement program. However, as the approach i s new and the process needs time to internalize and institutionalize it, the constraint remains to be one o f the major issues to be addressed.

Stakeholder and private sector participation: T o date stakeholder participation in the sector has been very limited. A trend i s being set under the ongoing water supply and sanitation program, towards consultative process and participatory planning. Participation o f the private sector and informal sectors i s yet to develop. Though there i s awareness on the efficiency and service improvement the private sector could bring about, the thrust i s yet to develop with demonstrated performance.

Rationale for Bank involvement

5. investments. The Wor ld Bank i s the largest international development institution n o w active in the urban water sector. Other development partners, such as AfD, BADEA, the European Union, the European

Sector reform, particularly for urban water supply and sanitation requires time, expertise and large

21

Investment Bank, and the African Development Bank together make a major contribution to the urban water sector, but look to the Wor ld Bank to lead the assistance effort. In particular the Bank has a large staff with significant experience/expertise in water engineering, regulation, commercial operation, stakeholder involvement, and services in low-income areas. It also has sufficient resources to permit engagement in the sector over a prolonged period, helping to ensure consistent policies and investments. Finally, urban water utilities will need substantial financing from private sources, and the Bank i s perhaps uniquely positioned in terms o f expertise and knowledge to assist the government in establishing the necessary conditions and environment to make this possible. The Wor ld Bank i s wel l positioned to support the urban water supply in general and Addis Ababa in particular due to i t s long engagement in the sector in Ethiopia, including assistance with the development o f a sector strategy for rural communities, towns and urban centers, and in assisting Addis to develop i ts current water tar i f f structure and billing system.

6. Mengist) in Ethiopia, and the Wor ld Bank i s financing business planning, capacity building, and physical improvement in several others. AfD has appraised a €14m project to expand treatment capacity and reduce nonrevenue water in Addis Ababa, but requires the City or another donor to finance half. Early approval o f this project would provide resources for institution building and detailed engineering studies for works that could be financed by IDA or other donors.

Currently, AfDB and BADEA are financing water works in two large cities (Harar and Kibre

7. The Wor ld Bank group i s also able to offer Ethiopia a wide range o f products that wil l contribute to developing the sector. The IFC i s interested to finance private sector investors in Addis Ababa water supply and l ikely this requires a partial risk guarantee.

8. mi l l ion to the project for work in l o w income areas.

The Global Partnership for Output Based Aid has indicated i ts interest to contribute between US$5-10

H i g h e r level objectives to which the project contributes

9. The recent guiding strategic framework for the five-year period 2005-2010, Plan for Accelerated and Sustained Development to End Poverty (PASDEP), puts much accelerated growth as i t s main thrust to break out o f the self-perpetuating poverty traps. For al l reasons, a major push on growth i s at the centre o f the PASDEP for the coming five-year period.

10. FY 06-07, sees contribution to the country’s growth agenda as one o f the central underpinnings o f bank’s support to the country. Improved access to clean water supply and sanitation i s the core o f government’s plan and Bank assistance to strengthen the urban agenda and improve the urban infrastructure coverage level. The government plan i s to double the current water supply access rate o f 42% in 2005 to 84% by 2010.

The Inter im Country Assistance Strategy (ICAS) (May 1,2006, Report number 35142-ET) covering

1 1. This UWSSP i s designed to support operationalization of the broader growth strategy, interpretation o f the countries Integrated Water Resources Management policy, and contributing to the achievement o f the MDG and interim country goals.

22

Annex 2: Major Related Projects Financed by the Bank and/or other Agencies

ETHIOPIA: Urban Water Supply and Sanitation Project

Wor ld Bank financed

Sector Project IP DO

Water Supply and Sanitation (ongoing) Water Supply and Sanitation S S Project (Cr. No. 3901-ET and Grant NO. H085-ET)

ter supply Protection o f Basic Services (Grant S S NO. H224-ET)

Water resources management (ongoing) N i l e Basin Initiative NA NA

Food security (ongoing) Food Security Project (Cr. No . S S 3646-ET)

Community development - pastoralist Pastoralist Community S S regions (ongoing) Development Project (Grant No .

H038-ET) ................................................................................................................................................................................................................................................................� Decentralized service delivery (ongoing) CBDSD (Cr. No. 3698-ET) S S

Public sector capacity building - PSCAP (Cr. No. 3899-ET) S S decentralization (ongoing)

Productive Safety Nets Product Safety Nets (APL2) (Grant NA NA NO. H266-ET)

Other Agencies:

Water Sector Water Sector Development Program UNDP supported

Water Sector National Water Supply and Sanitation Master Plan- Netherlands supported

Urban Water Supply and Sanitation Af i ican Development Bank - Harar T o w n Water Supply and Sanitation

Urban Water Supply and Sanitation

Urban Water Supply and Sanitation

Urban Water Supply and Sanitation

Rural Water Supply and Sanitation

Rural Water Supply and Sanitation

EU and EIB U W S S for 15 towns

German Financial Cooperation ( Urban Towns .

Japanese Government/JICA - Eleven Urban Towns and RWSS in two regions

Finida - Rural Water Supply in Amhara and Benshangul Regions

ADB- RWSS project

................................................................................................................................................................................................................................................................l� ................................................................

~ ....................................................................................................................... .............................................

....................................................................................................................

..................................................................................

23

Annex 3: Results Framework and Monitoring

ETHIOPIA: Urban Water Supply and Sanitation Project

Results Framework

1. The U W S S Project Results Framework sets out the Project Development Objective and the Intermediate Results the project intends to achieve, with corresponding M&E indicators, and the way M&E information will be used to monitor results and make adaptations as needed during project implementation.

Increased access to sustainable water supply and sanitation services for people living in Addis Ababa and four secondary cities

Intermediate Outcomes

A. Addis Ababa Increased water production

Increased connections

More reliable supply

Improved cash f low

Sanitation improved

B. Secondary Cities Increased water production

Increased connections

More reliable supply

Improved cash f l ow

Sanitation improved

roject 0

Number o f people with improved water supply and sanitation.

Intermediate 0

Volume o f water produced.

Number o f new connections. Number o f rehabilitated connections.

Hours per day o f supply.

Ratio o f operating revenues/expenses,

Number o f people with access to improved sanitation in low-income areas.

Volume o f water produced.

Number o f new connections. Number o f rehabilitated connections.

Hours per day o f supply.

Ratio o f operating revenues/expenses.

Number o f people with access to improved sanitation in low-income areas.

f Project Outcome Information

T o determines if access to water supply and sanitation has increased as planned.

Use of Intermediate Outcome Monitoring

T o determine if key inputs will serve the targeted number o f beneficiaries.

T o assess financial viabil ity o f utilities.

T o assess progress in increasing access to improved sanitation.

T o determine if key inputs will serve the targeted number o f beneficiaries.

T o assess financial viabil ity o f utilities.

To assess progress in increasing access to improved sanitation.

24

Arrangements for Results Monitoring

2. compatible with the M&E system developed for the ongoing Water Supply and Sanitation Project. It will serve as a tool for implementers, to enable them to assess project implementation and undertake modifications o n a timely basis so that the project development objective and intermediate results can be achieved.

Institutional Issues. Monitoring and evaluation (M&E) for the project will be based on and

3. The attached table (Arrangements for Results Monitoring) identifies institutional responsibilities for data collection and reporting. MWR will provide an electronic database for data entry, indicator calculations, and report generation. The Ministry o f Water Resources and the Regional Water Bureaus have staff who are responsible for the coordination o f M&E activities for rural and urban water supply. These specialists, together with the firm contracted to construct the computer based information system for the national water supply and sanitation program, will provide init ial training for staff in A A W S A and the secondary cities in M&E, with follow-up, on-the-job training organized as needed.

4. Monitoring table. Detailed ru les for the collection, processing and organization o f M&E information will be part o f the M&E manual, and summarized in this annex. The project includes a budget for M&E activities including staffing, training, mid-term and final evaluations, data collection, and technical reviews. Data collection will take place through normal operations reports and financial accounting, plus annual audits. Budget i s also available to procure meters and other instrumentation required to monitor the water supply systems.

Data collection. Responsibility for data collection i s indicated in the Arrangements for Results

5. as required during project implementation to h r the r develop, implement and f ine tune the M&E system and to build local capacity to manage it. An M&E capacity plan i s incorporated in the project’s capacity building activities.

Capacity for implementing the M U system. Meetings, workshops and training events will take place

25

I I I I

Monitoring and Evaluation for Urban Water Supply and Sanitation

- 1. Population o f city - 2. Average number o f persons per household - 3. Average number o f persons per standpipe - 4a. Number o f residential house connections - 4a.i Number o f residential with access to yard tap - 4b. Number o f public standpipe connections - 4c. Number o f institutional, industrial and commercial connections - 5 , Average number o f households sharing residential connections - 6. Number o f connections wi th operating meters - 7. Production capacity (m3/day) (see 24 for actual) - 8. Transmission capacity (m3/h0ur) - 9. Water storage volume (m3> - 10. Length o f water distribution network (m)

6. Wor ld Bank to track progress in improving operational efficiency and in providing more people with water. Monitoring consists o f (i) a household survey conducted in each ci ty at the beginning and end of the project that can be used to estimate the number o f people who obtained improved water and sanitation services; and (ii) regular performance monitoring to measure progress in improving the efficiency o f the participating water utilities. The performance information and the monitoring indictors are listed o n the following pages. Operators should submit quarterly reports to their boards and semi-annual reports to the RWBs, MWR and WB. M&E information i s the same for planning, baseline and performance monitoring, but becomes more complete over time as metering i s improved and monitoring i s integrated into system operations.

The M&E requirements set out in the preceding pages are for the core indicators needed by the

Terminoloav production = volume into supply consumption = volume billed (sold) revenue = cash collected income = billing operating expenses = salaries/wages/benefits, energy, consumables, spare parts, taxes, plus administrative costs, but not depreciation and interest expenses LC = local currency

1, Preliminary-baseline survey. Cities should provide as much o f this information as possible when applying for an improved water supply. Information should be based o n utility records, observations, community discussions and best judgment.

information at the end o f step 1, and again in step 2 before systems are rehabilitatedexpanded, when better metering and records are available.

3,. Performance monitoring: City utility operators should collect performance information on a regular basis. The ci ty water board should submit semi-annual reports with a l l information updated.

2. . Baseline survey. Cities with the assistance o f planning/design consultants should provide this

27

- - - - - - ' 28. Cash collected (revenue) for new connections (LC) - 29. Number o fs ta f f - - - - - Replacement and expansion targets J J J

25b.Bil l ings to (income from) institutional, industrial and commercial customers (LC) 26a.Volume o f water pa id by institutions (m3) 26b.Volume o f water pa id by industrialkommercial customers (m3) 27a. Cash collected (revenue) f rom residential customers, excluding connection charges (LC) 27b.Cash collected (revenue) from institutional/industrial/commercial customers, excluding connection charges (LC)

30. Operating expenses (excluding depreciation charges) 3 1. Salaries and wages (LC) 32. Energy expenses (LC) + KWH and liters o f fuel 33. Tota l debt service (LC/year) 34. End o f year accounts receivable (LC)

Production and treatment replacemendexpansion (physical works and investment) Distr ibution and storage replacement/expansion (physical works and investment) N e w connections (number and investment)

PERFORMANCE I N D I C A TORS

Impact on consumers J Water coverage (percent o f people served by utility) J Water production (liters/capita/day) [24] / [ 11 J Percent o f people with access to house connections J Percent o f people with access to standpipes J Percent o f households without access to p iped supply J Average t ime between complaint and response (days) [22] J Average t ime between request for and installation o f connection (days) J Duration o f supply (average hourdday) [ 121 J Revenue per person served (LC/persodyear) [27a] / { [ l]*([A] + [B])} (Formula check) J Annual cost o f water for a household consuming 3m3 o f water per month f rom a yard tap. [ 171 * 3 * 12 J Annual cost of water for a household consuming 3m3 o f water per month f r o m a standpipe. [18] * 3 * 12 J Average t ime to collect 20 liters o f water

Financial Performance J Amount bi l led per m3 into supply ([25a]+[25b]) / [24] J Cash collected per m3 into supply ([27a]+[27b]) / [24] J Amount b i l led (income) / operating expenses ([25a]+[25b]) / [30] J NRW (volume b i l led as percent o f volume into supply) ([26a]+[26b]) / [24] J Value o f N R W as % o f the operating expenses {([25a]+[25b]) - ([27a]+[27b])}/ [30] J Debt service ratio (debt service /revenue) [33] / ([27a]+[27b]+[28]) J Collection ratio (cash collected / amount bil led) ([27a]+[27b])}/ ([25a]+[25b]) J Collection period (days) {[34] / ([27a]+[27b])} * 365 J

([2]*[4a]*[5] + [3]*[4b]) / [l] (check with 4A)

[2]*[4a]*[5] / [l] = [A] (also % per YT) [3]*[4b] / [l] = [B]

1 - [A] - [B]

[23]

[ii] / [iii] * 20 (Check Formula0

Operating cost coverage (operating revenue / operating expenses) ([27a]+[27b]) / [30 + depreciation (replacement)]

Operational Performance J Operating expenses per m3 into supply [30] / [24] J Energy expenditure per m3 into supply [32] / [24] J Labor costs (percent o f total operating expenses) J Staffing level (number per 1000 connections) J Average operating pressure (meters) J Metering level (percent o f connections with functional meter) J Production capacity (volume into supply (m3/day) / production capacity (m3/day)) J Transmission capacity ( f low capacity (m3/hour) /production capacity (m3hour)) J Storage capacity (storage (m3) / production capacity (m3/day))

[3 11 / [30] {[29] / ([4a]+[4b]+[4c])} * 1000

[average o f 13 a,b,c, . . .] [6] / ([4a]+[4b]+[4c])

[24] / [7] [8] / [7] / 24

[9] / [7]

28

Annex 4: Detailed Project Description

ETHIOPIA: Urban Water Supply and Sanitation Project

Project development objective and key indicators

1. The Development Objective o f the Urban Water Supply and Sanitation Project i s “increased access to sustainable water supply and sanitation services in Addis Ababa and four secondary cities”. Accordingly, the project i s designed to produce more water for a l l customers and extend the distribution network to unserved areas, and to improve the operational efficiency o f the participating water utilities by reducing non-revenue water and improving financial management. The introduction o f autonomous water boards and performance based contracts with operators, and outsourcing selected activities to private sector partners will also promote improved efficiency. Financing will be available to promote improved hygiene and sanitation practices, and to construct public sanitation facilities, the management o f which i s contracted to local service providers.

2. piping and improved water and sanitation services for low-income areas will be employed.

In achieving these objectives, labor intensive construction methods for small diameter distribution

3. Water Sumlv: As a result o f the proposed project, the 4 mi l l ion residents o f Addis and 800,000 residents o f the four other participating secondary cities will benefit f rom an increased, more reliable supply o f water. Water production will be increased from 210,000 to 360,000 m3/day(50 to 75 lpcd) in Addis and 23,500 to 40,000 m3/day (30 to 50 lpcd) in the four secondary cities. The water distribution network will be extended to serve 400,000 more people (40,000 connections) in Addis and 200,000 more people (20,000 connections) in the four secondary cities. Baseline information o n non-revenue water i s not wel l h o w n in any o f the cities, but estimated to be between 20 and 35%. The proposed target o f one third reduction would, for example, lower non-revenue water f rom 35 to 25%.

4. o f each city. In Addis Ababa the target will be to promote household latrines, hygiene and sanitation practice and construct fifty communal sanitation facilities that are managed by local service providers who will charge a user fee as stipulated in their contract. The target will be 20 facilities in each o f the secondary cities.

Sanitation: The project will increase access to improved sanitation facilities in l o w income areas

5. autonomous. The project wil l provide for facilitators to work with officials and water board members in participating secondary cities amongst others to review their enabling legislation and performance in the last years. In so doing the facilitator assist the water boards to prepare a procedures manual and code o f conduct, and recommend changes in the enabling legislation.

Institutional Sumort: The four secondary cities currently have water boards that are relatively

Project components

6. The project i s divided into three components: (i) Addis Ababa water supply and sanitation; (ii) secondary city water and sanitation; and (iii) program management. The sub-components for Addis Ababa and the secondary cities are similar: (i) increased access to water; (ii) improved operational efficiency and demand management; and (iii) institutional support.

7. These, and indicative percentages o f the total investment, are shown in the fol lowing table.

29

Component

1. Addis Ababa WSS 1A. Increased access to water

1B. Improved operational efficiency 1 C. Institutional reform 1D. Project Management

Sub-Total 2. Secondary City WSS 2A. Increased access to water

2B. Improved operational efficiency 2C. Institutional reform 2D. Project Management

Sub-Total 3. Program Management

Sub-Total 4. Unallocated

Total

Category

goods, works, consultants

goods, works, consultants

goods, consultants consultants, goods, training, operations

goods, works, consultants

goods, works, consultants

goods, consultants consultants, goods, training, operations

consultants, goods, training, operations

cost US$m

52.30

23.08

1.15 1.60

78.13

29.40

3.07

0.21 0.28

32.95 1 .oo

1 .oo 6.93

119.00

Yo o f total

44%

19%

1% 1 Yo

66%

25%

3 Yo

0% 0%

28% 1%

1 Yo 6 Yo

100%

Bank Financing

US$

44.30

19.03

1.15 1.40

65.88

25.40

3.07

0.21 0.28

28.95 1 .oo

1 .oo 4.18 100

% o f Bank Financing

44%

19%

1% 1 Yo

66%

25%

3%

0% 0%

29% 1%

1%

100% 4 Yo

Component 1: Addis Ababa Water Supply and Sanitation 1A. Increased access to water supply and sanitation 8. To address the water supply crisis in Addis Ababa where 210,000 m3/day are currently produced but more than 360,000 m3/day are needed to meet basic services, every effort must be made to increase the volume o f supply. This component will finance capacity expansion at the existing Legadadi reservoir and water treatment plant, deep boreholes at selected sites within Addis Ababa and a new wel l f ield located just northwest o f the city. It will also finance the extension o f the distribution network to unserved areas and new connections. Special attention will be given to low-income areas including community participation and complimentary drainage. The sewer system in the Kal i te catchment will be extended, and community sanitation facilities, managed under contract by local service providers who charge a user fee, will be constructed. Consultant services for design and construction supervision o f the production works, and possibly network expansion will be financed by Am.

1B. Improved operational efficiency and demand management 9. imperative that non-revenue water i s reduced and water conservation i s instilled in people. Improved financial management, billing and collection, customer management are also essential in establishing a financially viable water company that can finance the high costs o f keeping up with growth. Under this sub-component the materials and equipment plus costs associated with establishing pressure zones and leak detection areas; and repairing leaks in distribution network and at service connections will be covered. AAWSA’s financial management, billing/collection, and customer-management system wil l be improved. Public awareness for water conservation and hygiene and sanitation will be created. Catchment protection measures will be taken around the ci ty reservoirs.

With non-revenue water exceeding 35% in Addis Ababa and the high marginal cost o f water, i t i s

30

1C. Institutional Support 10. Funding would be provided for sector pol icy revisions and development, work on the legal and institutional framework for water supply and sanitation, developing polices and measures for enhanced private sector participation and financing in this sector, and improving utility governance and efficiency. Stakeholder consultation measures are also included in this component.

1D. Project management 1 1, Funding would be provided to A A W S A for project management activities including for conducting EMS, monitoring and evaluation, project management support, financial audits and capacity building.

Component 2: Secondary City Water Supply and Sanitation

2A. Increased access to water supply and sanitation 12. At present water supply in the four secondary cities i s 35 liters per capita per day, o f which about 25 lpcd actually reaches consumers. In comparison, water production in cities o f this size in most cities in Afr ica i s between 75 and 100 lpcd. On average, water production should be doubled in these cities. T h i s component will finance increased production as wel l as the extension o f the distribution network to unserved areas and new connections. Special attention will be given to low-income areas. Financing i s also available for the constructiodexpansion o f wastewater treatment ponds and piped sewerage to central commercial areas.

2B. Improved operational efficiency and demand management 13. efficiency could be improved by reducing non-revenue water and improving financial management, billing and collection, customer management. Under this sub-component the materials, equipment and costs associated with establishing pressure zones and leak detection areas; and repairing leaks in the distribution network and at service connections wil l be covered. Financial management, billing/collection, and customer-management can also be improved.

The water utilities in the four participating cities are reasonably efficient, but operational

2C. Institutional Support 14. Boards and for assisting them to develop procedures and codes o f conduct that would benefit them as wel l as water boards in other towns in Ethiopia. Operator contracts with performance targets and performance incentives would also be developed and tested.

Funding will be provided for refining enabling legislation that provides autonomy to the Water

2D. Project management 15. conducting EIAs, monitoring and evaluation, project management support, financial audits and capacity building.

Funding would be provided to the four utilities for project management activities including for

Key Inputs for Components 1 and 2

16. Key Inputs for components 1 and 2: Expand water production/distribution and wastewater treatment/collection; add new service connections for water and wastewater; create pressure zones within the distribution network; repair leaks in distribution piping and at service connections; replace o ld meters; improve financial management, billing/collection and customer-management systems; create public awareness for water conservation; and implement a catchment management plan. Consultant services for design and supervision o f the c iv i l works, financial management, and water conservation will also be provided.

31

17. K e y Outputs for components 1 and 2: To improved access - that is, increase the number o f people with improved water supply - water production, distribution, and connections will be increased to 90 percent o f households; 24 hour per day service will be provided to a l l areas within the city; and sanitation plans will implemented. To improve operational efficiency and manage demand non-revenue water will be reduced by 10 percent, and 80 percent o f costs will be recovered through tariffs (i.e. recurrent, renewalheplacement o f short l i fe assets, and expansion excepting distributiodconnections for low- income households). To establish better performing utilities, autonomous water boards, with operators working under performance based contracts will be established.

Component 3: Project Management and Monitoring and Evaluation

18. administrations and utilities. Funding would be provided for costs associated with project implementation, to synthesize existing water and sanitation access data to determine baseline figures and to monitor progress under this project and in meeting the overall water supply and improved sanitation access goals under the MDGs. T h i s component also includes training, workshops and other capacity building measures and support for environmental and social management.

Project management will involve sector institutions at federal and regional levels, c i ty

19. K e y Inputs: Inputs include technical assistance, goods, operation support, and training for effective project implementation and improved monitoring o f Performance towards achievement o f MDG goals.

20. and implementation o f the project and i ts contribution for the broader sector MDG goals and UAP.

K e y outputs: Outputs include improved system and enhanced capacity for effective monitoring

Stepped Approach to Urban Water Supply

21. Appraisal Criteria: The GOE has provisionally identified Addis Ababa City and four other secondary cities (Awassa, Gondar, Jimma, and Mekelle) to benefit f rom the project, provided they meet selection criteria established in the National WSS Program, as described herein. All four cities will receive assistance during implementation to preparehefine their business and expansion plans, improve operational efficiency, and strengthen their oversight boards. A final check on compliance with the appraisal criteria will be made before construction financing i s approved.

Operations, financial management, billing and revenue collection, and M&E systems are in place and efficient. Proposal for system expansion and continued operational efficiency improvement i s acceptable. Business plan including tar i f f structure and cost recovery strategy i s acceptable. Financial projections show that the utility can cover recurrent, renewalheplacement o f short l i fe assets, and repay i t s share o f capital investments. Utility financially and managerially autonomous. Board composition complies with statute, a l l members meet regularly according to schedule, and actively involved in planning. The proposed project and business plan must have been developed in consultation with stakeholders and be endorsed by the Municipality or Woreda.

Financial Policy: Towns with established Water Boards must have a good cash collection record to qualify for a step 4 loan through the MWR. They will be required to repay that loan to Water Resources Development Fund (WRDF) o n behalf o f MoFED, so are required to show in their business

32

plans how tar i f fs wil l be phased up to full cost recovery and to demonstrate that customers are willing and able to pay the tariffs required. Towns will also be required to have satisfactory financial management and monitoring and evaluation systems.

23. operator, and provide for long te rm higher-level professional support for functions beyond the capacity o f the operator.

Utility Water Boards are expected to enter into a performance-based contract with their utility

24. Consultation Process: Stakeholder consultation will be a key component o f project design at the c i ty level. Local officials and potential users o f the system are to be informed and consulted f rom the outset to ensure that they understand the process, understand that they o w n the facilities and are engaged so that systems are designed to meet consumer priorities. Sanitation and hygiene promotion will be carried out in conjunction with improvement o f the water supply system to promote household investment in sanitation and behavior that ensures health benefits are realized.

25. board will be the key body to over see implementing agency and will receive technical assistance from the Regional Water Bureau and consultants. Municipalities will be key stakeholders responsible for ensuring that town water boards are appointed and are functioning according to the principles o f establishment. Eventually, municipalities could be expected to contribute to financing a share o f the investment costs in water supply and sanitation facilities in order to reduce tariffs, though this i s not expected during the l i f e o f the current project. The regions will facilitate experience sharing across water boards and municipalities as part o f their capacity building and monitoring and evaluation process.

Linkage between Municipality and Town Water Board: For urban water supply, the town water

26. Performance based stepped approach to Urban Water and Sanitation: The M o W R has adopted a demand driven and performance based approach that links physical investment to capacity building and business planning to ensure that investments are efficient and targeted at towns that will sustain their facilities. These steps elaborated below will be followed by the UWSSP in providing the assistance to the selected cities. A diagram of,the stepped approach i s shown on the next page. Under this projects, cities would be expected to be moving to step 4, however, they may need assistance at the beginning to fully comply with requirements for step 3.

Step I - Towns receive assistance to form Water Boards, conduct in i t ia l assessment, consult with stakeholders and prepare applications for further assistance.

Step 2 - Town Water Boards with approved applications receive further assistance for planning and design, sanitation planning, preparation o f business plans, operator performance contracts, capacity building for Water Board members and utility staff, and implementation o f immediate service improvements.

Step 3 - Town Water Boards with approved project proposals receive assistance to tender works contractors, supervise construction, and continued capacity building o f the Board and operator.

Step 4 - Town Water Boards that have already received grants to improve their water supply systems and have established creditworthiness may qualify to borrow for further expansion o f their systems including assistance with design, tendering o f works contractors, construction o f facilities, construction supervision, and capacity building.

33

Stepped Approach to Water Supply

STEP 1 Technical Assistance to establish Town Water Boards and prepare

avvlication: Technical Assistance to Towns to f o r m Water Board, carry out ini t ial assessment, identify immediate service improvements, consult with stakeholders and prepare application for Step 2.

STEP 2 Planning, capacity

building and immediate service imvrovements:

Phase 1: Technical Assistance to T o w n Water Board & utility to build capacity o f board members and operator, implement financial & mgmt systems, implement immediate service improvements, prepare preliminary design for rehabilitation and expansion, feasibility studies, sanitation p lan and business plan. Phase 2: Borehole sitting, drilling Final design & tender docs.

Main Criteria to Oualifv foi Stev 2 (grant):

Application filed with basic information on existing water supply and sanitation & needs

Board created and Board members appointed Stakeholder consultations held regarding program requirements, est. costs, tariffs & contribution required Key uti l i ty staff in place for capacity building Proposed immediate service improvements within per capita ceiling and according to positive l i s t

Autonomous Town Water

STEP 3 Rehabilitation or initial investment - towns not previously improved with grant financinq

Investment financing & Technical Assistance to T o w n Water Boards to implement business plans, rehabilitate and expand water & sanitation facilities and carry out further capacity building o f Board and utility during construction and for at least a year after.

Main Criteria to Oualifi for Step 2, ahase 2 and Stev 3(grant): SteD 2. Phase 2:

Project proposal acceptable Business p lan acceptable Board meeting as scheduled & involved in planning Stakeholder consultations held Immediate service improvements completed Revenue covers current O&M costs + allowance for renewal and replacement o f short l i fe assets Technical and administrative staff trained at basic level

0 Utility operating autonomously with accountability in place

Reconfirm the above based o n f inal design

0 Local contribution deposited to bank account

Step 3:

STEP 4 Exvansion:

Investment financing & Technical Assistance to financially viable uti l i t ies for longer term expansion, incl. construction supervision - financed through internally generated cash and lending o n commercial terms.

~

Main Criteria to Oualifv for Ytev 4 (loan):

Proposal for further development & expansion o f the system i s acceptable Business p lan acceptable Operations, f inancial management, billing and revenue collection & M&E systems in place and efficient (as confirmed by independent audit) Full cost recovery tariffs in place for existing system Contribution deposited to account Utility operating efficiently with adequately trained technical and administrative staff, performance agreement and provision for external technical assistance Board meeting as scheduled & involved in planning

34

Distribution System Management and Non-revenue Water Reduction

27. non-revenue water reduction and better system control so that water can be distributed throughout the entire system.

Addis Ababa and the other participating secondary cities intend to use part o f the grandcredit for

28. Improvement o f the meter readingbilling; chain: Manual meter reading and data transfer i s typically a major source o f errors and, potentially, corruption. The introduction o f electronic, hand-held meter reading devices i s essential. A barcode that will be glued o n each customer meter must be scanned by the meter reader and only then it i s possible to enter the reading. Data transfer f rom the device to the billing system i s done electronically, eliminating another source o f error. Billing software should have an interface that i s compatible with the software o f the meter reading equipment.

29. Production Metering: Procurement and installation o f production f l ow meters.

30. be found on service connections including the connecting point to the main pipe. In case a leaking service connection i s detected, the entire service connection, including the pipe saddle, shall be replaced. Typically, 10% o f a l l service connections need replacement.

3 1. be found on primary and secondary pipelines. However, a budgetary provision for the procurement o f repair materials and the execution o f repair works i s needed.

32. commerciaVindustria1 connections are required.

33. commercial meters for those that can not be repaired.

Replacement o f Leaking Service Connections: The vast majority o f a l l hidden leaks i s expected to

Leak Repair o n P r i m a u and Secondary lines: Only a small portion o f hidden leaks are l ikely to

Imurovement o f Meter Testing; Facilities: Water meter test benches for household and

Procurement o f Customer meters: Provision should be made to purchase household and

34. duties efficiently if they have their own dedicated vehicles.

Vehicles and motor bicycles for Leak Detection Crews: Leak detection crews can only fulfill their

35.

36. isolate subsystems, improve capability to better control pressure and distribute water throughout the system. Also, installation o f bulk meters to measure inflow/outflow to/from the sub-systems.

37. parts o f the distribution network (District Metered Areas) each consisting o f about 1,000 service connections. DMAs allow leak detection teams to focus on problem areas. DMAs are equipped with an in f low meter, a pressure reducing valve and a pressure logger. This will be l imi ted to areas o f the cities where leakage i s highest.

38.

39. secondary distribution system. Consultant services can be arranged help with the process.

40. planning, design, construction supervision, plus management assistance non-revenue water reduction, and improved financial and customer management.

Leak Detection Equipment: Procurement o f Leak detection equipment.

Imurovement o f Operational Sub-Systems: Distribution system restructuring to hydraulically

DMA Establishment: Design, construction and commissioning o f small hydraulically discrete

m: Util it ies should incode their system layout into a GIs.

Hydraulic Modeling: The utilities should prepare a hydraulic model o f their primary and

Proiect Imulementation Consultancy: The utilities should secure consultant assistance for project

35

Water Supply and Sanitation Services in Low Income Areas

Incorporating Output Based Aid

Introduction

41. in low-income areas o f the participating cities. Areas would be prioritized and selected o n the basis o f their existing water supply coverage, with,unserved areas given preference. For the purposes o f the Project low-income areas refer to those communities where almost a l l o f the households would be served by public taps and/or individual yard taps. Households which can afford internal plumbing and water appurtenances such as sinks, showers and flush toilets may be located within low-income areas but would not qualify for assistance. They would be required to pay the full cost o f connections up front.

The project will pay special attention to the improvement o f water supply and sanitation services

42. sanitation facilities, and improved drainage where the increased supply o f water would result in muddy streets and pathways. Communal sanitation facilities can include pit latrines, showers, and clothes washing basins. Community facilitators (sociologists and an engineer) would assist communities to plan their water and sanitation facilities, and, in the process, promote improved hygiene and water conservation practices. Local private operators would be contracted by the sub-city to operate and maintain the communal sanitation facilities for a fee. Local private operators may also be contracted by the water utility to manage the water distribution system within the area, including operation o f public taps, billing and collection for individual connections, and nonrevenue water reduction. Environmental Guidelines for Contractors will be attached to al l bidding documents for constructiodrehabilitation contracts.

In addition to improving water supply services, the Project will finance improved communal

43. For the purposes o f the low-income component o f the project, communities can be divided into (A) areas with good access and drainage where most secondary piping i s already constructed but more yard taps are required; (B) areas with adequate access and drainage but with l imi ted distribution piping and few yard taps; and (C) areas with poor access and drainage where prolonged and intensive community facilitation will be needed to plan the water and sanitation facilities, and develop a resettlement action plan if households must be relocated to gain access to and secure sites for community sanitation facilities.

Financing Arrangements

44. infrastructure to subsidizing the delivery o f an agreed output. In the case o f the UWSSP, the exact outputs are to be determined and will be clearly defined in the grant agreement. They would apply only to clearly targeted households and would relate to the delivery o f water to households (via the use o f tertiary distribution pipes, pipe connections to the yard tap and yard or other forms o f tap). The details o f the exact outputs that need to be fulf i l led prior to grant disbursement will be clearly defined in the grant agreement. The level o f ongoing performance required will also be specified in the grant agreement.

m: Output Based Aid shifts the focus from subsidizing the expenditure required to build

45. The water utility, city or region would pre-finance the construction o f the tertiary distribution piping and connections within a low-income area, and would be repaid periodically when portions o f the work have been completed and independently verified. Although the majority o f subsidy payment i s made after verification that outputs have been delivered, a small advance payment (typically up to 10% o f the entire grant agreement amount) may be made at the time the grant agreement i s signed to help with start-up costs.

36

46. Water Resources (MoWR) for the four secondary cities and A A W S A in the case o f Addis Ababa will s i g n sub-grant agreement with MoFED. It should be noted that GPOBA participation i s conditional on approval by the GPOBA panel o f experts and donors and by the Wor ld Bank.

OBA grant agreements would be signed between the Wor ld Bank and the MOFED. Ministry o f

1

47. IDA: In order to ensure consistency o f approach, IDA funds for tertiary distribution piping and connections in l o w income areas will fo l low the OBA procedure. However, normal Bank financial and procurement procedures would be used for other elements o f the project financed by IDA such as consultant services and other works l ike secondary distribution piping, sanitation facilities and drainage. See the financial and procurement management sections o f the PAD for further information.

OBA grant Grant Agreements

Proposed Institutional Framework and Fund Flow with Key Stages in OBA Arrangement

Funds flow arrangements

48. Unl ike conventional lending, OBA funds (whether originating f rom GPOBA or IDA) f l ow after defined outputs have been verif ied as delivered. Grant agreement arrangements for funds f l ow would be as follows (refer to above figure).

49. a report f rom the independent verifier setting out what functioning outputs (as defined in the grant agreement) have been delivered during the period. Typically, this would occur o n a quarterly basis.

Wor ld Bank would be signatory to the grant agreements and would disburse funds after receiving

50. M o W R for the secondary cities. As such the M o W R would be responsible for coordinating and monitoring the program, including consolidation o f reports and maintaining the designated account into which the GPOBA trust fundADA account would make payments for the c i ty water utilities (after delivery o f outputs). Construction under the OBA component would be pre-financed by the participating utilities, cities or Regional Water Bureaus. The Urban Water Department o f the Regional Water Bureaus would assist the cities to secure consultant services to plan and build the capacity o f the c i ty water

M o F E D will be the counter part for the grant agreement and will s i g n sub-grant agreements with

37

utilities, and supervise them. They will also maintain a data base for regular utility performance monitoring under the National Water Supply and Sanitation Program.

5 1. A A W S A would be the counterpart to one o f the sub-grant agreements. A A W S A would have the obligation to deliver the outputs as defined in the grant agreement before any payment i s made. A A W S A would contract for works to be carried out in accordance with Wor ld Bank procurement requirements and the relevant measures proposed in the Environmental and Social Management Framework (ESMF). A A W S A or the Ci ty would pre-finance the works. After receiving a report f rom the independent verifier setting out what functioning outputs (as defined in the grant agreement) have been delivered during the period, typically o n a quarterly basis, G P O B N I D A would make a payment directly into the A A W S A designated account.

Institutional arrangements

52. the program in each city.

Proiect Management Units would employ a sociologist and engineer to coordinate and monitor

53. experience would assist l o w income communities to plan and implement their water and sanitation programs.

Communitv facilitators consisting o f a engineer and sociologists with community development

54. Contractors would carry out works in compliance with the Environmental Guidelines for Contractors. They may play a role in taking some o f the pre-financing burden to expedite construction if they so choose.

55. made and that the works comply with the defined requirements (as set out in the grant agreement). After verification, subsidy payments would be made by the Wor ld Bank into the designated accounts. The verifier would be contracted by the participating cities and approved by the Wor ld Bank.

Independent verifiers would periodically verify that the claimed number o f connections have been

56. facilities within the l o w income areas, and to manage the sub-distribution systems within those areas. Local private companies would also be contracted by woredas or sub-cities to operate and maintain community sanitation facilities.

Local private companies may be contracted by the water utility to construct water and sanitation

Implementation Arrangements

57. agreements. These will consist o f an agreed number o f connections to agreed specifications and timelines in the cities. The utilities would be responsible for pre-financing the works. Once carried out, an independent consultant would verify that the connections meet the required specifications and that water services have been delivered to the new connected households at a satisfactory level and for a specified number o f months (to be defined in the grant agreement). Receipt o f confirmation o f the delivery o f these outputs would be followed by an authorization for an agreed level o f funds transfer to the utility for each connection carried out (to be defined in the grant agreement).

Outputs and disbursements: The required outputs will be clearly defined and set out in the grant

58. c i ty government and the utility. Within these assigned geographic zones, a further screening may consist o f ensuring that only dwellings without internal water appurtenances are targeted. Only households fall ing within the targeting criteria would be eligible for subsidies.

Targeting: Within Addis and the four other cities, l o w income areas would be identified by the

38

59. Consumer contribution: Qualifying households would be required to pay an up fi-ont connection charge which may be o f the order o f 10-20% o f the cost o f the service connection between the street and the water meter within household compounds. Beneficiaries could make equal re-payments over a 2-3 year period along with their water bill.

60. Ta r i f f rate: I t ’s anticipated that most households would share the water tap in their neighbor’s compound. For this to happen i t ’s important that yard tap customers be allowed to pay a low, flat rate tar i f f up to about 10-15 m3/month. This would allow three to five households to share a common tap, without necessarily moving up in the normal graduated tar i f f rate schedule. The tariff will cover the utilities’ operating cost for producing and distributing water.

61. Unit subsidv: The init ial unit subsidy per connection to be financed by GPOBA and IDA under an OBA format would be based o n the independent engineer’s estimate for the l o w income areas to be served in the f i rs t year o f the program, taking account o f previous contract pricing and possibly the results o f competitive bidding processes. The unit subsidy may vary for c i ty to city, and can be adjusted f rom time to time.

62. income areas would be supervised by the utility or a relevant c i ty department. They in turn would hire the services o f a community facilitation team to assist the cornniunity to lay out the distribution system and identify households that would pay the up-front yard tap connection fee. The facilitators would also assist residents to plan their sanitation facilities, solid waste management collection, and improved drainage as required. In the process they would promote improved hygiene and water conservation practices.

Planning and desim: Planning and design o f the distribution system within participating l o w

63. that the environmental and social screening process as described in the Environmental and Social Management Framework (ESMF) i s carried out. The screening results would indicate potential negative environmental and social impacts and qualified personnel would recommend the appropriate mitigation and monitoring measures.

As part o f the planning and design process, the relevant utility or c i ty department would ensure

64. o f the l ikelihood that arrangements will have to be made to relocate some households within the community to improve access and to make room for community sanitation facilities. The project will hire qualified social consultants to address any potential social issues due to land acquisition and prepare Resettlement Act ion Plans, as required, in compliance with the Resettlement Policy Framework (RPF) that has been prepared separately for the Project. Resettlement action plans, approved by the Government and IDA, would be required for a l l loss o f property and income.

Active community participation i s essential in planning and design in low-income areas because

65. f i r m s or individuals by the water utilities. All facilitators must meet the requisite educational and professional qualifications for their assignments. First NGOs would be invited to present a technical proposal setting out their understanding and approach to the assignment and the qualification o f the proposed facilitators. Selection would be o n the basis o f the technical merit o f their proposal. If suitable NGOs are not found, an advertisement would be placed in a local newspaper for interested candidates to submit their qualifications. Shortlisted candidates would then be invited to a workshop to better understand the assignment and requisite ski l ls , and requested to associate with others to present a complete team and a technical proposal. Final candidate teams will be invited to present their technical proposal to the selection committee.

Procurement: Community facilitators could be provided by NGOs at their cost, or contracted as

39

66. OBA including national competitive bidding, employing standard bid documents. By using these procedures, the OBA project will meet the expenditure-based requirements for subsidy disbursements without the need for further evidence o f output costs. Works will be packaged to maximize local employment opportunities.

C iv i l works will be procured by the utilities according to Wor ld Bank procurement guidelines for

Approach to Sanitation in Commercial and High Income Residential Areas

67. In l o w income residential areas water supply and sanitation planning and implementation will be integrated (see the fol lowing section o n water supply and sanitation in l o w income areas). In high income residential areas sanitation will be based o n on-site septic tank systems financed by the owner. For high- income residential areas and multiple family housing developments, the project would explore legal means o f requiring builders to provide community collection and treatment/disposal systems. With this pol icy change, developers would be required to finance sewers and community associations would be required to contract local private operators. In other, higher-density, mostly commercial areas, where on- site disposal i s not possible, the Project will finance the constructiodextension o f piped sewers. Wastewater stabilization ponds and sludge drying beds would also be financed.

40

Annex 5: Project Costs

ETHIOPIA: Urban Water Supply and Sanitation Project

Project Cost Sharing

Component

1. Addis Ababa WSS 1A. Increased access to water 1B. Improved operational efficiency

1 C. Institutional reform 1D. Project Management Sub-Total 2. Secondary City WSS 2A. Increased access to water

2B. Improved operational efficiency 2C. Institutional reform 2D. Project Management Sub-Total 3. Program Management Sub-Total 4. Unallocated Total

Component

1. Addis Ababa WSS 1A. Increased access to water 1B. Improved operational efficiency

1C. Institutional reform 1D. Project Management

Sub-Total 2. Secondary City WSS 2A. Increased access to water 2B. Improved operational efficiency

2C. Institutional reform 2D. Project Management

Sub-Total 3. Program Management Sub-Total 4. Unallocated Total

Category

goods, works, consultants goods, works, consultants

goods, consultants consultants, goods, training, operations

goods, works, consultants

goods, works, consultants goods, consultants consultants, goods, training, operations

consultants, goods, training, operations

IDA Financing

Category

goods, works, consultants goods, works, consultants

goods, consultants consultants, goods, training, operations

goods, works, consultants goods, works, consultants

goods, consultants consultants, goods, training, operations

consultants, goods, training, operations

cost US$m

52.30 23.08

1.15 1.60

78.13

29.40

3.07 0.21 0.28

32.95 1 .oo 1.00 6.93

119.00

cost US$m

52.30 23.08

1.15 1.60

78.13

29.40 3.07

0.21 0.28

32.95 1 .oo 1.00 6.93

AfD US$m

2.00

4.05

0.00 0.20 6.25

0.00

0.00 0.00 0.00 0.00 0.00 0.00 2.75 9.00

Yo o f total

44% 19%

1 Yo 1 Yo

66%

25% 3%

0% 0%

28% 1%

1 Yo 6 Yo

119.00 100%

GPOBA US$m

6.00 0.00

0.00 0.00 6.00

4.00

0.00 0.00 0.00 4.00 0.00 0.00 0.00 10.00

IDA financing

US$m

44.30 19.03

1.15 1.40

65.88

25.40

3.07 0.21 0.28

28.95 1 .oo 1.00 4.18

100.00

Bank % of Financing Bank

US$ m Financing

44.30 44% 19.03 19%

1.15 1% 1.40 1 Yo

65.88 66%

25.40 25%

0.21 0 Yo 0.28 0%

28.95 29% 1 .oo 1% 1 .oo 1% 4.18 4% 100 100%

3.07 3 yo

41

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Annex 6: Implementation Arrangements

ETHIOPIA: Urban Water Supply and Sanitation Project

Program Management

1. autonomy to the urban utilities to plan, implement and operate their system. The primary responsibility for implementation o f urban water supply and sanitation improvements wil l rest with Town Water Boards, who will contract consultants to assist with planning, design, feasibility studies, capacity building, procurement and construction supervision as wel l as works contractors and suppliers.

The project follows government’s decentralized implementation arrangement which provides

2. reform process. The RWDBs will also be primarily responsible for appraising readiness o f Town Water Boards to receive further assistance. The Federal ministry o f water resources ( M o m ) through i t s National Program Coordination Unit (NPCU) will assume technical oversight and arrange additional technical assistance and capacity building activities and provide federal level support to the reform process as and when requested by the utilities.

The regional Water Bureaus will coordinate and monitor the over a l l program and facilitate the

3, developed and on the j o b training i s being provided to number o f urban utilities to build their capacity and prepare them for effectively implementing investments. The secondary cities identified under this project are expected to receive capacity building assistance to strengthen their organizational arrangement, prepare their business plan and enter into a performance agreement between the manager and the water board.

Under the ongoing Water Supply and Sanitation Project guidelines, toolkits and manuals were

4. The following institutions will be involved in project implementation:

Ministry of Water Resources (MWR): The MWR will be responsible for overall coordination and monitoring and evaluation o f the program, facilitation o f capacity building and pol icy formulation. I t s Water Resources Development ‘Fund’ wil l be responsible for coordinating and monitoring the Federal Government’s on-lending program for urban WSS sub-projects. The MWR will oversee the implementation o f the ESMF and the RPF. Towards this end, the Ministry wil l recruit a capacity building consultant who will be located in the National Project Coordination Unit (NPCU). This consultant will be responsible for implementing the provisions o f the E S M F and RPF and will coordinate these activities with the relevant personnel o f the regional c i ty administrations. H e will coordinate the preparation o f the environmental and social sections o f the Annual Report with AAWSA.

Regional Water Resources Development Bureaus (R WBs): The RWBs are responsible for overall program planning, management, coordination and capacity building at the regional level. The RWBs play an important role in arranging technical assistance for towns and cities to qualify for grantskredits to improve their water supply facilities, and in appraising t o d c i t y business plans and designs.

City Administration: The City Administration i s responsible for appointing the water board chair person and other members according to the provisions o f the enabling proclamation. The City Administration also approves investment plans and tar i f f adjustments.

49

Water Boards (?E?s): Water Boards are responsible for planning and managing town and ci ty water supply systems. Water Boards enter into a performance agreements or contracts with a utility operator, who handles routine operations and maintenance and secures supplemental professional services to assist them to improve efficiency and expand the system over time.

Water Utility Operator: Water utility operators are accountable to their Water Board under a performance agreement or contract for the operation and maintenance o f a water supply system.

City administrations: The ci ty administrations are responsible for facilitating the stake holder consultation process and passing the local legislations needed to support the reform.

Performance agreement: There should be a performance agreement between the T o w n Water Board and the General Manager o f the utilities, which would set out agreed performance targets in accordance with the business plan and the operator should be responsible for reporting on performance indicators.

Professional support to water board and operator: Util it ies may need to have access to higher level professional support for such things as non-routine maintenance, quality assurance, planning for expansion and even such routine functions as billing, accounting and procurement. Cities will need to secure professional support on an ongoing basis through retainer contracts, franchising agreements or other means. The practitioner specialist groups on town water supply business planning and operations should explore alternatives and propose standard contract agreements.

Capacity Building

5. Water Boards and operators to plan water supply and sanitation systems and to build capacity for oversight and management. Water Board members will learn about program development, management and monitoring and evaluation primarily by going through the planning process with the consultants. Operator staff will learn necessary sk i l l s primarily through on-the-job training by consultants. The Regional U W S S team will monitor progress at the Town Water Board level and can also provide technical assistance.

Town Water Board and operator capacity building: Consultants will be contracted to assist cities

50

UWSSP- Diagram of Institutional Arrangements

~~

1. Ministry o f Finance and Economic Development (MOFED).

t 2i. Ministry o f Water Resources (MWR) . WSS Program Coordination Unit.

3

ji 2ii. Ministry o f Water Resources (MWR) Water Resources Development Fund (WRDF).

3. Regional Water Resources Development Bureau Project Implementation Support Units.

5. AAWSA Water Boards receive grant and Loan and . administers SA.

5. Secondary Cities Water Boards receive grant and Loan.

I :

........................................................... Tasks at each stage

...........................................................

---------- ................................................................................ i 1. Signs credit/grant agreement and subsidiary i i loan agreement with A A W S A . .................................................................................. ---------- .............................................................................

2i. a. Release funds to Cities water Boards based o n appraised projects and agreed financing schedule, b. Program management, support to Regions, & M&E; review and reconcile periodic financial, procurement and physical accomplishment reports f rom Regions and individual cities.

i i

............................................................................... ---------- ................................................................................ i 2ii. Implementation agency; conduct final i appraisal o f project proposals and monitor i implementation. ................................................................................. ---------- .......................................................................... ",,

i 3. a. Coordinate Regional program; Pre appraise i i proposed projects f rom the Cities. i b. Monitor implementation and provide technical i i support: assistance in review and refinement o f i i pol icy and legislations. i c. Implement Regional capacity bldg program i i d. Compile physical and procurement reports, :. consolidate and submit to MWR. ................................................................................ i 5. a. Identification, proposal preparation and i implementation o f projects. i b. Environmental and social management.

.................................................................................

..................................................................................

...................................................... i 6. a. Provision o f services, goods, i i works & o n the job training. i b. Participate in training, i practitioner forum.

6. Contractors, Consultants, Suppliers, and Trainers.

.........................................................

51

Annex 7: Financial Management and Disbursement Arrangements

ETHIOPIA: Urban Water Supply and Sanitation Project

Introduction

1. The financial management assessment i s conducted in l ine with the Financial Management Practice Manual issued by the FM Board on 3 November 2005. The objective o f the assessment i s t o determine whether the implementing entities have acceptable financial management arrangements, which wil l ensure: (i) the funds are used only for the intended purposes in an efficient and economical way; (ii) the preparation o f accurate, reliable and timely periodic financial reports; and (iii) safeguard the entities’ assets. As part o f the FM assessment, the team visited Ministry o f Water Resources ( M o m ) , Addis Ababa Water and Sewerage Authority (AAWSA) and Awassa and Jimma Water Supply and Sewerage Enterprises. The FM assessment was conducted during the months o f January and February 2007.

Country Issues

2. The recently completed Joint Budget and Aid review (JBAR) and the Fiduciary Assessment (FA) show that Ethiopia has made significant progress in strengthening public financial management in recent years. As part o f the JBAR, the Bank in collaboration with other donors, conducted a Public Financial Management (PFM) status review using the Public Expenditure and Financial Accountability (PEFA) framework. Out o f the fourteen indictors covered under this review, Ethiopia met 7 o f the indictors related to the planning, budgeting and reporting systems. Generally, Ethiopia scores high in macroeconomic management, including aggregate fiscal discipline and minimizing fiscal r isks. Satisfactory progress was also noted in budgeting and accounting reform, though the adequacy and quality o f budget reporting leaves room for improvement and remains a key concern.

3. The FA, which was completed in early 2005, notes that considerable progress has been made in implementing FM reforms in both federal and regional level administrations. The areas o f improvements include budget processes, internal controls and cash management. Also, some steps have been taken in reforming internal and external audits. Nevertheless, there are some weak areas that require attention. These include delays in financial reporting (both in-year and annual), inadequate capacity o f the auditors- general to discharge their responsibilities; and weakness in legislative scrutiny o f audited financial reports. At Regional level, the situation varies f rom region to region. The roll-out o f PFM reforms occurred first in S N N P and Tigray regions, with the support o f the Government and donor initiatives to support these reforms. They both show improvement in the overall public finance function and a consequential reduction in fiduciary risk. Other Regions are at an earlier stage o f investment in PFM or have not yet commenced their plans and therefore demonstrated less progress in PFM improvement. More recently, Amhara and Oromiya have improved their performance significantly, as evidenced by timeliness in closure o f accounts and also implementation o f the budget and accounts reforms.

4. Management and Control sub-program (EMCP) o f the government’s c iv i l services reform program. EMCP has developed a revised strategic plan to implement the nine components o f the sub-program Mobilization behind the E M C P (in terms o f financial and human resources), as a key component of the Public Sector Capacity Building Program (PSCAP), i s now a priority.

Ethiopia’s public financial management reforms have been managed by the Expenditure

52

Summary of Program Description

5 . The proposed project development objectives are to:

Reduce the supply-demand gap for potable water in selected urban areas in Ethiopia; Improve access to improved sanitation in selected urban areas o f Ethiopia; and Improve the performance o f selected urban water and sewer utilities through sector reform and increased private sector participation.

- - -

Risk Assessment and Mitigation

Risk

Inherent risk Country level

Entity level

Project level

Control Risk Budgeting

Risk rating

S S

S

S

S M

Risk Mitigating Measures

Incorporated into Project Design

The project has a capacity building component to strengthen the financial management systems o f I A S

Establishment o f an integrated P C U in A W W S S A to coordinate project activities. The P C U has recruited a finance officer. Recruitment o f an additional accountant at M o W R i s one o f the effectiveness conditions

Conditions for negotiations,

Board or Effectiveness

(Y/N)

Y

N

Remarks

There is a c i v i l service reform Project, which i s ongoing and being undertaken by the government in developing the accounting and auditing profession and improve the salary scale o f c i v i l servants. This wil l have a long-term effect rather than a short-term effect. Only A A W S A has previous experience in implementing donor-financed projects; the other four towns water uti l i t ies do not have any experience o f implementing donor-financed project. M o W R and Regional Water Bureaus wil l provide technical assistance to town water uti l i t ies The project has a capacity building component

Al l implementing agencies prepare annual budget and they prepare regular reports comparing budget and actual

53

Risk Risk rating

H-High, S-Substantial, M-MI

Risk Mitigating Measures

Incorporated into Project Design

The project has a capacity building component to strengthen capacity at a l l levels

Conditions for negotiations,

Board or Effectiveness

(Y/N) N Accounting

Internal Control

Funds F l o w

Financial

reports Submission o f the Y

S

M

S

S

audited WSS project accounts for the year ended 7 July 2006 will be a condition for

erate, L -Low

The accountant t o be hired for MoWR will provide technical support t o town water uti l i t ies

The project will design

Remarks

N

Y

N

The four towns water uti l i t ies maintain simple accounting records, they do not produce complete balance sheet and prof i t and loss account All the implementing agencies have relatively good internal control systems, the internal control system includes internal audit activities Funds may no t f l o w o n t ime f r o m MoWR to town water utilities. Finance Officers at MoWR will visi t regions to ensure that uti l i t ies submit regular SOEs for replenishment o f the D A s There could be delays in getting financial reports f r o m town water utilities.

A A W S A and MoWR will close their accounts, within three months after the end o f each fiscal year so that the auditors wil l have three months to complete the audit

6. The overall financial management risk rating for this project i s assessed as Substantial.

Strengths

7. regulations are the major strengths indicated in most o f the PFM diagnostic works conducted so far. A A W S A has a previous experience in implementing donor-financed projects, including Bank-financed projects. T o implement the project properly, A A W S A established an integrated P C U with adequate and experienced staff.

The country’s discipline in executing budget and complying with the existing government

8. The four towns water supply and sanitation enterprises do not have any experience in implementing donor-financed projects. They only maintain basic accounting records; they do not produce balance sheet and prof i t and loss account. All o f them are in the process o f updating their accounting systems to record a l l financial transactions so as to produce complete financial statements.

54

Weaknesses and Action Plan

Organizing continuous training for finance staff o f a l l implementing agencies

Significant Weaknesses

M o W A A W S A Regular

Action Responsible body Completion

Lack o f adequate staff at the Finance Department o f M o W R

Recruitment o f an additional accountant at the Finance Department o f M o W R to further strengthen the existing capacity

M o W R Before effectiveness

Delays in getting regular financial reports on timely basis

Implementing Entities

9. Ministry o f Water Resources (MoWR), Addis Ababa Water Supply and Sewerage Authority; and Awassa, Gondar, Jimma and Mekelle Water Supply and Sewerage Enterprises will implement the project. M o W R will coordinate project activities for the four enterprises. Each o f the enterprises will implement the project activities in i t s town. Regional Water Bureaus will provide technical assistance to the four enterprises. AWSSA will be responsible for the implementation o f the proposed project activities to be undertaken in Addis Ababa city.

Budgeting

10. respective board o f management. Each o f the PIUs prepares quarterly and annual reports comparing budget and actual. The regular reports are submitted to the board o f management for review and follow- up. The proceeds o f the project will be included in the annual budget o f the I A s .

AWSSA and the four enterprises prepare annual budget. Annual budgets are approved by their

Accounting

1 1. entry accounting system. I t follows the International Financial Reporting Standards in recording and reporting financial transactions. I t has a financial management manual, the manual includes complete chart o f accounts-the chart o f accounts will be revised to accommodate the recording and reporting o f the project transactions. The finance function o f A A W S A i s the responsibility o f the Finance Department; the Head o f the Finance Department reports to the Deputy General Manager for Resources Management o f AAWSA. In total, the Finance Department has thirty staff with adequate o f qualifications and experience, seven o f them has f i rst degree in Accounting. For the day-to-day follow-up o f the project financial transactions, a new finance office has been in place under the PCU. The finance officer reports to the Head o f the PCU administratively and to the Head o f the Finance department technically.

A A W S A has a complete accounting system. It follows accrual-basis o f accounting o n a double

12. The four cities water utilities maintain basic accounting records. They maintain ledgers for cash, receivables, payables, revenue and expenditures. They do not maintain complete records for f ixed assets, depreciation, stock, provisions, and taxation. As a result o f incomplete records, they do not produce annual financial statements; they prepare statements o f receipts and payments o n regular basis. Each o f the town water utilities has adequate staff to look after the existing financial transactions. With a few

55

days training, the staff o f the town water utilities are capable o f recording and reporting the financial transactions o f their offices.

13. M o W R i s currently implementing a Bank-financed project, Water Supply and Sanitation Project (WSSP). The finance function for the existing project i s being handled by the Finance Department o f M o W R . T o strengthen the Finance Department o f MoWR, contractual staff have been employed and an additional accountant will be hired to strengthen the project finance team. As M o W R will manage one o f the Designated Accounts, the staff working for the existing project and the additional accountant will look after the financial transactions o f the proposed project. The financial management manual and other formats for the existing project will be equally applicable for the proposed project as the implementation arrangements for the two projects are more or less the same, the only change M o W R will do i s to assign account numbers for receivables, payables, revenue and expenditures and communicate the same to town water utilities.

Internal Control and Internal Auditing

14. management in order to (i) carry out the project activities in an orderly and efficient manner; (ii) ensure adherence to policies and procedures; and (iii) safeguard the assets o f the project and secure as far as possible the completeness and accuracy o f the financial and other records.

Internal control comprises the whole systems o f control, financial or otherwise, established by

15. management o f the project in achieving the project objectives in an orderly and efficient manner. Thus, the main focuses o f the internal control system are placed o n the following:

A A W S A and the other cities water utilities have good internal control systems, which help the

- Segregation o f duties - Physical control o f assets - Authorization and approval - Clear channels o f command - Arithmetic and accounting accuracy - Integrity and performance o f staff at a l l levels - Supervision

16. All o f the implementing agencies have internal audit u n i t s reporting to the general manager o f their respective offices. For example, A A W S A has seven internal auditors, who perform post audit activities. The internal audit units will include the project financial transactions in their work program.

56

Fund Flows and Disbursement Arrangements

Designated Account A-AWSSA

Flow of funds to Implementing Agencies

Designated Account B - M o W R (including allocations for the

four enterprises)

GranVCredit Account

Birr account

Payment to contractors/ suppliers/

I I I I

Payment to contractors/ suppliers/ Consultants

Payment to contractors/ suppliers/ Consultants

Payment to contractors/ suppliers/ Consultants

suppliers/ suppliers/

17. for A A W S A and DA-B for the four towns water utilities and M o W R . A A W S A will be responsible for the management DA-A and M o W R will be responsible for DA-B. A A W S A may effect payments f rom DA-A or transfer money into local currency account f rom the DA and effect payments f rom the local currency account. Each o f the town water utilities will get money f rom DA-B based o n approved proposal and grant/financing agreement to be entered into between M o W R and each o f the town water utilities. Each o f the town water utilities will open a separate bank account for the project. The town water utilities will keep records o n receipts and uses o f funds, and will submit regular financial reports to M o W R . Subsequent transfers will be made on the basis o f utilization reports. All supporting documents will be kept in each o f the town water utilities.

To transfer money f rom the grant proceed, two Designated Accounts (DAs) will be opened-DA-A

Disbursement Methods

18. The project will start with the disbursement methods based on designated Account Advance, Direct Payment and Special Commitment. At the beginning o f the project, the designated accounts wil l be replenished o n the basis o f statements o f expenditures. I t i s possible to use the interim unaudited financial reports for the replenishment o f the DA after IDA i s satisfied with the adequacy o f the financial arrangements. Proceeds from the GPOPA wil l be disbursed according to the GPOBA guidelines.

57

Minimum Value of Applications

19. The minimum value for Direct Payment and Special Commitment will be USD 1,000,000.

Reporting on Use of Credit Proceeds

20. The supporting documentation for reporting eligible expenditures paid from the designated accounts will be summary reports o f Statements o f Expenditure (SOEs) and records evidencing eligible expenditures for payments against contracts valued above USD 200,000 for works and goods, USD 100,000 for consulting f i r m s and USD 50,000 for individual consultants.

2 1. expenditures (copies o f receipt, supplier’s invoices, etc).

The supporting documentation for direct payment requests should be records evidencing eligible

22. with the withdrawal application on a monthly basis.

The project will submit a bank statement and a reconciliation o f the designated accounts together

23. must be made available for review by periodic World Bank review missions and external auditors.

All supporting documentation for SOEs will be retained at each o f the implementing agencies and

24. and attached to the disbursement letter.

The formats o f the interim un-audited financial reports have been agreed during the negotiations

Designated Accounts

25. mil l ion for DA-B respectively.

The total allocation o f the Designated Account will be USD 7 mil l ion for DA-A an USD 3

Counterpart Contribution

26. The Government will make all arrangements necessary to ensure the timely mobilization o f the counterpart funds required for project implementation. The government contribution will be in the form o f salaries o f civil servants working on the project, office spaces and other operating costs related to the project.

Retroactive Financing

27. Government has requested retroactive financing for up to USD 10 mill ion to cover eligible expenditures incurred under categories 1, and 2 after April 1,2007 and up to the date o f the grant signing.

58

Table C: Allocation of Credit proceeds

Category

(1) Works and Goods (a) for Part A - A A W S A (b) for Part B - Secondary Cities

(2) Consultants (a) for Part A - A A W S A (b) for Part B - Secondary Cities (c) for Part C - MWR

(3) Training (a) for Part A - A A W S A (b) for Part B - Secondary Cities (c) for Part C - MWR

(4) Operating Costs (a) for Part A - A A W S A (b) for Part B - Secondary Cities (c) for Part C - MWR

(5) Unallocated TOTAL

Amount of the Credit Allocated

(Expressed in US$)

41,250 2 1,340

1,350 120

0

0 0 0

0 0 0

1,000 65,000

Amount of the Grant Allocated (Expressed in

US$)

15,100 5,300

8,025 2,155

250

0 20

300

400 15

450

3,000 35,000

Percent of expenditure

to be financed

100% 100%

100% 100% 100%

100% 100% 100%

100% 100% 100%

Financial Reporting

28. reliable information regarding project resources and expenditures. The system will provide reliable records and reports on a l l assets and liabilities and financial transactions o f the project, and sufficient financial information for managing and monitoring activities. The four cities water utilities prepare simple regular financial reports, including o f receipts and payments. MoWR will provide technical assistance to further strengthen the four cities water utilities. MoWR will consolidate the financial reports fkom the four cities water utilities with i t s records and produce consolidated reports.

The existing accounting and reporting system o f A A W S A i s capable o f producing accurate and

29. A A W S A and MoWR will produce Inter im Unaudited Financial Reports (IFRs) and submit the same to IDA forty-five days after the end o f each quarter. At a minimum, the financial reports should include the sources and uses o f funds, expenditures by main expenditure classifications, beginning and ending cash balances and other supporting schedules. The formats o f the IFRs will be agreed during negotiation.

Auditing

30. Since the Federal Auditor General i s responsible for auditing a l l government funds, i t will conduct the audit or assign other external auditor to the project. The existing external auditor for A A W S A and MoWR i s the Audit Services Corporation. A A W S A and MoWR will submit audited financial statements six months after the end o f each fiscal year. Since A A W S A i s an independent

59

organization, i t will prepare an entity accounts (the notes to the accounts will include the financial transactions o f the project). The auditor will express a single audit opinion on the entity accounts. M o W R will prepare consolidated project financial statements and the auditors will express a single audit opinion o n the project accounts. In addition, Regional Audit Bureaus undertake regular audits on the accounts o f utilities.

3 1. The latest available audited financial statement for A A W S A i s for the year ended 7 July 2004. A A W S A i s in the process o f closing i t s accounts for the year ended 7 July 2005 and 2006. A A W S A intends to close i t s accounts for the year ended 7 July 2006 by the end o f this fiscal year. The audited financial statements for Water supply and Sanitation Project (WSSP), which i s implemented by MoWR, for the year ended 7 July 2006 has been received by the Bank.

Conditions

For Effectiven ess .

32. effectiveness conditions.

Recruitment o f an additional accountant for the Finance Department o f M o W R will be one o f the

Financial Covenants

33. statements in accordance with International Accounting Standards. A A W S A and M o W R shall submit audited financial statements n o later than six months after the close o f each fiscal year. In addition, A A W S A and M o W R shall submit interim unaudited financial reports forty-five days after the end o f each calendar quarter.

The recipients shall maintain a financial management system and prepare project financial

Supervision Plan

34. possible. Each year, there should be at least two supervision missions.

Considering the nature o f the project, the Bank’s supervision mission should be as regular as

60

Annex 8: Procurement Arrangements

ETHIOPIA: Urban Water Supply and Sanitation Project

Procurement Environment

1. Federal level i s governed by the procurement code issued by the Federal Government in January 12,2005 and the Procurement Directives released in July 2004. At Regional level the procurement code i s enacted by the Region government and the procurement directive i s adapted to each Region based on the model prepared by the Federal Government.

Public procurement in Ethiopia follows the federal structure o f the government. Procurement at

2. The Country Procurement Assessment Report (CPAR) done in 2002 identified weakness in the country procurement system. The Government has taken the fol lowing actions based on the recommendation o f the CPAR: (i) A new procurement code has been enacted at federal level and at the four major regions that would be included in the project; (ii) an independent Public Procurement Agency with monitoring functions has been established at Federal level; (iii) new Federal Procurement Directives were issued in July 2005; (iv) Standard bid documents for procurement o f works, goods and selection o f consultants have been prepared and distributed to Federal and Regional government bodies; and (v) procurement has been fully decentralized to implementing agencies. However, gaps in capacity building s t i l l remain, as the large training program envisaged in the CPAR action plan could not be implemented in full. In addition Independent regulatory bodies have not been established in the regions. I t has been reported that professional staff have been assigned at the Oromia region and that similar efforts have been made at the SNNPR. However, there i s a need for f i r ther actions to make the regulatory agencies at each o f the regions fully staffed and functional.

General

3. Procurement for the proposed project would be carried out in accordance with the Wor ld Bank's "Guidelines: Procurement Under IBRD Loans and IDA Credits" dated M a y 2004 revised October 1, 2006; and "Guidelines: Selection and Employment o f Consultants by Wor ld Bank Borrowers" dated M a y 2004 revised October 1,2006, and the provisions stipulated in the Legal Agreement. The various items under different expenditure categories are described in general below. For each contract to be financed by the Loadcredi t , the different procurement methods or consultant selection methods, the need for pre- qualification, estimated costs, prior review requirements, and time frame are agreed between the Borrower and the Bank in the Procurement Plan. The various thresholds indicated below are for the purpose o f the init ial procurement plan. The Procurement Plan will be updated at least annually or as required to reflect the actual project implementation needs and improvements in institutional capacity.

4. expansion, D a m Rehabilitation, Drilling Bore holes, Restoration o f existing water supply and sewage treatment plants, repair and maintenance o f water supply networks, expansion o f piped water and sewer networks in urban areas. The procurement will be done using the Bank's Standard Bidding Documents (SBD) for a l l ICB and National SBD agreed with or satisfactory to the Bank for a l l NCBs. Works estimated to cost less than U S D 1,000,000 per contract may be procured using NCB. Shopping method can be used for contracts with estimated values less than U S D 50,000.

Procurement of Works: Works procured under this project would include: Water treatment plant

5. agreement that would be signed between the Bank and MoFED. The M o F E D will in turn s ign sub-grant agreement with the MWR and AAWSA. The funds would be disbursed against clearly defined outputs after independent verification. The measurable outputs shall include number o f new connections that

Output Based Aid: Funds would be provided for l o w income areas under a separate grant

61

meet the agreed specifications, level o f services and period o f service. Payments shall be made based on an independent Engineering estimate for the f i rst year and based o n updated unit rates taking into account the actual results o f the procurement process for the following year. Procurement o f goods, works and selection o f service providers shall be done in accordance with the Wor ld Bank procurement guidelines. The detail procedures and procurement arrangements for the OBA would be agreed and defined in the grant agreement.

6. fittings, water meters, vacuum Trucks, vehicles, motorcycles, electro mechanical equipment and laboratory equipment. The procurement will be done using the Bank’s SBD for a l l ICB. Goods and Equipment contracts estimated to cost less than U S D 200,000 per contract may be procured using NCB using national SBD agreed with or satisfactory to the Bank. Shopping method shall be used for contracts with estimated values o f less than U S D 50,000.

Procurement of Goods: Goods procured under this project would include: Supply o f pipes and

7. Design and Supervision Services, EIA, technical assistance for pol icy and legal kame work analysis, studies related to implementation o f Institutional reorganization and capacity building. Most contracts with f i r m s will be awarded through the use o f the Quality and Cost Based Selection (QCBS) described under sections 2.1-2.3 1 o f the Consultant Guidelines. Consulting Services for audit and other contracts o f a standard or routine nature may be procured under the Least Cost selection method (LCS) described under section 3.6 o f Consultant Guidelines. Consulting assignments costing less than USDlO0,OOO may be procured through the Selection based on Consultants Qualifications (CQS): Short lists o f consultants for services estimated to cost less than U S D 200,000 equivalent per contract may be composed entirely o f national consultants in accordance with the provisions o f paragraph 2.7 o f the Consultant Guidelines. Contracts for individual consultants (IC) will be done by comparison o f the qualifications o f at least three candidates, in accordance with Section V o f the Consultant Guidelines. Single-source selection (SSS) will be used in exceptional cases in accordance with Sections 3.9 t o 3.13 o f the Consultant Guidelines.

Selection o f Consultants: Consultant services under the project shall include: Engineering

8. Ethiopian Government practices in accordance with the Federal Public Procurement Directives o f July 2005 or, whenever those Directives do not apply, commercial practices commonly used for the same purposes.

Operating Costs: Expenditures made for operational costs such as fuel and stationery will fo l low

9. contracts for works and goods procured, will be presented in the Project Implementation Manual.

The procurement procedures and SBDs to be used for each procurement method, as wel l as model

10. used for al l tenders for procurement o f goods and works under International Competitive Bidding (ICB). Domestic preference would be applicable under I C B in accordance with clause 2.55 and Appendix 2 o f the Bank’s guidelines. The Government’s standard bidding documents for procurement o f goods and works for National Competitive Bidding (NCB) were reviewed by the Bank and found to be generally consistent with the Bank’s guidelines and procedures. However, some provisions in the Government’s standard bidding documents need to be adjusted to ensure that the documents are fully compatible with the Bank’s guidelines. The standard documents o f the government can be used for the procurement o f goods and works provided that: (i) the standard documents are used for NCB without pre-qualification only; (ii) margin o f preference i s not applicable; (iii) bidders are given a minimum o f 30 days to submit bids from the date o f availability o f the bidding documents; (iv) Foreign bidders are not excluded from participation; and (v) Results o f evaluation and award o f contract are published. Detai l comments have been provided by the Bank for revision o f the bidding documents.

Standard Bid Documents and Manuals: The Bank’s standard bid documents (SBD) will be

62

1 1, SBDs to be used for procurement o f goods and works using N C B that are revised as per the comments provided and found to be acceptable by the Bank would be provided to each o f the Util i t ies and the A A W S A with the PIM.

The procurement procedures shall be outlined in the Project Implementation Manual (PIM). The

Assessment of the agency’s capacity to implement procurement

12. responsible for overall coordination, monitoring and evaluation o f procurement activities under the project.

The National Program Coordination Office o f the Ministry Water Resources (MWR) will be

13. International consultants would be employed by the MWR to co-ordinate and follow-up the procurement activities and provide support to the A A W S A and the four cities. The consultant would be responsible for providing training for the management staff and tender evaluation committees in the four regions. In addition the consultant would be responsible for taking the lead role in the preparation o f bidding documents for I C B contracts and RFP for selection o f International consultants and the preparation o f evaluation reports until the capacity o f the cities and A A W S A i s adequately strengthened to handle the procurements. The employment o f an International Procurement specialist i s under process at A A W S A and the consultant would be responsible for providing support to A A W S A o n handling the procurements under this project.

A highly qualified procurement specialist with sufficient experience on I C B and selection o f

14. Util i t ies (WUs) in Awassa, Jimma, Gonder and Mekele would be responsible for handling their procurements in the respective Regions. The Water Util i t ies would be init ially responsible for handing procurement using shopping and N C B procedures and selection o f consultants where the short-list i s comprised o f national f i r m s only in their respective regions. Procurement o f ICB contracts and selection o f International consultants would be fully delegated to the WUOs after confirming that the WUO have enhanced their capacity to a satisfactory level. The Regional water resource development bureaus would provide engineering and technical support to the water utilities. The WUOs would assign qualified professional staff t o work with the International Procurement Consultant throughout the entire procurement process including procurement planning, preparing bidding & RFP documents and evaluation o f bids and proposals in order to enable them to build their capacity. The W U s would be delegated to handle national procurement using N C B and shopping immediately after (i) employment or assignment o f a qualified staff; (ii) participation o f the staff in the training program if already not adequately qualified; and (iii) implementation o f the Orientation program. Further delegation would be given to the W U s after conducting an assessment and confirming that they have the built the capacity to handle the procurements.

Procurement activities for component 1 would be carried out by the A A W S A . The Water

15. An assessment o f the capacity o f the Implementing Agency to implement procurement actions for the project has been carried out by Samuel Haile Selassie and Abiy Admassu from January 16 to 18,2007 and February 20,2007. The assessment reviewed the organizational structure for implementing the project and the interaction between the project’s staff responsible for procurement and the regions at the relevant units in each o f the offices.

16. The procurement procedures being followed by A A W S A were not fully consistent with the Bank guidelines. The deviations noted include (i) use o f merit point system (50% finance, 40% technical and 10% delivery) for procurement o f standard goods; and (ii) bracketing (rejection o f bidders with prices that vary more than 20% f rom the adjusted Engineers estimate) for works. In addition the staff o f A A W S A do not have sufficient training on procurement.

The A A W S A has limited capacity in handling donor financed contracts and large scale contracts.

63

17. The Water Util i t ies in Awassa, Jimma, Gonder and Mekele have very l imi ted experience in procurement. The utilities have been generally handling small value procurements and the procurement was managed by the tender committee members. None o f the utilities in the four regional cities have staff with knowledge in Donor financed procurement. The tender committee members were selected from different departments in the cities administration. Tender committees o f WUOs are composed o f professionals and support staff representing the respective WU departments

18. However at Gonder contract award o f more than ETB 500,000 (Approx. USD 57,000) are approved by the Water Board.

Procurement decisions are approved by the Utility manager at Awassa, Jimma, and Mekele.

19. Util i t ies in the four cities.

The fol lowing actions have been agreed to build the capacity o f the A A W S A and the Water

I Action 1. One qualif ied consultant procurement specialist would be employed

at the Ministry o f Water Resource before effectiveness to assist in the management o f the procurement functions and bui lding procurement capacity. The consultant would be responsible for providing technical assistance for (i) preparing and delivering procurement capacity building workshops at A A W S A and the four cities; (ii) Preparing bidding documents, bid evaluation reports, and contract documents; (iii) mentoring procurement staff at the MWR, and the four cities; (iv) reviewing procurement documents; and (v) reviewing the institutional setup for managing procurement and making recommendations for building capacity.

2. A procurement orientation workshop will be conducted for staff at A A W S A and the four WUs that are involved in the procurement decision-making process including tender committee members, Div is ion Heads, Department Heads. The Orientation would be conducted during launch o f the project. Each o f the W U s would review their institutional setup and restructure their internal procurement management system as required.

3 . Each o f the Water Utility Operators would assigdemploy a procurement staff with at least a basic degree preferably in Engineering with sufficient knowledge o n procurement whose primary responsibility would be to handle the procurements under the project. Intensive training would be provided to the staff if required.

4. The Project Implementation manual that was developed under the Water Supply and Sanitation Project would be adopted for the project to ensure that i t adequately meets the specific needs o f the Project. The P I M should include a description o f a procurement monitoring and reporting system based o n which the MWR would regularly review the procurement activities in each o f the cities. In addition the P I M should include clear information o n a l l key aspects o f procurements processing, including roles and responsibilities and records management,

20. The overall project risk for procurement i s high.

Responsible MWR

MWR, W U s and A A W S A

WU

MWR

Date by effectiveness

by effectiveness

Within three months o f effectiveness and before any disbursement i s made to the city. by effectiveness

64

Procurement Plan

1 Ref. No.

21. The Borrower, at appraisal, developed a procurement plan for project implementation which provides the basis for the procurement and selection methods. The plan has been agreed between the Borrower and the Project Team o n February 27,2007 and i s available at MWR (National Project Coordination office) and A A W S A (Project preparation and fol low up office). I t will also be available in the project’s database and in the Bank’s external website. The Procurement Plan will be updated in agreement with the Project Team annually or as required to reflect the actual project implementation needs and improvements in institutional capacity.

2 3 4 5 6 7 8 9 Contract Estimated Procurement P-Q Domestic Review Expected Comments

(Description) cost Method Preference by Bank Bid-

Post) Date (‘000) (yesho) (Prior / Opening

Frequency of Procurement Supervision

1. Addis Ababa Water and Sewerage Authority Increased access to water and sanitation Legedadi Treatment Plant Capacity 5,400 ICB Yes Yes Prior Aug. 2008 Expansion ~

Dam Rehabilitation 500 ICB Yes Yes Prior July 2008

12,000 ICB No Yes Prior June 2008 Drilling and equip 75 Production Boreholes

Multiple Water, Wastewater and drainage for low 8,000 ICB N o Yes Prior contracts income areas Procurement o f New Vacuum Trucks Equipment, spares and Rolling Stock

1.1

4,000 ICB N o Yes Prior Sep. 2008

2,000 ICB N o Yes Prior Dec. 2008

22. assessment o f the Implementing Agency has recommended yearly supervision missions to v i s i t the f ie ld to carry out post review o f procurement actions.

In addition to the pr ior review supervision to be carried out f rom Bank offices, the capacity

Details of the Procurement Arrangements Involving International Competition

23. Goods, Works, and Non Consulting Services

(a) List o f contract packages to be procured following ICB and direct contracting:

65

5 1 6 7

4

Civil Works (Source development, transmission and distribution work) Supply o f pipes and fittings for transmission and Primary and secondary distribution line Supply o f vacuum truck Supply o f Water

Equipment.

1,195 ICB N o Yes Prior

1,200 ICB No N o Prior

800 ICB No Yes Prior

Quality Laboratory 250 ICB No Yes Post

distribution work) Civil Works (Drying bed) 1,200 ICB

No Prior

4 Supply of pipes and fittings for tertiary 900 ICB distribution line Supply and installation of electro-mechanical equipment

500 ICB

4 Procurement

Method Contract Estimated

(Description) (‘000) I No.

Preference (yeslno)

by Bank (Prior I Post)

Bid- Opening

fittings for transmission and Primary and secondary distribution line Supply o f water meter, pipes and fittings for tertiary

3,890 ICB Jan. 2009

900 ICB Prior

Prior

distribution line Supply of vacuum truck 600 ICB

ICB Supply of Water Quality Laboratory Ea uioment .

250 Prior Nov. 2007

-7- Mar. 2008

Apr. 2008

Nov. 2007

Nov. 2007

4. Mekelle I Civil Works (Source I

-

N o

- No

I 1,490 I ICB development, transmission and Prior

Prior

Jan. 2008

Aug. 2008

Jan. 2008

Jan. 2008

Jan. 2008

I

Supply of pipes and I 1 fittings for ~ 1 2,100 I ICB transmission and Primary and N o

- N o -

No

-

Prior

Prior

66

1 Ref. No.

-

2 3 4 5 6 7 8 9 Contract Estimated Procurement P-Q Domestic Review Expected Comments

(Description) cost Method Preference by Bank Bid-

Post) Date (‘000) (yes/no) (Prior / Opening

600 ICB No Yes Prior Nov. 2007 Supply o f vacuum truck Procurement o f transportation means (Vehicle and/or motor cycle) Laboratory Equipment

650 ICB N o Yes Prior Nov. 2007

250 ICB N o Yes Prior Nov. 2007

Civil Works (Source development, transmission and distribution work) Supply o f pipes and fittings for transmission and Primary and secondary distribution line Supply o f pipes and fittings for tertiary distribution line Supply o f vacuum truck

(b) ICB contracts for procurement o f goods and works estimated to cost above USD 200,000 per contract and a l l direct contracting will be subject to pr ior review by the Bank.

24. Consulting Services

(a) List o f consulting assignments with short-list o f international f i rms.

1,640 ICB No Yes Prior Mar. 2008

2,600 ICB N o N o Prior Jan. 2009

900 ICB No Yes Prior Nov. 2008

600 ICB No Yes Prior Nov. 2007

Supply o f Water Quality Laboratory Equipment.

250 ICB No Yes Post Nov. 2007

1 Ref. No.

67

2 3 4 5 6 7 Description of Assignment Estimated Selection Review Expected Comments

.cost Method by Bank Proposals (Prior / Post) Submission

Date

1

2

3

Legedadi Treatment Plant Capacity 705 QCBS Prior Oct. 2007 Expansion Water Line Extension & New 1,305 QCBS Prior Aug. 2007 Connection Drilling and equip 75 Production 1,567 QCBS Prior Dec. 2007 Boreholes

4

5

Water, Wastewater and drainage for 1,044 QCBS Prior Feb. 2008 low income areas Engineering and Studies 1,000 QCBS Prior Multiple

~

12

2 Description o f Assignment

I 13

3 4 5 6 7 Estimated Selection Review Expected Comments

cost Method by Bank Proposals (Prior / Post) Submission

EIA and RAP

Network Rehabilitation

contracts 1,000 QCBS Prior Multiple

contracts 1,851 QCBS Prior Multiple

contracts Replacing malfunctioning Water Meters Sub-system Isolation and Installation of Bulk meters Mav uvdatina

995 QCBS Prior Multiple contracts

463 QCBS Prior

300 OCBS Prior June 2008 Public Awareness Creation

AAWSA Oraanizational Reform

850 QCBS Prior Multiple contracts

500 OCBS Prior Feb. 2008 Corporate Financial and Business Planning Private Sector Participation Capacity Building

300 QCBS Prior Jan. 2008

700 QCBS Prior Jan. 2008 1,100 QCBS Prior Multiple

contracts

1 Consultancy for the design review 340 QCBS Prior Jan. 2008 and supervision for water supply system including auxiliary buildings

(b) Consultancy services estimated to cost above U S D 100,000 per contract for f i r m s and U S D 50,000 for individual consultants and al l single source selection o f consultants will be subject to prior review by the Bank.

1

(c) Short l i s t s composed entirely o f national consultants: Short l is ts o f consultants for services estimated to cost less than U S D 200,000 equivalent per contract may be composed entirely o f national consultants in accordance with the provisions o f paragraph 2.7 o f the Consultant Guidelines.

Consultancy for the design review and supervision for water supply system including auxiliary buildines

68

190 QCBS Prior Jan. 2008

1 Consultancy for the design review 191 QCBS Prior Jan. 2008 and supervision for water supply system including auxiliary buildings

1 Consultancy for the design review 190 QCBS Prior Jan. 2008 and supervision for water supply system including auxiliary buildings

Annex 9: Economic and Financial Analysis

FNPV (Birr Mil l ion)

136

ETHIOPIA: Urban Water Supply and Sanitation Project

FIRR (%) ENPV EIRR (%) (Birr Million)

15 217 20

Financial and Economic Internal Rates o f Return

Average Tarif f Increase

Increase in Potable WaterA'ear

1, A A W S A . Results o f the financial and economic modeling are shown in Table 9.1 for A A W S A .

Without Project Wi th Project Notes 0 5.0% For the 5 Project years only, after

1 .O Mm3 36.5 Mm3 By Project end than the increase i s 0

Increase in Customers Domestic Standposts Commercial & Institutional

2. Project. Taxes are estimated to represent 15 percent o f the cost o f new c iv i l works, engineering and equipment investments.

The difference between the FlRR and ERR are estimated VAT taxes for selected portions o f the

120,000 160,000 Ditto 750 1,050 Ditto 12,000 16,000 Ditto

Model M e t h o d o l o p and K e y Assumptions

3. percent discount rate. All monetary amounts are in 2007 Birr. A condensed worksheet o f the model i s shown at the end o f this Annex. An electronic version o f the complete financial model i s in I R I S for the Project.

The model i s a with and without cost benefit models, with a 15 year analysis period and a 10

4. For the Base Case, Table 9.2 illustrates the principal assumptions.

5. As shown in Table 9.2, under the Project, 44,300 new connection are added to the A A W S A system. In addition, the Project provides about an additional 100,000 cubic meter per day in potable water supply (36.5 mi l l ion cubic meters per year).

6. mil l ion, which represents c iv i l works and the associated engineering and supervision, goods related to potable water supply and sanitation and project management. The investment amount used in the model does not include Sector Reform or Training and Workshops.

The Based Case model for A A W S A assumes an IDA plus AFD investment o f just over U S 7 5

Sensitivity and Switching Analysis.

7. Case results in four scenarios as follows:

K e y r isks outlined in Section C4 o f the P A D are modeled for their effect o n the A A W S A Base

Scenario 1. N o tar i f f increases.

69

Scenario 2. Incremental water produced by the Project i s reduced by 20 percent caused by less than expected groundwater yields and/or less than successful reductions in non- revenue water.

FIRR (%)

8. Results o f the sensitivity analysis are shown in Table 9.3 below:

Base case Scenario

15 >1 12 1 2

Scenario 1 2

9. cause the NPV to equal zero. The results for A A W S A are shown in Table 9.4.

The same scenarios were then modeled to determine what adjustment would be necessary to

Value When NPV=O Tar i f f Increase = 3.2%, (versus 5 % in Base Case) N e w Water i s 52% less than Base Case

FNPV FIRR (%) ENPV

Implications for Proiect Implementation

EIRR (%) 1

10. As shown above, regular small tar i f f increases while the Project i s underway i s very important for the Project’s long-run sustainability. In addition, regular tar i f f increases will be required even after this Project i s completed in order to afford any large scale basin transfer. Thus, small increases n o w will help to reduce the l ikely much larger increases that will come with any basin transfer scheme.

-15.3

1 1. Secondary Citv. T h e methodology used the financial and economic benefits for a typical secondary city are the same as described above for AAWSA, with one exception. Given the less dense and more rural nature o f the secondary cities, for the economic benefits i t was assumed that unconnected households would save time by having a water connection closer to the home.

3 10.4 15

12. Fol lowing the economic analysis used in the PAD for the on-going IDA financed Water Supply and Sanitation Project (Cr. 3901, H850), and updating the wage data for 2007 hour ly rates, the economic benefit o f time savings not having to fetch water i s calculated as follows:

The daily rate for labour in the secondary cities i s Birr 10 per day. In a typical secondary city, 25 percent o f the population i s not close to a water point now and would save the 2 hours per day f rom the Project’s investments. I t i s assumed that two hours per day per household on average can be saved by the Project, o f which 50% would go to productive uses and 50% to leisure activities.

13. Investment in a secondary c i ty i s assumed to be US$8 mill ion, the number o f domestic water connections doubles f rom about 8,000 to 16,000, and water production increases by 1.8 mi l l ion cubic meters per year.

14. With these assumptions, the fo l lowing financial and economic benefits are calculated.

70

Annex 10: Safeguard Policies

ETHIOPIA: Urban Water Supply and Sanitation Project

1. Physical Cultural Resources; OP 4.12 Involuntary Resettlement; OP 4.37 Safety o f Dams; and OP 7.50 Projects o n International Waterways. The project’s environmental screening category i s B, and the safeguard screening category i s S2. The sections below describe the steps taken by the Borrower to address potential adverse environmental and social impacts that might result f rom future project activities.

The project has triggered the safeguard policies OP 4.01 Environmental Assessment; OP 4.1 1

2. environmental and social impacts such soil erosion, soil and water pollution, a potential increase in malaria, loss o f vegetation, traffic accidents and air pollution that might result f rom the project’s construction and rehabilitation activities under components 1 and 2. Consistent with OP 4.01, the Borrower has prepared an Environmental and Social Management Framework (draft ESMF) because the exact locations and potential negative localized environmental and social impacts o f the future investments could not be identified pr ior to appraisal.

OP 4.01 Environmental Assessment: This pol icy has been triggered due to potential adverse

3. The ESMF outlines an environmental and social screening process which includes (a) the completion o f the environmental and social screening form (appendix 3) by qualified personnel; (b) the assignment o f the appropriate environmental category to the sub-project; (c) the recommendation regarding the appropriate level o f environmental work based o n the screening results; (d) public consultations; (e) review and clearance o f the environmental and social screening results as wel l as separate EIA reports; and ( f ) environmental monitoring and evaluation.

4. The ESMF includes an Environmental and Social Management Plan (ESMP) which outlines the institutional arrangements for the implementation and monitoring o f mitigation measures, cost estimates and time horizons. For example, potential groundwater contamination due to the construction and operation o f new dril led wells i s to be mitigated through proper designs and construction techniques as wel l as periodic water quality testing and the planting o f s h b s to prevent contamination o f wel l water. Monitoring will be the responsibility o f the implementing agencies for each sub-project as wel l as water testing by the Federal Ministry o f Water Resources. Whi le the costs o f mitigation measures are included in the construction contracts, the cost o f monitoring (water testing) will cost $5,000 per year during project operation. Similarly, monitoring o f the implementation o f mitigation measures at the Legedadi dam will amount to $10,000. The ESMP will be included in the Project Implementation Manual. The federal Environmental Protection Agency (EPA) will monitor the implementation o f the ESMP.

5. bidding documents. These guidelines are designed to ensure that construction and rehabilitation activities are carried out in an environmentally and socially sustainable manner.

The ESMF furthermore includes Environmental Guidelines for Contractors to be attached to the

6. Boards o f Jimma and Awassa, two secondary cities that could potentially benefit from the UWSSP, with the Environmental Protection Agency (federal level), and the Wor ld Bank country office. Staff involved in the operation o f water systems in Addis Ababa, Awassa, and Jimma have also been interviewed. The ESMF was disclosed in Ethiopia and at the Bank’s Infoshop o n February 14,2007.

The ESMF was prepared in consultation with A A W S A in Addis Ababa, with the Town Water

7. monitoring indicators are included in the ESMP. Annual environmental monitoring reports will be prepared by A A W S A . These reports will provide summaries o f (i) environmental screening forms; (ii) EIAs carried out in the course o f the year; and (iii) a summary o f the environmental monitoring

Environmental monitoring activities will be incorporated into the project’s M&E System;

71

carried out on systems at both construction and operation phases. The annual reports will be reviewed by the EPA and the Ministry o f Water Resources, and copies will be sent to the Wor ld Bank.

8. responsible for the implementation o f the ESMF; draft terms o f reference are being prepared. Towards this end, the N P C U wil l hire a Capacity Building Consultant who wil l be responsible for carrying out training o f local project implementers in environmental and social screening, in i t ia l review o f the screening results and EL4 Reports, review and update provisions o f the ESMP and the Environmental Guidelines for Contractors in light o f actual developments under sub-projects. The Capacity Building Consultant will assist c i ty administration staff as wel l as utility staff in the environmental and social screening activities, oversee the implementation of the ESMP and RPF, and arrange for appropriate environmental training.

The National Project Coordination Unit (NPCU) o f the Ministry o f Water Resources will be

9. chance finds during construction and rehabilitation activities. Any potential chance finds will be identified and dealt with in the context o f the ESMF, appendix 3.

OP 4.11 Physical Cultural Resources: This pol icy has been triggered due to the possibility o f

10. OP 4.12 Involuntary Resettlement: This policy has been triggered due to the potential need for land acquisition under components 1 and 2. Consistent with OP 4.12, the Borrower has prepared a Resettlement Policy Framework (RPF). The RPF identifies the future investments that are l ikely to entail land acquisition such as wells, and water distribution networks including pipelines, public stand tabs, public water kiosks and other distribution-related facilities.

11. . The document further outlines the resettlement and compensation principles outlining, for example: (a) the general framework within which any impact o f the project o n land andor people (land acquisition, resettlement, and livelihood restoration o f affected people) will be addressed; (b) the minimization o f displacement through design procedures; (c) the establishment o f a cut-off-date and eligibil i ty criteria for each sub-project; (d) l ivelihood restoration; (e) compensation; and (9 consultation and grievance mechanisms. The RPF further describes the processes, entitlements and other provisions related to monitoring and evaluation; grievance mechanisms; assistance to vulnerable people; implementation arrangements, and responsibilities for the different tasks involved in the implementation o f the RPF. The RPF was disclosed in Ethiopia and at the Bank’s Infoshop o n February 14,2007.

12. Implementation o f the RPF in Addis Ababa will be the responsibility o f the Capacity Building Consultant to be located in the NPCU with assistance from Social Consultants. The Capacity Building Consultant will also support the towns in the organization o f resettlement planning (valuation commissions, censuses, payment o f compensation); select consultants to develop appropriate resettlement action plans; participate in monitoring and evaluation (possibly through consultants for the most significant resettlement activities, if any). The Social Div is ion o f the federal Environmental Protection Agency (EPA) will monitor compliance o f resettlement activities with the RPF, Ethiopian law, and OP 4.12.

13. by the towns benefiting f rom the project. Every sub-project will have to assess budget needs for the funding o f compensation and resettlement, and to identify and secure potential sources o f funding. The RPF highlights that under OP 4.12, the Bank does not disburse against cash compensation and other resettlement assistance paid in cash, or against the cost o f land (including compensation for land acquisition). However, the Bank may finance the cost o f land improvement associated with resettlement activities. In the unlikely event where resettlement housing would need to be constructed, this can, however, be funded by the IDA loan, as wel l as related consulting services, supervision, monitoring and evaluation.

Funding o f compensation and land acquisition for resettlement sites (if any need) will be funded

72

14. investments will re ly o n the performance o f three existing dams near Addis Ababa (Legadadi Dam, Gafarsa Dams, D i re Dam). Consistent with this policy, the Borrower has carried out a D a m Safety Analysis. Accordingly, the Borrower has engaged independent dam specialists to (a) inspect and evaluate the safety status o f the existing three dams near Addis Ababa (Legedadi Dam, Gafarsa Dams, D i re Dam); (b) review and evaluate the operation and maintenance procedures o f the Addis Ababa Water and Sewerage Authority (AAWSA) who owns these dams; and (c) provide a written report o f findings and recommendations for any remedial work or safety-related measures. The inter im report dated December 18,2006, i s available in the project files; for security reasons, i t has not been disclosed to the public.

OP 4.37 Safety of Dams: This policy has been triggered because the project’s water supply

15. recommends that the Act ion Plan should include, as a minimum: (a) a spillway operation plan at Legedadi, including community training in flood emergency preparedness; (b) establishing a monitoring program at al l the three dams based o n the priority elements identified during the workshop; the program should be based on a set o f new “baseline” data (dam movements, deformations, seepage rates etc.); and (c) collecting, or re-doing if necessary, as build drawings o f the works. This action plan i s expected to include institutional arrangements at the local level in cases o f emergencies. The project wil l support the implementation o f the above recommendations under component 1 A.

The interim report’s main finding i s that, overall, the dams are in good condition. The report

16. Addis Ababa. It i s recommended that as part o f the capacity expansion at the existing Legedadi reservoir and treatment plant under component lA, this component also finance (a) an environmental and social assessment o f the current activities around the reservoir (agricultural production, livestock grazing, sanitation, waste water and waste generation by the surrounding population); and (b) selected priorities of AAWSA’s catchment management plan. T o the extent that catchvents management activities involve infrastructure investments such as small dual-purpose s i l t trap reservoirs or buffer strip works, environmental and social assessments will need to be completed and disclosed pr ior to the commencement o f construction. The Bank will receive copies for review and clearance.

Catchment management: The appraisal mission visited Di re D a m and Legedadi D a m near

17. OP 7.50 (International Waterways): The Bank, o n behalf o f the Government o f Federal Democratic Republic o f Ethiopia, notif ied a l l the downstream riparians in accordance with O P B P 7.50, concerning the proposed project. No unfavorable responses were received f rom any o f the riparians based o n international waterways issues.

18. downstream riparians and are satisfied that the Project will not cause appreciable harm to the other riparians and will not be appreciably harmed by the other riparians’ possible water use.

The Bank staff have considered those aspects o f the Project that might have an affect o n the

73

Annex 11: Project Preparation and Supervision

ETHIOPIA: Urban Water Supply and Sanitation Project

Planned Actual PCN review 09/05/2006 Ini t ia l PID to PIC 0911 812006 Ini t ia l ISDS to PIC 0911 812006

Negotiations 02/26/2006 BoardfRVP approval 04/24/2007 Planned date o f effectiveness 081 3 I/ 2007 Planned date o f m id - te rn review 08/31/2010 Planned closing date 1213 1/20 12

Appraisal 021 1412007

K e y institutions responsible for preparation o f the project: 1. The Ministry o f Finance and Economic Development (MoFED) 2. The Ministry o f Water resources (MoWR) 3. The Addis Ababa City Administration 4. The Addis Ababa Water Supply and Sewerage Authority (AAWSA)

Bank staff and consultants who worked on the project included: Name Ti t le Unit Yitbarek Tessema Team Leader, Sr. Wat. & San. Specialist AFTU 1 Robert Roche Alexander McPhai l Alessandro Palmieri Edeltraut Gilgan-Hunt Rajat Narula Jonathan Pavluk Eshetu Yimer Samuel Hai le Selassie Belete Muluneh Wuleta Giday Marie Claire Li Tin Yue Mustafa Zakir Hussain Seleem Karimjee David Bo t B a N jock Tekalign Tsige Roland Lieumberger Gordon Hughes Frederic Geovenetti

Lead Sanitary Engineer Lead Wat. and San. Specialist Lead D a m Specialist Environment Specialist Sr. Finance Officer Sr. Counsel Sr. Financial Management Specialist Senior Procurement Specialist Senior Water and Sanitation Specialist Program Assistant Program Assistant Et Consultant FEU Principal Investment Officer Investment Officer Un-Habitat Ethiopia Office Consultant o n NRW Consultant o n Cost o f service and tar i f f Consultant- environment and Social

AFTUI A F T U 2 OPCQC AFTS2 LOAG 2 LEGAF AFTFM AFTPC ETWAF AFCE3 AFTU 1 GPOBA CAFS 1 -IFc CASDR-IFC

Bank funds expended to date o n project preparation: 1. Bank resources: U S D 122,450 2. Trust funds: 3. Total: U S D 122,450

Estimated Approval and Supervision costs: 1. Remaining costs to approval: 2. Estimated annual supervision cost:

74

Annex 12: Documents in the Project File

ETHIOPIA: Urban Water Supply and Sanitation Project

Policy Documents

1. GoE Integrated Water Resources Management Policy 2. GoE Water Sector Strategy

Preparation study reports

1. Institutional, financing and costing study for L o w Income areas service improvement component in Addis Ci ty

2. Cost o f service and tar i f f analysis for Addis Water and Sewerage Authority (AAWSA) 3. Issues paper concerning the Development o f Addis Ababa Water Supply system 4. Assessment o f Ground Water Situation around Addis Ababa City 5. Institutional, financial , and technical study for N o n Revenue Water component in Addis

City 6. D a m Safety assessment and action plan 7. Base line information and data sheet for the cities

Bank Staff assessments

1. Project concept note and QER review minutes 2. Aide memoires

Project Implementation Documents

1. Environmental and social management frame work reports 2. Toolkit and guidelines for business planning 3. Guideline for cost effective design

75

Annex 13: Statement o f Loans and Credits

ETHIOPIA: Urban Water Supply and Sanitation Project ~~

Difference between expected and actual

disbursements Original Amount in US$ Millions

Project ID FY Purpose IBRD IDA SF GEF Cancel. Undisb. Orig. Frm. Rev’d

PO97271

PO94704 PO79275

PO740 15 PO87707 PO82998

PO78692 PO78458 PO50272 PO76735 PO74020 PO50938 PO81773 PO44613 PO49395 PO75915 PO57770 PO50383 PO67084 PO69886 PO73196 PO35147

PO00733

2006 2006 2006

2006 2005 2005

2005

2005 2005 2004 2004 2003 2003

2003 2003 2003 2002 2002 2001

2001 2001 2001

1998

ET-Electricity Access (Rural) Expansion

ET-Financial Sector Cap Bldg. Project ET- Cap. Building for Agric. Serv (FY06) ET-Protection of Basic Services (FY06)

ET-Productive Safety Nets APLl (FY05) ET-Road Sec Dev Prgm Ph 2 Sup1 2 (FY05) ET-Post Secondary Education SIL (FY05) ET-ICT Assisted Dev S I M (FY05) ET-Priv Sec Dev CB (FY05) ET-Water Sply & Sanitation SIL (FY04) ET-Pub Sec Cap Bldg Prj (FY04) ET-Dec Serv Del CB (FY03) ET-Emerg Drought Recovery ERL (FY03) ET-RSDP APLl (FY03)

ET-Energy Access SIL (FY03) ET-Pastoral Community Dev APL (FY03) ET-Cultural Heritage LIL (FY02)

ET-Food Security S IL (FY02) ET-Emerg Recov & Rehab ERL (FYOI) ET-MAP (FYOI) ET-Demob & Reinteg ERL (FYOI)

ET-GEF Med Plants Cnsv & Sust Use (FYOI) ET-Agr Research & Training SIL (FY98)

0.00 0.00 0.00 0.00 0.00 0.00

0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

0.00 0.00 0.00

0.00

0.00

133.40 0.00

54.00 0.00

14.30 160.90

40.00 25.00 19.00 75.00

100.00 26.20

0.00 0.00

132.70

0.00 5.00

85.00

230.00 59.70

170.60 0.00

60.00

0.00 0.00 0.00 0.00 0.00 0.00

0.00

0.00 0.00 0.00

0.00

0.00

0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

0.00

0.00 0.00 0.00

0.00 0.00 0.00

0.00

0.00 0.00 0.00

0.00 0.00

0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 1.80

0.00

0.00 138.59 0.00 15.22 0.00 55.26 0.00 213.28 0.00 41.94 0.00 219.35

0.00 36.53 0.00 22.76 0.00 21.90 0.00 86.47 0.00 63.73 0.00 19.51 0.00 0.07 0.00 88.79 0.00 137.12 0.00 6.17 0.00 2.72 0.00 65.73 0.00 8.77 0.00 0.71 0.00 14.39 1.00 0.19

0.00 3.01

0.00 0.00 0.00 0.00 0.00 0.00

96.82 0.00 -5.09 0.00 15.48 0.00

15.70 0.00 7.89 0.00 1.75 0.00

14.85 0.00 7.27 0.00

15.28 0.19 -2.40 0.00 26.57 0.00

105.71 0.00 -10.39 0.00

1.59 0.00 13.75 0.00

-10.87 -21.93

-3.75 -3.75 7.56 -4.75 1.80 0.00

1.76 0.18

Total: 0.00 1,390.80 0.00 1.80 1.00 1,262.21 301.28 - 30.06

STATEMENT OF IFC’s Held and Disbursed Portfolio (US Dollars millions)

Committed Disbursed

IFC IFC

FY Approval Company Loan Equity Quasi Partic. Loan Equity Quasi Partic. ~~ ~~~ ~ ~ ~~ ~

Total portfolio: 0.00 0.00 0.00 0.00 0 00 0.00 0 00 0.00

Approvals Pending Commitment

FY Approval Company Loan Equity Quasi Partic.

Total pending commitment: 0.00 0.00 0.00 0.00

76

Annex 14: Country at a Glance

ETHIOPIA: Urban Water Supply and Sanitation Project

Ethiopia a t a glance 9/14/06

Key Development Indicators

(2005)

Population. mid-year (millions) Surface area (thousand sq. km) Population growth (Oh) Urban population (Oh of total population)

GNi (Atlas method, US$ billions) GNi per capita (Atlas method, US$) GNI per capita (PPP. international $)

GDP growth (Oh) GDP per capita growth (%)

(most recent estlmate, 2000-2005)

Poverty headcount ratio at $1 a day (PPP, Oh) Poverty headcount ratio at $2 a day (PPP, Oh) Life expectancyat birth (years) infant mortality (per 1,000 live births) Child malnutrition (% of children under 5)

Adult literacy, male (% of ages 15 and older) Adult literacy, female (% of ages 15 and older) Gross primaryenroilment. male (Oh of age group) Gross primaryenroilment. female ( O h of age group)

Access to an improved water source ( O h of population) Access to improved sanitation facilities (Oh of population)

Ethiopia

71.3 1,104

1.8 16

11.1 160

1,000

6.7 6.6

23 76 42

110 47

86 ' 70 '

22 13

Sub- Saharan

Africa

741 24,265

2.1 35

552 745

1,981

5.3 3.1

44 75 46

100 29

99 67

56 37

LOW income

2,353 29,265

1.6 30

1,364 580

2,486

7.5 5.6

59 80 39

73 50

110 99

75 38

Net Aid Flows

(US$ miiiions) Net ODA and official aid Top 3 donors (in 2004):

United States United Kingdom Germany

Aid (Oh of GNI) Aid per capita (US$)

Long-Term Economic Trends

Consumer prices (annual Oh change) GDP implicit deflator (annual Oh change)

Exchange rate (annual average, iocai per US$) Terms of trade index (2000 = 100)

Population, mid-year (millions) GDP (US$ millions)

Agriculture industry

Services

Household final consumption expenditure General gov't final consumption expenditure Gross capital formation

Exportsofgoodsandservices imports of goods and sewices Gross savings

Manufacturing

1980

212

19 4

15

3.4 6

4.5 4.4

2.1 131

37.7 7,269

58.9 11.9 6.0

29.2

80.0 9.8

14.5

7.6 11.9 10.8

1990 2000

1,016 693

50 130 35 11 47 39

6.5 6.9 20 11

5.2 0.7 3.9 6.0

2.1 6.1 151 100

51.2 64.3 12,083 7,845

51.9 47.7 11.6 12.4 5.1 5.7

36.3 39.9

77.2 73.1 13.2 18.9 12.9 20.5

5.6 12.5 6.6 25.0

11.9 16.3

(% of GDP)

2005

1,823

402 147 126

16.9 26

11.6 6.0

8.7 77

71.3 11,174

47.7 13.3 5.1

39.0

62.2 14.2 26.3

16.4 39.1 17.2

Age dlrtrlbutlon. 2005

Male Female

70.74 B C 4 4 6064 4044 30.24 20.24 1&14

w 7 20 10 0 10 21.

OerCent

I Under-5 mortality rate (per 1,000)

I 2501 2w

150

I W

50

0 1980 1995 2Mxl 202.4

OEthiopia OSubSaharan Afnca

Growth of GDP and GDP per caplta (%) 1 2 0 T 10

0

-10

-20 80 95 W 05

1980-90 1990-2000 2000-05 (average annual gmvvlh %) 3.1 2.3 2.1 2.0 3.5 4.2

0.6 2.2 3.1 3.4 4.0 5.8 3.1 3.8 2.4 3.5 4.5 3.9

1.0 2.3 4.8 4.0 9.6 -0.1 4.9 5.9 6.6

3.2 7.1 15.0 3.2 5.6 11.0 6.4 10.1 5.1

Note: Figures in italics are for years other than those specified. 2005 data are preliminaryestimates. .. indicates data are not available. a. National sources. b. Aid data are for 2004.

Development Economics, Development Data Group (DECDG).

77

Ethiopia

Balance of Payments and Trade

(US$ millions) Total merchandise exports (fob) Total merchandise imports (cif) Net trade in goods and services

Workers' remittances and compensation of employees (receipts)

Current account balance as a % of GDP

Reserves, including gold

Central Government Finance*

(% of GDP) Revenue

Expenditure and Net Lending

Overall surpluddeficit

Highest marginal tax rate (%)

Tax revenue

individual Corporate

External Debt and Resource Flows

(US$ millions) Total debt outstanding and disbursed Total debt service HlPC and MDRl debt relief (expected; flow)

Total debt (% of GDP) Total debt service (% of exports)

Foreign direct investment (net inflows) Portfolio equity (net inflows)

2000

486 1,611 -976

53

-335 4 . 3

349

14.6 9.9

27.1

-10.6

5,483 138

3,275

69.9 13.1

135 0

2005

618 3,633

-2.538

134

-1,013 -9.1

1,555

16.0 12.7 25.6

4 . 9

35 30

6,574 97

67.5 5.9

545 0

:omposition of total external debt, 2004

SM-term 38

iOA. 3,400

IMF, 183 JS$ millions

Private Sector Development

Time required to start a business (days) Cost to start a business (% of GNI per capita) Time required to register property (days)

Ranked as a major constraint to business (% of managers surveyed who agreed)

Tax rates Tax administration

Stock market capitalization (% of GDP) Bank branches (per 100,000 people)

2000 2005

32 - 65.1 - 56

-

73.6 60.3

.. 0.4

I Governance indicators, 2000 and 2004

I l l Voice and accountability

Political stability

Regulatory quality

Rule of law

Control of corruption

0 25 50 75 100

l8 2004 02000

Country's percentile rank (0-100) higher v~lues imply bene, ratings

Source: Kaufmann-Kraav-Mastmzzi. World Bank

Technology and Infrastructure 2000 2004

Paved roads (% of total) Fixed line and mobile phone

High technology exports subscribers (per 1,000 people)

(%of manufactured exports)

12.0 12.9

4 8

0.1 0.2

Environment

Agricultural land (% of land area) 31 32 Forest area (% of land area, 2000 and 2005) 13.7 13.0 Nationally protected areas (% of land area) .. 16.9

Freshwater resources per capita (cu. meters) .. 1,744

C02 emissions per capita (mt) 0.09 0.09

Freshwater withdrawal (% of internal resources) .. 4.6

GDP per unit of energy use (2000 PPP $ per kg of oil equivalent) 2.7 2.6

Energy use per capita (kg of oil equivalent) 291 299

(US$ mi/iions)

IBRD Total debt outstanding and disbursed Disbursements Principal repayments Interest payments

0 0 0 0 0 0 0 0

IDA Total debt outstanding and disbursed 1,779 3,359 Disbursements 137 162 Total debt service 34 72

IFC ( k a i year) Total disbursed and outstanding portfolio 0 0

of which IFC own account 0 0 Disbursements for IFC own account 0 0 Portfolio sales, prepayments and

repayments for IFC own account 0 0

MlGA Gross exmsure

Note: Figures in italics are for years other than those specified. 2005 data are preliminary estimates. .. indicates data are not available. -indicates observation is not applicable. * represents Federal and Regional Governments'. Development Economics, Development Data Group (DECDG).

8/28/08

78

Millennium DeveloPment Goals EthioDia

With selected targets to achieve between 1990 and 201 5 (estimate closest to date shown, +I- 2 years) uwi c Goal 1: halve the rates for SI a day poverty and malnutrltlon 1990 1995 2000 2004

Poverty headcount ratio at $1 a day (PPP, % of population) Poverty headcount ratio at national poverty line (% of population)

31.3 23.0 45.5 44.2

9.1 Share of income or consumption to the poorest qunitile (%) Prevalence of malnutrition (% of children under 5) 48 47

Goal 2: ensure that children are able to complete primaly schooling Primaly school enrollment (net, %) 22 36 56

Secondary school enrollment (gross, %) 13 17 31 Primaly completion rate (% of relevant age group) 26 18 37 55

Youth literacy rate (% of people ages 15-24) 43

Goal 3: eliminate gender disparity in education and empower women Ratio of girls to boys in primary and secondaly education (%) 68 65 77

Proportion of seats held by women in national parliament (%) 2 2 21 Women employed in the nonagricultural sector (Oh of nonagricultural employment) 40

Goal 4: reduce under-5 mortality by two-thirds Under-5 mortality rate (per 1,000) 204 192 176 166

Measles immunization (proportion of one-year olds immunized, %) 38 38 52 71 infant mortality rate (per 1,000 live births) 131 123 116 110

Goal 5: reduce maternal mortality by three-fourths Maternal mortality ratio (modeled estimate, per 100,000 live births) Births attended by skilled health staff (% of total)

850 6

Goal 6: halt and begin to reverse the spread of HlVlAlDS and other major diseases Prevalence of HiV (% of population ages 15-49) Contraceptive prevalence (% of women ages 15-49) 4 8 Incidence of tuberculosis (per 100,000 people) 128 353 Tuberculosis cases detected under DOTS (%) 15 33 36

Goal 7 : halve the proportion of people without sustainable access to basic needs Access to an improved water source (% of population) 23 22 Access to improved sanitation facilities (% of population) 3 13 Forest area (% of total land area) 13.7 13.0 Nationally protected areas (% of total land area) 16.9

GDP per unit of energy use (constant 2000 PPP $ per kg of oil equivalent) 2.6 2.4 2.7 2.6 GO2 emissions (metric tons per capita) 0.1 0.0 0.1 0. I

Goal 8: develop a global partnership for development Fixed line and mobile phone subscribers (Per 1,000 Deopie) 3 4 8 . . Internet users (per 1,000 people) Personal computers (per 1,000 people) Youth unemployment (% of total labor force ages 15-24)

!ducation Indicators (%)

100,

1898 2wo 2002 2004

--O-Primry net enrolimnt ratio

-a- Ratio of girls to boys in primry 8 secondary education

Measles lmmunlratlon (% of I-year olds)

1880 1985 2000 2004

0 Ethiopia USub-Saharan Afnca

L 0 0 0 2

1 3

ICT indicators (per 1,000 people)

lo 1

2WO 2002 2004

0 Fixed + mobile subscribers IB Internet users

Note: Figures in italics are for years other than those specified. .. indicates data are not available

Development Economics, Development Data Group (DECDG).

8/28/06

79

MAP SECTION

Ras DashenRas DashenTerara (4620 m) Terara (4620 m)

E t h i o p i a nE t h i o p i a nP l a t e a uP l a t e a u

DDee

nnaa

kkii ll DD

eess

eerr

tt

GGrr

eeaa

tt

RR

iiff

tt

VV

aall ll

eeyy

O g a d e nO g a d e n

T I G R AYT I G R AY

A FA RA FA RA M H A R AA M H A R A

S O M A L IS O M A L I

O R O M I YAO R O M I YA

G A M B E L AG A M B E L A

DIRE DAWADIRE DAWA

SOUTHERN NATIONS,SOUTHERN NATIONS,NATIONALITESNATIONALITESAND PEOPLESAND PEOPLES

ADDIS ABABAADDIS ABABA

BENSHANGULBENSHANGUL

HARARHARAR

DDiinnddeerr

TTeekkeezzee

AAttbbaarraa

BBlluuee NNiillee

AAww

aasshh AAkkoobboo

GGeennaallee

DDaawwaa

BBaarroo

AAbbaayy

HHaanngg

eerr

DDiiddeessaa

WW

aabbee SShheebbeellee

RRaammiiss

WWaabbee GG

eessttrroo WWaabbee SShheebbeellee

WeldiyaWeldiyaDebraDebraTaborTabor

AxumAxum

AdigratAdigrat

SodoSodo

NegeleNegele

MegaMega

ImiImi

DoloDoloOdoOdo

Degeh BurDegeh BurAwareAware

WarderWarder

DomoDomo

MoyaleMoyale

YavelloYavello

WendoWendo

ShashemeneShashemene

NazretNazret

WelkiteWelkite

HosainaHosainaBongaBonga

GimbiGimbiAwashAwash

DodolaDodola

HumeraHumera

Kebri DeharKebri Dehar

GondorGondor

DeseDese

DebreDebreMarkosMarkos

AselaAsela

GobaGoba

GoreGore

NekemteNekemte

JimaJima

HarerHarerDire DawaDire Dawa

Bahir DarBahir Dar

MekeleMekele

GambelaGambela

AwasaAwasa

AsosaAsosa

AsayitaAsayita

JijigaJijigaADDISADDISABABAABABA

SUDANSUDAN

ERITREAERITREA

SOMALIASOMALIA

UGANDAUGANDA KENYAKENYA

DJIBDJIB

To To KerenKeren

To To GedarefGedaref

To To MarsabitMarsabit

To To WajirWajir To To

MogadishuMogadishu

To To MogadishuMogadishu

To To HargeysaHargeysa

WeldiyaDebraTabor

Axum

Adigrat

Sodo

Negele

Mega

Imi

DoloOdo

Degeh BurAware

Warder

Domo

Ferfer

Moyale

Yavello

Wendo

Shashemene

Nazret

Welkite

HosainaBonga

GimbiAwash

Dodola

Humera

Kebri Dehar

Gondor

Dese

DebreMarkos

Asela

Goba

Gore

Nekemte

Jima

HarerDire Dawa

Bahir Dar

Mekele

Gambela

Awasa

Asosa

Asayita

JijigaADDISABABA

T I G R AY

A FA RA M H A R A

S O M A L I

O R O M I YA

G A M B E L A

DIRE DAWA

SOUTHERN NATIONS,NATIONALITESAND PEOPLES

ADDIS ABABA

BENSHANGUL

HARAR

SUDAN

ERITREA

SOMALIA

UGANDA KENYA

DJIBOUTI

REP.OF

YEMEN

Dinder

Tekeze

Atbara

Blue Nile

Aw

ash Akobo

Genale

Dawa

Baro

Abay

Hang

er

Didesa

W

abe Shebele

Ramis

Wabe G

estro Wabe Shebele

INDIANOCEAN

LakeTana

LakeTurkana

R e d S e a

G u l f o f A d e n

Gibe

Blue Nile

To Keren

To Gedaref

To Marsabit

To Wajir To

Mogadishu

To Mogadishu

To Hargeysa

E t h i o p i a nP l a t e a u

De

na

ki l D

es

er

t

Gr

ea

t

R

if

t

V

al l

ey

O g a d e n

Ras DashenTerara (4620 m)

14°N

36°E 40°E 44°E

46°E 48°E

42°E32°E

34°E 36°E 38°E 40°E 44°E 46°E 48°E42°E32°E

12°N

14°N

12°N

10°N

8°N

6°N

4°N

10°N

8°N

6°N

4°N

ETHIOPIA

This map was produced by the Map Design Unit of The World Bank. The boundaries, colors, denominations and any other informationshown on this map do not imply, on the part of The World BankGroup, any judgment on the legal status of any territory, or anyendorsement or acceptance of such boundaries.

0 50 100 150

0 50 100 150 Miles

200 Kilometers

IBRD 35400

MA

RCH

2007

ETHIOPIA

URBAN WATER SUPPLY ANDSANITATION PROJECT

PARTICIPATING CITIES

SELECTED CITIES AND TOWNS

PROVINCE CAPITALS

NATIONAL CAPITAL

RIVERS

MAIN ROADS

RAILROADS

PROVINCE BOUNDARIES

INTERNATIONAL BOUNDARIES