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Document of
The World Bank
FOR OFFICIAL USE ONLY
Report No: 59131 - TJ
PROJECT APPRAISAL DOCUMENT
ON A
PROPOSED GRANT
IN THE AMOUNT OF
SDR 10.10 MILLION
(US$ 16 MILLION EQUIVALENT)
TO THE
REPUBLIC OF TAJIKISTAN
FOR THE
SECOND DUSHANBE WATER SUPPLY PROJECT
May 6, 2011
This document has a restricted distribution and may be used by recipients only in the
performance of their official duties. Its contents may not otherwise be disclosed without World
Bank authorization.
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CURRENCY EQUIVALENTS
(Exchange Rate Effective {Date})
Currency Unit = TJ Somoni
TJS 4.4668 = US$1
US$1.5855 = SDR 1
FISCAL YEAR
January 1 – December 31
ABBREVIATIONS AND ACRONYMS
AF CIS
Additional Financing Commonwealth of Independent States
CPS CQS DA DC
Country Partnership Strategy Selection Based on Consultants’ Qualification Designated Account Direct Contracting
DVK Dushanbe Vodokanal DWSP Dushanbe Water Supply Project (on-going. predecessor project) DWSP2 Second Dushanbe Water Supply Project (the Project) EBRD European Bank for Reconstruction and Development ECA EIB
Europe and Central Asia European Investment Bank
EMMP FBS FM
Environmental Management and Monitoring Plan Fixed Budget Selection Financial management
GDP GNI
Gross Domestic Product Gross National Income
GORT Government of the Republic of Tajikistan GPF IC
Governance Partnership Facility Individual Consultant selection procedure
ICB IDA IDB IFCA IFR ISA
International Competitive Bidding International Development Association Islamic Development Bank
Investment Facility for Central Asia
Interim Financial Reports
International Standards on Audit KAF Kafarnigan wellfield KMK LCS
Khojagii Manziliyu Kommunali Least Cost Selection
MDG M&E
Millennium Development Goals Monitoring and evaluation
MIDP Municipal Infrastructure Development Project MOF Ministry of Finance MTR Mid-term Review NAP NCB
Napornaya Water Treatment Plant National Competitive Bidding
OPIAP PCU
Operational Performance and Improvement Action Plan Project Coordination Unit
PDO PFS
Project Development Objectives Project Financial Statement
PIP PMC POM PPP QBS QCBS RAP
Priority Investment Program Project Management Consultant Project Operational Manual Public-Private Partnership Quality Based Selection
Quality and Cost Based Selection
Resettlement Action Plan RPF Resettlement Policy Framework SAM Samotechnaya Water Treatment Plant SCADA Supervisory control and data acquisition SIC State Investments Committee SIL SOE SSS SUE
Specific Investment Loan Statement of Expenses Single (or Sole) Source Selection State Unitary Enterprise
SWAP Sector-wide Approach SWW TA
South-West wellfield Technical Assistance
TOR Terms of Reference VAT WHO WSS
Value Added Tax World Health Organization Water Supply and Sanitation
Regional Vice President: Philippe H. Le Houerou (ECAVP)
Country Director: Motoo Konishi (ECCU8)
Sector Director: Country Manager Sector Manager:
Peter Thomson (ECSSD) Marsha Olive (ECCTJ) Wael Zakout (ECSS6)
Task Team Leader: Pier Francesco Mantovani/Anna Cestari (ECSS6)
TAJIKISTAN
SECOND DUSHANBE WATER SUPPLY PROJECT
I. Table of Contents
I. STRATEGIC CONTEXT ................................................................................................. 1
A. Country Context ................................................................................................................ 1
B. Sector and Institutional Context ........................................................................................ 2
C. Higher Level Objectives to which the Project Contributes ............................................... 3
II. PROJECT DEVELOPMENT OBJECTIVES ................................................................... 4
A. Project Development Objectives ....................................................................................... 4
Project Beneficiaries ............................................................................................................... 4
PDO-level Results Indicators .................................................................................................. 4
III. PROJECT DESCRIPTION ............................................................................................... 5
A. Project Components .......................................................................................................... 5
B. Project Financing ............................................................................................................... 6
Lending Instrument ................................................................................................................. 7
C. Lessons Learned and Reflected in the Project Design ...................................................... 8
IV. IMPLEMENTATION ....................................................................................................... 9
A. Institutional and Implementation Arrangements ............................................................... 9
B. Results Monitoring and Evaluation ................................................................................... 9
C. Sustainability ................................................................................................................... 10
D. Conditions for Effectiveness ........................................................................................... 11
V. KEY RISKS AND MITIGATION MEASURES ........................................................... 11
VI. APPRAISAL SUMMARY .............................................................................................. 12
A. Economic and Financial Analysis ................................................................................... 12
B. Technical ......................................................................................................................... 14
C. Financial Management .................................................................................................... 15
D. Procurement ..................................................................................................................... 15
E. Social (including safeguards) .......................................................................................... 16
F. Environment (including safeguards) ............................................................................... 17
G. Other Safeguards Policies triggered (if required) ............................................................ 18
H. Readiness: ........................................................................................................................ 18
Annex 1: Results Framework and Monitoring.............................................................................. 21
Annex 2: Detailed Project Description ......................................................................................... 27
Annex 3: Implementation Arrangements ...................................................................................... 39
Annex 4: Operational Risk Assessment Framework (ORAF) ...................................................... 52
Annex 5: Implementation Support Plan ........................................................................................ 55
Annex 6: Team Composition ........................................................................................................ 58
Annex 7: Financial and Economic Analysis ................................................................................. 59
Annex 8: Governance ................................................................................................................... 69
Annex 9: Social and Customers Satisfaction Survey .................................................................... 77
Annex 10: Map ............................................................................................................................. 82
TAJIKISTAN
SECOND DUSHANBE WATER SUPPLY PROJECT
PROJECT APPRAISAL DOCUMENT
EUROPE AND CENTRAL ASIA
ECSSD
Date: May 6, 2011 Team Leader: Pier Mantovani/Anna Cestari
Country Director: Motoo Konishi
Sector Manager/Director: Wael Zakout/Peter
Thomson
Sectors: Water supply (100%);
Themes: Access to urban services and housing
(100%)
Project ID: P118196 Environmental category: B
Lending Instrument: Specific Investment Loan
Project Financing Data
[ ] Loan [ ] Credit [X] Grant [ ] Guarantee [ ] Other:
For Loans/Credits/Others:
Total Bank financing (US$m.): 16.00
Proposed terms: IDA Grant, no principal or interest repayment.
Financing Plan (US$m)
Source Local Foreign Total
BORROWER/RECIPIENT 0.00 0.00 0.00
CO-FINANCING 1.00 2.00 3.00
IDA Grant 5.00 11.00 16.00
Total: 6.00 13.00 19.00
Borrower: Republic of Tajikistan
Responsible Agency: Dushanbe Vodokanal
Contact Person: Fasulokhon Isupov
Telephone No.: 221-09-92
Fax No.: 221-77-45
Email: [email protected]
Estimated disbursements (Bank FY/US$m)
FY 12 13 14 15 16
Annual 1 4 4 4 3
Cumulative 1 5 9 13 16
Project Implementation Period: August 2011-December 2015
Expected effectiveness date: August 29, 2011
Expected closing date: December 31, 2015
Does the project depart from the CAS in content or other significant respects?
Ref. PAD I.C. [ ]Yes [ X ]No
Does the project require any exceptions from Bank policies?
Ref. PAD VI.G. OP7.50 International waterways
Have these been approved by Bank management?
[ X]Yes [ ] No
[ X]Yes [ ] No
Is approval for any policy exception sought from the Board? [ ]Yes [X] No
Does the project include any critical risks rated ―substantial‖ or ―high‖?
Ref. PAD III.E. [ X ]Yes [] No
Does the project meet the Regional criteria for readiness for implementation?
Ref. PAD VI.H. [X]Yes [ ] No
Project development objective Ref. PAD II.A.
Improve water utility performance and water supply services in selected areas of Dushanbe.
Project description Ref. PAD III.A
Component 1. Metering and Demand Management (US$ 7.62 million of which IDA US$ 5.97
million): The component will finance consumption metering and bulk metering of water, for
increased revenue, reduced wastage, and better tracking of losses, including: (i) supply and
installation of 76,500 residential meters (i.e. approximately 46% of DVK users) and installation
of 1,500 apartment building master meters in selected areas of the city; (ii) rehabilitation of
1,500 apartment building service connections; (iii) supply and installation of bulk flow meters at
water production facilities; (iv) supply and installation of a Network Information System (NIS);
(v) communication strategy and public awareness campaigns to promote metering and demand
management; and (vi) installation of SCADA system.
Component 2. Water Quality Improvement (US$ 6.27 million of which IDA US$ 4.91 million): The component will support system upgrades for improved quality of water, including: (i) partial
renewal of filtration capacity at Samotechnaya WTP (SAM); (ii) network cleaning; (iii)
installation of in-network re-chlorination systems; (iv) equipment for water quality monitoring;
(v) reconstruction of pumping station and tanks at the Napornaya WTP (NAP); and (vi)
provision of maintenance equipment.
Component 3. Institutional Strengthening and Capacity Building (US$ 3.34 million of which
IDA US$3.34 million): The component will finance activities to build institutional capacity and
improve utility performance of DVK, which includes (i) Carrying out an assessment of DVK’s
organizational and capacity-building needs; (ii) Installation of modern accounting, billing and
water revenue collection systems; (iii) Provision of technical assistance to the management of
DVK to improve its financial performance; (iv) Provision of technical assistance, and carrying
out of studies to improve the water supply operations of DVK, including studies for hydraulic
modeling, and for design of pressure zones and SCADA system; and (v) Implementation of
training programs for DVK staff.
Component 4. Implementation Support (US$ 1.78 million of which IDA US$ 1.78 million): The component will provide project Implementation support including (i) design and supervision
of works; (ii) project implementation unit operating costs, and (iii) annual project audits.
Safeguard policies triggered?
Environmental Assessment (OP/BP 4.01)
Natural Habitats (OP/BP 4.04)
Forests (OP/BP 4.36)
Pest Management (OP 4.09)
Physical Cultural Resources (OP/BP 4.11)
Indigenous Peoples (OP/BP 4.10)
Involuntary Resettlement (OP/BP 4.12)
Safety of Dams (OP/BP 4.37)
Projects on International Waterways (OP/BP 7.50)
Projects in Disputed Areas (OP/BP 7.60)
X Yes ○ No
○ Yes X No
○ Yes X No
○ Yes X No
○ Yes X No
○ Yes X No
X Yes ○ No
○ Yes X No
X Yes ○ No
○ Yes X No
Significant, non-standard conditions, if any, for:
Board presentation: N/a
Grant effectiveness:
The Subsidiary Agreement has been executed on behalf of the Recipient, the Project
Implementing Entity and the Municipality of Dushanbe.
The Recipient has adopted the Project Operational Manual, satisfactory to the Association.
Covenants applicable to project implementation:
Except as the Association shall otherwise agree, the Project Implementing Entity shall
not incur any debt unless a reasonable forecast of its revenues and expenditures shows
that the estimated net revenues for each fiscal year during the term of the debt to be
incurred shall be at least 1.2 time the estimated debt service requirements of the Project
Implementing Entity in such year on all its debt, including the debt to be incurred.
The Recipient shall take all the necessary measures, including reasonable annual
adjustments of water supply and sewerage tariffs and annual provision of subsidies to the
Project Implementing Entity, in order to maintain for each of the fiscal years of the
Project Implementing Entity after the fiscal year ending on December 31, 2011, a ratio of
total cash operating expenses to total cash operating revenues not higher than 0.90 and to
enable the Project Implementing Entity to collect effectively all operating revenues
related to its operations.
Upgrade/install automated accounting system with capacity to generate IFRs within 3
months of effectiveness
DVK will establish an internal audit unit within 6 months of effectiveness.
1
TAJIKISTAN
SECOND DUSHANBE WATER SUPPLY PROJECT
I. STRATEGIC CONTEXT
A. Country Context
1. Tajikistan is a land-locked country with mountains over 90 percent of its surface. Its
population of 7.3 million people is young and growing rapidly. A severe lack of employment
opportunities has led a large number of workers (up to 40 percent of the working population) to
seek better job prospects abroad—largely in Russia. The resulting dependence on remittances
increases the vulnerability of the Tajik economy. Tajikistan is also prone to natural disasters,
such as floods, mudflows, landslides, avalanches, earthquakes, droughts and epidemics. Heavy
rains in the spring of 2009 claimed lives and destroyed villages and arable land.
2. Immediately after independence, the country fell into a devastating civil war (1992–
1997). With the political stabilization that ensued and with the support of the international
community, economic growth has been robust, averaging 8.6 percent per year between 2000 and
2008. Tajikistan nevertheless remains the poorest country in the Europe and Central Asia (ECA)
region with a per capita gross national income (GNI) of US$560 and 41 percent of the population
below the poverty line. With stability, a more modern government based on democratic
principles has emerged, however, decision making remains centralized and political
accountability is limited.
3. Tajikistan shares a 1,400 km-long border with Afghanistan, and it is only separated from
Pakistan by the narrow Wakhan corridor. Tajikistan’s remoteness, unfavorable geopolitical
location, deteriorating Soviet-era transport networks, and weak governance and regulatory
frameworks pose significant barriers to international trade, connectivity and investment. In
2000–2008 economic growth was driven mainly by the restoration of fiscal discipline and
macroeconomic stability, which stimulated consumption, production and investment and was
facilitated by implementation of structural reforms to liberalize the economy. In the past decade,
positive impacts also resulted from a favorable external environment: world prices for cotton and
aluminium—Tajikistan’s two main export commodities—soared, while growth in Russia and
other partner countries boosted demand for Tajik labor. The resulting remittances fuelled a
consumption boom, which helped support buoyant growth in real gross domestic product (GDP)
during the period. With its dependence on commodity exports, such as aluminium, cotton and
labor, accounting for 51.8 percent of GDP in 2008 (measured through remittances), Tajikistan
was hit hard by the global economic crisis.
4. Despite progress in some areas, it is unlikely that Tajikistan will achieve its Millennium
Development Goals (MDG) by 2015. The indicators related to infant mortality (per 1,000 live
births), under-five mortality (per 1,000 live births), and maternal mortality (per 100,000 live
births) stand at 56, 68 and 97 compared to the 2015 MDG targets of 25, 30 and 30 respectively.
The incidence of tuberculosis and HIV/AIDS has been increasing, whereas the use of
contraception and knowledge of HIV/AIDS prevention remains limited. Social sector
expenditure remains lower than in other Commonwealth of Independent States (CIS) countries.
Despite efforts to improve its social sector, the quality of education and health services remains
2
below Soviet-era levels. A large proportion of the population still has only limited access to basic
services. The social safety-net system established to protect the vulnerable and unemployed is
rudimentary.
B. Sector and Institutional Context
5. Water supply service covers about 59 percent of the population.1 Coverage averages 93
percent in urban areas and is almost universal in the capital Dushanbe. Access to service in rural
areas, however, is inadequate and lags substantially at 47 percent. Water quality in most
communities does not meet national drinking standards, and service interruptions are frequent.
Furthermore, only 14 percent of the population has access to centralized sanitation services (44
percent in urban areas and 3 percent in rural areas). This impacts people’s health negatively and
adds a burden to daily household management, inevitably affecting women and children. Water
supply and sanitation (WSS) infrastructure, largely inherited from the Soviet era, is deteriorating
quickly and is plagued by poor operation and maintenance. In general, sector institutions and
providers have weak capacity. Since decentralization in 1997, institutional arrangements have
changed significantly. Tajikistan lacks a ministry responsible for WSS planning, policy
development and regulation. The central government has transferred virtually all of its
responsibilities for urban water delivery and sewerage services to the municipalities (Hukumats).
A central agency, Khojagii Manziliyu Kommunali (KMK), retains regulatory oversight and
provides operational and investment support to all municipal operators, except for the capital city
Dushanbe.
6. The Dushanbe WSS utility or Dushanbe Vodokanal (DVK) is set up as an independent
―State Unitary Enterprise,‖ operating de facto under close and undivided control by the
Municipality. Dushanbe features a fairly developed yet degraded WSS infrastructure. Decades of
underinvestment with limited technical and managerial capacity have caused water losses and
consumption to reach extremely high levels by international standards with demand approaching
1000 litre/capita/day (l/c/d). Most residents have a home or yard connection, but service is of
poor quality. Pressure is often insufficient, and service frequently discontinued in summer,
especially in the upper floors of apartment buildings. Inadequately treated ―brown‖ water, high
in suspended solids, is occasionally distributed after strong rains increase raw water turbidity in
the Varzob River (which provides 50 percent of DVK’s supplies). DVK’s customer service
performance is particularly weak: door-to-door controllers issue handwritten bills for cash
payment and achieve extremely low collection levels. The extensive sewerage network suffers
substantial degradation and saturation, resulting in chronic sewer overflows. A decrepit
secondary wastewater treatment plant reduces pollution marginally with serious environmental
impacts on the Varzob River.
7. To date, the World Bank, the European Bank for Reconstruction and Development
(EBRD) and the Swiss Cooperation are Tajikistan’s main partners for water supply
rehabilitation. The World Bank-financed improvements to urban services have mainly focused
on water supply through two ongoing operations, the Dushanbe Water Supply Project (DWSP)
and the Municipal Infrastructure Development Project (MIDP), targeting eight provincial towns.
1 MDG target for 2015 is 79 percent
3
8. DWSP implementation, launched in 2002 and due to close in June 2011, has had major
delays linked to DVK capacity and governance weaknesses, as well as the termination of the
management contract operator responsible for project implementation and utility operations
improvement. More recently import restrictions on equipment and materials shipped via
Uzbekistan have also delayed DWSP completion. Implementation challenges aside, it is
generally accepted that DWSP will have contributed2 to tangible improvements in the reliability,
safety and quality of Dushanbe’s water supply. Almost 40 km of pipe network were replaced,
pumping facilities for groundwater extraction upgraded, energy-efficient equipment installed,
filter and chlorination systems partially renovated, and production and consumption meters
purchased. DVK’s technical and managerial capacity as modern utility, however, has only
improved marginally.
9. In Dushanbe, the need for vast infrastructure upgrades remains unattended. A
comprehensive 2010 feasibility study of WSS rehabilitation, renewal and expansion
requirements3 assesses the 2011-2035 investment needs at about US$400 million, including the
development of new remote water sources and the extensive upgrading of sewage collection and
treatment systems. Over the period 2010-2017, urgent unfunded needs have been assessed to
exceed $40 million. In this seven-year horizon, targeted rehabilitation is needed to strengthen
water supply reliability and quality, including the critical renewal of pumping and storage
facilities, as well as filtration and chlorination capacity. In a medium-term strategic perspective,
multi-year system-wide demand management investments are needed to reduce losses and
wasteful water uses, improve operational cost efficiency, and foster DVK's long-term
sustainability.
10. On the institutional side, DVK continues to feature weak technical and managerial
capacity, limited focus on customer service and cost recovery, and hands-on involvement by the
Municipality in utility decision making. Stronger management capacity, performance incentives
and institutional governance are needed to bring about change.
C. Higher Level Objectives to which the Project Contributes
11. For the period FY10-13, water, including the improved provision of WSS services, is a
priority in the Country Partnership Strategy (CPS) between the Government of the Republic of
Tajikistan (GORT) and the Bank, together with improvements in public service governance.
12. Dushanbe continues to feature one of the worst water supply services among CIS
capitals, constraining the fulfilment of the city’s economic potential. The project will afford
critical improvements in water and service quality, as well as in revenue collection and financial
sustainability. These will, in turn, improve health outcomes and quality of life for Dushanbe's
population, while facilitating economic activity and freeing municipal resources for other
productive investments. Importantly in the medium term, the project is expected to promote
greater accountability in water usage and utility management, setting DVK on a path of more
sustainable and efficient service and resource management. Given its limited funding against
vast program needs, the project is also likely to leverage fruitful collaboration with other donors.
2 Along with other investments by the Islamic Development Bank
3 GWCC and TBW Tajikistan, 2010
4
II. PROJECT DEVELOPMENT OBJECTIVES
A. Project Development Objectives
13. The proposed project development objective (PDO) is to improve water utility
performance and water supply services in selected areas of Dushanbe.
14. The PDO is the result of project scope maturation with DVK and the Municipality. It
reconciles the city’s pressing dual imperatives for safe and satisfactory public service and for
improved financial performance. Considering the scale of rehabilitation and upgrade needs and
the limited available funding, the targeted improvements cannot be achieved system wide but
rather in selected DVK service areas. The objective is to be attained through (i) water treatment
and distribution infrastructure upgrades to achieve water quality and service improvements
noticeable by customers, (ii) metering programs and improved billing and collection systems to
quickly enhance revenue generation while improving customer service, and (iii) technical
assistance and capacity-building activities to strengthen DVK’s management and operational
performance. Achievement of the objective will be measured through improvements in water
quality for selected areas of Dushanbe, in service satisfaction and in revenue collection and
financial viability of DVK.
Project Beneficiaries
15. The project beneficiaries are the people of Dushanbe connected to the water supply
network and receiving DVK services. Most of Dushanbe’s 700,000 inhabitants, regardless of
their income level, face hardship caused by inadequate water supply services. Given the very
high rate of connection to the water supply network, tangible improvements in the quality,
delivery and efficiency of potable water services are expected to benefit the great majority of the
population, including its poorer segments. The social analysis and customer survey done during
project preparation and through implementation will be an important means to inform and
involve beneficiary groups and to address their needs.
16. The intermediate project beneficiary is the Dushanbe Vodokanal (DVK). The provision
of targeted technical assistance throughout project implementation aims to improve management,
operational and technical knowledge within the utility. Furthermore, project activities and
investments will help set DVK on a path of improved compliance, customer service and financial
viability.
17. Effective metering and billing practices are expected to reduce water demands and bring
associated economic and environmental benefits. Improvements in drinking water quality and
water supply system operation are expected to bring health benefits and respond to a priority
expressed clearly by the population.
PDO-level Results Indicators
18. The Project Development Objective will be measured by the following main indicators:
5
Indicator one: Water quality in the network. This indicator is measured through the most
relevant three parameters for the Dushanbe water supply systems: turbidity in the network,
concentration of residual chlorine in the network and bacteriological water quality.
Indicator two: Customer satisfaction with water supply service. Currently DVK has no
technical means to describe city service levels in detail (hourly duration of regular supply,
average number of ad hoc service interruptions and network water quality on the consumer
side). Indicators will be measured through customer satisfaction surveys (baseline, first
follow-up survey at midterm and yearly surveys to follow), which should target about 10
percent of system customers (about 1,600 households). The survey will measure main
indicators: number of people satisfied with water quality and number of people receiving
continuous water supply (24-hour service).
Indicator three: Improvement of DVK's financial performance. This indicator will be
measured through the following parameters: financial operating ratio,4 increase in the
number of registered customers in DVK's billing database, increased billing and collection
rates as reflected in improved accounts receivable collections (as percent of revenue)
19. These indicators will provide information on DVK's service quality and performance
(water safety and quality, customer satisfaction, and improved revenue and cost recovery) in
Dushanbe. Other indicators to be monitored during the project are intermediate results indicators
specific to various project components. The measurement will be done in accordance with the
project implementation schedule.
III. PROJECT DESCRIPTION
A. Project Components
20. The project includes four components:
Component 1. Metering and Demand Management (US$ 7.62 million of which IDA US$
5.97 million): The component will finance consumption metering and bulk metering of
water, for increased revenue, reduced wastage, and better tracking of losses, including: (i)
supply and installation of 76,500 residential meters (i.e. approximately 46% of DVK users)
and installation of 1,500 apartment building master meters in selected areas of the city; (ii)
rehabilitation of 1,500 apartment building service connections; (iii) supply and installation
of bulk flow meters at water production facilities; (iv) supply and installation of a Network
Information System (NIS); (v) communication strategy and public awareness campaigns to
promote metering and demand management; and (vi) installation of SCADA system.
Component 2. Water Quality Improvement (US$ 6.27 million of which IDA US$ 4.91
million): The component will support system upgrades for improved quality of water,
including: (i) partial renewal of filtration capacity at Samotechnaya WTP (SAM); (ii)
4 The working ratio, as defined in the financing agreement (ratio of cash operating expenditures/cash operating
revenues) is to be less than 0.9.
6
network cleaning; (iii) installation of in-network re-chlorination systems; (iv) equipment for
water quality monitoring; (v) reconstruction of pumping station and tanks at the Napornaya
WTP (NAP); and (vi) procurement of maintenance equipment.
Component 3. Institutional Strengthening and Capacity Building (US$ 3.34 million of
which IDA US$3.34 million): The component will finance activities to build institutional
capacity and improve utility performance of DVK, which includes (i) Carrying out an
assessment of DVK’s organizational and capacity-building needs; (ii) Installation of modern
accounting, billing and water revenue collection systems; (iii) Provision of technical
assistance to the management of DVK to improve its financial performance; (iv) Provision
of technical assistance, and carrying out of studies to improve the water supply operations of
DVK, including studies for hydraulic modelling, and for design of pressure zones and
SCADA system; and (v) Implementation of training programs for DVK staff.
Component 4. Implementation Support (US$ 1.78 million of which IDA US$ 1.78
million): The component will provide project Implementation support including (i) design
and supervision of works; (ii) project implementation unit operating costs, and (iii) annual
project audits.
21. Operational Performance Improvement Action Plan. The above project investments may
not suffice to achieve the sought-after transformation of DVK into a well-performing service
provider unless the Municipality and DVK are also committed to an Operational Performance
Improvement Action Plan (OPIAP). DVK and the Municipality have agreed to follow such an
OPIAP and will submit it to Bank approval as a condition to negotiations. Indicative OPIAP
tasks are outlined in Annex 2, Part B. The OPIAP will be further detailed and updated at project
inception with the support of the Project Management Consultant (PMC).
B. Project Financing
22. The project is a stand-alone US$19 million investment operation to be funded by a
US$16 million IDA 15 grant and US$3 million co-financing from the Municipality. The Ministry
of Finance would transfer the IDA $16 million to DVK as a grant for the exclusive benefit of the
project with no requirement for repayment of principal or interest. In exchange the Ministry of
Finance (MOF) expects the Municipality to provide counterpart co-financing of US$3 million.
GORT thus seeks to help DVK improve its dire financial situation, while inducing stronger
municipal oversight and accountability for DVK performance. MOF and the Municipality agreed
that such a short term loan from the Municipality to the DVK would carry no interest.
23. The Second Dushanbe Water Supply Project (DWSP2) investment scope was selectively
excerpted from a proposed DVK Priority Investment Program (PIP) estimated at US$47 million
(before taxes)1 and fully described in section VI-D and Annex 2 of this PAD. Additional funding
remains to be secured by DVK to finance other PIP needs. European donors, including EBRD,
the European Investment Bank (EIB) and the Investment Facility for Central Asia (IFCA) have
expressed interest to that effect. In November 2010, a joint World Bank, EBRD and EIB
preparation mission took place; however, as of March 2011, no European financing commitment
had been formalized.
7
Lending Instrument
24. The lending instrument is a Specific Investment Loan (SIL) in the form of a US$16
million IDA grant to GORT.
25. MOF has agreed to pass the grant through to DVK on the same grant terms (unlike the
previous project, no interest or principal repayments are due to MOF from DVK), whereas co-
financing funds will be made available from the Municipality to DVK on soft terms. A
Subsidiary Agreement acceptable to the Bank will be entered into between MOF, DVK and the
Municipality to reflect these arrangements.
26. The Municipality will provide the US$3 million co-financing to DVK on soft terms with
a commitment fee and repayment of principal. As a performance incentive, the commitment fee
may be softened if DVK satisfies certain financial performance milestones agreed with the
Municipality. Improvements sought may include increased billing and collection; registering and
billing all DVK customers by the end of the project's first year; overhaul and automation of the
billing and accounting departments; and streamlining the role of collectors no later than the
project's second year.
Project Cost and Financing
Table 2 Investment by Component 2011-2016 (US$ million)
Note: 7 percent contingency has been included in each component
Component
Total Cost
US$m
IDA US$ % IDA
Component 1: Metering and Demand Management 7.62 5.97 78
i) Consumption metering : Installation of 76,500 residential meters and 1,500 master meters;
ii) Rehabilitation of apartment building connections.
iii) Bulk metering
iv) Supply and installation of a Network Information System (NIS)
v) Communications strategy and public awareness campaign.
vi) Installation of SCADA
Component 2: Water quality improvement 6.27 4.91 78
i) SAM filters reconstruction
ii) Network cleaning
iii) In-network rechlorination systems
iv) Water quality monitoring units;
v) Reconstruction of pumping station and tanks at NAP
vi) Procurement of maintenance equipment (hydraulic excavator)
Component 3: Institutional strengthening and capacity building 3.34 3.34 100
i) Institutional Assessment
ii) Modernization of accounting and, billing and collection systems
iii) Technical Assistance for corporate development and financial performance
iv) Technical Assistance and studies for operational improvements
v) Training programs
Component 4: Implementation Support 1.78 1.78 100
i) Design and supervision of works
ii) Project management operating costs
iii) Annual audits
Totals (may not sum up due to rounding) 19.00 16.00 84
8
C. Lessons Learned and Reflected in the Project Design
27. There are several lessons to be learned from the first IDA financed project:
Governance Assessment: A Governance Assessment carried out by the World Bank as part
of project preparation confirms a critical need to improve DVK’s institutional capacity and
management quality if project outcomes are to be achieved in a timely manner in the short
term. More importantly DVK's sustainability and its future operations will be jeopardized if
steps are not taken to improve its overall governance, particularly in instituting improved
managerial accountability, operational transparency, staff incentives, and internal and
external communication. The Governance Assessment revealed the following issues
plaguing DVK performance (refer to Annex 8 for details): i) poor management capacity; ii)
lack of motivating performance incentives for staff; iii) weak accountability; iv) lack of
access to information; v) nonpayment or underpayment of user fees; and vi) lack of a
monitoring and evaluation (M&E) system. Within this context and given the limited project
funding, it is pertinent that the Municipality and DVK commit to improving DVK's
governance and overall performance in parallel with project implementation to ensure DVK
sustainability in the future
Alternative Approaches to Promote DVK and Project Performance. DWSP2 success is
dependent on better DVK performance in the areas of project implementation, utility
management and institutional governance. Based on client consultations, DWSP supervisory
experience, and the findings of a governance factors5 analysis (see Annex 8), project design
opts for different implementation arrangements than in DWSP. With the express support of
the Municipality, all project implementation oversight tasks and technical assistance will be
entrusted to a single Project Management Consultant (PMC) firm with relevant international
experience. The PMC will support and report to DVK. By comparison, since termination of
its service contract private operator, DWSP has been implemented by DVK with the support
of a Project Coordination Unit (PCU) of locally hired individual consultants reporting to the
Municipality. Utility operations will remain DVK's full responsibility with the support of
limited advisory resident technical assistance provided by the PMC and without the
introduction of a private public partnership with a management contract operator. DVK’s
commitments to improve utility operations will be embedded in the OPIAP. Finally, the
project deems it is premature to seek fundamental reforms of DVK status and by laws as a
means to reduce municipal interference with utility decision making. Rather, the project
recognizes the Municipality’s control of DVK and seeks to promote transparency, capacity
building and performance incentives for DVK managers and for DVK as a service provider
to render less frequent municipal involvement.
Relevant Level of Implementation Support is Required. The project combines infrastructure
investments with delicate institutional strengthening and capacity-building activities in a
challenging low capacity and weak governance environment. Supervision by the Bank will
require a relevant mix of technical expertise, spanning water supply engineering and utility
management and operations, as well as fiduciary expertise, with adequate frequency of
5 Supported by Governance Progress Facility in place for Tajikistan.
9
missions. During the first two years of the project, supervision missions will be needed at
least three times a year and subsequently twice a year.
IV. IMPLEMENTATION
A. Institutional and Implementation Arrangements
28. The recipient of the grant is the Ministry of Finance (MOF). The Dushanbe Vodokanal,
operating under the control of the Municipality of Dushanbe, is the implementing agency for the
project and the manager of project assets. The Municipality of Dushanbe will provide co-
financing for the project.
29. An internationally recruited Project Management Consultant (PMC) firm will provide
project management tasks, as well as technical assistance and capacity building for DVK. The
PMC will be responsible for managing and overseeing all project implementation tasks,
including (i) oversight of project procurement activities; (ii) oversight of project financial
management activities; (iii) oversight of detailed design preparation; (iv) works supervision; (v)
reporting; and (vi) training program coordination. The PMC will also oversee the delivery of the
institutional assessment. Finally, the PMC will provide a team of resident and short-term senior
experts and advisors qualified to provide utility management and operations technical assistance
to DVK’s director and managers. DVK will be responsible for collecting all data required for
project M&E and reporting.
30. The overall project financial management function, including budgeting, accounting,
reporting, internal control, funds flow and audit, will be the responsibility of DVK with support
of the PMC. This arrangement differs from DWSP and its additional financing in which the
PCU, established by DVK and the Municipality, has been responsible for fiduciary
responsibilities and implementation of the project. There will be limited ring fencing of the
fiduciary functions, including the use of dedicated Designated Account, maintenance of project-
specific financial management system and independent audit by auditors satisfactory to IDA.
B. Results Monitoring and Evaluation
31. The Results Framework and indicators for DWSP2 have been designed to be realistic and
measurable. DVK will retain the responsibility of data collection for the monitoring and
evaluation activities of DWSP2. The baseline data are available as collected during the DWSP
implementation and by the feasibility study prepared for DWSP2. Monitoring and evaluation of
project outcomes and results during its implementation will follow standard World Bank
practice. DVK will collect the data, and the PMC will compile the updated data in regular project
reports (quarterly and yearly) and in conjunction with World Bank missions. Indicators, which
require additional data or surveys (for example, the social and customer satisfaction survey) for
their measurement, will be collected at least three times during the course of the project: a
baseline survey currently under implementation for DWSP, a mid-term survey and an end-of-
project survey. The reports shall be published in a form accessible to DVK management,
Municipality of Dushanbe and other interested stakeholders. Core indicator number 4 has been
included as the number of household connections affected by the project rehabilitation works
(and metering) will be measurable. Given the already very high rate of connectivity to the main
10
network in Dushanbe, Core indicator number 1, as defined by the World Health Organization
(WHO) parameters, is not expected to provide relevant progress information.
32. DVK will be responsible for data collection for measuring the indicators: engineers will
be responsible for assessment of technical indicators; DVK financial staff will be responsible for
assessment of the state of DVK's financial viability and reporting on the financial indicators in
the progress reports. Financial data and assessments, including covenants, will be verified in the
annual audits. The overall responsibility for collection of data and issuance of the M&E reports
will be with an M&E specialist hired under the project. The assessment methodology has been
developed under the DWSP by a dedicated M&E consultant.
33. The Mid-term Review (MTR) will be conducted after completion of the project's second
year and will be focused on the review of results achieved under the project, as well as validation
of planned activities for the each project component.
C. Sustainability
34. DWSP2 will build on the achievements and experience of predecessor DWSP to improve
the sustainability of project investments and of DVK operations. The following include several
dimensions of sustainability that are taken into account:
Sustainability of project investments: Investments were prioritized to respect the client’s
paramount objective of increasing operational revenue, thus benefitting from a high level of
client ownership. The quality of design and works will be improved by reliance on an
internationally recruited PMC resident within DVK for the entire project duration. The
operation and maintenance of the infrastructure, equipment and systems provided under the
project will be relatively simple and manageable by duly-trained DVK personnel. The
project will further promote adequate private sector involvement in tasks with more
substantial ―modernization‖ contents, such as the turnkey delivery and initial operation of
rapid sand filters at SAM and the outsourcing of telephony-based billing, collection and
payments systems.
Institutional sustainability and performance of DVK: Despite some inefficiencies associated
with the institutional capture of DVK by the Municipality exemplified by hands-on
involvement in utility management and investment decision making, the project will not
pursue institutional reform of DVK as a condition for performance improvement. By
adopting simple and modest performance objectives focused on delivering potable water, on
improving billing and collection, and on metering consumptions (objectives that are
understood by DVK and the Municipality and are within their capabilities with outcomes
that customers will feel immediately), the project opts to empower gradual self-
improvement of utility performance. By providing advisory PMC technical assistance to
DVK’s management and operations, the project relies on client leadership to effect change
in DVK through project-funded investments. A DVK-supplied OPIAP embodies DVK’s and
the Municipality’s commitment to such discrete performance improvement steps. The
project further assumes that increased managerial capacity, coupled with new performance
incentives and relevant communication of performance goals, will not only result in service
quality and performance gains but will also reduce the need for municipal interference. In
11
the process, the frequent advisory support of Bank supervision missions will play an
important role. Beyond DWSP2’s strategic seeding, continued investment in DVK
infrastructure, systems and capacity modernization will be essential to sustain and expand
such gains. As a corollary activity to the project, the Bank will also seek to initiate and
mobilize funding for a South-South knowledge transfer partnership between DVK and the St
Petersburg Vodokanal.
Financial sustainability of DVK. In addition to the above, the new project should afford a
net gain in financial sustainability because its investments, although largely revenue
generating, will be financed by a grant. The mobilization of substantial unbilled and
uncollected revenues is expected to provide quick results for DVK, deferring the need for
substantial tariff adjustments. On a more fundamental level, the project will introduce
systematic metering in parts of Dushanbe, initiating the transition to accountable water
service—essential for the long-term financial sustainability of any utility.
D. Conditions for Effectiveness
35. The following are conditions for effectiveness:
The Subsidiary Agreement has been executed on behalf of the Recipient, the Project
Implementing Entity and the Municipality of Dushanbe.
The Recipient has adopted the Project Operational Manual satisfactory to the Association.
V. KEY RISKS AND MITIGATION MEASURES
36. The overall project risks are rated medium, impact-driven (M-I) and considered
manageable through planned mitigation measures. Potential risks are summarized in the
Operational Risk Assessment Framework (see Annex IV).
37. Implementation risks, such as associated with low DVK technical, management and
fiduciary capacity, are mitigated by relying on a private PMC to oversee project implementation
tasks, including procurement, disbursements and reporting, managing the design and works
supervision tasks, and providing technical assistance to DVK operations. Committing DVK and
the Municipality to the OPIAP will further mitigate utility management weaknesses and
municipal interference with the project and utility decision making. Component 3 of the project
focuses on institutional assessment and strengthening of DVK, as well as technical assistance
and training to build DVK's technical, financial and managerial capacity. A governance
assessment study financed through the Governance Partnership Facility (GPF) of the World
Bank also recommended measures to achieve better DVK corporate governance and lessen direct
Municipality influence in utility operations and investments to ensure results.
38. Dushanbe water users express high demand for improved quality of water supply service,
as well as reduced tolerance for service disruptions. In general users accept well the minor tariff
adjustments applied annually by DVK. More substantial increases, such as in 2008, do not cause
open discontent if preceded by noticeable service improvements. Acceptance of meter-based
billing and of new tariffs will be assessed by the GORT through ad hoc user surveys and
supported by relevant wide public information campaigns and focused interventions to ensure
effective asset rehabilitation with limited disruptions to service.
12
39. Project objective risk to DVK's financial sustainability lies in any backtracking on
commitments or delays in improving the billing and collection of the vodokanal, as the
installation of the payment system is a dated covenant. This would also impact the project’s
objective to reduce high wastage in the system. Relying on tariff increases will not ensure
sustainability without improvements in services and equity in payments. This risk is mitigated by
a high awareness among officials and their commitment to improved billing and collections.
Additionally a sustained public information and outreach program must accompany the
investments to highlight the water supply services improvements, spread awareness of bill
payment to maintain the system, and advise on avoiding water wastage, along with other public
health messages. Another project risk is the increased indebtedness of DVK that might make it
difficult for the company to reach the financial indicators. A covenant in the legal agreement and
agreement of the Government to pass the grant to DVK mitigates this risk.
40. There is also a risk that the project may negatively affect certain vulnerable consumer
groups through the higher tariffs and more stringent usage monitoring and collection system. The
social analysis and consumer satisfaction survey is designed to identify such potential groups and
mitigate the negative impacts. This risk is not expected to be high as all households in Dushanbe
are already included in the water authority's current billing network.
VI. APPRAISAL SUMMARY
A. Economic and Financial Analysis
41. Financial Analysis – Current Situation. DVK’s financial situation is weak. On the
revenue side, DVK bills its customers on a per capita norm consumption basis, and households
increasingly underreport the number of users. DVK currently registers (and bills) about 48
percent of Dushanbe citizens receiving its service, which is neither sustainable nor equitable.
Accounts receivable are about 25 percent of annual revenues and can be improved. Despite the
reported decline in consumers, DVK increased its revenue through substantial tariff increases
when tariffs doubled in 2008 and increased by about 15 percent in 2009. Budgetary and
commercial customers, however, pay three and seven times more than households respectively.
On the expenditure side, DVK operates at very low production cost levels, and it is not likely
that such costs can be reduced further. Production staff salaries are very low at 15 percent of total
cost of goods sold, while electricity costs (30 percent) are high due to unnecessarily high
volumes of produced and wasted water (about 75 percent). Other nonproduction costs (including
administrative and selling costs) are very high, and in 2009 reached 44 percent of DVK’s total
operating costs, resulting in negative income. The current cash operating ratio (an indicator) is
1.07, meaning expenditures exceed revenues (before payment of interest). This situation can be
corrected once the billing and collection system is operational. Technical assistance provided in
the project will recommend adjustments to align costs and focus resources on the greatest needs.
42. Debt. The Government’s decision to pass on the IDA grant terms to DVK (without
requiring DVK to repay principal or interest) is absolutely necessary to put DVK on a
sustainable path to financial recovery. Currently DVK is responsible for repaying MOF the
principal of the credit and the grant of DWSP. MOF also charges interest, which will soon reach
5 percent. The debt repayment (interest and principal) is estimated to reach 2.6 million TJS in
13
2011 on the existing DWSP credits and grant. DVK’s debt situation is critical and does not meet
tests such as the debt/asset ratio at 1.04 in 2009, which indicates its debt is just about equal to its
assets. A recommended healthy ratio is not more than 50 percent. Additionally in the long term,
DVK is exposed to a foreign exchange risk with the debt denominated in US$. Any additional
debt to DVK should be evaluated carefully to ensure the Bank’s covenant on debt/service ratio is
met and to ensure the long-term viability of DVK.
43. Projections and NPV calculations. Behind the financial and economic analysis, the main
assumption for project success in achieving financial sustainability is the improvement in
recording, billing and collection from the vast majority of customers. It is assumed that this will
be accomplished in the project's first year given the high level of awareness among officials at
both local and central government levels. Advanced steps are being taken to achieve these
actions. Projections of DVK income, expenditure and cost recovery tariffs are based on
estimated water demand increases, reductions in water waste, and improved billing and
collections. Major cost items added to the projections include depreciation and maintenance
costs of the new investments. Based on the assumption that DVK, with the support of the
Municipality, undertakes the actions prescribed under the project (improvements in billing and
collection, including alignment in the internal organization, debt relief and tariff increases) and
the very soft IDA financing terms, the financial net present value of the investments are high and
reach TJS 183 million and the financial rate of return approaches 30 percent.
44. Economic Analysis. Without the project, the main economic costs will include continuous
waste of water and electricity at high levels of water production. Lack of maintenance will
accelerate the deterioration of the water supply facilities in the city and erode benefits currently
accruing from the present system, while maintaining a weak billing and collection culture. In
broader economic terms, not undertaking the project will have substantial economic costs on
DVK as a provider of basic services to the capital of the country and on Dushanbe’s economy
and future development and growth prospects. With the project, additional capital investment
costs and larger operations and maintenance costs will be required. On the benefits side, the
project will allow for (a) reduction in electricity costs; (b) reduction of losses of economically
valuable water; and (c) increase of water supply to additional Dushanbe residents. Using these
assumptions and a discount rate of 10 percent, the project is economically justified with an
internal rate of return approaching 100 percent. Increases in costs and reductions in benefits of
20 percent each will keep the economic rate of return high at an estimated 75 percent. The
project includes other benefits that are difficult to quantify. There are costs to securing a clean
and reliable water supply, including fetching, boiling or other treatment. Water borne diseases
continue to be reported in Dushanbe due to inadequately treated water. Information on these
external economic costs is not available in a manner sufficient to attribute to the costs of
inadequate water supply (e.g., handwashing and other hygiene measures contribute directly to
reductions in water borne diseases but need the supply of clean water). Nevertheless these costs
are real to the beneficiaries and to the economy and providing clean water can reduce them.
45. Affordability. At the current tariff rates and using 2009 Tajik monthly poverty line and
extreme poverty line (TJS 162 and 104 respectively), household expenditures on water are
affordable (for a family of four) at 0.87 percent and 1.36 percent of these poverty rates
respectively. The average full coverage tariff, however, will require tariff increases that would
14
make household expenditure on water difficult to afford for very poor one-income families at 2.9
and 4.5 percent of the mentioned poverty lines. Nevertheless as mentioned above, the households
pay less than the average tariff, while budgetary and commercial units pay three to seven times
higher tariffs. In general, projected average cost recovery tariff is about three times current
tariffs. The Municipality and GORT’s Anti-Monopoly Committee will review annually DVK's
financial situation based on actual data of revenues, collections and costs to determine the
appropriate tariffs, subsidy levels and other actions required to ensure its sustainability. Tariff
adjustment proposals may also benefit from an updated social assessment and periodic customer
surveys, as well as from expert advisory technical assistance by the PMC.
46. Fiscal Impact. As a grant with no repayment requirements, the IDA grant repayment will
not have a fiscal or affordability impact on the national or municipal government budgets. The
Municipality of Dushanbe will be required to contribute US$3 million equivalent over the five-
year life of the project. Based on figures provided by the Municipality, the municipal budget is
growing by about 30 percent over 2010-2011. The largest part of this growth has been in capital
expenditures, while growth in current expenditure remained at a modest 10 percent. The total
contribution required from the Municipality is about 2 percent of its total budget and 4 percent of
its capital expenditure budget, and will not represent a significant burden on its financial
capacity.
B. Technical
47. The project can only cover a limited portion of DVK’s Priority Investment Program
(PIP). Targeting investments for the available US$16 million IDA grant amid overall PIP needs
estimated at US$47 million is a delicate process. The proposed scope is the result of extensive
optimization consultations with DVK and the Municipality, accounting for the uncertainty
affecting the potential availability of other sources of parallel financing, such as that envisioned
with European donors.
48. IDA investments will maximize meter installation for revenue generation and demand
management, which is expected to allow the metering of about 40 percent of DVK’s customer
base. Critical rehabilitation investments to improve water quality are retained in the project to the
extent that they are necessary to avoid blockage of meters by turbid water. Visible water quality
improvements will also create customer goodwill to accept new metering, billing and collection
practices. The project scope, will also fit investments for optimization of network operation
(pressure zoning, energy efficiency, SCADA systems), which would accelerate improvement of
service pressure in high apartment building during summer months.
49. By renewing filters at SAM, the project will complete the restoration of DVK’s filtration
capacity initiated by DWSP with the installation of Napornaya Water Treatment Plant (NAP) filters
and will ensure the lasting distribution of filtered, non turbid water in Dushanbe. The project opts
to renew only 50 percent of the SAM filtering capacity with the assumption that all water savings
gains induced by metering and demand management programs across DVK’s service areas will
translate in reduced demand for SAM production.
50. Project component implementation will apply all modern materials and technology.
Accurate designs and selection of appropriate solutions will precede physical investment.
15
Modern and adequate quality materials and equipment will be purchased for the rehabilitation
works and installations. Capacity building and technical assistance will be sought from
competent experts with extensive international experience in the field of utility management and
service provision.
C. Financial Management
51. The financial management arrangements established for the ongoing DWSP are
satisfactory and can be replicated for the proposed DWSP2. Under the ongoing DWSP (which
will close in June 2011), the PCU is responsible for the financial management function. DVK is
involved in the payments process through approval of invoices and works completion statements,
as well as payment requests prepared by the PCU. Both DVK and PCU have installed automated
accounting system, using the 1C accounting software. The accounting system has limited utility
as the installation was only about 60 percent complete. At DVK the accounting system is used
mainly for cash, bank and payroll transactions. All reports by DVK and PCU are prepared
manually.
52. Based on the assessment of DVK’s financial management capacity, it was determined
that the DWSP financial management arrangement will change, and DVK would be able to
maintain the project accounting system for the proposed project. The chief accountant of DVK
would be responsible for the project financial management system but would require the
assistance of a financial management consultant to be provided by the PMC to establish an
effective project accounting system and to maintain the system during project implementation.
To meet the minimum financial management requirements of the World Bank, DVK would need
to implement the following actions: (i) install a new accounting system, preferably the latest
version of 1C software (8.0); (ii) fully document the financial management procedures
(budgeting, accounting, reporting, internal control, audit) in a manual of financial procedures;
and (iii) receive the support of a financial management consultant to assist the chief accountant
in handling day to day project financial management and disbursement functions.
53. The project operating manual (POM) has to be updated to reflect activities under the
proposed project and the changes to the financial management responsibilities. DVK will submit
unaudited interim financial reports on a quarterly basis, and the project and entity financial
statements will be subject to audit by independent auditors and under Terms of Reference (TOR)
satisfactory to IDA. The project will also be subject to risk-based financial management reviews,
initially after every six months as part of the project implementation support. The entity financial
statements will be required to monitor financial performance and as part of DVK's institutional
strengthening, including the modernization of accounting and of billing and collection systems.
D. Procurement
54. The PMC shall absorb functions fulfilled by the currently existing PCU established for
implementation of the ongoing DWSP, including responsibility for carrying out project
procurement. The PMC will work in close collaboration with DVK staff to ensure knowledge
transfer to DVK procurement staff through on-the-job training and to build procurement capacity
within the water supply service. A procurement capacity assessment was carried out at DVK,
revealing little existing procurement capacity and no established internal procurement
16
procedures. Procurement delays due to these factors were identified as a main procurement risk.
Experience with DWSP indicates that procurement in the country does not attract adequate
competition. To mitigate these risks, experienced procurement consultants of PMC should be
engaged to support the DVK procurement team. The Bank team will closely supervise and
monitor the procurement processes and provide support to facilitate capacity development in
procurement. Procurement packages will be developed to ensure competition in line with the
market of procured items. More details on procurement arrangements are provided in Annex 3.
55. Guidelines on Preventing and Combating Fraud and Corruption in Projects Financed by
IBRD Loans and IDA Credits and Grants, dated October 15, 2006 and updated in January 2011,
shall apply to this project.
E. Social (including safeguards)
56. The project's social development objectives focus on (a) ensuring that the water supply
service needs and constraints of all categories of customers are addressed; (b) specifically
ensuring that the needs and constraints of the economically and socially vulnerable sub-groups
are recognized and addressed; and (c) putting in place mechanisms for customer information,
feedback and involvement in relevant aspects of the service provided.
57. To facilitate achievement of these objectives, the project focuses on both the demand and
supply side of water provision. The main tool used is a Customer Satisfaction and Social
Analysis Study, which will be completed at the beginning of the project and will be repeated
annually during implementation. The main purpose of this study is to develop a baseline on
customer satisfaction, willingness and capacity to pay, and perceived needs and gaps in current
service provision. It will also feed into completing the evaluation of DWSP. The study findings
will specifically provide guidance on the following aspects of project design: (a) identify specific
areas and customers who may be more disadvantaged and underserviced; (b) specify priorities of
customers that link to their willingness and ability to pay; (c) inform indicators for project
monitoring on beneficiary impact; (d) provide information to better target the awareness
campaign on reducing water usage; and (e) highlight preferences linked to improving the image
of the service provider. In addition, the study will inform activities in the sector, such as tariff
structure and payment procedures, which will impact project outcomes.
58. The study uses a mix of quantitative and qualitative data, supplementing interviews with
some focus group discussions across the different user groups. The methodology ensures that a
comprehensive set of criteria are used to cover (a) users of different income levels; (b) the four
different water sources; (c) categories of housing (house versus apartment block); (d) floor of
residence (top versus ground); (e) different geographical regions of the city; (f) views of
nonhouseholds, particularly businesses, on water services and tariffs; and (g) peak and low water
seasons.
59. The study will serve as a baseline to measure project impact, as well as to provide a
framework within which ongoing project impacts on customers are monitored. It is expected that
follow up data will be collected once or twice a year during each year of project implementation,
so the impact of project activities initiated in that year and the resulting changes in customer
satisfaction can be captured. The follow up studies are expected to be conducted in a shorter
17
period: they will focus only on specific issues and will target the users affected by specific
activities implemented in that period.
60. The final survey at the end of project will be more comprehensive to capture
improvements in customer satisfaction and overall project impacts, both those directly linked to
project-financed activities and those with indirect impacts resulting from the general
improvement of the utility and sector.
61. Involuntary Resettlement OP 4.12 is triggered. Since these detailed impacts will only be
known once project implementation commences and technical designs are finalized, the
possibility of land acquisition and restrictions in access cannot be ruled out at this stage. The
project has developed and disclosed a Resettlement Policy Framework (RPF), which will inform
all activities involving land acquisition, restriction of access to land or services and loss of assets.
The completed prefeasibility studies indicate that the project will largely be limited to
rehabilitation of existing structures. The planned filters at SAM and the water pumping station
and tanks at NAP will be built on the premises of DVK where there are no activities or
residences. However, as project design is further detailed, there is a possibility that some
construction may exceed available land and may have to take place on sites not yet identified.
Further, some land within residence compounds may have to be temporarily used or accessed for
works, such as excavation of trenches. In addition if sanitary protection areas need to be
established to avoid water source contamination at the water treatment plants, the identified areas
will need to be cleared of settlements (if any) and existing structures. Further, certain polluting
and quality threatening activities will be restricted (e.g., livestock access) in the designated
sanitary protection area. This activity will also include some mitigation measures, such as
installation of fences, septic tanks and drains.
62. The RPF identifies the possible impacts from project activities, describes the range of
potential impacts (temporary and permanent) to land use, access and structures, and specifies the
compensation rates and procedures for the same. Where there is a gap between national and
World Bank procedures, the latter will prevail for all activities financed under this project. The
RPF will serve as a screening device to ascertain if there will be any impacts resulting from
project activities. If any impacts are identified, the Borrower will develop relevant Resettlement
Action Plans as described in the RPF, which will detail the specific impact and compensation
and present it to the World Bank for approval. No civil works will commence until the World
Bank approves such plans. The RPF will be implemented by DVK with the support of the PMC
and with assistance from the Municipality who has authority on land acquisition issues in
Dushanbe.
F. Environment (including safeguards)
63. The project is qualified as category B and would support rehabilitation works equivalent
in nature to those of the predecessor DWSP on water supply systems (rehabilitation of pumping
station facilities and water reservoirs; renovation of the chlorination facilities and of rapid sand
filters; replacement of distribution network; and rehabilitation, replacement or installation of
production water meters), which are not expected to generate significant environmental and
social impacts. Potential adverse impacts relate to (i) inappropriate disposal of water treatment
sludge; (ii) safety hazards from the chlorination process; (iii) pollution by construction site run
18
off; (iv) disturbances during construction, including by dust, noise, vibration, access restriction,
closure of roads and increased traffic; (v) improper disposal of demolition debris; (vi) damage to
existing utility services during pipe repairs and installation; (vii) safety hazards from
construction activities; (viii) spillage of fuel and oil from construction; and (ix) damage to trees
and vegetative cover. At the same time, the project is expected to bring significant environmental
and health benefits, such as improvements in public health through better quality and availability
of treated water and improvements in the sustainability of raw water sources through reductions
in losses and wastage.
64. As the nature of the work to be financed under the project does not change compared to
DWSP, the current Environmental Management and Monitoring Plan (EMMP) for DWSP will
be applied. The document specifies required mitigation measures for the project activities that
are standard and widely used in construction projects. The EMMP stipulates all contracts for
construction works will include requirements for implementation of the specific measures, as per
EMMP provisions and good construction practices. Furthermore, daily control and monitoring of
construction works will be part of responsibilities of the PMC. The quality of drinking water
supply will be monitored according to national standards, using new laboratory equipment to be
financed by the project.
65. The project does not impact cultural property or natural habitats. The Borrower and DVK
are familiar with the World Bank's Safeguard Policies. The Bank team will continue to closely
monitor EMMP implementation, providing relevant assistance and capacity building. The
EMMP has been disclosed locally and in the InfoShop.
G. Other Safeguards Policies triggered (if required)
66. The project, as it predecessor DWSP1, continues to finance investments in rehabilitation
of water supply and sanitation infrastructure within the Amu Darya river watershed which
extends into Uzbekistan and Turkmenistan. Accordingly the project triggers O.P. 7.50
―International Waterways‖. The Bank has considered these aspects and is satisfied that because
of its rehabilitation and demand management focus the project will not (i) cause appreciable
harm to the other riparians as it will not adversely change the quality or quantity of water flows,
and (ii) it will not be appreciably harmed by the other riparians' possible water use. Thus an
exception to the notification requirements has been granted on the grounds that the project
involves rehabilitation or reconstruction of currently operating schemes (including the pumping
station and tanks at Napornaya WTP, which are required to replace decaying assets. The project
investments will not increase the volume of water abstraction, nor affect the rights of other users.
Further, the project aims to improve efficiency of water use and to substantially reduce
Dushanbe’s high water consumption rates.
H. Readiness:
67. This is a repeat project, the objectives and scope of which are defined and agreed with the
Client. The feasibility studies are very thorough in their technical and cost estimates. The PCU of
DWSP1 is drafting the TOR for the detailed engineering designs. The draft revision of the POM
to include updated financial management chapters was finalized before negotiations. The Client
19
also submitted their draft OPIAP. The task team is working with the Client on the preparation of
the PMC's TOR to accelerate its recruitment and selection will be completed by the end of 2011.
20
Fig. 1 Project Implementation Plan
A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D
1 Preparatory Works/Tender Preparation
1.1 Preparation of ToR for the PMC and tendering
1.2 Preparation of the TOR for detail designs SAM filters
1.3 Preparation of TORs for design of pumping station and reservoir at NAP
2 Implementation Support
2.1 PMC hired
2.2 Tendering works for cleaning the water supply system
3.2 Feasibil ity Study, Designs, Tender Documents and tendering for SAM filters
4.2 Designs, tender docuemnts and tendering of NAP pumping station
5.2 Detailed Designs, Tender Documents and tendering for Chlorination Plants
6.2 Tendering of Laboratory Equipment
7.2 Tendering Phase for Procurement of Water Meters and Service Connections
8.2 Preparation of tech. spec. and tendering for SCADA
9.2 Supervision of Works
2.9 Audits
3 Component 1 -- Metering and Demand Management
3.1 Procurement and installation of Bil l ing Software
3.2 Procurement of consumption water meters
3.2 Installation of Water Meters and Service Connections
- Pilot Zone
- Groundwater Zones (SWW/KAF)
3.4 Procurment and installation of Production Meters
3.5 Installation of SCADA
4 Component 2--Water Quality and Efficiency Improvement
4.1 Maintenance Works for cleaning the water supply system
4.2 Construction of Filters at SAM Treatment Plant
4.3 Installation of rechlorination units
4.4 Reconstruction of NAP pumping station and tank
4.5 Water Quality Monitoring/Laboratory equipment
4.6 Procurment of hydraulic excavator
5 Component 3 -- Institutional Strengthening
5.1 Institutional assessment
5.2 Procurement of Software NIS/Hydraulic modelling
5.3 TA for water quality monitoring unit and Laboratory
5.4 TA for Operational Performance Improvement (Long-term)
5.5 TA for Operational Performance Improvement (Short term expert pool)
5.6 TA on SCADA and Hydraulic Modelling and pressure zones
5.7 Training
5.8 TA for Corporate Development and Finance
5.9 Development of a demand management strategy
5.10 Development of a metering and bil l ing strategy and program
5.11 Tariffs, planning and budgeting, Financial modelling
5.12 Support Accounting department
5.13 Implementing bil l ing and metering program
5.14 Capacity building in HR management
5.15 Customer Relationship Management
5.16 Support of Legal department
2012 2013 2014 2015
Year 2 Year 3 Year 4Preparation Year 5
E
F
F
E
C
T
I
V
E
N
E
S
S
Corporate Development & Financial Performance Improvement
Operational Performance Improvement
TasksN°Year 1
2011
21
Annex 1: Results Framework and Monitoring
TAJIKISTAN DUSHANBE SECOND WATER SUPPLY AND SANITATION PROJECT
Results Framework
Project Development Objective (PDO): Improve water utility performance and water supply services in selected areas of Dushanbe.
PDO Level Results Indicators*
Co
re Unit of
Measure Baseline
Cumulative Target Values**
Frequency
Data
Source/
Metho
dology
Responsi
bility for
Data
Collectio
n
Descriptio
n
(indicat
or
definiti
on, etc.)
YR 1 YR 2 YR3 YR 4 YR5
Indicator One: Water quality in
the network:
Parameter 1: Turbidity in the
network
Mg/l; 2009: 40%
of samples
comply
with the
standard
(MAC* is
2mg/l)
To start the
design of
the SAM
filters
To start
constructio
n of SAM
filters
To start
operation
of the
SAM
filters;
99% of
samples
comply
with the
standard
99% of
samples
comply
with the
standard
99% of
samples
comply with
the standard
Accessed
annually,
based on
daily
measureme
nts by
DVK
DVK
laborat
ory
DVK/
PMC
Improvement of
indicators is
subject to
successful
operation of
NAP filters,
construction and
operation of
SAM filters, and
partial washing
of the network.
Parameter 2: Residual chlorine
in the network:
% 2009: 98%
of samples
show
residual Cl
Design and
installation
of
rechlorinati
on
equipment
in the
network
Completion
and start up
of the re
chlorinatio
n
equipment
in the
network
99% of
samples
show
residual
Cl
99% of
samples
show
residual Cl
99% of
samples
show
residual Cl
Accessed
annually,
based on
daily
measureme
nts by
DVK
DVK
laborat
ory
DVK/
PMC
Note: sensitivity
of the test is
0,02 mg/l of Cl
concentration-
this is a
traceable
border.
The indicator is
subject to
installation of
rechlorination
systems and
general
reduction of
turbidity in the
network.
Parameter 3: Bacteriological
water quality:
% 2009: 96%
of samples
comply
Subject to
improveme
nt of water
Subject to
improveme
nt of water
99% of
samples
comply
99% of
samples
comply
99% of
samples
comply with
Accessed
annually,
based on
DVK
laborat
ory
DVK/
PMC
The indicators
are subject to
reduction of
22
with the
standard
(MAC* is 3
coli
forms/l)
treatment at
SAM and
NAP and re
chlorinatio
n in the
network
treatment at
SAM and
NAP and re
chlorinatio
n in the
network
with the
standard
with the
standard
the standard daily
measureme
nts by
DVK
turbidity in the
network and
presence of
residual Cl in
the network.
Indicator Two: Customer
satisfaction with water supply
services
In the absence of relevant technical data on the
quality of water supply services in DVK (due to the
lack of relevant technical means), the selected
parameters and characterizing customer’s opinion on
water quality were selected as indicators to measure
the project progress.
Parameter 1: Improved water
quality (in general) - Percentage
of customers, satisfied with water
quality
% 2010 TBD
by the
Customer
Satisfaction
Survey,
conducted
under the
DWSSP 1
No changes
are
excepted
No changes
are
expected
Improved Improved Improved Measures
annually
starting
year 3 of
the project
Survey
by
PMC/
DVK
DVK/
PMC
Note: the target
value will be set
after the
baseline will be
determined
under the
DWSSP 1.
Parameter 2: Availability of ws
services- Percentage of customers
with 24h of ws service per day
% 70% of
population
have 24h
per day
access to
ws
services; to
be revised
based on
the results
of 2011
Customer
Satisfaction
Survey
(DWSSP) 2
No changes
are
excepted
No changes
are
expected
Improvem
ents due
to
installed
meters
Improveme
nts due to
installed
meters
90% of
customers
receive 24h
services; the
final target
will be
revised after
hydraulic
model is in
place
Before the
start of the
project;
progress is
measured
in the
middle and
at the end
of the
project
Survey
by
PMC/
DVK
and
data
from
hydrau
lic
model
DVK/
PMC
Hydraulic
model will be
developed by
the project.
Indicator Three: Improvement of
financial performance of DVK
Parameter 1: Cash operating
ratio has improved
ratio 2009: 1,07
Setting of
project
accounts,
no target is
imposed
To reach 1 Not
higher
than 0,9
Not higher
than 0,9
Not higher
than 0,9
Annually PMC/
DVK
DVK/P
MC
Financial
working ratio of
total cash
operating
expenses
(excluding
interest and
other charges
on debt) to total
cash operating
23
revenues;
ideally should
be less then 1;
improvement of
ratio means
increase of
revenues (if
revenues grow
faster then
expenses).
Parameter 2: Number of
residential customer registered
and billed.
Num
ber
2009:
154,000
residential
customers
or 340 495
people
Intensive
inventorying
of customers
should take
place
By the end of
2011 the
baseline
number
should be
increased to
cover reflect
the actual l
population of
Dushanbe
(plus the
service area
in Rudaki
rayon)
To reach
actual
population
of the DVK
service area
To reach
actual
population
of the DVK
service area
To reach
actual
population
of the DVK
service area
Annually PMC/
DVK
DVK/P
MC
Officially,
population in
Dushanbe is
720,000 people,
plus the
population in
the service area
in Rudaki rayon
should be
reflected.
The baseline
data are taken
from the
feasibility study
report.
Parameter 3: Accounts
receivable as % of revenue
% 25% Gradual
decrease
towards
15%
Gradual
decrease
towards
15%
15% 15% 15% Annually PMC/
DVK
DVK/P
MC
Reaching the
target by the
end of the year
3 is subject to
overall
improvement of
water quality in
the system.
INTERMEDIATE RESULTS
Component 1: Demand management
component
Intermediate Result indicator 1: Number
of household connections impacted by
the project: (Installation of meters and
rehabilitation of service connections in
the pilot area)
core
in
dic
ato
r
Num
ber of
meter
s
instal
led
2887
individual
residential
meters;
about 700
non
residential
consumers
are billed
on the pipe
Preparation
of the
component
Implementa
tion is in
progress
Implemen
tation is in
progress
Implementa
tion is in
progress
76,500
meters
installed in
ground
water area
and about
1500 service
connections
are
rehabilitated
In
accordance
with
project
implementa
tion
schedule
PMC/
DVK
DVK/P
MC
Nonresiden
tial
consumers
should be
encouraged
to install
meters at
their own
expense.
Service
24
diameter
basis
connection
is from the
network to
the
apartment
building.
Intermidiate result indicator 2:
Installation of SCADA and NIS with
technical assistance
Syste
ms
instal
led
and
functi
oning
Partial
hydraulic
modeling
in pilot
zones only
Preparation
of technical
specification
s
Procureme
nt and
installation/
training
TA and
training
continued
System in
operation
System in
operation
In
accordance
with
project
implementa
tion
schedule
DVK DVK
Component 2: Water quality and
reliability improvement
Intermediate Result Indicator1:
Improvement of water turbidity at the
outlet of SAM
% 2009: 90%
of samples
do not
comply
with the
standard
(MAC is
2mg/l)
To start the
design of
the SAM
filters
To start
constructio
n of SAM
filters
To start
operation
of the
SAM
filters;
99% of
samples
comply
with the
standard
99% of
samples
comply
with the
standard
99% of
samples
comply with
the standard
Accessed
annually,
based on
daily
measureme
nts by
DVK
DVK
laborat
ory
DVK/
PMC
Intermediate result indicator 2:
Improvement of water turbidity at the
outlet of NAP
% 2009: 70%
of samples
do not
comply
with the
standard
MAC
(2mg/l);
At the end
of the year
filters are
in
operation,
99% of
samples
comply
with the
standard
99% of
samples
comply
with
standard
MAC
99% of
samples
comply
with
standard
MAC
99% of
samples
comply
with
standard
MAC
99% of
samples
comply with
standard
MAC
Accessed
annually,
based on
daily
measureme
nts by
DVK
DVK
laborat
ory
DVK/
PMC
Illustration:
max daily
average in
2009 was
8,6 mg/l.
Intermediate result indicator 3:
Operational improvement of DVK:
Parameter 1: Per person water
production in the system
m3/p
erson
2009: 938
lcd
No changes
are
expected
No changes
are
expected
About
40% of
population
will
reduce
their
Same as for
year 3;
To be
reduced by
50% for
these 40% of
the
population
Annually DVK/
PMC
PMC 2009:
246700
000m3 per
about
720000 p-n
(without
25
consumpti
on by
50% as a
result of
metering;
system
wide
reduction
by 20% is
expected
who will be
metered;
system wide
reduction of
consumption
by 20% is
expected
Rudaki
rayon).
Parameter 2: Yearly energy
consumption (only ws services)
kWh 2009 (ws
system
only): 112
037 073
kWh
No changes
are
expected
No changes
are
expected
To be
reduced
by 10%
systems
wide
Same as for
year 3
To be
reduced by
10% systems
wide
Annually DVK/
PMC
PMC Total
energy
consumptio
n 2009 (ws
and
sewerage):
116 257 21
0 kWh.
Intermediate Result indicator 4:
Construction and commissioning of
SAM treatment plant
Fact
of
opera
tion
2010: not
available
Design of
the filters
Start of
constructio
n of filters
at SAM
Start of
the
operation
of filters
at SAM
Filters are
in
operation
Constructed
and in
operation
In
accordance
with
project
implementa
tion
schedule
PMC/
DVK
PMC
Intermediate Result indicator5:
Introduction of rechlorination systems
in the network
2010:
New
disinfection
(Cl) system
at SAM
Preparation
of the
component;
Implementa
tion has
started
Implemen
tation is
completed
3 reservoirs
in the
network
stations
have new
re-
chlorinatio
n
equipment
3 reservoirs
in the
network
stations have
new
rechlorinatio
n equipment
In
accordance
with
project
implementa
tion
schedule
PMC/
DVK
PMC 3 reservoirs
(zone III,
Bahar and
Suhrob).
Intermediate Result indicator 6: Supply
of modern water testing laboratory
equipment to DVK
Fact
of
suppl
y and
com
missi
oning
Current
outdated
equipment
used by
DVK
laboratories
Procureme
nt is
prepared
Equipment
is
purchased;
New
equipment
is
functionin
g;
New
equipment
is
functioning
New
equipment is
functioning
to support
required
water testing
In
accordance
with
project
implementa
tion
schedule
PMC/
DVK
PMC New
equipment
is aimed at
the support
of the
existing
testing.
Intermediate Result Indicator 7:
Reconstruction of Napornaya pumping
station and tanks
Fact
of
opera
tion
2010:
reached its
limit
Preparation
of designs
Tenders
and works
begin
Works
continued
commissio
ning
New
pumping
station and
tanks are in
operation
In
accordance
with
project
implementa
PMC/
DVK
PMC
26
tion
schedule
Component 3: Institutional
strengthening
Intermediate Result indicator1:
Improvement in billing
Fact
of
impro
veme
nt
Billing
software is
not used by
DVK; the
billing is
based on
norms and
assumption
s
Setting of
accounts
and transfer
to billing
systems;
Billing is in
operation
Billing is
in
operation
Billing is in
operation
Billing is in
operation
In
accordance
with
project
implementa
tion
schedule
PMC/
DVK
PMC
Intermediate Result indicator 2.
Completion of the water supply master
plan
Fact
of
comp
letion
Not
developed
in DVK
Works
have
started
Works are
in progress
Works are
in
progress
State of the
progress
Water
supply
master plan
is completed
In
accordance
with
project
implementa
tion
schedule
PMC/
DVK
PMC
Intermediate Result indicator 3.
Completion of training in monitoring
of energy costs and energy audit
Fact
of
comp
letion
DVK
doesn’t
have the
methodolog
y for
conducting
the energy
audit
No changes
are
expected
Training
and audit
have
started
Training
is in
progress
Completed
and in use
by the staff
of DVK
Completed
and in use
by the staff
of DVK
In
accordance
with
project
implementa
tion
schedule
PMC/
DVK
PMC
*Please indicate whether the indicator is a Core Sector Indicator (see further http://coreindicators)
**Target values should be entered for the years data will be available, not necessarily annually.
27
Annex 2: Detailed Project Description
1. This annex is divided in two parts: Part A ―Detailed Description of Components,‖ and
Part B ―Operational Performance Improvement Action Plan.‖
Annex 2 - PART A: Detailed Components Description
2. This section discusses the tasks and investments in each component, including
implementation aspects.
Component 1. Metering and Demand Management (US$ 7.62 million of which IDA US$
5.97 million): The component will finance consumption metering and bulk metering of
water, for increased revenue, reduced wastage, and better tracking of losses, including: (i)
supply and installation of 76,500 residential meters (i.e. approximately 46% of DVK users)
and installation of 1,500 apartment building master meters in selected areas of the city; (ii)
rehabilitation of 1,500 apartment building service connections; (iii) supply and installation
of bulk flow meters at water production facilities; (iv) supply and installation of a Network
Information System (NIS); (v) communication strategy and public awareness campaigns to
promote metering and demand management; (vi) installation of SCADA system.
Subcomponent 1a: Consumption Metering (partial coverage): The project will finance
procurement and installation of 76,500 residential meters, allowing metering of about 46
percent of DVK's individual customers. About 1,500 master meters are already procured and
available to DVK will also be installed to measure volumes entering apartment buildings
before distribution to individual apartments, which will cover about 50 percent of
Dushanbe’s apartment buildings. The project will also provide for the any required
rehabilitation of the master service connections linking the apartment buildings being
metered to the network. The very high water consumption in Dushanbe is due to water
wastage, undeclared consumption by customers, and water losses within the buildings and
house connections. It is important to note, however, that little information is available
regarding the quantity of water lost and its distribution to the above mentioned loss and
wastage components. According to DVK’s assessment (GWCC report 2010) about 77
percent of the total water losses are attributable to service connections and internal
plumbing. Per capita consumption measured at apartment block buildings amounts up to
1,000 liters/capita/day. As part of a demand management program, the project will thus
tackle the difficult problem of reducing losses associated with leaks in the common piping in
apartment buildings, upstream of individual apartment meters and plumbing. Once losses in
common areas are measured, the Municipality is prepared to make the apartment building
associations and residents accountable to pay for leaked volumes or to repair leaking pipes
in their building common areas.
Subcomponent 1b: Bulk Metering: To address the water balancing in the Dushanbe system,
the project will install flow meters at all four production stations (NAP, SAM, KAF and
SWW) so that DVK can start measuring what is produced and correlate this with distributed
volumes to better assess water losses.
28
Subcomponent 1c: Communication and Public Awareness Campaign: Installation of meters
and the subsequent improvement in billing and collection under the project will require a
change in consumer habits. Improved water supply service will result in an increase in
consumption levels, which will require public awareness campaigns promoting good water
consumption and hygiene practices. The project will finance the development and
implementation of a communications strategy for DVK that will aim to promote DVK’s
image in improving water services in Dushanbe. As part of this effort, the project will
finance the establishment of a DVK website to improve transparency and public access to
information on current and on-going projects undertaken by the utility and to manage pubic
discontentment with regard to increased tariffs, etc. This subcomponent will also finance
multimedia awareness campaigns.
Subcomponent 1d: Installation SCADA with associated Technical Assistance. In order to
optimize the metering and demand management component the project will finance the
installation a SCADA system. This hardware will be accompanied by specific TA provided
by the PMC to build the capacity of DVK to operate and maintain the systems installed.
Component 2. Water Quality Improvement (US$ 6.27 million of which IDA US$ 4.91
million): The component will support system upgrades for improved quality of water,
including: (i) partial renewal of filtration capacity at Samotechnaya WTP (SAM); (ii)
network cleaning; (iii) installation of in-network re-chlorination systems; (iv) equipment for
water quality monitoring; (v) reconstruction of pumping station and tanks at the Napornaya
WTP (NAP); and (vi) procurement of maintenance equipment.
DVK faces chronic difficulties in providing potable water to its customers because of the
lack of working filtration capacity at the SAM and NAP water treatment plants. While the
situation has improved with the rehabilitation of SAM sedimentation ponds and the pending
commissioning of NAP filters under DWSP, high water turbidity associated with storms can
still get through the treatment plants and enter the network, resulting in ―brown‖ water being
distributed to clients. These accidents have historically also led to the silting of some areas
of the network and of most network storage tanks. The situation must be corrected not only
to ensure potable water service for customers, but also to avoid blockage of newly installed
meters by silt and sand particles. The project, therefore, will clean by flushing selected parts
the water supply network and the reservoirs, which silted up during previous years with the
high content of suspended solids that existed when SAM and NAP sedimentation and
coagulation ponds were out of operation. During the past two years, only a small part of the
network and reservoirs has been cleaned due to DVK's limited resources. Cleaning of the
network is a compulsory step before introducing demand management, as water meters
cannot be installed in water with a high content of suspended solids. Chlorination can only
work effectively to improve water quality if the network has been cleaned. Therefore,
outsourcing the cleaning works to a contractor as soon as possible is recommended.
Subcomponent 2a: Renovation of SAM: Although water quality has been improved
considerably at the SAM outlet during the past five years (renovation of sedimentation pond,
construction of new chlorination plant), the key element in the treatment chain, namely the
29
rapid sand filter station has not yet been renovated. High turbidity at SAM (20 mg/l) is due
to (i) poor performance of coagulation and sedimentation treatment step and (ii) lack of
operational rapid sand filters. The high turbidity rates are causing (i) high chlorine
consumption; (ii) ineffective disinfection with related health risks for consumers; (iii)
production of carcinogenic chlorine by-products; and (iv) injection of suspended solids into
the distribution system, causing tank sedimentation, pump, valve and meter dysfunctions.
Rapid sand filter units are clogged, and buildings (for example, roofs) are in poor structural
condition. Automation equipment and valves have been dismantled (IDB financing) but
have not been replaced; IDB decided not to continue financing of this investment
component. Metering and demand management programs are expected to substantially
reduce water consumption within the next decade. Accordingly, it is expected that part of
the existing production capacities (SAM, NAP, KAF, SWW) might no longer be required to
their full extent. There is, however, an imperative need to improve water quality from SAM
as early as possible to cover Dushanbe’s short- and medium-term water demands. As SAM
is the main production unit in Dushanbe and has the advantage of supplying water by gravity
to most of the supply area, DVK does not intend to cease its operation in the near future. It is
noteworthy that this investment component will enhance the demand management
component and allow more meters to be installed, as high turbidity in the network would
block consumption water meters. In summary, the SAM renovation is needed to improve
water quality and is an indispensable accompanying measure for metering and water
consumption reduction. Because of the uncertainty about the evolution of water demand in
Dushanbe, however, only 50 percent of SAM filtration capacity will be renewed.
Subcomponent 2b: Network Cleaning: DVK estimates that about 50 percent of the total
network (which corresponds to a length of about 370 km) has to be cleaned by flushing and
other hydraulic or mechanical means. Discrete segments of the network will be cleaned until
the purged water meets relevant turbidity and color criteria. This will apply mainly to
network sections that are supplied with surface water treated in SAM and NAP. An
estimated nine reservoirs with a total capacity of about 60,000 m³ and an estimated quantity
of sludge of 12,000 m³ also have to be cleaned. This subcomponent should include all
necessary auxiliary works for cleaning of about 40 percent of these pipes and reservoirs,
such as dismantling of valves, cutting and welding of dead-end pipes, sludge transport to a
landfill, etc. The works should be implemented with full mitigation of service disruptions,
including effective advance communications to the affected neighborhoods, streets and
customers, as well as effective management and disposal of liquid and solid waste to avoid
any flooding or soiling of streets or properties.
Subcomponent 2c: In-network Rechlorination Systems: This component will finance the
installation of secondary chlorination systems at selected distribution storage tanks to ensure
adequate residual chlorine levels are maintained in the distribution system. The systems will
rely on robust chlorinated lime dilution and mixing technology with none of the risks
associated with liquid or gas chlorination.
Subcomponent 2d: Water Quality Monitoring Equipment: This subcomponent will provide
for mobile water quality monitoring crews established to sample and test water quality
parameters in situ in the network, as well as laboratory equipment for DVK facilities.
30
Subcomponent 2e: Reconstruction of the pumping station and tanks at Napornaya WTP. The
existing pumping station in general is in very poor condition and has to be abandoned. The
building was constructed in 1932 and is in very bad shape (all civil works and in particular
the roof). The current structural condition of the building does not allow renovation of the
building. For this reason it is proposed to construct a new building at the location of the
existing warehouse. Pumps and other electromechanical equipment have already been
procured under DWSP 1. In addition to the new pumping station, the location of which
determines the new hydraulic layout, two new feeder reservoirs with a volume of 2,000 m³
(due to seismic regulations the second reservoir is required as reserve capacity) will be
necessary as equalizing tank between the filter building and the pumping station. One of the
existing reservoirs (1000 m³ and 500 m³) will be used to provide additional storage volume
in emergency cases.
Subcomponent 2f: Procurement of hydraulic excavator. The sedimentation ponds at SAM
and NAP station require regular cleaning but only SAM station has hydraulic excavators for
removal of sludge in the sedimentation pond. Manual cleaning is difficult to perform and
carries substantial health risks for workers involved (skin and respiratory infections due to
coagulants). It is a priority for DVK to acquire an excavator to be deployed at NAP WTP.
Component 3. Institutional Strengthening and Capacity Building (US$3.34 million of
which IDA US$3.34 million): The component will finance activities to build institutional
capacity and improve utility performance of DVK, which includes (i) Carrying out an
assessment of DVK’s organizational and capacity-building needs; (ii) Installation of modern
accounting, billing and water revenue collection systems; (iii) Provision of technical
assistance to the management of DVK to improve its financial performance; (iv) Provision
of technical assistance, and carrying out of studies to improve the water supply operations of
DVK, including studies for hydraulic modelling, and for design of pressure zones and
SCADA system; and (v) Implementation of training programs for DVK staff.
While the PMC will play a direct managerial and operational role in project implementation,
it will also oversee the delivery of the following subcontracted tasks under this component:
development of detail design, institutional assessment and staff training.
Subcomponent 3a: Institutional Assessment will be carried out to evaluate the current
capacity of DVK, its organizational structure and the operating environment influencing its
current non performance in delivering water service efficiently. This activity will include the
hiring of an international consultant to perform the assessment and recommend options for
DVK reorganization, modernization of management and operating procedures and
information systems, changes in staffing needs based on a functional review, improvements
in monitoring and evaluation, and options for mainstreaming performance incentives. The
assessment will also review compensation structures and performance incentive options. The
institutional assessment will build on the findings and recommendations of the Governance
Assessment of DVK carried out by the World Bank (attached as Annex 8).
31
Subcomponent 3b: Modernization of Accounting and Billing will be pursued through (i)
implementation of the automated system to assist DVK to effectively manage its customer
database, enhance its billing and collection processes for all customers, including those
provided by vendors of billing, collection and kiosk payment services, and (ii) the upgrade
and modernization of automated accounting system at DVK with built-in controls and
enhanced functions to meet operational requirements of improved business processes due to
the introduction of the automated billing/collection system and ensure reliability and
timeliness of financial reporting. Implementation of the subcomponent C1 will go along
with a functional review of DVK’s billing and collection operations and staffing.
Subcomponent 3c: Technical assistance (TA) for corporate development and financial
performance improvement includes support in the following areas: (i) corporate
development and finance; (ii) accounting department; (iii) accounting and customer
service/billing software; (iv) planning and budgeting of tariffs; (v) billing and metering
program; (vi) human resources functions; (vii) customer relationship management; and (viii)
measures to improve transparency, accountability and financial autonomy. This activity will
also pilot instituting performance-based incentives (monetary and nonmonetary) at DVK to
retain good staff, encourage better staff performance and improve overall DVK operational
performance. DVK modernization will be pursued through the reorganization of
management and operational capacities, modernization of procedures, promotion of utility
management performance, staffing of new operational needs, and outsourcing of some
utility functions.
Subcomponent 3d: TA for operational improvement includes i) resident TA for operation
and maintenance performance improvement; ii) hiring of short-term specialists for TA on
specific technical needs, i.e. hydraulic modelling, pressure zones and SCADA system
design.; iii) developing an assessment of seismic risks for SAM; iv) TA for a process
diagnostic and optimization study of the SAM coagulation/sedimentation ponds.
Subcomponent 3e: Staff Training will be performed by highly qualified institutional
development consultants. A training program will be developed and delivered based on the
results of the institutional assessment. The program could include on-the-job training,
technical training, and knowledge sharing with performing utilities either through video
conferences and/or study tours. Staff will also receive training on energy efficiency, water
quality monitoring, communications and customer service, among other things. To this end,
the training measures will contribute to improved operational performance (reduction of real
water losses, energy efficiency, proactive operation and maintenance, etc.) and to improved
service levels (water pressure, availability and reliability of water supply, water quality).
As a corollary activity to the project, the Bank will also facilitate the development and
funding of a South-South knowledge transfer and capacity-building partnership between
DVK and the St Petersburg Vodokanal.
Component 4. Implementation Support (US$ 1.78 million of which IDA US$ 1.78
million): The component will provide project Implementation support including (i) design
32
and supervision of works; (ii) project implementation unit operating costs, and (iii) annual
project audits.
The following tasks are included in this component:
• Supervision of network cleaning operations
• Engineering and supervision for SAM
• Tendering and supervision for demand management component
• Annual project audits
33
Annex 2 - Part B
Operational Performance and Improvement Action Plan (OPIAP)
1. Project investments may not suffice to achieve lasting performance outcomes unless
DVK organization and operations are also improved. In the absence of a contractual public-
private partnership (PPP) mechanism, such transformations cannot be directly affected by the
PMC but must be implemented by DVK and the Municipality.
2. DVK and the Municipality have thus agreed to develop and commit to an Operational
Performance Improvement Action Plan (OPIAP).
3. The following is a preliminary draft OPIAP outline based on commitments formulated by
DVK with key steps or tasks organized as strategic tasks. The Municipality and DVK will
provide management, staff and operating budgets for plan implementation. IDA will finance
investments and technical assistance. The indicative OPIAP outlined below remains to be
completed with other steps and tasks to be determined by the Municipality and DVK and
detailed with milestones, dates, responsibilities, resources needed and funding sources.
4. Submittal of an OPIAP outline by the Municipality and DVK, which is acceptable to the
Bank, will be a condition to engage IDA grant negotiations. The OPIAP will be adjusted,
detailed and finalized at the start of the project with the help of the PMC and periodically
updated as part of implementation. Once adopted, the OPIAP will be used to guide and monitor
DVK progress.
34
April 11, 2011 DRAFT
Second Dushanbe Water Supply Project
OPERATIONAL PERFORMANCE IMPROVEMENT ACTION PLAN (OPIAP)
Submitted for the development of SUE «Dushanbevodokanal»
Actions / Activity Responsible Implementation
date6
Description of follow-up actions / Comments
(i) Financial recovery of the DVK 1.1 Strategy for water use
management DVK, with PMC
support November 2011-
February 2012 1. Assessment of current situation, 2. Development of goals and objectives, 3. Development of strategy for achieving the goals and objectives, i.e.
installation of 65000 meters, master meters throughout all stations
of water production, rehabilitation of connection to house water
supply systems, supervision of works, operation and maintenance. 4. Procurement and installation of Network Information System (NIS)
with subsequent training. 5. Development and implementation of public information campaigns. 6. Assessment of resources for implementation. 7. Timeline for implementation.
1.2 Institutional assessment of
DVK Municipality, DVK
with PMC support October 2011-April
2012 1. Assessment of DVK management structure 2. Assessment of DVK performance and operations 3. Analysis of corporate culture of DVK 4. Analysis of performance incentives. 5. Analysis of HR management.
6. Assessment of costumer relations and public information 7. Assessment of resources required for implementation of
improvement strategy. 8. Timeline for implementation.
1.3 Technical support for
improving financial efficiency DVK, with PMC
support December 2011-
December 2013 1. Enhancement of financial management control system. 2. Development of a program aimed at reducing production costs. 3. Analysis of the causes of losses (physical and commercial) of the
6 Assuming that the Project becomes effective in August 2011.
35
enterprise, and development of action plan for reduction; 4. Develop and implement training programs for financial
improvement. 1.4 Tariffs Municipality, DVK
with support by
PMC
Analyses and
review every 6
months
1. Review of tariffs for all categories of consumers in order to prevent
over-consumption; 2. Optimization and update of structure of tariffs towards reduction of
water consumption (e.g. block tariffs). 3. Training of DVK staff to use, update and optimize the new tariffs
structure. 1.5 Implementation of the billing
and collection system
DVK, with PMC
support January 2012 -
December 2012 1. Inventory of consumers and registering newly identified
subscribers. 2. Purchase and installation of an automated payment system for DVK
by local company; 3. Procurement and implementation of new billing software,
accompanied by relevant training package; 4. Upgrade and modernize the customer database (including the
installation of new water meters). 5. Training for controllers and operators.
1.6 Support of Accounting
Department - Reform of accounting
system; - Systematization of
information; - Recover Lost Data (bad
debts); - Introduction of modern
methods of accounting and
reporting; - Automation system.
DVK, with PMC
support November 2011-
December 2015 1. Reorganization of financial management structure of the DVK. 2. Restructuring of financial management staffing scheme. Staff
development through trainings, certifications; 4. Develop and implement a system of performance rewards for
employees; 5. Setting service standards for the preparation of financial records and
financial statements. Control over the implementation deadlines; 6. Ordering the accounting system - the constant monitoring, careful
checking and rechecking reflect transactions in the account; 7. Development, approval and conformance of documents; 8. Rechecking of all analytical data accounting, ordering arisen
deviations and alignment with the necessary adjustments in
accordance with the data of analytic accounting and the ledger; 9. Full inventory of assests and fixed assts. 10. Based on the existing previously installed software 1C: Enterprise
7.7 introduced an updated version of 1C: Enterprise 8.0. 11. Continuation of training of employees of the enterprise accounting
under IFRS;
36
12. Support for accounting department. Short-term experts on specific
tasks (i.e., specialists in learning to use the software) should support
the company in improving the overall efficiency of the department. 13. Annual independent audit of projects and enterprises in the
submission of audit reports to the World Bank. 1.7 Development of human
resources capacity
DVK, with PMC
support June-July 2012 follow up activities
between January
2013- February
2015
1. Develop recommendations for improved management of human
resources; 2. Develop short, medium and long term strategies and plans for
capacity building to solve the urgent need to improve the capacity of staff of DVK. 3. Introduction salary schemes and incentives toward attracting and
retaining qualified staff. 4. Training
(ii) Improvement of Customer Service and Customer
Relationship
2.1 Managing relationships with
customers (including
consumer surveys and legal
support).
Municipality, DVK,
with PMC advice January 2012-
December 2013 1. Develop of recommendations for improving the management of
relations with consumers. 2. Develop short, medium and long-term strategy to address existing
weaknesses. 3. Capacity building to carry out consumer surveys regularly. 4. Strengthening of the legal department. 5. Training employees in professional approach with consumers. 6. Improve call center for receiving account/bill inquiries. 7. Improve call-in system to receive calls for service problems. 8. Report on changes in service and image of the company
(information campaigns, logo, website, uniform of controllers) 2.2 Public communication
strategy
Municipality, DVK,
with consultant
assistance
January 2012-
December 2015 1. Develop communication strategy to inform customers of:
DVK recovery goals,
New modernized billing/collection/metering practices
Investment program for water quality improvement
Service interruptions due to works
DVK news
etc.. 2. Establish DVK website 3. Conduct periodic customer surveys to assess the improvement of
service and of customer satisfaction
37
4. Communicate to the public results of service and performance
improvements (e.g. water quality, pressure, service interruptions, leaks
repaired, meters installed). (iii) Improving Water Supply Services 3.1 Reconstruction of filters on
Samotechnaya water station DVK with support of
PMC September 2011-
December 2013 1. Preparation of surveys , designs and tender documentation; 2. Tender; 3. Project Implementation; - demolition of existing nonfunctioning rapid sand filters; - Construction of new rapid filters; - supervision of works; - commissioning and operation.
3.2 Cleaning network and
reservoirs DVK and
Municipality with
support of PMC
September 2011-
June 2013 1. Survey and detection of the most silted sections of water supply
network and reservoirs; 2. Preparation of technical specifications, scope and tender documents 3. Tender; 4. Clean-up works; 5. Supervision of works.
3.3 Re-chlorination DVK with support of
PMC March 2012-
March 2013 1. Survey and preparation of technical specifications for equipment re-
chlorination and tender documents for the 5 reservoirs; 2. Tender; 3. Purchase and installation of equipment; 4. Supervision of works; 5. Exploitation.
3.4 Water quality equipment DVK with support of
PMC October 2012-
February 2013 1. Determination of the required laboratory equipment; 2. Preparation of specifications and tender documents; 3. Tendering and procurement of equipment; 4. Application.
3.5 Training of DVK staff to
operate and maintain the new
installations
DVK with support if
PMC September 2012 –
June 2014 1.Training on O&M of filters 2. Training on O&M of re-chlorination 3. Training on water quality monitoring 4. Training on O&M of water meters
3.6 Technical studies DVK with support
with PMC September 2011-
December 2013 1. Study for optimization of coagulation and sedimentation process at
SAM. 2. Study of seismic risk assessment & mitigation at SAM
3.7 Planning and implementation
of the program to provide the
Municipality, DVK
with support of PMC September 2011-
December 2015 1. Prepare multi-year strategy (goals, methods, plans, staffing, costs,
legal aspects, communication).
38
subscribers with meters 2. Initiate a program to provide the subscribers with meters in
apartment buildings. 3. Initiate a program to provide the subscribers with meters in private
homes. 4. Long-term information campaign (media, trust building).
5. Monthly evaluation of progress.
6. Mobilizing additional funding. 3.8 Planning and implementation
of demand management
program.
Municipality, DVK
with support of PMC September 2011-
December 2015 1. Prepare multi-year strategy (goals, methods, plans, staffing, costs,
and communication) 2. Installation of production meters.
3. Implement a program to prevent leaks in residential apartment
buildings. 4. Systematic leak detection and reduction in networks.
39
Annex 3: Implementation Arrangements
Figure 2 – DWSP2 implementation arrangements
1. Project institutional and implementation mechanisms are summarized in Figure 1. The
implementing agency for the project is the Dushanbe water and sewerage utility, Dushanbe
Vodokanal (DVK), which is set up as a ―State Unitary Enterprise‖ (SUE) operating under the
direct and undivided control of the Municipality of Dushanbe. Decades of underinvestment and
DVK’s limited technical and managerial capacity have led water supply services to decay rapidly
and to be in critical need for rehabilitation. At the same time, DVK’s capacity and institutional
profile require enhancement. The project will balance physical investments, targeted at
improving DVK’s revenues by extensive metering and improved collection, with improvement
in the water production infrastructure, as well as technical assistance and capacity building to
improve DVK’s performance as a utility. The latter will be provided by an internationally
recruited Project Management Consultant (PMC) who will also be responsible for the oversight
of project activities, including overseeing the procurement of works, goods and consulting
services for the project, as well as DVK’s financial management (FM) of the project.
Project Management Consultants (PMC)
2. The PMC will be hired internationally and will consist primarily of a highly experienced
Senior Utility Manager and a Senior Utility Operations Engineer. The Senior Utility Manager
who is also the Team Leader of the PMC will support the DVK Director by providing technical
and operational advice with regard DVK management. The key responsibility of the Senior
40
Utility Operations Engineer will be to assist DVK line managers to manage the day-to-day
activities of the project, such as procurement of goods and services, financial management,
project supervision and reporting. Although the PMC will also provide dedicated TA and
training in some select areas of DVK’s operation (see detailed description of components and
cost tables in this annex), it will only play a supervisory role with respect to certain tasks that
will be subcontracted: development of detailed design, Institutional Assessment and DVK staff
training. A key responsibility of the PMC will be to ensure implementation of agreed actions
outlined in the Operational Performance Improvement Action Plan (OPIAP) by the Municipality
and DVK.
Project Administration Mechanisms
3. To ensure a smooth transition between DWSP and DWSP2, an improvement in DVK
capacity and institutional profile, and adequate project administration, the functions of the
Project Coordination Unit (PCU), originally established under the Municipality of Dushanbe
(owner of DVK and ultimately responsible for the provision of water supply services in
Dushanbe), will be transferred to a PMC who will be responsible, together with DVK, for day-
to-day implementation of project activities. Specific functions, such as financial management,
will be largely implemented by DVK’s dedicated department with oversight by the PMC, which
will provide technical assistance and training. Procurement under the project will be processed
by the PMC. Unlike the DWSP, however, the PMC will be integrated and share tasks with DVK
to build DVK capacity. The PMC would be responsible for the following: overseeing day-to-day
project activities; coordinating with DVK, the Municipality of Dushanbe, auditing consultants
and overseeing data gathering by DVK.
4. Institutional Capacity. In order to ensure the long-term sustainability of service and
infrastructure, DVK must address institutional modernization and capacity-building needs.
Priority needs include the development of a customer service culture, backed by appropriate
systems and infrastructure, and the improvement of cost recovery performance and financial
autonomy. On a more fundamental level, DVK should tackle its human resources management
weaknesses to build a better-trained and qualified workforce and to attract and retain more
skilled personnel. Measures remain to be agreed to achieve better DVK corporate governance
and utility performance. A governance study is being carried out during project preparation that
will help identify and recommend implementable medium-term measures under the project to
strengthen DVK’s managerial and decision-making capacity, as well as improve accountability
and transparency through improved public access to information. Efforts will be made under the
governance study to clarify roles and responsibilities and to leverage existing corporate links of
DVK with the Dushanbe Municipality to improve utility operations. Following DWSP’s
unsuccessful experience, PPP approaches are not deemed readily feasible to promote institutional
modernization and capacity building. In the short term, DVK is not assessed as ready to undergo
―corporatization‖ for improved governance.
Financial Management (FM)
41
5. The overall project financial management function, including budgeting, accounting,
reporting, internal control, funds flow and audit, will be the responsibility of DVK. This is
different from the ongoing DWSP, including the additional financing (AF) in which the PCU
established by DVK and the Municipality of Dushanbe is responsible for fiduciary
responsibilities. DVK will be supported by the PMC and will establish and maintain a project
financial management system capable of generating interim financial reports to be used for
monitoring fiduciary aspects of project implementation.
6. The inherent risk of the project is rated as high, while the control risk is rated substantial
with the overall FM risk being substantial. After satisfactory implementation of the mitigation
measures, the overall FM risk will be moderate. The table below lists the actions required to
ensure satisfactory financial management system by effectiveness.
Recommended Action Responsibility Deadline POM to be updated to include financial management chapters,
including project accounting and reporting, funds flow, audit
arrangements, disbursement procedures, etc.
DVK Draft by
negotiations
Upgrade/install automated accounting system with capacity to
generate IFRs DVK
Within 3 months of
effectiveness
Recruitment of PMC to include financial management consultant
to support chief accountant and be responsible for project financial
management and disbursement functions
DVK Effectiveness
Training of financial management staff on financial management
and disbursement procedures of the World Bank World Bank
During project
implementation
Establish an internal audit unit to be responsible for continuous
review of the internal control function, as a well as administrative,
operational and financial activities of DVK
DVK Within 6 months of
effectiveness
7. Budgeting and Planning. DVK will be responsible for timely preparation of project
budgets based on the procurement plan. Project budgets, prepared on an annual basis, will form
the basis for allocating funds to project activities. The budgets will be prepared in enough detail,
by activities and account codes, and broken down by quarter. Annual budgets should be agreed
with IDA before final approval, and approved annual budgets will then be entered into the
accounting system and used for periodic comparison with actual results as part of the interim
financial reporting.
8. Flow of Funds. The proceeds of the IDA Grant will be disbursed over a period of five
years or for such longer period as will be agreed with IDA. Project funds will flow from IDA
through the following mechanisms: (i) via a single designated account operated by DVK (to be
replenished in accordance with guidelines in the disbursement letter); (ii) reimbursement with
full documentation; (iii) direct payments from the Grant Account with full documentation; (iv)
special commitments.
9. Accounting and Records. The accounting system used by DVK is largely manual,
although an automated accounting system has been installed and used for certain functions,
including payroll. DVK's accounting system will be strengthened to enable tracking of all project
financial transactions and timely generation of interim financial reports. The automated
accounting system established under the original DWSP will be upgraded to have built-in
42
controls and capacity to generate interim financial reports (IFRs). DVK will use Cash
Accounting for project accounting and reporting, but corporate accounting and reporting will be
used on accrual accounting system.
10. Project Financial Reporting. Unaudited IFRs will be generated by the project accounting
system based on formats agreed with the World Bank. The reports, to include Statement of
Sources and Uses of Funds, Uses of Funds by Project Activities (Components & Expenditure
Categories) and Statement of Designated Account, will be submitted to the World Bank within
45 days of the end of each quarter with the first reports under the proposed project being
submitted after the end of the first full quarter following initial disbursement.
11. Internal Control & Internal Audit. Internal control procedures, including expenditure
and payment approvals, timely and complete recording of transactions, regular reconciliation of
accounts and balances, segregation of duties, safeguard of data and assets, as well as regular
reporting and audits, will be described in detail in the Project Operational Manual (POM) to be
developed before negotiations. This will supplement instructions and guidance issued by the
Ministry of Finance, including the Instruction on Accounting in Budget Organizations #157
issued on December 26, 2000 and updated in 2010.
12. There is currently no internal audit function within DVK, but establishment of an internal
audit unit will be encouraged in line with the ongoing process of establishing internal audit units
in public sector agencies. Establishment of an internal audit unit will be a dated covenant.
13. External Audit. Audits of project financial statements, under the IDA portfolio in
Tajikistan, have been contracted out in block by the State Investments Committee (SIC). Entity
audits, however, are contracted by the respective implementing entities. Project and entity audits
will be conducted by independent auditors acceptable to IDA on terms of reference (TOR)
acceptable to IDA and according to the International Standards on Audit (ISA) issued by the
International Auditing and Assurance Standards Board of the International Federation of
Accountants.
14. The annual audited entity and project financial statements will be submitted to IDA
within six months of the end of each fiscal year and also at the project closing. The entity
financial statements will be required to monitor financial performance and, as part of the
institutional strengthening of DVK, to include the modernization of accounting and of billing and
collection systems. The auditor will also be required to assess and report on adherence to the
project indicators and financial covenants. The audited project financial statements shall be made
publicly available in accordance with the World Bank’s Access to Information Policy. Upon
receipt of the audited financial managements the Bank will also make them publicly available.
The following table identifies the audit reports that will be required to be submitted by the
project together with the due date for submission:
Audit Report Due Date Entity Financial Statements of DVK Within six months of the end of each fiscal year
and also at the grant closing
Project Financial Statements (PFS), including Statement of
Sources and Uses of Funds, Use of Project funds by
Within six months of the end of each fiscal year
and also at the grant closing
43
Activities, SOE Withdrawal Summary, Statement of
Designated Account, and Notes to the Financial Statements.
Disbursements
15. The project will follow transaction-based disbursement procedures. Withdrawals from the
Grant Account will be requested in accordance with the guidance to be given in the
Disbursement Letter. DVK will be responsible for keeping the supporting documentation for all
project expenses, especially those reported through statement of expenses (SOEs), and for
making them available to World Bank supervision missions and the auditors.
16. The Minimum Application Size for direct payments and for issuance of Special
Commitments will be communicated to the Borrower in the Disbursement Letter. All withdrawal
applications for direct payment or for issuance of special commitments will be supported by full
documentation. DVK will maintain a Designated Account, in the currency of the Grant, in a
commercial bank satisfactory to IDA. The designated account will be subject to audit as part of
the audit of the project financial statements.
17. Designated Account (DA). To facilitate timely disbursements for eligible expenditures
on works, goods and services, the Borrower/Recipient will open and operate, under terms and
conditions acceptable to the Bank, DAs in US dollars in a commercial bank acceptable to the
World Bank. DVK will be responsible for the appropriate accounting of the funds deposited into
the designated accounts, for reporting on the use of these funds and for ensuring that they are
included in the audits of the financial statements. Consistent with the Disbursement Guidelines,
the advance method will not be available for use until the existing lapsed loan in the portfolio is
resolved. Ceiling of the DAs and the Minimum Application Size for Direct Payment or Special
Commitment will be communicated in the Disbursement Letter.
18. Applications documenting the advances to the DAs will be made on a quarterly basis or
more regularly as needed. Expenditures against contracts for the following will be fully
supported: (i) works estimated to cost greater than US$1,000,000 equivalent; (ii) goods estimated
to cost greater than US$200,000 equivalent each; (iii) consultant services for consulting firms
estimated to cost greater than US$100,000 equivalent each; and (iv) individual consultant
services estimated to cost greater than US$50,000 equivalent each. Expenditures against
contracts below these limits will use SOEs. Documentation supporting expenditures claimed
against SOEs will be retained by the respective implementing agencies and will be available for
review when requested by Bank supervision missions and project auditors.
Procurement
19. Procurement Capacity and Risk. The PMC shall absorb functions fulfilled by the
currently existing PCU established for implementation of the ongoing DWSP, including
responsibility for carrying out project procurement. The PMC will work in close collaboration
with DVK staff to ensure transfer of knowledge to DVK procurement staff through on-the-job
training to build procurement capacity within the water supply service. Procurement risk
assessment was carried out based on Procurement Risk Assessment and Management System (P-
RAMS). Little procurement capacity exists in DVK with no established internal procurement
44
procedures. Procurement delays due to these factors were identified as main procurement risks.
Experience with DWSP indicates that procurement in the country does not attract adequate
competition. To mitigate these risks, experienced procurement consultants of PMC should be
engaged to support DVK procurement team. It is expected that PMC will have been selected by
August 29, 2011 (effectiveness), pending contract signature and mobilization. POM with clear
description of procurement processes will be developed and consulted by DVK staff during the
project implementation. The Bank team will closely supervise and monitor the procurement
processes and provide support with regard to facilitation of capacity development in
procurement. Procurement packages will be developed such to ensure competition in line with
market of procured items. To facilitate timely implementation of the procurement plan, terms of
reference and for the initial procurement tasks will be prepared prior to effectiveness. The
procurement risk is rated as high.
20. Applicable Guidelines. Procurement for the proposed project will be carried out in
accordance with the World Bank’s "Guidelines: Procurement under IBRD Loans and IDA
Credits" published in May 2004 and revised in October 2006 and May 2010 (Procurement
Guidelines); "Guidelines: Selection and Employment of Consultants by World Bank Borrowers"
published in May 2004 and revised in October 2006 and May 2010 (Consultant Guidelines); and
the provisions stipulated in the Financing Agreement.
21. Procurement Plan. Initial procurement plan covering all procurement activities for the
entire project period has been developed and will be agreed at the negotiations. The plan will be
updated annually, or as required, to reflect the actual project implementation needs. Each update
will be subject to the World Bank’s review and will be published on the World Bank’s external
web site in accordance with the requirements of the World Bank Guidelines. A General
Procurement Notice will be published at the negotiations. Summarized Procurement Plan is
provided below.
Works. Works contracts for renovation of rapid sand filters at Samotechnaya water
treatment plant, reconstruction of pumping station and tanks at Napornaya WTP, network
cleaning, and renovation of house connections are expected under the project. Works will be
procured through NCB procedure except for the first two contracts (estimated at US$3.6
million and US$ 1.5 million respectively) where ICB procedure will be used.
Goods. Goods contracts, including supply and installation of flow meters (US$0.2 million),
supply and installation of water meters for apartments (US$5.1 million), and supply and
installation of the hydraulic modeling, pressure zones and SCADA (USD 1.2 million) will
be procured through ICB procedure. Other contracts for procurement of in-network
chlorination equipment, of laboratory equipment, of software for accounting and billing,
network information system and hydraulic modeling for DVK, as well as implementation of
the communication and public awareness program below US$100,000, will be procured
through shopping procedure.
Consultants' services. Consultants' services would include capacity building for operational
performance improvement and DVK institutional strengthening (US$2.7 million) and
engineering design and supervision of physical investments (US$0.4 million). In view of the
45
large value of the packages, QCBS will be applied for all contracts. LCS will be used for
hiring audit services.
Training. Training program, including management practices, operations and maintenance,
energy efficiency, human resource management, customer relations, and exploring a
partnership with a leading regional water utility, will be developed and cleared by the Bank.
Operating Cost. Budget for operating costs will be prepared and cleared by the Bank
22. Procurement Supervision and Ex-post Review: Procurement reviews and supervision
will be provided from the country office. In addition, two supervision missions are expected to
take place per year during which ex-post reviews will be conducted on a sample basis (one per
five contracts) for the contracts that are not subject to Bank prior review. One post review report,
which will include physical inspection of sample contracts, including those subject to prior
review, will be prepared each year. Not less than 10 percent of the contracts will be physically
inspected.
23. Procurement Thresholds: The thresholds for procurement methods and Bank prior
review are indicated in the following table.
Expenditure
Category
Contract
Value (US$) Procurement Method Bank Prior Review
Goods
>100,000 ICB All the ICB contracts
≤100,000 Shopping The 1st Shopping contract
NA DC All DC contracts
Works
>1,000,000 ICB All the ICB contracts
≤1,000,000 NCB The 1st NCB contract
≤ 100,000 Shopping The 1st Shopping contract
NA DC All DC contracts
Consultant
Services
>200,000 QCBS, QBS, FBS, LCS All contracts above US$100,000
for firms plus the 1st CQS
contract regardless of value; and
all contracts above US$50,000
for individuals; and all SSS
contracts.
≤200,000 CQS
NA SSS
NA IC
Notes: ICB – International Competitive Bidding
NCB – National Competitive Bidding
DC – Direct Contracting
QCBS – Quality and Cost Based Selection
QBS – Quality Based Selection
FBS – Fixed Budget Selection
LCS – Least Cost Selection
CQS – Selection Based on Consultants’ Qualification
SSS – Single (or Sole) Source Selection
IC – Individual Consultant selection procedure
NA – Not Applicable
Environmental and Social (including safeguards)
46
Safeguards Policy Compliance:
24. Environmental Management and Monitoring Plan (EMMP) and Resettlement Policy
Framework (RPF) Disclosure and Consultations: For the on-going DWSP, the EMMP was
disclosed in accordance with the WB’s policy in the country. On March 24 and 25, 2000, the
project approach and the technical, financial, institutional, social and environmental aspects were
discussed in a workshop with key stakeholders, government agencies, representatives from the
Ministry of Health, the Ministry of Environment, and the media. The EMMP was sent to the WB
InfoShop in October 2000.
25. For DWSP2, a repeater project, the borrower publicly disclosed the EMMP in both
English and Russian on the official site of the Dushanbe Municipality
(http://www.dushanbe.tj/ru) on January 14, 2011. Public consultation followed in selected
neighborhoods of Dushanbe to inform stakeholders and beneficiaries of the scope, expected
impacts and procedures of DWSP2, including EMMP and RPF (January 14 and 25, 2011).
Minutes were recorded. The EMMP was updated taking into consideration the results of the
consultations and posted on the municipality web site and submitted to the WB InfoShop (on
February 2, 2011).
26. Resettlement Policy Framework: Involuntary Resettlement OP 4.12 is triggered. Since
these detailed impacts will only be known once project implementation commences and
technical designs are finalized, the borrower has developed (in English, Russian and Tajik) and
disclosed (January 30, 2011) a Resettlement Policy Framework (RPF) which will inform all
activities involving land acquisition, restriction of access to land or services and loss of assets.
The RPF will serve as a screening device and, if any impacts are identified, the Borrower will
develop relevant Resettlement Action Plans (RAPs) as described in the RPF and present it to the
World Bank for approval. No civil works will commence until the World Bank approves such
plans. Since OP 4.12 was not triggered in DWSP, DVK has been informed and provided
documents to make them familiar with the WB requirements for social impacts. The Monitoring
and Evaluation officer will be given any additional training as required to manage the social
surveys, which will be undertaken by qualified consultants. The Resettlement and Compensation
Committees will also be provided any additional technical training needed to manage RAPs.
These committees will include and work closely with the Municipality of Dushanbe who has
both experience and ultimate responsibility for resettlement and land acquisition issues. In
addition, World Bank missions will include a specialist for guidance and advice on social
development issues (including safeguards).
27. Notification to riparian countries: OP 7.50 applies to the project as the city of Dushanbe
is located on an international waterway as defined by paragraph 1(b) of OP 7.50. However,
considering the nature of the investments, the exception to the external notification requirements
of OP 7.50 set forth in paragraph 7(a) is applicable (management memorandum is available in
project files). The project involves rehabilitation of ongoing schemes that (i) will not adversely
change the quality or quantity of water flows to the other riparians and (ii) will not be adversely
affected by the other riparian's water use.
47
Capacity of the Borrower for Safeguard Implementation:
28. The Borrower, including the Municipality of Dushanbe, the Dushanbe Vodokanal and the
Project Coordination Unit, have managed the initial DWSP and are familiar with the World
Bank's Safeguard Policies. Application of environmental policies has improved in the last two
years, following specific supervision and advice provided by the Task Team. The World Bank
team will continue closely monitor EMMP implementation, providing relevant assistance and
capacity building. The EMMP will be a direct responsibility of DVK, under the management of
an international PMC. Responsibilities for daily monitoring will be part of construction
supervision. Compliance with the EMMP and monitoring of the impact during the construction
phase will be undertaken by an Water Supply and Environmental Engineer of DVK with support
and oversight of the PMC as part of his/her contract supervisory duties and by the Municipal
Department for Environment.
Environment
29. Project Activities and Locations: DWSP2 is a repeater operation to continue improving
water supply service in Dushanbe. The project aims at combining investments for urgent
rehabilitations with more strategic investments in demand management and institutional
strengthening. Component 2, Priority rehabilitation works, which will have direct environmental
impacts, will cover the following activities: (i) the renovation of rapid sand filters at
Samotechnaya WTP; (ii) the installation of in-network re-chlorination; and (iii) network
cleaning; (iv) re-construction of pumping station and two tanks at Napornaya WTP. Civil works
will predominantly entail pipe replacement, which includes building and pavement demolition,
trench excavation, pipe laying, trench filling, civil works for foundations and erection of new
buildings and tanks, and pavement application, as well as renovation of sand filters. All works
under the investment program are planned to be of a reconstruction or rehabilitation nature, on
properties owned by DVK or rights-of-way assigned to municipal infrastructure. All these
activities are not expected to generate significant adverse environmental and social impacts.
30. Environmental Impacts: Potential negative impacts of the project would relate to (i)
inappropriate disposal of water treatment sludge; (ii) safety hazards from chlorination process;
(iii) pollution by construction runoffs; (iv) disturbance during construction including dust, noise,
vibration, access restriction, closure of roads and increased traffic; (v) improper disposal of
demolition debris; (vi) damage to existing utility services during pipe repairs and installation;
(vii) safety hazards from construction activities; (viii) spillage of fuel and oil from construction;
and, (ix) damage to trees and vegetative cover. At the same time, the project is expected to bring
significant positive environmental and health benefits, such as improvements in public health
through better quality and availability of treated water and improvements in the sustainability of
raw water sources through reductions in losses and wastage.
31. Project Environmental Category: Based on expected impacts, the project is qualified as
Category B for which a partial environmental assessment (EA) and a simple EMMP should be
prepared and applied during its implementation.
48
32. Key Measures to be Taken by the Borrower to Address Safeguards Policy Issues –
Environment: The required mitigation measures for the project activities are standard and widely
use in construction practices. They are well prescribed in the EMMP, which was prepared for the
initial project. As the new project will support same types of activities as under the initial project,
it is proposed that the existing EMMP be applied to new project. The most important mitigation
measures proposed would include (a) measures for reduction of noise and vibration. Excavation
and works related to will not be performed in residential area at night time. The daily control of
the equipment applied in construction and transportation will insure the allowable noise. The
over vibration from heavy machines and mechanisms will be maximally reduced; (b) Air
protection. The contractor will apply measures for air protection from dust during the process of
construction and materials transportation, conducting periodic watering of construction areas and
removing all unnecessary materials. All streets, pavements and construction areas shall be
cleaned up upon the completion of construction works; (c) Removal of silt and sludge formed
after the water treatment. These activities will be done strictly in accordance with the
construction standards and rules (SNiP-2.04.02-84), which require undertaking of special
measures for collection and utilization of sediment from the water treatment stations. Sludge and
silt disposal will be in special places approved by the environmental authorities. The sediments
will be not drawn into permeable soils close to the surface water and buildings; (d) Prevention of
underground water pollution. On the construction sites waste collection and drainage control will
be provided. To prevent the development of erosion, all the damaged vegetation shall be
transplanted, and all the formed pits and trenches shall be brought to their original state; (e)
Prevention of chlorine leakage. For prevention, the chlorine system should operate in a vacuum
for leakage prevention, the chlorinators shall be produced from materials that have the capacity
to withstand the corrosion effect of chlorine, and the chlorine meter shall be installed inside the
chlorination unit; (f) Prevention of accidents during construction. The contractors will take all
necessary precautions in all fields of construction work, in particular, in residential areas and
heavy traffic areas. The precautions will be directed to protect labor and construction workers'
health. Public access to the construction sites will be limited; (g) Control of fuels and lubricants.
All above ground tanks will be kept in impervious beds, the tank capacity shall be 110 percent of
the amount stored and necessary measures for prevention of fuel leakage shall be taken during
the operation of equipment. Relevant requirements for the environment protection shall be
strictly followed.
33. Integration of environmental safeguards requirements into the project documents. The
EMMP stipulates all contracts for construction works will include requirements for
implementation of specific mitigation measures and good construction practices. Furthermore,
daily control and monitoring of construction work will be part of responsibilities of the PMC.
The quality of drinking water supply will be monitored according to national standards using
new laboratory equipment financed by the DWSP.
Social Impacts
34. The social development objectives of this project focus on ensuring that the needs and
constraints of all categories of customers are addressed with a special focus on vulnerable
subgroups and through establishment of information and feedback mechanisms. The main social
impacts will be that customers will now benefit from more reliable, regular and cleaner water
49
supply. Water use will now be monitored accurately, and billing options will be clearer and more
efficient. However, this means that customers will now have to pay according to their water use,
and earlier informal arrangements to reduce payment will no longer be possible. Further,
nonpayment will result in water supply cut off. This may have negative impacts on some
subgroups who may not have regular income streams or may be living in more temporary
housing.
35. Project Activities May Involve Some Land Acquisition. While the project will largely be
limited to reconstruction or rehabilitation of existing structures, some land within residence
compounds may have to be temporarily occupied for work.
36. Key Measures to be Taken by the Borrower to Address Safeguards Policy Issues – Social:
To facilitate achievement of the project’s stated social development objectives, the main tool
used will be a Customer Satisfaction and Social Analysis Study which will develop a baseline on
customer satisfaction and perceived needs and gaps in current service provision. This study will
(a) inform project design by identifying areas and subgroups who may be disadvantaged and
underserviced; (b) inform on customers willingness and ability to pay; (c) suggest indicators for
monitoring beneficiary impact; (d) guide the awareness campaign on reducing water usage; and
(e) highlight preferences linked to improving the image of the service provider.
37. The study will serve as a baseline to measure project impact, as well as a framework
within which ongoing project impacts on customers are monitored. It is expected that follow-up
data will be collected once or twice a year during each year of project implementation. The final
survey at the end of project will be more comprehensive to capture improvements in customer
satisfaction and overall project impacts: both those directly linked to activities financed by the
project and those that may have indirect impacts resulting from the general improvement of the
utility and sector.
38. Study Implementation Arrangements: The study will be conducted by an independent
firm, and it is expected that DVK will recruit a similar entity to carry out the mid-
implementation surveys, as well as the end of project surveys. Within DVK, the monitoring and
evaluation officer will be assigned to coordinate and manage the study, as well as the mid-
implementation and end project surveys. These will be crucial components of the M & E
framework of the project.
39. Social Safeguards Implementation Arrangements: The overall coordination of the project
will be provided by DVK, which will oversee all resettlement planning and coordinate all issues
relating to the compensation. They will have assistance from the Municipality who has authority
on land acquisition issues in Dushanbe. Screening for the RAP will be undertaken by the
consultants contracted to design the activity under the supervision of Land Management
Department of Dushanbe Municipality. Following the socioeconomic census and identification
of affected parties, a RAP will be developed. This will be coordinated by a Resettlement and
Compensation Committee that is set up and overseen by DVK. It is anticipated that a private
consultant will undertake the work or an NGO/CBO will be commissioned for this particular
task. Following completion of the RAP for an activity, the Resettlement and Compensation
Committee must submit the RAP to the Mayor of Dushanbe city for approval. The RAP is also to
50
be submitted to DVK office to ensure compliance with the RPF and consistency in approach
among different activities.
40. The grievance committee will be comprised of at least five members of whom two are
DVK and Municipality of Dushanbe representatives (but not those on the Resettlement and
Compensation Committee). The other three members should be independent of the project
implementing authorities and Government of Tajikistan. They should be chosen from recognized
NGOs/CBOs operating in Dushanbe along with eminent persons of appropriate standing.
41. The customer survey and social analysis will also serve as an important tool for
information sharing and consultation with potential affected persons. The intermediate surveys
during project implementation will further serve as a channel for continued dialogue. The use of
both qualitative and quantitative methods in these studies will provide adequate venues to ensure
that consumers’ priorities and problems are recognized and addressed.
Monitoring & Evaluation (M&E)
42. The project indicators and detailed targets to be achieved under the DWSP were
developed according to the project’s design with the performance-based service contract. Due to
the cancellation of the contract with the private operator, the project did not manage to
implement most of the detailed operation improvement programs, which included, inter alia,
reduction of energy consumption, optimization of pressure in the network, strengthening of water
quality control, financial management and improved customers relations. As a result, many
indicators were not technically measurable. In light of this experience, for DWSP2 the PDO-
level indicators were selected among these parameters, which are realistically quantifiable.
43. DVK will retain the responsibility for data collection for M&E activities of DWSP2. The
baseline data are available from collection during the implementation of DWSP and from the
feasibility study prepared for DWSP2. Monitoring and evaluation of outcomes and results during
project implementation will follow standard World Bank practice. DVK will collect the data and
pass them to the PMC, which will present updated data in regular project reports and in
conjunction with World Bank missions. Indicators, which require additional data or surveys (i.e.,
the social and customer satisfaction survey) for their measurement, will be collected at least three
times during the course of the project: baseline survey currently under implementation under
DWSP, mid-term survey and at the end of the project. The reports shall be published in a form
accessible to management of DVK, Municipality of Dushanbe and other interested stakeholders.
44. As DVK staff will be responsible for data collection for measuring the indicators,
engineers will be responsible for assessment of technical indicators and financial staff of DVK
will be responsible for assessment of the state of DVK's financial viability. The annual audit will
assess the indicators collected by DVK. The overall responsibility for data collection and
issuance of M&E reports will be with the M&E specialist hired under the project. The
methodology for assessment has been developed under the DWSP by a dedicated M&E
consultant.
Role of Partners (if applicable)
51
i. The project will not be co-financed, but EBRD, EIB and IFCA have expressed
strong interest in providing financing to other parts of the PIP.
ii. If other donors make funds available, these investments will be implemented as
parallel financing to the IDA project.
52
Annex 4: Operational Risk Assessment Framework (ORAF)
Negotiations and Board Package Version7
Project Development Objective(s)
Improve water utility performance and water supply services in selected areas of Dushanbe.
PDO Level Results
Indicators:
1. Water quality in the network
2. Customer satisfaction with water supply services
3. Improvement of financial performance of DVK
Risk Category
Risk Rating Risk Description Proposed Mitigation Measures
Project Stakeholder Risks
M-L Public discontent with meter-based billing, and increased tariffs, and service interruption (while rehabilitating works under the project). DVK employees and managers may resist operational, management and administrative changes, and unions may aggravate the situation. Qualified staff may leave in the face of these changes, especially with existing low salaries.
Project design includes focused intervention to ensure Regular Social Analysis and Customer Satisfaction Survey (SACSS) will be carried out to monitor the social situation and to prepare adequate measures. The project includes financing of public information campaigns and focused interventions to ensure effective rehabilitation of assets with limited disruptions to service. The project aims at strengthening the complaints and dispatch center in DVK. The selection of target communities to be covered under the limited scope of the project is based on technical criteria, while the identification and monitoring of potential vulnerable sub-groups is done though social analysis and follow up surveys As part of the OPIAP the municipality and DVK will have to commit to instituting staff incentives including carrying out a Compensation Review.
Implementing Agency Risks
High Implementation may fall behind schedule due to weak managerial strategic planning, implementation capacity at DVK.
The project will benefit from the services of a project Management Consultant internationally recruited, including TA and CB activities. Smooth transition between PCU and PMC will be monitored. As project
7 This is the version that should be used for Negotiations and submission for Board Approval.
53
implementation progresses gradual transfer of managerial responsibilities from PMC to DVK.
Project Risks
Design
Medium- I
Any backtracking or delays on improvements to the financial operations of the vodokanal may jeopardize or delay the rebounding of the financial health of the vodokanal, disappoint officials, and risk achievement of the financial sustainability objective. Demand management component is new for the country and needs further discussion with Client. There may also be public discontent with the meter installation and introduction of billing. Project may face delays and cost overruns before meeting its objectives.
Actions to ensure improvements in the billing and collection received support from all levels of Government and activities to address them (complete inventory of customers, software and mechanisms to improve billing and collection among others) are scheduled to be accomplished in the first year of the Project. These measures will be supported by public information and awareness raising. i) Studies will be carried out to better define and design demand management (DM) activities. ii) Supervision team will include experts experienced in water DM and utility capacity building. iii) Implementation consultation will be in place to assist with project implementation unlike DWSP1. iv) Institutional component will finance communication strategy and public awareness campaign. The hired PMC should jump-start capacity building actives. While the World Bank – and possibly other donors- will continue the dialogue with the GORT to strengthen the utility.
Social and Environmental
Low
i) Unexpected social opposition to the water demand management plan may result in decrease or reversal of Govt. commitment to demand management. ii) Risk that perhaps some vulnerable groups will be negatively impacted. The Project risks (category B) are linked to short term
A Social Analysis and Customer Satisfaction Survey (SACSS) is being carried and preliminary data is expected prior to Negotiations. Vulnerable groups will be captured under this survey. In addition, annual CSSs will be undertaken during the life of the project An awareness campaign and consultations with the stakeholders including local NGOs and CSOs will be included in project design. The project will begin with improving billing and collection, before altering the tariffs structure. This with the aim that those who can, and currently do not, start to pay. Further, the project will ensure that the applicable safety net for the most vulnerable apply, so that hardship risk is mitigated for these groups. EMMP provisions/measures will guide all contracts for
54
environmental impacts related to reconstruction and rehabilitation. Stipulated mitigation measures will be not implemented and monitoring activities could be not adequate.
construction works. Utility will monitor and control construction works The quality of drinking water supply will be monitored according to international and national standards. The WB team will closely monitor EMMP implementation, providing relevant environmental and social safeguards capacity building and assistance. DVK will develop and have the Resettlement Policy Framework agreed with the Bank.
Program and Donor
Low Unavailability of parallel financing for the PIP would reduce project’s impacts. Delayed/differed entry of other donors may negatively affect synchronization of activities
The project has been thoroughly fine-tuned as a stand-alone operation to strike a balance among priorities. The comprehensive feasibility study allows clear division of intervention, in a way that can facilitate a modular approach even at different times. Coordination with other potential donors is continued through frequent exchanges of information.
Delivery Quality Medium-I GORT fails to improve its billing and collection, and later to enforce a tariff policy compatible with DVK’s financial viability and demand management goals. Contract management is still a challenge.
Team is having on-going discussions with the Municipality and GORT. Study tour to St. Petersburg vodokanal for senior GORT and Municipal managers is being organized in summer 2011. (iii) Water Sector note was prepared and discussed with GORT.
Overall Risk Rating at Preparation
Overall Risk Rating During Implementation
Comments
M-I M-I
55
Annex 5: Implementation Support Plan
Strategy and Approach for Implementation Support
1. The strategy for implementation support (IS) has been developed based on many years of
experience gained during preparation and implementation of the DWSP1. This project will
require effective and robust management for it to achieve its development objective. To support
a weak implementing agency, the project design envisions an internationally recruited Project
Management Consultant (PMC), which will be a firm of national and international experts
contributing to project implementation from inception until the end. The IS will be supported by
the highly decentralized staff located in country, thus offering better opportunities for more
frequent field visits and daily interaction with the counterparts.
2. Technical: The World Bank will do a technical review of the procurement packages
(most expected to be ICBs for works, goods and consulting services) and will follow up with
technical review missions on a regular basis.
3. Procurement: Implementation support will include a) provision of support to DVK
capacity development; b) reviewing procurement documents and providing timely feedback to
DVK and the PMC; c) providing detailed guidance on the Bank’s Procurement Guidelines to
DVK and PMC; and d) monitoring procurement progress against the detailed procurement plan
through the two supervision missions are expected to take place per year, during which ex-post
reviews will be conducted for the contracts that are not subject to Bank prior review.
4. Financial Management: As part of its implementation support missions, the World Bank
will conduct risk-based financial management supervisions, initially after every six months and
thereafter at appropriate intervals, depending on the level of assessed risk. These will pay
particular attention to (i) project accounting and internal control systems; (ii) budgeting and
financial planning arrangements; (iii) review of unaudited Interim Financial Reports; (iv) review
of audit reports, including financial statements and remedial actions recommended in the
auditor’s Management Letters; and (v) disbursement management and financial flows and
counterpart funds, as applicable.
5. Environmental and Social Safeguards: The Bank team will actively support and build
capacity of DVK in implementation of the agreed actions in the EMMP and specifically in
screening the impact of the project activities using the RPF. If any impacts are identified, the
Bank will provide relevant support to DVK and the PMC in developing Resettlement Action
Plans to be approved by the World Bank to detail the specific impact and compensation.
6. Monitoring and Evaluation: DVK will retain the responsibility of data collection for the
monitoring and evaluation activities of DWSP2. The baseline data are available as collected
during the implementation of the DWSP and by the feasibility study prepared for DWSP2. DVK
will collect the data for the PMC to compile the updated data in the regular project reports
(quarterly and yearly) and in conjunction with World Bank missions. Indicators, which require
additional data or surveys (i.e., the social and customer satisfaction survey) for their
56
measurement, will be collected at least three times during the course of the project: baseline
survey currently under implementation under DWSP, mid-term survey and at the end of the
project. DVK staff will be responsible for collection of the data for measuring the indicators:
engineers will be responsible for assessment of technical indicators; financial staff of DVK will
be responsible for assessment of the state of financial viability of DVK and reporting on the
financial indicators in the progress reports. Financial data and assessments, including covenants,
will be verified in the annual audits. The overall responsibility for collection of data and issuance
of the M&E reports will be with M&E specialist hired under the project. The methodology for
assessment has been developed under the DWSP by a dedicated M&E consultant.
Implementation Support Plan
7. A majority of the Bank’s IS team members, including the co-TTL, are either based in the
World Bank Country Office in Tajikistan (Country Office) or in Central Asia. This will ensure
timely, efficient and effective implementation support to DVK and PMC. Formal IS missions
and field visits will be carried out semiannually or more frequently if needed. Operational staff
located in the Country Office will provide the daily interaction with DVK and the PMC.
8. Technical inputs: The team’s engineers, including co-TTL based in the region, will
conduct site visits on a semiannual basis throughout project implementation. Engineering inputs
can also be provided as and when required. Engineering and related inputs will be required to
review bid documents, technical specifications and fair assessment of the technical aspects of
bids. During construction and commissioning, technical supervision will be warranted to ensure
technical contractual obligations are met.
9. Institutional Strengthening Actions: Implementation of the OPIAP and institutional
strengthening actions are the key for success of the project. A Governance and Institutional
Capacity Building Expert will, therefore, be retained by the World Bank team to relevant provide
support to DVK and PMC ensure efficient implementation of the agreed actions.
10. Fiduciary requirements and inputs: Regular hand holding and on-the-job mentoring by
the Bank’s financial management specialist and procurement specialists will be available as per
the practice established during implementation of the DWSP1. DVK will be provided with the
opportunity to build the capacity of its staff to strengthen its financial management capacity and
to improve procurement management efficiency. Both the financial management and the
procurement specialists are based in the country office to provide timely support. Additional
support from the Headquarters and Almaty will be available in the areas of financial
management and procurement respectively. Formal support for financial management and
procurement will be carried out semi-annually.
11. Safeguards: Inputs from an environment specialist (based in the Headquarters) and a
social specialist (based in the region) will be available throughout the project period. They will
provide regular support to DVK and the PMC through regular and constant monitoring of social
and environmental issues and supervision mission.
57
Operations: An operational staff (based in the region and the Country Office) will be available
to DVK and the PMC for daily interaction, support to project implementation and regular advice
via email and telephone. The Bank’s implementation support is summarized as follows:
Time Focus Skills Needed Resource
Estimate
Partner
Role
First
twelve
months
Start up and
technical TORs
and procurement
of components
(consulting
services, good
and works)
Water Supply and Utility
Specialist/Procurement/FM
150,000
12-60
months
Implementation
of components 1,
2 and 3
Water Supply and Utility
Specialist/Procurement/FM/FA/Ops
Exp/Env exp/Soc Exp/M&E
540,000
Other
II. Skills Mix Required (over project implementation – 5 years)
Skills Needed Number of
Staff Weeks
Number of
Trips
Comments
Water Supply System and Utility
Expert
50 10
Governance and Institutional CB
Expert
30 8
Procurement Expert 15 5
FM Expert 15 5
Financial Analyst 20 5
Operations Expert 20 5
Environmental Expert 10 5
Social Expert 10 5
M&E 20 8
III. Partners
Name Institution/Country Role
DVK Utility/Tajikistan Implementing
Agency
58
Annex 6: Team Composition
World Bank staff and consultants who worked on the project:
Name
Title
Unit
Pier Francesco Mantovani Lead Water and Sanitation Specialist,
TTL
ECSS6
Anna Cestari Water Resources Specialist, Co-TTL ECSS6
Serdar Jepbarov Operations Officer ECCTM
Maha Armaly Sr. Urban Finance Specialist ECSS6
Takhmina Mukhamedova Operations Analyst ECSS6
Yarissa Lyngdoh Sommer Operations Analyst ECSS6
Arcadii Capcelea Sr. Environmental Specialist ECSS3
Roxane Hakim Social Development Specialist ECSS4
Leila Talipova Consultant ECSSD
Dilshod Karimova Procurement Specialist ECSO2
Shodi Nazarov Financial Management Specialist ECSO3
Friedrich Holzmann Consultant
Nils Junge Consultant
John Otieno Ogallo Sr. Financial Mgt. Specialist ECS03
Kenneth Mwenda Counsel LEGEM
Joseph Formoso Sr. Finance Officer CTRFC
Milane Reyes Program Assistant ECSSD
Maria Teresa Lim Program Assistant ECSSD
Farzona Mukhitidova Program Assistant ECCTJ
Aziza Nasyrova Program Assistant ECCTJ
Oscar Alvarado Sr. Water Supply and Sanitation
Specialist, peer-reviewer
LCSUW
Shyamal Sarkar Sr. Sanitary Engineer, peer-reviewer SASDU
59
Annex 7: Financial and Economic Analysis
1. IDA funds, co-financing and flow of funds. Departing from the previous approach of
charging DVK up to 5 percent interest on IDA funds, the Ministry of Finance (MOF) decided to
pass on IDA grant terms (US$16 million, no principal and no interest repayments) to DVK on
condition that the Municipality of Dushanbe (MOD) provides the counterpart financing to the
project (US$3 million). This is done to provide the critical support that DVK needs to lift itself
from a difficult financial situation and to free scarce resources from debt repayment obligations
to more productive and necessary activities, such as increased operations and maintenance and
training for employees. This is also required to ensure DVK’s debt service ratio in compliance
with the covenants in the legal agreement (>=1.2). MOD as DVK’s owner will provide the
necessary performance oversight of DVK and the project. MOF and MOD are considering
passing the co-financing funds on to DVK on a similar IDA grant funds basis (no interest or
principal) but with a commitment fee. The fee can be waived provided DVK meets certain
financial operational improvements including (a) full registration and billing of all customers
(first year of the project); (b) improvements in collection (annually); and (c) overhaul and
automation of the accounting and billing department and of the role of collectors (second year of
the project).
2. Financial Analysis – Current Situation. The financial statements of DVK are audited
under the DWSP project and, with other consultant reports, form the basis for the analysis of the
financial situation of DVK.
A. Revenues. A major problem for DVK is that it does not include all the consumers in its
billing data base. DVK bills its customers on a per capita basis (where meters are not
installed), and households increasingly underreport the number of users. DVK currently
registers (and bills) about 48 percent of its customers, which is not sustainable or equitable.
The number of apartment customers registered declined at an unrealistic rate (17 percent and
20 percent in 2007 and 2008 respectively) as households report fewer persons living in the
residences. Despite the reported decline in consumers, DVK increased its revenue through
substantial tariff increases (tariffs doubled in 2008 and increased by about 15 percent in
2009). However, the main burden of the tariffs and tariff increases fall on commercial and
budgetary customers who pay three and seven times more than households respectively.
Budgetary institutions generate about three times the revenue generated by households and,
therefore, represent the main source of revenue for the vodokanal. This, in effect, means that
the government provides a substantial subsidy to the vodokanal and an untargeted subsidy to
households, which reduces household incentive for water conservation. Improvements in
collection and management of accounts receivables are also needed. For tariff adjustments,
the MOD will review the tariff proposals by DVK twice a year to determine (a) the extent of
improvements in the billing and collections achieved and (b) extent of tariff increases or
subsidies needed, while giving increased importance to cost recovery from tariffs. Sustained
improvements to billings and collection, as well as overall sound financial operations of
DVK are the cornerstone for the success of the project in reaching its development objective
60
of financial sustainability. Backtracking on this important issue is a risk to the sustainability
of DVK as a viable commercial and service-oriented enterprise.
B. Expenditures. DVK operates at very low production cost levels, and it is not likely that
costs overall can be reduced. Staff salaries are very low, while electricity costs are very high
due to unnecessarily high volumes of produced and wasted water (about 75 percent).
Electricity costs are about 30 percent of total production and distribution costs and are more
than three times production salary costs. Salaries remain at a low level and do not allow
DVK to attract the level of skills that it needs to run a modern water and wastewater utility.
Overall staff numbers have increased by 56 in between 2007 and 2009 to reach a total of
973. The efficiency of DVK staff as measured by number of staff/000 registered customer
declined between 2008 and 2009. DVK does not appear to be an overstaffed utility given its
reliance on manual labor for its operation. On the other hand, other nonproduction costs
(include administrative and selling costs) are very high and reached 44 percent of DVK’s
total operating costs, leading DVK into negative income. A review of DVK structure and
organization will be part of the capacity building for the utility.
C. Debt. The Government’s decision to pass on the IDA grant terms to DVK (without
requiring DVK to repay principal or interest) is absolutely necessary to put DVK into a
sustainable path of financial recovery. DVK is almost unique in the water sector in the
region for not receiving any government capital subsidy, particularly given its weak starting
financial situation and large investment needs. Currently, DVK is responsible for repaying
MOF the principal of the credit and the grant of DWSP. MOF also charges interest, which
will soon reach 5 percent. The debt repayment (interest and principal) is estimated to reach
TJS 2.6 million in 2011 on the existing DWSP credits and grant. The Government and DVK
will also have to ensure that the debt service coverage covenant (not less than 1.2) under
DWSP is maintained. DVK’s debt (with IDA through MOF) is denominated in US dollars,
which exposes DVK to long-term foreign exchange risks. DVK’s debt is already high, and
its debt/asset ratio reached 1.04 in 2009, which means that its long-term debts are higher
than its long-term assets. By comparison healthy ratio is below 50 percent. This will require
that any additional debt by DVK be evaluated carefully in order not to jeopardize the long-
term sustainability of DVK.
3. Projections and NPV Calculations. Behind the financial and economic analysis, the
main assumption for project success in terms of achieving financial sustainability is the
improvement in recording, billing and collection from the vast majority of customers. It is
assumed that this will be accomplished by the first project year given the high level of awareness
among officials at both local and central government levels, and advanced steps are being taken
to take action. Projections of DVK’s income, expenditure and cost recovery tariffs are based on
the estimated water demand increases, reductions in water waste, and improved billing and
collections. Major cost items added to the projections include depreciation and operations and
management costs of the new investments. Based on these assumptions and IDA financing
terms, the financial net present value of the investments are high and reach TJS 183 million, and
the financial rate of return approaches 30 percent. Provided DVK undertakes the necessary
financial improvements, its sustainability will be assured in the medium to long term. The
project, and particularly the full grant element of the financing, gives DVK the appropriate tools
and time to reach sustainability.
61
4. Economic Analysis. The economic analysis evaluates the economic costs and benefits
with and without the project. Without the project, the main economic costs will be continuous
waste of water and electricity at high levels of water production. Lack of maintenance will
accelerate the deterioration of the water supply facilities in the city and erode benefits currently
accruing from the present system, while maintaining a weak billing and collection culture. Not
having the planned improvements in water supply services and the operational management of
DVK as the provider of a basic service in the capital will have broader economic implications on
the vodokanal itself and on the long-term social and economic growth prospects of Dushanbe.
With the project, additional capital investment costs and larger operations and maintenance costs
will be required. On the benefits side, the project will allow for (a) reduction in electricity costs,
(b) reduction of losses of economically valuable water, and (c) increase of supply of water to
additional Dushanbe residents. Using these assumptions, the project is economically justified
with an internal rate of return around 100 percent. This high rate of return is largely due to the
assumed reduction in water losses valued at the cost recovery tariff, which are real ―economic‖
gains due to the project. Increases in costs and reductions in benefits of 20 percent each will keep
the economic rate of return high at an estimated 75 percent.
5. The Project includes other benefits that are difficult to quantify. In Tajikistan in
general, and in Dushanbe in particular, the population has suffered hardships due to an
inadequate water supply system. These hardships include leakages; interruptions to overall water
supply services in general and to dwellers in high rise sections of apartment buildings in
particular; and inadequate water quality. These hardships are reflected in time and financial costs
to secure clean water (including fetching, boiling or other treatment). In addition, water borne
diseases continue to be reported in Dushanbe due to inadequately treated water. Information on
these external economic costs is not available in a manner sufficient to determine their partial
attribution to the costs of inadequate water supply (e.g., handwashing and other hygiene
measures contribute directly to reductions in water borne diseases but need the supply of clean
water). Nevertheless these costs are real to the beneficiaries and to the economy and providing
clean water contribute to their reduction.
6. Affordability. At the current tariff rates and using 2009 Tajik monthly poverty line and
extreme poverty line (TJS 162 and 104 respectively), water expenditures are affordable (for a
family of four) at 0.87and 1.36 percent respectively. However, average full coverage tariff
(including interest and principal but excluding depreciation), will require tariff increases that
would make household expenditure on water difficult to afford for very poor one income
families at 2.9 and 4.5 percent of the mentioned poverty lines. On average, projected cost
recovery tariff is about three times current tariffs. The MOD will review annually the financial
situation of MOD, based on actual data of revenues, collections and costs, to determine the
appropriate tariffs, subsidy levels and other actions required to ensure DVK's sustainability.
7. Fiscal Impact. As a grant with no repayment requirements, the IDA grant will not have a
fiscal or affordability impact on the national or municipal government budgets. The MOD will
be required to contribute US$3 million equivalent over the five-year life of the project. Based on
figures provided by the municipality, the municipal budget is growing at about 30 percent over
2010-2011. The largest part of this growth has been in capital expenditures, while growth in
current expenditure remained at a modest 10 percent. The total contribution required from the
62
MOD is about 2 percent of the total MOD budget and 4 percent of the capital expenditure
budget, which will not represent a significant burden on MOD's financial capacity to contribute
to the project.
63
Dushanbe Vodokanal - Income Statement Actuals and Projections: 2009-2030
Page 1
Water Demand Projections (000 m3) 2009 2010 2011 2012 2013 2014
Domestic Consumers 35,586.9 38,296.8 51,639.6 67,042.0 67,640.4 62,593.3
Boiler Plant 4,218.9 7,266.0 7,266.0 7,266.0 7,411.3 7,559.5
Public Consumption 14,807.7 13,326.9 12,660.6 12,660.6 12,660.6 12,660.6
Commercial Consumption 3,643.3 4,189.8 4,608.8 4,701.0 4,795.0 4,808.7
Total Consumption 58,256.8 63,079.5 76,174.9 91,669.6 92,507.3 87,622.1
Production 246,754 230,000 200,000 180,000 160,000 140,000
UFW 76% 73% 62% 49% 42% 37%
Cost/m3 produced with Dep without i 0.099 0.124 0.150 0.190 0.226 0.266
Electricity Costs/m3 projected at 15% 0.017 0.019 0.022 0.026 0.029 0.034
Cost/m3 sold/consumed (incl. dep, excl. i) 0.419 0.452 0.394 0.373 0.390 0.425
Cost/m3 sold incl. I and p excl. dep 0.387 0.417 0.379 0.351 0.393 0.448
Cost/m3 sold incl. I and p and dep 0.462 0.488 0.436 0.417 0.456 0.531
revenue/m3 sold/consumed 0.32 0.42 0.379 0.35 0.39 0.45
1.10 1.14
Tariffs (water) Effective Average Tariff 0.217 0.318 0.291 0.273 0.311 0.358
Domestic Consumers 0.118 0.126 0.136 0.145 0.153 0.161
Boiler Plant 0.118 0.126 0.136 0.145 0.153 0.161
Public Consumption 0.35 0.375 0.404 0.431 0.454 0.477
Commercial Consumption 0.85 0.910 0.982 1.046 1.104 1.159
Revenues (Water) 12,976.6 14,554.3 17,680.1 21,162.6 22,544.2 22,899.2
Domestic Consumers 4,199.3 4,835.4 7,041.6 9,736.1 10,363.3 10,069.5
Boiler Plant 497.8 917.4 990.8 1,055.2 1,135.5 1,216.1
Public Consumption 5,182.7 4,990.9 5,120.7 5,453.5 5,753.5 6,041.2
Commercial Consumption 3,096.8 3,810.6 4,527.0 4,917.7 5,291.9 5,572.4
Total Sales Proceeds 18,532 26,297 28,870 32,198 36,322 39,251
Water Sales Proceeds 12,637 20,087 22,163 25,055 28,786 31,338
WW Sales Proceeds 5,804 6,210 6,707 7,143 7,536 7,913
Other Sales 91
Total Cost of Sales 1/ 13,657 17,021 17,594 20,941 22,143 22,577
Cost of Water Sold 12,084 15,338 15,776 19,005 20,101 20,433
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Dushanbe Vodokanal - Income Statement Actuals and Projections: 2009-2030 Page 2
Water Demand Projections (000 m3) 2009 2010 2011 2012 2013 2014
Staff Salaries 1,310 1,402 1,514 1,612 1,701 1,786
Social Fund 328 351 379 404 426 447
Materials 1,743 1,865 2,014 2,145 2,263 2,376
Electricity Costs 4,159 4,458 4,458 4,614 4,717 4,746
Other Costs 173 185 200 213 225 236
Maintenance all new Assets 899 1,079 2,020 2,909 1,449
Depreciation 4,371 4,495 4,315 6,061 5,818 7,247
Cost of WW Sold 1,573 1,683 1,818 1,936 2,042 2,145
Gross Profit on Sales 4,875 9,277 11,276 11,257 14,178 16,674
Other Operating Income 114
Gross Profit on Sales 4,989 9,277 11,276 11,257 14,178 16,674
Selling Expenses 3,420 3,659 3,952 4,209 4,441 4,663
General Administrative Expenses 3,747 4,009 4,330 4,611 4,865 5,108
Other Operating Costs 3,591 3,842 4,150 4,419 4,663 4,896
Total Other Operating Expenses 10,758 11,511 12,432 13,240 13,968 14,667
Total Operating costs 24,415 28,532 30,026 34,181 36,112 37,244
Operating income (5,769) (2,235) (1,156) (1,983) 210 2,007 Interest expenses 1,460 990 1,276 1,584 1,979 2,330
Taxes -
Income/Loss for the period (25,863) (3,224) (2,433) (3,567) (1,769) (323)
Income before interest (5,769) (2,235) (1,156) (1,983) 210 2,007
income before interest and depreciation (1,398) 2,260 3,158 4,078 6,028 9,254
Debt Service Ratio 1.00 1.00 1.00 1.00 1.00
Cash Operating Ratio 1.08 1.04 1.06 0.99 0.95
65
Dushanbe Vodokanal - Income Statement Actuals and Projections: 2009-2030 Page 3
Water Demand Projections (000 m3) 2015 2016 2017 2018 2019 2020
Domestic Consumers 53,301.8 51,403.0 47,433.9 43,401.5 43,249.1 43,854.7
Boiler Plant 7,710.7 7,865.0 8,022.3 8,182.7 8,346.4 8,513.3
Public Consumption 12,660.6 12,660.6 12,660.6 12,660.6 12,660.6 12,660.6
Commercial Consumption 4,988.7 5,088.5 5,190.2 5,294.0 5,399.9 5,507.9
Total Consumption 78,661.8 77,017.0 73,307.0 69,538.8 69,656.0 70,536.5
Production 120,000 100,000 95,000 90,000 90,000 91,809
UFW 34% 23% 23% 23% 23% 23%
Cost/m3 produced with Dep without i 0.320 0.396 0.443 0.463 0.488 0.508
Electricity Costs/m3 projected at 15% 0.039 0.045 0.052 0.059 0.068 0.078
Cost/m3 sold/consumed (incl. dep, excl. i) 0.488 0.515 0.574 0.599 0.630 0.661
Cost/m3 sold incl. I and p excl. dep 0.558 0.545 0.596 0.611 0.648 0.682
Cost/m3 sold incl. I and p and dep 0.646 0.632 0.684 0.699 0.733 0.762
revenue/m3 sold/consumed 0.56 0.54 0.60 0.61 0.65 0.68
1.25 0.98 1.09 1.02 1.06 1.05
Tariffs (water) Effective Average Tariff 0.452 0.432 0.471 0.472 0.503 0.532
Domestic Consumers 0.169 0.177 0.186 0.196 0.205 0.216
Boiler Plant 0.169 0.177 0.186 0.196 0.205 0.216
Public Consumption 0.501 0.526 0.552 0.580 0.609 0.639
Commercial Consumption 1.217 1.278 1.341 1.409 1.479 1.553
Revenues (Water) 22,719.3 23,673.3 24,283.6 24,886.9 26,290.1 27,938.9
Domestic Consumers 9,003.5 9,116.9 8,833.6 8,486.8 8,879.8 9,454.4
Boiler Plant 1,302.5 1,394.9 1,494.0 1,600.1 1,713.7 1,835.3
Public Consumption 6,343.2 6,660.4 6,993.4 7,343.1 7,710.2 8,095.7
Commercial Consumption 6,070.1 6,501.0 6,962.6 7,457.0 7,986.4 8,553.4
Total Sales Proceeds 43,873 41,964 43,712 42,458 45,151 48,110
Water Sales Proceeds 35,564 33,240 34,553 32,840 35,052 37,507
WW Sales Proceeds 8,308 8,724 9,160 9,618 10,099 10,604
Other Sales
Total Cost of Sales 1/ 22,966 23,460 25,090 23,826 25,181 27,004
Cost of Water Sold 20,714 21,095 22,608 21,219 22,444 24,130
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Dushanbe Vodokanal - Income Statement Actuals and Projections: 2009-2030 Page 4
Water Demand Projections (000 m3) 2015 2016 2017 2018 2019 2020
Staff Salaries 1,875 1,969 2,067 2,171 2,279 2,393
Social Fund 470 493 518 544 571 599
Materials 2,495 2,620 2,751 2,888 3,033 3,184
Electricity Costs 4,678 4,483 4,898 5,336 6,137 7,199
Other Costs 248 260 273 287 301 316
Maintenance all new Assets 1,739 2,226 3,206 1,231 1,477 1,891
Depreciation 6,957 6,679 6,412 6,156 5,909 5,673
Cost of WW Sold 2,252 2,364 2,483 2,607 2,737 2,874
Gross Profit on Sales 20,906 18,504 18,622 18,632 19,970 21,106
Other Operating Income
Gross Profit on Sales 20,906 18,504 18,622 18,632 19,970 21,106
Selling Expenses 4,896 5,140 5,398 5,667 5,951 6,248
General Administrative Expenses 5,364 5,632 5,914 6,209 6,520 6,846
Other Operating Costs 5,140 5,398 5,667 5,951 6,248 6,561
Total Other Operating Expenses 15,400 16,170 16,978 17,827 18,719 19,655
Total Operating costs 38,366 39,630 42,069 41,653 43,900 46,659
Operating income 5,506 2,334 1,644 805 1,251 1,452 Interest expenses 2,665 2,948 3,158 3,239 3,289 3,095
Taxes
Income/Loss for the period 2,842 (614) (1,514) (2,434) (2,038) (1,644)
Income before interest 5,506 2,334 1,644 805 1,251 1,452
income before interest and depreciation 12,464 9,014 8,056 6,960 7,160 7,125
Debt Service Ratio 1.00 1.00 1.00 1.00 1.00 1.00
Cash Operating Ratio 0.87 0.94 0.96 0.98 0.97 0.97
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Dushanbe Vodokanal - Income Statement Actuals and Projections: 2009-2030 Page 5
Water Demand Projections (000 m3) 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
Domestic Consumers 44,469 45,091 45,723 46,363 47,012 47,670 48,337 49,014 49,700 50,396
Boiler Plant 8,632 8,753 8,876 9,000 9,126 9,254 9,383 9,515 9,648 9,783
Public Consumption 12,661 12,661 12,661 12,661 12,661 12,661 12,661 12,661 12,661 12,661
Commercial Consumption 5,508 5,508 5,508 5,508 5,508 5,508 5,508 5,508 5,508 5,508
Total Consumption 71,270 72,013 72,767 73,531 74,306 75,092 75,889 76,697 77,517 78,348
Production 87,783 88,699 89,627 90,569 91,523 92,491 93,473 94,468 95,478 96,501
UFW 0.23 0.23 0.23 0.23 0.23 0.23 0.23 0.23 0.23 0.23
Cost/m3 produced with Dep without i 0.56 0.57 0.60 0.64 0.68 0.70 0.75 0.80 0.86 0.90
Electricity Costs/m3 projected at 15% 0.09 0.10 0.12 0.14 0.16 0.18 0.21 0.24 0.28 0.32
Cost/m3 sold/consumed (incl. dep, excl. i) 0.70 0.70 0.74 0.78 0.84 0.86 0.92 0.98 1.05 1.11
Cost/m3 sold incl. I and p excl. dep 0.72 0.73 0.77 0.81 0.87 0.90 0.95 1.02 1.09 1.15
Cost/m3 sold incl. I and p and dep 0.80 0.80 0.84 0.88 0.93 0.96 1.01 1.07 1.14 1.20
revenue/m3 sold/consumed 0.57 0.59 0.62 0.65 0.68 0.71 0.74 0.77 0.80 0.84
1.05 1.01 1.05 1.06 1.07 1.03 1.06 1.07 1.07 1.05
Tariffs (water) Effective Average Tariff 0.562 0.566 0.599 0.638 0.685 0.707 0.756 0.813 0.879 0.929
Domestic Consumers 0.226 0.238 0.250 0.262 0.275 0.289 0.303 0.319 0.334 0.351
Boiler Plant 0.226 0.238 0.250 0.262 0.275 0.289 0.303 0.319 0.334 0.351
Public Consumption 0.671 0.705 0.740 0.777 0.816 0.857 0.900 0.945 0.992 1.042
Commercial Consumption 1.631 1.712 1.798 1.888 1.982 2.081 2.185 2.294 2.409 2.530
Revenues (Water) 29,502 31,154 32,899 34,745 36,695 38,757 40,937 43,241 45,677 48,252
Domestic Consumers 10,066 10,717 11,411 12,149 12,935 13,772 14,663 15,612 16,622 17,697
Boiler Plant 1,954 2,081 2,215 2,358 2,511 2,673 2,846 3,031 3,227 3,435
Public Consumption 8,501 8,926 9,372 9,840 10,332 10,849 11,392 11,961 12,559 13,187
Commercial Consumption 8,981 9,430 9,902 10,397 10,917 11,462 12,036 12,637 13,269 13,933
Total Sales Proceeds 51,218 52,462 55,885 59,779 64,403 67,320 72,321 77,992 84,591 90,096
Water Sales Proceeds 40,084 40,772 43,610 46,890 50,870 53,110 57,400 62,325 68,141 72,823
WW Sales Proceeds 11,134 11,691 12,275 12,889 13,533 14,210 14,921 15,667 16,450 17,272
Other Sales
Total Cost of Sales 1/ 28,938 28,968 31,133 33,725 36,996 38,509 42,050 46,202 51,221 55,078
Cost of Water Sold 25,920 25,799 27,806 30,231 33,328 34,657 38,006 41,956 46,762 50,397
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Dushanbe Vodokanal - Income Statement Actuals and Projections: 2009-2030 Page 6
Water Demand Projections (000 m3) 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
Staff Salaries 2,513 2,639 2,771 2,909 3,055 3,207 3,368 3,536 3,713 3,899
Social Fund 629 661 694 728 765 803 843 885 930 976
Materials 3,344 3,511 3,686 3,871 4,064 4,267 4,481 4,705 4,940 5,187
Electricity Costs 7,916 9,198 10,689 12,421 14,435 16,776 19,497 22,660 26,338 30,613
Other Costs 332 348 366 384 403 424 445 467 490 515
Maintenance all new Assets 2,723 1,046 1,255 1,606 2,313 888 1,066 1,364 1,964 754
Depreciation 5,446 5,228 5,019 4,818 4,626 4,441 4,263 4,092 3,929 3,772
Cost of WW Sold 3,018 3,168 3,327 3,493 3,668 3,851 4,044 4,246 4,458 4,681
Gross Profit on Sales 22,280 23,495 24,752 26,055 27,407 28,811 30,271 31,789 33,370 35,018
Other Operating Income
Gross Profit on Sales 22,280 23,495 24,752 26,055 27,407 28,811 30,271 31,789 33,370 35,018
Selling Expenses 6,561 6,889 7,233 7,595 7,975 8,373 8,792 9,232 9,693 10,178
General Administrative Expenses 7,188 7,547 7,925 8,321 8,737 9,174 9,633 10,114 10,620 11,151
Other Operating Costs 6,889 7,233 7,595 7,975 8,373 8,792 9,232 9,693 10,178 10,687
Total Other Operating Expenses 20,637 21,669 22,753 23,890 25,085 26,339 27,656 29,039 30,491 32,015
Total Operating costs 49,575 50,637 53,886 57,615 62,081 64,848 69,706 75,241 81,711 87,094
Operating income 1,643 1,825 1,999 2,164 2,322 2,472 2,615 2,750 2,879 3,002 Interest expenses 2,894 2,684 2,466 2,238 2,001 1,754 1,496 1,226 946 653
Taxes
Income/Loss for the period (1,251) (859) (467) (74) 321 718 1,119 1,524 1,934 2,350
Income before interest 1,643 1,825 1,999 2,164 2,322 2,472 2,615 2,750 2,879 3,002
income before interest and depreciation 7,089 7,053 7,018 6,983 6,948 6,913 6,878 6,843 6,808 6,774
Debt Service Ratio 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00
Cash Operating Ratio 0.97 0.97 0.96 0.96 0.96 0.96 0.96 0.96 0.97 0.97
69
Annex 8: Governance
Governance Assessment - Objective
1. An assessment to identify opportunities for medium-term capacity building and
institutional strengthening interventions to strengthen DVK management was conducted between
February 7- 21, 20011. The purpose of the assessment was to analyze the institutional and
political factors affecting the management, performance and accountability of DVK and to
identify appropriate and implementable entry points and achievable milestones to be
implemented under DWSP2.
2. The analysis and recommendations are based on discussions with a range of stakeholders,
including the Director of DVK, the PCU Director, Deputy Mayor, the department of complaint
handling in the Municipality, the press office of the Municipality, the Consumer Union, the
Home Owners Association, and international organizations and donors. A World Bank
Governance Trust Fund funded the study.
Key messages
i) Linking disbursements to performance. An assessment of DWSP indicates that
DWSP2 will be more effective if performance conditions that trigger release of funds
are incorporated into the design.
ii) Mainstreaming Incentives. Incentive mechanisms should be mainstreamed, both
within project design and DVK operations. Under present arrangements, managers
and staff have little apparent reason to change practices or achieve time-bound
results. Political will and professional pride, while they may exist in some measure,
are insufficient to improve performance. Incentives must go beyond financial
remuneration and bonuses, particularly since there are presumed to be countervailing
financial incentives (informal payments).
iii) Risk that outside intervention will not achieve intended impact. DWSP revealed
internal resistance to externally-driven assistance, through lack of cooperation with
the Private Management Operator contracted under DWSP1 and severe delays or
nonimplementation of components. External assistance can sometimes serve more
like a patch, leading to superficial changes without addressing the core issues. To
increase the chances that recommendations prepared by the World Bank or expert
consultants (e.g., M&E, mission statement, incentives structures, communication,
etc.) are accepted and implemented, analysis and recommendations should be
developed in close coordination with local partners (e.g., DVK, PCU).
iv) Improve monitoring with DVK. As long as DVK management does not know or
demonstrate concern for monitoring its operations, progress will be compromised.
Analysis and evaluation will be difficult if not impossible. While external monitoring
will be necessary and critical, developing and internalizing a corporate norm of
monitoring will be as important.
70
v) Tajikistan’s institutional environment, although challenging, is only one factor.
DVK’s relatively poor performance to date cannot be entirely blamed on the weak
institutional environment (or even on the local mentality, a factor often voiced by
local stakeholders). Other utilities, e.g., Khujand Vodokanal and Barki Tojik, have
demonstrated that, even if they still have far to go, significant progress is possible
under local circumstances.
Findings and recommendations
3. Preliminary findings indicate a critical need to improve DVK’s institutional capacity and
management quality to ensure achievement of project outcomes, timeliness of project
implementation and financial sustainability of DVK.
DVK Management
Issues. DVK technical and managerial capacity is inadequate to meet the needs of an
efficient and effective water company. This is reflected in DVK’s poor performance.
Contributing factors include lack of independent decision making and relatively high
turnover of DVK directors. Short-term appointments or an environment of frequent
management turnover reduces the incentive to promote changes at DVK. Interference by the
municipality in utility and project decision making reduces autonomy. Furthermore, while
accountability to the municipality for errors or service problems may be stringent,
accountability for improving overall performance is low. This is partly related to poorly
aligned incentives, to an old-style bureaucratic company culture, and to poor record keeping.
The low attention given to customer service (there is no dedicated customer service
department) and cost recovery clearly signals that they are not priorities. Enhanced
institutional governance and capacity are needed to improve the sustainability of DVK’s
assets and operations.
Recommendations. It is therefore recommended that a well-qualified DVK director,
committed to achieving results, be appointed prior to start of project implementation. The
director should be appointed through a transparent, competitive process with the
participation of the World Bank. Ensuring that DVK is led by such a director would go far
toward demonstrating the Hukumat’s commitment to municipal water sector reform. The
appointment of a good leader should be complemented by the appointment of Strategic Task
(ST) managers (in charge of implementing the Tasks outlined in the Strategic Action Plan
that will transform DVK operations). ST managers may be new hires or existing line
managers.
Mission statement
Issues. It is unclear what guides DVK’s operations, beyond addressing technical problems
on an ad-hoc basis (and is understandable, given its financial difficulties). Well-performing
water utility companies have a clear and well-defined mission statement, or corporate vision,
which guides management and employees in their work, create norms and provide focus,
something which DVK lacks at present.
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Recommendations. To promote a new corporate culture, DVK management is highly
encouraged to develop such a statement. It would serve three purposes: i) focus management
and staff on the essential purpose of their company; ii) guide actions and priorities and
responses to issues; iii) help to promote create an esprit de corps. It is important that the
discussion of a company vision, which would develop into a mission statement, begin
internally and in a consultative process.
Performance capacity
Issues. The capacity of DVK staff is currently very low. This is largely related to poor
qualifications, limited experience, and high turnover. Currently DVK employs 980 staff. HR
reports that there are 1,145 positions and the balance of 165 are vacancies. Although DVK is
not significantly overstaffed, its personnel often lack qualifications, equipment and
incentives to improve service performance. Staff skills are not in line with operational
requirements. There is no competitive selection process, leaving hiring decisions at the
discretion of managers. DVK also lacks the required technical capacity and modern
equipment (hardware and software) to improve service delivery, corporate performance and
efficient O&M. Current accounting systems are outdated and the absence of customer
database makes cash flows and payments difficult, if not impossible, to track. Nonetheless,
there are at least two reasons to work at a company like DVK, despite low remuneration.
First, high unemployment levels make any sort of employment attractive. Second, it can be
assumed that employees in at least some departments are able to benefit from informal,
nonwage payments.
Recommendations. A functional review should be undertaken to determine future staffing
needs. Improvements in Human Resource Management are essential to promote an
environment of transparency and objectivity in hiring and firing practices in DVK. In order
to be effective and reduce waste of resources, training programs or activities should be
targeted at DVK employees who can benefit the most. It is recommended that an employee
assessment be used to determine training needs. There is also the risk that employees who
receive training will leave the company after their skill set makes them more marketable.
High turnover of staff at DVK appears to be a recurrent problem. Therefore, training
programs should be designed and integrated with other measures (including higher salaries,
introduction of performance incentive system, etc.). It will also be important to create a
simple monitoring system to determine whether those designated for training actually
receive it, whether it makes any difference to the performance of their department, and how
long they remain employed after training is received. The training program can then be
reviewed periodically.
Performance Incentives
Issues: A critical issue at DVK is the absence of performance targets and performance-
related remuneration. This is not in line with good industrial practice. It can be assumed that
incentives are in place at DVK, but they do not necessarily lead to maximizing DVK
revenue. This is because many of them are informal and work against company interests.
Thus, an incentive strategy will need to take into account not just the introduction of new
incentives but the need to override (and eliminate) old incentives (of the informal kind).
72
Only the collections department has a formal incentive system, whereby collectors receive a
percentage of the amounts collected, if the collection rate hits certain targets. Yet even this
department has a high number of vacancies, suggesting the incentive system is inadequate,
alongside other issues. Basic salaries are low (average levels: TJS 275 for operational staff,
TJS 441 for administrative staff and TJS 814 for management), both in relation to the past
(five years ago they still compared favorably with other state entities) and in relation to other
utilities. In the economy as a whole, salaries increased by, on average, 40 percent per year
between 2006 and 2008, while at DVK they have been stagnant.
Recommendations: Well-aligned incentives will be critical to moving DVK to a
performance-based operation and will influence the success of DWSP2. They should be set
at sufficiently ambitious levels to ensure staff is motivated to reach the targets A number of
managerial and institutional key performance indicators should be proposed and the human
resource department should be in charge of managing these indicators, i.e., retrieving the
data, updating the data base, identifying trends and reporting those trends to the Director. In
addition to company performance incentives, incentives should be mainstreamed throughout
the project design as well, as they may be the most effective way of achieving results in a
low capacity and low motivation environment. Full commitment from the Municipality and
DVK management is required to introduce and implement performance incentive measures.
More broadly, a Compensation Review should be conducted to carry out a comparative
study of salaries across other utilities in the country and the regional at large which should
result in recommendations on future salary increases and staff performance measurements.
Accountability
Issues. At present, DVK management is not held accountable for poor results. Poor
performance on the part of DVK is overlooked or there appears to be no performance
evaluations in place. There are two types of accountability: i) external accountability,
referring to the utility’s responsibility toward outside stakeholders (the Hukumat, as the
owner and founder, and the donors, as provider of financing for outcomes) and ii) internal
accountability, referring to the fact that management and staff are responsible for
effectiveness and efficiency. Accountability should exist throughout the structure, so that
staff members are held accountable for work done by their subordinates, as well as being
accountable to their superiors.
There is a critical lack of accountability measures in place in DVK with respect to customer
relations and complaints handling, although the Municipality apparently has an effective and
functioning complaints department. Communication channels are limited via collectors who
are unlikely to pass on complaints and via various departments, which interact with
customers on an ad hoc basis. Similarly, continued poor implementation of donor projects
suggests there is also low accountability toward donors. At DVK, customer accountability is
not apparent without a dedicated customer service department or hotline.
73
Recommendations. Accountability can be encouraged through i) awareness building and
training; ii) tracking progress through monitoring systems; iii) introducing incentives, both
rewards and sanctions; and iv) improving the "corporate culture."
Access to Information
Issues. Based on a review of the feasibility study and meetings, basic information—whether
concerning customers, leakage rates, tariffs, and many other issues—is often unreliable,
inaccessible, or nonexistent. The information vacuum makes diagnosing problems and
prescribing remedies difficult.
Recommendations. Information management is critical for efficient and effective operations
and responding to problems and opportunities. It includes collecting, storing, analyzing and
making information available. Addressing this situation should be a priority. As part of
DWSP2, it will be necessary to redress the information imbalance through a rigorous
monitoring program and constant presence. The project should aim to improve i)
communication and availability of basic information to customers and ii) installation of a
customer database in DVK. TojigGas and DushanbeGorSvet (the electricity company) both
have electronic databases through which they track and manage customer billing, suggesting
there is every reason to believe such a system can be replicated at DVK.
Nonpayment, underpayment and noncollection
Issues: Collectively nonpayment, underpayment, and noncollection present a major problem
for DVK, undermining its operations and its sustainability by constraining investments.
Nonwillingness to pay for water services is a result of one or a combination of the
following: i) poor quality water; ii) socioeconomic conditions; iii) inequitable billing, with
charges unrelated to usage; iv) absence of a customer contract; v) collectors willing to
collect less than the amount prescribed by the norm; vi) perception of corruption. Currently
customers and DVK may be engaging in a bargaining relationship with negative equity,
transparency and fiduciary implications.
Recommendations: To put the company on a reliable footing, the status quo will need to be
transformed from a bargaining into a transparent transaction relationship. This issue should
be quantified and explored further as part of the customer survey. Here again, improved
access to information combined with public awareness (to change customer consumption
habits due to newly installed metering systems) should be an essential part of DWSP2.
Civil society
Issues. Civil society in Tajikistan is weak as it relates to consumer or homeowner rights.
There are no NGOs, as far as can be determined, actively engaged on Dushanbe water
issues. Combined with the lack of access to DVK via a customer service department, this
has the effect of severely limiting consumer voice, despite consumers comprising the most
affected stakeholder group. To the extent that they are addressed, water issues fall under the
purview of the mohalla committees (nonformal, but often effective district/neighborhood
74
groups who elect volunteer representatives and act as community-driven self-help
organizations) with whom the Hukumat engages on a regular basis.
Recommendations: Include members of Home Associations and mahallas in discussions on
reform. Decisions on who is selected should be made in a transparent manner.
Monitoring and evaluation
Issues. The draft ICR stresses the critical role of data gathering, monitoring and evaluation
to project success. Monitoring is rudimentary while evaluation is a new and untested
concept at DVK. Data was often not made available, making calculations and reporting
difficult. For example, monitoring of water pressure or leak detection was not undertaken.
Most importantly, there appeared to be no interest on the part of DVK to track its systems or
progress.
Recommendations. Given the information and accountability deficit, a strong monitoring
and evaluation component will be critical to project success. It will signal to the borrower
that activities and results matter. It will allow project implementers and DVK staff and
managers to track their own progress and analyze weaknesses (although first a culture of
hiding deficiencies will need to be overcome). There should be a clear and (relatively easy)
indicators, progress should be prominently displayed (e.g., by hanging charts on the walls)
and results should be independently evaluated. Involving the state statistics department
should be considered as they have the authority to collect information and also sanction the
agency if distortions are found. Independent external monitoring should also be conducted
for medium-term and final evaluations.
Institutional Strengthening Actions
An Action Plan has been developed that outlines entry points under the project and the key
areas of intervention required to improve DVK performance with respect to indicators of
good governance. Prior to starting project implementation, it is essential that the following
improvements in technical capacity are carried out to ensure smooth and efficient
management of DVK during and after completion of the system:
Technical Actions:
a. Modernization of the billing and collection system shall (and can) be done before
start of physical works under the project.
b. Inventory and installation of a Customer Database and identification of current and
future customers.
c. Installation of accounting software is envisaged before project implementation and
corrective measures will be instituted to improve accounts payable and receivables in
DVK.
d. Promote metering.
Institutional Actions:
75
a. Revise customer contract.
b. Institute a dedicated customer relations department, including hotline phone service.
c. Establish a reliable customer feedback mechanism.
d. Establish a Compensation Review Committee consisting of relevant government
decision makers (Mayor, DVK director Ministry, etc.) to review current DVK staff
salary levels as compared to salaries at other utilities in Tajikistan and submit
proposal to revise and increase salary levels to relevant authority.
e. Development of a Communications Strategy and Public Awareness Campaign and
improve public access to information of tariffs, improvements under the project and
expected change in customer habits.
f. Staff training is expected during project implementation phase, civil works phase and
at the completion of system construction.
g. Updating terms of reference (TOR), i.e. roles and responsibilities as part of the
Institutional Assessment.
h. Hiring of relevant technical and administrative staff.
Performance Action Chart
DVK Performance Action Chart illustrates graphically the linkage between the critical
governance elements: capacity, transparency, accountability and performance incentives.
Central to improving governance is political will and commitment (through the Municipality and
DVK) without which most efforts in this area risk being wasted. A key issue is communication,
which is mainstreamed throughout the strategy. Establishing a norm of good communication can
achieve the following:
i. Faster identification of problems and response time
ii. Keep processes on track and reduce chances of implementation drift
iii. Better customer outreach and information sharing increases DVK’s accountability
iv. Increase trust between partners (team building)
v. Information becomes more available
vi. Faster response to problems as they arise
There are four dimensions to communication; each will require attention and a specific strategy
and each needs to be given careful consideration:
External communication – Project Implementation
External communication – DVK Operations
Internal communication – Staff
Internal communication – Management
76
Fig 2: Operational Performance Improvement Actions Chart
77
Annex 9: Social and Customers Satisfaction Survey
Second Dushanbe Water Supply Project
Terms of Reference
Project Background
1. The Republic of Tajikistan is to receive a Grant from the International Development
Association (IDA) toward the cost of the Second Dushanbe Water Supply Project (DWSP2). The
overall objective of the project will be to improve water supply service delivery and efficiency in
selected areas of Dushanbe. This will be achieved through (i) urgent reconstruction and
rehabilitation works; (ii) installation of meters, leakage reduction and demand management
programs; and (iii) utility capacity building for improved customer service, HR management and
investment planning. As part of preparation (and subsequent implementation) of the project, the
Government of the Republic of Tajikistan will carry out a Customer Satisfaction and Social
Analysis Study (CSSS) (activity A of this TOR) in Dushanbe before, during and after the
investments are completed. These terms of reference provide a brief description of the project, as
well as the objectives and scope of work for the consultant firm who will carry out the tasks.
Project context and scope
2. The project will finance the following components: (i) Metering and Demand Management;
(ii) Water Quality Improvement; (iii) Institutional Strengthening and Capacity Building, and (iv)
Implementation Support. Depending of funding available, the components may include:
(a) Metering and Demand Management: Water demand management will aim to reduce
the volume of water produced per capita to a reasonable level. This will include (i) the
introduction of water metering for each household, (ii) a strategy for reducing the leaks within
residential buildings with common internal networks, (iii) a connection replacement program,
and (iv) a public communication and awareness campaign.
(b) Water Quality Improvement: Priority rehabilitation works will support urgent design,
repairs and rehabilitations to improve the reliability of water supply and its compliance with
drinking water standards. The component will cover two or more of the following activities: (i) a
new pump station facility and reservoir for the Napornaya water treatment plant (NAP); (ii) the
renovation of chlorination facilities in three production stations (NAP, Kafarnigan Wellfield
(KAF)-east, KAF-west and Southwest Wellfield (SWW); (iii) the renovation of rapid sand filters
at Samotechnaya water treatment plant (SAM); (iv) the renewal of around 7 percent of the
distribution network due to the high number of pipe breaks, which cause frequent supply
interruptions and water losses; and (v) rehabilitation, replacement or installation of production
water meters. Priorities will be selected with the Client during project preparation, accounting for
available cofinancing.
(c) Institutional Strengthening and Capacity Building. Management strengthening and
capacity building of DVK will aim to improve DVK operational performance and build its
strategic planning capacity. It will include (i) building DVK’s capacity for modern and effective
HR management, (ii) procuring maintenance equipment, (iii) implementing a Water and
Sanitation Master Plan and financial model, (iv) improving and updating the customer database
78
and introducing billing based on metered consumption, (v) an energy audit of DVK operations,
and (vi) implementing a training plan.
(d) Implementation Support. Project implementation support will cover staff, equipment
and operating costs of the PCU and of an international implementation consultant.
The contract will require distinct types of activities, each of which is described below.
Customer Satisfaction and Social Analysis Study (CSSS)
General Background and Objectives
3. The purpose of a CSSS is to obtain quantitative and qualitative data to inform an indicator of
project achievement—improved potable water supply service as assessed through customer
satisfaction. In general terms, the CSSS is used both as a benchmark for project baseline and as
an input to project design. It presents an opportunity to gather data from project beneficiaries to
inform both project design and implementation. The CSSS will be based on an overall
understanding of the social and institutional context of the project and its proposed interventions.
It will assess current needs, concerns and expectations of project stakeholders (including
customers). This ensures project activities respond to the needs of the target groups, identifies
specific concerns of vulnerable groups and provides an avenue to articulate the concerns of the
range of stakeholders. During implementation this tool will monitor project impacts by assessing
the immediate and long-term effectiveness of implemented activities. The CSSS will make
practical, concrete recommendations regarding ways to increase the positive impact of the
project and mitigate any negative impacts with a special focus on ensuring that no subgroup is
rendered unduly vulnerable, isolated or ignored.
Methodology
4. The Customers Satisfaction and Social Survey will be conducted during project preparation to
serve as a baseline and inform project design. This study will be adapted to be repeated annually
(or on a different scheduled is so agreed with the client) during project implementation to inform
activities and assess their impacts. It will also be the primary tool to inform about the baseline
against which progress will be measured at the end of project (evaluation). This contract will
only be for the first CSSS, which includes the designing of the subsequent annual studies but not
carrying them out. These will be contracted separately. The study will use a combination of
quantitative and qualitative research methods, including household surveys, focus groups and
case history. Each methodology will focus on the range of focus issues (see below) most relevant
to that set of informants. While the focus will be on the customer groups, key informants
(interviews and focus groups) in the Municipality and DVK will also be targeted to ensure a
comprehensive understanding of the issues.
5. Sampling: The sample size is expected to be approximately a 1 percent (1,600
households/commercial enterprises) of the current customer base. In order that the sample is
representative, the criteria for selection of households should take the following into
consideration: a) type of habitat (house, apartment building or commercial enterprise); b) height
of apartment, specifically the floor (30 percent of samples should be at the 1st floor and 70
79
percent at the highest floors of the building—top 2 floors; c) service area/source of potable water
(SAM, NAP, SWW, KAF); and d) socioeconomic status (to be assessed by living standards,
channels to voice concerns, use of informal procedures, job profile, etc.) in the case of
households and size of enterprise (small, medium, large) in the case of commercial enterprises;
d) household connection or public standpost.
6. Focus Issues of the CSSS: Includes elements of potable water supply services relating to users
and service provider. The indicators that will be used to determine the success of the project are
(a) coverage and reliability of public water supply, (b) quality of drinking water treated, (c)
efficiency, (d) collected revenue from sales to domestic and commercial customers, (e) ability to
effectively meet demands of vulnerable sub-groups, and (f) percentage of customers satisfied
with the service.
To promote the continuous improvement of potable water supply service to users the following
issues should be highlighted in the study:
i. Access to water supply and waste water services for the different subgroups of customers
ii. Provision of service
a. Application for service – time to establish new service provisions, repairs and price of
service.
b. Drinking water supply – quantity of drinking water supply, pressure of drinking water
supply, continuity of drinking water supply(hours per day/fluctuations in seasonal
availability), coverage and availability of drinking water services.
c. Drinking water quality (purity, color, taste, odor) and aesthetic aspects of water.
iii. Contract management and billing
a. Service agreement – availability of a clear service agreement.
b. Billing – accuracy of billing, response to billing complaints, clarity of billing and
methods of payment.
c. Unit of billing – how billing is organized in apartment blocks, tallying actual usage
with reported number of users, adjusting for fluctuations in use due to migrant
workers and other factors.
iv. Promoting a good relationship and channels of communication between the water authority
and users
a. Contact with users – written contacts, telephone contacts, user visits to the offices of
the water utility, visits of authority personnel to the user, notification of restrictions
and interruptions and availability of information, gaps or specific issues where
information is lacking.
b. Grievance channels – ease of access and time for processing enquiries, complaints
and requests.
c. Channels of communication to public – accessibility of information on DVK services,
information to public on planned works and disruption.
v. Safety and emergency management – channels to alert on emergencies, time and
effectiveness of the response.
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vi. Identification of different user subgroups – disaggregated by socio-economic status for
household and enterprise size for commercial enterprises, housing type/location of housing,
channels to voice concern, access to reliable service, etc.
vii. Informal channels and procedures in use – alternative channels of sources/access to water
for underserviced areas, informal means to cut queues for new connections, manipulation of
meter readings and bill payments, etc.
viii. Ability and willingness to pay – suitability of current tariff, conditions under which increase
tariff would be acceptable, etc.
ix. Expenses incurred due to lack of availability of potable water, such as in house purification
filters, boiling water, purchase/borrowing of water from neighbors, alternative sources or
informal vendors, health costs due to infections linked to impure water. etc.
x. Trust in water institutions and understanding the roles of water institutions.
7. The above issues will be covered as relevant to the different user groups, using the range of
techniques mentioned in the methodology section. Some areas will be better addressed through
the individual surveys (e.g., ability to pay), whereas others like trust in water institutions and
public information channels will be discussed in the focus group discussions. The case histories
will be done on select informants with focus on relevant issues.
Composition of Team:
8. The consultant will propose the composition of the core team and field supervisors. It is
suggested that the core team include at least the following: applied sociologist/anthropologist,
statistician, survey specialist and institutional specialist. It is suggested that field teams should be
trained together to assure consistency and quality. The consultant will decide how many field
teams the core team can successfully train and supervise to obtain quality field data.
It is recommended that the team proceed with its work in the following stages:
Brief field visits to few sites
Draft common instruments for interviews, focus groups and case history and submit for
review
Determine sample as per criteria and submit for review
Field training and field test instruments and approach on a sample (one week)
Complete field investigations and collate data (two weeks)
Draft reports
Submit draft reports for review
Deliver final report
Output
9. The social scientists whose services are procured through this contract will produce the
following:
i) An inception report, which will include a work plan for the duration of the consultancy, a
detailed methodology, sample questionnaires for the range of stakeholders, focus group
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discussion guiding points, a rationale for the choice of sample, field staffing, focus issues for the
analysis and a plan for data storage, handover and ongoing study during implementation. The
World Bank will review the methodology and questionnaire.
ii) A draft, which the World Bank will review and comment on, and then a final report on the
assignment, including executive summary, methodology used, analysis of findings for each focus
topic in the study, operational recommendations for project design and implementation. The
report will also include the design (methodology and focus issues) for the repeater annual studies
planned during project implementation, taking into account the sequencing of project activities
and the resource constraints. The report will give consideration to specific context of the
investment and relevant topics identified as elements of the drinking water services relating to
users to identify and assess risks and to develop recommendations for maximize benefits from
the design and implementation of the project. The reports must be brief and readable so that they
can be understood and used by project staff, design contractors, local leaders, staff of the local
water company and the general public. The data will be handed over and relevant training given
so it can be used as a monitoring tool during project implementation.
Deliverables
10. The consultant will conduct this first survey and produce outputs as outlined in the section
above (output).
11. Subsequent surveys and assessments will be contracted out separately during project
implementation and will follow this schedule approximately: surveys over a period of 4.5 years
and produce 4 or 5 reports. The first survey and report will be used as the baseline to measure
progress and impacts made by the projects. The second survey will be administered after two
years of project implementation and will be completed with a full analytical report of the
progress made and the impacts achieved by the investment. Finally, the consultant will
administer two subsequent surveys—annually on year three and four of implementation and the
final survey (year four) will be used to prepare the final report, which will summarize project’s
impacts.
12. The report for this first survey (scope of this consultancy) will be prepared in Tajik (or
Russian) and in English both in hard copy and electronic version, along with qualitative and
quantitative data (SPSS format) and a codebook. Draft documents are to be submitted to DVK as
they are prepared. DVK will forward the copy of the report to the financiers, allowing two weeks
for comments before preparing the final versions of the reports.
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Annex 10: Map
KAF
SAM
NAP
SWW
DushanbeAirport
Varzob RiverLushob River
Gissar Canal D
ushanbe ska River
Kafir
nigan
Rive
r
ISMAIL SOMONI
KARAMOVA
RUDAKI
RUDAKI
ACADEMIC GHAFUROV
NABIEV
NABIE
V
DJAMI
ABAYA
SHESTOPAVLOV
AINI
TITOV
DRUZHBA NARODOV
KORGAR
BORB
AD
NEGM
ATA
KARA
BAEV
A
HAFIZA SHEROZI
PROF
SIUZO
V
RUDAKI
AINI
AHMED DONISHKARAMOVA
0 1
0 1 2 Miles
2 Kilometers
TAJIKISTAN
SECOND DUSHANBE WATER SUPPLY PROJECTMain Components of Water Supply System
WATER TREATMENTPLANTS AND WELLFIELDS
THIRD STAGE PUMPING STATIONS
TREATED WATER STORAGE
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.
MAIN ROADS
SECONDARY ROADS
RAILROADS
IBRD 38511
MAY 2011
TAJIKISTANDushanbe