Document ofThe World Bank

FOR OFFICIAL USE ONLY

Report No: 19987

IMPLEMENTATION COMPLETION REPORT(Core ICR)

ON AN

IDA CREDIT

IN THE AMOUNT OF US$ 35 MILLION

TO THE

PEOPLE'S DEMOCRATIC REPUBLIC OF ETHIOPIA

FOR THE

SECOND ADDIS ABABA URBAN DEVELOPMENT PROJECT(Credit 2161-ET)

December 29, 1999

Water and Urban UnitEastern and Southern AfricaAfrica Region

This document has a restricted distribution and may be used by recipients only in th perfonnance of their official duties. Its contents may not otherwise be disclosed withouWorld Bank authorization.

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CURRENCY EQUIVALENTS

(Exchange Rate Effective)

Currency Unit = Ethiopian Birr

As of May 1990Birr 1.00 = US$ 0.483US$ 1.00 = Birr 2.07

As of June 30, 1999Birr 1.00 =US$ 0.128

US$ 1.00= 7.795

FISCAL YEARJuly 1 - June 30

KEY ABBREVIATIONS AND ACRONYMS

AAAR Addis Ababa Administrative RegionAACG Addis Ababa City GovernmentAACBP Addis Ababa Capacity Building ProjectAARA Addis Ababa Roads AuthorityAAWSA Addis Ababa Water and Sewerage AuthorityCBB Construction and Business BankCBE Commercial Bank of EthiopiaEDPO Environmental Development Project OfficeERR Economic Rate of ReturnGoE Government of iEthiopiaHSB Housing and Savings Bank (subsequently named CBB)IDA International Development AssociationMWUD Ministry of Works and Urban DevelopmentPIO Project Implementation OfficeUDSS Urban Development Support Services

Vice President: Callisto E. MadavoCountry Director: Oey Astra MeesookSector Manager: Jeffrey S. Racki

Task Team Leader: Gautam Sengupta

FOR OFFICIAL USE ONLYCONTENTS

Page No1. Project Data ........................................................... 12. Principal Performance Ratings ........................................................... 2

3. Assessment of Development Objective and Design, and of Quality at Entry ........ 24. Achievement of Objective and Outputs ........................................................... 95. Major Factors Affecting Implementation and Outcome ........................................ 13

6. Sustainability ........................................................... 147. Bank and Borrower Performance ........................... ................................ 158. Lessons Learned ........................................................... 169. Partner Comments ........................................................... 1710. Additional Information ........................................................... 17

Annex 1. Key Performance Indicators/Log Frame MatrixAnnex 2. Project Costs and FinancingAnnex 3. Economic Costs and BenefitsAnnex 4. Bank InputsAnnex 5. Ratings for Achievement of Objectives/Outputs of ComponentsAnnex 6. Ratings of Bank and Borrower PerformanceAnnex 7. List of Supporting DocumentsAnnex 8. Related Bank Loans/CreditsAnnex 9. Key Implementation Indicators

Table .IA. Key Implementation Indicators for Sites and Services: InfrastructureDevelopment

Table IB. Key Implementation Indicators for Sites and Services: HousingDevelopment

Table 2. Key Implementation Indicators for Kebele Upgrading Civil Works andFlood Control Projects

Table 3. Key Implementation Indicators for Street Maintenance Civil WorksTable 4. Key Implementation Indicators for Solid Waste Management Civil

WorksTable 5. Key Implementation Indicators for Akaki Water Supply Component

Annex 10. Studies and Training included in the ProjectAnnex 11. Status of Legal CovenantsAnnex 12. ICR Mission Aide Memoire and its Attachments

Attachment 1. Project Implementation Status as of June 30, 1999Attachment 2. Schedule of Retention Money to be released Prior to 31 October,

1999 against Bank Guarantee for Defects LiabilityAttachment 3. Plan for Future Operations of Project Capital Investments

Annex 13. Borrower's Contribution to ICR

Maps

No. 30666

This document has a restricted distribution and may be used by recipients only in theperformance of their official duties. Its contents may not otherwise be disclosed withoutWorld Bank authorization.

Project ID: P000712 Project Name: Second Addis Ababa UrbanDevelopment Project

Team Leader: Gautam Sengupta TL Unit: AFTU IICR Type: Core ICR Report Date: December 29, 1999

1. Project Data

Name: Second Addis Ababa Urban Development I/C Number: 21610Project

Country/Department: Ethiopia Region: Africa RegionalOffice

Sector/subsector: UM - Urban Management; WU - Urban WaterSupply

KEY DATESOriginal Revised/Actual

PCD: 12/28/1989 Effective: 11/12/1990 11/12/1990Appraisal: 02/15/1990 MTR: NA NAApproval: 06/20/1990 Closing. 06/30/1997 06/30/1999

Borrower/lmplementing Agency: Government/Project Implementation Office of the Addis Ababa CityGovernment/Addis Ababa Water Supply & Sewerage Authority/Construction and Business Bank

Other Partners: None

STAFF Current At AppraisalVice President: Callisto. E. Madavo Edward V.K. JaycoxCountry Director: Oey Astra Meesook Callisto E. MadavoSector Manager: Jeffrey S. Racki Jonathan BrownTeam Leader at ICR: Gautam Sengupta Carolyn GochenourICR Primary Author: Sudeshna RoyChoudhury

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2. Principal Performance Ratings

(S=Satisfactory, HS=Highly Satisfactory, U=Unsatisfactory, HL=Highly Likely, L=Likely, UN=Unlikely,HUN=Highly Unlikely, HU=Highly Unsatisfactory, H=High, SU=Substantial, M=Modest, N=Negligible)

Outcome: U

Sustainability: UN

Institutional Development Impact: N

Bank Performance: U

Borrower Performance: U

QAG (if available) ICRQuality at Entry: Not ApplicableProject at Risk at Any Time: Not Applicable Yes

3. Assessment of Development Objective and Design, and of Quality at Entry3. 1 Original Objective:

3.1.1. Project objectives outlined in the Staff Appraisal Report (SAR), Report No. 8632-ET were:(a) improving basic infrastructure and enviromnental conditions in project areas;(b) supporting a core housing development program primarily for lower-income families;(c) promoting opportunities for poor women living in -the kebeles to enhance their income;(d) providing assistance to urban service delivery agencies to carry out their activities moreefficiently; and(e) promoting the adoption of sound cost recovery policies.

3.1.2. Background. The Project evolved over a period of three years (1987-1990). The project conceptwas clear and was initiated in response to the request of the then Minister of Housing and UrbanDevelopment at a time when urban development was not on the Bank's country assistance priority list.Although the project design was intended to be based on the lessons learned from the First UrbanDevelopment Project (Cr. 1366-ET), in practice it proved to be ambitious and complex vis-a-vis theactual implementation capacity of the institutions involved. Also, given the political development and thecomplex institutional arrangements for implementation, the project design underestimated the risksassociated with achieving the development objectives.

3.1 .3. To give a historic context of the assessment of project objectives, it would be useful to note thethinking in the mid 1980s vis-a-vis sector issues both within the Bank and the Government. Around 1986urban development was not a priority in the Bank assistance strategy to Ethiopia-the emphasis was moreon the productive sectors. The only ongoing urban project in the country portfolio was the First UrbanDevelopment Project (Cr. 1366-ET). The Bank's Country Assistance Memorandum (CAM) did notinclude any support for a second urban project. The draft CPP, however, had a second project in thereserve program. An Urban Infrastructure Review study that was due to be undertaken around this timewas excluded from the CAM program because of resource constraints but was retained in the ESWprogram proposed in the draft CPP.

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3.1.4. It was against this background that the then Minister of Urban Development and Housing visitedWashington D.C. in end July 1986 to discuss the Government's urban policies and lending with the Bank.A request for IDA support towards promoting urban development in towns outside Addis Ababa, and forevolving and implementing an overall urban policy was made at this time. The Minister outlined theGovernment's thinking on a decentralization strategy. It was envisaged that a project to support theGovernment's decentralization objectives would include social and community services and marketfacilities which would be designed to serve a hierarchy of towns and villages. These towns would need tobe provided with a certain amount of basic infrastructure to foster productive enterprises outside of AddisAbaba and generally to improve the links between the rural and urban economies. This was alsoimportant given the need to slow down the rapid growth of Addis Ababa and to expand employmentopportunities in the rural areas. Bank staff at that time concurred with the Minister's approach.Subsequently, a mission was fielded in February 1987 to discuss the objectives of a follow-on project inthe urban sector at which time agreement was reached between the Government and IDA that the follow-on project would: (a) build on the experience of the First Urban Development Project; and (b) expand itsfocus to support a strategy of regional development that was then being pursued by the Government.

3.1.5. In keeping with the above understandings, a follow-on project, the Integrated Rural/UrbanDevelopment Project, began to be conceptualized. A component of this proposed project for AddisAbaba would have included the following sub-components: sites and services, kebele upgrading, nationalhousing sector study, road maintenance, and solid waste management. The other component of theproposed Integrated Rural/Urban Development Project included nine other towns which involved sub-components such as housing, town-wide infrastructure improvements, income enhancement andemployment generation component, water supply, and a sanitation pilot demonstration project.

3.1.6. It was envisaged that the total cost of the Integrated Rural/Urban Development Project would beabout US$100 million of which IDA would finance US$35 million with co-financing to be provided byother bilaterals for the remainder of the US$65 million. However, all the bilaterals that were approached(ODA, FINNIDA, SIDA, EIB, the Italians) declined. Shortly thereafter it was decided in the Bank that inthe interest of effective policy discussions and more efficient project implementation, the program wouldbe presented to Bank management and other possible donors as two separate operations: one would be anUrban Poverty Alleviation Project whose objective would be to begin to tackle the absolute povertyconditions among the poor in Addis Ababa; the second would be the Market Towns Development Projectaimed at improving essential services and infrastructure tied to the rural productive areas. This proposalof the Bank was communicated to the Government in June 1989. Though the Government concurred withthe Bank's proposal, it pointed out that the two projects would need to be looked at as one given that theGovernment perceives them as one integrated project and also due to the potential over-stretching of thecapacity of the implementing ministry, i.e., the Ministry of Urban Development and Housing (MUDH) ifit had to provide two separate project management offices to manage the implementation of the twoprojects. Around mid 1989, it was decided that the IDA allocation for both these projects would besignificantly increased from US$35 million to US$75 million ($35 million for the Urban PovertyAlleviation Project in Addis Ababa and US$40 million for the Market Towns Development Project).Breaking the original integrated project into two therefore served two key purposes:(i) it precluded presenting to IDA management one large project for a country that most donors werelooking at in askance at that time; and (ii) it managed to provide the full funding (US$75 million) fromIDA thus negating the other bilaterals' reluctance to provide co-financing to the country just then.

3.1.7. The complexity of the issues involved regarding the genesis of the eventual Second Addis AbabaUrban Development Project (SAAP) which came out of the Urban Poverty Alleviation Project in AddisAbaba can be better appreciated given the above background. As discussed above, the genesis of theproject itself was characterized by political uncertainty, policy and institutional transition in the country, arepeat of the objectives of the First Urban Development Project in order to complete the unfinishedbusiness agenda, ambitious objectives in the context of complex institutional arrangements, weak

capacity, lack of implementation experience, and inefficient and inappropriate systems and proceduresprimarily with regard to procurement and financial managernent. This was the reality of the project interms of its implementation context.

3.2 Revised Objective.:

3.2.1. The project was restructured in June 1997. Basically, except dropping objectives which had becomeunattainable due to the changed policy of increasing the interest rates to commercial rates, the otherobjectives substantially remained the same. Consequently, the restructuring was authorized at managementlevel.

3.2.2. The project became effective in November 1990 and implementation progress was generally slow forthe first two years of implementation. Subsequently, implementation of the project virtually came to astandstill, largely as a result of the overall transition in the country. Rapid changes in institutionalresponsibilities and arrangements, frequent changes in key project staff and uncertain and evolving economicpolicies of a government in transition contributed to a markedly changed environment for projectinmplementation. This transition was characterized by major administrative and fiscal decentralization. Whilethe new government accepted and supported the fundamental objectives of this project, it decided to conducta review of the emphasis and implementation arrangements of the project, in light of the changes in theeconomic, political and administrative environment. The governnent established two governing principlesfor restructuring the project: (i) to redirect project activities in a way to maximize the benefits to the poor byimproving access to basic services; ancl (ii) to strengthen management, financial and technical capacity ofservice delivery/implementing agencies to improve efficiency and sustainability of investments. An optionthat was available at the time of restructuring was to cancel the project and begin afresh with a new initiativewhich would reflect not only the policies and priorities of the new government but would also be "tailored" torealities of capacity constraints of the implementing agencies. However, preparing a new project would havemeant significant loss of time in the face of the urgency the new government attached to directinginvestments for the benefit of the poor. Furthermore, given the state of play in terms of broader policy dialogand the evolving relationship between the new Government and the Bank, canceling the project was notcoinsidered as a practical option. As a result, the restructuring exercise attempted to primarily simplify someof the design and implementation aspects of the project. However, in retrospect the complex institutional andimplementation arrangement issues weire not fully resolved; resulting in difficult implementation experiencefollowing the restructuring exercise.

3.2.3. The original project objectives, which were consistent with the objectives and priorities of the newgovernment, remained substantively unchanged during the restructuring of the project. However, the projectwas conceived and designed under a set of policies and circumstances which were no longer fully applicable.The economic policies of the new government needed to be reflected in the restructured project. Also,considerable depreciation of the Ethiopian Birr (about 67% depreciation during implementation as comparedto the original appraisal estimate) had affected the amount of the proceeds remaining under the credit.Therefore, though project objectives were not substantively changed, some priorities within the projectcomponents were re-ordered, some project components were eliminated, and some new elements added.

3.2.4. The primary objectives of the restructuring were: (i) to realign the project in a manner consistentwith the new Government's policies and priorities; and (ii) to direct financial and technical resources tothose activities which would have the most development impact.

3.2.5. In this context, the original project objectives (a), (b) and (d) enumerated in section 3.1.1. abovewere maintained throughout the life of the project but changes were made regarding (c) and (e) duringprojject restructuring in July 1996 to reflect the then current realities. With regard to (c) which involvedthe provision of loans to poorer women for income generating activities, it was found that numerousadministrative problems, and lack of interest by potential beneficiaries who were required to reimburse

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the loans at commercial lending rates, resulted in unsuccessful implementation of the sub-component. Itwas therefore decided that existing loan agreements at the time of project restructuring would be closedand no new ones would be made. The remaining sub-component funds would be reallocated amongst theother project components, thus this project objective was no longer relevant in the restructured project.With regard to objective (e) which was, promoting the adoption of sound cost recovery policies, giventhat the Government's new priority was to strengthen management, financial and technical capacity ofservice delivery/implementing agencies to improve efficiency and sustainability of investments, the focuswas changed towards trying to improve financial management and operating practices.

3.2.6. Therefore, after project restructuring the objectives were:(a) Improving basic infrastructure and environmental conditions in project areas;(b) supporting a core housing development program primarily for lower-income families;(c) providing assistance to urban service delivery agencies to carry out their activities moreefficiently; and(d) improving financial management and operating practices.

3.2.7. The revisions to the project objectives were, therefore, not substantive in that the original projectobjective (c) was subsumed under the added emphasis given to kebele upgrading as a whole in therestructured project; the same applies for the original objective (e) with regard to putting the focus moreon improvement of financial management and operating practices under the restructured project. Basedupon agreement with the Bank's Africa Region management, the restructured project was approved by theRegional management and not submitted to the Board.

3.3 Original Components:

3.3.1. Original project components included:

(i) Sites and services, including development of about 2,000 serviced plots with 1,900 core housingunits built by self-help with supporting infrastructure and community facilities at two locations inAddis Ababa municipality and about 350 serviced plots and self-help core housing units withsupporting infrastructure in Akaki;(ii) Kebele upgrading, including infrastructure improvements and loans for improvementlupgrading ofhouses in seven centrally located kebeles in Addis Ababa in the first phase; similar investments forkebeles in Addis Ababa to be identified in a second phase; and a loan fund to finance revenue-generating and other development projects in kebeles citywide in Addis Ababa;(iii) Street maintenance, including vehicles, equipment, spare parts, plant and civil works in AddisAbaba;(iv) Solid waste management, including vehicles, spare parts, collection containers, landfill equipmentand civil works in Addis Ababa;(v) Municipal infrastructure, including improvements to roads and drains, essential vehicles andequipment, and a power line extension to service the new sites and service areas in Akaki;(vi) Water supply improvement including major expansion works in Akaki; and(vii) Institutional support programs, including consultancy services, studies, technical assistance,training, vehicles and equipment to strengthen management and maintenance systems of projectagencies, and assistance for project management and implementation.

3.3.2. The total project cost, including contingencies, was estimated at US$46.7 million equivalent atappraisal. The IDA Credit of US$35 million would finance about 75% of the total project cost, over aseven year period. At completion, final costs were about US$39.2 million of which IDA contributedUS$31.4 million (about 80% of total project costs).

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3.3.3. The design of the project reflects that components were reasonably related to project objectives.However, some of the implementing agencies were new and others did not have the capacity and thepolicy environment was not favorable. Given the multiplicity of objectives and components, the multipleagencies involved in executing the project (three), the untested capacity of the newly created projectirmplementing agency, the Project Implementation Office (PIO) in the Addis Ababa AdministrativeRegion (AAAR), and the uncertainties with respect to the administrative and financial managementcapacities of the other agencies such as the Housing and Savings Bank (HSB) and the Addis Ababa Waterand Sewerage Authority (AAWSA), implementation was bound to be complex. In terms of institutionalcapacity, the PIO (in the role of providing overall coordination of project activities) was an untested, neworganization. With regard to the HSB (which would be responsible for the housing component), aroundSeptember 1989 it was noted that HSB was almost entirely dependant on subsidized funding, which theGovernment provided by requiring the pension and insurance sectors to main low cost deposits with HSB,and which IDA would supplement. This directed and subsidized funding provided a disiixcentive to HSBto mobilize its own resources and adversely affected development of pension and insurance funds as amajor potential source of long-termn money. The taxation policy of the Government also appeared toconstrain HSB's ability to build its equity base. Finally, HSB had portfolio and financial problems, andthe projections suggested that continued infusions of Government capital will be required to cover itsdeficits. The Addis Ababa Water and Sewerage Authority (AAWSA) to be responsible for implementingthe Akaki water supply component was also not a financially viable entity.

3.3.4. The design of the project has taken into account the lessons learned in the First UrbanDevelopment Project. The sites and services and kebele upgrading components did take into accountsome of the lessons learned from the previous IDA-financed Urban Development Project implementedfrom 1983-91 in the country. This pertained to the success of community participation in projectplanning, design and management with respect to self-help housing cooperatives. However, Governmentcommitment to revise its policy on nationalized housing stock and encourage private ownership did notmnaterialize by the end of the first project and this follow-on project was supposed to make this issue aconidition of disbursement. For various reasons, however, (see paras. 4.2.1. and 4.2.2. for details), theeffective implementation of this component was hindered. Also, the successful approach of the firstUrban Development Project with regard to scheduling implementation in the sites and servicescomponent in such a way so as to delay completion of road construction until most of the houseconstruction was completed in order to negate the adverse effects on the roads due to the movement ofheavy construction vehicles and equipment was not followed. This resulted in associated damages to theon-site roads and entailed repairs.

3.4 Revised Components:

3.4.1. In restructuring, three factors were considered: (a) poor implementation experience as the result oflaclc of institutional capacity, an issue which needed to be urgently addressed; (b) project investments neededto "'spread" in a way to maximize the benefits to the poor; and (c) early closure of the project needed to bepursued while using the remaining life (and funds) under the project to better prepare the service deliveryinstitutions for improved planning and implementation of the next generation of investments. Another factorwhich helped in realigning specific component budgets under the restructured project relates to gains due toexchange rate changes. The original prcject costs were estimated at a time when the Birr was valued at Birr 2= US$1. With the changes in the exchange rate regime in the country, at the time of restructuring, the Birrwas; valued at about Birr 6 = US$ 1. Given the large local content of the investments, the depreciation of theBin resulted in significant local cost savings (in terms of the US$ available under the credit). For instance,the amount of IDA credit at project restructuring translated into Birr 230 million as compared to ETB 73million at appraisal. Under the restructuring exercise, a large portion of these gains due to exchange ratechanges were directed at increasing the budgets for specific conmponents (valued in terms of local currency) toachieve the underlying objectives. Thus., under the restructured project, the scope of some components wasincreased, some project components were eliminated, and some new elements added in line with the

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governing principles, stated earlier, while conforming to the original project objectives. In general, for therestructured project, the gain in value of the IDA credit in terms of local currency has been directed towardstwo main objectives: (a) to increase the scope of certain components to"scale up" the coverage of improvedbasic infrastructure to benefit the population at large; and (b) to invest in building capacity of theinstitutions/agencies.

3.4.2. During project restructuring, the IDA credit amount was kept unchanged at SDR 27.1 million.Schedule I to the Development Credit Agreement (DCA) was revised to reflect the revised application of theIDA credit by component and component specific financing percentages. Financing percentages wererealigned to ensure full financing of each component by a combination of Government and IDA funds(including amounts already disbursed). The following table summarizes the project budgets by component atappraisal, restructuring and closure.

Table 1: Summary of Component Budgets(in US$ millions)

Component Appraisal Restructured Actual/ LatestEstimate Estimate Estimate

Land .02 .028 .028Sites and Services 3.73 2.18 1.65Housing Development 12.36 7.14 7.05Kebele Upgrading 3.88 5.30 1.56Municipal Infrastructure 17.00 17.68 21.11Akaki Water Supply 6.44 5.41 4.49Institutional Support 3.25 8.11 3.05

Total: 46.68 46.10 39.19

3.4.3. The total project cost essentially remained unchanged. The main quantitative shifts in the projectbudget were as follows: (a) an increase of about US$3.2 million for additional investments in kebeleinfrastructure investments (about 7% of total project cost); and (b) an increase of about US$ 4.8 million forinstitutional capacity building of Addis Ababa City Government (about 10% of the total project cost). Theseincreases were covered through local cost savings under the Addis Ababa Sites and Services component(US$3.3 million); by eliminating the Akaki Sites and Services component (US$2.2) million, which wasdeemed less priority; and eliminating home improvement loans in the kebeles (US$2.1 million).

3.4.4. The main departure from the original project was to focus the civil works activities more towardskebele upgrading, given that almost 85 percent of the population in Addis Ababa lives in kebeles requiringinfrastructure and enviromnental sanitation imnprovement, and to put more emphasis on capacity building inthe Addis Ababa City Government. Consistent with the govermnent's new approach towards shelterdevelopment i.e., getting the Government out of the business of direct construction of housing and letting theprivate sector take the lead, the home improvement loan component was dropped and the undisbursed fundswere redirected towards expanding the scope for improving basic services such as sanitation, drainage,community water supply and road maintenance.

3.4.5. Under the restructured project, the kebele upgrading component was scaled up. Originally, sevenkebeles were to be upgraded in Phase I, with a further ten kebeles under Phase II. The revised proposalincluded the improvement of 16 additional kebeles, to bring it up to a total of 33. The ProjectImplementation Office would carry out the necessary engineering studies including design and monitoring ofthe projects. Civil works construction, which was to have been carried out by private contractors, would becarried out using resources available within AACG, including the Road Construction Department.Additionally, beneficiaries within each kebele would be brought into the project, through the provision ofeither a financial or a labor contribution by the kebele residents.

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3.4.6. In the absence of existing legislation covering land reform, and in particular the privatization of thehousing owned by the kebeles, it was not possible to disburse funds for the home improvement loanscomponent in the kebeles. Consequently, the undisbursed funds were transferred to provide increasedinfrastructure investments in the kebeles. In addition, the Kebele Development Fund component, whichoriginally included funding for community facilities and other revenue generating projects as well as for theprovision of loans to poorer women for income generating projects, was reallocated for more basicinfrastructure investments in the kebeles. Numerous administrative problems, lack of interest by potentialbeneficiaries (who are required to reimburse the loans at commercial lending rates), and duplication of someolFthese activities by NGOs resulted in the lack of success of this project component. Consequently, existingloans agreements were closed out, and it was decided that no new loans would be made.

3.4.7. The restructuring process took over two years to be completed, to ensure full ownership of both theCentral and the Addis Ababa City Government. Given that the restructuring primarily involved re-ordering of priorities within project components, elimination of some project components, addition ofsome new elements, and the extension of the credit closing date by two years from June 30, 1997 to June30, 1999 to allow for adequate time to complete project activities-not major substantive changes inthemselves-it was approved by the Regional management in April 1997 without requiring approval bythe Board.

Rating Component Sector Cost (US$ M)S Sites & services inc]luding supporting UH 8.98

infrastructure (including landcompensation)

U Kebele upgrading including UM 1.56infrastructure

S Infrastructure improvement UM 21.11(drains/street maintenance &improvement, improvements in trafficmanagement & road safety, electricity,solid waste management, vehicles andequipment)

S Solid waste managernent UMS Improvement of Akaki water supply WU 4.49U Institutional strengthening of project UM 3.05

agencies

Cost included under the infrastructure improvement component.

3.5 Quality at Entry:

(i) Consistency of project objectives with the CAS and Government priorities: (see para. 3.1.2. fordetails).

(ii) The Bank's safeguard policies, applicable to the project such as those on Environmental Assessmentand Involuntary Resettlement were met. With regard to the environment, the project was stated to have abeneficial impact in terms of improved environmental and health conditions by addressing criticalsanitation deficiencies in the kebele upgrading component, drainage improvements, and improved andexpanded refuse collection. On resettlement, a detailed resettlement plan, for the relocation of 19 affectedfamilies, was submitted during project niegotiations.

(iii) Quality of the design: (see paras. 3.1.3, 3.1.4., 3.1.5. and 3.3.6. for details).

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(iv) Reasonableness of assumptions about any relevant external factors: The key project output washousing units of which there was a huge and widely acknowledged and recognized shortage. In addition,investments in infrastructure upgrading in the kebeles was also greatly needed given the demonstrablypoor living conditions that obtained in the majority of them. Further investments in the road and drainagenetwork as also water supply in Akaki were necessary to alleviate service deficiencies. Project risks,especially with regard to implementation, however, were underestimated given the complex institutionalarrangements for implementing the project. An extraneous factor, i.e. the civil unrest and the resultingoverall transition in the country, put the project at considerable risk when implementation virtually came toa standstill during early, yet critical, years of the project. Rapid changes in institutional responsibilities andarrangements, frequent changes in key project staff and uncertain and evolving economic policies of agovernment in transition contributed to poor project implementation.

4. Achievement of Objective and Outputs4.1 Outcome/achievement of objective:

4.1.1. Overall the outcome of the project is assessed as unsatisfactory. The project failed to achieve itsmajor objectives and is unlikely to give substantial development results. Expected post-constructioneconomic or financial rates of return are low. Where physical outputs have been significant as in thehousing construction of 2,244 houses compared to 2,250 houses at appraisal or (99.73%), risingconstruction and financing costs have put the houses constructed outside the income bracket of theoriginally targeted population. Delayed implementation of sites and services such as water supply,hindered rapid occupancy of completed units and usage of community facilities. With respect to anothermajor component, Akaki water supply improvement, management and administrative arrangementsbetween kebeles and AAWSA has held up the use of public fountains.

4.1.2. This has been both a difficult project to implement by the Government and to supervise by theBank. In retrospect, it is not self evident that the lessons learned from the First Urban DevelopmentProject were fully incorporated and built into the design and pragmatic implementation strategy for theproject. While the broad objectives of the project remain critical to achieving sustainable developmentimpact, what proved to be difficult was to operationalize these objectives, particularly considering thelimited implementation capacity and experience of the PIO and AACG, the evolving institutionalrelationship between AACG and the Central Government, and the intended institutional and financialreforms, through the manifold project components. The weak implementation capacity of the projectentities and the transitions in the country since the beginning of the project also hampered efficient andeffective deci3ion-making at critical junctures. Given this reality of the project in terms of itsimplementation context, achievement of physical outputs was consciously emphasized by both theGovernment and the Bank at the time of project restructuring. However, this required intense Bankinvolvement, so much so that there was a risk of the Bank usurping implementation responsibility of theproject from the Government in order for the credit proceeds to be effectively utilized within the timeremaining. The more fundamental objectives of institutional and financial reform critical for sustainabilitywere not achieved. Although funding was retained for institutional and financial reforms in therestructured project, in the absence of attention from the Addis Ababa City Government, this objectiveremains unfulfilled.

4.2 Outputs by components:

4.2.1. Sites and Services: Physical accomplishment was substantial. Infrastructure provided under thiscomponent includes on-site and off-site gravel roads (17.3 km), asphalt roads (3.9 km), communalfacilities such schools, health facilities, etc. (10), storm water drainage (9.6 km), and electricity supply.Offsite infrastructure provided under the project has helped the development of housing and transportfacilities adjacent to all the three housing sites. However, absence of timely provision of supporting

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infrastructure, particularly permanent water supply has hindered rapid occupancy of completed units andusage of community facilities. Also, delays and problems encountered with the provision of temporarywater supply to enable construction activities in the Jimma Road housing site has been one of the majorcauses for delays in housing construction and related cost increases.

4.2.2. Housing Development: A total of 2,244 houses have been built under the project in the three sitesof Ambo Road (494), Jimma Road (1,400) and Akaki (350). A key change during project implementationwas with regard to the original beneficiary target group which changed due exchange rate devaluation,domestic inflation, and increase in interest rate on mortgages in 1993. The housing component under theproject was initially designed to provide affordable housing to low income families earning salaries lessthan Birr 400 per monthlUS$193 at the then exchange rate. However, the Government introduced a newinterest rate regulation that raised lending interest rate for the housing sector from 4.5% to 12%. Thisincrease adversely affected the initially targeted beneficiaries and made the houses unaffordable for them.

Construction costs in 1993 were estimated by the PIO to have increased by more than 100% from theSAR estimates. New interest rates on mortgage loans were pegged at 11.5% for medium-term and 12%for long-term housing mortgage loans. In order to enhance the affordability of the house constructors andalso ensure the concept of full cost recovery principle, the HSB in consultation with AACG in mid 1993proposed a weighted average interest rate of 6.4% to be applied on the amount of proceeds to be lent tothe house constructors. This rate was obtained by blending the World Bank's 75% share at 4.5% annualrate with HSB's portion of 25% at 12% annual interest rate. The Bank noted that it had no objection to theunderlying objectives which are implied in the proposal to blend down the effective interest rate and thusprovide some degree of subsidy to the beneficiaries in order to keep the pricing affordable to the targetgroups. However, the implementation mechanism of this principle would need to be consistent with theGovernment's overall macro-economic policies including a program of macro-economic reforms andstructural adjustments as articulated in its 1993/94-1995/96 Policy Framework Paper and agreed with theIM F and the World Bank. In this context, the Bank pointed out that it was the Government's policy thatthere be no differentials in interest rates either between sectors (e.g. industry vs. housing) or betweenbuyers (e.g. public vs. private). Any interest subsidy, decided as a matter of policy by the Government,would be made explicit and should be directed at an identified beneficiary group. The Bank therefore,proposed that in order to be consistent with this approach, the HSB should charge the full market interestrate (i.e. about 12% per year) on its housing construction loan. However, the interest relief (subsidy)c.ould then be provided to the ultimate beneficiaries in the form of a cash rebate, funded with the nationalGovernment's budgetary contribution. This process would make the process of subsidy and its cost to theeconomy transparent. It is possible to construct such an arrangement where the subsidy could be directlyand. explicitly borne by the "safety net" contemplated under the PFP.

A new affordable marketing plan reflecting increased cost of construction and materials and new interestrates for mortgage loans was submitted to IDA. This plan was based on a thorough analysis ofaffordability through actual registration of cooperative applicants. The survey revealed that: (i) there wasstill a strong demand for self-help housing in Addis; (ii) some 70% of the applicants could only affordcore plus zero units (income range Birr 650-900 p.m.); and (iii) the majority of the rest could afford coreplus one units. Based on this analysis, a new composition of housing types was proposed by the PIO andthe Bank in principle agreed. However, the Bank was informed in September 1994 that the HSB hadagain increased its lending interest rate for the housing sector for second time from the previously agreed12%X) to 15% with effect from September 1, 1994. It was noted that this would have a negative implicationon the housing component and that the Bank should intervene with the Government to keep the interestrate for project purposes at 12%.

Based upon the above, the target population changed with a shift to higher income groups whosubsequently changed the design of the housing types; there were upward revisions in terms of the

10

structure and quality of the houses constructed. Overall, the project did assist in increasing the availablehousing stock in the city thereby helping to alleviate the most pressing problem of housing shortage.

4.2.3. Kebele Upgrading: The number of kebeles upgraded exceeded the appraisal target by two. Thiscomponent suffered from a delayed start as sale of government-owned housing stock was a condition ofdisbursement of this component. IDA agreed to waive this requirement around 1993 as the sale ofhousing stock was subsequently made a SAC condition. After being scaled up during the restructuring,agreement was reached in October 1997 on scaling down the scope of the kebele upgrading programbecause of the demonstrated lack of implementation capacity in the executing agency, the EnvironmentalDevelopment Project Office (EDPO). Eventually, only 9 kebeles (three by private contractors and six byEDPO) were upgraded as part of this project. Upgrading works in the kebeles included construction ofasphalt roads (1.67 km), gravel roads (1.12 km), paved stone roads (7.13 kin), paved stone ditches (8.16km), concrete pipe drainage (5.2 km), hard stands for solid waste containers (I 9), communal latrines (40),and public water standpoints (27). One of the benefits of the project is that community participation andinvolvement in upgrading activities has increased the awareness within AACG for the need to do communityconsultation in order to ensure ownership and sustainability of the investments. To facilitate implementation,an Operational Manual was developed and introduced at restructuring, based on experiences with priorapproaches towards implementing upgrading programs. This Operational Manual has proven to be avaluable tool in designing and implementing subsequent programs. Another result is that in the future,woredas will be involved in actual execution of the works in Addis Ababa whereas EDPO will do the designand supervision. Resettlement aspects of the component were done effectively and in a manner consistentwith the Bank's safeguard policies. The following table summarizes the physical and financial aspects ofresettlement under this component:

Total No. of Total No. of | Total Size of Affected Population Compensation Paid for Total Remarks

Wereda Kebele Households Inhabitants Fully Affected Partially Affected Total Fully Affected Partially Affected (Birr)

In the Kebele In the Kebele (Birr) (Birr)

8 23 563 3139 25 25 145,704.64 145,704.64

8 24 797 4123 3 3 86,039.28 86,039.28

8 25 731 3444 53 53 46,410.69 46,410.69

7 30 62174 6391 24 24 77,254.86 77,254.86

7 3 1 1713 9286 3 84 8 18,107.35 256,981.77 275,089.12

7 32 1788 9802 22 22 61,355.42 61,355.42

7 33 1483 8235 4 45 143,780.32 143,780.32

7 33 9 9 7,054.90 7,054.90 (Agencyfor theAdminis-tration ofRentedHousesZone Five

________ ________ __________ ________ ___________ O~~~~~~~~~~~~~~~0ffieceF)i1388 7557 1 1 1,307.07 1,307.07 =

Total 3 302 305 18,107.3 825,888.9.843,9963

4.2.4. Municipal Infrastructure With respect to street maintenance, eight street maintenance projects werecompleted under phase one and another six projects under the second phase (total of about 25 km lengthcompared to the appraisal target of 31.7 km), implemented by contractors. BDth equipment and materialsprovided under the project have been utilized fully by the Addis Ababa Roads Authority (AARA). As aresult the main roads in the city are now being better maintained as opposed to three years ago. Theinputs through the project essentially helped AARA to implement a critical mass of its work programuntil about a year ago. However, contractor capacity to do asphalt concrete is a problem and most roads

11

htave been done using the penetration method. As a result, these have deteriorated quickly because of theh:igh traffic volume on the roads.

In terms of solid waste management., the following was done: one building and fence work, on-siteasphalt road (1.69 km), one truck park, procurement of solidl waste containers (1362). The equipment andtechnical assistance inputs have helped considerably in improving the functioning of the solid wastemanagement division within the Health Bureau of the AACG. In addition, because of the project inputs it hasbeen recognized that the institutional arrangements for solid waste management has to be reorganized, aprocess which has already started. However, the Repi landfill site is not being managed as a sanitary landfillbut as a tipping site. The life of this tipping site is estimated to be another five years. Therefore,consideration needs to be given to diverting the weigh-bridge to the proposed new sanitary landfill sitethat is being considered. The workshop and the control office for the weigh-bridge are there at the sitebut not in use. There are plans to use the workshop in the near-future to carry out routine maintenance ofequipment. The Health Bureau recognizes the limitations at the tipping site and its inability to carry outlandfill operations in an environmentally friendly manner. For instance there are no layers of covermaterial in between layers of refuse, there is no leachate control and treatment though there is awarenessand concern. The Health Bureau has begun studying the site from the point of view of taking somestopgap measures for leachate control till the new landfill site is commissioned. The equipment receivedand the investments made on the site have brought some dividends in that the operations are much betterthan before. However, it is important that the City Government focuses its attention on the whole issue ofsolid waste management and also develops a new sanitary landfill urgently. Also, there arerecommendations made by consultants that need to be addressed without delay. In addition, other keyessential municipal equipment and vehicles such as fire fighting equipment, road maintenance equipment,etc. have also been procured under the project.

4.2.5. Akaki Water Supply Improvement TIhe physical targets were substantially achieved. Works completedunder this component include pipe laying (48.74 km), building of three reservoirs (3, 1 00 nd capacity in total),auKiliary buildings, three boreholes, electro-mechanical works, procurement of pipes and accessories (50.03km length). The project's intervention to augment water supply in Akaki has resulted in the identificationof the full potential of the aquifer. The investments under the project triggered actions by AAWSA to betterutilize the full supply potential of the Akaki aquifer to benefit a large section of Addis Ababa. AAWSA notedthat with respect to upgrading of water supply in Akaki, beneficiary assessments that were conducted indicatethat water consumption by the beneficiaries has increased from 20 to 80 liters per family per day due toinvestments made under the project. Average time spent by beneficiaries in collecting water has substantiallyreduced due to increased number of water points. The public water fountains provided under the project havehelped considerably in providing easier access to safe water. However, all of the fountains have not beengiven water connections. This is because management and administration arrangements between thekebeles and AAWSA have not yet been sorted out. AAWSA indicated that this issue is being addressed.In addition, leak detection equipment and training contributed towards increasing operating efficiency ofAAWSA's operations as a whole.

4.2.6. Institutional Development Institutional development under the project included various key technicalassistance in the form of consultancies to the various project agencies such as AAWSA, PIO, AARA and theAACG Health Bureau to supplement their implementation capacity and provide on-the-job training as well asseveral studies such as the Water Tariff Study for AAWSA, solid waste management strategies and trainingactivities. However, it had been assumed around 1996, that given the long-term nature of key capacitybuilding tasks and that the credit was due to close in mid 1999, these institutional strengthening activitieswould be subsumed under the proposed Addis Ababa Capacity Building Project (AACBP). Given that thisintervention did not materialize due to lack of interest from both the AACG management and the CentralGovernment, as a result, the activities included under this component primarily concentrated on short-termcapacity building tasks. Most critically, the project failed to address the fundamental issues of improvingbudg,eting, accounting and financial management of AACG. This was largely due to the fact that the project

12

was perceived and treated as an enclave initiative and the reform agenda built into the project was notintegrated into the mainstream decision making and operations of AACG.

4.3 Net Present Value/Economic rate of return: See Annex 3 for details.

4.4 Financial rate of return: NA

4.5 Institutional development impact:

4.5.1. Institutional development impact has been at most modest or negligible. There was someinstitutional development in terms of capacity enhancements in agencies such as AAWSA, the AACG'sHealth Bureau and the Addis Ababa Roads Authority (AARA) due to project inputs. With respect toAAWSA, leak detection equipment and training contributed towards increasing operating efficiency ofAAWSA's operations as a whole. In addition, the water tariff study financed under the project contributedtowards recognition of the importance of sound financial management practices and its implementation isnow being facilitated under the ongoing IDA-fnanced Water Supply Development and RehabilitationProject. The equipment and technical assistance inputs to the AACG Health Bureau in terms of solid wastemanagement have helped considerably in improving the functioning of the solid waste management divisionwithin the Health Bureau of the city govermment. Because of the project inputs it has been recognized that theinstitutional arrangements for solid waste management has to be reorganized, a process which has alreadystarted. With respect to AARA, the provision of traffic management equipment helped to enhance roadsafety standards in the city. Technical assistance to AARA on road construction and maintenance also provedto be useful.

4.5.2. The project, however, was unable to significantly influence fundamental policy reforms, programformulation, prioritization of investments and related financial management and implementation issueswithin AACG as an institution. In addition, the nucleus of skilled professionals built at the PIO was lostbecause of changed priorities in the AACG. This was especially critical given that at one time it wasmooted that the PIO should be transformed into the equivalent of an Economic Development Councilresponsible for program management functions including the formulation and coordination of all urbandevelopment policies and initiatives in AACG given the experience it had garnered in implementing andcoordinating a multi-sectoral and multi-agency implemented SAAP.

5. Major Factors Affecting Implementation and Outcome5.1 Factors outside the control of government or implementing agency:

After effectiveness, political instability caused a dramatic slowdown in implementation. No Banksupervision missions were undertaken between October 1990 to October 1991. With restoration ofpolitical stability in late 1991 implementation resumed, but changes in senior personnel in theimplementing agencies resulted in less rapid development than would have otherwise occurred.

5.2 Factors generally subject to government control:

The election of a new administration in Addis Ababa in 1993 created further delays in the implementationof the project as all personnel and procedures were reviewed. Key personnel were replaced. Many ofPIO's records were impounded, staff replaced, and verbal instructions were given to cancel theimplementation of procurement decisions taken earlier. Delays in implementation and decision-makingalso resulted because the relationship of some key sector agencies (i.e. AAWSA) with AACG remainedunclear till about 1994. There were serious delays in tariff increases to achieve cost recovery.

13

5.3 Factors generally subject to implementing agency control:

Around 1997 with another change in the management leadership in the AACG, key executive decisionsand management actions pertinent to the project were not taken. These decisions and actions wereessential not only to ensure the timely completion of ongoing activities but to also finish project activitiesin the most efficient and effective manner. Repeated requests from IDA to AACG on the weakimplementation capacity of the EDPO (implementing agency for the kebele upgrading program),consequent non-cornpletion of the high poverty focussed kebele upgrading component, the need tosupplement EDPO's implementation capacity or explore alternative mechanisms for delivery of theprogram went largely unheeded. This did indeed result in a substantial scaling-down of the kebeleupgrading program which had been one of the centerpieces of project restructuring. In addition, effectivecoordination among the various implementing agencies did not happen especially with regard to thehousing loans and cooperatives component. The inability of AAWSA to provide timely and adequatetemporary water supply to enable quick construction of housing and communal facilities in the three sitesand services schemes resulted in hugely delayed housing construction activities driving up costs as alsothe PIO's inability to effectively coordinate with the housing cooperatives and AAWSA. Also, the AACGwas unable to retain key PIO staff thus impeding effective implementation and important monitoring andevaluation activities especially in the last one year of the project.

5. 4 Costs andfinancing:

The original project costs were estimated at a time when the Birr was valued at Birr 2 =US$1. With thechanges in the exchange rate regime in the country, at the time of restructuring, the Birr was valued at aboutBilT 6 = US$ 1. Given the large local content of the investments, the depreciation of the Birr resulted insignificant local cost savings (in terms of the US$ available under the credit). On completion followingrestructuring, the latest/actual estimates are shown in 3.4.2Table 1.

(i) Sites and Services: The lower actual estimate is mainly attributable to local cost savings under the sitesand services component in Addis Ababa and elimination of the Akaki sites and services componentduring restructuring which was deemed less priority. Also, after restructuring there was some over-estimation of the works.(ii) Housing Development: Actual estirnate is lower primarily due to the elimination of the homeimprovement loans component during restructuring.(iii)I Kebele Upgrading: The lower actual estimate is due to scaling -down of the kebele upgradingprogram due to capacity constraints in EDPO.(iv) Municipal Infrastructure: Increase in the actual estimate primarily due to increased focus on solidwaste management activities during restructuring to improve basic sanitation as well as the provision ofincreased numbers of municipal vehicles and equipment given the need to restock critical essentialmunicipal equipment.(v) Akaki Water Supply: Actual estimate is lower due to decreased costs of civil works stemming fromexchange rate savings.(vi) Institutional Support: Marginal difference.

6. 'Sustainability6.1 Rationale for sustainability rating:

The investments under the project are unlikely to be sustainable given that no firmn commitment has beenreceived from the AACG on financing the operations and maintenance of the physical investmentsfinanced under the project. This is further reinforced by the fact that in AACG, in general, there has beena lack of credible institutional, financial, and operational reforms undertaken. There may be someinstitutional benefits for AAWSA, the AACG Health Bureau, and AARA in termns of overall operationalefficiency due to project inputs.

14

6.2 Transition arrangement to regular operations:

Attachment 3 of Annex 12 (the ICR Mission Aide Memoire) contains a plan for future operations of themajor components financed under the project. This plan was developed and agreed to between themission and the PIO and represents what is considered to be essential to ensure sustainability of theinvestments. However, a firm commitment from the AACG to undertake the activities proposed underthe plan has not been received. Given that most of the investments under the major project componentsare the direct responsibility of various bureaus and departments of the AACG, it would be necessary forthem to receive explicit budgetary allocations as indicated in the plan. Consequently, whether or howmuch funds are actually made available for operations and maintenance would depend upon the overallfinancial resources of the AACG and their applications. Further, there is a need for cost recovery throughmoving towards commercial operation of the water supply schemes.

7. Bank and Borrower PerformanceBank7.1 Lending:Refer to paras. 3.1.2, 3.1.3., 3.14. and 3.1.5

7.2 Supervision:Overall supervision performance is considered to be satisfactory, although the frequency and impact ofthe Bank's supervision effort varied during different implementation periods of the project. Bank'ssupervision effort became more intense and proactive including and following the restructuring exercisefrom 1996. During this period the Bank fielded 10 supervision missions and supervised the project withdue diligence; the country department recognized this project as being one of the best supervised in areview conducted in 1997-1998. Prior to 1996, effective supervision of the project was adversely effectedby the political transition in the country, subsequent changes in key personnel in the implementingagencies as well as changes in Bank task team. This lack of continuity of key personnel, both in theimplementing agencies and in the Bank, exacerbated an already difficult implementation environment.

7.3 Overall Bank performance:Overall Bank performance was unsatisfactory.

Borrower7.4 Preparation:The Government's preparation performance was adequate given the capacity limitations.

7.5 Government implementation performance:Implementation performance has generally been unsatisfactory. The civil unrest in the country in the earlyyears of the project retarded implementation progress to a point where only about 6% of the credit wasdisbursed at the end of two years after credit effectiveness. There were lengthy delays in the procurementprocess, coordination among the key implementing agencies was weak. Project restructuring took two andhalf years (from January 1994 to July 1996 from the Government's side) due to decision-makingconstraints, as well as capacity constraints. Frequent high level management changes in AACG alsodelayed the implementation schedule. Also, performance of contractors and suppliers was unsatisfactorywhich stemmed in part due to the PIO's limited capacity to effectively supervise their activities.

7.6 Implementing Agency:Despite the efforts put in by the implementing agencies, weak capacity in these agencies contributed todelays in implementation as well as coordination problems between some of the key actors such asAAWSA, PIO, CBB and EDPO.

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7.7 Overall Borrower performance:IJnsatisfactory.

8. Lessons Learned

8.1. The project appears to have substantially achieved its physical targets although it is not likely toachieve the expected benefit (low ERR) and also unlikely to be sustainable (cost recovery, institutionalcapacity). In terms of institutional development, implementation experience of the project has helpedraise the level of awareness amongst those involved in its execution in terms of the complexity of issuesinvolved in planning, design and implementation of basic infrastructure improvement programs. Theproject has also served to build capacity, albeit in a limited sense, in segments of the professional staff inthose bureaus and departments in the AACG which were involved in project activities.

8.2. On Main Streaming: The project, however, has not been able to achieve substantially itsinstitutional development and broader capacity building objectives. In particular, in this context, it shouldbe noted that the project objectives and the development imperatives did not get fully incorporated intothe mainstream policies and programs of AACG. In a sense the project worked as an enclave operationwi.thout having many of the benefits accrue to AACG as a whole. Also, the project was unable tosignificantly influence fundamental policy reforms, program formulation, prioritization of investmentsand related financial management and implementation issues within AACG as an institution.

8.3. On Delivery Mechanism: Given the experience with the project it is the task team's assessment thatwith regarcd to generic city management, while the city (in this case the AACG) should remain responsiblefor the provision of basic public services, it is not necessary that it has to "deliver" these services by itself.Altemative service delivery mechanisms, under different incentive structures, including increasedinvolvement of the private sector, communities, NGOs, etc. should be explored.

8.4. On Competitive Advantage of the Bank: In this context, it should also be noted that it is not selfevident that the Bank has a comparative advantage in financing and supervising small individual sub-prcjects. Given the high transaction costs of such an approach, the Bank should concentrate on assistingthe client in building its capacity to ef0ectively and efficiently manage the project implementationprocess. Experience indicates that the Bank should be less involved in "managing" the implementationprocess and be more of a "financier" and a "catalyst" to support building up the client's managementcapacity.

8.5. On Comprehensive Capacity Building: The Bank did endeavor to address the issue of institutionalstrengthening and capacity building at the Addis Ababa City Govermment given the need for a broad-based set of capacity building initiatives to help it become more responsive and more efficient to thedevelopment demands, needs and priorities of all its stakeholders. Around mid 1996, the AACG and theBank proposed to formulate an Addis Ababa Capacity Building Project (AACBP) which would help toidentify key issues that needed to be addressed. The first set of actions would be to: (i) articulate a first setof priority capacity building actions; and (ii) initiate the process of a series of internal meetings anddiscussions, involving all stakeholders--R14 officials, other sector agencies, representatives frombus;iness and community, and NGOs.

8.6. On PIO: Under SAAP, PIO functioned in a mode which was outside the mainstream operations ofAACG. ThuLs, the policies and programs under the project, managed through the PIO, did not get trulyintegrated in the overall decision making process in AACG. It had been agreed with AACG that the roleof the PIO, which under the project had been to implement and coordinate IDA-financed investments inthe urban sector in AACG, would be revisited with a view to enabling it to become more of a programmanagement office for the AACG. Thus, the PIO's institutional capacity would need to be strengthened toenable it to become the in-house econornic policy management team. The idea was that it would be

16

mainstreamed into the AACG in order to facilitate coordination of all donor-funded activities so as toavoid duplication of efforts and ensure that donor investment interventions are consistent with thecountry/region's development objectives. The PIO could thus be gradually transformed into theequivalent of an Economic Development Council at the sub-national level which would be responsible forprogram management functions including the formulation and coordination of all urban developmentpolicies and initiatives in the AACG. This entity could function as the technical secretariat to the seniorAACG management and be a forum for setting investment priorities within AACG.

8.7. Priority tasks in Addis Ababa Development: During 1997, considerable progress was made withdefining a program of targeted interventions from an institutional strengthening context, in a participatorymanner involving various stakeholders, through the proposed AACBP (see para 8.5). However, there wasa change in the management leadership within AACG which had other priorities and the CentralGovernment did not pursue for IDA assistance in this regard. Consequently, further preparation effortswere halted. The contribution of Addis Ababa to the national economy is significant. Of the total privatesector investment requested at national level, about 54% is in Addis Ababa. However, only a smallerfraction of the total amount is realized (less than half) because of: (i) lack of adequate infrastructure(roads, water, electricity, etc.) (ii) lack of efficient provision of land and construction permits; (iii) lack ofadequate financial resources to provide basic public services, etc. The consequences of not addressingthese city management and service delivery issues in Addis Ababa could result in potentially serioussocial and economic consequences not only to the residents but also to the nation. It is, therefore,imperative that making available the necessary assistance in the form of strengthening the city's overallprogram and financial management capacity, including improving revenue mobilization andenhancement, needs to be seriously considered to enable the functioning of the national economy properlyand to effectively address poverty and basic service delivery issues in Addis Ababa.

9. Partner Comments(a) Borrower/implementing agency: See Annex 13 for the Borrower's contribution to the ICR.

(b) Cofinanciers: Not Applicable

(c) Other partners (NGOs/private sector): Not Available

10. Additional Information

10.1. About US$2.3 million was canceled from the credit around August 1998 after a determination wasmade that those monies would not be effectively utilized given the time remaining till credit closing.Approximately US$3.7 million of the credit remains undisbursed (after reconciliation between overdrawnand under drawn categories of about US$292,000). Therefore, expected savings, at a maximum, couldamount to US$3.7 million which would have to be canceled from the credit.

17

10.2. The current status of the undisbursed monies and the reasons why are enumerated below:

Component Undisbursed Reasons for Savingsas of 12/14/99(in US$)

Sxites and Services (civil works) 447,777 Actuals were less than originally budgeted.Kebele Upgrading (civil works) 91,596 Weak implementation capacity of EDPO.Sireet Maintenance (civil works) 408,684 Cancellation of one road which was planned

to be replaced by another but was not done.Solid Waste Management (civil 85,074 On-site road in the landfill site and the truckworks) park were not completed by the closing date.Municipal Infrastructure 88,147 Unused amount on the extension of off-site(electricity civil works) electricity.Building Materials for Housing 278,265 This balance should have been reallocated toDevelopment (goods) other components as these materials were

____________ procured long before restructuring.Vehicles and Equipment for 1,412,414 Pumps and other materials for AAWSA couldAACG and AAWSA (goods) not be procured due to delay in procurement

process. Also, represented in this amount isthe final payment for equipment stranded at

.__________ Assab port.Street Maintenance Materials 262,433 Actuals were less than originally estimated.(goods)Consultant Services and Training 784,252 AAWSA was not able to pay for consultancyfor AACG and AAWSA services as the supervision work went beyond(services) the project closing date, also some AACG

________________________ consultancy savings.Unallocated 159,541

TOTAL 3,926,587

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Second Addis Ababa UrbanDevelopment Project

Credit 2161-ET

Annex 1

Key Performance Indicators/Log Frame Matrix

19

Annex 1. Key Performance Indicators/Log Frame Matrix

Outcome / Impact Indicators:Indicator/Matrix Projected in last PSRI Actual/Latest Estimate

See under Note below.

Output Indicators:

Indicator/Matrix Projected in last PSR1 Actual/Latest Estimate1. Improvement in the quality of life ofapproximately 6,000 households due toinfrastructure improvements in 6 pilotkebeles.(i) No. of stand pipe users.(ii) No. of public toilet users.(iii) Kms. of new/ improved access roads,(iv) Tons of garbage collected! disposed.2. Provision of adequate shelter for2,250 households.(i) No. of families with new homes.3. Improvements in supportinginfrastructure.(i) No. of community facilities such asschools, markets, etc. established.(ii) No. of housing units with watersupply connection.(iii) Kms. of new! improved roads.(iv) Kms. of new/ rehabilitated drains.(v) No. of housing units with electricityconnection.4. Provision of permanent water supplyin Jimma (1400 units), Ambo (500 units)and Akaki (350 units) sites and servicescomlponent.(i) No of housing units with permanentwater supply connection.5. Adequate maintenance of 20 kms ofasphalt roads and attendant drainageimprovements as well as maintenance ofadditional roads in region using materialsand equipment purchased under theproject.(i) Kms. of asphalt roads maintained andimproved.(ii) Kms. of additional roads maintainedand improved using materials andequipment purchased under project.(iii) Kms. of drains maintained andimproved.

6. Improved solid waste managementfunciLions.(i) No. of tons of garbage collected/ _

20

Annex 1. Key Performance Indicators/Log Frame Matrix

Outcome / Impact Indicators:Indicator/Matnix Projected in last PSR' Actual/Latest Estimate

See under Note below.

Output Indicators:

Indicator/Matrix Projected in last PSR1 Actual/Latest Estimatedisposed.(ii) No. of households served by one skip.(iii) Frequency of maintenance ofvehicles and equipment.7. Improvement of the Akaki watersupply system in terms of expansion,distribution, and management capacityresulting in increased (8,300 m3/day) andimproved water supply to Akaki town.(i) No. of new households withpermanent water supply.(ii) No. of public water facility users.(iii) Percent of unaccounted for water.(iv) Frequency of maintenance ofequipment.8. Improvement of delivery of publicservices in the Addis Ababa regionthrough implementation of the FinancialManagement System (FMS), the UrbanLand Management System (ULMS), andprovision of equipment to the differentbureaus.(i) Percent of increase in revenuecollection.

1/ End of project

Note: During the project restructuring exercise, performance and impact indicators were identified andincluded as part of the final restructured project proposal to enable effective monitoring and evaluation.However, given the age of the project, the total absence of any kind of baseline data to evaluate projectimpact, and the implementing agency's (PIO) limited capacity, it was agreed both between theGovernment and IDA that it would not be practical or feasible to evaluate project impact with any degreeof detail. Project outputs, however, could be measured against realistic set targets which would give atleast some indication of the result of project activities and can be used as proxies for impact of theinvestments. Subsequently, a couple of M&E reports were submitted by the PIO to IDA in 1998.Thereafter, due to staff attrition (given that the project was due to close in June 1999) and attendantsevere capacity constraints, no further reports were submitted. Annex 9 of this ICR, however, providesdetails on physical implementation indicators by key project component in terms of targets envisaged atappraisal and what was completed at project completion

21

Second Addis Ababa UrbanDevelopment Project

Credit 2161-ET

Annex 2

Project Cost and Financing

22

Annex 2. Project Costs and Financing

Project Cost by Component (in US$ million equivalent)Appraisal Actual/Latest Percentage ofEstimate Estimate Appraisal

Project Cost By Component US $million US $millionAddis AbabaLand Compensation 0.02 0.28 1400%Sites and Services 2.9 1.65 57%Housing Development 9.86 7.05 71%Kebele Upgrading 3.41 1.56 46%Municipal Infrastructure (Street Maintenance and 13.10 21.11 161%Solid Waste Management)AkakiCivil Works 0.07 0.33 477%Vehicles and Equipment 0.46 0.23 49%Water Supply Improvement 4.44 3.93 89%Institutional Support 2.61 3.05 117%

Total Baseline Cost 36.87 39.18 106%Physical Contingencies 3.35Price Contingencies 6.46

Total Project Costs 46.68 39.18 84%

Total Financing Required 46.68 39.18 84%

Project Costs by Procurement Arrangements (Appraisal Estimate) (US$ million equivalent)

Procurement Method

Expenditure Category ICB NCB Other2 N.B.F. Total Cost

1. Works 7.9 5.3 13.2(6.8) (4.2) (11.0)

2. Goods 14.4 14.4(9.9) (9.9)

3. Services 2.8 2.8(1.8) (1.8)

4. Housing Development 2.5 9.9 12.4(2.2) (7.0) (9.2)

5. Kebele Development 2.8 1.1 3.9(2.3) (0.8) (3.1)

6. Land Compensation 0.1 0.1(0.0)

Total 24.8 8.1 13.9 46.8(18.9) (6.5) (9.6) (35.0)

1/ Figures in parenthesis are the amounts financed by the IDA Credit. All costs include contingencies2/ Includes minor works, goods, consulting services, training, technical assistance services.

23

Project Costs by Procurement Arrangements (Actual/Latest Estimate) (US$ million equivalent)

Procurement Method

Expenditure Category ICB NCB Other2 N.B.F. Total Cost

1. Works 1.7 2.6 1.4 5.7(1.4) (2.2) (1.2) (4.8)

2. Goods 22.1 0.8 0.9 23.8(17.0) (0.6) (0.9) (18.5)

3. Services 3.0 3.0(3.0) (3.0)

4. Housing Development 4.7 4.7(3.8) (3.8)

5. Kebele Development 1.3 0.3 1.6(1.0) (0.2) (1.3)

6. Land Compensation 0.3 0.3(0.0)

Total 23.8 4.7 10.7 39.2(18.4) (3.8) (9.2) (31.4)

I/ Figures in parenthesis are the amiounts financed by the IDA Credit. All costs include contingencies2/ Includes minor works, goods, consulting services, training, technical assistance services.

Project Financing by Component (in US$ million equivalent)Percentage of Appraisal

Component Appraisal Estimate Actual/Latest EstimateBank GoDvt. Cofin- Bank Govt. Confin- Bank Govt. Cofin-

ancier ancier ancierAd1dis AbabaLand Compensation 0.02 0.28 1400%Sites and Services 2.65 1.08 1.37 0.28 51% 26%Housing Development 8.82 3.54 5.36 1.69 61% 48%Kebele Upgrading 2.72 1.16 1.27 0.29 47% 25%Municipal 13.6 3.4 16.09 5.02 118% 148%Infrastructure (StreetMaintenance and SolidWaste Management)AkakiCivil Works 0.07 0.02 0.30 0.03 422% 167%Vehicles and 0.60 0.17 0.06 29%EquipmentWater Supply 4.31 1.44 3.79 0.15 88% 10%ImprovementInstitutional Support 2.28 0.98 3.05 134% 0%

Total Project Costs 35.06 11.62 31.39 7.80 90% 67%

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Annex 3

Economic Costs and Benefits

25

Annex 3: Economics Costs and Benefits

A. Housing and Sites and Services

AddisAbaba (Jimma Road and Ambo Road) and Akaki Sites and Services

Sub-component Appraisal Restructuring_ _____________ esdmate

Addis Ababa Housing and Sites and Services -Jimma 1 9% 11.2%Road and Ambo Road)Akaki Housing and Sites and Services Scheme 17% 6.9%

Souirce: AKT Consultants, Implementation Coimpletion Report of the Second Addis Ababa Urban Development Project June1959.

1. The sites and service component of Addis Ababa and Akaki (on and off-site infrastructure andhousing development) comprised of U'S$11.67 million or 32% of the base project cost. At restructuringthe component was reduced to US$9.08 million. As both housing construction and construction of on-and off-site infrastructure have not been completed, the economic rate of return was not re-calculated.The benefit from the housing and site and services is expected to be far below the SAR due to:

* Significant variations in construction cost that occurred;- The additional allocations for emergency water supply, street lighting, maintenance of on-site

roads and drainage, additional works on roads and drainage;T The monetary and labor contribution of cooperatives;

* The allocation of resources from the institutional support component (through allocations fromPIO) for organization of cooperatives, supervision of housing and on-site infrastructureconstruction;

- The allocation of additional resources for community facilities; and- Delayed completion (procurement of housing material and construction site road and changes in

FY 1991/92 but first batch was completed in FY 1996/97)

2. The results of a beneficiary survey provides the characteristics of the participants and otherattributes are summarized below.

Benieficiaries Characteristics Type of Houses (%) Total

A B C DPlace of WorkEmployee of region 14 52.8 33.3 2.8 11.1 15.9bureau/OfficesOther government office employees 47.0 31.5 2.0 19.5 65.6Non-Government Organizations .42.9 42.9 0.0 14.3 6.2Owners of Private Firm 66.7 - 33.3 1.3Other _44.4 55.6 - 4.0

Monthly Salary<790 61.5 38.5 - - 6.1790-1290 61.2 29.9 3.0 6.0 31.51291-2500 41.1 -- 38.3 2.8 17.8 50.2 -

26

Beneficiaries Characteristics Type of Houses (%) Total

:___-___-__----_ A 1B C IDPlace of Work2501 and over 19.2 26.9 - 53.8 12.2

Age Group _ _ _25-29 60.0 40.0 - - 2.229-34 51.3 30.8 - 17.9 17.335-39 47.5 37.5 2.5 112.5 35.640-44 37.1 40.3 1.6 21.0 27.645-49 66.7 3.7 7.4 22.2 12.050-55 41.7 33.3 - 25.0 5.3

GenderMale 47.1 32.1 2.7 18.2 81.0Female 45.5 43.2 - 11.4 19.0

__ __ __ __I 1:Educational Attainmentl12 completed or less 44.4 44.4 5.6 5.6 8.3Diploma 57.4 34.0 - l 8.5 21.6First Degree 43.1 35.8 1.6 19.5 56.4Second Degree 46.7 20.0 - 33.5 13.8

Martial Status __rNever married 52.4 26.2 - 21.4 18.2Currently married 44.8 36.5 2.8 16.0 78.4Divorced - 100.0 - - 0.4Separated 100 - - 0.4Widowed 50.2 16.7 - 33.3 2.6

Total 46.7 33.5 2.2 17.6 100Total 1004 810 44 200 2058 1

Source: AKT Consultants, Implementation Completion Report of the Second Addis Ababa Urban Development Project June1999.Note: Average income = 1,548.4 Average household size = 5

B. Kebele Upgrading Component

Sub-component Appraisal Re-estimate

Kebele Upgrading 14.8% ! 13.2%

Source: AKT Consultants, implementation Completion Report of the Second Addis Ababa Urban Development Project June1999.

3. At appraisal the Kebele Upgrading component was US 4.5 million or 12% of the base cosT of theproject (US$36.86 million). On restructuring the re-estimated ERR ranges from as low as 4.2% to 20.1%depending on the imputed rent. Assuming a realistic value for rent, an ERR value of 13.2% is obtained. .

27

C. Street Maintenance Componment

Sub-component Appraisal Re-estimate

Street Maintenance 18% (15.6) (4.7%) to 9.0%

4. This component had represented 22 % of the base cost of the project. At appraisal the economicrate of return was estimated at 18%. Re-estimated under two sets of scenario for traffic growth, re-estimated ERR ranged between -4.7%/o and +9.0%. Note, although the ERR at appraisal was 18% itshould have been 15.6%. Traffic data was not available to do a re-evaluation of the ERR.

D. Akaki Water Supply Scheme

Slb-componenf 4Appraisal RestructuringRe-estimate

Akaki Water Supply Expansion Scheime 9.6% 2.9%

5. This cost of this component at iappraisal was estimated at US$4.44 million out of total base projectcest of US$36.86 million. At restructuring the total estimated cost of the Akaki water supply scheme wasestimated to be US$5.4 million. The ERR was estimated at appraisal to be 9.6%. The restructured projectERR estimate after completion is 2.99%o. This is largely due to the fact that the IDA-financed portioncomprised of production capacity, related electro-mechanical equipment and primary distribution. TheGovernment decided because of the overall reallocation of the component budget to finance the secondaryand tertiary distribution system from its own resources. At project closing, the secondary and tertiarydistribution system has not been fully commissioned. As a result, the full production capacity of the IDAfinanced component is currently under-utilized resulting in, therefore, an expectedly low ERR.

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Annex 4

Bank Inputs

29

Annex 4. Bank Inputs

(a) Missions:Stage of Project Cycle Nio. of Persons and Specialty Performance RatingMonthNYear Count Specialty Implementation Development

Progress Objective

Appraisal: February 1990 2 Financial Analysts, 2 NA NAMunicipal Engineers

Negotiations: April 16-20, 5 2 Financial Analysts, Sr. NA NA1990 Municipal Engineer, Sr.

Counsel, DisbursementOfficer

Board: June 20, 1990 4 Financial Analyst, Sr. NA NAMunicipal Engineer, Country

_____________________ _______ Economist, Sr. CounselEffectiveness: November NA NA12, 1990 ,,,,

October 15-26, 1990 3 Financial Analyst, 2 _ ____________________ VMunicipal Engineers

January 9-11, 1991 1 Municipal Engineer _

November 25-December 6, 4 Sr. Urban Planner, Sr. 1 11991 Municipal Engineer,

.Municipal Engineer,]Financial Analyst

June 15-July 18, 1992 3 Sr. Urban Planner, Sr. 1Municipal Engineer,Financial Analyst

May 12-31, 1993 4 Sr. Urban Planner, Municipal 2 2E]ngineer, Financial Analyst,Chartered Surveyor

October 28-November 12, 3 Sr. Operations Officer, Sr.1993 M4unicipal Engineer, NA NA

L ______ Financial AnalystApril 6-22, 1994 (Project 4 Sr. Operations Officer, Sr.Restructuring Mission) Municipal Engineer, NA NA

Flinancial Analyst, UrbanPElanner

June 12-22, 1994 (Follow- I tJrban Plannerup Project Restructuring NA NAMission) _ _

October 10-21, 1994, 5 Financial Analyst, Sr. U SSanitary Engineer, YoungrFtofessional, Consultant,

Operations AnalystNovember 28-December 2, 2 Sr. Operations Officer, 'NA NA1994 Urban PlannerMarch 16-30, 1995 1 Sr. Municipal Engineer S SMid 1995 2 PT. Operations Officer, Sr. S U

L __________________________ Municipal Engineer __

30

Stage of Project Cycle No. of Persons and Specialty Performance RatingMonth/Year Count Specialty Implementation Development

Progress ObjectiveJanuary 17-18, 1996 1 Pr. Operations Officer NA NAFebruary 1-13, 1996 1 Sr. Sanitary Engineer NA NAApril 24 - May 10, 1996 4 Pr. Operations Officer, S S

Municipal Engineer,Operations Analyst,Disbursement Officer(Resident Mission)

October 14-November 7, 7 Pr. Operations Officer, Sr. S S1996 Municipal Engineer, Civil

Engineer, Operations Officer(Resident Mission), UrbanTransport Specialist, 2Consultants

February 3-15, 1997 4 Pr. Operations Officer, Civil S UEngineer, Operations Officer(RM), Consultant

May 30-June 12, 1997 4 Pr. Operations Officer, Civil S UEngineer, Operations Officer

______ (RM), ConsultantAugust 21-26, 1997 4 Pr. Operations Officer, 2 U U

Operations Officers (RM),Consultant

October 20-November 5, 5 Pr. Operations Officer, Civil U U1997 Engineer, 2 Operations

Officers (RM), ConsultantMay 3-13,1998 5 Pr. Operations Officer, Civil U U

Engineer, 2 OperationsOfficers (RM), Consultant

August 4-7, 1998 4 Pr. Operations Officer, 2 U UOperations Officers (RM),Consultant

November 9-13, 1998 3 Pr. Operations Officer, U UOperations Officer (RM),Consultant

May 3-7, 1999 4 Pr. Operations Officer, U UMunicipal Engineer,Operations Officer (RM),Consultant

August 2-13, 1999 (ICR 5 Pr. Operations Officer, NA NAMission) Municipal Engineer,

Operations Officer (RM),Financial ManagementSpecialist, Consultant

31

(1) StaffgStage of Project Cycle Actual/Latest Estimate

________________________ = No. Staff weeks US$ (,000)Identification/Preparation __

Appraisal/Negotiation 28.5 77.2Supervision 185.1 528.2ICR Li 40.0Total 213.6 645.4

"Preparation of this project and the MAarket Towns Development Project (Cr. 2103-ET) was donetogether as originally both projects were one (i.e. the Integrated Urban Development Project). However, adecision was made to split the project around June 1989 into two such that activities in Addis Ababacomprised the Second Addis Ababa Urban Development Project and those in the other urban areas weresubsumed under the Market Towns Development Project. Project preparation costs, therefore, are notreflected under SAAP but are captured under the Market Towns Development Project. The total cost ofpreparing both projects is about US$ 256,400 and total staff weeks equal 110.9.

2/ The WPA system has been discontinued therefore number of staff weeks not applicable anymore.

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Annex 5

Ratings for Achievement ofObjectives/Outputs of Components

33

Annex 5. Ratings for Achievement of Objectives/Outputs of Components

(]I=High, SU=Substantial, M=Modest, N=Negligible, NA=Not Applicable)

RatingIX] Macro policies []H[]SU[]M[]N 1X] NAIXJ Sector Policies [ ] H [ I SU [ ] M fX N [] NAIX] Physical [JH []SU IXIM [ IN []NA)XI Financial []H []SU []M [N7N []NA/X] Institutional Development [ ] [ ]SU [ M IX] N [ ]NAJXI Environmental [ H [ ] SU LXI M [IN r ]NA

Social[X] Poverty Reduction [ ]H [ ]SU XM [] N [I]NA[X] Gender []H []SU []M IXIN []NAIX] Other (Please specify) []H []SU [IM [IN /X]NA

[XI Private sector development [ ] H [ ] SU [ I M [ ] N [XI NA:X] Public sector management [ ] H [ ] SU [ ] M [X] N [ INA/ Other (Please specify) [ ]H [ ]SU [ ]M [ IN [XNNA

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Second Addis Ababa UrbanDevelopment Project

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Annex 6

Ratings of Bank and Borrower Performance

35

Annex 6. Ratings of Bank and Borrower Performance

(]HS=Highly Satisfactory, S=Satisfactory, U=Unsatisfactory, HU=Highly Unsatisfactory)

6.1 Bank performanceRating

[I] Lending UIC] Supervision SfX] Overall U

6.2 BorrowerperformanceRating

[X] Preparation S/i] Government implementation performance Ufir] Implementation agency performance UIX] Overall U

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Annex 7

List of Supporting Documents

37

Annex 7. List of Supporting Documents

1. Staff Appraisal Report (No. 8632'-ET)2. Memorandum and Recommendation of the President (No. P-5334-ET)3. Development Credit Agreement, August 13, 19904. AAAR Project Agreement, August 13, 19905. AWSA Project Agreement, August 13, 19906. HSB Project Agreement, August 13, 19907. Project Restructuring Proposal, May 19968. Amendment of the DCA, April 30, 19979. Amendment of the AAAR Project Agreement, April 30, 199710. Amendment of the AWSA Project Agreement, April 30, 199711. Amendment of the HSB Project Agreement, April 30, 199712. Cancellation and Reallocation of Credit Proceeds, August 3, 199813. AAWSA Project Evaluation Report, June 199914. CBB Implementation Completion Report, June 199915. Implementation Completion Report, Main Report, June 1999, AKT Consultants16. Back-to-office Reports with relevant attachments (July 1992 to August 1999)

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Annex 8

Related Bank Loans/Credits

39

Annex 8. Related Bank Loans/Credits

Credit Title Purpose Year of Approval Status

First Urban Development * Lower-cost, replicable 1983 Completed in JuneProject (Cr. 1366-ET) approaches to housing 1991

including the development ofserviced sites for self-helphouse construction in AddisAbaba for families above thepoverty threshold.

* Upgrading of environmentalconditions and infrastructurein Addis Ababa for thosefarnilies below the povertythreshold.

* Technical assistance to HSBto identify and begin toaddress key issues associatedwith the maintenance of urbanrental housing schemes androad systems in Addis Ababa.

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Annex 9

Key Implementation Indictors

41

Annex 9. Key Implementation Indicators

Tabie 1A: Key Implementation Indicators for Sites and Services: Infrastructure Development

Description Unit Quantity Construction Maintenance PHO FHOdays

Appraisal Restructuring Actual Contract ActualAmbo Road Housing SiteGravel road (on site) Km NAV 3.63 100 479 804 04/07/94 21/06/96Asphalt road (Access) Km 0.8 1.03 90Communal facilities in No. 0 0 3 177 201 27/11/98housing sites

Storm water drainage Km NAP 0.58 270 900 30/06/95Electricity Supply NAV NAVJimma Road Housing SiteGravel road (on site) Km NAV 11.27 270 978 1042 15/08/95 22/06/98Asphalt road (Access) Km 1.8 2.87 210Communal facilities No. 4 4 4 400 572 18/05/99Storm water drainage Km NAV 9.02 281Electricity Supply NAP NAP

Akaki Housing SiteGravel road (on and off site) Km NAV 2.36 NAV NAVCommunal facilities No. 0 0 3 120 164 826 29/03/94 517/95Electricity Supply NAP NAP

NAV - Not AvailableNAP - Not ApplicablePHO - Provisional Hand OverFHO - Final Hand Over

42

Table IB: Key Implementation Indicators for Sites and Services: Housing Development

Number of housing units Construction period Completion time

Description Appraisal Restructuring Actual Contract Actual Maintenance PHO FHO

Ambo site

Core + 0 (A) 100 100 224 NAP NAP NAP NAP NAP

Core + 1 (B) 250 250 206 NAP NAP NAP NAP NAP

Core + 2 (C) 0 0 0 NAP NAP NAP NAP NAP

Core + 3 (D) 150 150 36 NAP NAP NAP NAP NAP

Others (ground +1) 0 0 28 NAP NAP NAP NAP NAP

Sub-Total 500 500 494

Jimma road site

Core + 0 (A) 280 280 604 NAP NAP NAP NAP NAP

Core + I (B) 700 700 500 NAP NAP NAP NAP NAP

Core +2 (C) 0 0 0 NAP NAP NAP NAP NAP

Core + 3 (D) 420 420 164 NAP NAP NAP NAP NAP

Others (ground +1) 0 0 132 NAP NAP NAP NAP NAP

Sub-Total 1400 1400 1400

Akaki siteCore + 0 (A) 70 70 176 NAP NAP NAP NAP NAP

Core + I (B) 176 176 104 NAP NAP NAP NAP NAP

Core+2(C) 104 104 44 NAP NAP NAP NAP NAP

Core +3 (D) 0 0 0 NAP NAP NAP NAP NAP

Others (ground +1) 0 0 26 NAP NAP NAP NAP NAP

Sub-Total 350 350 350

Total (1+2+3) 2,250 2,250 2,244

43

Table 2: Key Implementation Indicators for Kebele Upgrading Civil Works and Flood Control Projects

Quantity Construction Maintenance PHO FHODays

Description Unit Appraisal Restructuring Actual Contrac Actualt

Implemented by PrivateContractorsWoreda 8 Kebele 23 NAP NAP NAP NAP 600 500 459 08/07/96 12/10/97

Woreda 8 Kebele 24 first*** NAP NAP NAP NAP 495 30/07/96 20/11/97

Woreda 8 Kebele 24 second NAP NAP NAP NAP 180 340 03/10/98

Woreda 8 Kebele 25 NAP NAP NAP NAP 180 441 391 26/06/97 22/07/98

Woreda 2 Kebele 17 NAP NAP NAP NAP 273 304 24/03/99

Woreda 14 Kebele 21 NAP NAP NAP NAP 312 366 14/05/99

Sub-total

Implemented by EDPOWoreda 7 Kebele 30 NAP NAP NAP NAP 187 655

Woreda 7 Kebele 31 NAP NAP NAP NAP 220 683

Woreda 7 Kebele 32 NAP NAP NAP NAP 237 654

Woreda 7 Kebele 33 NAP NAP NAP NAP 355 637

Woreda 6 Kebele 08 NAP NAP NAP NAP NAV

Woreda 5 Kebele 22 NAP NAP NAP NAP 180

Sub-total

Total

Total Kebeles Covered No 15 36 11

Physical Status of UpgradingCivil Works

Asphalt Road km 18.57 1.67 NAP NAP NAP NAP NAP

Gravel Road km 55.57 1.12 NAP NAP NAP NAP NAP

Paved stone Road km 5.57 7.13 NAP NAP NAP NAP NAP

Paved stone Drainage km 35.76 8.16 NAP NAP NAP NAP NAP

Concrete Pipe Drainage km 5.2 5.03 NAP NAP NAP NAP NAP

44

Quantity Construction Maintenance PHO FHODays

Description Unit Appraisal Restructuring Actual Contrac Actualt

Slab Bridge No. 26 NAP NAP NAP NAP NAP

Foot Bridge No. 26 NAP NAP NAP NAP NAP

Communal latrine No. 66 156 40 NAP NAP NAP NAP NAP

Public pipe points No. 11 104 27 NAP NAP NAP NAP NAP

Hard stands No. 28 78 19 NAP NAP NAP NAP NAP

Street lighting No. 350 0 0 NAP NAP NAP NAP NAP

45

Table 3: Key Implementation Indicators for Street Maintenance Civil Worke

Street Name Street Length (km) Construction Days

Appraisal Restructuring Actual Contract Actual Maintenance PHO FHO

1. Sahie Selassie Bridge to Semen NAP NAP 2.34 270 334 380 16/10/96 31/10/97Hotel & from NorthernMunicipality by the LazaristMission to Addisu Gebeya

2. French Embassy to Jesus Church NAP NAP 1.19 180 318 428 28/08/96 31/10/97

3. Enkulal Fabrica to Rufael NAP NAP 0.64 210 318 428 28/08/96 31/10/97

4. Dil Paint Factory by the Eth. Coffe NAP NAP 2.20 270 458 25/02/97Board to Diabaco

5. Old Bulgaria Embassy to Debre NAP NAP 1.44 210 311 420 10/09/96 05/11/97Zeit Road

6. Belair Hotel by Aware to 6* Police NAP NAP 1.30 280 488 27/03/97Station

7. The Three Ketechen Roads NAP NAP 3.74 450 548 19/05/97

8. Medhanealem School to Kolfe NAP NAP 1.66 210 507 08/04/97Children Center

9. Janmeda to Minilik Hospital NAP NAP 1.08 150 103 04/06/98

10. Coffee Board Junction to Seminary NAP NAP 1.15 179 165 06/05/98College

11. French Embassy to Bella NAP NAP 1.56 150 187 04/06/98

12. Ground Force Garage to Jesus NAP NAP 2.16 210Church

13. British Embassy to Traffic Office NAP NAP 1.61 160 186 03/06/98

14. Diabaco through Bisrate Gebriel NAP NAP 3.07 405 421 26/01/99Church to Jimma Road and fromDiabaco to Vatican Embassy

Total 31.7 31.7 25.14

46

Table 4: Key Implementation Indicators for Solid Waste Management Civil Works

Quantity Construction Days PHO FHODescription Unit Appraisal Restructuring Actual Contract ActualBuilding and Fence Work Site I I 1 2/23/98 5/27/99On-site asphalt road construction and Km NAV NAV 1.69 121 June 99off-site maintenanceTruck Park No. 0 1 1 240 June 99Solid Waste Containers No. 140 1362 1362

47

Table 5: Key Implementation Indicators for Akaki Water Sunpplv Component

Description Unit Quantity Construction Days Completion date

Appraisal Restructuring Actual Contract Actual Pl-O FHOPhase -I

Akaki Water SupplyCivil Work 720 1415 15/11/98a. Pipe laying km NAV 15.95 15.91b. Reservoirs (1500 and 800 m3) No. NAV 2.00 2.00c. Auxiliary Building Ls NAVSub-total (civil work) NAVConstruction of Boreholes No. NAV 3.00 3.00 NAV 780 Apr. 97Mechanical and Electrical Works Ls NAV NAV 90 Oct. 95Supply of Pipes and Accessories km NAV 15.92 17.20 NAVPhase -2

Akaki and Hlousing Site

Civil Worka. Pipe laying km NAV 53.00 32.83b. Reservoirs (800 m3) No. 1NAV 1.00 1.00

c. Auxiliaiy Buildings Ls NAVSub-total (civil work)Mechanical and Electrical Works Ls NAVSupply of Pipes and Accessories km NAV 53.00 32.83

Note. Civil Works under phase-2 are not part of the SAAUDP cost but they are part of the Akaki Water Supply and the Sites and Services Project

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Annex 10

Studies and Training included in the Project

49

Annex 10. Studies and Training included in the Project

Component (agency)' Study Purpose Status Impact of Study

STUDIES

KUG-CW Detailed engineering design in Prepare detailed civil works design Completed Upgrading civil works.

(PlOzlocal consultant) target kebeles Minimize dislocations due to project

SM-CW Drainage implications of road Study the type and volume of drainage works Completed(PIO=>AARAz:'Local maintenance needed to ensure sustained impact of maintenanceConsultant) works.

SWM-CW & VME2 Report of First Tranche Technical Evaluate performance of project procurements Completed Impact not felt due to(Foreign Consultant) Assistance Intervention Identify the VME needs of the SWM system and prevailing political & adm.

prepare technical specifications environment.Identify new disposal site out of five sites in theCity Master Plan

SWM-CW & VME3 Reports of Second & Third Evaluate performance of project procurements. Completed New vehicle & equip.(Foreign Consultant) Tranche Technical Assistance Identify weaknesses in SWM cycle & recommend needs identified, technical

Intervention (including training) improvements in each stage. specification. prepared &

Identify the VME needs of the SWM system and procured.prepare technical specifications. Trained Head of SWM

Identify new disposal site out of five sites in the Unit.City Master Plan. Improvements in VMETrain SWM Unit staff on SW data collection, mgt. & organizationalanalysis, design & implementation of better VME structure suggested.utilization methods.

SWM-CW & VME4 Report of Fourth Intervention of Evaluate performance of project procurements. Partly(Foreign Consultant) Technical Assistant Evaluate alternative disposal mechanisms and Completed

feasibility of re-cycling waste and improvementsin disposal site management practices.

'Component refers to the one affected directly by the study, training, workshop; not necessarily the component from which the study was financed. Agency refers tothe agency responsible for overall organization or execution (or both) of the activity (study, training, workshop).

2 VME is procurement of vehicles, machinery and equipment.

3 VME is procurement of vehicles, machinery and equipment.

4VME is procurement of vehicles, machinery and equipment.

50

Component (agency)' Study Purpose Status Impact of Study

STUDIES

WSI Study on Water Tariff Structure Evaluate the tariff structure and suggest a new Completed New tariff schedule

(Foreign Consultant) schedule to ensure better cost recovery. adopted in 1995; a"survival rate" & rates thatrise with utilizationapplied.

IS-TA Study to Modernize Payroll Improve financial management practices to ensure Completed

(Local consultant) Preparation and Payment in availability of sufficient resources & cost recoveryAACG mechanisms.

** A major Financial Mgt. study plannedfor inSAR has been canceled by govt as part of AA-CBP.

IS Study on Urban Development &

(PIO, WUDB) Information Needs

WSI Organization and Management Streamline organizational structure of AAWSA, Completed

(AWSA, local Study and improve MIS system

consultant)

SWM "Designing a strategy for project Completed

(PIO, local consultant) for community-basedenvironmental sanitation"(1998/99)

SM Study on Road Transport System

(PIO, AA Roads Auth.) in Addis Ababa

SWM Study on Management Design an MIS for Sanitation and assess financial Completed Fund for implementing the

(PIO) Information System for Sanitation requirements project has been requested

Activities in Addis Ababa (with from EU

UNDP Regional Water &Sanitation Group for East &Southern Africa) (1998/99)

SM Street maintenance: study on Identify the institutions involved in street Completed

(PIO, IDA) institutional set-up and system maintenance; identify main deficiencies inrequirements for SM and traffic maintenance/traffic managementmanagement

WORKSHOPS, PANEL, DISCUSSIONS, ETC

51

Component (agency)' Study Purpose Status Impact of StudySTUDIES

SAAUDP Panel Discussion on Create awareness/sensitize agencies and their staff Completed(PIO) "Development Problems ofAddis regarding the role of PIO (SAAUDP)

and Role of SAA UDP" (for half-a-day)

RM Urban Transport Workshop (half- Completed(PIO) a-day)SWM Workshop on SWM study Discuss findings of the study undertaken by Completed PIO-led committee to(PIO) "Environmental Sanitation Case foreign consultants (sponsored by UNICEF) and ensure and follow-upStudy" undertaken by foreign design mechanisms for implementation of its implementation has beenconsultants (two days) recommendations. set up.SAAUDP Workshop on the iitiative for Assess institutional, material, and human resource Completed Follow-up action not taken(P1O) Addis Ababa Capacity Building needs for better provision of public services and because initiative was notProject (3 days) design an investment program to be financed by approved by government.

SAAUDPSWM A workshop on "Institutional set- Create sustainable conditions for environmental Completed(PIO) up for environmental sanitation" sanitation in Addis Ababa

and a workshop on "Financingenviromnental sanitation"(1998/99).

TRAININGSM A two-week visit for Road Enhance the awareness/experience of road mgt. Completed(PIO) Authority Board Members and staff regarding road (road maintenance) systemsExecutivesIS Computer training for AACG: Improve data processing capacity of AACG Completed(PIO) 1995/96IS Computer training for EDPO, Improve data processing capacity of AACG Completed(PIO) PIO, Health Bureau (1997/98)IS Training on Financial Accounting Completed(PIO & Debre Zeyt Mgt for six staff of PIO and 2 fromIrstitute) other AACG agencies (1998/99)

52

Component (agency)' Study Purpose Status Impact of Study

STUDIES

IS Training on Project Planning, Completed

(PlO & Debre Zeyt Mgt Implementation Monitoring andInstitute) Evaluation from 11 staff from

other AACG agencies (1998/99)IS Training on Ethics in Public Completed

(PIO & Debre Zeyt Mgt Management from II PIO staffInstitute) and 14 from other AACG

agencies (1998/99)IS Training on Budgetary Planning Completed

(PIO & Debre Zeyt Mgt and Control hics in PublicInstitute) Management for 2 PIO staff and

10 from other AACG agencies(1998/99)

iS Trainings for 22 staff (1998/99) Completed

(PIO & Debre Zeyt Mgt on:Institute) * Record Management

* Office Operation &Management (levels I & II)

IS Training on operation of newfire- Completed(PIO) fighting equipment for 4 staff of

Fire Brigade in South Africa(1998/99)

IS-project management Training on Contract Improve implementation performance by Completed Limited impact due to

(PIO) Management for PIO staff (3 speeding-up and better manage procurement early resignation of thepersons-i in Accra and 2 in contracts. trained staff.Nairobi)

53

Second Addis Ababa UrbanDevelopment Project

Credit 2161-ET

Annex 11

Sbtatus of Legal Covenants

54

Annex 11. Status of Legal Covenants(as per the restructured project)

Section Present Original Revised Description of Covenant CommentsReference/ Status Fu1filment Fulfilment

Covenant Class Date Date

Development Credit Agreement2.02 (b)/ I/ C Opening of Special Accounts for Complied with

l l l | CBB, AAWSA and AAAR

AAAR Project Agreement3.04 / 7 C In carrying out Part B (upgrading Complied with

of kebeles), AAAR to implementin a manner satisfactory to IDA aresettlement plan for the peoplewhose homes may be affected.

4.01(a) C I AAAR to maintain records and Complied withaccounts for Parts A. I(development of housing sites andservices), B (upgrading ofkebeles), C (infrastructureimprovement in Addis Ababa), D(solid waste management in AddisAbaba), and F. I (institutionaldevelopment for AAAR) of the

____________ ___ ________ _ _____ Project.4.01(b) /I C AAAR to have accounts audited Complied with

within nine months of end of fiscalyear and submit to IDA

4.0 1/2 NC AAAR to take all appropriate Not compliedmeasures to recover on-site withinfrastructure costs associated withcarrying out Part A. 1 (developmentof housing sites and services) of

______________ _the project from the beneficiaries.

AAWSA Project Agreement3.04 /2 C 09/30/91 AAWSA to carry out a Water Complied with

Tariff Study and consult with IDAprior to implementation of therecommendations.

4.01(a) I C AAWSA to maintain records and Complied withaccounts for Parts E (water supplyin Akaki) and F.2 (institutionaldevelopment for AAWSA)of theProject.

4.01(b) I C AAWSA to have accounts audited Complied withwithin 12 months of end of fiscalyear for first two years and withinnine months of end of fiscal yearfor subsequent years and submit toIDA.

4.01(c) /I C AAWSA to have SOEs included in Complied withaudit report with separate opinion.

4.02(a) /2 CP AAWSA to produce for each fiscal Complied with

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Section Present Original Revised Description of Covenant CommentsReference/ Status Fulfilment Fulfilment

Covenant Class Date Dateyear total revenues equivalent to partiallynot less than the sum of (i) totaloperating expenses and (ii) theamount by which debt serviceexceeds the provision fordepreciation.

4.02(b) /2 CP AAWSA shall prepare forecasts to Complied withdetermine whether it will meet partially4.02(a).

4.02(c) /2 CP AAWSA to take all necessary Complied withmeasures to meet 4.02 (a). partially

CBB Project Agreement2.06(a) / 3 C CBB to extend loans to Complied with

individuals, coops and self-helpgroups for house constructionunder terms, conditions andeligibility criteria acceptable toIDA.

2.06(b) / 3 C 12/31/90 CBB to enter into an agreement Complied withwith AAAR for bulk purchase ofbuilding materials.

2.07 /3 C CBB to extend sub-loans to Complied withselected cooperatives for theconstruction of residential housesunder terms and conditionisapproved by IDA including interestat the prevailing market rate, and arepayment period of 25 years,including a grace period of one

__ __ __ __ __ ___ _ ___ year.4.01(a)/ 1 C CBB to maintain records and Complied with

accounts for Part A.2 (sub-loansfor housing units and relatedservices in Addis Ababa andAkaki) of the Project.

4.01(b) / I C CBB to have accounts audited Complied withwithin nine months of end of fiscal

___________________ ________ _________ year and submit to IDA.Action Taken Covenant ClassC - Complied With I - Accounts/AuditCD - Compliance after Delay 2 - Financial performance/generate revenue from beneficiariesCP - Complied with Partially 3 - Flow and utilization of Project fundsNC - Not Complied With 4 - Counterpart funding

5 - Management aspects of the Project or of its executing agency6 - Environmental covenants7 - Involuntary resettlement8 - Indigenous peoples9 - Monitoring, review and reporting10 - Implementation11 - Sectoral or cross-sectoral budgetary or other resource allocation12 - Sectoral or cross-sectoral regulatory/institutional action13 - Other

56

Second Addis Ababa UrbanDevelopment Project

Credit 2161-ET

Annex 12

Mission Aide Memoire and its Attachments

57

Annex 12. ICR Mission Aide Memoire and its Attachments

FEDERAL DEMOCRATIC REPUBLIC OF ETHIOPIA

Second Addis Ababa Urban Development Project (Credit 2161-ET)Implementation Completion Review Mission, August 2-13, 1999

AIDE MEMOIRE

l. Introduction

1. An IDA team consisting of Mr. Gautam Sengupta (Team Leader), Mr. Yitbarek Tessema(Operations Officer), Mr. Eshetu Yimer (Financial Management Specialist), Mr. HamimMagdon-Ismail (Engineer) and Ms. Sudeshna RoyChoudhury (Consultant) conducted anImplementation Completion Review (ICR) mission in Ethiopia from August 2-13, 1999 of theSecond Addis Ababa Urban Development Project (SAAP). The mission met with officials fromthe Ministry of Economic Development and Cooperation (MEDAC); the Ministry of Works andUrban Development (MWUD); the Project Implementation Office (PIO), the Addis Ababa Waterand Sewerage Authority (AAWSA), the Addis Ababa Roads Authority (AARA), the HealthBureau, and the Environmental Development Project Office (EDPO) of the Addis Ababa CityGDvernment; the Construction ancl Business Bank (CBB); and the Urban Development SupportServices l(UDSS) of the Ministry of Works and Urban Development (MWUD). This aidememoire summarizes the mission's main findings and recommendations. The mission wouldlike to gratefully acknowledge the co-operation and assistance extended by all the officialsduring its visit.

2. Mission Objectives: The main objectives of the mission were to: (i) explain about theBank's requirement for the Government's contribution to the ICR; (ii) agree on the plan for thefuture operations of the project to ensure sustainability of investments financed under the credit;and (iii) elicit views of various stakeholders on the project.

II Background

3. The project which became effective in November 1990 was restructured in July 1996 forreasons enumerated in para. 6 below. The original project objectives were not changed duringthe restructuring but some priorities within project components were re-ordered, some projectcomponents were eliminated, some new elements added and the credit closing date was extendedby two years. In August 1998, a reallocation of credit proceeds was undertaken (see para. 8).Again, the reallocation did not change the project objectives, no new component was added ordeleted and there was no further extension of the closing date. The reallocation exercise resultedin a shift of funds towards those components that had a good implementation track record. Inaddition, SDR 1.75 million from the credit was canceled from those activities that were unlikelyto be completed by the credit closing date of June 30, 1999.

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A. The Original Project

4. In response to the severe shortage of housing, deteriorating physical infrastructure, unhealthyenvironmental conditions, and inadequate financial and management capacity to effectively meetthe needs of a growing national capital, Addis Ababa, the previous Government of Ethiopia soughtIDA assistance in the sector. The Second Addis Ababa Urban Development Project as a follow-onto the First Urban Development Project was approved by IDA on June 20, 1990. The project's totalcost was estimated at US$46.7 million, to be financed by an IDA credit of SDR 27.1 million(US$35 million equivalent5) and contributions from the Government of Ethiopia (US$1 million)and the project agencies (US$10.7 million).

5. The main objective of the project was to help improve basic infrastructure and environmentalconditions in the project areas of Addis Ababa and Akaki. The original project components were:

* sites and services and core housing development in two locations in Addis Ababa and one inAkaki;

* upgrading of infrastructure and housing in some kebele (slum) areas in Addis Ababa and aloan fund to finance revenue-generating projects for poor women and other developmentprojects in kebeles citywide;

* street maintenance and improvements to solid waste management in Addis;* improvements to municipal infrastructure in Akaki, and expansion of its water supply

system; and* institutional support programs to strengthen management and maintenance systems in the

project agencies.

6. The project became effective in November 1990 and implementation progress was generallysatisfactory for the first two years of implementation. However, implementation of the projectvirtually came to a standstill during 1993, 1994, and the early part of 1995, largely as a result of theoverall transition in the country. Rapid changes in institutional responsibilities and arrangements,frequent changes in key project staff and uncertain and evolving economic policies of a governmentin transition contributed to poor project implementation. While the new government accepted andsupported the fundamental objectives of these two projects, it decided to conduct a review of theemphasis and implementation arrangements of the project, in light of the changes in the economic,political and administrative environment. The government established two governing principles forrestructuring the project: (a) to redirect project activities in a way to maximize the benefits to thepoor by improving access to basic services; and (b) to strengthen management, financial andtechnical capacity of service delivery/implementing agencies to improve efficiency andsustainability of investments.

B. Project Restructuring

7. In December 1995, the project implementing agencies and IDA agreed, at a working level, ona general framework for restructuring, as well as a revised implementation schedule. Following thisgeneral agreement, however, there was a lengthy delay while the Government and IDA reached

5 Currently about US$38 million equivalent.

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agreement on difficult policy and implementation arrangement issues. These were finally resolvedin April 1996, and the formal restructuring proposal (Project Restructuring Proposal, May 1996)was submitted by the Government and agreed with IDA in July 1996. Eventual formalization of therestructuring and the amended legal agreements was concluded in April 1997.

8 The original project objectives, which were consistent with the objectives and priorities of thenew government, remained unchanged during restructuring of the project. However, the projectwas conceived and designed under a set of policies and circumstances which were no longer fullyapplicable. The economic policies of the new government needed to be reflected in the restructuredproject. Also, changes had taken place in world currency markets that affected the amount of thecredit remaining under the credit agreement. Therefore, though project objectives were notchanged, some priorities within the project components were re-ordered, some project componentsvwere eliminated, and some new elements added.

9. The primary objectives of the restructuring were: (i) to realign the project in a mannerconsistent with the new Governmient's policies and priorities; and (ii) to direct financial andtechnical resources to those activities which would have the most development impact. The maindeparture from the original project was to focus the civil works activities more towards kebeleupgrading, given that almost 85 percent of the population in Addis Ababa lives in the kebelesrequiring infrastructure and environmental sanitation improvement, and to put more emphasis oncapacity building in the Addis Ababa City Government. The restructuring process took over twoyears to be completed, to ensure full ownership of both the Central and the Addis Ababa CityGovernment. The original credit closing date of June 30, 1997 was extended by two years toJune 30, 1999 during the restructuring, to allow adequate time to complete all project activities.

C. Reallocation of Credit Proceeds

10. Based upon actual implementation experience since project restructuring, the timelyimplementation of the kebele upgrading program proved to be difficult given the weakinstitutional capacity and lack of experience of the implementing agency, the EDPO. It becameevident that the scope of the kebele upgrading program would need to be reduced. Also, thecapacity building component expanded during project restructuring, proved to be too ambitiousin the context of evolving fundamental policy and systemic reforms in city administration.G:iven the long term nature of capacity building initiatives, specially in the evolving context ofdecentralization (Regionalization), both IDA and the Government considered it to be moreprudent to start afresh later in this regard. In August 1998, therefore, agreement was reachedwith the Government on reallocation of credit proceeds among various project componentstaking into account the developmtent priorities of Addis Ababa and the need for completingactivities by the credit closing date of June 30, 1999. The reallocation did not change the projectobjectives, no new component was added or deleted, and there was no further extension of thecredit closing date. Substantively, the reallocation aimed to shift funds towards thosecomponents which had a good irmplementation track record. The major budget shift amongcomponents concerned an increase for the purchase of additional municipal equipment foressential city services by primarily reducing allocations from the kebele upgrading componentand other types of goods and equipment. Agreement was also reached to cancel SDR 1.75million of the IDA credit from the component pertaining to long-term capacity building taskswhich were unlikely to be completed by the credit closing date.

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III. Project Implementation Status

11. Attachment 1 summarizes the status of implementation of the various project componentsat the credit closing date of June 30, 1999.

12. Site Visits: The IDA mission conducted site visits for some of the major componentsfinanced under the credit. The main findings from these site visits are as follows:

(i) Akaki Water Supply: The mission visited the bore-hole pump remote control room, the chlorineinjection tank and the bore-holes from which water is pumped. Treated water is pumped twice aday into the storage reservoir from which water is gravity fed into the reticulation systemsupplying Akaki. All four bore-holes, three new and one upgraded have been commissioned.The three new bore-holes are used for water supply with the upgraded bore-hole acting as astandby. At the time of the visit there was no water production taking place. The BranchManager informed the mission that the system was operational and functioning satisfactorily.The exterior approaches to the buildings at the site were messy as a result of the rains and alsoconstruction debris from the adjacent water supply construction works. AAWSA indicated thatit will be carrying out the paving and tidying of the exterior premises at an appropriate timewhen all works in the vicinity are completed. In addition, one of the public fountains was alsovisited and appeared to be functioning and providing water in sufficient quantity. However, allof the fountains have not been given water connections. This is because management andadministration arrangements between the kebeles and AAWSA have not yet been sorted out.AAWSA indicated that this issue is being addressed. The mission learnt that the project'sintervention to augment water supply in Akaki has resulted in the identification of the fullpotential of the aquifer which is substantial and further development and utilization by AAWSA.

(ii) Sites and Services at Jimma, Ambo andAkaki Roads: The mission visited the following sites:

(a) The Jimma Road housing scheme (1,400 houses): It should be mentioned here that the creditfinanced housing loans through the CBB to housing cooperatives. These housing loans have beenfully disbursed but the actual construction of the houses are at various advanced stages, duemainly to modifications of the plans in some housing cooperatives. The mission also noted thatthere were very few residents at the Jimma Road housing scheme because of a lack of sufficientwater supply. The temporary water supply arrangement was not adequate. The communityfacilities which were complete were not operational as very few people had moved into theirpremises. AAWSA informed the mission that permanent water supply (financed fromAAWSA's own resources) would be made available to residents in two months time. Themission was informed that work on the permanent supply system has resumed with theappointment of a new contractor. The mission noted that there is need to monitor this activityclosely so that people can move into the housing scheme as soon as possible. In addition, actionsshould be taken to have the community facilities functioning as soon as the residents move in. Itwas noted that the internal access roads to the houses from the main road were in poor conditionprimarily due to the movement of heavy equipment due to the construction activity that is stillongoing. The mission pointed out that the AACG should construct the access roads as soon asthe construction works on the houses is fully completed. The mission was informed that the PIOhas recently organized community committees to take over the operations and maintenance ofthe on-site infrastructure. The mission was also given to understand that the development of this

61

housing scheme has had a synergistic effect in terms of further housing development andincreased public transport access in the immediate area mainly because of the ancillaryinfrastructure such as roads, etc. that have been built.

(b) The Ambo Road housing scheme (500 houses): The residents of this housing scheme havetaken occupation recently. There is temporary water supply available to the residents.Permanent water supply will be provided by AAWSA from its own resources. AAWSA hasincluded the provision of permanent water supply in this site in the same contract for thepermanent water supply scheme for the Jimma Road housing site. However the communityfacilities are not yet functional although the buildings and services are in place. The mission wasinformed that the school is targetied to start classes at the beginning of the next academic yearwhile the health clinic has to be provided with the required staff, furniture and equipment.Actions have been taken to have these become fully functional shortly. It was noted that theimrportance of advance planning and timely provision of necessary budgets needs to beetnphasized in future projects.

(iii) Kebele Upgrading: Woreda 7, Kebele 32 was visited. The upgrading work is complete. Thewater supply fountain inspected was functioning under the management of the kebeleadministration. The charge for 20 liters of water is 5 cents which is much cheaper than what thecommunity was paying prior to the supply of water in this manner. The hard stands for therefuse containers are not in use. Tne mission was informed that as soon as the skips arrive theywill be deployed at the kebeles. Modalities are to be worked out for the safekeeping of the skipswhen deployed. The mission nLoted that it is necessary that operational and maintenancemechanisms are put in place in consultation with the community. The investments made must beprotected and built on. Commumity education and public awareness are essential for thesustainability of the investments. In addition, a storm water canal retaining wall in Wereda 2,Kebele 17 and Wereda 14, Kebele 21 (300 meters on either side of the stream) has beencompleted satisfactorily and has stood the test of the recent heavy rainfall. The danger posed tothe houses and residents of the area by collapsing earth is not there and erosion has also beenminimized. Incomplete design work and inaccurate cost estimates are some of the problems thatwere faced during implementation.

(iv) Repi Landfill (Tipping) Site: A substantial length of the permanent fence has been broughtdown to give way to the Addis Ring Road. A temporary wooden pole fence has been erected inits place. The off-site approach road to the landfill is complete but the on-site internal accessroad under the same contract has riot been finished. The on-site access road is in poor conditiondue to, possibly, design and constiuction inadequacies compounded by the sole owner contractorpassing away. Tipping is taking place outside the fenced area of the site because inclementweather has made the area inside the fence inaccessible. Thus, the reduction in scavenginganticipated by the fencing is not of relevance. The life of this tipping site is estimated to beanother five years. Therefore, consideration should be given to diverting the weigh-bridge to theproposed new sanitary landfill site that is being considered. The workshop and the control officefor the weigh-bridge are there at t;he site but not in use. There are plans to use the workshop inthe near future to carry out routine maintenance of equipment. The sheep-foot compactor at thesite is out of order but will not be repaired as this equipment is unable to operate productively inthis site which is essentially a tipping site. It may be of use in the sanitary landfill to bedeveloped. The Health Bureau recognizes the limitations at the tipping site and its inability tocarry out landfill operations in an. environmentally friendly manner. For instance there are no

62

layers of cover material in between layers of refuse, there is no leachate control and treatmentthough there is awareness and concern. The Health Bureau has begun studying the site from thepoint of view of taking some stopgap measures for leachate control till the new landfill site iscommissioned. The equipment received and the investments made on the site have broughtsome dividends in that the operations are much better than before. However, it is important thatthe City Government focuses its attention on the whole issue of solid waste management andalso develops a new sanitary landfill urgently. Also, there are recommendations made byconsultants that need to be addressed without delay.

(v) Street Maintenance: The mission drove through some of the roads that have recently beenrestored. The important point is the upkeep of these roads and the sustainability of theinvestments. The mission was informed that there is no real holistic pavement managementsystem in place and this has led to ad hoc interventions. Traffic management systems are non-existent and there is an urgent need for pervasive design standards.

During the site visits the mission focused on the need for constant awareness of theimportance of sustainability of all investments, forward planning for their upkeep,maintenance and operational management systems and timely budget allocation.

13. Payments after Credit Closing Date: The mission informed the Government thatreimbursements from IDA would be made only for those goods, works and services receivedand/or completed before the credit closing date of June 30, 1999 and such expenditures would bepaid from the credit proceeds for a period up to four months after the credit closing date, i.e.,through October 31, 1999.

14. Payments for Retention Monies: IDA has agreed with the Government that it would beeligible for reimbursements against retention monies to be paid to relevant civil workscontractors and suppliers of goods during the maintenance/defects liability period against anacceptable bank guarantee received from such contractors/suppliers. Att4chment 2 summarizesthe agreed list of contractors/suppliers, amount of retention money to be paid against acceptablebank guarantee, and the duration of the maintenance/defects liability period. The missionadvises the Government that reimbursements from IDA would be made against the agreedamounts of retention money only through October 31, 1999. The Government should,therefore, conclude these transactions and submit the necessary reimbursement requests assoon as possible.

IV. Views of Stakeholders

15. The mission solicited the views of the implementing agencies within the Addis Ababa CityGovernment and direct beneficiaries on project implementation experience with respect to someof the major components. The following highlights some of the key observations of thestakeholders.

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(i)+ Akaki Water Supply* AAWSA noted that with respect to upgrading of water supply in Akaki, beneficiary assessments

that were conducted indicate that water consumption by the beneficiaries has increased from 20to 80 liters per family per day due to investments made under the project.

* The public water fountains provided under the project have helped considerably in providingeasier access to safe water.

* Average time spent by beneficiaries in collecting water has substantially reduced due toincreased number of water points.

* The investments under the project triggered actions by AAWSA to better utilize the frill supplypotential of the Akaki aquifer to benefit a large section of Addis Ababa.

* Leak detection equipment and training contributed towards increasing operating efficiency ofAAWSA's operations as a whole.

* The tariff study financed under the project contributed towards recognizing the importance ofsound financial management practices and its implementation is now being facilitated under theongoing IDA-financed Water Supply Development and Rehabilitation Project.

(ii') Sites and Services at Jimma, Ambo and Akaki Roads* Supply of housing stock in the city has increased.* Absence of timely provision of supporting infrastructure, particularly permanent water supply

has hindered rapid occupancy of completed units and no usage of community facilities.* Offsite infrastructure has helped development of adjacent housing and transport facilities.

(iii) Kebele Upgrading* The component which espoused community participation and involvement in upgrading

activities has increased the awareness within AACG for the need to do community consultationin order to ensure ownership and sustainability of the investments.

* The capacity of the EDPO, the implementing agency, needs to be strengthened and itsinstitutional structure needs to be reorganized to be more efficient in delivering these programs.

* Funds flow mechanisms and procurement processes need to be streamlined and shortened.* The Operational Manual produced under the project has proved to be a valuable tool in

designing and implementing future programs.* Woredas to be involved in actual execution of the program whereas EDPO will do the design

and supervision.

(iv) Solid Waste Management* The equipment and technical assistance inputs have helped considerably in improving the

functioning of the solid waste management division within the Health Bureau of the citygovernment.

* Because of the project inputs it has been recognized that the institutional arrangements for solidwaste management has to be reorganized, a process which has already started.

(v) Street Maintenance* Both equipment and materials provided under the project have been utilized fully by the

AARA. As a result the main roads in the city are now being better maintained as opposed tothree years ago. The inputs through the project essentially helped AARA to implement acritical mass of its work prograrm until about a year ago.

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* Contractor capacity to do asphalt concrete is a problem and most roads have been done usingthe penetration method. However, these have deteriorated quickly because of the high trafficvolume on the roads.

V. Key Observations of the Mission

16. Overall, the project appears to have achieved its objective of accomplishing the intendedphysical targets. Implementation experience of the project has helped raise the level ofawareness amongst those involved in its execution in terms of the complexity of issues involvedin planning, design and implementation of basic infrastructure improvement programs. Theproject has also served to build capacity, albeit in a limited sense, in segments of the professionalstaff in those bureaus and departments in the AACG which were involved in project activities.

17. However, the project has not been able to achieve one of the key objectives of institutionaldevelopment and broader capacity building. In particular, the mission notes the following:

(i) The project objectives and the development imperatives did not get fully incorporated into themainstream policies and programs of AACG. In a sense the project worked as an enclaveoperation without having many of the benefits accrue to AACG as a whole.

(ii) The project was unable to significantly influence fundamental policy reforms, programformulation, prioritization of investments and related financial management and implementationissues within AACG as an institution.

(iii) While the AACG should remain responsible for the provision of basic public services, it isnot necessary that it has to "deliver" these services by itself. Alternative service deliverymechanisms including increased involvement of the private sector, communities, NGOs, etc.should be explored.

(iv) It is not self evident that the Bank has a comparative advantage in financing and supervisingsmall individual sub-projects. Given the high transaction costs of such an approach, the Bankshould concentrate on assisting the client in building its capacity to effectively and efficientlymanage the project implementation process. Experience indicates that the Bank should be lessinvolved in "managing" the implementation process and be more of a "financier" and a "catalyst"to support building up the client's management capacity.

VI. Plan for Future Operations of the Project

18. Attachment 3 is a plan for future operations of the major components financed under theproject. This plan was developed and agreed to between the mission and the PIO and representswhat is considered to be essential to ensure sustainability of the investments. However, a firmcommitment from the AACG to undertake the activities proposed under the plan is still to bereceived.

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19. Given that most of the investments under the major project components are the directresponsibility of various bureaus and departments of the AACG, it would be necessary for themto receive explicit budgetary allocations as indicated in the plan. Consequently, whether or howmuch funds are actually made available for operations and maintenance would depend upon theoverall financial resources of the AACG and their applications.

VII. Schedule of Preparation of ICR

18. The mission held discussions with the PIO and its consultants on the ongoing analyticalwork required to prepare the Government's contribution to the ICR. It was agreed that the PIOwill finalize and submit its contribution to the ICR by September 30, 1999. IDA will makeavailable the draft of the full ICR for the Government's comment within three weeks ofreceiving the Government's contribution to the ICR, i.e., October 22, 1999. It has been agreedthat the Government will provide its comments on the draft within two weeks, i.e., by November5, 1999. IDA will make available the final draft ICR for the Government's comments withintwo weeks after receiving the Government's comments on the initial draft, i.e., by November 19,1999.

Gautam SenguptaTeam Leader, SAAP/MTDP/DSPThe World Bank

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Key Persons Met:

H.E. Ato Girma Birru, Minister, MEDACH.E. Ato Haile Assegidie, Minister, MWUDAto Aschalew Aberra, General Manager, PIOAto Dereje Ayalew, Project Engineer, AAWSAW/o Tseganesh Melese, IDA Unit Head, CBBAto Gutema Bulcha, General Manager, UDSS/MWUDAto Ismael Ibrahim, General Manager, AARAAto Mehari Bekele, Enviromnental Health Department Head, AACG Health BureauAto Kinde Bizuneh, General Manager, EDPO

Copies to:

H.E. Ato Girma Birru, Minister, MEDACHWE. Ato Haile Assegidie, Minister, MWUDH.E. Ato Berhanu Tamirat, Vice Minister, MWUDAto Tadesse Kebede, General Manager, AAWSAAto Aschalew Aberra, General Manager, PIOW/o Tseganesh Melese, IDA Unit Head, CBBAto Gutema Bulcha, General Manager, UDSS/MWUDMr. Nigel Roberts, Resident Representative, The World Bank Resident Mission, EthiopiaMr. Surit Singh, Principal Operations Officer, The World Bank Resident Mission, Ethiopia

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Attachment 1SECOND ADDIS ABABA URBAN DEVELOPMENT PROJECT (CR. 2161-ET)

Project Implementation Status as of June 30, 1999

No Major Project Component/Activities Unit Physical Targets andAccomplishment Cost (in '000 Eth. Birr)

SAR Restructuring Reallocation Actual SAR Restructuring Reallocation Actual

I Sites and Services1.1 Community facility no. 4 4 10 1200 5456 8320 61601.2 Site servicing __ _ _ __I

1.2.1 Off.9-sit- and on-site roads wit drains 20 20 20 18.20 2064 1552 3632 3017.61.2.2 Electricity supply sites 3 3 3 3 224 896 1012 998.4I.2.3 Up-grading (Asphalting) of off-site km _ 4 3184 3160

roads

2 Housing Loan Units 2250 2250 2250 2244 14640 32560 40500 40500

3 StreetMaintenance _3.1 Asphalt roads and drains maintenance km 3.1.7 31.20 34.20 31.20 7680 16880 - 20720 14264.83.3 Bitumen Ton 560 560 3720 3720 920 920 7114.4 4602.4

4 Kebele Up-grading __- _4.1 Number of kebeles No. 11 33 1 1 1 1 4288 26552.8 13144 9771.2

5 Solid Waste Management _ _ ____5.1.1 Land fill site improvement Cont. I I I l 553.6 396 396 378.45.1.2 Access roads with drains km 0.94 0.95 2.8 2.8 226.4 727.2 2068 2183.25.1.3 Truck park with work shop facility Cont. 0 _ 1 1 1 - 1546.4 1546.4 2432

5.3 Solid waste containers pcs 140 1362 1362 1362 1375 5290 5290 5110

6 Institutional Development6.1 Municipal equipment No. 82 92 III 111 18308 83513 101003 920276.2 Consultancy _ _ _ _ _ _ _

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No Major Project Component/Activities Unit Physical Targets and Accomplishment Cost (in '000 Eth. Birr)

SAR Restructuring Reallocation Actual SAR Restructuring Reallocation Actual

6.2.1 Design and supervision

6.2.2 Advisory services and system study No 1_ 4 2277 22149 12249 6800

6.2.3 System study6.3 Training

7 Akaki Water Supply7.1 Civil work' #ofcont. 4 2 2 2 11925 5508 5508 2476

7.2 Vehicle and equipment # Of Packg. 3 3 3 3 415 1158 1158 2358

7.3 Goods4 # Of Packg. 2 2 2 2 629 25945 25945 18039

7.4 Consultancy and training ' #Of Packg. 5 5 5 1244 17118 17118 12332

Total 67969 248167.4 269907.8 226610

1- Civil works include design and supervision contract.2- The package includes: Test benches, Office equipments, and vehicles3- The package micludes: Org& Mgmt. St-dy, tariff stidy, MIS system study, Technicians training, and management training.

Th6e package includes suply of pipes and Supply and installation of electromechanical

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ttachment 2Schedule of Retention Money to be Released Prior to 31, October, 1999 Against Bank Guarantee for Defects Liability

Project Contract Contractor Contract Out Standing Retention Provisional Date Date ofNo Amount of end of defects actual

liability period payment ofretention

_____________ % Amount IDA Share .L Sites and Services I

1.1 Jimma Road Housing Site . .___ la) Asphalt Road Construction at 14/98 2,959,632.25 5 147,981.61 118,385.29 June 23, 2000

Jimma Road Housing Siteb) Communal facility construction at 04/97 5,007,251.74 5 250,362.59 200,290.07 May 18, 2000

Jimma Road Housing Sitec) Drainage structure construction at 08/98 1,411,566.26 5 70,578.311 56,462.65 June 24, 2000

Jimma Road Housing Site1.2 Akaki Housing Site

- Communal facility construction at 13/98 1,404,858.80 5 73,755.09 59,004.07 March 4, 2000Akaki Housing Site

1.3 Ambo Road Housing Sitea) Asphalt Road Construction at 20/98 988,370.00 5 49,418.50 39,534.80 June 2, 2000

Ambo Road Housing Siteb) Drainage structure construction at 09/98 231,712.83 5 11,585.64 9,268.51 Feb 16, 2000

Ambo Road Housing Constructionc) Communal facility construction 12/98 1,253,179.97 5 72,159.67 57,727.73 Nov. 19, 1999

at Ambo Road Housing Site _ _II. Repi Sanitary Land Fill Site- On site Asphalt road construction and off 18/98 2,154,259.44 5 107,712.97 86,170.38 June 23, 1999

site Asphalt road maintenance workBuilding and pavement work at Woreda 07/98 2,773,253.66 5 138,662.68 110,930.15 June 23, 19998 Kebele 13 (Truck park)

IIL. Street Maintenance, Second Phase- Road from Ground Force Garage to Jesus 06/97 2,415,090.00 5 120,754.50 96,603.60 June 30, 2000

Church- Road from Diabacco through Bisrate 08/97 2,751,336.11 5 137,566.81 110,053.45 Jan. 26, 2000

Gebriel church to Jimma road & roadfrom Diabacco to Vatican EmbassyIV. Retaining Wall Construction

- Retaining wall construction at Woreda 10/98 1,384,343,00 5 69,217.15 55,373.72 March 17, 20002 Kebele 17

- Retaining wall construction at Woreda 11/98 1,453,090.40 5 72,654.52 58,123.62 May 14, 200014 Kebele 21

Total Amount 26,187,944.46 1,322,410.05 1,057,928.04

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Attachment 3

PLAN FOR FUTURE OPERATIONS OF PROJECT CAPITAL INVESTMENTS

1. Housing Sites and Services

Housing: The owners shall assume maintenance costs. The Construction and Business Bank (CBB) willkeep on collecting loan repayment at current interest rate. The total project cost for all housing units in thethree housing sites is Birr 45 million. Maintenance requirement per year is about Birr 500,000. Inaddition, major maintenance is required every 10 years amounting 25% of the project cost.

Utilities: Similar to the current experience elsewhere in the city, Addis Ababa Water and SewerageAuthority (AAWSA) and Ethiopian Electric Power Corporation (EEPCO) will be the responsibleagencies (as the prime utility companies) in management and operation of water and electric powersupply woks respectively. These institutions shall complete individual connections to each house.

Off-site and on-site-roads and drains: All the housing sites are found in the peripheries where there isalso other construction being carried out. Trucks passing through these roads would damage the alreadyconstructed roads. Promotion of development committees to generate resources is required for furthermaintenance and upgrading of on-site roads and drains. Off-site roads shall be maintained by the AddisAbaba Roads Authority (AARA) together with the community in each of the respective sites. The totalamount required for routine maintenance annually is about Birr 67,000. Major maintenance is requiredevery 5 years and the amount estimated for this investment is 25% of the project cost which is Birr 2million.

Communal Facilities. There are two options for these facilities. The market center either would be underthe management of the community development committee or rented by the Addis Ababa CityGovernment (AACG) Finance Bureau. Schools, kindergartens and health centers either would be underrelevant bureaus of the AACG (Education and Health) or contracted to the private sector. All communalfacilities can in principle generate resources to cover at least maintenance costs. The amount required formaintenance of these facilities in the three housing sites is Birr 52 thousand. In addition, 25% of theproject cost which is currently Birr 1.3 million is required every ten years.

2. Kebele Upgrading Program

The different types of infrastructure provided under this component require different arrangements. Roadsand drains are beside large local or access roads. These require regular maintenance. Infrastructurecompleted earlier is now deteriorating. In the long term, the shift to community management can be anoption if it is preceded by adequate sensitization and promotion. In the short term, however, interventionby NGOs and the Government in cooperation with the community seems to be a more sensible approach.Involvement of government agencies might have to be limited to financing and contract administration.Experience has shown that physical force account involvement is inefficient.

Communal Latrines: The beneficiaries in the project areas are managing communal latrines. Cleaning andcash contribution to get regular emptying services is handled by the beneficiary households. There are toomany households per latrine, however. This is discouraging proper management of these latrines inparticular cleaning. This overloading is due to lack of space in the area to construct additional latrines.Further interventions to reduce congestion would be an issue that needs to be considered in these areas.

71

S'olid Waste Hardstandings: Solid vwaste containers are not placed on hardstandings provided under thiscomponent. Some people in the area dump solid waste on the hardstands themselves. Containers need tobe placed in these sites by the Solid 'Waste Management Unit of the Health Bureau.

'ublic Standpipes: Some public sitandpipes are not in operation due to delays in providing waterconnections by AAWSA. Kebele Development Committees are managing those standpipes that areoperational. An alternative arrangement would be to consider poor women in the project areas.Mlaintenance of standpipes would be financed by user fees.The overall amount required for the maintenance of upgrading projects annually, in the 9 Kebeles (5/22,6,108, 7/30, 7/31, 7/32, 7/338/23, 8/24, and 8/25) and the two flood control projects, is Birr 71,000. Inaddition 25% of the project cost for major maintenance every 10 years is required. This amount currentlyis estimated at Birr 1.5 million.

3. Street Maintenance Component

Civil works under this component included maintenance of streets in different areas in the city. The AddisAbaba Roads Authority (AARA) has; been involved in selection, design and supervision as major streetswhich require further maintenance and upgrading is its responsibility. Birr 167,000 and Birr 4.1 millionare required for routine maintenance every year and major maintenance every ten years respectively.Three beneficiary agencies are involved for street maintenance related procurement of goods. These arethe AARA, Equipment Service Department of the Addis Ababa City Government (AACG) andConstruction Materials Production Enterprise (CMPE). The operation and maintenance responsibility isunder each organization.

According to the information obtained from the Equipment Service Department and findings of technicalassistance interventions some of the tools and machinery purchased are poorly managed by theEcluipment Service. The Equipment Service Department has a chronic problem of skilled manpower. It isunlikely that the Equipment Service will provide efficient maintenance services for the AACG agencies.The AARA and other agencies in the AACG that have huge machinery overhaul would have to seek otheralternatives. These could be contracting out the service and own maintenance unit.

CMIPE is a profit making agency 'which supplies construction materials for road construction andmaintenance. Most of the machinery purchased are in operation. Maintenance and operating costsfinancing are guaranteed by the financial position of the enterprise. However, similar to other publicenterprises in the country other options such as privatizing should be studied for this enterprise.The total amount required for operation and maintenance of major equipment and vehicles is Birr 4.5million, excluding loan repayment and overhead costs of administration. This amount is only consideringmajor machinery and equipment that have been procured under the project. The amount estimatedincludes loan repayment, operating and maintenance costs. From operating and maintenance costs, itemsincluded are costs such as fuel and tires (where applicable) consumption, labor requirement andmaintenance.

Two financial sources are identified. These are general revenue for machinery and equipment provided tothe AARA and the enterprises revenue for items provided to the CMPE. User fees shall cover thefinamcial requirement of those items owned by the Equipment Services Department.

4. Solid Waste Management Component

The Solid Waste Component expanded into a more general "Sanitation Component" by includingprovision of equipment for cesspool rnanagement to the Health Bureau (for public toilets management)and AAWSA (for private houses' needs). The Health Bureau, which is responsible for solid wastemanagement, has been the beneficiary of most of the equipment and civil works under the component.

72

The Solid Waste Management Unit in the Health Bureau has a large fleet of vehicles, substantial otherresources (such as, a truck park constructed under the project, the landfill site), and a large staff. Thevolume of operation it is expected to undertake, and the dilemma between operations-regulatory roles ofthe Health Bureau call for a change in the institutional arrangement for the Solid Waste ManagementUnit, probably forming an independent entity under the AACG. AACG is recently looking at the optionsand a decision is expected soon.

The total amount required for civil works annual routine maintenance and major maintenance every tenyears is Birr 60,000 and 1.5 million respectively. Solid waste carriers, containers and landfill plant requireoperating costs including fuel and tires, labor and maintenance. The amount required for this purpose, peryear, is Birr 4.5 million, excluding loan repayment and overhead costs.

Financing for future resource requirements of the solid-waste component and public latrine servicingwould come largely from City general revenues, and a small part from fees on institutional entities. Theactions that were expected to be taken to increase cost-recovery has not been taken. Even if the mostfeasible financing option is regional budgets, actions to recover as much as possible should be taken soon.The cesspool emptier service provided by AAWSA is financed by user charges.

5. Akaki Water Supply Component

AAWSA, as a borrower by a subsidiary loan agreement entered with IDA, has been involved activelysince the very beginning. The component has been implemented (and is being implemented) by theoverall coordination of this organization. The operating management is also handled by AAWSA.According to AAWSA's June 1999 completion report, total operating costs owing to supply of chemicalsand electricity as well as salaries for one year is Birr 1.2 million. User fees charged by AAWSA shall bethe source for all the required resources under this component.

6. Institutional support

Several capacity building activities have been undertaken under the project. These include, technicalassistance, studies and training and procurement of municipal equipment. Procurement of specialized firefighting vehicles for the Addis Ababa Fire Brigade is the most considerable one. The operation andmaintenance management of these items shall be under the responsibility of this organization. Theamount estimated for annual operation for specialized vehicles purchased under the project is Birr 0.9million assuming the equipment would be active for half-an hour every day.

More than 40 automobiles and pick-up trucks worth about Birr 6.7 million were provided under theInstitutional Support component. These would require about Birr 0.7 million for operation andmaintenance. This would be paid for from the budgets of beneficiary agencies.

6 This may not be fire-fighting activity, daily check-up of truck engines, etc. would be included.

73

Attachment 3

Table 1. Vehicles and equipment provided for sanitation-related agencies under Second Addis for which operational resource requirements are calculated

Equipment Unit initial Accessories Unit total No. Total capital Statusprice (spares, etc.) capital cost of equip. cost as of 31-06-99

Solid waste trucksVolvo lift-trucks for 8m3 (less price of containers) 349,815.70 58,816.70 408,999.91 28 11,451,997.46 Delivered to Health Bureau in 1994RENAULT solid waste truck (I5m3) 592,336.50 197,445.50 789,782.00 10 7,897,820.00Solid waste trucks-4m3 (plus 28% for local cost) 380,030.46 0.00 380,030.46 5 1,900,152.32 Being shipped to port Djibouti

Cesspool emptier trucksCesspool emptier truck (Akaki component) 433,268.51 108,317.13 541,585.63 1 541,585.63 Delivered to Health Bureau (Akaki) in 1994Cesspool emptier(l15m3) 623,345.75 207,781.92 831,127.67 3 2,493,383.00 Delivered to Health Bureau 1998/99IVECO cesspool emptier (plus 10% unpaid) 565,786.40 110,514.20 676,300.60 5 3,381,503.00 Delivered to AAWSA 1998/99IVECO cesspool emptier (plus 28% local cost & 25% 504,707.20 141,318.02 646,025.22 12 7,752,302.59 Stranded in Port Assab due to warspares)

Containers8m3 solid waste containers 16,448.66 0.00 16,448.66 190 3,125,245.29 Delivered to Health Bureau in 1994I.lm3 solid waste containers 3,602.66 0.00 3,602.66 1,200 4,323,197.00 Delivered to Health Bureau 1998/99

Disposal site plantCompactor 1,221,178.85 352,657.00 1,573,835.85 1 1,573,835.85 Delivered to Health Bureau in 1994Crawler Dozer 1,001,800.81 277,726.00 1,279,526.81 1 1,279,526.81 Delivered to Health Bureau in 1994Weigh bridge 288,522.82 0.00 288,522.82 1 288,522.82 Awaiting shipment in port Djibouti

OtherRadio communication equipment 130,255.00 0.00 130,255.00 1 130,255.00 Delivered to Health Bureau 1998/99Double-cabin Mitsubishi pick-up trucks 188,422.21 0.00 188,422.21 2 376,844.42 Delivered to Health Bureau 1993 (?1994)

74

Attachment 3

Table 2. Annual resource requirements for solid waste collection trucks provided under Second Addis

Cost Item 8m3 lift-truck Renault waste truck 4m3 waste trucks

Unit cost Total cost Unit cost Total cost Unit cost Total cost

Capital cost 350,183.21 9,805,129.84 592,336.50 5,923,365.00 380,030.46 3,800,304.64Other capital items (e.g. spares, field kits) 58,816.70 1,646,867.62 197,445.50 1,974,455.00 0.00 0.00

Total capital cost 408,999.91 11,451,997.46 789,782.00 7,897,820.00 380,030.46 1,900,152.32Loan repayment (4.5%, 20 years) 31,442.34 880,385.41 60,715.40 607,153.95 29,215.28 146,076.38Annual maintenance cost (@ 5% of capital cost) 20,450.00 572,599.87 39,489.10 394,891.00 19,001.52 95,007.62Fuel cost 14,486.29 405,616.00 14,486.29 144,862.86 14,486.29 72,431.43Lubricant costs (at 5% of fuel cost) 724.31 20,280.80 724.31 7,243.14 724.31 3,621.57Tire costs (at 20% of fuel cost) 2,897.26 81,123.20 2,897.26 28,972.57 2,897.26 14,486.29Labor costs 9,125.00 255,500.00 9,125.00 91,250.00 9,125.00 45,625.00

Total direct costs per annum 70,000.19 1,960,005.28 118,312.35 1,183,123.52 66,324.66 331,623.29Overhead costs (@10% of direct costs) 7,000.02 196,000.53 11,831.24 118,312.35 6,632.47 33,162.33Total cost per year 77,000.21 2,156,005.81 130,143.59 1,301,435.87 72,957.12 364,785.61

ASSUMPTIONS Per week Per year Per week Per year Per week Per yearFuel consumption (km/It. or hr/It. for plant) 4.90 4.90 4.90Number of working days 5.00 260.00 5.00 260.00 5.00 260.00Available days (at 87% available time) 4.35 226.20 4.35 226.20 4.35 226.20Number of trips to disposal site (@ 5, 3 per day) 21.75 1,131.00 21.75 1,131.00 21.75 1,131.00

Distance: disposal to work area (@ 12.5 per trip) 548.75 28,280.00 548.75 28,280.00 548.75 28,280.00Cost of labor 175.00 9,125.00 175.00 9,125.00 175.00 9,125.00Cost of labor Driver Loaders Driver Loaders Driver LoadersMonthly salary 420.00 180.00 420.00 180.00 420.00 180.00

Monthly allowance (@25% of salary) 105.00 45.00 105.00 45.00 105.00 45.00Vehicle maintenance cost as % of capital cost 5.00% 5.00% 5.00%

75

Attachment 3

Table 3. Annual resource requirements for cesspool servicing trucks provided under Second Addis

Cost Item I 5m2 emptier 15m2 emptier-A 15m2 emptier-B 8m2 cesspool emptier -Ccesspool cesspool cesspool

Unit cost Total cost Unit cost Total cost Unit cost Total cost Unit cost Total cost

Capital cost 623,345.75 1,870,037.25 433,268.51 433,268.51 565,786.40 2,828,932.00 504,707.20 6,056,486.40

Other capital items (e.g. spares, field kits) 207,781.92 623,345.75 108,317.13 108,317.13 110,514.20 552,571.00 141,318.02 1,695,816.19Total capital cost 831,127.67 2,493,383.00 541,585.63 541,585.63 676,300.60 3,381,503.00 646,025.22 7,752,302.59

Loan repayment (4.5%, 20 years) 63,893.89 191,681.67 41,635.02 41,635.02 51,991.38 259,956.91 49,663.93 595,967.13Maintenance cost (@ 5% of capital cost) 41,556.38 124,669.15 27,079.28 27,079.28 33,815.03 169,075.15 32,301.26 387,615.13

Fuel cost 14,631.87 43,895.60 29,222.50 29,222.50 24,355.96 121,779.82 24,355.96 292,271.57

Lubricant costs (at 5% of fuel cost) 731.59 2,194.78 1,461.12 1,461.12 1,217.80 6,088.99 1,217.80 14,613.58

Tire costs (at20% of fuel cost) 2,926.37 8,779.12 5,844.50 5,844.50 4,871.19 24,355.96 4,871.19 58,454.31

Labor costs 11,862.50 35,587.50 11,862.50 11,862.50 11,862.50 59,312.50 11,862.50 i42,350.00

Total direct costs per annum 123,740.11 371,220.32 105,242.42 105,242.42 116,251.37 581,256.84 112,410.14 1,348,921.73Overhead costs (@10% of direct costs) 12,374.01 37,122.03 10,524.24 10,524.24 11,625.14 58,125.68 11,241.01 134,892.17Total cost per year 136,114.12 408,342.35 115,766.66 115,766.66 127,876.50 639,382.52 123,651.16 1,483,813.90

ASSUMPTIONS Per week Per year Per week Per year Per week Per year Per week Per yearFuel consumption (km/it. or hr/it. for plant) 3.50 3.50 3.50 3.50

Number of working days 5.00 260.00 6.00 312.00 5.00 260.00 5.00 260.00

Available days (at 87% available time) 4.35 226.20 5.22 271.44 4.35 226.20 4.35 226.20

Number of trips to disposal site (@5, 3 per day) 13.05 678.60 26.10 1,357.20 21.75 1,131.00 21.75 1,131.00Distance: disposal to work area (@12.5 per trip) 436.50 20,403.00 815.50 40,748.50 685.00 33,962.50 685.00 33,962.50

Cost of labor 227.50 11,862.50 227.50 11,862.50 227.50 11,862.50 227.50 11,862.50

Cost of labor Driver Loaders (2) Driver Loaders Driver Loaders Driver LoadersMonthly salary 420.00 360.00 420.00 360.00 420.00 360.00 420.00 360.00

Monthly allowance (@25% of salary) 105.00 90.00 105.00 90.00 105.00 90.00 105.00 90.00

Vehicle maintenance cost as % of capital cost 5.00% 5.00% 5.00% 5.00%

76

Attachment 3

Table 4. Annual resource requirements for landfill plant & equipment provided under Second Addis

Cost item Crawler Dozer Landfill CompactorUnit cost Total cost Unit cost Total cost

Capital cost 1,001,800.81 1,001,800.81 1,221,178.85 1,221,178.85

Other capital items (e.g. spares, field kits) 277,726.00 277,726.00 352,657.00 352,657.00

Total capital cost 1,279,526.81 1,279,526.81 1,573,835.85 1,573,835.85Loan repayment (4.5%, 20 years) 98,365.09 98,365.09 120,990.43 120,990.43

Annual maintenance cost (@ 5% of capital cost) 31,988.17 31,988.17 39,345.90 39,345.90

Fuel cost 99,358.35 99,358.35 65,292.63 65,292.63

Lubricant costs (at 5% of fuel cost) 9,935.84 9,935.84 6,529.26 6,529.26

Tire costs (at 20% of fuel cost) 0.00 0.00 16,323.16 16,323.16

Labor costs 17,337.50 17,337.50 11,862.50 11,862.50

Total direct costs per annum 239,647.44 239,647.44 248,481.38 248,481.38Overhead costs (@10% of direct costs) 23,964.74 23,964.74 24,848.14 24,848.14Total cost per year 263,612.19 263,612.19 273,329.52 273,329.52

ASSUMPTIONS Per week Per year Per week Per year

Fuel consumption (km/lt. or hr/It. for plant) 35.00 23.00Number of working days 5.00 260.00 5.00 260.00

Available days (at 87% available time) 4.35 226.20 4.35 226.20

Number of trips to disposal site (@ 5, 3 per day) 35.00 1,131.00 35.00 1,131.00

Distance: disposal to work area (@ 12.5 per trip) 35.00 1,131.00 35.00 1,131.00

Cost of labor 332.50 17,337.50 227.50 11,862.50

Cost of labor Driver Assistants (4) Driver Assistants (4)

Monthly salary 420.00 720.00 420.00 360.00

Monthly allowance (@25% of salary) 105.00 180.00 105.00 90.00Equip & plant maint cost as % of capital cost 2.50% 2.50%

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Attach...eUt 3

Table 5. Annual resource requirements for solid waste containers provided under Second Addis

Cost Item 8m3 waste containers I. 1 m3 waste containers

Unit cost Total cost Unit cost Total cost

Capital cost 16,448.66 3,125,245.29 3,602.66 4,323,197.00Other capital items (e.g. spares, field kits) 0.00 0.00 0.00 0.00

Total capital cost 16,448.66 3,125,245.29 3,602.66 4,323,197.00

Loan repayment (4.5%, 20 years) 1,264.51 240,256.81 276.96 332,350.72Annual maintenance cost (@ 2.5% of capital 411.22 78,131.13 90.07 108,079.93cost)Fuel cost 0.00 0.00 0.00 0.00Lubricant costs (at 5% of fuel cost) 0.00 0.00 0.00 0.00

Tire costs (at 20% of fuel cost) 0.00 0.00 0.00 0.00Labor costs 0.00 0.00 0.00 0.00

Total direct costs per annum 1,675.73 318,387.94 367.03 440,430.64Overhead costs (@10% of direct costs) 167.57 31,838.79 36.70 44,043.06Total cost per year 1,843.30 350,226.73 403.73 484,473.71

78

Attachment 3

Table 6. Vehicles and equipment provided to AARA under Second Addis for which operational resource requirements are calculated

Equipment Unit initial Accessories Unit total No. Total capital Status

price (spares, etc.) capital cost of equip. cost as of 31-06-99

Dump trucks 433,268.51 108,317.13 541,585.63 8 4,332,685.06 Delivered to UDWB in 1994

Water-tank trucks 433,268.51 108,317.13 541,585.63 1 541,585.63 Delivered to UDWB in 1994

Air compressor 215,159.64 83,800.68 298,960.31 4 1,195,841.25 Delivered to UDWB

Asphalt paver 485,209.09 105,639.94 590,849.02 3 1,772,547.07 Delivered to UDWB

Tire roller 485,209.09 105,639.94 590,849.02 1 590,849.02 Delivered to UDWB

Front-end/backhoe loader 508,012.38 44,828.09 552,840.47 3 1,658,521.41 Delivered to UDWB

Excavator 508,012.38 44,828.09 552,840.47 1 552,840.47 Delivered to UDWB

Motor graders 1,001,800.81 277,726.00 1,279,526.81 2 2,559,053.63 Delivered to UDWB

Vibrator roller compactor 374,638.76 124,879.59 499,518.35 2 999,036.69 Delivered to UDWB

79

Attachment 3

Table 7. Vehicles and equipment provided for road maintenance-related agencies under Second Addis for which operational resource requirements are calculated

Cost item Tire Roller Loader Excavator Motor Grader Vibrator roller

Unit cost Total cost Unit cost Total cost Unit cost Total cost Unit cost Total cost Unit cost Total cost

Capital cost 485,209.09 508,012.38 508,012.38 1,001,800.81 374,638.76Other capital items (e.g. spares, field 105,639.94 44,828.09 44,828.09 277,726.00 124,879.59kits)

Total capital cost 590,849.02 590,849.02 552,840.47 1,658,521.4 552,840.47 552,840.47 1,279,526.81 2,559,053.6 499,518.35 999,036.691 3

Loan repayment (4.5%, 20 years) 45,422.19 45,422.19 42,500.24 127,500.73 42,500.24 42,500.24 98,365.09 196,730.18 38,401.04 76,802.09Maintenance cost (Q 5% of capital cost) 88,627.35 88,627.35 27,6$2.02 82 ,926.07 27,642.02 27,642.02 127,952.68 255,905.36 74,927.75 149,855.50

Fuel cost 44,459.61 44,459.61 55,136.25 165,408.75 75,121.02 75,121.02 57,341.70 114,683.40 44,459.61 88,919.22

Lubricant costs (at 5% of fuel cost) 4,445.96 4,445.96 2,756.81 8,270.44 7,512.10 7,512.10 2,867.09 5,734.17 4,445.96 8,891.92Tire costs (at 20% of fuel cost) 0.00 0.00 13,784.06 41,352.19 0.00 0.00 14,335.43 28,670.85 0.00 0.00

Labor costs 9,125.00 9,125.00 9,125.00 27,375.00 9,125.00 9,125.00 9,125.00 18,250.00 9,125.00 18,250.00Total direct costs per annum 192,080.12 192,080.12 150,944.39 452,833.18 161,900.39 161,900.39 309,986.98 619,973.96 171,359.37 342,718.74

Overhead costs (@10% of direct costs) 19,208.01 19,208.01 15,094.44 45,283.32 16,190.04 16,190.04 30,998.70 61,997.40 17,135.94 34,271.87Total cost per year 211,288.13 211,288.13 166,038.83 498,116.49 178,090.43 178,090.43 340,985.68 681,971.35 188,495.30 376,990.61

ASSUMPTIONS Per week Per year Per week Per year Per week Per year Per week Per year Per week Per yearFuel consumption (Birr/hr) 39.31 48.75 66.42 50.70 39.31

Number of working days 5.00 260.00 5.00 260.00 5.00 260.00 5.00 260.00 5.00 260.00

Available days (at 87% available time) 4.35 226.20 4.35 226.20 4.35 226.20 4.35 226.20 4.35 226.20

Number of hours worked (@6 hrs/day) 35.00 1,131.00 35.00 1,131.00 35.00 1,131.00 35.00 1,131.00 35.00 1,131.00

Cost of labor 175.00 9,125.00 175.00 9,125.00 175.00 9,125.00 175.00 9,125.00 175.00 9,125.00

Cost of labor Operator Assistants Operator Assistants Operator Assistants Operator Assistants Operator Assistants

Monthly salary 420.00 180.00 420.00 180.00 420.00 180.00 420.00 180.00 420.00 180.00

Monthly allowance (@25% of salary) 105.00 45.00 105.00 45.00 105.00 45.00 105.00 45.00 105.00 45.00

Maintenance cost as % of capital cost 15.00% 5.00% 5.00% 10.00% 15.00%

80

Attachment 3

Table 8. Vehicles and equipment provided for road maintenance-related agencies under Second Addis for which operational resource requirements are calculated

Cost item Dump trucks Water-tank trucks Air compressor Asphalt paver

Unit cost Total cost Unit cost Total cost Unit cost Total cost Unit cost Total cost

Capital cost 433,268.51 433,268.51 215,159.64 485,209.09

Other capital items (e.g. spares, field kits) 108,317.13 108,317.13 83,800.68 105,639.94

Total capital cost 541,585.63 4,332,685.06 541,585.63 541,585.63 298,960.31 1,195,841.25 590,849.02 1,772,547.07

Loan repayment (4.5%, 20 years) 41,635.02 333,080.12 41,635.02 41,635.02 22,982.92 91,931.66 45,422.19 136,266.58

Maintenance cost (@5% of capital cost) 27,079.28 216,634.25 27,079.28 27,079.28 14,948.02 59,792.06 88,627.35 265,882.06

Fuel cost 99,252.04 794,016.29 82,710.03 82,710.03 75,121.02 300,484.08 71,682.78 215,048.34

Lubricant costs (at 5% of fuel cost) 4,962.60 39,700.81 4,135.50 4,135.50 7,512.10 30,048.41 7,168.28 21,504.83

Tire costs (at 20% of fuel cost) 19,850.41 158,803.26 16,542.01 16,542.01 751.21 3,004.84 0.00 0.00

Labor costs 9,125.00 73,000.00 9,125.00 9,125.00 9,125.00 36,500.00 9,125.00 27,375.00

Total direct costs per annum 201,904.34 1,615,234.73 181,226.83 181,226.83 130,440.26 521,761.06 222,025.61 666,076.82

Overhead costs (@10% of direct costs) 20,190.43 161,523.47 18,122.68 18,122.68 13,044.03 52,176.11 22,202.56 66,607.68

Total cost per year 222,094.78 1,776,758.21 199,349.52 199,349.52 143,484.29 573,937.16 244,228.17 732,684.50

ASSUMPTIONS Per week Per year Per week Per year Per week Per year Per week Per year

Fuel consumption (Birr/hr) 73.13 73.13 66.42 63.38

Number of working days 5.00 260.00 5.00 260.00 5.00 260.00 5.00 260.00

Available days (at 87% available time) 4.35 226.20 4.35 226.20 4.35 226.20 4.35 226.20

Number of hours worked (@6 hrs/day) 26.10 1,357.20 35.00 1,131.00 35.00 1,131.00 35.00 1,131.00

Cost of labor 175.00 9,125.00 175.00 9,125.00 175.00 9,125.00 175.00 9,125.00

Cost of labor Driver Assistant Driver Assistant Operator Assistants Operator Assistants

Monthly salary 420.00 180.00 420.00 180.00 420.00 180.00 420.00 180.00

Monthly allowance (@25% of salary) 105.00 45.00 105.00 45.00 105.00 45.00 105.00 45.00

Maintenance cost as % of capital cost 5.00% 5.00% 5.00% 15.00%

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Attachment 3

Table 9. Vehicles and equipment provided to Fire Brigade under Second Addis for which operational resource requirements are calculated

Equipment Unit initial Accessories Unit total No. Total capital Status

price (spares, etc.) capital cost of equip. cost

Bronto F72 fire-fighting truck 7,739,705.70 0.00 7,739,705.70 1 7,739,705.70 Delivered to Fire Brigade in 1997

Fire-fighting trucks 1,103,186.40 0.00 1,103,186.40 5 5,515,932.00 Delivered to Fire Brigade in 1997

Ambulance 600,000.00 0.00 600,000.00 1 600,000.00 Delivered to Fire Brigade in 1997

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Attachment 3

Table 10. Vehicles and equipment provided for road maintenance-related agencies under Second Addis for which operational resource requirements are calculated

Cost Item Bronto F72 fire-fighting truck Rapid fire- trucks Ambulancefighting

Unit cost Total cost Unit cost Total cost Unit cost Total costCapital cost 7,739,705.70 1,103,186.40 600,000.00Other capital items (e.g. spares, field kits) 0.00 0.00 0.00

Total capital cost 7,739,705.70 7,739,705.70 1,103,186.40 5,515,932.00 600,000.00 600,000.00Loan repayment (4.5%, 20 years) 594,998.73 594,998.73 84,808.72 424,043.58 46,125.69 46,125.69Maintenance cost (@ 5% of capital cost) 386,985.29 386,985.29 55,159.32 275,796.60 30,000.00 30,000.00Fuel cost 8,271.00 8,271.00 8,271.00 41,355.02 44,787.60 44,787.60Lubricant costs (at 5% of fuel cost) 413.55 413.55 413.55 2,067.75 2,239.38 2,239.38Tire costs (at 20% of fiuel cost) 1,654.20 1,654.20 1,654.20 8,271.00 4,478.76 4,478.76Labor costs 17,337.50 17,337.50 9,125.00 45,625.00 9,125.00 9,125.00

Total direct costs per annum 1,009,660.27 1,009,660.27 159,431.79 797,158.95 136,756.43 136,756.43Overhead costs (@10% of direct costs) 100,966.03 100,966.03 15,943,18 79,715.90 13,675.64 13,675.64Total cost per year 1,110,626.30 1,110,626.30 175,374.97 876,874.85 150,432.07 150,432.07

ASSUMPTIONS Per week Per year Per week Per year Per week Per yearFuel consumption (Birr/hr) 73.13 73.13 39.60Number of working days 5.00 260.00 5.00 260.00 5.00 260.00Available days (at 87% available time) 4.35 226.20 4.35 226.20 4.35 226.20Number of hours worked (@0.5 hrs!day) 2.18 113.10 2.18 113.10 35.00 1,131.00Cost of labor 332.50 17,337.50 175.00 9,125.00 175.00 9,125.00Cost of labor Driver Assistants (4) Driver Assistant Operator AssistantsMonthly salary 420.00 720.00 420.00 180.00 420.00 180.00Monthly allowance (@25% of salary) 105.00 180.00 105.00 45.00 105.00 45.00Maintenance cost as % of capital cost 5.00% 5.00% 5.00%

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Second Addis Ababa UrbanDevelopment Project

Credit 2161-ET

Annex 13

Borrower's Contribution to ICR

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Annex 13. Borrower's Contribution to ICR

Federal Democratic Republic of Ethiopia

Second Addis Ababa Urban Development ProjectCredit No. 2161-ET

Borrower Perspective of the ProjectEvaluation Report

1. INTRODUCTION

The Government of Ethiopia and the World Bank (IDA) signed an agreement (No. 2161-Er on 13August 1990 to under take the Second Addis Ababa Urban Development Project (SAAVDP) inAddis Ababa.

The Project originally was designed to cover ten areas. These were Sites & Servis, HusingCuctik Lo^, Kekie Upgading Homing nprzo Loan, KebeleDedopne Fw7ad, Street Maiane,Solid Waste Manaxnt, Water Suppi, Municpal Insfrast and Instizioal Support

Implementing agencies were the Addis Ababa City Government (AACG) (the then Addis AbabaAdmninistrative Region (AAAR)), the Construction and Business Bank (CBB) (the then the Housingand Savings Bank) and the Addis Ababa Water and Sewerage Authority (AAWSA).

In 1996 the project was restructured to allow provisions for macroeconomic and sectoral policychanges undertaken following the change in the government in Ethiopia.

2. STATEMENT/EVALUATION OF OBJECTIVES

2.1. PROJECT OBJECTIVES

Both the SAR and the restructured document maintained five major objectives. These are:

* Improving basic infrastructure and environmental conditions in project areas;

* Supporting a core housing development program primarily for lower-income families;

* Promoting opportunities for poor women living in the Kebeles to enhance their incomes;

* Providing assistance to urban service delivety agencies to carry out their activities moreefficiently; and

* Promoting the adoption of sound cost recovery policies and practices.

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2.1. EVALUATION OF OBJECTIVES

2.2.1. Realism and Importance of Objectives

In the housing sector low cost replicable approach on serviced plots has been adopted. However,adopting sites and services approach on a larger scale as to make significant contributions towardssolving housing problems is almost unthinkable. Urban services generally lag behind urban growth:it is estimated that up to 90 percent of the areas in Addis Ababa are not sufficiently serviced.

In the water and sanitation sector, the strategy to achieve the poverty reduction objective is tosupport government investment plans in water and sanitation infrastructure including institutionalcapacity building. The other strategy adopted, to improve the deteriorating sanitation system in slumareas, was to change the tenure structure (e.g. sale of government owned houses). Provision ofcomprehensive package to upgrade slum areas, improving the capacity of the public agenciesinvolved in the delivery of sanitation and water services directly contributed to these objectives.

2.2.2. Complexity of the Project

The project had been rendered complex primarily by the fluid political, economic and institutionalenivironment that occurred during its implementation. This required re-definition of its priorities,delivery mechanisms and groups involved in the project in various capacities.

The project was complex in terms of the large number of institutions and other interest groupsinvolved as irnplementing, collaborating and beneficiary agencies. This constrained efficientcoordination in each stage in the project life cycle from identification of activities to undertake toplanning for efficient future operations.

The project required procurernent, engineering design/specification, coordination, andmonitoring/evaluation skills than the beneficiaries/implementing agencies could muster. Similarly,the absorptive capacity of the economy in terms of availability of well-qualified contractors anddesign consultants made the project too complex to implement.

2.2.3. Extent of risk in the ProDject

The SAR identified three risk areas items: risk regarding sale of kebele-owned houses in projectareas, increase in water tariffs, and costs of the Akaki Water Supply Component. The first risk,though not of significant implication to the achievement of project objectives, materialized. The risein water tariffs has been implemented though the magnitude was not large enough to result in theanticipated rise in rates of return. Finally, the rise in the cost of Akaki Water Supply improvementseems to have been larger than anticipated and truly risked the achievement of expected rates ofcost-recovery.

Art important source of risk that was ignored is the intensification of the civil war. The war led tochange of government and significant changes in the implementation environment, delays inproduction of project outputs, and in the level and composition of costs.

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3. ACHIEVEMENT OF OBJECTIVES

3.1. PHYSICAL OBJECTIVES

3.1.1. Housing Sites and Services

Hosig In the housing component, the physical objectives set out in the SAR/Restructuring havebeen achieved, even exceeded when type/quality of housing units is considered. Significant changes,dominantly improvements in design of structures, occurred due to demands from beneficiaries. Thepoverty focus of the housing loans have been lost, pardy due to the rise in construction cost andinterest rates.

(mwuafaities: There is high physical achievement in communal facilities construction due tofurther allocation of budget to this activity to construct additional infrastructure in Ambo Road andAkaki housing sites. The reallocation also included the procurement of furniture to some of thesestructures (schools and health centers and posts). Design problems and problems related to capacityof contractors led to cost-overruns and implementation delays.

Utdiies. Electric power and water supply works in the housing sites have been completed in twosites (Ambo Road and Akaki sites) and were in progress in Jimma Road housing site. Since JimmaRoad site accounts for the largest proportion of housing developments, the failure to provideutilities in this site in a timely manner has made the weighted average implementation rating to bevery low.

Roads anddraim There is high physical achievement in these works due to change in design of off-site roads (from gravel to asphalt) and additional works on on-site drainage. Roads and drains inJimma site in particular deteriorated fast due to omissions in the design stage that overlookeddrainage implications of the roads. Decisions to asphalt off-site roads imply rise in proportion ofcosts that are not directly recoverable from beneficiaries.

3.1.2. Kebele Upgrading Civil Works

Upgraded Kebeles are far below both the SAR and Restructuring estimates. The overall estimateranged between 22 to 36 Kebeles. The project upgraded only 9 Kebeles (40 to 23 percent of theestimates) and two flood control civil works in two Kebeles.

3.1.3. Kebele Development Fund

The Project implemented 10 income generating projects for Kebeles and one income generatingproject for poor women. The implemented projects performance is unsatisfactory. Two of them areclosed and others failed to service the loan as scheduled.

3.1.4. Street Maintenance

Civi Works. The SAR planned to undertake a minimum of 31.70 kilometers of streets. Actualmaintenance was about 25.12 km of streets in 14 places.

Thtazmei of Good.v Procured items such as machinery (for road construction, quarry, andworkshop), workshop tools, asphalt plant, vehicles (trucks), spare parts and materials (asphalt forroad construction) have been handed over to the Addis Ababa Roads Authority (AARA),Construction Materials Production Enterprise (CMPE), and Equipment Services Department.

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3.1.5. Solid Waste Management

CGo Works: The projects included in this sector are building and fence work at the landfill site,asphalt road construction and building and pavement work at truck-park. The building and fencework is the only project completed. Others are still in progress.

AP7nert of Gocd solid waste conLtainers, specialized vehicles and machinery and equipment havebeen procured. The procurement exceeded the SAR estimate substantially due to additionalprocurement made owing to additional budget allocation while restructuring and reallocations madeaft;er.

3.1.6. Municipal Infrastructure-Akaki

Tlle implementation of this component aborted due to the incorporation of the Akaki town toAddis Ababa. All municipal services are know provided by relevant Bureaus of the AACG.

3.1.7. Water Supply Improvement

Physical achievement in this component is biased towards supply than construction. 3 bore-holeshave been drilled and one bore-hole has been rehabilitated; 2 reservoirs were built and about 16 kmof pipe laying was undertaken.

3.1.8. Institutional Support

AAAR. Technical assistance to different agencies has been provided as indicated in the SAR Theassistances were in relation to Road Construction and maintenance, solid waste management and.project implementation.

Procurement of vehicles and office equipment exceeded the SAR target due to further additionsduring restructuring and reallocations. The most significant is the procurement of specialized firefighting vehicles that includes 72 met;er rescue truck that can be used for high rise buildings.

Most studies have not been undertaken. The implementation of the studies part of the componenthas been affected by the envisaged Addis Ababa Capacity Building Project. This project has notbeen implemented.

AA WSA. All activities under this component have been implemented as envisaged in the SAR. Themajor consultancy part of this sub-component was made to facilitate the implementation of theAkaki Water Supply Component. In addition, water tariff study, water leakage study, organizationalmanagement study and short-termn training were undertaken.

3.2. FINANCIAL OBJECTIVES

The total Project cost was 46.1 million USD and out of which IDA loan was USD 35 million (SDR27.1 million). The loan amount has been downsized to SDR 25.35 million in 1998. The total cost ofthe project included counterpart funding by the government (Borrower) and the beneficiaries. TheBorrower assumed full financing roles in taxes and duties, compensation payments, and employee'sbenefits in project management. The Borrower also fnanced part of the local costs. In this regard,both the Borrower and beneficiaries covered 20 percent of local costs excluding some technicalassistance, training and studies whose cost was covered fully by IDA loan. As of end of June 1999the disbursement status was about 37 million USD. Out of which 30 million was from IDA and theremaining 7 million was covered by government and project agencies.

Due to slow implementation in procurement of civil works, goods and services, the performance ofdisbursement has been unsatisfactory. Procurement of civil works and services including studies

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demand more from domestic conditions than procurement of goods. Thus, the domestic absorptioncapacity, might be one explanation for low disbursement.

3.3. ECONOMIC RATE OF RETURN

The SAR estimate and the recalculated ERR for four applicable components of the project arepresented as follows. Rates of return in the activities have declined except in the KebeleInfrastructure Upgrading Component which, regretfully, was implemented in a very small scale. Thefall in rates of return is partly explained by optimistic benefit estimates in the SAR, rise in (mostlyforeign) costs, cost overruns due to design faults, and inclusion of additional activities without dueeconomic justification.

Component SAR ICR/ recalculated

Sites and Services

Addis Ababa Jimma and Ambo Road) 19.0 percent 11.2 percent

Akaki 17.0 percent 6.9 percent

Kebele Upgrading 14.0 percent 13.2 percent

Street Maintenance 18.0 percent 9.0 percent

Akaki Water Supply 9.6 percent 2.9 percent (orless)

3.4. POVERTY REDUCTION

The primaxy objective of the SAAUDP was poverty reduction. Yet, most components of the projectwere not directly related to this objective. The project reached the poor directly only through theKebele Upgrading Component. However, low physical achievement limited the adequacy of theproject's contribution in poverty reduction. Indirect contributions with respect to poverty alleviationwas made through the implementation of the Akaki Water Supply Component that increased accessto water.

The claim that housing loans in the Sites and Services Component were meant to target low-incomepeople was unrealistic; it proved to miss the target widely. Housing improvement loans and loans forincome generating activities for poor women which would have contributed more to this goal werecancelled/terminated.

3.5. ENVIRONMENTAL OBJECTIVES

Three components of the Project had direct implication to the environment. These are: the KebeleUpgrading Component, the Solid Waste Management Component and the Akaki Water SupplyImprovement Component. Substantial contribution is made in upgraded areas although its scale istoo small to have widespread impact.

Significant contributions have been made to the pbysiad capacity to improve supply of environmentalsanitation services. This has been made through the supply of solid waste and cesspool collectionvehicles and containers. Increased and improved access to potable water supply that resulted from

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SAAUDP's contribution to Akaki 'Water Supply Improvement scheme would also affect sanitationpositively.

3.6. GENDER AND OTHER SOCIAL OBJECTIVES

Tlle SAR indicated that some fund from the Kebele Upgrading Component would be allocated forincome generating projects for poor women. There was no, however, considerable implementationrecord in this aspect.

The other area of the project where gender issue was relevant is the slum upgrading activities of theKebele Upgrading Component. In this area of the Project's activity, basic sanitation infrastructurehave been provided in poor areas where about half of the households are also women headed. Thepositive impact is also expected to come out through induced home based job opportunities that areprimarily women's domain.

Increased access to safe water owing to the implementation of the Akaki Water Supply Componentas well as improved sanitation situation owing to the increased capacity of solid waste collection andupgraded slum areas would imply considerable contribution to health and other welfare benefits.Contribution to alleviate housing shortages was made. However, this cannot be regardedconisiderable. The project provided 2244 houses and the annual need and backlog in the city isestimated at 15, 000 and 30,000 housing units respectively.

3.7. READJUSTMENT, RESETTLEMENT AND DISLOCATION

The Project aimed to minimize the r eadjustment, resettlement or dislocation costs that would havebeen incurred while implementatioin. Two components were relevant in this regard. One is theHousing Sites and Services Component and the other is the Kebele Upgrading InfrastructureDevelopment Component. Compensation was paid to all affected families.

3.8. INSTITUTIONAL DEVELOPMENT

The Addis Ababa Roads Authority (AARA), at the moment, has an annual maintenance capacity ofBirr 30 to 50 million. In fact, not all this is attributed to the assistance made by SAAUDP. The solidwaste collection capacity has also been increased from 50 to 65 percent. However, most of theinstitutional development efforts were intervened by procurement of goods. Complementaryactivities (technical assistance, studies and training) were limited.

3.9. PUBLIC SECTOR MANAGEMENT

The Project included technical assistance and studies to improve the management capacity of thepublic agencies involved in urban service delivery in Addis Ababa. Examples are, technical assistanceprovided to Road Construction and Maintenance Department which were later transferred to theAddis Ababa Roads Authority, and to Addis Ababa Health Bureau in conjunction with solid wastemanagement. In addition, water tariff and water leakage studies have been undertaken by otheragencies to improve the management and financial capacity of AAWSA. The water tariff study havebecome the base for another similar study in another AAWSA's project.

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3.10. PRIVATE SECTOR DEVELOPMENT

The restructuring included private sector development as one major objective. The project createdopportunities for private sector development in the country. All the contracts except part of the civilworks component have been implemented together with the private contractors. The SAAUDP alsoinvolved considerable procurement of goods. All goods in all the components were supplied byprivate suppliers under several contracts. It should be noted that the SAAUDP's private sectordevelopment in this regard is limited due to the fact that most of them were supplied from abroad.

4. MAJOR FACTORS AFFECTING THE PROJECT

4.1. FACTORS OUTSIDE GOVERNMENT CONTROL

In general, pefomxe of contracaos and wppliers was unsatisfactory and resulted in implementationdelays. Most of the contractors delivered goods and services behind the agreed schedule.

12 cesspool emptier trucks procured by an ICB contract are stranded in Port Assab due to thecurrent EFtio-Eritrn cnac. The process of shifting delivery orders from Port Assab to PortDjibouti also contributed to delays in procurement.

4.2. FACTORS WITHIN THE CONTROL OF THE GOVERNMENT

The major macroeconomic events that affected SAAUDP are devaluation, liberalization of domesticand foreign trade, the attempt to reduce the role of the government in ecoilomic activity and thedrive towards privatization. SAAUDP was affected by these in many ways. First, it led to a rise imthe Birr-equivalent of the loan and IDA funds available for local expenditures on goods andservices. Second, it increased the tariffs on imports of vehicles, equipment and materials and thematching fund required from the Borrower to finance these. Thirdly, it changed the asset position ofthe Borrower by raising the Birr-equivalent of its debt. This affects the affordability of the projectand Borrower's ability to service its loans. The whole process led to the restructuring process whichin turn caused delay in implementation.

4.3. FACTORS WITHIN THE CONTROL OF IMPLEMENTING AGENCIES

4.3.1. Staffing

The major implementing agency in the SAAUJDP is the AACG. The AACG's ProjectImplementation Office (PIO) had manpower problems. Rapid turnover of (professional) staff meantthat the stock of experienced staff at any one time had been very low. In 1998/99, there was nosenior (professional) staff who worked since the Restructuring of 1996, let alone since project start-up.

The AACG also, in later years, added the Environmental Development Project Office (EDPO) toexecute upgrading civil works replacing commercial contractors. Implementation speed of KebeleUpgrading undertaken using EDPO was unsatisfactory. This was by large reflected by the EDPO'scapacity. This led to downsizing of the budget allocated for the Kebele Upgrading component.

4.3.2. Adequacy of Monitoring and Evaluation

All the implementing agencies focused on the monitoring aspect and evaluations are rarelyundertaken. Moreover, reports submitted to different authorities never attracted responses. One

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reason for this was failure to keep the technical and advisory committees regular meeting. The otheris frequent changes of authorities in the AACG to whom PIO used to report regularly.

4.3.3. Fungibility of Resources

Resources such as vehicles acquired to facilitate project implementation were used for otherpurposes by the AACG.

4.3.4. Beneficiary participation.

Beneficiary organizations, such as bureaus and project offices of the AACG, were slow to preparetechnical specifications for procurement or in evaluation technical specifications forwarded to them.The performance of members of housing cooperatives was also poor.

5. PROJECT SUSTAINABILITY

Housing sites and services produced a lower economic rate of return compared to the SAR. Roadsand drains in peripheral locations, -vhere sites and services projects are located, are vulnerable duefurther housing developments in the area. Heavy trucks and construction machinery, for instance,would darmage the already provided off-site and on-site roads.

The establishment of AARA, introduction of road fund and the conducive policy environment forprivate civil work contractors would imply that positive developments are in place for roadconstruction and maintenance in the city.

Solid waste and upgrading infrastructures provided by the project are comprehensive in the sense ofintegration of activities implying sustainability.

Lack of complimentary inputs such as well motivated and capable labor force, efficient & speedymaintenance capacity, and appropriate institutional framework would substantially affect negativelythe sustainable operations of vehicle and equipment provided by the project.

AAWSA is the leading institution in water supply in Addis Ababa and its surroundings. Experiencegained in implementing similar completed and on-going projects would add to the technicalcapabilities of the Authority. Tariff revisions in favor of cost recovery pricing would develop theresource position of the Authority.

6. BANK PERFORMANCE

Since 1987 the mission visited the imnplementing agency and the Borrower 17 times. Out of thesetwo were for identification in 1987; two for appraisal in 1989 and 1990, one specialized program in1996; eleven were for implementation review during 1993-1999 and one for implementationcompletion report in 1999. The performance was intensive in 1997 and 1998. The Bank'ssupervision missions were effective in assessing project implementation status as well as identifyingrequired actions. However, Borrower's slow response constrained the effectiveness. The BanksperFormance were poor in areas of project appraisal as explained by large deviations from SARdespite the Banks contribution to use earlier studies undertaken during the implementation of theFirst Urban Development Project (Credit # 1366-ET). The Bank also took much time to approveand finalize the restructuring process.

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7. BORROWER PERFORMANCE

The Borrower was able to provide the required matching resources throughout the implementationperiod. However, poor performance in other aspects affected the overall implementation process.One of the most serious was the failure of the government to comply with the recommendations ofthe studies undertaken.

8. ASSESSMENT OF OUTCOME

Physical achievement in civil works have been constrained by design problems (some streetmaintenance works and roads and drains in the sites and services scheme) and affected theinfrastructure provided. Circulation in the housing sites is difficult due to the narrowness of theroads. This also affected utility line (both water and electricity) operation.

Upgrading of slum areas improved environmental sanitation in the area. However, this cannot beregarded as adequate when compared to the upgrading requirement in the city.

Kebele Development Fund projects and the poor women income generating project failed toachieve the envisaged outcome. This justifies the appropriateness of the discontinuation of thiscomponent during restructuring.

Streets maintained in different parts of the city are being intensively used. However, these streets areless likely to serve for many years due to the increased pressure from high traffic.

Solid waste carriers use the landfill site access roads intensively. Fence and building works are poorlyundertaken. The site is still accessed by human and animal scavengers.

Goods procured by the project increased solid waste collection capacity. Similarly, the roadconstruction and maintenance capacity of the AARA has been increased.

The physical components of the Akaki Water Supply Component, have been cornpleted and therelated system has been put in operation. This has improved the water supply situation in Akakitown. Full utilization of the investment made still calls for the successful completion of fiurther civilworks included in Phase-II.

9. FUTURE OPERATION

9.1. HOUSING SITES AND SERVICES COMPONENT

H asing owners shall assume maintenance costs. Maintenance requirement for all houses per year isabout half million Birr. In addition, major maintenance is required every 10 years amounting 25% ofthe project cost.

Utiliies: Similar to the current experience elsewhere in the city, Addis Ababa Water and SewerageAuthority (AAWSA) and Ethiopian Electric Power Corporation (EEPCO) will be responsibleagencies (as the prime utility companies) in management and operation of water and electric powersupply works respectively. These institutions shall complete individual connections to each house.

Cfsite and on-site-oads and draiw All the housing sites are found in the peripheries where there arealso other constructions carried out. Trucks passing through these roads would damage the alreadyconstructed roads. Promotion of development committees to generate resources is required tofurther maintenance and upgrading of on-site roads and drains. Off-site roads shall be maintained byAARA together with the community in each respective site. The total amount of Birr required to

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routine maintenance annually is about 67 thousand. Major maintenance is required every 5 years andthe amount estimated for this investment is 25% of the project cost or Birr 2 million.

Ccn Facilities. There are two options for these facilities. The market center either would beunder the management of the community development committee or rented by AACG FinanceBureau. Schools, kindergartens and health centers either would be under relevant bureaus of theAACG (Education and Health) or contracted to the private sector. All communal facilities can inprinciple generate resources to cover at least maintenance costs. The amount required formaintenance of these facilities in the three housing sites is Birr 52 thousand. In addition, 25% of theproject cost is required every ten years. This arnount is currently Birr 1.3 million.

9.2. KEBELE UPGRADING COMPONENT

Different infrastructure provided under this component require different arrangement. Roads anddrains are by large local or access roads. These require regular maintenance. Activities completedearlier are now deteriorating. In the long term, the shift to community management can be an optionif it is preceded by adequate sensitization and promotion. In the short term, however, interventionby NGOs and Government in cooperation with the community seems to be a more sensibleapproach. Involvement of governmLent agencies might have to be limited to financing and contractadministration. Experience has shovvn that physical force account involvement is inefficient.

The beneficiaries in the project areas are managing communal latrines. Cleaning and moneycontribution to get regular emptying service is handled by the beneficiary households. There are toom;my households per latrine, however. This is discouraging proper management of these latrinesparticularly cleaning. This overloading is due to lack of space in the area to construct additionallatrine. Further intervention to reduce congestion would be an issue that needs to be considered inthese areas.

Solid waste containers need to be placed in hardstanding sites by Solid Waste Management Unit ofthe Health Bureau. Some public standpipes are not in operation due to water connection delay theresponsibility of which belongs to AAWSA. In those who already started operation, themanagement is given to the Kebele Development Committee. Alternative arrangement wouldconsider poor women in the project areas. Maintenance of standpipes would be financed by userfees.

The overall amount required for amnual maintenance of upgrading projects is Birr 71 thousand. Inaddition, 25% of the project cost for major maintenance every 10 years is required. This amountcurrently is estimated at Birr 1.5 million.

9.3. STREET MAINTENANCE COMPONENT

CiNil works under this component are maintained streets in different places of the city. The AARAhas been involved in selection, design and supervision. As major streets further maintenance andupgrading is the responsibility of the Authority. Birr 167 thousand and Birr 4.1 million are requiredfor routine maintenance every year and for major maintenance every ten years respectively.

Three beneficiary agencies are involved for street maintenance related procurement of goods. Theseare the AARA, Equipment Service Department of the AACG and CMPE. The operation andmaintenance responsibility is under each organization.

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Some of the tools and machinery purchased are poorly managed by the Equipment Service. TheDepartment has a chronic problem of skilled manpower. It is unlikely that the Equipment Servicewill provide efficient maintenance services for the AACG agencies. The AARA and other agenciesin the AACG that have huge machinery overhaul shall seek for other alternatives. These could becontracting out the service and own maintenance unit.

CMPE is by large profit making agency besides to supplying construction materials for roadconstruction and maintenance. Most of the machinery purchased are in operation. Maintenance andoperating costs financing are guaranteed by the financial position of the enterprise. However, similarto other public enterprises in the country other options such as privatizing should be studied for thisenterprise.

The total amount of money required for operation and maintenance of major equipment andvehicles is Birr 4.5 million, excluding loan repayment and overhead costs of administration. Thisamount is only considering major machinery and equipment that have been procured by theSAAUDP.

Two financial sources are identified. These are general revenue for machinery and equipmentprovided to the AARA and the enterprise's revenue for items provided to the CMPE. User fee shallcover the financial requirement of those items owned by the Equipment Services Department.

9.4. SOLID WASTE MANAGEMENT COMPONENT

The Solid Waste Component expanded into a more general "Sanitation Component" by includingprovision of equipment for cesspool management to Health Bureau (for public toilets management)and AAWSA (for private houses' needs). The Health Bureau, responsible for solid wastemanagement, has received the largest part of equipment and civil works under the component. TheSolid Waste Management Unit has a large fleet of vehicles, substantial other resources (such as, atruck park constructed under SAAUDP, the landfill site), and a large staff. The volume of operationit is expected to undertake, and the dilemma between operations-regulatory roles of the HealthBureau call for a change in the institutional arrangement for Solid Waste Management Unit,probably forming an independent entity under the AACG. AACG is recently looking at the optionsand a decision is expected soon.

The total amount required for civil works annual routine maintenance and major maintenance everyten years is Birr 60 thousand and 1.5 million respectively. Solid waste carriers, containers and landfillplant require operating costs including fuel and tire, labor and maintenance. The amount requiredfor this purpose, per year, is Birr 4.5 million, excluding loan repayment and overhead costs.

Financing for future resource requirements of the solid-waste part and public latrine servicing wouldcome largely from City general revenues, and a small part from fees on institutional entities. Thecesspool emptier service provided by AAWSA shall be financed by user charges.

9.5. AKAKI WATER SUPPLY COMPONENT

The operating management is handled by AAWSA. Total operating costs owing to supply ofchemicals and electricity as well as salaries for one year is Birr 1.2 million. User fees charged byAAWSA shall be the source for all the required resources under this component.

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9.6. INSTITUTIONAL SUPPORT COMPONENT

Several capacity building activities have been undertaken by the SAAUIDP. Procurement ofspecialized fire fighting vehicles to Addis Ababa Fire Brigade is the most considerable one. Theoperation and maintenance management of these items shall be under the responsibility of thisorganization. The amount estimatecd for annual operation including daily check up of truck enginesof specialized vehicles purchased under the SAAUJDP is Birr 0.9 million. In addition, more than 40automobiles and pick-up trucks worth in the order of 6.7 million Birr were provided to variousagencies under the Institutional Support component. These would require about Birr 0.7 million foroperation and maintenance. This would be paid for from the budgets of beneficiary agencies.

10. KEY LESSONS LEARNED

Organization of an implementing agency: appropriate organizational structure is a key issue withhuge influence on the success of any project, specially integrated, inter-sectoral projects that involvea large number of agencies and activities. From the specific circumstances under which SAAUDPwas implemented, many organizational issues have been raised. The most important ones that relateto authority, division of responsibility, and accountability that need to be addressed are:

Authority: the agency that coorcinates and implements the project (for instance as PIO inSAAUDP) need to be given required authority to enforce the requirements set out in the project,ancl mechanisms through which other agencies can be made accountable to it in the perforrmance ofactivities related to the project. This could be done by making it, for instance, a direct extension ofthe AACG Executive Council or Economy Sector of the Executive Council. The minimumrequirement is to clearly make the project implementing and coordinating agency above the Bureausthat perform everyday policy,-making/service-giving functions.

Accountability: there is a need to make other agencies responsible for delays and cost over-runs inactivities under their purview. Since there is a tendency to give project activities lower priorities(compared to their 'main' functions), there should be a mechanism to force agencies to incorporatethese activities as one of their priority areas.

Collaborating agencies: there is a need to make assistance to relevant agencies strongly conditionalon execution of their responsibilities under the project.

Conitract Administration: Separate contracts for civil engineering works and supply of goods(eqLipment and pipes) affected coordination negatively. Moreover, disintegrating contracts decreasesthe total value in each contract which is less likely to attract large contractors.

Cornponent/Activity Phasing: A project component with a number of activities shall be pilotedor phased. Factors that were not identified well at the time of project formulation would come outimportant while implementation. This helps to improve implementation (e.g. speed) and delivery(supervision, cost-effectiveness and quality).

Operations: Operational plan needs to be prepared and agreed with concerned agencies beforeprocurement.

Component Specific IssuesInterest rate subsidies alone are unlikely to acconmodate the poor in sites and service scheme. Themarket rate shift in SAAUDP seems appropriate. This also encourages loan repayment rate.

Cormpensation system in upgrading slum areas is effective to secure right-of-way. However, it can betime consuming to obtain ownership certificate that is often absent in these areas and alsoencourages irregular ownership claims.

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Second Addis Ababa UrbanDevelopment Project

Credit 2161-ET

Map

97

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