Project Completion Report

Transcription

1 Project Completion Report Project Number: Loan Number: 2208-UZB December 2011 Uzbekistan: Kashkadarya and Navoi Rural Water Supply and Sanitation Sector Project

2 CURRENCY EQUIVALENTS Currency Unit sum (SUM) At Appraisal (31 October 2005) At Project Completion (30 June 2011) SUM1.00 = $ $ $1.00 = SUM1,136 SUM1, ABBREVIATIONS ADB Asian Development Bank CSP country strategy and program DP direct purchase DWCU drinking water consumers union EIRR economic internal rate of return EOCC economic opportunity cost of capital FIRR financial internal rate of return HSE ICB hygiene and sanitation education international competitive bidding IEE initial environmental examination LARP land acquisition and involuntary resettlement plan m 3 cubic meter MOH Ministry of Health NGO non government organization O&M operation and maintenance PIU project implementation unit PMU project management unit PPMS project performance monitoring system PSC project steering committee QCBS quality- and cost-based selection RCSES Republic Center of State Sanitary Epidemiological Surveillance SAR SSS subproject appraisal report single source selection UCSA Uzbekistan Communal Services Agency WACC weighted average cost of capital WDC water distribution center WIS water intake structure WSS water supply and sanitation GLOSSARY hokimiat provincial government oblast province rayon district vodakanal water supply and sanitation agency makhallya neighborhood NOTES (i) (ii) The fiscal year (FY) of the Government ends on 31 December. In this report, "$" refers to US dollars.

3 Vice - President X. Zhao, Operations 1 Director General J. Miranda, Central and West Asia Department, CWRD Director R. Subramaniam, Urban Development and Water Division, CWRD Team Leader Team Members L. Zheng, Lead Urban Development Specialist (Municipal Services), CWRD R. Romasanta, Senior Project Officer, CWRD N. Talipova, Senior Social Sector Officer, URM R. Seno, Operations Assistant In preparing any country program or strategy, financing any project, or by making any designation of or reference to a particular territory or geographic area in this document, the Asian Development Bank does not intend to make any judgments as to the legal or other status of any territory or area.

4 BASIC DATA CONTENTS Page i I. PROJECT DESCRIPTION 1 II. EVALUATION OF DESIGN AND IMPLEMENTATION 1 A. Relevance of Design and Formulation 1 B. Project Outputs 2 C. Project Costs 4 D. Disbursements 5 E. Project Implementation Schedule 5 F. Implementation Arrangements 5 G. Conditions and Covenants 6 H. Consultant Recruitment and Procurement 6 I. Performance of Consultants, Contractors, and Suppliers 8 J. Performance of the Borrower and Executing Agency 9 K. Performance of the Asian Development Bank 9 III. IV. EVALUATION OF PERFORMANCE A. Relevance 9 B. Effectiveness in Achieving Outcome 10 C. Efficiency in Achieving Outcome and Outputs 10 D. Preliminary Assessment of Sustainability 10 E. Impact 11 OVERALL ASSESSMENT AND RECOMMENDATIONS A. Overall Assessment 12 B. Lessons Learned 13 C. Recommendations 13 APPENDIXES 1. Design and Monitoring Framework Project Costs at Appraisal and Actual Project Costs Breakdown of Yearly Disbursements, Implementation Schedule Status of Compliance with Loan Covenants Contract Packages and Procurement Procedures Economic and Financial Reevaluation Summary of Resettlement and Land Compensation Organizational Structure of Project Implementation Implementation of Gender Action Plan 40 SUPPLEMENTARY APPENDIXES A. Profile of Completed Subproject Facilities B. Implementation of Capacity Building Program C. Implementation of Hygiene and Sanitation Education Program

5 BASIC DATA A. Loan Identification 1. Country Republic of Uzbekistan 2. Loan Number 2208-UZB (SF) 3. Project Description Kashkadarya and Navoi Rural Water Supply and Sanitation Sector Project 4. Borrower Republic of Uzbekistan 5. Executing Agency Uzbekistan Communal Services Agency Uzkommunkhizmat 6. Loan Amount $25.0 million (SDR million) 7. Project Completion Report Number PCR:UZB 1301 B. Loan Data 1. Appraisal Date Started Date Completed 2. Loan Negotiations Date Started Date Completed 3. Date of Board Approval 4. Date of Loan Agreement 5. Date of Loan Effectiveness In Loan Agreement Actual Number of Extensions 6. Closing Date In Loan Agreement Actual Number of Extensions 7. Terms of Loan Interest rate Maturity (number of years) Grace period (years) 8. Terms of Relending Interest Rate Maturity (number of years) Grace Period (years) Second-Step Borrower 30 August September November November December February May May 2007 None 30 June June 2011 None 1.0 % per annum during grace period 1.5 % per annum thereafter % per annum during grace period and 1.7% per annum thereafter 32 8 Kashkadarya Hokimiat Navoi Hokimiat 9. Disbursements a. Dates Initial Disbursement 7 November 2007 Final Disbursement 1 15 Sep 2011 Time Interval 46 months Effective date 10 May 2007 Closing date 30 June 2011 Time interval 49 months 1 The liquidation/refund of unliquidated imprest advance is still to be finalized which might affect the final date of disbursement.

6 ii Category (1) b. Amounts as of 2 November 2011 Original allocation (2) Last allocation (3) Disbursed amount (4) Undisbursed balance (5=3-4) SDR US$ SDR US$ SDR US$ SDR US$ Category 1. Civil works Equipment and materials 3. Capacity building HSE program Project management and consulting services Interest during construction 7. Unallocated funds Total a b c d a Exchange rate at appraisal: SDR 1.0 = $1.446 b Exchange rate at the time of reallocation: SDR 1.0 = $1.564 c Exchange rates prevailing at the time of each disbursement, totals calculated at SDR 1.0 = $ These figures are tentative pending refund to the Asian Development Bank of the unliquidated imprest advance and final closure of the loan account. d Exchange rate as of 2 November 2011 per Loan Financial Information System (LFIS): SDR 1.0= $1.564 C. Project Data 1. Project Costs ($ million) Cost Appraisal estimate Actual Foreign Exchange Cost Local Currency Cost Total Financing Plan ($ million) Cost Appraisal estimate Actual Implementation Costs Borrower Financed ADB Financed Other External Financing Total IDC Costs Borrower Financed ADB Financed Other External Financing Total

7 iii 3. Cost Breakdown by Project Component ($ million) Component Appraisal estimate Actual A. Physical infrastructure 1. Water supply Sanitation Detailed design and construction supervision Subtotal (A) B. Institutional development 1. Capacity building program HSE Project management support Subtotal (B) C. Taxes and duties D. Contingencies Physical a Price a Subtotal (D) E. Interest and Other Charges During Construction a TOTAL In Actual column, contingencies were distributed in respective components where they were actually used. 4. Project Schedule Item At appraisal Actual Project Management Consultant 1 Jun Jul 2008 Engineering Design Completion 31 Dec Jul 2009 Construction contracts Date of award 1 Jan Mar 2009 Date of completion 31 Dec Dec 2010 Start of operations 1 Jan Jan 2011 Equipment and Supplies First Procurement 1 Jun Oct 2007 Last Procurement 31 Dec Apr 2011 Completion of Equipment Installation 31 Dec Jun 2011 Other dates Program of training Vodakanals personnel, local authorities 1 Jun May 2009 and representatives of makhallya committees Accounting automation and financial experts training 1 Jun May 2009 program HSE program 1 Jan May 2009

8 iv 5. Project Performance Report Ratings Implementation Period Development Objectives Ratings Implementation Progress From 10 May 2007 to 30 June 2011 Satisfactory Satisfactory D. Data on Asian Development Bank Missions Name of Mission Date No. of Persons No. of Person-Days Specialization of Members a Fact-finding 25 May 6 Jun a, b, c Appraisal 30 Aug 15 Sep a, b, c Loan Inception 22 May 6 Jun a, b, c, d Review 1 29 Nov 8 Dec b, e, f Review Apr e, f Review May e, d Review 4 24 Nov 1 Dec e, g Review Apr d, g, h Review Sep d, g Midterm Review Nov a, d, e, g Review May d, g Review Jul d, g, n Review Sep d, g, m Review Dec d, g, I, m Review Mar d, g Project completion review 6 27 Sep d, g, j, k, l a a = senior urban economist; b = project administration unit head; c = project specialist; d = assistant project analyst; e = project economist; f = portfolio management officer; g = urban development specialist; h = social development specialist; i = senior portfolio management specialist; j = water supply engineer (staff consultant); k = economist (staff consultant); l = senior social sector officer; m = environmental specialist; n = social safeguards specialist;

9 1 I. PROJECT DESCRIPTION 1. Aging infrastructure, institutional constraints and low investments in the water supply and sanitation (WSS) sector for the past two decades was inhibiting people s access to basic WSS services in Uzbekistan. Rural water supply, in particular, had been deteriorating because of budget constraints. 2. The government s development objectives were to promote economic growth, reduce poverty, and provide balanced regional development including improved WSS services. Since the promulgation of the Law on Water and Water Use in 1993, the government gradually extended and strengthened the legislative framework covering Uzbekistan s needs in the WSS sector, particularly in rural areas. In 2004, the government requested the Asian Development Bank (ADB) for assistance in improving and expanding the WSS systems in Kashkadarya and Navoi provinces. A loan of SDR million ($25.0 million equivalent) from ADB s Special Funds resources was approved on 12 December The Loan Agreement was signed on 9 February 2007 and became effective on 10 May The project aimed to improve living conditions and public health in the rural areas of Kashkadarya and Navoi provinces through improved access to WSS services. Kashkadarya and Navoi provinces were selected because of their high rates of poor people (38% in Kashkadarya and 24% in Navoi provinces) and the urgent need for improved WSS services. The project followed a sector lending approach and supported the government s objectives of decentralization, poverty reduction, and human development by providing (i) improved rural WSS infrastructure services, and (ii) training programs to strengthen the institutional capacity and financial sustainability of the agencies responsible for WSS services. 4. The project scope proposed at appraisal comprised the following two parts.: a. Part A: physical infrastructure, which consisted of (i) the development and rehabilitation of piped water supply systems, and (ii) the construction of public and school latrines for 12 districts, covering 170 villages with populations ranging from 300 to 8,000. b. Part B: institutional development, which included (i) a capacity-building program for government staff and other stakeholders to efficiently plan, implement, operate, and maintain the WSS systems, (ii) a hygiene and sanitation education (HSE) program, and (iii) project management support. II. EVALUATION OF DESIGN AND IMPLEMENTATION A. Relevance of Design and Formulation 5. Uzbekistan s WSS policy was based on three legal instruments: (i) the National Water Supply Development Scheme ( ) approved by the Cabinet of Ministers in 1999; (ii) the Resolution of the Cabinet of Ministers approved in 2003 (RCM No. 405); and (iii) the latest 3-year public investment program. By providing basic WSS facilities, in particular for the poor in the 12 districts of Kashkadarya and Navoi provinces, the project s design and formulation were consistent with the government s policy and strategy for the WSS sector at the time of both appraisal and completion. 6. ADB s operational strategy in the water supply sector for Uzbekistan was set out in the Asian Development Bank country strategy and program (CSP). 2. The CSP considered water supply services essential to economic growth and improved living standards. It focused on: (i) improved water supply 1 ADB Report and Recommendation of the President to the Board of Directors. Proposed Loan to the Republic of Uzbekistan for the Kashkadarya and Navoi Rural Water Supply and Sanitation Sector Project. Manila. 2 ADB Uzbekistan: country strategy and program updated for

10 2 efficiency through investments in physical infrastructure; (ii) improved cost recovery by revising the level and structure of water tariffs; and (iii) preservation of water resources and environmental protection through the establishment of legislative standards and regulations. The CSP emphasized the acute need for rural water supply systems in Kashkadarya and Navoi provinces, where half the villages had no access to safe and reliable WSS services. ADB has prepared a country operations business plan, 3 which retains the same priorities as the CSP, such as human development involving the provision of safe and sustainable water supply, sanitation, and waste management services 7. The project followed a sector lending approach and supported the government s objectives of decentralization, poverty reduction, and human development by providing (i) improved rural WSS infrastructure services, and (ii) training programs to strengthen institutional capacity. The project also supported several principal elements of ADB s water policy. 4 Community consultations were undertaken prior to implementation to ensure that technically appropriate systems were adopted. The project design was sound and relevant at appraisal and completion, and it adequately incorporated the project objectives. Project implementation involved a high level of stakeholder participation and ownership by the beneficiary communities. No major changes in project scope were made, while minor changes in project design were made to help maximize the project s benefits by covering wider areas of the target districts with improved access to safe water and environmental sanitation. B. Project Outputs 1. Part A: Physical Infrastructure 8. Part A included the development and rehabilitation of piped water supply systems, and construction of public and school latrines in 12 districts 5 in Navoi province and 7 in Kashkadarya province. Because of the geographical spread and different sources of water, the establishment of 21 water supply systems was proposed to effectively cover all 12 districts. Each water supply system included water distribution centers (WDCs) or water intake structures (WISs), depending on whether the water source was an existing transmission mains or groundwater, as well as transmission and distribution pipelines, and house connections. Overall, 17 WDCs and 18 WISs were constructed in the 7 districts of Kashkadarya province and 13 WDCs and 11 WISs in the 5 districts of Navoi province. All 21 systems were equipped with chlorination facilities. No water treatment plant was constructed, as water quality met the national water quality standard, although a high level of iron content 5 was observed in some districts. 9. The project constructed: (i) 183 km of transmission pipelines with a diameter of mm, (ii) 1,318 km of distribution pipelines with a diameter of mm, (iii) 59 new pumping stations with underground reservoirs and chlorination facilities, (iv) 67 new production wells, (v) 23 elevated water tanks, (vi) 43,038 house connections including yard piping, and (vii) 117 public standpipes in Kashkadarya province. The project also rehabilitated (i) 2 existing production wells and pumping stations, and (ii) sanitation facilities with ventilated improved pit latrines and septic tanks in 38 public schools. 10. Minor changes in project scope were made to meet actual site conditions during implementation. They were: (i) an increase in the number of production wells, (ii) increases in the length of water mains, (iii) a decrease in the number of improved pit latrines at schools, (iv) provision of public standpipes in Kashkadarya province, and (v) procurement of additional operation and maintenance (O&M) equipment 3 Country Operations Business Plan, Republic of Uzbekistan , July ADB Water for All: The Water Policy of ADB. Manila. 5 According to a report from Shahrisabz vodakanal, the iron content of the groundwater is around 7.0 mg/lit, which is within the government standard, while mg/lit are the standards normally applied worldwide.

11 3 (truck cranes, laboratory equipment, and submersible pumps) for the provincial water supply and sanitation agencies (vodakanals). 2. Part B: Institutional Development 11. Capacity-Building Program. The program aimed to strengthen the capacity of the staff of central and local government agencies and other stakeholders so that they could efficiently plan, implement, operate, and maintain the WSS systems. A local training institute 6 was engaged to assist the project management unit (PMU) in carrying out the program. The program included training in (i) O&M for the operators of the new water supply systems, (ii) subproject planning, financial management, and accounting for the Uzbekistan Communal Services Agency (UCSA), the PMU, the project implementation units (PIUs), and the Drinking Water Consumers Union (DWCU); and (iii) subproject appraisal, design, and procurement procedures in accordance with ADB guidelines for the design institutes. Training focused on: (i) plant operators, in O&M of pump equipment and water quality testing; and (ii) financial and management staff of the vodakanals and DWCU members, in meter reading and collecting water tariffs from consumers. The program was conducted in Tashkent and the subproject districts from June 2009 to June A total of 1,281 central and local government staff were trained, 734 or about 57% of whom were women. The main topics of the training, the targeted agencies, and the trained people are shown in Supplementary Appendix C. 12. Hygiene and Sanitation Education (HSE) Program. The program was implemented from June 2009 to June 2010 by the Republic Center of State Sanitary Epidemiological Surveillance (RCSES) under the Ministry of Health (MOH). The HSE program aimed to enhance the community s understanding of the close interrelationship between hygiene, sanitation, water, and health. The program included: (i) development of HSE media materials for hygiene and sanitation promotion for distribution to the communities and schools; (ii) HSE orientation and training workshops for district and village leaders, health staff, and school teachers; (iii) the distribution of posters to the 38 schools for hygiene, sanitation, and health awareness education; and (iv) the conducting of HSE lessons in the selected schools. Prior to the implementation of the program, 262 trainers, including school teachers in the subproject districts and MOH staff at the central and provincial levels, were trained by the RCSES. Eventually, the program covered over 3,600 schoolchildren in 54 primary and secondary schools within the subproject districts of Kashkadarya and Navoi, compared with the 4,000 schoolchildren estimated at appraisal. Various training materials were prepared in the Uzbek and Russian languages and more than 2,000 sets of these materials were distributed among schools and communities. The implementation of the HSE program is shown in Supplementary Appendix D. 13. Project Management Support. Consulting services to help UCSA implement the project were provided through 7 contract packages 2 international and 5 national. The primary contract was for project management support, under which the international consultant assisted with (i) project management and monitoring, (ii) supervision of the construction of the subprojects, and (iii) planning and implementing the capacity building and HSE programs. 14. The subproject feasibility study reports for the first 4 core subprojects were prepared during project appraisal in September 2005, and those for the other 8 subprojects were prepared by UCSA with the assistance of a design institute in RTM SEC Uzkommunukuvtashkilotchi

12 4 C. Project Costs 15. At project appraisal, the total project cost including interest charges and contingencies, was estimated at $36.0 million, comprising $5.6 million in foreign currency and $30.4 million in local currency. The ADB loan was envisaged to finance $25.0 million (69.4%) of the total project cost to cover the entire foreign exchange cost of $5.6 million, including $0.5 million for interest and other charges during construction, and $19.4 million of the local currency cost. The government, including district governments and communities, was to cover the remaining local currency costs, namely $11.0 million equivalent (30.6%). 16. A total of 21 civil works contracts were awarded for water supply and sanitation works in the 12 subprojects. During implementation of the construction activities, there were several changes in the scope of the works to meet actual site conditions such as: (i) an increase in the number of production wells, (ii) increases in the length of water mains, (iii) a decrease in the number of improved pit latrines at schools, and (iv) the provision of public standpipes in Kashkadarya. The civil works contracts amounted to $19.0 million, compared to $23.4 million estimated at appraisal. $14.3 million of the $19 million was financed out of the loan, which was about 21% less than the $18.8 million estimated at appraisal, giving savings of about $4.4 million in the category of Civil Works. For the category of "Equipment and Materials", the actual cost was $6.5 million, a 110% increase from the $3.1 million estimated at appraisal. In order to cover the additional costs for equipment and materials and project management consulting services, the government requested ADB for a reallocation of loan funds between the categories, including the use of loan savings to procure additional O&M equipment. On 13 April 2011, ADB approved the proposed loan reallocation. As a result, the actual project cost at completion became $34.12 million with a foreign exchange cost of $5.29 million and a local currency cost of $28.83 million equivalent. ADB financed $22.82 million (67%), while the government and the project beneficiaries financed $11.10 million (33%). The project cost estimated at appraisal and the actual cost are shown in the Basic Data Sheet and Appendix The loan agreement stipulated that all goods and services purchased under the project would be exempted from local taxes and duties. Accordingly, the government issued two presidential decrees 7, under which local taxies and duties including custom duties to all goods and services purchased under the project were exempted. D. Disbursements 18. Total disbursements of the ADB loan amounted to $23.02 million, compared with $25.0 million envisaged at appraisal. Loan disbursements were not significant in 2007 and 2008, with the initial disbursement taking place in the fourth quarter of The disbursement rate significantly increased in 2009 and Funds were disbursed according to ADB standard payment procedures and there were no significant problems. The provisions for counterpart funds were sufficient and payments were generally made on time. 19. The first disbursement from the imprest account, which took place on 7 September 2007, was for $167,000, which is within the imprest account ceiling of $200,000 as stipulated in the Loan Agreement. The ceiling amount was increased to $940,800 on 12 December 2008 and further increased to $1,059,200 on 23 November Use of the imprest account was effective and it guaranteed direct and timely payments to civil works contractors and suppliers. The average turnover 7 One called About measures on implementation of ADB-funded Kashkadarya and Navoi Rural Water Supply Project and the other called About measures for further improvement of rural and urban drinking water supply and saving use of gas issued in June 2008

13 5 ratio of the imprest account during project implementation was estimated at The full impact of the above payment procedures was found to be positive. A breakdown of yearly disbursements is in Appendix 3. E. Project Implementation Schedule 20. At appraisal, it was envisaged that the project would be implemented over 5 years from January 2006 to December The loan was approved by ADB on 12 December 2005 but the loan agreement was not signed until 9 February 2007, about 14 months after Board approval. The major reason for the late loan signing is the delay in preparing the feasibility study for all 12 subprojects and the government s approval thereof, which was given only on 8 January The subproject feasibility study was revised to reflect the comments raised by the ministries concerned, in particular, on financial matters. The loan became effective on 10 May 2007, three months after the loan signing when the conditions for loan effectiveness had been fully met. These conditions were: (i) setting up of the Project Steering Committee; (ii) establishment of the PMU and PIUs; (iii) ratification of subsidiary loan agreements; and (iv) submission of legal opinion by the government. Despite these delays in the initial stage, the project was substantially completed by the end of December 2010 as originally scheduled. 21. After the loan became effective on 10 May 2007, the PMU started its preliminary work, including the engagement of consultants for detailed design and procurement of equipment and vehicles. In January 2008, two consulting firms for the detailed design works were engaged, followed by the international consulting firm for project management support in July The detailed designs, land acquisition, and involuntary resettlement plans (LARPs) for the eight subprojects were developed and completed in June Most civil works contracts were awarded from March to December 2009, compared to early 2007 as originally scheduled. Delays in awarding the civil works contracts were mainly due to: (i) time spent finalizing eight subproject appraisal reports (SARs), the fifth versions of which were approved by ADB only on 10 July 2009 after being initially submitted to ADB in August 2008; (ii) delays in obtaining government approval for implementation of the project; and (iii) delays in preparing the detailed designs and LARPs. Delays also occurred in procuring operational equipment because no responsive bids were received for some international competitive bidding (ICB) packages. In spite of a 1.5-year delay in the start-up and a 0.5-year delay in the early implementation stage, all the works had been substantially completed by 31 December 2010, and the completed water supply systems were put into operation after a commissioning test. The actual implementation schedule compared to appraisal is in Appendix 4. F. Implementation Arrangements 23. The project implementation arrangements designed during project appraisal were basically followed. UCSA was the executing agency and had overall responsibility for project coordination, implementation, and liaison with the relevant government agencies and ADB. The PMU for the ADBsupported Urban Water Supply Project 8 was reinforced with additional staff to undertake procurement of goods, civil works, and services, and coordination with the provincial governments. The PMU consisted of 16 technical and administrative staff, most of whom had the requisite experience. An interministerial Project Steering Committee (PSC) 9 was established under Presidential Decree No. PP-555, dated 8 January The decree authorized the PSC to approve subproject feasibility and appraisal 8 Loan No UZB: Urban Water Supply Project, dated 29 April Comprised 15 ministries and offices concerned, including representatives of the Ministry of Economy, Ministry of Finance, Ministry of Foreign Economic Relations, Investments and Trade, Ministry of Justice, Customs Office, Kashkadarya and Navoi provincial governments, UCSA, and other agencies.

14 6 reports, the yearly financing plan, and implementation arrangements. The PSC was chaired by the First Deputy Prime Minister and convened meetings four times during project implementation. A bidding committee was established under the First Deputy Prime Minister Decision No. 05/1-11, dated 10 September The bidding committee was authorized to procure civil works, equipment, and consulting services. 24. At the provincial level, a PIU was established in both Kashkadarya and Navoi provinces in January Each PIU was adequately staffed with 15 staff in Kashkadarya and 12 staff in Navoi, including design, construction, and financial specialists. The PIUs undertook tasks related to construction supervision, community participation, and socio-economic surveys during project implementation. Each PIU was supported by the project management consultants and the design institutes for the preparation of detailed designs, bidding documents, and construction supervision. At the community level, a DWCU was established for each of the 167 resettlements in the two provinces. Each DWCU had an average of 5 staff members per 100 house connections, who were selected from among the beneficiaries. The DWCU staff members were trained in the basic skills of O&M for water supply facilities, meter reading, and collection of water tariffs. G. Conditions and Covenants 25. In general, all covenants were complied with, although compliance was delayed for some of them. Both the central and provincial governments financed counterpart funds in a timely manner. The PMU submitted to ADB progress reports, audited financial statements, and other required documentation in a satisfactory manner. The status of compliance with loan covenants is in Appendix 5. Covenants that were partly complied with or complied with only after delays were the following: a. Subproject Selection and Approval (Loan Agreement schedule 6, para. 10). The PMU was not able to finalize the SARs for the remaining 8 subprojects until June 2009; b. Water Tariff (Loan Agreement schedule 6, para. 7). Annual reviews of water tariffs were not fully conducted, nor were the results submitted to ADB on a regular basis. However, the present water tariff rates at $ /m 3 for households are able to cover essential O&M expenditures in the 12 districts; and c. Project Performance Monitoring System (Loan Agreement schedule 6, para.19). The PPMS was incorporated into quarterly progress report and submitted to ADB in October 2008, or 11 months behind schedule. H. Consultant Recruitment and Procurement 26. At appraisal, 680 person-months of consulting services (50 person-months of international and 630 person-months of local consultants) were envisaged for project management support, including reviewing technical studies and detailed designs, procurement, construction supervision, and financial and institutional strengthening activities. Given the delay in the start-up of project implementation, the inputs of the consulting services were substantially adjusted by allocating about 300 person-months for project management support and the rest for project auditing, accounting, capacity building, and the HSE program. At project completion, the inputs of personnel for project management support services were 351 person-months in total, consisting of one international team leader with 26.7 person-months and 26 national staff positions. The five national consultant packages were for (i) preparation of detailed designs and construction supervision for 7 subprojects in Kashkadarya province, (ii) preparation of detailed designs and construction supervision for 5 subprojects in Navoi province, (iii) training of operations personnel in vodakanals, (iv) automation of the accounting system and finacial management training, and (v) the HSE program. Preparation of the detailed designs and bidding documents, construction supervision, and other support to the PIUs were awarded to the local engineering institutes

15 7 as consultants. Together with community-based DWCUs, the PIU undertook community consultation for planning, designing, and monitoring subprojects as well as socioeconomic surveys. As a result, a total of seven packages consisting of two international and five national consulting services were contracted as follows: a. project management support international (1 package); b. detailed design and bidding documents national (2 packages); c. preparation of annual audit reports international (1 package); d. capacity building national (1 package); e. accounting automation national (1 package); and f. HSE program national (1 package) 27. Consultants were engaged according to quality- and cost-based selection (QCBS) procedures for three contracts, namely, (i) project management support, (ii) preparation of annual audit reports, and (iii) detailed design and bidding documents. The consultants for capacity-building and the HSE program were engaged using the single source selection (SSS) method as agreed by ADB For project management support, the first ranked international consulting firm was engaged on 29 July 2008 with a total input of 290 person-months (38 person-months of international and 252 person-months of local personnel, including 51 person-months for secretary and /translators). The contract was amended twice. The first amendment was made on 24 December 2009 to decrease the inputs of international experts from 38 to 26 person-months and increase the inputs of local experts (excluding the secretary and translators) from 201 to 244 person-months. This change was made because (i) local engineers required more time to supervise the civil works that were spread over wide geographical areas, and (ii) additional local hydrogeology and topography experts had to be recruited to develop new production wells and pumping stations. The second amendment was made on 15 April 2011 to engage an international and a domestic expert each with 2 person-months to prepare a project completion report for the borrower. 28. Because of insufficient experience and knowledge about ADB's rules and regulations, the PMU and PIUs, as well as the consultants, could not develop the LARPs based on the framework prepared at the time of project formulation. This posed a risk that the project may not be completed satisfactorily. Thus, ADB hired a resettlement staff consultant in May 2009 to assist UCSA in preparing LARPs. As a result, the LARPs were finalized in June 2009 and approved by ADB in July This enabled work on all 21 civil works contracts to start in late The 21 civil works contracts covered 5 districts in Navoi and 7 districts in Kashkadarya, as originally planned. In accordance with Schedule 4 of the Loan Agreement, all the contractors were selected based on national competitive bidding procedures as the estimated amount of each contract was less than $2.0 million. In selecting civil works contractors, post-qualification was used upon ADB s approval of a minor change in the procurement method. 30. Operational equipment for provincial vodakanals was procured through 14 contracts. ICB procedures were used successfully for the procurement of backhoe-loaders, truck cranes, and laboratory equipment (4 contracts). However, bids for another 2 contracts under ICB procedures failed. Therefore, international shopping procedures were used for 9 contracts, covering the procurement of generator sets, diesel compressors, submersible drainage pumps, polyethylene pipe welding equipment, and leak detection equipment. For the procurement of tool kits, electric welding machines, and various other items, the direct purchase procedure was used (1 contract).

16 8 31. For the capacity-building program, two state institutes were engaged in May 2009 through SSS procedures as agreed by ADB, one 10 for capacity development and training of water supply operators, and the other 11 for the automation of accounting and training of staff in financial management. For the HSE training program, a contract was signed in May 2009 with RCSES through SSS procedures. All the services under the three contracts were completed by June The summary of contract awards estimated at appraisal and actual is shown in Appendix 6. I. Performance of Consultants, Contractors, and Suppliers 32. The performance of the international consultant for project management support was less than satisfactory. The team leader was replaced twice, first in February 2009 and then in September 2009, as both the first and second team leaders were neither well qualified nor mobilized in a timely manner. The consulting firm also failed to mobilize finance, resettlement, and gender specialists as scheduled. The consultant submitted reports and documents generally as required, but the quality of the reports was substandard. 33. The performance of the consultants for detailed design was also less than satisfacotry. The consultants were engaged in January 2008, but it was not until early 2009 that detailed designs and bidding documents for the 4 core subprojects were completed, compared with June 2008 as originally scheduled. Preparation of detailed designs and bidding documents for the remaining 8 subprojects was also slow until an ADB mission required the consultants to increase personnel to carry out the work for all the packages in parallel in early Detailed designs were completed in October 2009 or 3 6 months behind schedule. This resulted in delays in the commencement of civil works. 34. The performance of the civil works contractors was in general satisfactory. While all the construction works were substantially completed by the end of December 2010, some of the contractors failed to complete the works within the original contractual period. 12 They had to pay liquidated damages for the delays according to the conditions of the contract. Major reasons for the delays were (i) interrupted supplies of electricity and diesel, and (ii) design modifications and adjustments because of the inaccuracy of the hydrogeological and geological surveys. 35. Of the 14 contracts for the supply of equipment, only the 4 under ICB procedures were awarded in The other 10 contracts were delayed because either (i) no acceptable bids were received, or (ii) rebidding was required (up to three times in some cases) because of bidders non-compliance with the technical specifications. In addition, the delivery of imported goods was delayed because of the time spent for preparation of necessary documents for registration by the contractors and acceptance by the relevant government agencies. As a result, some of the imported goods were not delivered until the second quarter of The performance of the two local institutes engaged for the capacity-building program was satisfactory. They completed all activites and outputs as scheduled. They improved the capacity of operational staff and communities in conducting O&M of the new facilities. The HSE program was also implemented successfully, producing various training materials and conducting awareness campaigns and presentations to schoolchildren in the subproject districts as originally scheduled. 10 RTM SEC Uzkommunukuvtashkilotchi (Uzbekistan Communal Training) 11 LLC Global Business Services 12 For example, the contractor LLC «Temur Malik» in Kiziltepa district of Navoi province completed the works with a 6-month delay.

17 9 J. Performance of the Borrower and Executing Agency 37. The performance of the borrower, the UCSA as executing agency, and the PMU was in general satisfactory. The PMU ensured adequate coordination among ADB, contractors, and consultants. Project implementation suffered a start-up delay of 1.5 years, because the Cabinet of Ministers did not approve the subproject feasibility study reports until 8 January This was mainly because most of the officials concerned at the ministries were not familiar with ADB's requirements for a WSS sector project as it was their first time to assess the feasibility of subprojects. Thus, finalizing the SARs took much longer than expected. The first versions of the SARs for the eight subprojects were submitted to ADB in August 2008, but they were revised repeatedly to reflect ADB s requirements until ADB approved the fifth version of the SARs on 10 July With assistance and guidance from the ADB project team, the UCSA, PMU and the PIUs have obtained valuable experience and knowledge through implementing the project. 38. A high turnover of PMU and PIU staff, mainly because of the low salary, had a negative impact on the timely implementation of the project. While no change was made for the position of PMU project director, the position of PMU project manager changed three times, and the heads of the PIUs in Kashkadarya and Navoi changed three times and once, respectively. Only 4 of the 16 positions in the PMU remained unchanged from the beginning to end of the project. K. Performance of the Asian Development Bank 39. ADB s performance is considered satisfactory. During implementation of the project from November 2006 to June 2011, ADB dispatched 11 review missions, in addition to the inception, midterm, and completion review missions. The review missions were effective and instrumental in addressing various issues to achieve the timely completion of the project. The April 2009 review mission advised the UCSA of the ADB no-extension policy beginning 2009, and agreed with the UCSA on the use of an implementation reminding system with milestone activities and deadlines. The system was effective in enabling the UCSA and PMU to complete the project as scheduled. In 2010, ADB dispatched 4 review missions to ensure the substantial completion of the project by the end of December ADB worked closely with the UCSA, PMU, and PIUs and gave them timely assistance to solve various problems, including the preparation of LARPs and procurement and payment issues. ADB s Uzbekistan Resident Mission actively participated in monitoring project implementation and provided the PMU with valuable and timely advice and instructions. ADB review missions frequently visited the subproject sites, met local government officials and requested their support to expedite the civil works. The missions also (i) interacted with the project beneficiaries and explained the likely positive and negative impacts that would affect them during project implementation and upon completion of the project; and (ii) responded to the UCSA s requests regarding project implementation. The initial delays of 2 years could have been minimized, if ADB had taken some proactive action right after loan signing to coordinate with the government for its prompt approval of the subproject feasibility study reports. III. EVALUATION OF PERFORMANCE A. Relevance 40. The project is rated highly relevant. It was consistent with the government's priorities at the time of appraisal and also its current priorities, as given in the socioeconomic development plan and strategy included in its new Welfare Improvement Strategy for The WSS sector was recognized as being in need of improved and expanded infrastructure, particularly in remote areas. During the last two decades, investments in this sector had been insufficient to address the growing demand for WSS

18 10 services. ADB provided its assistance according to the strategy of the government for the development of rural areas with a view to achieving poverty reduction and economic growth. The WSS sector is one of the priority areas in ADB s new country partnership strategy The project helped the government finance its improvement of WSS services in rural areas and improve the living conditions of poor households, with the expectation that this will eventually accelerate economic growth. B. Effectiveness in Achieving Outcome 41. The project is rated effective in achieving the outcome envisaged at appraisal. The main objective to provide a reliable safe water supply to the rural population in the targeted 12 districts was achieved as envisaged. As of August 2011, 245,300 people in 167 rural settlements and /villages, or about 11% of the country s rural population, were being served by the water supply systems constructed under the project. This compares with the baseline target of 170 rural settlements and villages by A total of 38 schools in the 12 districts were upgraded with water supply and sanitation systems. The institutional capacity of the related agencies and communities was strengthened to ensure the effective O&M of the water supply systems. The project promotes the longterm development of water supply and sanitation and improves the condition of people s health in the subproject districts. C. Efficiency in Achieving Outcome and Outputs 42. The project is efficient in financial and economic terms. The financial internal rate of return (FIRR) of the subprojects was reevaluated using discounted cash flow analysis. The cost streams include capital investment and O&M costs. Revenues are generated mainly from water sales. The FIRR at project completion ranges between 5.7% and 8% in Kashkadarya, averaging 7.3%, and between 5.4% and 6.3% in Navoi, averaging 5.7%. The average FIRR in Kashkadarya at project completion is slightly higher than at appraisal. However, the reverse is true in Navoi, as actual subproject operating costs are higher than at appraisal while actual water demands are lower. Nonetheless, all exceed the weighted average cost of capital (WACC), thus reaffirming financial viability. 43. The economic internal rate of return (EIRR) was likewise reevaluated for each subproject. Costs were adjusted to reflect the shadow rates of traded goods. Project benefits were based on willingnessto-pay tariffs for reticulated water supply, expected values of safe drinking water, time, labor, treatment, and storage cost savings. The estimated EIRR for the subprojects in Kashkadarya ranges between 16.6% and 25.9%, averaging 21.2%. In Navoi, the EIRR ranges between 16.5% and 25.1%, averaging 19.7%. In both provinces, the average EIRR at completion is slightly higher than at appraisal, and all exceed the threshold economic opportunity cost of capital (EOCC) of 12%. Financial and economic analyses are given in Appendix 7. D. Preliminary Assessment of Sustainability 44. The project is rated sustainable. All the subproject facilities are functioning and operating as designed, supplying quality water to the targeted consumers. The capacity of the water supply facilities will be sufficient enough to meet the increasing demand for the next 5 10 years. However, water supply is not round the clock, because of frequent power cuts. Installation of standby generators is not advisable given the cost of investment and O&M for a small-scale water supply system. Uninterrupted power supply should be discussed with the power supply authority. The institutional capacity of the vodakanals was improved through the systematic training of management and technical personnel. DWCUs were established for all 167 water supply systems. All DWCU staff members were trained and are fully committed to their responsibilities including meter reading and tariff collection. Installation of meters and automation of accounting are effective for financial management including billing and tariff

19 11 collection. The actual collection rate was about 60% in September 2011, and is expected to increase gradually to 90% by The project is rated financially sustainable based on an analysis of tariff willingness-to-pay and on affordability. The tariff is established by the local government based on actual O&M costs and reviewed by the government. The typical monthly bill of each household during the initial year of tariff adjustments was between $3.40 and $5.70 in Kashkadarya, and between $2.08 and $$6.31 in Navoi. This is between 1.3% and 2.2% of average household income in Kashkadarya and 0.8% and 2.3% in Navoi. The project achieved full capacity in early 2011 and an analysis of O&M costs will be undertaken in 2012 based on the results of financial activity in FY Improvement of water quality, including 24- hour water supply, and piped-system accessibility to households increased the willingness-to-pay. In 2011, tariffs were increased by 25%. Tariffs need to be increased in 2015 at between 5% and 32% in Kashkadarya, and 36% and 58% in Navoi. All subprojects will achieve full O&M cost recovery in 2013; only the Kanimekh subproject will achieve this later, in Until it is achieved, the subprojects will need subsidies for O&M from the respective Hokimiats. Adequate tariffs will ensure the future sustainability of the project. E. Impact 46. The newly established WSS systems benefit 100% of the population in 167 rural settlements and villages of the 12 subproject districts of Kashkadarya and Navoi provinces. This represents 98% of the original target of 170 settlements and villages. The project will therefore achieve its long-term objective of improved living standards and public health in the subproject areas. The provincial vodakanals estimated that, after project completion, waterborne diseases are likely to drop to 14,000 and 11,000 persons per year in Kashkadarya and Navoi, respectively, compared with 41,000 and 34,000 persons per year before the project. Annual medical costs will also decrease, from $10 per person before the project to $5.9 per person in Kashkadarya and $6.1 per person in Navoi. 47. Poverty. The project has provided the rural population in the project districts with quality water and empowered vulnerable communities through the formation of DWCUs. To ensure rural communities equitable access to a safe and reliable water supply, a monitoring system was developed at the community level. The UCSA and provincial administration monitored the socioeconomic implications of the project during project implementation as part of the PPMS. Of the 245,300 people served, about 5% were considered poor in Kashkadarya and 15% in Navoi. Poor families who have difficulty in paying the water tariff are subsidized by the government. The HSE program contributed to the increased awareness about sanitation and health among the rural population including school children, which will enhance health benefits and increase productivity. 48. Environment. The project is environmentally beneficial. An initial environmental examination (IEE) was carried out for each of the core subprojects in accordance with the Environmental Policy of ADB (2002), ADB s Environmental Assessment Guidelines (2003), and national guidelines. 13 The physical component of the subprojects, with simple, appropriate, and low-cost technology, did not pose any significant adverse environmental consequences. The provision of safe drinking water and proper sanitation facilities made a significant positive impact on the environment. The government s environment sector policies and the capacity of the relevant government agencies are adequate. The IEE reports and the summary initial environmental examination concluded that none of the subprojects was environmentally sensitive. Environmental concerns, for which appropriate safeguards were built into the subproject designs, included (i) protection of water source areas, (ii) controlled extraction of 13 RD Instruction on the procedure for environmental impact assessment.

20 12 groundwater, (iii) installation of water supply facilities away from household perimeters and cultivated lands, and (iv) proper collection and disposal of wastewater. 49. Involuntary Resettlement. LARPs for the 12 subprojects were prepared with the assistance of a resettlement consultant and approved by ADB in July According to the LARPs, 44 households were marginally affected. Permanent acquisition of 8.4 hectares (ha) of land was made for construction of WDCs for Kiziltepa, Nurata and Konimekh subprojects in Navoi province, compared to ha estimated at appraisal for construction of groundwater pumping stations and storage tanks. Temporary land acquisition was also made for about 14 ha during construction work. In Navoi province, 17 households were affected as a result of permanent land acquisition, and 5 households were affected by temporary land acquisition for pipelaying works during the autumn and winter of In Kashkadarya province, no households were affected by permanent land acquisition, but 22 were affected by temporary land acquisition for pipelaying works. In August 2009, the PIUs disclosed the LARPs to the affected households and explained their rights for compensation. Shortened versions of the LARPs were posted at the district Hokimiyats, vodakanals, and Councils of Rural Settlements. The PMU construction and monitoring specialist monitored all LARP activities, and monitoring reports were posted on the PMU internal network each month. Also, local consultants were hired to prepare independent monitoring reports for all 12 subprojects, which were submitted to ADB in May All the affected households were compensated or settled in accordance with the LARPs. Of the 44 affected households, 10 voluntarily donated their land to the state reserve, 16 received cash compensation, 17 were compensated based on a land for land option, and 1 household, who had illegally planted cotton on the state reserve land, voluntarily relinquished his right to compensation. Temporarily affected lands were restored to their original condition and returned to the farmers, who also received some compensation. 51. Gender Issues. During project preparation, gender assessment was carried out to assess (i) potential gender-differentiated impacts and the options to maximize the benefits to women and minimize the adverse impacts, and (ii) the capacity of government agencies, community-based organizations, and women s groups for project preparation and implementation. In addition, a gender action plan was prepared to incorporate gender findings in project design and promote women s participation in project-related activities and their direct access to project benefits, including the planning of WSS facilities, involvement in the HSE program, and membership of DWCUs. All the proposed gender actions were carried out during project implementation. Subprojects were selected and designed with the participation of both men and women, and more than 50% of the DWCU management positions were held by women. Also, more than 50% of participants in the HSE workshops and training courses were women, and the majority of health staff and school teachers at the district level were female. IV. A. Overall Assessment OVERALL ASSESSMENT AND RECOMMENDATIONS 52. Overall, the project is rated successful. The project achieved its outputs and outcome as envisaged at appraisal. The sustainability of project facilities is robust with the well organized vodakanals and communities, whose capacities were strengthened. The environmental impact was positive. Involuntary resettlement and permanent and temporary land acquisition were implemented according to ADB s policy. A positive social impact was achieved. The EIRRs and FIRRs are satisfactory, taking into account such impact factors as time saving and economic benefits of improved water delivery, improved health, and increased revenue.

21 13 B. Lessons 53. Based on the assessment of the project, the following lessons were learned: a. Significant inflation during project implementation affected the project cost. The total project cost could have been less than that actually spent, if the initial 2-year delay in implementation had been avoided. Action should have been taken by all the parties concerned including ADB to ensure that the government was taking timely action. b. The PMU and PIUs should be staffed and consultants recruited in a timely manner to carry out the necessary work at an early stage, such as the preparation of SARs, LARPs, detailed designs, and bid documents; the selection of contractors; and coordination with government agencies and other stakeholders. c. The salaries of PMU and PIU staff should be comparable with prevailing market rates to prevent the high turnover of PMU and PIU staff. d. Adequate local counterpart funds should have been allocated to the PMU and the PIUs to enable them to undertake the basic socioeconomic survey at the start and end of the project. e. Highest priority should be given to international consultants that are qualified and familiar with local rules and regulations related to project implementation. f. The quality of civil works for watertight structures, such as the underground and elevated water reservoirs constructed under the project, achieved the required local standards. However, local civil works contractors need further training on technology and workmanship for the construction of water supply facilities, in particular, watertight structures to reach international standards. g. The inclusion of a resettlement specialist within consulting services is essential to ensure timely preparation of LARPs. h. The PPMS report was prepared but not comprehensive. The PPMS should include all the technical and socioeconomic indicators that are essential to monitor the project s outcome and impact. C. Recommendations 1. Project-Related 54. Future Monitoring. The following actions are required: a. The UCSA and local governments should review all the vodakanals to make sure the completed water supply systems are in commercial operation. b. The government and UCSA should regularly review and regulate tariffs to ensure financial sustainability based on consumers affordability. The government must cultivate public understanding to ensure that people will support tariff adjustments. c. Water supply is not available 24 hours a day because of power shortages. Power supply should be ensured for public utilities such as water supply facilities. 55. Covenants. The level and structure of tariffs must be reviewed by local governments annually and the results submitted through the UCSA to ADB within 3 months after each review. 56. Future Action or Follow-up. The high content of iron will not only be unfavorable for consumers but will also cause the clogging of pumps and pipelines. Clogging affects pump operation and lessens the life of pipes and pumps. Iron removal facilities should therefore be constructed in places where the iron content is high. In addition, the distribution systems should be extended to benefit other rural settlements in the provinces.

22 Timing of the project performance evaluation report. All civil works and project components were substantially completed by the end of December 2010 and put into commercial operation one after another toward the middle of An additional 2 3 years may be required to assess the longterm socioeconomic benefits of the project. The suitable timing for the performance evaluation will therefore be in 2015 or General 58. General recommendations are as follows: a. Delays in the preparation of subproject feasibility reports by the UCSA resulted in delays in initiating detailed design works. In future projects, consulting services should be provided to carry out subproject feasibility studies where the executing agency s capacity is limited. b. Frequent changes of PMU and PIU staff not only cause a loss of momentum in project implementation, but also affect the quality of work. The EA should ensure that the qualified staff are retained from the beginning to the end of project implementation. For this purpose, adequate salaries that are competitive with the private sector should be guaranteed. c. Groundwater is exploited with minimal control by the central government agency concerned. Government regulations to control water sources should be strengthened to protect groundwater from illegal exploitation and pollution. d. Construction contract prices for civil works contracts must be denominated in US dollars. Alternatively, the amount quoted in the local currency should be fixed at the original exchange rates at the time of bid opening. This is particularly important in countries that suffer from high inflation and depreciation of the local currency.

23 Appendix 1 15 DESIGN AND MONITORING FRAMEWORK Design Summary Appraisal Targets Project Achievements Key Issues and Recommendations Impact Improved living standards and public health in rural areas of Kashkadarya and Navoi provinces By 2010, in the project areas: Increase public satisfaction with water supply quality from present 40% (100,000 persons) to 80% (200,000 persons). The population served with quality water under the project is estimated at 245,345 people in167 villages or 11% of the population in Kashkadarya and Navoi provinces. Kashkadarya and Navoi oblast administrations remain committed to support the vodakanals and the DWCUs. Reduce incidence of waterborne diseases from present 30% (75,000 persons) to 10% (25,000 persons). Reduce medical costs for treatment of waterborne diseases from average present $10 per year, by 40% to $6 per year per person. Incidence was reduced to 9% (22,080 persons) in 2010 according to MOH annual health statistics. Medical costs for treatment of waterborne diseases were reduced to $6 per year per person according to MOH annual health statistics. The rural water supply agencies keep operating and maintaining the completed subproject facilities in a satisfactory manner, so that quality water is supplied to consumers without interruption. Reduce loss of working days due to waterborne diseases from present average of 20 days, by 50% to 10 days per person per year. The number of nonworking days has fallen to 11 days per person per year. The local governments extend the capacity building and the hygiene and sanitation education (HSE) program to other villages which were not targeted under the project. Outcome Improved access to basic water supply and sanitation facilities in the project areas Number of rural settlements with water supply systems commissioned (54 villages in 2008, 108 in 2008, 108 in 2009, and 170 in 2010) 167 rural settlements were provided with water supply systems during The rural water supply agencies need to expand distribution systems and constantly supply pressurized water to consumers. At least one school with upgraded water supply and sanitation in each village (55 villages in 2008, 108 in 2009, and 170 in 2010) Of 170 schools originally planned, 38 schools were provided with improved sanitation during The remaining schools were excluded from the project as they were to be improved under the government school reconstruction program (Resolution of Inter Committee on Construction No. 05/1-11 dated 4 August 2009) The vodakanal of each district needs to monitor the situation and ensure that the remaining schools are provided with improved sanitation under the government reconstruction program.

24 16 Appendix 1 Outputs 1. Upgraded rural water supply and distribution systems in Kashkadarya and Navoi provinces 412 km of pipeline will be constructed in 2008, 280 km in 2009, and 350 km in ,500 km of transmission and distribution pipelines were laid during Each vodakanal continues to expand the distribution systems to serve an even larger population than that envisaged under the project. 8 pumping stations will be constructed in 2008, 10 in2009, and 15 in water distribution centers (WDCs) and 29 water intake structures (WISs) with pumping stations were constructed in The pumping stations are well operated and maintained and spare parts are replenished as needed. 2. Establishment of effective and sustainable water supply management systems. 13 production wells will be constructed in2008, 6 in 2009, and 24 in Reduction and further elimination of subsidies to water supply systems. 67 production wells were constructed in For all subprojects except one, subsidies to water supply systems will be completely eliminated by 2013 by government resolution. The exception is Kanimekh, where the subsidy will remain until It is essential to monitor closely: (i) the well water level, so as to prevent over-extraction of groundwater, and (ii) water quality to see if it meets the water quality standard. 3. Affordable water tariffs. Control of production costs.100% of poor households will be able to pay for minimum water consumption. Current tariffs are set at affordable levels. Planned future adjustments are likewise deemed affordable to all users. Adequate tariff policy is adopted by the Government. Tariff structure with affordable water tariffs for low income customers is set. Customers are willing to pay increased tariffs. 4. Constitution of community-based DWCUs capable of operating water supply systems About 50 DWCUs will be established in 2008, 60 in 2009, and 60 in 2010 A total of 167 DWCUs, one for each water supply system, were established in 2009 (77 DWCUs in Kashkadarya and 90 in Navoi). 5. Strengthened capacity of UCSA and DWCUs to sustain and manage rural water supply systems. No less than 50 management staff effectively trained in system operation, management, financial management, budgeting procedures About 120 DWCU management personnel trained each year from 2007 to management staff of vodakanals were trained. 168 DWCU management personnel trained in , more than 50% of which were women. About 280 O&M personnel of vodakanals and 334 DWCU members trained. Gender training was conducted in accordance with the gender action plan. Vodakanals continue to support the training of DWCU members and encourage their active participation in O&M of the completed WSS facilities. The vodakanals continue the training programs for their staff on a sustainable basis. 40 O&M personnel of DWCUs and oblast trained each year from 2008 to 2010 Population covered by the health and sanitation education.

25 Appendix 1 17 Women s organizations will be trained in planning of water supply facilities. Reduced incidence of waterborne diseases Training materials will address the needs of both men and women. Various training materials were prepared to raise the awareness of links between water and diseases. Printed materials were delivered to MOH rayon departments. 6. Improved public health and hygiene awareness of the rural population. 50% of participants in hygiene awareness workshops will be women. One women s committee will be selected for development in subproject planning. 3,650 people trained in the HSE program, 53% of which were women. The HSE programs are continued so as to expand health and hygiene awareness over the whole population in the districts. 7. Resettlement preparation, implementation and monitoring Full compensation for all land used for the project All 44 affected households were compensated in accordance with the LARPs The local governments continue to monitor the impact of the HSE program on communities in the districts. Activities with Milestones 1. Design of water supply and sanitation systems for 65 rural settlements in Kashkadarya oblast and 105 rural settlements in Navoi oblasts. Appraisal Target To start in July Project Achievements Started in August 2008 and completed in July 2009 (Kashkadarya). Started in March 2009 and completed in December 2010 (Navoi). Key Issues Delays in government approval of the subproject feasibility reports. 2. Construction works in first subproject packages 3. Constitution of DWCUs and provision of training to the DWCUs in Kashkadarya and Navoi. To start in July 2006 and be completed by end of To be completed by end of Started in June 2009 and completed in June 2010 Started in June 2009 and completed in June Delays in preparation of detailed design Delays in government approval of the subproject feasibility reports. 4. Training of central, oblast and local administrations involved in the implementation of the Project. To start in June 2006 and be completed by June 2009 Started in June 2009 and completed in June 2010 Delays in government approval of the subproject feasibility reports. 5. Public Hygiene and Sanitation Education (HSE) Program To start in January 2008 and be completed in June Started in July 2009 and completed in June 2010 Delays in start due to delays in government approval of the subproject feasibility reports

26 18 Appendix 1 Inputs At Appraisal Actual Difference ADB loan Physical infrastructure $25.00 million $22.82 million $2.18 million Capacity building $0.50 million $0.30 million $0.20 million HSE program $0.20 million $0.12 million $0.08 million Project management support $1.3 million $1.00 million $0.30 million Consulting support to PMU Procurement review and approval Regular review missions (implementation arrangement review, midterm, and final reviews Government Complied with during project implementation. Regular reviews conducted jointly by ADB and PMU, PIU staff. Counterpart Financing $11.00 million $11.00 million a $0.00 Project management offices established and maintained at all levels Project management offices established and maintained during project implementation O&M budget and staffing properly maintained during project implementation. a Estimated at SDR 1.0=$1.564 for consistency. Actual remains at equivalent $11.0 million. Note: Unallocated funds were transferred to respective components where they were actually utilized. Source: ADB estimates.

27 Appendix 2 19 Project Costs at Appraisal and Actual Project Costs Table 2.1 Summary Project costs ($ million) Appraisal Actual Component estimate A. Physical infrastructure 1. Water supply Sanitation Detailed design and construction a supervision Subtotal (A) B. Institutional development 1. Capacity building program HSE Project management support Subtotal (B) C. Taxes and duties D. Contingencies Physical b Price b Subtotal (D) E. Interest and Other Charges During Construction TOTAL a financed by the government b In the Actual column, contingencies were transferred to the respective components where they were actually utilized. Source: ADB Estimates

28 20 Appendix 2 Category (1) Table 2.2 Financing Plan (SDR million) Original Last allocation allocation (2) (3) Disbursed amount (4) Undisbursed balance (5=3-4) A. Asian Development Bank 1. Civil works Equipment and materials Capacity building HSE program Project management and consulting services 6. Interest during construction Unallocated funds Subtotal А В. Government of the Republic of Uzbekistan 1. Civil works Exemption from taxes and duties Subtotal В С. Project provinces 1. Detailed design Subtotal С Total amount (SDR million) Total amount (million $ equivalent) a b c d а Exchange rate at appraisal: SDR 1.0 = $ b Exchange rate at reallocation: SDR 1.0 = $ c At exchange rate at the time of disbursement: SDR 1.0 = $ d At preparation of this Report: SDR 1.0 =$ Note: Unallocated funds have been transferred to categories where they were actually utilized Source: ADB Estimates

29 Appendix 3 21 BREAKDOWN OF YEARLY DISBURSEMENTS, ($ million) Period Disbursements Cumulative Disbursements % 2007 I quarter II quarter III quarter IV quarter % 2008 I quarter % II quarter % III quarter % IV quarter % 2009 I quarter % II quarter % III quarter % IV quarter % 2010 I quarter % II quarter % III quarter % IV quarter % 2011 I quarter % II quarter % III quarter % Total %

30 IMPLEMENTATION SCHEDULE 22 Appendix 4