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Document of The World Bank

Report No: ICR0000931

IMPLEMENTATION COMPLETION AND RESULTS REPORT (IDA-37300)

ON A

CREDIT

IN THE AMOUNT OF SDR 11.4 MILLION (US$15.0 MILLION EQUIVALENT)

TO

ALBANIA

FOR A

MUNICIPAL WATER AND WASTEWATER PROJECT

June 10, 2010

Sustainable Development Department Southeast Europe Country Unit Europe and Central Asia Region

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CURRENCY EQUIVALENTS

(Exchange Rate Effective January 2010)

Currency Unit = Albanian Lek Lek 1.00 = US$0.01 US$1.00 = Lek 97.67

SDR 1.00 = US$1.54

FISCAL YEAR

ABBREVIATIONS AND ACRONYMS

ADF Albanian Development Fund CAS Country Assistance Strategy CMU Contract Monitoring Unit CP DCA

Consumer Panel Development Credit Agreement

EC Executive Committee EMPF Environmental Management Plan Framework GPRS Albania - Growth and Poverty Reduction Strategy HRP Human Resources Plan IF ITR

Investment Fund Independent Technical Reviewer

KfW Kreditanstalt fur Wiederaufbau (Germany) MC Management Contract MoE Ministry of Economy MoF Ministry of Finance MoTAT MoPWTT

Ministry of Territorial Adjustment and Tourism Ministry of Public Works, Transportation and Telecommunications

NWRC National Water Regulatory Commission NWSS National Water Supply and Sanitation Strategy O & M Operations & Maintenance PIU Project Implementation Unit PO PPIAF

Private Operator Public Private Infrastructure Advisory Facility

PSP Private Sector Participation RWSA Rural Water and Sanitation Agency RWSS Rural Water Supply and Sanitation Strategy UFW Unaccounted for Water

Vice President:Philippe Le Houerou

Country Director:Jane Armitage

Sector Manager:Wael Zakout

Project Team Leader:Michael John Webster

ICR Team Leader:Sanyu Lutalo

ALBANIA Municipal Water and Wastewater Project

CONTENTS

Data Sheet A. Basic Information

B. Key Dates C. Ratings Summary D. Sector and Theme Codes E. Bank Staff F. Results Framework Analysis G. Ratings of Project Performance in ISRs H. Restructuring I. Disbursement Graph

1. Project Context, Development Objectives and Design...............................................12. Key Factors Affecting Implementation and Outcomes ..............................................53. Assessment of Outcomes ............................................................................................94. Assessment of Risk to Development Outcome.........................................................135. Assessment of Bank and Borrower Performance .....................................................136. Lessons Learned........................................................................................................157. Comments on Issues Raised by Borrower/Implementing Agencies/Partners...........16Annex 1. Project Costs and Financing..........................................................................17Annex 2. Outputs by Component..................................................................................18Annex 3. Economic and Financial Analysis .................................................................21Annex 4. Bank Lending and Implementation Support/Supervision Processes.............24Annex 5. Beneficiary Survey Results ...........................................................................26Annex 6. Stakeholder Workshop Report and Results...................................................27Annex 7. Summary of Borrower’s ICR and/or Comments on Draft ICR.....................29Annex 8. Comments of Cofinanciers and Other Partners/Stakeholders .......................47Annex 9. List of Supporting Documents ......................................................................48MAP

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A. Basic Information

Country: Albania Project Name: Municipal Water & Wastewater Project

Project ID: P041442 L/C/TF Number(s): IDA-37300

ICR Date: 06/10/2010 ICR Type: Core ICR

Lending Instrument: SIL Borrower: GOVERNMENT OF ALBANIA

Original Total Commitment:

XDR 11.4M Disbursed Amount: XDR 11.3M

Revised Amount: XDR 11.4M

Environmental Category: F

Implementing Agencies: Ministry of Public Works, Transportation and Telecommunications Water PIU/CMU

Cofinanciers and Other External Partners: B. Key Dates

Process Date Process Original Date Revised / Actual

Date(s)

Concept Review: 04/23/1996 Effectiveness: 09/04/2003

Appraisal: 09/23/2002 Restructuring(s):

Approval: 01/28/2003 Mid-term Review: 06/20/2006 12/09/2005

Closing: 12/31/2009 12/31/2009 C. Ratings Summary C.1 Performance Rating by ICR

Outcomes: Moderately Satisfactory

Risk to Development Outcome: Substantial

Bank Performance: Moderately Satisfactory

Borrower Performance: Moderately Satisfactory

C.2 Detailed Ratings of Bank and Borrower Performance (by ICR) Bank Ratings Borrower Ratings

Quality at Entry: Moderately Satisfactory Government: Moderately Satisfactory

Quality of Supervision: Satisfactory Implementing Agency/Agencies:

Moderately Satisfactory

Overall Bank Performance:

Moderately SatisfactoryOverall Borrower Performance:


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C.3 Quality at Entry and Implementation Performance IndicatorsImplementation

Performance Indicators

QAG Assessments (if any)

Rating

Potential Problem Project at any time (Yes/No):

No Quality at Entry (QEA):

None

Problem Project at any time (Yes/No):

No Quality of Supervision (QSA):

None

DO rating before Closing/Inactive status:


D. Sector and Theme Codes

Original Actual

Sector Code (as % of total Bank financing)

Sanitation 20 5

Water supply 80 95

Theme Code (as % of total Bank financing)

Access to urban services and housing 40 40

Infrastructure services for private sector development 40 40

Other human development 20 20 E. Bank Staff

Positions At ICR At Approval

Vice President: Philippe H. Le Houerou Shigeo Katsu

Country Director: Jane Armitage Christiaan J. Poortman

Sector Manager: Wael Zakout Motoo Konishi

Project Team Leader: Michael John Webster Andreas Rohde

ICR Team Leader: Sanyu Sarah Senkatuka Lutalo

ICR Primary Author: Sanyu Sarah Senkatuka Lutalo F. Results Framework Analysis

Project Development Objectives (from Project Appraisal Document) To improve water and sanitation services in four participating cities and achieve financial viability in their water utilities, by introducing a new incentive-based multi-city management contract approach.* (*There was a discrepancy between the description of the Project Appraisal Document and that in the Development Credit Agreement. This is explained in Section 1.2 of the main text.)

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Revised Project Development Objectives (as approved by original approving authority) Not applicable. (a) PDO Indicator(s)

Indicator Baseline Value

Original Target Values (from

approval documents)

Formally Revised Target Values

Actual Value Achieved at

Completion or Target Years

Indicator 1 : Participating water utilities engage private operator through management contract to take over operation and maintenance (O&M) of existing facilities.

Value quantitative or Qualitative)

To be achieved before Credit Agreement Effectiveness

Achieved Achieved

Date achieved 05/30/2003 06/06/2003 08/05/2003 Comments (incl. % achievement)

A private operator was successfully engaged through a 5-year performance-based Management Contract to take over O&M of existing facilities. The contract closed in August 2008.

Indicator 2 : Average hours of supply per day (hours):


Durres-2.1 hours; Fier-6.2 hours; Lezha-20 hours; Saranda-1.8 hours

Fifth-year contract Target: Durres-6 hours; Fier-13 hours; Lezha-23.8 hours; Saranda-12 hours

Fifth-year contract: Durres-3.3 hours; Fier-17.9 hours; Lezhe-20.5 hours; Saranda-6.3 hours


Only Fier met the target number of hours, and Durres and Saranda improved.

Indicator 3 : Percentage of total connected population in service area receiving at minimum 2 hours of water supply per day: Durres, Fier, Lezha, Saranda


Durres-38%; Fier-88%; Lezha-95%; Saranda-46%

Fifth-year contract Target: Durres-76%; Fier-98%; Lezha-99.3%; Saranda-93%

Fifth-year contract: Durres-100%; Fier-100%; Lezhe-92%; Saranda-100%


All cities with the exception of Lezhe met and exceeded the targeted minimum hours of supply.

Indicator 4 : Percentage of samples complying with faecal coliform standard: Durres, Fier, Lezha, Saranda



Fifth-year contract Target: Durres-98.5%; Fier-98.5%; Lezha-98.5%; Saranda-98.5%

Fifth-year contract: Durres-98.9%; Fier-99.9%; Lezhe-99.7%; Saranda-100%

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All cities met the target for water quality compliance.

Indicator 5 : Improvements of financial viability - Working Ratio: Durres, Fier, Lezha, Saranda


Durres-4.80; Fier-4.90; Lezha-6.70; Saranda-6.10

Fifth-year contract Target: Durres-1.1; Fier-1.1; Lezha-1.1; Saranda-1.1

Fifth-year contract: Durres-1.7; Fier-1.5; Lezhe-1.6; Saranda-1.9


All four cities registered significant improvement with respect to this indicator but did not fully meet the target for working ratio.

Indicator 6 : Collection rate (%): Durres, Fier, Lezha, Saranda



Fifth year contract Target: Durres-79%; Fier-79%; Lezha-79%; Saranda-79%

Fifth-year contract: Durres-56%; Fier-81%; Lezhe-64%; Saranda-73%


All cities' collection rates improved although only Fier fully met the target.

(b) Intermediate Outcome Indicator(s)

Indicator Baseline Value

Original Target Values (from

approval documents)

Formally Revised

Target Values

Actual Value Achieved at

Completion or Target Years

Indicator 1 : Investment Component: Priority investment program completed successfully--Satisfactory disbursement rate.

Value (quantitative or Qualitative)

To be monitored during project implementation

100% of project (IF) funds disbursed

100% of investment funds disbursed at completion.


The priority investment program was implemented successfully, although part of it was completed after the Management Contract closed.

Indicator 2 : Wastage and over consumption of water reduced.



Wastage and over consumption of water reduced satisfactorily.

Date achieved 08/30/2003 12/31/2009 Comments This was not a key performance indicator under the Management Contract and

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(incl. % achievement)

no specific target for levels of consumption. Consumption of water reduced in Fier by 5%, in Lezhe by 6% and in Saranda by 3%. Data for Durres was not available.

Indicator 3 : Savings in O&M costs achieved.



Savings in O&M costs achieved satisfactorily.

Besides Lezhe, the three other utilities resulted with higher O&M costs.


Besides Lezhe, the three other utilities resulted with higher O&M costs, hence this indicator was not achieved.

Indicator 4 : Monitoring and Benchmarking of the water sector


No systematic monitoring

All 54 utilities are regularly monitored and performance is benchmarked.

Benchmarking system successfully introduced and functional.


A monitoring and benchmarking system involving all 54 utilities in Albania was established through the project and is functioning effectively.

G. Ratings of Project Performance in ISRs

No. Date ISR Archived

DO IP Actual

Disbursements (USD millions)

1 06/19/2003 Satisfactory Satisfactory 0.00 2 09/08/2003 Satisfactory Satisfactory 0.00 3 04/02/2004 Satisfactory Satisfactory 0.88 4 09/14/2004 Satisfactory Satisfactory 1.43 5 01/07/2005 Satisfactory Satisfactory 2.03 6 05/28/2005 Satisfactory Satisfactory 2.96 7 01/02/2006 Satisfactory Satisfactory 5.03 8 02/21/2007 Satisfactory Satisfactory 8.56 9 11/26/2007 Moderately Satisfactory Moderately Satisfactory 12.06

10 04/30/2008 Moderately Satisfactory Moderately Satisfactory 13.40 11 12/24/2008 Moderately Satisfactory Moderately Satisfactory 15.26 12 06/17/2009 Moderately Satisfactory Moderately Satisfactory 16.08 13 11/07/2009 Moderately Satisfactory Moderately Satisfactory 16.50

H. Restructuring (if any) Not Applicable

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I. Disbursement Profile

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1. Project Context, Development Objectives and Design

1.1 Context at Appraisal Country Background: After the collapse of communism in the early 1990s Albania, like several other countries in the Region, underwent a political and economic transition, moving from a centrally planned to a market based economy. The Bank’s Country Assistance Strategy (CAS), approved in 1993, focused on addressing the emergency situation in Albania during the first years of transition, supporting critical imports and physical rehabilitation of infrastructure. As a result of several factors, including a combination of private sector activities especially in agriculture spurred by on-going reforms at the time, external financing, and workers’ remittances from abroad, the country experienced steady macroeconomic growth and its GNI per capita rose from US$610 in 1994 to US$2,930 in 2006. However, it was still among the poorest countries in Europe at the time the project was appraised, with one-third of its population characterized as poor and even a higher share lacking access to adequate basic services such as water supply and sanitation (WSS). The Project supported Albania’s Poverty Reduction Strategy Paper approved in November 2001, known as the Growth and Poverty Reduction Strategy (GPRS), which underpinned the Bank’s Country Assistance Strategy (CAS) for 2002-2005. The GPRS rested on two pillars: (a) governance and (b) strong economic growth, and emphasized policy interventions to improve services. One of its goals was to make tangible improvements in infrastructure services, such as water supply and sewerage, and to increase access for the poor. The CAS emphasized poverty alleviation in connection with economic growth, improving governance, building capacity in institutions, and improving natural resource management. The remaining reform agenda was focused on tackling weak governance and institutions and infrastructure deficiencies. The project supported the CAS in promoting efficient WSS services in connection with natural resource management. In addition, in line with the Government’s decentralization strategy defined in the CAS and the GPRS it was expected to promote management of water supply and wastewater at the local level by setting up transparent and inclusive mechanisms at the level of local government for decision-making, implementation and management of natural resources and public services. Sectoral Issues: The main issues facing Albania’s water sector at the time of project appraisal included: (i) ageing and deteriorating physical infrastructure much of which was approaching the end of its design life making it inefficient and uneconomical to operate and maintain; (ii) a weak institutional and governance framework; (iii) poor demand management, with consumption levels of up to 500 litres per capita per day not being uncommon; and (iv) lack of financial viability due to low tariffs and weak revenue collection systems. Utilities were largely dependent on insufficient allocations from central government transfers to compensate for their shortfalls. In light of all the above constraints, service quality was poor, non-revenue water was high, and utilities provided service only 2-4 hours a day in many cities.

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Project History: The Municipal Water and Wastewater Project (MWWP) was not the first Bank-financed project in Durres, Fier, Lezhe and Saranda, the four cities that participated in the MWWP. It followed two earlier projects: (i) Durres Water Supply Rehabilitation Project (DWSRP), approved in May 1994 (total cost US$17.6 million, of which US$11.6 million was financed by IDA and US$5.5 million by the Government); and (ii) Albania Water Supply Urgent Rehabilitation Project (WSURP), approved in February 2000 (total cost US$14.6 million of which US$10 million was financed by IDA). The concept review for the MWWP was initially carried out in April 1996. However preparation was stopped mainly due to the Kosovo crisis. The MWWP as defined during the concept stage in fact ended up being prepared and implemented as two operations (WSURP and MWWP) in response to the strain on the system caused by the refugee influx from Kosovo. The project was subsequently separated into two operations, the forerunner being the WSURP which set the stage for the MWWP. Project records indicate the revised date for beginning preparation as February 2002 when activities relating to preparation of the MWWP resumed. Project cities: Durres is a coastal city with high tourism value and a population of about 220,000 people that swells to about 300,000 during the summer. Fier is an industrial city with a population of 93,000, while Saranda and Lezhe also located at the Ionian and Adriatic coasts respectively, have populations of 30,000 swelling to up to 80,000 in the summer, and 22,000, respectively. The cities are spread over a total distance of about 250 km along Albania’s western side.

1.2 Original Project Development Objectives (PDO) and Key Indicators (as approved)

The PDO as defined in the PAD was to improve water and sanitation services in the four participating cities and achieve financial viability in their water utilities, by introducing a new incentive-based multi-city Management Contract (MC) approach. The PDO, as defined in the Development Credit Agreement (DCA), was to improve the safety, reliability, efficiency, quality and financial viability of the water supply and sanitation services in Durres, Fier, Lezhe and Saranda. The wording of the PDOs is largely identical with the exception of the financial viability that the PDOs, according to the wording in the PAD, specify should be achieved. The difference is likely due to imprecise wording since the performance target set for the Working Ratio under the Management Contract was 1.1. A working ratio, defined as the ratio between cash operating and maintenance costs and cash operating revenue, must be less than unity in order for financial viability to be achieved. For purposes of the ICR therefore, the PDO wording in the DCA is retained.

Performance Indicators: Key performance indicators for the project were: (i) Safety and Quality – measured by percentage of water quality analyses meeting faecal coliform standards; (ii) Reliability – measured by (daily) number of hours of water supply; (iii) Financial Viability, Efficiency and Sustainability – measured by collection rates and financial working ratios; and (iv) Service to the poor and needy – measured by increase in the percentage of the total population in the service area with a minimum of two hours of daily water supply. The extent of progress towards achieving the performance targets

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was to be directly related to the annual Performance-based Incentive Compensation (PIC) payment to the Operator, which was to be annually reviewed and verified by an Independent Technical Reviewer (ITR).

1.3 Revised PDO (as approved by original approving authority) and Key Indicators, and reasons/justification The project’s development objective was not revised.

1.4 Main Beneficiaries, The primary beneficiaries of the project were the population in the service areas of the Durres, Fier, Lezhe and Saranda Utilities, totaling about 350,000 people, who were expected to benefit from improved WSS services in terms of safety and quality as well as hours of supply. In addition to direct benefits such as increased convenience and consumer satisfaction with improved water supply, improvements in water quality are deemed to contribute to public health benefits by reducing the risk of waterborne diseases in the project areas. Indirect beneficiaries of the project included the Durres, Fier, Lezhe and Saranda utilities and Central and local governments. The strategic choice to use an experienced international water utility Operator under a MC was seen as a means of overcoming the existing utilities’ weak managerial and technical capacity in the short-term with direct and long-lasting benefits for their financial and technical performance. Central government also benefitted from the project’s direct support to its development agenda for the infrastructure sector to improve service delivery in the four economically important cities. Technical Assistance provided to support establishment of a Benchmarking system for the WSS utilities also benefitted Central Government’s monitoring capacity for the entire sector. Finally, in supporting the government’s decentralization agenda promoting management of WSS services by setting up transparent and inclusive mechanisms at the level of local government for decision-making, implementation, and management of WSS services, the project was designed to empower local governments to eventually manage these services in a more efficient manner.

1.5 Original Components (as approved)

The components of the project were as follows: Component 1 – Management Contract (estimated cost US$4.40 million, or 20.5% of total project costs): This component financed the costs of a five-year MC. These costs included a base fee and a performance-based fee to be paid to the Operator based on the achievement of targets defined in the contract. The Operator was to be given full responsibility for managing an investment program; operating the water supply and sewerage systems; developing and implementing a demand management program, including a public awareness campaign; and implementing improved commercial (billing and collection) and financial management systems.

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Component 2 – Investment Fund (Estimated cost US$ 13.76 million, or 64.2% of total project costs): The Investment Fund (IF) financed works, goods, and services aimed at improving the operation of the water supply and sanitation services in the four cities and achieving the performance targets in the MC. The Operator would propose an annual investment plan and propose revisions, if necessary. The investment plan, including any revision to it, was subject to clearance by the Executive Committee1 (EC) which was in charge of the project on behalf of the Government, and the Bank. Component 3 – Technical Assistance (TA) and PIU (estimated cost US$3.27 million, or 15.3% of total project costs): This component was to strengthen project implementation by supporting the Project Implementation Unit (PIU), including salaries, training, vehicles, and incremental operating costs; and various consulting services for supervision of the MC and audits, studies, and field investigations related to the Project. In addition, the component was to possibly finance services, goods, and works to support important elements of sector and institutional reform, such as preparation of PSP options after the termination of the MC, benchmarking of water utilities, support for a public consultation program on water sector issues, support for the newly-founded water utility association and a national vocational center for the sector, and preparation of other proposed water sector projects throughout Albania. Part of the TA would be provided for reform of the rural water and sanitation sector, and would include assistance for establishing the Rural Water and Sanitation Agency (RWSA); developing a statute and operational manual for the RWSA; providing assistance to the RWSA and to the Albanian Development Fund (ADF); benchmarking the rural water and sanitation sector, and preparing a Rural Water Project scheduled for FY05.

1.6 Revised Components While the project components were not officially revised, the original scope of TA activities was reduced during the course of implementation due to changing government priorities. In particular, TA activities related to reform of the rural water and sanitation sector and preparation of a Rural Water Project that had been scheduled for FY05 were not carried out although an official restructuring was not done for the project. The project however leveraged other resources to carry out some of the activities. For instance, some of the reforms were addressed within the context of a Development Policy Loan (DPL) which was prepared in parallel with the project between 2007 and 2009, with the Bank’s support. The DPL was eventually dropped, but also failed to achieve significant movement on the issue of reducing subsidies which was to have further incentivized better management of the utilities. Additionally, activities such as the public consultation program on water sector issues were addressed through a separate Public Private Infrastructure Advisory Facility (PPIAF) grant which financed, in addition to a study on local private sector participation in water supply, a public communications campaign.

1 The Executive Committee comprising representatives from the line Ministries and local governments was responsible for supervising the MC on behalf of the Government.

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1.7 Other significant changes Scope of Investment Fund: Some investments originally envisaged to be financed through the Investment Fund were ultimately cancelled due to escalating costs and exchange rate losses experienced after delays in preparation of the investment plans by the PO. Some of these activities were later financed through government grants after termination of the MC. Investments specifically targeting sanitation that were envisaged at appraisal, such as: implementation of a Septage Management program; development and implementation of a sewer and drainage canal network cleaning program; preparation of maps of the sewer network and development of a computer model of the network were eventually not implemented by the Operator with agreement by the Executive Committee and the Bank. Reallocation of Credit Proceeds: During project implementation two reallocations of the credit proceeds occurred, first in May 2007 and second in July 2008, totalling an SDR 984,000 increase in the Works category of the disbursement schedule. The reallocation was requested because of the: (i) exchange rate changes between the SDR (which was the currency of the Credit) and the Euro and Albanian Lek, (ii) additional investments requested during the implementation, and (iii) increase of the prices of the construction materials. The second reallocation involved the increase of the Government contribution to 50% of the construction works in order to keep all payment commitments to ongoing contracts and finance additional investments.

2. Key Factors Affecting Implementation and Outcomes

2.1 Project Preparation, Design and Quality at Entry The project was the first water project in Albania involving PSP through a MC and project preparation and implementation involved a learning process for stakeholders at all levels. Moreover, during the project preparation period the water sector in Albania was in astate of flux, with significant reforms being undertaken as prerequisites for implementing the new approach. Set within this context, specific factors during project preparation and design that affected implementation and outcomes both positively and negatively are analyzed below. (a) Soundness of background analysis and reforms: The objectives were clear and responsive to Albania’s development priorities and the Bank’s assistance strategy. Project preparation and design were shaped by the Bank’s experience and lessons learned in the preparation and implementation of water projects in Albania, projects involving PSP through Management Contracts in the Region and elsewhere, and Economic and Sector Work (ESW) in the water and energy sectors. The advancement of key sector reforms and stakeholder involvement during project preparation indicated central and local government commitment to the project. Sector reforms were initiated early in project preparation and participating utilities were transformed into commercial companies before the project started. To allow the four utilities to enter into a single contract with the Operator, a water company agreement was signed among the companies, which regulated the relationships between them and with the Operator. The decentralization of

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responsibilities for water and wastewater services to local governments, which was officially launched in January 2002 (although in fact it has taken much longer to transfer almost all utilities to the local government units, until 2008) provided utilities together with the local governments with the right to make all operation and investment decisions as well as to set tariffs. Critical risks to the project successfully meeting its objectives were identified upfront and although measures to mitigate them were identified, in reality actual achievements were dependent on the presence of a set of exogenous factors such as: the level of political support at all levels for proposed measures such as tariff increases; the quality, experience and interpersonal skills of the Operator’s staff and not just the reputation of the firm; and most importantly the misalignment between the existing legal and regulatory framework and the Management Contract with respect to authority and responsibilities of the utilities’ Supervisory Board and the Operator. Another critical risk not addressed during preparation concerning issues relating to the potential need for staff reductions. Overall, in hindsight there appears to have been somewhat overstated optimism during preparation and design with respect to the potential benefits of the Management Contract in terms of performance improvements. Although there was no formal Quality at Entry assessment carried out for the project by QAG, the ICR rates the quality at entry as Moderately Satisfactory, given the close attention paid to relevant lessons and good practice in design of Management Contracts, the effective policy dialogue between the Bank and the Government which resulted in significant reforms, and the stakeholder involvement in the project, as well as the shortcomings in assessing some of the risks and the legal and regulatory framework for supporting the Management Contract. (b) Shortcomings in Design of the Management Contract: These included:

(i) The geographic spread and diversity of participating cities: The four participating cities combined under the single Management Contract are spread over a total distance of 250 km and vary in size and customer structure.

(ii) Governance Framework: There was a misalignment between the existing legal and regulatory framework governing responsibilities for managing water and sanitation services in Albania and the Management Contract. Consequently there was a conflict in competencies between the Operator and the Supervisory Boards of the utilities which had ultimate authority for key decisions such as staffing, ultimately limiting the control of the former over key decisions. This problem was raised on several occasions by the Bank team, but was not resolved.

(iii)Institutional arrangements: The government set up an Executive Committee comprising seven officials representing key stakeholders, three from central government and one from each local government, to oversee the project. The Committee was supposed to meet three or four times a year. However, meetings were not held regularly and attendance was often poor.

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2.2 Implementation (a) Global economic situation: The global escalation in the cost of oil and the credit crisis which caused extraordinary inflationary pressures on commodities and energy costs affected the financial performance of the utilities as well as implementation of some investment and consultancy contracts. (b) Staffing issues for both Implementing Agencies and the Operator: The Contract Monitoring Unit (CMU), which was also the acting project implementation unit (PIU) for other projects in the sector in Albania, was understaffed especially at the start of the Contract, had a high staff turnover, and at one point between 2006-07 the unit lacked key personnel. This affected its effectiveness as Government’s overseer of the Operator’s activities, leading to slow response time for decision-making and delays in processing of payments. The turnover of utility directors and mayors in some cities was also high and resulted in frequent loss of institutional memory and changing priorities and levels of commitment to the project. In addition, there was a high turnover in the Operator’s key personnel especially at the commencement of the Management Contract and key staff were changed three times at the request of the Bank and the Government due to sub-optimal performance. (c) Implementation delays: The Operator submitted most of the investment and operational improvement programs with more than 8 months delay. Delays in procurement necessitated abandoning of some planned contracts envisaged in earlier procurement plans including civil works investments under the Investment Fund due to cost escalation and exchange rate losses. Delays in providing approvals by the EC and MWPTT also resulted in delayed payments to the Operator and other contractors at various times during implementation, impacting project implementation. (d) Investment budget vis-à-vis needs: In the MWWP the IF was spread out too thin compared to the investment needs of the cities, so that the impact especially in the larger cities such as Durres which had significant investment needs (to the tune of Euro 100 million) was very limited.

2.3 Monitoring and Evaluation (M&E) Design, Implementation and Utilization The CMU with the support of an independent technical and financial auditor (the Independent Technical Reviewer (ITR)) was responsible for monitoring progress against the performance indicators agreed in the Management Contract. The Contract required the Operator to provide information on a monthly, quarterly and annual basis regarding all operations and maintenance activities, financial operations, progress towards implementing other deliverables under the technical assistance components. The ITR, who was supposed to visit the project two times a year, verified the improvements achieved on an annual basis over the term of the Contract and the Operator’s Performance Incentive Compensation (PIC) was paid on his recommendation. The performance indicators for the project were set on the basis of the targets for earning the highest Performance Incentive Compensation under the Management Contract. In hindsight, in light of the dire state of sector infrastructure and the huge investment needs

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prior to the project particularly in cities such as Durres and Fier, it was unrealistic to expect very significant improvements in services from the Management Contract, and the targets for the project could have been more realistic.

2.4 Safeguard and Fiduciary Compliance

Environmental Assessment: Project design took into account the Bank’s safeguards policies and included procedures and implementation arrangements to ensure full consideration of environmental safeguards in accordance with OP 4.01. The project was rated Financial Intermediary (FI) given that specific physical investments to be financed through the Investment Fund were to be defined by the Operator during the course of the project. There were no major issues related to environmental management under the project thus the ICR rates it satisfactory.

Social Assessment: A social assessment was carried out as part of project preparation. However it appears to have focused more on as water users as the main stakeholders and not enough on other important stakeholders to the Management Contract, such as utility staff who could be affected by the Contract, or parliamentarians and other political leaders who impacted implementation.

Involuntary Resettlement: OP 4.12 was not triggered since no land acquisition was anticipated under the project. Nonetheless a clause was included in the Contract requiring the Operator to identify and address in collaboration with government any potential resettlement issues in the annual investment plan. There were no issues relating to land acquisition during implementation.

Procurement: Overall procurement of most contracts, which was carried out by the Operator under the Management Contract and later by the CMU, was undertaken in a satisfactory manner with moderate problems such as delays. There was an additional problem relating to the transfer of the procurement function from the Operator to the CMU. A post-review conducted in November 2008 after the Contract closed revealed that the Operator had not returned important procurement records such as bids, bidding documents, bank guarantees, signed copies of contracts, advertisements, and the Bank’s no-objections to the Borrower as was required under the Contract. The Bank raised the issue with the Government and most of the documents were eventually returned, with the exception of some of the documentation relating to nine (4 prior and 5 post review) of the 69 contracts procured. The Operator finally returned the documents several months later after the Bank threatened misprocurement. The ICR rates management of the procurement function moderately unsatisfactory.

Financial Management: The Bank Financial Management supervision team regularly reviewed the systems and provided timely advice to the CMU to strengthen them. Financial management of the project was carried out in compliance with provisions of the legal agreements with minor shortcomings, and was assessed by the Bank Financial Management specialists to be satisfactory.

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2.5 Post-completion Operation/Next Phase After completion of the Management Contract in August 2008, responsibility for operations and maintenance (O&M) of the facilities was supposed to revert to the utilities whose ownership in line with the Government’s decentralization policy has in principle been transferred to the respective local governments. The transition process to the local governments has faced some obstacles in the case of Lezhe and Durres which have refused to assume the responsibility for managing their respective systems. The conflict between the central Government and the respective cities appears to be about the role played by each mayor in the oversight of the utility. As a result the governance of at least the Durres and Lezhe utilities can best be described as uncertain. There is need for continued government oversight and support to ensure that the transfer is complete and adequate arrangements including budget and staffing are in place to continue to operate and maintain the systems in a sustainable manner. Dialogue is still ongoing to improve the enabling framework and sustain sector reforms as well as on development of future programs to be financed by the Bank, the Government and other donors in Albania. In September 2009, the Municipality of Fier received a soft loan of Euro 10 million from KfW to finance reconstruction and modernization of the water supply systems to provide 24-hour water supply. Lehze and Saranda have also received loans from KfW.

3. Assessment of Outcomes

3.1 Relevance of Objectives, Design and Implementation Rating: High The relevance of the project development objective of improving the safety, reliability, efficiency, quality and financial viability of the water supply and sanitation services in Durres, Fier, Lezhe and Saranda is rated high. This objective is aligned with the second pillar of the joint Bank-IFC CAS for Albania for FY06-09 which focused on improving public service delivery particularly in the social sectors, with outcomes including improved public infrastructure and access to safe rural water supply and sanitation.

3.2 Achievement of Project Development Objectives Rating: Moderately Satisfactory The project aimed at improving the safety, reliability, efficiency, quality and financial viability of the water supply and sanitation services in Durres, Fier, Lezhe and Saranda by introducing an incentive-based multi city Management Contract with an internationally experienced private utility operator. In order to achieve the objective, the Operator was responsible for: operating the water supply and sewerage services in the four utilities; managing the priority Investment Program to rehabilitate water supply and sewerage systems in each city; developing and implementing a demand management program; and developing and implementing improved commercial (billing and collection) and financial management systems. Table 1 below provides a summary of the results in the four cities at the end of the Management Contract based on achievement of the key performance indicators for the project. From the results, 19 out of 20 performance indicators measuring the safety, quality, reliability and efficiency of water

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supply services improved overall as a result of the Project, albeit to varying extents in different cities. Specific outcomes included improvements in water supply services, in particular: (i) increased continuity of supply in all four cities; (ii) increased number of customers with at least two hours a day in all cities; (iii) improved water quality in all cities; and (iv) improved collection rates in all cities. In some instances however the performance targets set in the Management Contract were only partially achieved. The project was also able to contribute to strengthening of the utilities to manage water supply and sanitation services in a more efficient and effective manner through some of the operational improvement programs established through the Management Contract. Notable outcomes included: (i) improvements in efficiency of billing operations as a result of installation of Billing software in all four cities; (ii) improvements in financial management transparency, accountability and reporting through introduction of new Accounts software in all utilities except Durres which was unwilling to adopt the new systems; and (iii) increase in metering from about 16% to 43% of customers over the course of the project, resulting in improved demand management. Table 1: Summary of the Performance Indicators at the end of the Management Contract

Continuity of Supply (hrs)

Service Area with 2hrs

supply (%)

Water Quality compliance

(%)

Collection rate (%)

Working Ratio

Durres Base Year 2.1 38 96 39 4.8 Year 5 3.3 100 98.9 56 1.7 Target 6 76 98.5 79 1.1

Fier Base Year 6.2 88 98 33 4.9 Year 5 17.9 100 99.9 81 1.5 Target 13 98 98.5 79 1.1

Lehze Base Year 20 95 55 33 6.7 Year 5 20.5 922 99.7 64 1.6 Target 23.8 99 98.5 79 1.1

Saranda Base Year 1.8 46 88 33 6.1 Year 5 6.3 100 100 73 2.6 Target 12 93 98.5 79 1.1

Legend Fully Achieved

Partially achieved

Not achieved

In addition to improvements in quality and efficiency of services there were significant improvements in the collection rates and overall financial position in all four utilities which were in dire financial shape at the start of the project. All four utilities’ Working Ratios had improved by the end of the Management Contract although they did not meet the performance target of 1.1 Working Ratio and remained unable to fully recover their operating costs. The main reasons for the financial outcome were tariffs below operating costs and high operating costs. Factors such as increases in energy costs which almost

2 In the Case of Lehze, the size of service area increased as a result of extension of the water supply network to a new area, distorting the achievement of this indicator.

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doubled over the course of the project and failure to fully implement the Human Resources Plan which recommended reductions in utility staff, contributed to the high operating costs. The governance in the Albanian water supply and sanitation sector is still dysfunctional in many aspects, including the setting and enforcement of financial and tariff policies, and there is practically no water utility in Albania that is close to achieving a financial working ratio below unity. Moreover, considering the ready availability of operating subsidies it is unrealistic to expect any one utility to exert itself to reduce the financial working ratio below unity and the utilities continue to rely on central government operating subsidies and grants. Nonetheless at the macro level it may be inferred that the Project helped contribute to reducing the overall fiscal burden by improving the financial position of the utilities thereby reducing the level of subsidy required. Monitoring and benchmarking of the performance of water utilities across Albania was also improved through establishment of a Sector Monitoring and Benchmarking program within the MoPWT. In light of the above improvements in the safety, reliability, efficiency, quality and financial viability overall in the four cities, and the full or partial achievement of 19 out of the 20 targets, the efficacy of the PDO is rated moderately satisfactory.

3.3 Efficiency An economic and financial analysis was conducted at project appraisal, and the internal rate of return and NPV were calculated. Apart from the financial analysis of the performance of the four utilities under the project (see Annex 3), an ex-post calculation of the internal rate of return and NPV at project closing is presented below (Table 2).

Table 2: Results of Cost-Benefit Analysis at Project Completion

Economic Financial At appraisal At completion At appraisal At completion

NPV in Lek million 780.0 (1,484) 752.5 (1,854)

Internal Rate of Return (IRR) 15% N/A 15% N/A

The economic and financial rates of return were both 15% and the NPVs are Lek 780 and 752.5 million respectively at appraisal. The discount rate used is 10%, which is IDA’s generally accepted and used hurdle rate for water supply projects. The quantifiable benefits of the projects measured in monetary terms were resource savings (energy and personnel cost savings). The main quantifiable benefit was assumed to come from the increased collection rates. At project closing the four utilities improved their financial positions but did not hit the target of turning around to a self-financed operation, and to generate positive cash flow. This outcome affected the NPV of economic and financial analysis that resulted negative, and therefore, the IRR could not be calculated. The collected revenues with project did not show net increase, while the cost of electricity and of the personnel had a steady net increase during 2003–2009. Detailed analysis is presented in Annex 3. Nonetheless, because of the service improvements there is confidence regarding the non-quantifiable economic benefits resulting from the Project at

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the sector and macro levels. In the Project areas, improved water supply services is expected to have achieved benefits such as reducing the risk of water-related diseases and reducing the coping expenditures due to better water quality and more equitable water allocations. At the macro level, the Project helped contribute to reducing the overall fiscal burden by improving the financial position of the utilities thereby reducing the level of subsidy, which is a major concern of the Government in the sector. Overall the ICR rates efficiency as moderate considering the total investment per capita (approximately US$40 per capita) under this project vis-à-vis the results achieved.

3.4 Justification of Overall Outcome Rating Rating: Moderately Satisfactory The overall outcome rating for the project is moderately satisfactory as a composite rating of its high relevance, moderately satisfactory efficacy, and moderate efficiency.

3.5 Overarching Themes, Other Outcomes and Impacts (a) Poverty Impacts, Gender Aspects, and Social Development The project design specifically took into account the poor in the service area by providing incentives to the Operator to deliver water to the entire population for at least two hours a day, which would satisfy at a minimum the basic needs of the poor, a large number of whom live in neighborhoods that received less than two hours a day. This was achieved in all cities with the exception of Lezhe. (b) Institutional Change/Strengthening At the central government level, one of the main sector-wide benefits of the project is the development of the Monitoring and Benchmarking Program which has improved overall performance monitoring of the water sector. In addition, at the utility level there were marked improvements in staff capacity with regard to commercial and financial management through installation of the new billing and accounting systems and training in their use. The transfer of technical skills from the Operator to utility staff appears to have been limited however with regard to some intended aspects such as management and technical functions due to an apparent failure on the part of some utilities to second their staff to attend several of the planned training. Overall, the ICR rates impacts on institutional strengthening as moderately satisfactory.

(c) Other Unintended Outcomes and Impacts (positive or negative) There were no other significant unintended outcomes or impacts that can be attributed to the project.

3.6 Summary of Findings of Beneficiary Survey and/or Stakeholder Workshops A stakeholder workshop to discuss the results and the lessons learned from the MWWP was held on July 2, 2008. The workshop concluded that the Management Contract was in essence implemented satisfactorily by the Operator, although there were difficulties, and that any future project in Albania involving such a Management Contract concept would require some revisions, particularly with respect to legal provisions, delegation of

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powers, procedures and responsibilities. It further concluded that the ultimate goal is potentially achievable if utilities adhere to the principles of good governance and implement the recommendations from the Human Resources Plan, improve billing collection and consider raising tariffs to the recommended levels. Details on the workshop are provided in Annex 6.

4. Assessment of Risk to Development Outcome Rating: Substantial There is a substantial risk that development outcomes achieved under the project in terms of service quality improvements and financial viability of the utilities may not be maintained. The first risk to the development outcomes relates to the utilities in the participating cities not only failing to generate sufficient revenues to achieve financial viability, which in fact they were not able to do under the project, but also to maintain those improvements achieved. The utilities need to be able to lower their operating costs, adjust tariffs as needed, and to maintain high collection rates if they are to improve their financial viability. Throughout implementation raising of tariffs was a contentious political issue that affected the financial outcomes. The second risk, related to the first, is the increased risk that physical investments made through the project and the associated service improvements and operational standards attained would not be sustained due to inadequate resources for proper operations and maintenance leave alone capital investments for upgrading systems. The ICR recommends an evaluation of the indicators at a later date, say three to five years after the closing the MC, to assess whether the results have been sustained. The third risk relates to governance of the institutions if the institutional support provided through the new structures is not adequate to provide the required support to the utilities to sustain the development outcomes. Completion of the transfer of utilities to local governments will require strong political support and local government ownership and commitment. Sustainability of the project outcomes will depend on the utilities’ adherence to the principles of good governance and implementing the actions to achieve financial viability. KfW is taking over assistance to Saranda, Lehze and Fier, as a result of renewed coordination among donors on the municipal water sector.

5. Assessment of Bank and Borrower Performance

5.1 Bank Performance (a) Bank Performance in Ensuring Quality at Entry Rating: Moderately Satisfactory Bank performance is rated moderately satisfactory for quality at entry of the project. The rating reflects the assessment that although sufficient resources were devoted to preparing the project and that the background analysis and design duly considered most of the relevant issues; inadequate attention appears to have been paid to ensuring that the Management Contract was fully aligned with the legal and regulatory framework for the water sector in Albania at the time.

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(b) Quality of Supervision Rating: Satisfactory Overall, the quality of Bank supervision is rated satisfactory. Again, the rating reflects the fact that adequate budget and staff resources with an appropriate skill mix were allocated for supervision throughout the project implementation period, and supervision missions were carried out at least twice a year by the team, including for fiduciary and safeguards aspects. Although there was an issue related to inadequate transfer of procurement records by the Operator after the Management Contract closed, the Bank team was instrumental in following up with the relevant parties to ensure that the documents were returned by the Operator. Although not party to the Management Contract, the supervision team made efforts to bring key issues that needed to be addressed to the attention of the Government and to mediate between the parties to help solve potential disagreements. (c) Justification of Rating for Overall Bank Performance Rating: Moderately Satisfactory The ICR rates the overall Bank performance as moderately satisfactory combining the moderately satisfactory performance for quality at entry of the project and satisfactory performance during implementation.

5.2 Borrower Performance (a) Government Performance Rating: Moderately Satisfactory The rating combines the performance of the Government during preparation and implementation of the project. The Government worked closely with the Bank team during preparation of the Project and demonstrated its commitment by carrying out significant sector reforms including transformation of the WSS utilities in the four cities participating in the project into joint stock companies owned by the municipalities, and adoption of a series of resolutions and decrees to strengthen PSP. It established the Executive Committee (EC) comprising representatives from the line Ministries and local governments with responsibility for supervising the Management Contract. It did not however do enough to support timely resolution of some of the regulatory and governance issues on a policy level that hindered implementation progress in spite of the issues being raised by the Bank. The involvement of local government during implementation was limited given that the process of transferring the utilities to the municipalities, a process outside of the project, was not completed in a timely manner. (b) Implementing Agency or Agencies Performance Rating: Moderately Satisfactory Assessment of implementing agency performance is based on the aggregated assessment of the performance of the individual agencies/institutions involved in managing the project. The Executive Committee and Contract Monitoring Unit performance are rated moderately unsatisfactory and moderately satisfactory, respectively. While overall both institutions supervised and supported the Project amidst the existing governance constraints, there were shortcomings in their performance such as delayed processing of payments and slow response times to submissions from the Operator. The Executive Committee met only sporadically and meetings were not always well attended. The

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utilities’ performance is also rated moderately satisfactory. Generally the utilities worked with the Operator within the structure of the Contract to implement the project, with some more responsive than others. In particular for instance, there is evidence of inadequate responsiveness to the Operator in some cities such as Durres where the Operator was denied full access to records and facilities required to fulfill some of their duties or where the utility failed to delegate staff to attend training offered by the Operator. The other cities were more responsive. (c) Justification of Rating for Overall Borrower Performance Rating: Moderately Satisfactory The rating for Borrower performance combines the ratings for the Government’s and the aggregated rating of the implementing agencies’ performance during preparation and implementation as well as consideration of the overall outcomes rating for the project in general.

6. Lessons Learned

(i) Performance-based Management Contracts can be effective for improving WSS systems, but they cannot be expected to be fully effective if the sector’s governance framework does not adequately support key elements of the concept such as full delegation to the private operator of decision-making responsibilities concerning management of utility operations. Adequate attention must be paid during design of Management Contracts to ensure that they are fully aligned to the existing legal and regulatory framework to avoid any issues that could potentially undermine the effectiveness of the Contract.

(ii) Investment budgets under Management Contracts should be sufficient in relation to existing needs if they are to have an impact on the quality of service in line with expectations of the clients.

(iii)Risks associated with staffing reductions need to be highlighted upfront in PADs, especially where project outcomes are partly dependent on the reductions. Moreover, where such reductions are recommended in a project, staff should be recognized as key stakeholders and their concerns considered in the social analysis.

(iv) Technical reviewers for Performance-based Management Contracts should be appointed prior to commencement of the Contracts to allow their involvement in collection of the baseline data on sector performance and input on reporting requirements in order to improve the M&E function for the MC. In this case, the IR only came on board several months after the Management Contract commenced and took issue with the reporting arrangements and some of the baseline indicators.

(v) The quality of the Operator’s individual staff is of paramount importance to the success of Management Contracts. While originally offered staff appeared to possess the required qualifications, the Operator changed the expatriate staff of its management team three times. The frequent changes increased the difficulties of Operator staff to become knowledgeable of the systems and of the sector governance and in the end reduced their effectiveness.

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(vi) Performance indicators should be properly aligned with the development objectives if they are to be effective in monitoring and evaluation of not just the Management Contract but also the project outcomes.

(vii) Performance indicators should be designed to capture all critical elements of service performance more effectively in order to encourage Operators to focus on improving services in all key areas. Unaccounted-for water was not a performance indicator in this Management Contract, hence although it was high (more than 70%), it was not considered a priority by the Operator and did not improve significantly.

(viii) Design of project implementation schedules should be realistic in order to maintain realistic expectations on the part of clients and allow contractors to deliver quality programs. In this case about 50% of the programs were due within 90 days after the Start Date, which was deemed insufficient time for the Operator to fully understand the country and local environment and the issues on the ground, collect data, and complete procurement of urgent investments and development of meaningful operational improvement programs.

(ix) Preparatory work for Management Contracts should involve thorough assessment of the political economy of the sector to assess the level of commitment of key stakeholders and participating utilities. The commitment of utilities could have been better assessed during preparation, for instance by requiring them to meet higher pre-project hurdles to demonstrate local ownership of the project.

(x) The Bank needs to give adequate attention to strengthening support for contract management during implementation and not just for procurement of contracts. Much effort was put in preparation and procurement of the Management Contract to ensure that the Borrower got value for money. However less effort seems to have been put on contract management during implementation to address arising problems in order to be able to deliver the desired results.

7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners (a) Borrower/implementing agencies

(b) Cofinanciers Not applicable. (c) Other partners and stakeholders Not applicable.

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Annex 1. Project Costs and Financing

(a) Project Cost by Component (in USD Million equivalent)

Components Appraisal Estimate

(USD millions)3Actual/Latest

Estimate (USD millions)4

Percentage of Appraisal

MANAGEMENT CONTRACT 4.40 4.97 113 INVESTMENT FUND 12.08 17.95 149 TECHNICAL ASSISTANCE AND PROJECT IMPLEMENTATION UNIT

2.95 1.96 66

PPF REFINANCING 0.50 0.50 100

Total Baseline Cost 19.93 25.38 Physical Contingencies 0.75 Price Contingencies 1.25

Total Project Costs 21.93 25.38 Front-end fee PPF 0.00 0.00 Front-end fee IBRD 0.00 0.00

Total Financing Required 21.93 25.38 116

(b) Financing

Source of Funds Type of Cofinancing

Appraisal Estimate

(USD millions)

Actual/Latest Estimate

(USD millions)5

Percentage of Appraisal

Borrower Government counterpart funds

6.93 7.21 104

International Development Association (IDA)

Credit 15.00 Credit (SDR 11.4 equivalent)

17.03 (SDR 11.28 equivalent)

99

3 This cost was net of taxes. 4 There are discrepancies between the appraisal and actual costs due mainly to exchange rate fluctuations.

5 There is a discrepancy between the total financing amounts provided and the final project costs provided by the Borrower, partly due to factors such as the exchange rate fluctuations and consideration of taxes and duties.

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Annex 2. Outputs by Component Component 1 – Management Contract: The project successfully implemented a five-year incentive-based, multi-city Management Contract with an internationally experienced private utility operator in accordance with the project design. The Operator under the Management Contract was responsible for implementing the Investment Fund to support short-term and operating investments to improve operations and maintenance (O&M) and support in the rehabilitation of WSS systems in addition to a number of Operational Improvement Programs to improve utility performance. The following section summarizes the key outputs resulting from the Management Contract with respect to these outputs. Notable outcomes of the Operational Improvement Programs implemented by the Operator as part of the Management Contract include:

• Improvements in efficiency of billing operations as a result of installation of billing software in all four cities.

• Improvements in financial management transparency, accountability and reporting through introduction of new accounts software in all utilities except Durres which was unwilling to adopt the new systems.

• Improvements in demand management. Meter installation has resulted in a reduction of consumption and therefore a reduction in billing. 43% of domestic customers were metered by the end of the MC, up from 16% at the beginning of the project.

Several outcomes from the Operational Improvement Programs envisaged at appraisal were however not achieved by the Operator. For instance reductions in operation and maintenance costs by reducing the high utility staffing levels were not achieved due to failure to adopt the Human Resources Plans (HRPs) developed by the Operator to gradually cut staff in all utilities. Although the HRP was finally approved towards the end of the second Contract year, it encountered a lot of resistance from the individual Utilities (except Lezhe) and the respective supervisory boards for realization of the Plan. After five years of operations, the resulting staff levels in all four cities were higher than the target levels set on the HRP. This is particularly the case for Durres and Fier with respective levels 60% and 41% more than target. The situation in Saranda and Lezhe is less pronounced, where targets have been exceeded by 11% and 7.5% respectively. Furthermore, in failing to ensure that their staff attended some of the targeted trainings carried out by the Operator, the potential institutional strengthening impact through transfer of skills and capacity was reduced. In addition no systematic leak detection program was carried out and unaccounted for water (UFW), though not officially a performance indicator, remained at unacceptably high levels in all cities.

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Table A2.1: Trend in Staffing levels in the Utilities

Base Year End Year

1End Year

2End Year

3End Year

4End Year

5Durres Actual 342 419 419 425 444 460 Durres HRP 342 329 316 303 300 286 Fier Actual 227 227 227 227 221 235 Fier HRP 227 214 201 200 200 166 Lezhe Actual 94 96 96 91 90 86 Lezhe HRP 94 91 88 85 88 80 Saranda Actual 73 75 74 73 73 68 Saranda HRP 73 71 68 66 67 63 Total Actual 736 817 816 816 828 849 Total Planned 736 705 673 654 655 595

Component 2 – Investment Fund: The Investment Fund (IF) through which short-term and operating investments were made in the four cities was managed by the Private Operator (PO). A summary of key investments is presented below. About 93% of the IF which financed works, goods and services aimed at improving the operation of WSS services was disbursed. Due to delays by the Operator in procuring and implementing some contracts, they were implemented directly by the CMU and respective utilities after the closing of the Management Contract.

Table A2.2: Summary of Activities financed under the investment Fund

Contract Description

Agreed Contract

Amount into US$

Latest Best Completion

Estimate US$

Percent (%)

Potential Overrun

(US$)

Percent Overrun

(%)

Civil Works Durres 2,478,998.68 2,568,323.17 15.97% 89,324 3.60% Civil Works Fier 4,575,272.19 4,743,637.26 29.49% 168,365 3.68% Civil Works Lezhe 1,550,745.04 1,555,408.36 9.67% 4,663 0.30% Civil Works Saranda 1,220,665.42 1,268,442.80 7.89% 47,777 3.91%

Civil Works 9,825,681.33 10,135,811.59 63.01% 310,130 3.16% Supply of Good 3,537,956.92 3,721,918.20 23.14% 183,961 5.20%

Consulting Services 1,419,562.20 2,227,108.91 13.85% 807,547 56.89% Total 14,783,200.45 16,084,838.70 100.00% 1,301,638.25 8.80%

Source: Spreadsheets of the Private Operator. US$ = United States Dollar. % = percent

The impact of the investments may be directly linked to achievement of some of the project’s performance targets. Impacts of the investments in larger cities such as Durres and Fier were limited because of the magnitude of investment needs compared to the funds available for the cities under the MWWP. Investments specifically targeting sanitation such as the sewer cleaning and sewer network development program and the septage management program, were not implemented hence impacts on sanitation were not met. Component 3 - Technical Assistance Program: Apart from project management, the main successful outcome of the TA program relates to the introduction of a Monitoring and Benchmarking Program for the entire water sector within the General Directorate of Water and Sanitation (GDWS). The Program has been successful at improving the

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quality of the data from the 54 water utilities in Albania. Other TA activities, such as those relating to reforms in the rural water and sanitation sector, support for a public consultation program on water sector issues, and preparation of PSP options after the termination of the Management Contract, were not financed through the loan. It should however be noted that some of the reforms were addressed within the context of a Development Policy Loan (DPL) which was implemented in parallel with the project between 2007 and 2009, with the Bank’s support. This DPL was eventually dropped. Activities such as the public consultation program on water sector issues were addressed through a separate PPIAF grant which financed, in addition to a study on local private sector participation in water supply.

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Annex 3. Economic and Financial Analysis Net Present Value/Economic rate of return. An economic and financial analysis was conducted at project appraisal, and the internal rate of return and NPV were calculated. An ex-post calculation of the internal rate of return and NPV at project closing was performed. Table A3.1 below shows the negative results of the economic NPV at project closing, which explained also why the IRR could not to be calculated. A cost-benefit framework was utilized at appraisal to assess the financial and economic viability, based on with and without project scenarios. The economic rate of return was 15% and the NPV 780 Lek million at appraisal. The discount rate used is 10%, which is IDA’s generally accepted and used hurdle rate for water supply projects. The quantifiable benefits of the projects measured in monetary terms were resource savings (energy and personnel cost savings). The main quantifiable benefit was assumed to come from the increased collection rates.

Table A3.1: Results of Cost-Benefit Analysis at Project closing

Economic At appraisal At completion

NPV in Lek million 780.0 (1,484) Internal Rate of Return (IRR) 15% N/A

At project closing the four utilities improved their financial positions, but did not hit the target of turning around to a self-financed operation, and generate positive cash flow. Because of the efficiency improvements expected from the Private Operator under the Management Contract, the assumption at appraisal was a net decrease in O&M expenses (savings in energy and labor expenses). The collected revenues with project did not show net increase. The collected revenues during the project implementation were about 55% lower than anticipated at appraisal. As to the cost of electricity and of the personnel, those resulted from 23% in 2003 to 76% in 2009, higher than anticipated at appraisal. The improvements of the services from the four water utilities have contributed, however, to the economic benefits, which are not quantifiable at the sector and macro levels, such as: (a) reducing the risk of water related diseases, and (b) reducing the coping expenditures due to better quality water and more equitable water allocations. At the macro level, the Project affected positively on the overall fiscal burden by reducing the level of subsidy, which is of major concern of the Government in the sector.

Financial rate of return. One of the main project objectives was to lead those four facilities within the five-year project period (2003-2008) to financial independence. According to the financial projections all four utilities were projected to break even in 2007, i.e. their collected revenues would cover 100% operating expenses. The financial position of the four utilities after five years of the Management Contract (2008) improved substantially from the base year (2002). However, the Private Operator was not able to turn the four utilities into financially viable autonomous entities that would be able to recover the increasing operation and maintenance costs of water and

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sanitation services, and repay their loans for investments. Actually, the four utilities are incurring annual cash shortages which are being covered through Government operating subsidy (see Table A3.2 on Financial Performance Indicators below).

Table A3.2 Summary of Financial Performance Indicators

2002 (Base Year)

Project Appraisal Document

2008 Actual

DURRES Domestic water tariff (Lek m3) 21.1 56.2 38.0 Billed revenues (Lek million) 211 809 447 Collected revenues (Lek million) 74 679 264 Collection ratio (%) 35 84 59 Working ratio 4.8 0.8 2.3 Current ratio 1.1 4.0 5.7

FIER Domestic water tariff (Lek m3) 20.0 44.0 35.0 Billed revenues (Lek million) 92 273 169 Collected revenues (Lek million) 31 227 112 Collection ratio (%) 34 83 66 Working ratio 4.9 0.9 2.4 Current ratio 0.9 5.4 7.7

LEZHE Domestic water tariff (Lek m3) 15.0 54.5 43.0 Billed revenues (Lek million) 19 135 62 Collected revenues (Lek million) 6 112 41 Collection ratio (%) 34 83 66 Working ratio 6.7 0.8 2.1 Current ratio 0.7 4.1 35.3

SARANDE Domestic water tariff (Lek m3) 15.0 45.3 40.0 Billed revenues (Lek million) 13 102 71 Collected revenues (Lek million) 5 84 53 Collection ratio (%) 34 83 75 Working ratio 6.1 0.9 1.3 Current ratio 0.6 2.7 27.5

Source: MWWP, PAD, pg. 55, PICC Review, October 2008, IR, pg.26, 29, and KPMG Audit Reports

The ex-post calculation of the financial rate of return and NPV presented in Table A3.3 below reflects the failure of the four utilities to achieve the financial targets, i.e. the incremental collected revenues and energy and personnel cost savings as a proxy for project benefits, which were explained in the preceding paragraphs.

Table A3.3: Results of financial rate of return at Project closing

Financial At appraisal At completion

NPV in Lek million 752.5 (1,854)

Internal Rate of Return (IRR) 15% N/A

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Loan repayment capability. The assumption taken in the PAD was that the IDA credit would be on-lent to the four utilities from the Ministry of Finance for the same grace and maturity periods (10/20 years) but at a higher interest rate of 1.5% per annum. As per the sub-loan agreement, the four utilities will begin paying in full the interest on the sub-loans (including the capitalized interest) starting from 2008. Because none of the four utilities was able to reach the financial target, the Ministry of Finance and the boards of the four utilities will have to review the sub-loan agreements to determine what change in the terms (e.g., reschedule the loan repayment terms) is feasible and measures necessary to be taken.

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Annex 4. Bank Lending and Implementation Support/Supervision Processes

(a) Task Team members

Names Title Unit Responsibility/ Specialty

Lending

Andreas Rohde, Task Team Leader/Sanitary Engineer

ECSEE Task Team Leader

Kishore Nadkarni Senior Financial Analyst ECSEE Financial Analyst Takao Ikegami Senior Sanitary Engineer ECSEE Procurement Specialist

Sandro Michiei Financial Management SpecialistECCAL Financial Management Specialist

Junko Funahashi Counsel LEGEC Counsel Rohit Mehta Finance Officer LOAGI Finance Officer

Manuel Marino Senior Sanitary Engineer, Water PSP Specialist

ECSEE Sanitary Engineer, Water PSP Specialist

Olav Christensen Financial Management SpecialistECSPS Financial Management Specialist

Marie-Marguerite Bourbigot Senior Water and Sanitation Specialist

ECSIE Water PSP Specialist

Ahmed Jehani Lead Counsel LEGEC Lead Counsel Salman Salman Lead Counsel LEGEN Lead Counsel Rita Cestti Senior Environmental SpecialistECSSD Environmental Specialist Hermine De Soto Senior Social Scientist ECSSD Social Scientist Arben Bakllamaja Project Officer ECSEE Project Officer Claudio Purificato Sanitary Engineer ECSEE Sanitary Engineer Xavier Chauvot de Beauchene Consultant ECSEE Consultant Maria Teresa R. Lim Team Assistant ECSEE Team Assistant Suhail J.S. Jme’An, Peer Reviewer MNSIF Peer Reviewer

Supervision/ICR

Michael John Webster Senior Water and Sanitation Specialist

ECSS6 Task Team Leader

Amelita Velasco Procurement Assistant ECSC2 Procurement Arben Bakllamaja Consultant ECSSD Financial Analyst Artan Guxho Projects Officer ECSS5 Operations Elda Hafizi Program Assistant ECCAL Team Assistant Elona Gjika Financial Management SpecialistECSPS Financial Management

Klas B. Ringskog Consultant ECSSD Institutional Advisor/ ICR reviewer

Lynette Alemar Senior Program Assistant ECSSD Team Assistant Majed El-Bayya Lead Procurement Specialist ECSC2 Procurement Maria Teresa R. Lim Program Assistant ECSEE Team Assistant Sanyu Lutalo Environmental Engineer ECSSD ICR author

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(b) Staff Time and Cost Staff Time and Cost (Bank Budget Only)

Stage of Project Cycle No. of staff weeks

6 USD Thousands (including travel and consultant costs)

Lending FY98 Not available 156.54 FY99 Not available 75.08 FY00 24.65 94.89 FY01 16.32 52.19 FY02 24.31 136.26 FY03 21.70 131.61 FY04 0.0 0.01

Total: 646.58 Supervision/ICR

FY95 0.00 FY96 0.07 FY97 0.00 FY98 Not available 0.16 FY99 Not available 0.09 FY00 0.1 0.53 FY01 Not available 0.00 FY02 Not available 0.11 FY03 5.10 54.76 FY04 22.19 143.56 FY05 22.99 111.30 FY06 18.81 81.64 FY07 21.84 94.79 FY08 15.50 75.84 FY09 20.53 88.04 FY10 15.90 56.64

Total: 707.46

6 The SAP system of tracking staff weeks was not in place before 2000 hence accurate data on this is not available.

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Annex 5. Beneficiary Survey Results A formal beneficiary survey was not carried out for the project.

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Annex 6. Stakeholder Workshop Report and Results A workshop to discuss the results and the lessons learned from the Municipal Water and Wastewater Project (MWWP) was held on July 2, 2008 at the Tirana International Hotel. More than 30 delegates attended the workshop. Representation from the four cities was lower than expected; only members of Lezhe and Fier Utilities attended; Saranda Utility representative had to leave due to illness; and Durres Utility did not attend. Moreover, none of the representatives of the municipalities from Durres, Fier, Lezhe and Saranda attended. PowerPoint presentations were given by the Independent Reviewer (IR), the Chairman of the Executive Committee (EC) and the Private Operator (PO). Further orations were provided from Lezhe and Fier utilities, the World Bank, the Ministry of Economy, Trade and Energy, previous CMU Directors and from the Advisor on Water to the Prime Minister’s Office. The general inference was that the MWWP had been successful. Main conclusions from the workshop. The basic development objective for improvement to the water supply and sanitation services in the four participating cities and to alleviate poverty by providing safe water access to all levels of society including the poor had been achieved. Moreover, there have been general improvements in all performance indicators since the commencement of the Project. This is especially the case for the technical aspects, with continuity of water supply, water coverage within the service area and water quality compliance improving markedly. Financial indicators, although showing improvement, have failed to reach their intended targets. This was particularly the case for the Working Ratio (cash operating expenses/revenue collected) which needed to be less than 1 in order for the utilities to have any chance of being financially sustainable. This ultimate goal is potentially achievable if utilities adhere to the principles of good governance and implement the recommendations from the Human Resources Plan, improve billing collection and consider raising tariffs to the recommended levels. The Management Contract (MC) was in essence implemented satisfactorily by the PO, but there were difficulties, and any future project in Albania involving such a MC concept needs revision, particularly regarding legal provisions, delegation of powers, procedures and responsibilities. Implementation constraints. The politicization of the sector has also been a hindrance in the implementation of the MC and remains a key constraint to sustainability. High turnover in senior staff from all stakeholders involved on the MWWP has also had a negative influence on the results. All utilities continue to be too reliant on state subsidies to cover energy costs, social insurance etc. Even though central government has confirmed that such subsidies will eventually be phased out as part of the reform in the water sector, there has been no concrete timeframe proposed for this.

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It is also apparent that the interest in the MWWP and its outcomes are not adequately aligned, which can be partly corroborated by the disappointing turnout for the workshop from the utilities, local government and municipalities. This is unfortunate, and also quite surprising, as the ultimate responsibility for repayment of the IDA credit will eventually fall upon the very same municipalities. Concerns were also raised about the potential vacuum that could result by the sudden departure of the PO on 4th August 2008 at the stipulated end of the MC. Although the PO will be present (albeit in reduced numbers), until September 2008 in order to prepare the Final Annual Report and the PIC Application for Year 5, the MC parties should consider amore phased/tapered withdrawal of PO support from the cities (perhaps over a period of 6 months). This was in principle supported by the utility representatives that were present. It was agreed that for the time remaining, the PO would concentrate efforts to consolidate the gains made on the Project and would be diligent in ensuring that all investments were handed over to the utilities in a correct and appropriate manner. It is extremely important that the PO/EC-CMU together with the utilities communicate regularly and use all their available resources to achieve this.

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Annex 7. Summary of Borrower’s ICR

Development Objectives The overall development objective of the MWWP was to introduce into Albania a new incentive-based multi-city management contract approach to improve the water supply and sanitation services and achieve financial viability in the participating water utilities of Durres, Fier, Lezhe and Saranda. The positive outcome from the MWWP would be improved water quality, quantity, and overall better environmental conditions within the four towns. Moreover, the specific objectives of the MC implemented by the PO are:

• Improve the standard and efficiency of the water and wastewater services of the Water Companies, with particular regard to improving the duration, reliability and disinfection quality of the water supply services

• Increase consumer willingness to pay for water and wastewater services through a higher quality and more consumer responsive service

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• Improve the financial performance of the Water Companies and achieve a financially sustainable operation

• Train and develop the Water Companies staff to enable the improvements achieved by the Operator in management, operation and financial performance to be sustained beyond the term of the Contract,

• Procure operations and maintenance equipment and repair and rehabilitate the infrastructure of the Water Companies under the Operation Investment Fund Program

• Prepare and maintain investment plans for the application of capital funds during the term of the contract and assess the longer term investment needs

Design and Project Components Design of the project took into consideration lessons learned in previous projects including the DWSRP and WSURP Albania, as well as other projects in the region (Georgia, Tajikistan, Kazakhstan, Uzbekistan, Armenia and Kosovo), where management contracts had been used for WSS services and positive results achieved. The MWWP comprised of three components, namely: Management Contract: This component financed the costs related to the five-year MC. These costs included a base fee (paid monthly) and a performance-based fee (paid annually) to be paid to the PO according to the achievement of targets defined in the MC. The PO was given full responsibility for managing the investment program; operating the water supply and sewerage systems; developing and implementing the demand management program, including a public awareness campaign; and implementing improved commercial (billing and collection) and financial management systems. Investment Fund: The Investment Fund (IF) financed works, goods, and services aimed at improving the operation of the water supply and sanitation services and achieving the performance targets in the MC. The PO proposed investments that were required in an annual investment plan and revisions, if necessary. The investment plan, including any revisions was subject to clearance by the EC and the WB. The PO’s plan for use of the Operating Investment Fund (OIF) needed to comply with the categories of expenditures listed in the WB Project Appraisal Document (PAD). Technical Assistance and PIU: This component strengthened project implementation by supporting the CMU, including salaries, training, vehicles, and incremental operating costs; and various consulting services for supervision of the MC, audits, studies, and field investigations related to the MWWP. In addition, the component financed services, goods, and works to support important elements of sector and institutional reform, such as:

• preparation of PSP options after the termination of the MC; • benchmarking of water utilities; • support for a public consultation program on water sector issues; • support for the newly-founded water utility association and a national vocational

centre for the sector,

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• the Rural Water Supply and Sanitation Agency (RWSA) and • Preparation of other proposed water sector projects throughout Albania.

The allocated budgets are shown in Table A7.1 below.

Table A7.1: Allocated Budget of MWWP

Component Indicative

Costs (US$M)

% of Total

WB financing (US$M

% of Total

Management Contract 4.90 22.3 4.40 29.3 Investment Fund 13.76 62.7 7.78 51.9 Technical Assistance and CMU 3.12 14.2 2.67 17.4 Total Project Costs 21.93 100.0 15.00 100.0

An innovative part of the design of MWWP was to introduce an incentive based multi-city management contract that measured the success of the project against specific indicators, which are also the objects under which the incentive-based fee is measured. The indicators proposed under such a management contract were as follows:

• Reliability: Number of hours of water supply • Service to the Poor and Needy: Increase in the percentage of the total population

in the service area with a minimum of two hours of daily water supply • Safety and Quality: Percentage of water quality analysis meeting faecal coliform

standards • Financial Viability, Efficiency and Sustainability: Improvement of collection rate

and working ratio In order to address and improve the indicators the whole range of fields of operation of a water utility as well as the attitude and response of customers were covered by the MC. Under the assumption that a professional Utility operator knows best how to change and improve the operations, the MC was designed such that in an initial phase the PO prepares his own interlinked plans and programs with associated implementation schedules for the duration of the MC. These plans and programs, subject to consent of the EC, were then supposed to guide the gradual improvement of services. Achievements of Objectives and Outputs

Obligations under the Management Contract. Services to be provided by the PO and hence obligations under the Management Contract are described in the General Conditions (GC) and in the Appendices, with the most relevant Appendices as regards PO performance and attainment being:

- Appendix 2: Description of the Services - Appendix 6: Performance Standards - Appendix 9: Performance Incentive Compensation - Appendix 12: Operating Investment Fund

The specific activities to be monitored by the EC and the CMU are listed in Article 5 (App.2) of the MC. The Performance Standards Appendix (App. 6) supplements the

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Services Appendix (App.2) and provides, through the Performance Standards Chart, time limits for submission of plans and programs and their implementation. Monitoring Provision. In order to help ensure the objectives and outputs of the MWWP, the MC contained provisions for monitoring with an Independent Reviewer (IR), who would perform duties in an impartial and independent manner to determine the improvements the PO had achieved periodically over the term of the Contract, and agree the value of any Performance Incentive Compensation (PIC) payments due. Following an international pre-qualification process, the MPWTT entered into a Contract with an Independent Reviewer (IR) in August 2004. 7 This Contract was timed to coincide with a review on the first year of operational performance by the PO; the MC commencing in August 2003. The IR was to undertake 10 visits to the MWWP project area during the 5 years duration of the MC; at approximately 6-monthly intervals. General Performance Review. In order to effectively monitor the PO’s obligations, performance and achievements with respect to the MC, a total of 29 activities comprising obligations and deliverables were included as part of the General Performance Review Process. These were taken from Article 5, Appendix 2 of the MC and are summarised in the following Table A7.2

7A Contract for Consultancy Services of the Independent Reviewer for the MWWP was signed on 5th August 2004

between MPWTT (formerly Ministry of Territory Adjustment and Tourism) and COWI AS (formerly Interconsult International AS) of Norway as lead firm in the IR Consortium.

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Table A7.2: Summary of Main PO Obligations and Deliverables under the MC

Activity

No.

Clause Ref. No. From

Art 5. App.2 Description of PO Obligations under the MC

5.2 Activities Monitored by EC 1 5.2 (1) Prepare and Implement Human Resources Plan 2 5.2 (2) Propose and Implement Tariff Scheme 3 5.2(3)(a) Prepare and maintain Operating Investment Fund Annual Plan 4 5.2(3)(b) Prepare and maintain Master Investment Plan 5 5.2(4) Prepare Annual Report

5.3 Activities Monitored by CMU 5.3.1 Management/Administration

6 5.3.1(1) Prepare Base Year Data Report 7 5.3.1(2)(a) Develop and Implement Information System for Customer Services 8 5.3.1(2)(b) Develop and Implement Information System for Financial Accounting 9 5.3.1(3)(a) Develop and Implement Illegal Connections Program 10 5.3.1(3)(b) Develop and Implement Customer Meter Program 11 5.3.1(4)(a) Improve collection of Revenues (PIC Indicator) 12 5.3.1(5)(a) Develop and Implement Customer Services Improvement Program 13 5.3.1(5)(b) Develop and Implement Customer Services Training Program 14 5.3.1(5)(c) Develop and Implement Public Information Program 15 5.3.1(5)(d) Develop and Implement Customer Survey Program

5.3.2 Operation and Maintenance 16 5.3.2(1)(a) Develop and Implement Minimum Water Supply Service Program (PIC

Indicator) 17 5.3.2(1)(b) Develop and Implement Continuity of Water Supply Service Program (PIC

Indicator) 18 5.3.2(2)(a) Develop and Implement Water Quality Monitoring Program (PIC Indicator) 19 5.3.2(3) Develop and Implement Leakage Reduction Program 20 5.3.2(4) Develop and Implement Septage Management Program 21 5.3.2(5) Develop, Implement and Maintain Mapping and Hydraulic Models Program 22 5.3.2(6)(a) Develop, Implement and Maintain Facilities Data Base 23 5.3.2(6)(b) Prepare Final Condition Survey 24 5.3.2(7) Prepare and Implement Corrective Maintenance Program 25 5.3.2(8) Prepare and Implement Preventive Maintenance Program 26 5.3.2(9) Prepare and Implement Safety Program 27 5.3.2(10)(b) Develop and Implement Procurement Guidelines

5.3.3 Training 28 5.3.3.(1) Develop, Implement and Maintain Training and Development Program

5.3.4 Monthly and Quarterly Reporting 29 5.3.4(1) Prepare Monthly and Quarterly Reports

Nomenclature for Achievements. The IR catalogued these achievements of the PO under the General Review Reports. The IR during each review evaluated progress in all categories and developed a standardized nomenclature describing the performance of the PO against the obligations mentioned in Table A7.2 above. These are:

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• Achieved: defining that the specified task or target has been substantially

completed as stipulated within the MC. • Partially achieved: Activities for completion of the specified task or target have

started or are in progress, even if it is not measurable, and are thus within the respective Performance Standards.

• Delayed achieved: If the respective Performance Standard has been achieved or a deliverable submitted, but with considerable delay.

• Not achieved: No activity has been undertaken to reach the respective Performance Standard or respective deliverable.

• Objected: Introduced in the final contract year of the MC which defined that the PO had fulfilled his obligations but implementation had been objected or delayed by the utility or the respective supervisory board.

Achievements Obtained. A full description of the assessed progress and achievements obtained throughout the MC with respect to the above activities is shown in Appendix 1. Due to the requirement for this report to be submitted prior to the completion of the MC, the final assessment of activities from the 10th visit has not been included. However, a consolidated assessment on the likely achievements and results at closure of the MC is indicated. The PO has basically failed to satisfy the initial requirement of the obligations, which was to prepare within the first half year of the MC, implementation programs with associated time schedules and implementation time frames. Most of the programs were submitted with more than 8 months of delay, well into the 2nd Year of the Contract. Subsequent requests by the EC/CMU and the WB to amend the programmes have been ignored. This resulted in the fact that none of the fields of intervention described in the MC had a valid implementation schedule until the end of the MC. Activities were done on an ad hoc basis and along internal plans. The first OIF plan along with procurement rules was finally presented after 18 months from the MC commencement, instead of the required 3 months. This resulted in significant delays of contract implementation and cancellation of important parts of the investment due to cost escalation and exchange rate losses. Furthermore, other parts of the PO’s obligations, such as modelling, mapping, and customer surveys were also victims of the financial limitations. This threatens to potentially undermine the overall improved operational sustainability of the investment. In an attempt to partly redress this shortfall, the PO has conducted some training seminars in the closing months of the MC, together with some small customer surveys, but it is widely believed this is “too little – too late”! One exception to the above activities is the Human Resource Plan (HRP) which was finally approved towards the end of the 2nd Contract year. Unfortunately, the HRP encountered a lot of resistance from the individual Utilities (except Lezhe) and the respective supervisory boards for realisation of the Plan. After five years of operations, the resulting staff levels in all four towns are higher than the target levels set on the HRP (see Source: PO’s HRP and Progress Reports, HRP = Human Resources Plan figure below). This is particularly the case for Durres and Fier with respective levels 60% and 41% more than target. The situation is less pronounced in Saranda and Lezhe where

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targets have been exceeded by 11% and 7.5% respectively. Figure 3 also shows a marked increase in staffing levels in Durres during the Base Year prior to the appointment of the PO. The analysis of the data infers that all attempts to re-structure the staffing; including along the lines of personnel qualifications for specific duties; has failed, Lezhe being an exception to this statement, although even here, recruitment of a suitable engineer has taken an excessively long period of time.

Comparison of Actual and HRP Staffing Levels

Unfortunately, from midterm on the MC into Contract year 4, the CMU had been defunct and issues were handled irregularly by the head of EC on a low key basis. During this period, requests for decisions to be taken by EC/CMU were largely ignored, which forced the PO to operate at a significantly lower intensity. The results of the obligations of the MC can be summarized using the categories stated in the section on “nomenclature for achievements.” Many of the obligations do not have targets so judgement was made comparing the MC´s output with structures, manuals, operating procedures and guidelines used by successful operating utilities elsewhere. Delayed Achieved:

• Billing and collection (electronic processing, customer metering increased from 11% to 32%)

• Financial accounting (except Durrres: electronic processing, asset register, annual balance)

• Human resources (Job descriptions, required staff structures, HR department; structures existing, targets failed)

• Minimum Water Supply • Water Quality • Reporting

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Partially achieved • Customer relations (except from infrastructure improvements no difference in

operations to time prior MC can be noted, procedures missing or not followed) • Continuity of supply (improvements not achieving targets, except Fier where

target was achieved prior to MC) • Improve collection of revenues • Hydraulic Models program (only Hard and Software, no working model,

sewerage completely missing) • Mapping (Maps date back to prior MC, status of update unclear) • Illegal connections reduction • Training • Procurement under OIF

Objected

• Human resources (Number of staff) • Tariffs

Not Achieved

• Corrective and preventive maintenance (no procedures, no schedules, no handbooks), no difference to situation prior to MC

• Develop, implement and maintain facilities data base (No activity at all) • Leakage reduction • Septage management • Customer survey

The above refers to the verbal stipulations of the MC. Nevertheless, general improvements in the Utilities´ operations can be seen from the Base year until the end of the MC. Table A7.3 below compares a selection of indicators from the Base Year with Year 5.

Table A7.3 Comparison of Indicators: Base Year (2002) with Year 5 (2008)

The comparison of indicators show positive changes that occur are not consistent within the towns, which largely depends upon the size of the town. In smaller towns (i.e. Lezhe), changes of operations have a more immediate impact. It is also notable that factors outside the control of the MC (such as increased staff numbers, instructed by the supervisory board, electricity etc) have a negative impact on operations.

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PIC Targets. The MC contained no specific targets to enable the MWWP to be classified as a success or a failure. However the PAD’s Project Design Summary (Annex 1) interpreted the “Good” PIC criterion rating as the target value which can be considered as part of the achievement of the MWWP objectives. The only anomaly to this was the Working Ratio values in the PAD design summary, which gave spurious target values of “Excellent” or even better, at the end of the MC which are not considered realistic. For the purposes of assessment in this report, the IR has inferred that a “Good” rating achieved for the PIC parameters can be construed that performance targets and hence part of the overall objectives of the MWWP have been attained. PO Achievements for PIC. The IR has detailed the PO’s achievements in the PIC review reports that have been prepared at the end of each contract year. A total of 4 PIC review reports have been prepared to date, covering the first 4 contract years. The 5th and final PIC review report is due in August/September 2008. As this ICR had to be prepared prior to the completion of the MC on 4th August 2008, the PO achievements for the final contract year (Year 5) have been estimated using the 9 months of data provided (up until April 2008). This may not necessarily represent the actual PIC values for Year 5, which can only be obtained once the final monthly report for July 2008 has been provided by the PO. A summary of the PIC values obtained for the 20 performance indicators spread throughout the four towns are shown in Table A7.4 below. These PIC values are compared against the relevant target “good” rating for the specific year of the MC. Table A7.4 shows where a specific PIC value obtained has matched or exceeded the target rating (Cells have been shaded green when the target has been reached or exceeded).

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Table A7.4: Comparison of PIC Targets and Achievements

Year 1 Year 2 Year 3 Year 4 Year 5 2003/49 2004/5 2005/6 2006/7 2007/8

Performance Indicators Base year8

2002/3 target PIC

value target PIC

value target PIC

value target

PIC value

target PIC

value 10

Durres 1. Continuity (hr) 2.1 3 Nm11 3.5 3.9 4 2.2 5 2.6 6 5.3 2. Min. Supply (%) 38 36 27 46 53 56 59 66 84 76 90.4 3. Quality (%) 96 92 93.5 94 95.8 96 99.2 98 98.7 98.5 98.5 4. Collection Rate (%) 39 39 64 49 53 59 58 69 59 79 55.3 5. Working Ratio 4.8 2.92 2.1 1.99 2.5 1.54 1.9 1.3 1.5 1.1 2.2

Fier 1. Continuity (hr) 6.2 8 Nm 10 11.3 11 19.3 12 15.1 13 21 2. Min. Supply (%) 88 91 96 94 99 96 100 97 100 98 99.9 3. Quality (%) 98 92 97.6 94 97.2 96 96.6 98 99.7 98.5 100 4. Collection Rate (%)12 33 39 46 49 56 59 74 69 84 79 79.9 5. Working Ratio 4.9 1.82 1.5 1.55 1.6 1.36 1.2 1.22 0.9 1.1 1.88

Lezhe 1. Continuity (hr) 20 22 Nm 23 18.3 23.6 Nm 23.7 21.0 23.8 21.1 2. Min. Supply (%) 95 97 57 98 66 99.3 Nm 99.3 87 99.3 100 3. Quality (%) 55 80 85.7 92 72.2 95 78.6 98 95.6 98.5 99.3 4. Collection Rate (%) 33 39 50 49 54 59 55 69 58 79 65.5 5. Working Ratio 6.7 3.65 2.0 2.43 1.9 1.83 1.9 1.38 1.7 1.1 1.81

Sarande 1. Continuity (hr) 1.8 7 Nm 9 11.4 10 Nm 11 7.4 12 10.2 2. Min. Supply (%) 46 56 33 68 57 78 Nm 88 100 93 100 3. Quality (%) 88 92 96.4 94 99.6 96 100 98 100 98.5 100 4. Collection Rate (%) 33 39 64 49 71 59 77 69 80 79 75.7 5. Working Ratio 6.1 4.38 2.2 2.18 2.3 1.56 2.0 1.22 2.1 1.1 1.71

Source: IR PIC Reviews and PAD from World Bank. Nm = not measurable

96 Target – defined as “Good” PIC Criterion 1.6 PIC Value equals or exceeds target

An assessment of Table A7.4 can provide the following statements: • There have been overall improvements in all performance indicators from Project

commencement (Base Year) until the end of Year 5. • All towns have managed to reach their target in the final contract year for

minimum hours of water supply and water quality compliance. • Fier appears to have performed the best in terms of consistently reaching target

for many of the performance indicators for each consecutive year of the MC, which suggests that the PIC criteria were too relaxed.

8 According to base year figures recorded in the World Bank PAD 9 Contract years run from August to July. Year 5 will end on August 4, 2008. 10 Indicators from Year 5 are up to April 2008 (9 months) 11 Not measurable (due to insufficient pressure and flow meters – as judged by the Independent Reviewer) 12 As per the draft amendment to the Management Contract, the collection rate in Fier has been adjusted assuming 100% payment by state-owned utilities (particularly ARMO and TEC).

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• Lezhe appears to have performed the worst in terms of consistently not reaching target for many of the performance indicators for each consecutive year, which suggests that the PIC criteria were too stringent.

• Fier has also managed to reach target for continuity of supply and for collection rate in the final contract year, however the collection rate is artificially adjusted due to the assumption that bills from ARMO and TEC are paid

• None of the towns managed to achieve their required target for the working ratio in the final contract year.

The MC (Article 2.2 (2) of Appendix 9) contained a provision for adjustment of the PIC criteria by the IR at the end of Contract Year 2 that could then be applied in subsequent Contract Years 3, 4 and 5. The IR undertook the necessary review of the PIC criteria and made some minor recommendations for slight adjustments to the criterion values, but they were never implemented by the EC/CMU. The above PIC results generally imply that water and sanitation services have improved in the four towns, which was part of the overall original development objective of the MWWP. However the results on working ratio raise concerns on the financial sustainability for the towns in the future and this point is discussed in more details in the section on Sustainability. Major Factors Affecting Implementation and Outcomes The MWWP has, for Albania, the innovative approach of having a Private Operator managing the four utilities for a considerable time and at the same time providing financial resources to the PO in order to improve the Utilities’ infrastructure. Additionally, the MC incorporates four utilities with a geographically spread over a distance of 250 kms, with completely different customer structures (i.e. seasonal increase of customers by 50% due to tourism in Saranda and Durres, an industrial town in Fier, and a rural centre in Lezhe), and different numbers of population. As there has been no precedence the MC had to make a lot of assumptions and stipulate conditions that were mainly based on theoretical considerations. It seems therefore necessary at closure to evaluate a feed back on the structure of the MC itself as well as the stakeholders and actual player in during the implementation period. The following attempts to provide such a feed back. It is reflects the independent observations of the IR during the MC period. The individual components of the MC have been structured for this exercise as follows:

1. Legal Frame 2. Contract 3. Contract Monitoring Unit (CMU)/ Executive Committee 4. Utilities 5. Private Operator 6. Independent Reviewer

Legal Frame (a) A MC must be prepared with due regard for current or impending laws and

regulations. This was not respected and proved to be a critical issue. The current

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legislation provides that the only body that can issue instructions regarding personnel of a Utility is the supervisory board while the MC stipulated that all staff of the utility shall be under the supervisory control of the PO. As the supervisory board of a utility was not a party to the contract and relinquishing its rights to the PO is not foreseen in the law, conflicts with regard to appendix 8 were inevitable to the extent that the PO basically could not exercise any of the rights vested to him by the MC.

(b) During the duration of the MC legislation has been enacted to change the ownership of utilities. While basically this is a formal act it still affects the operations which a PO cannot foresee and provide any contingencies for. Any legislation affecting status of the utilities should exempt utilities of a running MC. Otherwise, a MC should contain provisions for change in legislation.

Contract (a) The four cities were to heterogeneous in client and operation structure to be

represented by one EC. 4 individual contracts with each city would have been more appropriate..

(b) The Contract is regarding deliverables too complicated, which makes it difficult to follow up implementation and decision making by EC/CMU

(c) The Contract provides apart from the 5 performance criteria no quantifiable target or target description of measurement, which leaves it to the PO to set his own targets and if he fails to do so leaves performance undetermined.

(d) The Performance indicators do not really reflect comprehensive performance and allow the PO to concentrate on improving indicators without really improving services. Unaccounted-for water not addressed in MC and therefore not tackled by PO.

(e) order to improve the Utilities’ infrastructure. Additionally, the MC incorporates four utilities with a geographically spread over a distance of 250 kms, with completely different customer structures (i.e. seasonal increase of customers by 50% due to tourism in Saranda and Durres, an industrial town in Fier, and a rural centre in Lezhe), and different numbers of population.

(f) Contractual sanctions are missing in case of non-performance of Operator with regard to deliverables and their implementation. It allows the PO just to ignore complete parts of his obligations.

(g) Remuneration is set on a constant fee and incentive payment. This does not reflect periods of special activities as required by MC and has led to a situation where the PO claimed that he cannot perform in special field of interventions because he has no funding left. A better structure would have been to separate cost-wise

- Regular operations - Preparing programs and implementations schedule - Special implementation activities - Incentive payment

(h) Approval procedure and default acceptance unclear, especially in cases where PO does not remind CMU/EC of a pending approval, actions and consequences in case of default approvals should be described.

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(i) Service area, population figures are static in the MC and do not reflecting significant growth or legal change of service area. There should be a provision to update these in regular intervals.

(j) EC/CMU have little influence to rectify defaults of PO. There should be a provision in the MC that if the PO defaults on his obligations, the EC/CMU have the right to charge a third party on cost of PO.

(k) There should be a provision in the Contract covering the case that EC/CMU/Utilities do not follow their obligations and stall decisions essential for performance of the contract.

(l) There should be a time frame for individual procurements. A deadline for procurement plans is not sufficient.

(m) Procurement rules are only clear as far as the WB is concerned. The MC should also contain clear instructions regarding local procurement (composition of procurement commission etc)

(n) Performance indicators not really reflecting performance, allow PO to concentrate on improving indicators without really improving services. Unaccounted-for water not addressed in MC and therefore not tackled by PO

(o) Reporting requirements are not clear enough defined with the result of not informative and poor reports over long period of the MC

(p) The Contract does not consider outside influence such as Ministries and regulatory bodies on MC performance. There should be a provision covering these issues (e.g. Regulatory Entity)

(q) The MC only allows one chance to change PIC criteria thresholds (after Year 2), the procedure with a contract addendum is too complicated and time consuming.

(r) The MC provides for no facility to change PIC parameters during the Contract. Contract Monitoring Unit (CMU)/ Executive Committee (a) CMU was understaffed especially in startup of MC and had limited resources to

evaluate and follow up all programs of PO, at later stage it was understaffed because acting as PIU for other projects.

(b) CMU/EC was completely defunct during project year 3. (c) Response time to submissions by PO was too slow (d) Limited response by CMU to written communication by PO (e) The EC meetings were held only sporadically resulting in delayed decisions. EC

members have been changing with resulting loss of information. Some EC decisions were overridden by Utility supervisory board.

(f) Processing of payments was delayed up to one year (g) The payment of the Albanian portion of procurement was constantly delayed. (h) CMU/EC partly fail to implement recommendations by WB (i) EC was not implementing Quorum facility available under MC to push through

decisions Utilities (a) Maintained independent status as opposite to MC. MC Clause 3.12 (Equipment,

Materials) and 31.14 (Revenue) and 4.4&5.3 (operating staff) clearly ignored. (b) Utilities refuse access to records and facilities

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(c) Utilities do not delegate staff to training offered by PO (d) Utilities refuse to implement plans provided by PO Private Operator (a) PO fails to show consistency (in contractual terms) with his operating staff and their

qualifications, exchanges staff too often in initial phase (b) PO Staff turnover at commencement of MC unacceptable leading to confusion on

responsibility and loss of Project knowledge (c) PO fails to submit all deliverables in time or at all (d) PO does not respond to requirements by EC/CMU regarding deliverables (e) PO does not provide implementation schedules and annual targets (f) Reports are delivered with more than 2 months delay (g) Reports are inconsistent, incomplete and partly with false information (h) Presence of PO staff at utilities is limited and not sufficient (i) Incompetence and delay in procurement results in reduced investments (j) Incompetence and delay in procurement results in incomplete contracts at end of MC

creating additional cost for EC/CMU Independent reviewer (a) IR Contract too restrictive, only allows two x fortnightly visits each year (b) IR Contract foresees activity on request of CMU only. This has led to a gap in review

of more than 1.5 years (c) IR’s influence is impeded because not truly independent when hired by one party (i.e.

CMU) (d) IR engaged too late at start of the MC Sustainability The overall objectives of the MWWP are directed towards achieving; financial and operational sustainability. As Chapter 3 has shown, there have been some noticeable improvements in the operation of the water supply and sanitation services since the start of the MC, however there are some concerns especially regarding sustainability which will be addressed below. Financial Sustainability. New billing and accounting computer systems have been successfully installed in the 4 towns. Billing systems are fully operational and there is no doubt that this activity will continue to be sustainable on the closure of the MC. Preparations of trial balances using the supplied software have encountered problems, and the supplier “Komtel” was brought in by the PO to solve these issues. Thus Fier utility has become the first town to produce financial statements for 2007. Efforts are now being made to undertake similar work with the supplier in Lezhe and Saranda and there is high probability that this activity will be sustained after MC completion in these three towns. However, the obdurate attitude of Durres utility and their outright refusal to use the accounting software provided, implies that will not be a sustainable activity.

43

The computerised accounting information system also contains a fixed asset register, but transfer of the old hand written data from the utilities into the system is a problem as the old data does not contain detailed background information or there is no information in existence. Hence only the detailed information on the new assets provided under the MC can be entered into the asset register. For the utilities in the 4 towns to be financially viable, it is important to reduce the working ratio to less than 1 and to improve the billing collection rate. Unfortunately, the targets for working ratio and for billing collection have not been achieved by the end of the MC (except Fier where billing collection reached target). However linear regression analysis of the monthly data provided by the PO indicates an overall “positive” trend for these indicators in Fier, Lezhe and Saranda. However for Durres the trend is “negative” for collection rate and “flat” for the working ratio. There are two decisions that the utilities/supervisory boards could make which could go a long way to improving the working ratios and collections rates. A reduction in staff in accordance with the HRP and an increase in tariffs in accordance with the recommendations of the PAD would substantially improve financial performance. Another important factor that was not foreseen at the time of preparation of the PAD was the recent global escalation in the cost of oil and the credit crisis which are causing extraordinary inflationary pressures on daily commodities. The effects of these crises are far reaching and are only beginning to take effect i.e. electricity tariffs in Albania have increased around 50% since the beginning of 2008 alone. With these impending financial pressures on the utilities there is urgent need for increased revenue collection. One essential factor for financial sustainability would be to increase the volume of production being sold. As it is, only a fraction of the actual production is being sold and billed. The resulting Unaccounted-for-Water volumes have remained nearly constant over the MC with 70% in Durres, 25% in Fier, 20% in Saranda and 50% in Lezhe. All systems rely on pumped production and electricity cost for production exceed all other operation cost of the utilities significantly. Most of the UAF is not caused by technical losses as significant investments have been done into the networks and pipe systems but by other factors. Operational Sustainability. The delays at the outset in getting procurement underway and the budgetary restrictions that are now in force have necessitated the abandonment of some planned contracts that were envisaged in earlier procurement plans. In addition, some US$5.8 million worth of contracts have been cancelled in civil works and supply of goods under the OIF. Furthermore, cancelled consultancy contracts such as implementation of customer surveys and to provide training in network modelling and other technical operations have undermined the potential for effective operational sustainability. To counteract this, the PO has resorted to undertaking some in-house customer surveys on a very limited sample base in the 4 towns and provided some in-house training, but there is a potential danger that this is “too little – too late”

44

Lessons Learned Temporary Notes: Better organisation of procurement matters at project commencement would have enabled all planned contracts to be realised and implemented in good time. The resulting delays have necessitated the cancelation of some contracts such as independent customer surveys, training using consultancy and network modelling, which threaten to varying degrees the operational sustainability of the utilities. Earlier appointment of the IR during the Base Year could have ensured the provision of a more reliable baseline data report from the PO that could have been acceptable to the WB. Furthermore, consideration should have been given by the CMU to making better use of the IR for providing extraordinary services throughout the MC by implementing contract Addendums (such as is being used for the preparation of this report) A greater array of important, yet easy to measure PIC indicators, should have been used to monitor PO performance and hence the calculation of the PIC. For example, PIC Monitoring should have been extended to include UFW, residual chlorination and O&M issues relating to operational sustainability. Conclusions and Recommendations Temporary Notes: The MWWP has not obtained full sustainability - . The decentralisation of control of the water companies to the respective municipalities within the four towns came too late (Year 4).

45

Appendix 1 to Borrower’s ICR – Assessment of achievement of contractual obligations

PO Achievements

Except for a 1.5 year gap from March 2006 to August 2007 (during this period the CMU was mainly in operational), the IR visited and reviewed the PO´s achievements with regard to the MC in regular intervals. The PO had nearly for none of the service standards prepared time schedules that had been in force. Repeated requests by WB and CMU to provide such schedules with targets the PO intended to achieve each year had been completely ignored. Only in the last 2 years of the MC the PO had submitted so-called “Action Plans” but even those did not define targets and timelines, against which measurement of the progress was possible. The IR was aware that in many of the service standard field activities were undertaken by the PO but their evaluation within the context of a development process proved to be extremely difficult. The assessment followed therefore a category system of four categories of achievements, in the absence of approved time schedules which had been needed to measure the progress:

• Achieved: defining that the specified task or target has been substantially completed as stipulated by the MC.

• Partially achieved: Activities for completion of the specified task or target have started and progress, even if it is not measurable, within the respective Performance Standards has been made.

• Delayed achieved: If the respective Performance Standard has been achieved or deliverable submitted, but with considerable delay.

• Not achieved: No activity to reach the respective Performance Standard or respective deliverable.

These ratings had been given as a measure against the stipulations of the MC and did not consider whether activities had been blocked by other parties. Therefore, in the last year it seemed to be necessary to introduce a new category defining that the PO has fulfilled his obligations but implementation has been objected or delayed by the utility, the supervisory board or other Government Authorities, who basically had no part in the MC.

• Objected The following tables provide a summary of the PO´s achievements throughout the MC compiled from the individual General Review reports.

46

It can be clearly seen that until 4th review, taking place after 2 years of operations, the PO has completely failed to satisfy his obligations under the MC. Not only had the time for submission of the initial plans and programmes passed, but also the required amendments by WB and CMU either had been ignored or submitted with one year of delay. The result was that until MC completion, the PO has been running his operations and improvements in a very fragmented way. The only exception is the human resource plan (HRP) that had been approved after 2 years. However the HRP faced difficulties for implementation by the utilities. A procurement plan for the OIF was finally available after 18 months into the MC. This has affected the foreseen procurement very negatively. Due to price increases and exchange rate losses the foreseen investments had to be cut drastically. One of the main reasons for this low performance was that the operator’s management staff had been changed frequently. The first 1.5 years has seen three resident managers. This period was followed for several months with only one of PO´s expatriate staff as temporary manager, who even did not have the required qualifications for such a position.

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Annex 8. Comments of Cofinanciers and Other Partners/Stakeholders Comments from the Private Operator (PO), Berlinwasser International AG

General Comment to the development and implementation of the Human Resources Plans: This report states in several paragraphs that the desired cut of staff in all utilities was not achieved, in the opposite, staff numbers increased towards the end of the Management Contract. We deem it necessary to explicitly and positively mention that the specific staff numbers (staff per 1,000 connections) have decreased greatly during the project term (in average by minus 30%).

Add Section 6, Lessons learned Operational Improvement Programs: This report sufficiently describes the achievements and difficulties in the preparation and implementation of Improvement Programs. It is the Private Operators view, that for future Management Contracts, it would be beneficial to stretch the timing of program preparation in order to be able to produce high quality programs suited to the actual project and situation. In this particular Management Contract, about 50% of the programs were due within 90 days after Starting Date. This time frame is not sufficient to do the data collection, fully understand the situation and develop tailor made suggestions in order to produce a meaningful program being a guideline for the duration of the Management Contract. We would suggest to straighten out the programs over a period of 6-12 months.

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Annex 9. List of Supporting Documents • Country Assistance Strategy for Albania for FY02-05, June 20, 2002 • Country Assistance Strategy for Albania for FY06-09, January 10, 2006 • Project Information Document • Project Appraisal Document, Report No. 24826, December 30, 2002 • Project Social Assessment Report • Credit Agreement: • Feasibility studies and Consultants reports (Various) • Environmental Management Plan Framework, July 23, 2002 • Financial Management Supervision Reports • Investment Plans (Various) • Project Management and Audit Reports (Various) • PIC Review Reports • Aide memoires • Implementation Status Reports • Annual Benchmarking Project Reports • Monthly and Quarterly Project Progress Reports • Implementation Completion Report produced by Independent Reviewer, COWI

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ALBANIA

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

0 10 20 30

0 10 20 30 Miles

40 Kilometers

IBRD 33359R1

JULY 2009

ALBANIASELECTED CITIES AND TOWNS

DISTRICT CAPITALS

NATIONAL CAPITAL

RIVERS

MAIN ROADS

RAILROADS

DISTRICT BOUNDARIES

INTERNATIONAL BOUNDARIES