ICRR 10065 Report Number : ICRR10065 ICR Review Operations Evaluation Department 1. Project Data : OEDID : OEDID: L2821 Project ID : P004903 Project Name : Second National Water Supply and Sewerage Project Country : Algeria Sector : Other Water Supply & Sanitation L/C Number : L2821-AL Partners involved : Prepared by : Tauno K. Skytta, OEDST Reviewed by : Hernan Levy Group Manager : Roger Slade Date Posted : 06/25/1998 2. Project Objectives, Financing, Costs and Components : Objectives : (i) Increase water production to meet present and future demand; (ii) Expand the respective distribution networks of the water companies; (iii) Increase the waste water treatment capacity to protect water resources and the environment; (iv) Strengthen finances of AGEP (national water and sewerage organization ) and the participating water companies; and (v) Improve efficiency of Borrower's construction industry in water supply and sewerage sector. Components : The project included the following components : (i) Four regional water sub-projects (including 13 regional water utilities) comprising water production, treatment, and transmission works to meet demand; in Ain Dalia -Souk Ahras-Ouenza through 2010; in In Amguel-Tamanrasset through 2000; in Ain Skhouna - Saida through 1997; and in Mexenna-Annaba until 1995; (ii) Three sewage treatment works designed largely to protect the health of downstream users; in Tlemcen to meet demand through 2005; in Maghnia through 1989; and in Setif through 2005; (iii) Training of managers in management of water and sewage installations; (iv) A study of the construction industry in the water supply and sewerage sector; (v) Studies of four potential water transfer systems for the northern areas of Algeria (from Taksebt Dam to Algiers and Tizi Ouzou; from Oued Cheliff to Mostaganem and Oran; from Beni Haroun Dam to Mila, Constantine, and Batna; and from Koudiat Affren Dam to Bouria ); and (vi) Implementation of new organisational, managerial, and financial structures for water companies . Costs : The total project costs: appraisal estimate US$630.5 million equivalent; actual US$233.1 million. Financing : Bank Loan of US$250 million of which US$25.8 million was cancelled. Loan Amendment : The project was amended several times to address changes in sector organization and resulting reallocation of loan funds. The most important amendment was agreed upon in February 1993. The amended project included these additional components : (i) organisational studies launched in April 1990; (ii) a national survey of the water sector; (iii) additional supplies, operational equipment and water schemes, compensating for elimination of the Ain Dalia-Souk Ahras-Ouenza sub-project; and (iv) additional water transfer studies, technical assistance, and training. 3. Achievement of Relevant Objectives : The project only partially achieved its stated objectives . The serious security situation and non -submission of progress reports by the borrower have prevented the Bank from assessing the completeness of the implementation of civil works and related procurements . Some of the institutional studies, although excessively delayed, were completed, but many key studies such as the construction industry study and water transfer studies were not completed. 4. Significant Achievements : There are no significant achievements . 5. Significant Shortcomings : Project implementation was undermined by the following : (i) weak institutional set up, overly centralised role for AGEP, and lack of capacity for managing the project; (ii) unsatisfactory security situation that limited Bank supervision; (iii) government's decision to ignore a loan condition that required tariff increases after a study in 1987; (iv) government's failure to reach a water sharing agreement with Tunisia (one sub-project); (v) excessive implementation delays caused by irregularities in procurement; (vi) excessive delays by national contractors in carrying out civil works; (vii) excessive delays in completing studies; (viii) failure to launch training program; and (ix) repeated reorganisations to address sector's weaknesses . 6. Ratings : ICR OED Review Reason for Disagreement /Comments Outcome : Unsatisfactory Highly Unsatisfactory Many of the main components were not even started, and the achievements on the other components is unknown . Institutional Dev .: Partial Negligible The project did not achieve its institutional objectives. Sustainability : Unlikely Unlikely Bank Performance : Deficient Unsatisfactory Borrower Perf .: Deficient Highly Unsatisfactory Major components were not completed; serious irregularities in procurement, reporting, and covenant compliance . Quality of ICR : Satisfactory 7. Lessons of Broad Applicability : Project performance indicators should be agreed upon at loan negotiations and the Bank should firmly insist on borrowers providing reports . The Bank should seriously consider cancelling project in situations where the borrower does not provide evidence of progress in completing components, and where conducting Bank supervision has become impossible. Moreover, processing of new loans /projects should definately be discontinued, especially when the borrower shows minimal commitment and the management capacity is proven to be unacceptably low . 8. Audit Recommended? Yes No 9. Comments on Quality of ICR : The ICR is a good effort under difficult circumstances to eveluate a complex project; in fact it is detailed and informative in part (in describing difficult country conditions ), but it fails to provide evidence of the extent various (especially physical) components have been completed . Under section "Future Operations", the ICR discusses chiefly future investments rather than the actual plan for operating the new facilities constructed under the current project and relevant operational indicators .