Administration of Grant Mongolia: Managing Soil Pollution in Ger Areas through Improved On-Site Sanitation Project

Transcription

1 Grant Assistance Report Project Number: November 2016 Administration of Grant Mongolia: Managing Soil Pollution in Ger Areas through Improved On-Site Sanitation Project (Financed by the Japan Fund for Poverty Reduction) This document is being disclosed to the public in accordance with ADB s Public Communications Policy 2011.

2 CURRENCY EQUIVALENTS (as of 10 November 2016) Currency unit togrog (MNT) MNT1.00 = $ $1.00 = MNT2, ABBREVIATIONS ADB Asian Development Bank CSO civil society organization EOJ Embassy of Japan in Mongolia JFPR Japan Fund for Poverty Reduction JICA Japan International Cooperation Agency MET Ministry of Environment and Tourism O&M operation and maintenance PAM project administration manual PMU project management unit SMEs small and medium-sized enterprises WASH water, sanitation, and hygiene NOTE In this report, $ refers to US dollars. Vice-President S. Groff, Operations 2 Director General A. Konishi, East Asia Department (EARD) Director Q. Zhang, Environment, Natural Resources, and Agriculture Division, EARD Team leader Team members Peer reviewer M. Bezuijen, Senior Environment Specialist, EARD T. Badarch, Senior Project Officer (Infrastructure), Mongolia Resident Mission, EARD F. Connell, Principal Counsel, Office of the General Counsel A. Heckmann, Senior Urban Development Specialist, EARD J. Lucero, Project Analyst, EARD A. Morel, Senior Environment Specialist, Southeast Asia Department (SERD) O. Purev, Senior Environment Officer, Mongolia Resident Mission, EARD F. Radstake, Principal Environment Specialist, EARD N. Sapkota, Senior Social Development Specialist, EARD A. Sebastian-Mercader, Senior Operations Assistant, EARD G. Tadevosyan, Social Development Specialist (Safeguards), EARD T. Ueda, Senior Natural Resources Economist, EARD N. Saito, Deputy Country Director, Viet Nam Resident Mission, SERD In preparing any country program or strategy, financing any project, or by making any designation of or reference to a particular territory or geographic area in this document, the Asian Development Bank does not intend to make any judgments as to the legal or other status of any territory or area.

3 PROJECT AT A GLANCE CONTENTS Page I. INTRODUCTION 1 II. THE PROJECT 1 A. Rationale 1 B. Impact and Outcome 3 C. Outputs and Key Activities 3 D. Cost Estimates and Financing Plan 5 E. Implementation Arrangements 6 III. PROJECT FEATURES 7 A. Technical 7 B. Economic and Other Impacts, Financial Viability, and Sustainability 7 C. Governance 8 D. Poverty and Social Impacts 8 E. Participatory Approach 9 F. Development Coordination 9 G. Safeguards 9 H. Risks and Mitigating Measures 10 IV. ASSURANCES AND CONDITIONS 10 V. THE PRESIDENT S DECISION 10 APPENDIXES 1. Design and Monitoring Framework List of Linked Documents 14

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7 I. INTRODUCTION 1. About one-quarter of Mongolia s population resides on the outskirts of Ulaanbaatar, the national capital, within peri-urban communities termed ger (traditional round-shaped dwelling) areas characterized by limited or no access to urban infrastructure, inadequate disposal of human fecal waste, sanitation-related diseases, and increasing risks of soil and water contamination. The grant will support local livelihoods through improved household sanitation and strengthening the life cycle for on-site (decentralized) fecal waste management, including the collection, transport, and composting of waste, in collaboration with communities, the private sector, and civil society organizations (CSOs). The project will serve as a model to scale up onsite sanitation in Mongolia and complement infrastructure development in core urban areas. II. THE PROJECT A. Rationale 2. The provision of basic sanitation services poses special challenges in Mongolia, where traditional solutions of flushing systems and wastewater treatment plants are hindered by limited infrastructure coverage and the very cold and arid climate, in which water is frozen for several months of the year, bacterial decomposition is slow, and water supplies are scarce. About 60% (1.8 million people) of the national population relies on unimproved sanitation facilities, in particular unlined pit latrines. 1 Human waste is discharged directly into the soil and, combined with poor hygiene awareness, presents risks to human health, and the pollution of soil and water. These issues are most apparent in Ulaanbaatar. From 1997 to 2014, the city s population increased from 0.63 million to 1.39 million, and by 2030, is forecast to increase almost 38%. 2 Population growth has exceeded the rate of infrastructure expansion and about 55% (0.77 million people) of the city s population reside in ger areas, which comprise 79% (21,823 hectares) of the city area, around a core urban center. Only 37% of the city population is connected to a centralized sewerage network and most (95%) of ger residents utilize pit latrines. 3 Soils in some ger areas are contaminated with disease-causing pathogens (e.g., salmonella) distinctive of poor sanitation, and waterborne diseases are common. 4 Development programs are expanding the coverage of sewerage networks, but will not reach many ger areas for a decade or more, while the rate of population growth suggests it is unlikely that complete coverage is ever achieved. 3. Improving the sanitation conditions of the ger areas requires addressing at least three areas: (i) strengthening the planning for on-site sanitation, including the development of pilot systems tailored to local socioeconomic and environmental conditions; (ii) pilot testing these systems at the site level, and mobilizing the involvement of the community, private sector, and other stakeholders; and (iii) improving the sustainability of on-site sanitation, through capacity building, and developing a road map for strengthening and scaling up on-site sanitation. 4. At the planning level, no procedures have been established for the collection and disposal of fecal waste in ger areas. The role of local government agencies in managing or Government of Mongolia Achieving the Millennium Development Goals: Fifth National Progress Report Ulaanbaatar. Japan International Cooperation Agency Project on Capacity Development in Urban Development Sector in Mongolia. Ulaanbaatar. World Bank Improving Sanitation in the Ger Areas of Ulaanbaatar City. Ulaanbaatar. WaSH Action in Mongolia Sanitation in Mongolia: Experiences, Challenges and Recommendations. Ulaanbaatar. ( WaSH and WASH have the same meaning [see Abbreviations]; the former is the agency name.)

8 2 regulating sanitation is poorly defined. The private sector has almost no involvement in on-site sanitation, yet significant opportunities exist to mobilize partnerships between the government, contractors, and communities for waste collection, treatment, and disposal. Understanding of the links between the disposal of human fecal waste and soil pollution is limited, and no longterm monitoring programs are in place for soil quality and sanitation-related diseases to help guide the development of policies and plans. Simple, cost-effective, and replicable on-site sanitation systems are required. At least one approach, ecological sanitation, is appropriate for Mongolia and promotes resource recovery of the fecal waste, through the diversion of urine from fecal waste in toilets, composting to certified health standards, and the subsequent sale and/or use as fertilizer. This offers opportunities for income generation and approaches that prevent the discharge of fecal waste into soil, do not require pit excavation, and reduce pressures on wastewater treatment and landfill facilities. 5. At the site level, communities in ger areas have a low understanding of disease transmission channels and limited knowledge or resources to adopt new methods of sanitation. Most pit latrines in ger areas are poorly built and do not meet regulatory standards. About 25% of homes in Ulaanbaatar s ger areas are on steep and/or rocky slopes (footnote 3), providing little opportunity for pit excavation or connection to sewerage networks. Unlicensed operators provide pit emptying services in some areas, but have inadequate equipment and disposal practices. Models for waste collection and treatment are lacking, including procedures and fee arrangements between communities, waste contractors, and composting agencies. 6. At all levels, the sustainability of initiatives that address on-site sanitation needs to be improved. No consolidated group or government agency coordinates stakeholder efforts for onsite sanitation. Advocacy and training are required across stakeholders to prioritize the sanitation agenda (at the government level) and to improve hygiene practices and acceptance of on-site sanitation approaches (at the local levels). Despite increasing policy recognition of the importance of on-site sanitation for ger areas, no strategy or action plan is in place for an integrated sanitation approach for ger areas and urban development, or the replication and scale-up of successful approaches. 7. Government and donor initiatives are addressing some of these issues. Since 2014, the regulatory framework for on-site sanitation has strengthened, with the release of the Law on Hygiene, 2016 (which requires households to upgrade pit latrines and comply with prescribed standards and designs), and new national standards for on-site sanitation and waste composting. National- and city-level policies for urban planning identify the need for on-site sanitation in ger areas (yet do not identify how this will be achieved). Over the past 10 years, donors have pilot tested ecological sanitation approaches with about 370 households in Ulaanbaatar, surveyed local sanitation practices, pilot tested a small composting facility, and prepared reviews (footnotes 3 and 4) of on-site sanitation. 5 Small government initiatives to install ecological sanitation toilets in ger homes have been launched, but focus on toilet designs and give little consideration to the management of fecal waste or soil contamination. These works have been limited by resources and funding, and the scale of impacts has been small, yet they provide a strong platform to build on. The lesson from these efforts, as well as projects by the Asian Development Bank (ADB) elsewhere, 6 is that there is a need to (i) implement advocacy, training, and financial subsidies to develop local ownership for new sanitation approaches; (ii) involve well-defined household clusters (e.g., whole streets) to mobilize local support; and (iii) refine and scale up business models for fecal waste collection and composting. 5 Much of this work has been led by two CSOs: Action Contre La Faim and WaSH Action in Mongolia. 6 ADB From Toilets to Rivers: Experiences, New Opportunities, and Innovative Solutions. Manila.

9 3 8. Support for on-site sanitation in ger areas complements ongoing efforts by the government and donors, including ADB and the Japan International Cooperation Agency (JICA), to improve living standards in Ulaanbaatar. JICA has supported urban planning for Ulaanbaatar since 2007, which resulted in the City Masterplan 2030, 7 the key planning document for urban development. The plan identifies the need to address sanitation in ger areas. Since 2010, ADB has promoted the inclusion of ger areas in city planning. From 2013 to 2022, two ADBsupported projects aim to expand Ulaanbaatar s urban services, including sewerage networks and the supply of affordable housing, but will not reach many outlying ger areas The need for on-site sanitation for ger areas is reflected in national development targets (improved sanitation for 60% of the population) 9 and for Ulaanbaatar (on-site sanitation in ger areas), 10 the Government of Japan s Country Assistance Policy and Midterm Strategic Action Plan for Mongolia (health and sanitation services), 11 and ADB s interim country partnership strategy, for Mongolia (soil and water protection) 12 and environment operational directions, (improved sanitation). 13 ADB is well placed to support on-site sanitation in Mongolia, which represents a new and complementary expansion of its national program and further commitment to improved living standards. The project is included in ADB s grant pipeline as 2016 firm. B. Impact and Outcome 10. The impact will be improved public health conditions and reduced soil pollution in ger areas. The outcome will be a demonstrated model for on-site sanitation and the prevention of soil pollution from human waste in ger areas. C. Outputs and Key Activities 11. The project will have three outputs: (i) planning for on-site sanitation strengthened, (ii) on-site sanitation life cycle piloted, and (iii) sustainability for on-site sanitation improved. Activities under outputs 1 and 2 will be piloted in three khoroos (subdistricts) of two districts of Ulaanbaatar Output 1: Planning for on-site sanitation strengthened. This output will develop mechanisms for planning of the on-site sanitation life cycle, to be pilot tested in output 2, comprising procedures and costs for waste containment at households, collection and transport of the waste, treatment, composting, sale of the compost, and monitoring. Procedures will build on tested approaches in Mongolia and elsewhere, and focus on addressing the remaining gaps in the life cycle, especially arrangements between communities and small and medium-sized 7 Government of Mongolia Ulaanbaatar City Master Plan Ulaanbaatar. 8 ADB Technical Assistance to Mongolia for Ulaanbaatar Water and Sanitation Services and Planning Improvement. Manila; ADB Report and Recommendation of the President to the Board of Directors: Proposed Multitranche Financing Facility to Mongolia for the Ulaanbaatar Urban Services and Ger Areas Development Investment Program. Manila; and ADB Technical Assistance to Mongolia for the Ulaanbaatar Affordable Housing and Urban Renewal Project. Manila. 9 Government of Mongolia Green Development Policy, Ulaanbaatar. 10 Government of Mongolia Green Development Strategic Action Plan for Ulaanbaatar Ulaanbaatar. 11 Government of Japan, Ministry of Foreign Affairs Country Assistance Policy for Mongolia. Tokyo. 12 ADB Interim Country Partnership Strategy: Mongolia, Manila. 13 ADB Environment Operational Directions, Manila. 14 The 27th khoroo (Bayanzurkh District) and 12th and 13th khoroos (Chingeltei District). Khoroos were selected based on socioeconomic status, severity of sanitation and/or soil pollution issues, and absence of urban development plans.

10 4 enterprises (SMEs) for waste collection, transport, and composting. This will include (i) roles and responsibilities for stakeholders at each stage of the on-site sanitation life cycle, tailored to the conditions of the project districts; (ii) the procedures, costs, and financial incentives for waste collection (between contractors and communities), including fees and rates affordable for households; 15 (iii) the development of pilot agreements between SMEs for waste collection and composting; (iv) strengthening the capacity of SMEs for the marketing and sale of the composted products; and (v) the establishment of two monitoring programs in selected project sites, one for soil quality and one for the occurrence and incidence of sanitation-related diseases, to provide baseline data for the target areas. These will be the first long-term monitoring programs for soil quality pollution from human waste and sanitation in Ulaanbaatar. 13. Output 2: On-site sanitation life cycle piloted. This output will (i) implement a community outreach program to facilitate and support beneficiary selection, training, and installation and operation and maintenance (O&M) of on-site sanitation units; (ii) establish three community management groups (one per khoroo) to mobilize household participation; 16 (iii) install around 1,500 on-site sanitation units (one per household), utilizing one of at least two technologies, ecological sanitation toilets, and holding tanks (simple storage tanks). 17 Unit designs and materials will be based on simple, tested technology, site conditions, and costeffective local materials. The ecological sanitation toilets will pilot the principle of resource recovery (from waste to composting) embodied by the ecological sanitation approach. Holding tanks will be applied for households in areas with shallow aquifers and/or adjacent to surface water, where the risks of soil and water contamination are highest; (iv) implement pilot agreements between the waste contractors and communities, including procedures for waste collection, fees, 18 O&M of the completed toilet units, and an O&M manual; and (v) strengthen the management capacity of SMEs for composting to market and sell composted products, while applying the technical composting procedures already developed and tested in Mongolia. 19 Each step in the life cycle will be accompanied by a strong participatory approach and extended project support for local skill development, employment, and project ownership. 14. Output 3: Sustainability for on-site sanitation improved. This output will strengthen the replication and scaling up of on-site sanitation in Mongolia beyond the project. The project will (i) establish the first national working group for on-site sanitation, 20 which will guide planning Preliminary payment mechanisms, approximate number of participating households, and cost estimates for toilet installation and fecal waste collection were developed during the design phase, based on project surveys of household affordability and willingness-to-pay and actual costs from other donor projects and surveys. The groups will represent the participating households, establish contracts with waste contractors for waste collection, and coordinate the payment of household waste collection fees. Participating households will be identified based on poverty status, severity of sanitation and/or soil pollution issues, and community feedback obtained during the first stages of the community outreach program. Technologies preventing or reducing soil pollution was identified through a review of on-site sanitation in cold countries, including designs tested and adapted to Mongolian conditions. Selection criteria included the need for simple and replicable designs, dry (non-flushing) systems, design life, improved hygiene, and costs of installation and maintenance. In the event that new technologies are developed in Mongolia or elsewhere which are suitable to local conditions and compatible with the project social and safeguard objectives, these may also be piloted. The estimated cost of waste collection is $5.3 per household per collection. The project will subsidize 100% of the cost of toilet installation (based on lessons learned from previous projects, in which lack of initial project support caused delays) for all recipient households and, for poor (including female-headed) households, 50% of the waste collection fee, for up to 12 collections (3 years). To strengthen ownership, households will be required to pay the waste collection fees prior to toilet installation. Waste collection will be quarterly, based on mean household size, container dimensions, and cost. The community outreach program will support households to continue planning for waste collection fees after the 3-year project subsidy has ended. Project support will include training and limited provision of specialist equipment to contractors for waste collection and/or composting. Equipment will initially be leased to contractors and then handed over at project completion. The group will include representatives from relevant line ministries and other stakeholders.

11 5 for sanitation in ger areas and support an integrated approach with urban development plans; (ii) implement training programs and technical support for households, contractors, and line ministries for on-site sanitation; (iii) disseminate the results of the project to line ministries, the private sector, and civil society, to promote on-site sanitation for other ger areas; and (iv) prepare the first national road map for sanitation planning for ger areas. This will consolidate the lessons from outputs 1 3 and provide a model for on-site sanitation in Mongolia. It will include a 5-year scale-up strategy and investment plan, which identifies other ger areas of high priority for on-site sanitation and the management of soil pollution, specific follow-up actions, roles and responsibilities, costs, financing mechanisms, and work schedules. 15. Project management. The executing agency lacks the personnel and resources needed to implement the project fully. The grant proceeds will (i) establish the administrative framework for the project, including a steering committee and project management unit (PMU); and (ii) finance the specialist support and PMU operational costs required to implement outputs 1 3. The PMU will implement the project on behalf of the executing agency, including accounting, procurement, training, preparation and dissemination of knowledge products, monitoring, and reporting. 16. Project location. The need for on-site sanitation in ger areas elsewhere in Mongolia is increasing, although at smaller scales than in Ulaanbaatar. During project design, the potential to include a second location was assessed. The project focuses on Ulaanbaatar as (i) it is the largest population center in Mongolia, with the highest incidence of poor sanitation, so actions here offer the greatest potential gains; (ii) partial solutions for on-site sanitation have already been developed in Ulaanbaatar, and combined with an increasingly supportive policy environment, provide a timely opportunity to leverage limited funds to complete the sanitation life cycle; (iii) the only compost facilities in Mongolia are located in Ulaanbaatar; (iv) the two largest towns in Mongolia after Ulaanbaatar support higher proportions of centralized water and sewerage services (50% in Darkhan and 40% in Erdenet) than Ulaanbaatar (37%), and have received recent donor assistance for wastewater treatment; 21 and (v) the use of limited grant funds is maximized by focusing on a single location. 17. Stakeholder communication and dissemination of project results. Public awareness for on-site sanitation is increasing. A project stakeholder communication strategy has been prepared to promote the project activities and lessons learned, and is in the project administration manual (PAM). 22 The strategy describes target audiences and media approaches, including events and workshops. D. Cost Estimates and Financing Plan 18. The project is estimated to cost $2.8 million (Table 1). 21 Sarantuyaa and Basandorj Water and Sanitation in Municipalities in the Selenge River Basin of Mongolia. Ulaanbaatar. 22 Project Administration Manual (accessible from the list of linked documents in Appendix 2).

12 6 Table 1: Cost Estimates Item Amount ($) a Share of Cost (%) A. Base Cost b 1. Planning for on-site sanitation strengthened 203, On-site sanitation life cycle piloted 1,697, Sustainability for on-site sanitation improved 90, Project management 401, Subtotal (A) 2,392, B. Contingencies c 407, Total (A+B) 2,800, a Includes (i) taxes and duties of $136,000 to be financed by the Japan Fund for Poverty Reduction on a grant basis and administered by the Asian Development Bank. The amount of taxes and duties is determined on the basis that (a) the amount will be within the reasonable threshold identified during the country partnership strategy preparation process, (b) the amount will not represent an excessive share of the project investment plan, (c) the taxes and duties apply only to the grant-financed expenditures, and (d) the financing of taxes and duties is relevant to the success of the project; (ii) costs associated with implementing relevant safeguards and social and gender action plans, and (iii) estimated cost for annual auditing ($40,381). b In 2016 prices as of 15 April c Price contingencies computed on all costs except international and national consultants, based on cost escalation factors of 7.0% for for local currency costs; 1.4% for 2017, and 1.5% for on foreign exchange costs; and 10.0% for national consultant fee rates in the final 2 years of project implementation. Source: Asian Development Bank estimates. 19. The Japan Fund for Poverty Reduction (JFPR) will provide grant financing equivalent to $2.8 million, to be administered by ADB. The grant covers equipment, materials, project management consulting services, and training. The financing plan is in Table 2. The executing agency and district governments will provide in-kind counterpart support in the form of personnel and associated costs for salaries and project-related travel; office space for the PMU; and community outreach and participation, awareness raising, and training. Table 2: Financing Plan Source Amount ($ million) Share of Total (%) Japan Fund for Poverty Reduction a Government and beneficiaries Total a Administered by the Asian Development Bank. Source: Asian Development Bank estimates. E. Implementation Arrangements 20. The project will be implemented over 4 years (January 2017 December 2020). The Ministry of Environment and Tourism (MET), acting through the Department of Land Management and Integrated Water Policy Coordination, will be the executing agency. The executing agency will be supported by a PMU comprising a team of full-time and part-time consultants (including an accountant, to support the project financial management), which will be based in the MET offices in Ulaanbaatar. A project steering committee chaired by the executing agency will be established, and will provide oversight and policy guidance for the project and meet at least semiannually. The committee will include representatives from Ulaanbaatar municipal government and CSOs. ADB and the Embassy of Japan in Mongolia (EOJ) will be invited to participate as observers. Procurement of goods and works 23 will follow ADB s Procurement Guidelines (2015, as amended from time to time), and consultant recruitment will follow ADB s Guidelines on the Use of Consultants (2013, as amended from 23 The major components for procurement are materials and labor for construction of the sanitation units.

13 7 time to time). The implementation arrangements are summarized in Table 3 and described in detail in the PAM (footnote 22). Table 3: Implementation Arrangements Aspects Arrangements Implementation period January 2017 December 2020 Estimated completion and closing 31 December 2020 and 30 June 2021 respectively dates Management (i) Oversight body Project steering committee (ii) Executing agency Ministry of Environment and Tourism, acting through the Department of Land Management and Integrated Water Policy Coordination Procurement National competitive bidding 3 lots $1,269,589 Shopping for goods 7 contracts $226,147 Consulting services Individual consultant selection 11 consultants $618,340 Consultants qualifications selection 4 contracts $405,965 Least-cost selection 1 contract $49,883 Single-source selection 3 contracts $25,519 Advance contracting Not applicable under national laws at the time of project preparation. Disbursement The grant proceeds will be disbursed in accordance with ADB s Loan Disbursement Handbook (2015, as amended from time to time) and detailed arrangements agreed upon between the government and ADB. ADB = Asian Development Bank. Source: ADB. III. PROJECT FEATURES A. Technical 21. The project design was prepared by the government, ADB, and a team of technical specialists (sanitation, soil, health, policy, and finance) funded by the JFPR and Sanitation Financing Partnership Trust Fund 24 under the Water Financing Partnership Facility, based on site visits, stakeholder consultations, and desktop review. To complement the PAM and avoid delays after project effectiveness, a technical manual for project implementation was prepared, and includes the soil and sanitation monitoring programs under output 1. During project implementation, the consulting services will provide the necessary administrative and technical support to ensure that best practices are integrated into the detailed designs and implementation. Climate risk to the project is low given the small size of facilities, and simple and waterless designs of the sanitation units. B. Economic and Other Impacts, Financial Viability, and Sustainability 22. Improved sanitation results in improved health, dignity, and economic benefits owing to reduced health care expenses and greater productivity. These benefits, although not quantified, are expected under the project. The project design will also strengthen the financial viability and sustainability of the on-site sanitation life cycle through (i) use of the two selected sanitation technologies, which were identified as the least-cost options for purchase, construction, use of local materials, O&M, and affordability for the target communities; (ii) establishment of community groups to mobilize households for payment of waste collection fees; (iii) strengthening the business management capacity of SMEs for waste collection and the marketing and sale of compost; (iv) capacity building for the project communities, contractors, and government agencies; (v) establishment of the first national working group for on-site 24 Financing partner: Bill and Melinda Gates Foundation.

14 8 sanitation; and (vi) preparation of the first road map for on-site sanitation in Mongolia, which will promote a model for integration with urban development planning. The project design supports the key recommendations of donor reviews (footnote 4) for on-site sanitation in Ulaanbaatar, including the use of simple, affordable, and tested solutions, strengthening local capacity and the role of the private sector, and the establishment of a national working group. C. Governance 23. Financial management and procurement risk assessments were conducted for the executing agency. The pre-mitigation financial risks for the project are medium and the procurement management risks are high. The executing agency lacks in-house qualified financial and procurement personnel, but is supported by the MET s Economic, Financial and Planning Division, which provides financial and auditing oversight, including for donor-funded projects. A financial management action plan has been prepared and includes the following risk mitigation measures: (i) a qualified accountant and a procurement specialist will be recruited under the PMU; and (ii) accounting software acceptable to ADB will be used, supported by hard copy records. The Ministry of Finance and the MET will establish a procurement committee for the project to review and approve the work of the PMU procurement specialist. ADB, through the project team, will provide support and mentorship on procurement and consultant recruitment. ADB s Anticorruption Policy (1998, as amended to date) was explained to and discussed with the government and MET, which is aware of ADB s disclosure requirements for project reports and auditing. The specific policy requirements and supplementary measures are described in the PAM (footnote 22). D. Poverty and Social Impacts 24. The project s poverty targeting classification (TI-M) reflects its focus on the ger areas of Ulaanbaatar, a demographic sector characterized by high unemployment and limited access to sanitation infrastructure. The project khoroos support the second and third highest numbers of poor people in Ulaanbaatar respectively. The project is designed for livelihood improvement, and is classified effective gender mainstreaming under ADB s project gender classification system. Output 1 will establish and/or strengthen new income opportunities for SMEs through improving the business and marketing systems for fecal waste collection, transport, and composting. Output 2 will provide sanitation facilities for about 1,500 households (16% of households in the target khoroos), benefitting about 5,900 women, men, and children. 25 Outputs 2 and 3 will benefit the wider community in each project khoroo through the community outreach and khoroo clinic programs. A social and gender action plan was prepared and includes quantitative targets for the involvement of poor households, especially households headed by women, which comprise about 80% of poor households (footnote 25), as well as female representation in the national working group. Women play a critical role in household sanitation, and the community outreach program will empower and mobilize female community members to lead key aspects of the project activities. The project s inclusive approach and the social and gender action plan targets for gender and livelihoods also support national targets for gender equity Based on a mean household size of 3.94 persons in three project khoroos. National Statistical Office Chingeltei and Bayanzurkh Statistical Data Bulletins. Ulaanbaatar. 26 Government of Mongolia Environmental Sector Gender Strategy Ulaanbaatar.

15 9 E. Participatory Approach 25. Participating households, khoroo government agencies, local clinics, and SMEs for waste collection and composting will be the primary project beneficiaries involved in the installation and O&M of toilet units, waste collection, composting, and training. Demonstration of the on-site sanitation life cycle will depend on the active and sustained engagement of these stakeholders. The community outreach program will play a key role in establishing the community management groups, facilitating household selection and participation, O&M of toilet units, and payment of waste collection fees. Khoroo agencies will help coordinate community involvement and training, through their knowledge and networks with the communities. Khoroo clinics will co-prepare the project sanitation training agenda and lead the distribution of project materials on sanitation and hygiene to patients. The project will collaborate with CSOs involved in sanitation and soil pollution in Mongolia, including the National University of Medical Sciences and WaSH Action in Mongolia. Both agencies were consulted during project preparation and will be invited to collaborate and co-implement relevant project activities and trainings. F. Development Coordination 26. Consultative meetings were held with the EOJ, JICA, government agencies, and CSOs during project preparation. Their guidance improved the project design, including a focus on key elements in the on-site sanitation life cycle, and alignment with the Government of Japan country strategy for Mongolia. Coordination with the EOJ, JICA, and CSOs is embedded in the project design and defined in the roles and responsibilities for the project steering committee, executing agency, and PMU team (footnote 22). JFPR guidelines for development coordination and donor visibility are specified in the project documents and include the provision of project materials to the Government of Japan. Two CSOs Seitoku University (Japan) and Mongolia s University of Medical Sciences are conducting a 3-year research project on community health and soil contamination in Ulaanbaatar s ger areas. Both projects will focus on the same target districts for co-planning of surveys, training, hosting of key events, and information exchange. 27 G. Safeguards 27. Environment (category C). Environmental safety guidelines for project implementation have been prepared and are included in the PAM (footnote 22). The guidelines comply with ADB s Safeguard Policy Statement (2009) 28 and include a simple environmental management plan, which describes safeguard screening, management, and reporting procedures. The executing agency, supported by the PMU, will be responsible for environmental management plan implementation. The screening procedures exclude any category A or B activities. No significant adverse environmental impacts are expected. Environmental benefits include the use of dry (water-saving) waste systems, prevention of fecal waste entering the soil, promotion of resource recovery, and reduced pressures on wastewater treatment plants and landfill sites. 28. Involuntary resettlement (category C) and indigenous peoples (category C). The project does not involve involuntary resettlement or land acquisition. On-site sanitation units will be constructed on existing residential plots of beneficiary households. The project does not 27 Specific Coordination Details with the Embassy of Japan in Mongolia and the Japan International Cooperation Agency, and Japanese Visibility (accessible from the list of linked documents in Appendix 2). 28 ADB s Safeguard Policy Statement is available in English and Mongolian at safeguard-policy-statement and

16 10 impact any ethnic minority communities that would trigger ADB s policy requirements on indigenous peoples. H. Risks and Mitigating Measures 29. The project has potential governance, financial, and procurement risks. It provides adequate measures to mitigate these risks, and the integrated benefits and impacts are expected to outweigh the costs. Risks and mitigating measures are summarized in Table 4. Risks Personnel of the executing agency have limited experience in financial management and procurement. Participating households have limited adoption and/or operation and maintenance of the new sanitation designs. Installation of sanitation units was delayed because of seasonality and harsh winters. ADB = Asian Development Bank. Source: ADB. Table 4: Summary of Risks and Mitigating Measures Mitigating Measures (i) Project team will include an accountant and a procurement specialist; (ii) financial management software acceptable to ADB will be used for the project, supported by maintenance of hard copy ledgers and records; (iii) a national procurement review team will be established to support the project; and (iv) ADB training in disbursement, procurement, and consultant recruitment will be provided to the executing agency. A comprehensive participatory approach, including community outreach, consultations, training, and designs tailored to sites and local affordability will promote community support. (i) Advanced technical preparation in the project design phase will enable timely implementation; (ii) installation of units will be timed for spring to autumn; and (iii) unit designs promote climate resilience because of dry (waterless) systems and elevated cabins. IV. ASSURANCES AND CONDITIONS 30. The government and the MET have assured ADB that implementation of the project shall conform to all applicable ADB policies including those concerning anticorruption measures, safeguards, gender, procurement, consulting services, and disbursement as described in detail in the PAM and the grant agreement The government and the MET have agreed with ADB on certain covenants for the project, which are set forth in the grant agreement. These include the condition that no withdrawals shall be made from the grant account until the executing agency has certified to ADB that a project manager, accountant, and procurement specialist meeting the requirements set out in the PAM has been engaged. V. THE PRESIDENT S DECISION 32. The President, acting under the authority delegated by the Board, has approved the administration by ADB of the grant not exceeding the equivalent of $2,800,000 to Mongolia for the Managing Soil Pollution in Ger Areas through Improved On-Site Sanitation Project, to be provided by the Japan Fund for Poverty Reduction. 10 November 2016 Takehiko Nakao President 29 Legal document to be signed by the government and ADB.

17 Appendix 1 11 Impacts the Project is Aligned With DESIGN AND MONITORING FRAMEWORK Public health conditions in ger a areas improved and soil pollution in ger areas reduced (Green Development Policy and Sustainable Development Vision 2030) b Performance Indicators with Targets Results Chain and Baselines Outcome By 2020: Model for onsite a. On-site sanitation life cycle sanitation (O&M of toilet units, and collection and and the treatment of fecal waste) established prevention of for about 1,500 households in soil pollution Bayanzurkh and Chingeltei districts from human (2016 baseline: 0 household) waste in ger areas b. Soil contamination from pollutant demonstrated inputs from human waste prevented: urine (about 945 tons/year) and feces (about 252 tons/year) (2016 baseline: 0 ton) c Outputs 1. Planning for on-site sanitation strengthened By 2019: 1a. Pilot system for on-site sanitation, fecal waste management, and treatment endorsed by the project district governments (2016 baseline: 0 system) Data Sources and Reporting Mechanisms a b. MET and UMG annual reports, and project progress and completion reports b. Soil pollution program monitoring results, and General Agency for Specialized Inspection reports on sampling and inspection 1a b. MET and UMG annual reports, and project technical and progress reports Risks Inadequate enforcement of laws and standards for sanitation and water source protection Soil contamination caused by other factors, e.g., greywater Limited consensus between agencies on development planning approaches 2. On-site sanitation life cycle piloted 1b. Soil quality and sanitation-related monitoring programs conducted since 2017 at the designed sampling locations, timing, and frequency (2016 baseline: 0 program) By 2019: 2a. At least one pilot system for on-site sanitation implemented, which involves the private sector, civil society, and communities (2016 baseline: 0 system) 2b. On-site sanitation toilet units installed for about 1,500 households, of which at least 30% (450) are poor households, comprising at least 70% (315) households headed by women (2016 baseline: 0 household) 2a e. Project technical and progress reports, and MET and UMG annual reports 2b. General Agency for Specialized Inspection reports Low willingness to pay for fecal waste collection by target communities despite project subsidies and/or other incentives Inadequate marketing of compost 2c. About 5,900 people from the 1,500 target households directly benefit from the installed toilet units, including about 3,072 females d (2016 baseline: 0 people)

18 12 Appendix 1 Results Chain Performance Indicators with Targets and Baselines Data Sources and Reporting Mechanisms Risks 2d. At least 80% of the installed facilities are maintained in accordance with the project O&M manual (2016 baseline: 0 facility) 3. Sustainability for on-site sanitation improved 2e. About 50 tons of compost produced and certified to the national standard, of which at least 50% is sold (2016 baseline: 0 ton) By 2019: 3a. About 3,000 persons from at least 1,500 households and 10 agencies trained in the on-site sanitation life cycle, of which at least 40% (1,200) are women (2016 baseline: 0 training) 2e. Compost firm account books 3a b. Project progress reports, MET and UMG annual reports 3b. Road map for sanitation planning in ger areas submitted by the national sanitation working group (of which at least 30% are women) to relevant ministries (2016 baseline: 0 road map) Key Activities with Milestones 1. Planning for on-site sanitation strengthened 1.1 Develop and implement pilot system for on-site sanitation and fecal waste management, including waste collection and treatment (Q Q4 2020) 1.2 Implement monitoring programs for soil and sanitation-related disease, including baseline assessments of soil contamination and sanitation in target sites (Q Q4 2020) 2. On-site sanitation life cycle piloted 2.1 Prepare and implement community outreach program, ensuring the engagement of households that are poor and/or headed by women (Q Q4 2020) [GCD] [GE] 2.2 Identify participating households, with emphasis on the inclusion of households that are poor and/or headed by women, and establish implementation arrangements (Q2 2017) [GE] 2.3 Finalize the designs of the selected toilet models based on gender-balanced consultation, gender needs, and site conditions (Q3 2017) [GE] 2.4 Prepare and disseminate O&M manual for the facilities (Q Q1 2018) [GCD] [GE] 2.5 Install toilet units in households (Q Q2 2019) [GCD] [GE] 2.6 Implement waste collection fees and procedures (Q Q4 2020) 2.7 Implement compost marketing and sales (Q Q4 2020) 3. Sustainability for on-site sanitation improved 3.1 Establish national working group for on-site sanitation (Q Q4 2020) [GCD] [GE] 3.2 Prepare and implement training and technical support on improved sanitation for the government, private sector, and beneficiary communities (Q Q4 2020) [GCD] [GE] 3.3 Prepare road map for sanitation planning in ger areas, including scale-up strategy, investment plan, 5-year action plan, and integration with urban infrastructure planning (Q1 Q2 2020) [GCD] Project Management Activities Establish steering committee (at least 40% female members) and project management unit (Q1 Q2 2017) [GCD] [GE]

19 Appendix 1 13 Project Management Activities Assign government and community counterparts (Q1 2017) [GCD] [GE] Procure materials for on-site sanitation facilities (Q3 2017) Prepare annual work plans and ensure 100% of milestones are met (Q Q4 2020) Implement and monitor project activities and targets, including the design and monitoring framework, environmental safety guidelines, social and gender action plan, and stakeholder communication strategy (Q Q4 2020) Prepare semiannual progress reports, and inception, midterm, and final reports (Q Q4 2020) Prepare and disseminate project materials and, at least, two knowledge products (Q Q3 2020) [GCD] Inputs Japan Fund for Poverty Reduction: $2.8 million GCD = governance and capacity development, GE = gender equity, MET = Ministry of Environment and Tourism, O&M = operation and maintenance, Q = quarter, UMG = Ulaanbaatar Municipal Government. a Traditional round-shaped dwelling. b Government of Mongolia Green Development Policy. Ulaanbaatar; and Government of Mongolia Sustainable Development Vision Ulaanbaatar. c Assumes a total of 1,500 beneficiary households, mean household size of 3.6 persons (National Statistical Office Chingeltei and Bayanzurkh Statistical Data Bulletins. Ulaanbaatar), and mean minimum production of grams of feces/person/day and 1.42 liters of urine/person/day. C. Rose et al The Characterization of Feces and Urine: A Review of the Literature to Inform Advanced Treatment Technology. Critical Reviews in Environmental Science and Technology. 45 (17). pp. 1,827 1,879. d In 2014, the total population of the three project khoroos (subdistricts) was 37,841 people (27th Khoroo, Bayanzurkh: 13,570 people; 12th Khoroo, Chingeltei: 15,647 people; and 13th Khoroo, Chingeltei: 8,624 people), comprising 18,164 males and 19,677 females, a sex ratio of 1 male:1.08 females. Mean household size was 3.94 persons. The three khoroos had about 9,609 households, including 1,135 (12%) poor households, of which 909 (80%) were households headed by women. (National Statistical Office Chingeltei and Bayanzurkh Statistical Data Bulletins. Ulaanbaatar). A total of 5,900 beneficiaries represent 16% of the total population of the three khoroos. The target of 3,072 females represents 52% of the beneficiaries. The actual number of beneficiaries is anticipated to be higher because of the shared use of toilet facilities by two or more families in a single land plot. Source: Asian Development Bank estimates.

20 14 Appendix 2 LIST OF LINKED DOCUMENTS 1. Grant Agreement 2. Project Administration Manual 3. Summary Poverty Reduction and Social Strategy 4. Social and Gender Action Plan Supplementary Documents 5. Japanese Visibility 6. Specific Coordination Details with the Embassy of Japan in Mongolia and the Japan International Cooperation Agency 7. Financial Management Assessment 8. Procurement Risk Assessment