Alat and Karakul Water Supply Project Region. Europe and Central Asia Country. General Water and Sanitation Lending Instrument

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1 Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized PROJECT INFORMATION DOCUMENT (PID) CONCEPT STAGE Report No.: AB6039 Project Name Alat and Karakul Water Supply Project Region Europe and Central Asia Country Uzbekistan Sector General Water and Sanitation Lending Instrument SIL Project ID P Parent Project ID NA Borrower(s) Republic of Uzbekistan Implementing Agency Uzkommunhizmat, Bukhara Regional Vodokanal (BRVK), Alat District Vodokanal (AVK), Karakul District Vodokanal (KVK) Environmental Screening [ ]A []B [ ]C [ ]FI [ ]TBD (to be determined) Category Date PID Prepared 10/21/1010 Estimated Date of Appraisal 03/08/2011 Completion Estimated Date of Board O5/31/2010 Approval Concept Review Decision Following the review of the concept, the decision was taken to proceed with the preparation of the operation. Other Decision Not Applicable I. Introduction and Context Country Context Uzbekistan is an upper low income, resource rich country accounting for nearly half of Central Asia s population. Following independence in 1991, the Government s home-grown, gradualist, state-led development strategy has delivered consistent, and since the mid-2000s, robust economic growth as well as gradually progressing reforms. This approach eased the social costs of transition and reduced the economy s vulnerability to external shocks. At this stage, a key priority is to further develop the private sector to improve the potential for growth and the welfare of the population. Uzbekistan s economy has been relatively unaffected by the global slowdown. This was due mainly to its cautious approach to participation in the world financial markets and tight state control over financial sector development; the effects of a large fiscal stimulus; and increased exports of key commodities. According to official data, GDP growth, after accelerating from 7 percent in 2005 to over 9 percent in 2008, slowed only slightly to 8.1 percent in 2009, in line with the government s target. Until the crisis, the economic growth was largely fueled by booming commodity prices and manufactured exports. Construction, trade and services sectors accounted for approximately 2/3 of real GDP growth in In the aftermath of the crisis with external demand for manufactured goods having declined, the growth was supported by large investments financed by an anti-crisis fiscal stimulus and increased domestic consumption.

2 2 Sectoral and Institutional Context Since independence, Uzbekistan s municipal services sector has been decentralized. Service provision responsibility was transferred to local governments which became responsible for a larger share of expenditures on housing and utilities services. During the past 10 years, the Government focused efforts on strengthening the legal and institutional foundation for reforming the municipal services sector. Despite these efforts and given the large needs, inadequate investment and maintenance of infrastructure led to a continued decline in the state of municipal infrastructure services. Public infrastructure managed by most local governments is twenty or more years old and maintenance has been very poor. Installed technology is often inefficient from an energy-use perspective, or poorly designed, or both. The decline has resulted in a reduction of level of service and in the quality of life for the population, and has constrained private sector growth. This has led to inefficient practices and extensive subsidization of most utility services, especially in sectors such as water supply and sanitation. A Water Supply and Sanitation Sector Note was developed by the World Bank in partnership with GOU in The note reviews the status and issues of sector development. It identifies five priority reform and investment areas as follows: (i) enact demand management policies in urban water systems; (ii) implement urgent maintenance and rehabilitation programs; (iii) strengthen the institutional capacity of water supply and sanitation utilities; (iv) Rehabilitate and expand wastewater collection and treatment systems; and (v) rehabilitate and upgrade rural water supply systems. In this context, GOU has assigned high priority to improving environmental and public health conditions associated with deficient water supply services in rural areas. The Alat-Karakul districts are located in the Bukhara Region. The Bank is financing two other Projects in the Region: (i) the Bukhara-Samarkand Water Supply Project; and (ii) the Bukhara-Samarkand Sewerage Project. A Project Coordination Unit at the central level in Uzkommunhizmat is responsible for coordinating all projects in the communal services sector, and a Project Implementation Unit within the Bukhara regional water supply and sanitation utility is responsible for implementation of sector projects in the Bukhara region. These institutions now have relevant experience in implementing Bank-financed Projects. Relationship to CAS The Country Assistance Strategy (CAS) for Uzbekistan ( ) identifies basic infrastructure as one of the potential constraints to faster and widespread growth in the future. Uzbekistan has generally maintained its infrastructure in better condition than have some of its neighbors and has continued to invest in selected basic infrastructure projects throughout the transition period. Nevertheless, it is facing a major challenge going forward given its large stock of infrastructure assets inherited from the Soviet Union. As a result, the financing needs required to ensure that the provision and the quality of infrastructure services support future growth objectives will be immense in both urban and rural areas. The CAS also emphasizes the need to improve the performance of utility and communal services in large and small cities, towns and villages, and proposes rehabilitation and extension of water supply, sewerage and solid waste management systems; the reduction of physical and commercial losses and the installation of energy efficient systems. It also proposes a focus on a combination of operational efficiency with financial sustainability. The CAS Progress Report (May 2010) indicated that CAS outcomes for increased access to clean water measured by improved reliability, enhanced water quality, and better financial viability under the Bukhara and Samarkand Water Supply Project are on track for attainment by the end offy11. Lessons

3 3 learned for institutional development under the project, may be applied in other cities, and can help inform the design of similar projects in the sector. II. Proposed Development Objective(s) Proposed PDO: The proposed project development objective (PDO) is to improve the coverage, quality, and efficiency of public water supply services in the two districts (rayons) of Alat and Karakul in the Bukhara region. The objective would be achieved through rehabilitation and/or replacement of the existing water supply infrastructure that has now reached the end of its useful life. Key Results Achievement of project objectives would be measured by the following proposed performance indicators: (i) number of people (or households) with access to improved water service due to the Project(core indicator). (ii) increase in the number of water samples from the distribution systems that meet national quality standards; (iii) Customer satisfaction with water services Other indicators (i) reduced energy usage for water supply production (Kwh/m3 produced) (ii) reduction in water leakage (m3 of unaccounted for water) (iii) reduction in number of breaks/km of network. (iv) improve collections and cost coverage. III. Preliminary Description Project Description The Alat and Karakul districts lie in the Bukhara region, adjacent to the border of Turkmenistan. The town of Karakul is about 60 km from Bukhara city, and 15Km further lies the town of Alat. The Alat district has a population of 82,000 including the main district town of Alat with approximately 12,000 people. In 2008 in the total district the coverage of population with water supply was about 23%. Only the town of Alat has been reported by the utility as having 100% coverage of population with continuous 24/7 supply. The Karakul district has a total population of 127,000, which includes 22,000 people in Karakul town. In 2008 water network service coverage across the district was only about 15%. The town of Karakul features 60% coverage of population for an average of 2-3 hours/day. The water tariffs in Alat as well as in Karakul are very low. As of October 1 st, 2008 consumption tariffs for the various customer categories were as indicated in the table below:

4 4 Alat 2008 Sum / m3 Karakul 2008 Sum / m3 Domestic 80 Domestic 85 Budget Organisations 171 Budget Organisations 278 Commercial / Industry 187 Commercial / Industry 278 The Government has initiated the preparation of the proposed project using the financing for project preparation provided under the Bukhara and Samarkand Sewerage Project. An assessment of the current situation and proposed investment was completed in April 2009, and the Terms-of-Reference for the feasibility study was launched after discussions with the Government. It is expected that the feasibility study will be available in November The preliminary feasibility study recommends a two-stage approach focusing on system rehabilitation and extension respectively, estimated at $34.6 million and $26.4 million inclusive of all taxes and duties (about 20%). The first stage (i.e. the proposed project) will allow rehabilitation of backbone water supply infrastructure for potable water production and transmission, as well as benefit existing connected water users in the towns of Alat and Karakul (combined population 32,000). The second stage will allow extension of piped potable water service to an additional 151,000 people, with 90% coverage in 8 rural communities). It is expected that the proposed Project (or first stage) will comprise the following components: Component A. Alat Water Supply System Rehabilitation. This component will include several subcomponents designed to upgrade the main infrastructure providing water supply to the Alat district. This will include: (a) complete rehabilitation of the sedimentation pond at Dvoinik to remove accumulated sludge, refurbish the embankments and protect the area and the pumping station with fencing; (b) rehabilitation of the Transmission Main Intake at Dvoinik to minimize breakdowns. This will require the replacement of year old corroded pipes; (c) rehabilitation of the water treatment plant (WTP) and auxiliary facilities, which will require sludge removal, pipe and filter replacement, and other rehabilitation work; (d) rehabilitation of Alat Town Water Distribution Network to minimize breakdowns, which would require the replacement/rehabilitation of about 15Kms of pipes; (e) preparation of design work for the extension of then network to 4 or more villages in the Alat district. Component B: Karakul Water Supply System Rehabilitation. This component will include several subcomponents designed to upgrade the main infrastructure components of the system: (a) rehabilitation of the transmission lines (about 13 Km) between Alat and the Karakul reservoirs to avoid frequent breakdowns by replacing old corroded pipes; (b) rehabilitation of the Karakul Reservoirs and Pumping Station. Both existing reservoirs (1000 m3) are out of use and require complete refurbishment and capacity expansion to provide service to additional areas. The pumping station also requires complete refurbishment with new mechanical and electrical equipment as well as control system; (c) rehabilitation of the Karakul town Water Distribution Network to avoid breakdowns through rehabilitation or replacement of about 18 Kms of pipes; and (d) feasibility and design work to prepare extension of services to about 4 surrounding villages. Component C: Technical Assistance and Project Management. This component will include two subcomponents: (a) technical assistance to the two district vodokanals to improve their management and operations of the utility and the system. This will include support for their internal financial monitoring and reporting systems, including billing and collection, support for improvements in customer services and support for engineering and operational skills; and (b) project management support including

5 5 additional staff at the PCUs, audits, follow up customer surveys and monitoring and evaluation, including possible benchmarking and analytical support at the Uzkomunhizmat. IV. Safeguard Policies that might apply Safeguard Policies Triggered by the Project Yes No TBD Environmental Assessment (OP/BP 4.01) The Project risks (category B) are linked to short term environmental impacts related to reconstruction/rehabilitation works (dust, noise, improper construction waste disposal including asbestos materials, and accidental oil spillage). Also, some risk is related to sludge management. The Borrower will prepare an EA (with EMP) that will analyze potential impacts on volume of water abstraction and wastewater generated as a result of the rehabilitation works and will also cover options for extension of the system including water availability and implications for wastewater impacts The TORs for TA for design of the extension (2 nd stage of the Project) will ensure that environmental and social safeguard issues are addressed, such that the resulting design would be acceptable for World Bank investment. Natural Habitats (OP/BP 4.04) Pest Management (OP 4.09) Physical Cultural Resources (OP/BP 4.11) The EA process will confirm if PCR are affected by the proposed project investments. Chance finds provisions will be incorporated in the EMP. Involuntary Resettlement (OP/BP 4.12) Although there is a minor risk that the implementation of this Project will require land acquisition, because the majority of the work in the first phase relates to rehabilitation of existing infrastructure, the policy is triggered because experience in Uzbekistan and elsewhere shows that the rehabilitation of water supply networks involves permanent or temporary acquisition of land in residential, agricultural, or commercial areas on either a temporary or permanent basis The Borrow will be required to prepare a Resettlement Policy Framework in case land acquisition is needed for Project implementation. Indigenous Peoples ( OP/BP 4.10) Forests (OP/BP 4.36) Safety of Dams (OP/BP 4.37) Projects in Disputed Areas (OP/BP 7.60) * * By supporting the proposed project, the Bank does not intend to prejudice the final determination of the parties claims on the disputed areas

6 6 This Policy is not triggered. The water intake is located on the border between the Uzbek and Turkmen border posts - a site which does not belong to either country. This is not a "disputed" territory, so OP 7.60 does not apply. The team will ensure that the Turkmenistan authorities are informed of and indicate they have no objection to the proposed rehabilitation. The team is in the process to determine whether there is any formal agreement in place between Uzbekistan and Turkmenistan with regard to this intake. Projects on International Waterways (OP/BP 7.50) The water intake is from an irrigation canal which in turn draws water from the Amu Darya River, an international waterway. The proposed Project will finance only rehabilitation works of existing deteriorated water supply scheme. The team discussed the issue with the Legal Department, and a waiver from the notification requirement is possible if it is determined that the rehabilitation works will not change the amount of water abstracted. V. Tentative financing Source: ($m.) Borrower/Recipient $14.6 IBRD IDA $20.0 Others (specify) Total $34.6 VI. Contact point World Bank Contact: Pier Francesco Mantovani Title: Lead Water and Sanitation Specialist Tel: pmantovani@worldbank.org Implementing Agencies Uzkommunhizmat Contact: Mr. U. Khalmukhamedov, Title: Director General Address: 45a Uzbekistanskaya Av., Tashkent, Uzbekistan Tel. No.: ukh@uzkommunhizmat.uz Bukhara Regional Vodokanal (BVK) Contact: Mr. I. Kholmuradov Title: Director BVK

7 7 Address: 111 Ibn Sino St., Bukhara, Uzbekistan Tel: VII. For more information contact: The InfoShop The World Bank 1818 H Street, NW Washington, D.C Telephone: (202) Fax: (202) Web: