-
FOR OFFICIAL USE ONLY
Report No: PAD3490
INTERNATIONAL DEVELOPMENT ASSOCIATION
PROJECT APPRAISAL DOCUMENT
ON A
PROPOSED CREDIT
IN THE AMOUNT OF SDR 18.2 MILLION (US$25.0 MILLION
EQUIVALENT)
TO THE
DEMOCRATIC REPUBLIC OF TIMOR-LESTE
FOR A
WATER SUPPLY AND SANITATION PROJECT
April 1, 2020
Water Global Practice East Asia and Pacific Region
This document has a restricted distribution and may be used by
recipients only in the performance of their official duties. Its
contents may not otherwise be disclosed without World Bank
authorization.
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CURRENCY EQUIVALENTS
(Exchange Rate Effective January 31, 2020)
Currency Unit = United States Dollar (US$)
SDR 0.72800 = US$1
US$1.37362 = SDR 1
FISCAL YEAR
January 1 – December 31
Regional Vice President: Victoria Kwakwa
Country Director: Satu Kristiina Kahkonen
Regional Director: Benoit Bosquet
Practice Manager: Sudipto Sarkar
Task Team Leaders: Christophe Prevost and Berta Macheve
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ABBREVIATIONS AND ACRONYMS
ADB Asian Development Bank
BCC Behavior Change Communication
CAFI Administrative Council of the Infrastructure Fund (Conselho
de Administração do Fundo das Infra-Estruturas)
CDM Community Dialogue Manual
CESMP Construction Environmental and Social Management Plan
CPS Country Partnership Strategy
DA Designated Account
DBO Design Built and Operate
DED Detailed Engineering Design
DFAT Department of Foreign Affairs and Trade of Australia
DG Directorate General (Direcção Geral)
DGAS Directorate General for Water and Sanitation (Direcção
Geral de Água e Saneamento)
DNGRA National Directorate of Water Resources Management
(Direcção Nacional de Gestão de Recursos de Água)
DNSA National Directorate of Water Service (Direcção Nacional de
Serviço de Água)
DNSB National Directorate of Basic Sanitation (Direcção Nacional
de Saneamento Básico)
EIA Environmental Impact Assessment
EMP Environmental Management Plan
ESCP Environmental and Social Commitment Plan
ESF Environmental and Social Framework
ESIA Environmental and Social Impact Assessment
ESS Environmental and Social Standard
FM Financial Management
FSM Fecal Sludge Management
GAP Gender Action Plan
GBV Gender-based Violence
GHG Greenhouse Gas
GNI Gross National Income
GoTL Government of Timor-Leste
GRM Grievance Redress Mechanism
GRS Grievance Redress Service
IAU Inspection and Audit Unit
IEE Initial Environmental Examination
IFR Interim Financial Report
IPF Investment Project Financing
IRR Internal Rate of Return
JICA Japan International Cooperation Agency
JMP Joint Monitoring Programme
MCC Millennium Challenge Corporation
MoF Ministry of Finance
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MoH Ministry of Health
MSA Ministry of State Administration
MPW Ministry of Public Works
MSG Mother Support Group
NPC National Procurement Commission
NRW Nonrevenue Water
O&M Operation and Maintenance
ODF Open-defecation Free
PDO Project Development Objective
PMU Project Management Unit
POM Project Operations Manual
PPSD Project Procurement Strategy for Development
RPF Resettlement Policy Framework
SANIMAS Community-based Sanitation (Sanitasi Berbasis
Masyarakat)
SDG Sustainable Development Goal
SIP Sector Investment Plan
SMASA Municipal Water, Sanitation, and Environmental Services
(Serviço Municipal de Água, Saneamento e Meio Ambiente)
SOP Standard Operating Procedure
STEP Systematic Tracking of Exchanges in Procurement
STP Septage Treatment Plant
UNDP United Nations Development Programme
UNICEF United Nations Children’s Fund
WASH Water, Sanitation, and Hygiene
WHO World Health Organization
WSS Water Supply and Sanitation
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TABLE OF CONTENTS
DATASHEET
............................................................................................................................
1
I. STRATEGIC CONTEXT
......................................................................................................
7
A. Country Context
............................................................................................................................
7
B. Sectoral and Institutional Context
................................................................................................
9
C. Relevance to Higher Level Objectives
.........................................................................................
13
II. PROJECT DESCRIPTION
..................................................................................................
14
A. Project Development Objective
..................................................................................................
14
B. Project Components
...................................................................................................................
14
C. Project Beneficiaries
...................................................................................................................
19
D. Results Chain
...............................................................................................................................
20
E. Rationale for Bank Involvement and Role of Partners
................................................................
22
F. Lessons Learned and Reflected in the Project Design
................................................................
22
III. IMPLEMENTATION ARRANGEMENTS
............................................................................
24
A. Institutional and Implementation Arrangements
.......................................................................
24
B. Results Monitoring and Evaluation Arrangements
.....................................................................
25
C. Sustainability
...............................................................................................................................
25
IV. PROJECT APPRAISAL SUMMARY
...................................................................................
26
A. Technical Analysis
.......................................................................................................................
26
B. Economic Analysis
.......................................................................................................................
27
C. Fiduciary
......................................................................................................................................
29
D. Environmental and Social Management
.....................................................................................
30
E. Legal Operational Policies
...........................................................................................................
35
V. GRIEVANCE REDRESS SERVICES
.....................................................................................
35
VI. KEY RISKS
.....................................................................................................................
36
VII. RESULTS FRAMEWORK AND MONITORING
...................................................................
39
ANNEX 1: IMPLEMENTATION ARRANGEMENTS AND SUPPORT PLAN
................................... 47
ANNEX 2: FINANCIAL AND ECONOMIC ANALYSIS
.................................................................
55
ANNEX 3: MAP OF TIMOR-LESTE
..........................................................................................
64
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DATASHEET
BASIC INFORMATION BASIC_INFO_TABLE
Country(ies) Project Name
Timor-Leste Timor Leste Water Supply and Sanitation Project
Project ID Financing Instrument Environmental and Social Risk
Classification
P167901 Investment Project Financing
Substantial
Financing & Implementation Modalities
[ ] Multiphase Programmatic Approach (MPA) [ ] Contingent
Emergency Response Component (CERC)
[ ] Series of Projects (SOP) [✓] Fragile State(s)
[ ] Disbursement-linked Indicators (DLIs) [ ] Small State(s)
[ ] Financial Intermediaries (FI) [ ] Fragile within a
non-fragile Country
[ ] Project-Based Guarantee [ ] Conflict
[ ] Deferred Drawdown [ ] Responding to Natural or Man-made
Disaster
[ ] Alternate Procurement Arrangements (APA)
Expected Approval Date Expected Closing Date
22-Apr-2020 29-May-2026
Bank/IFC Collaboration
No
Proposed Development Objective(s)
The project development objective is to increase access to
safely managed drinking water and sanitation services in the
municipality of Baucau.
Components
Component Name Cost (US$, millions)
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Component 1: Water Supply and Sanitation Infrastructure
Development 21.00
Component 2: Infrastructure Sustainability Support 3.00
Component 3: Institutional strengthening and Project Management
1.00
Organizations
Borrower: Democratic Republic of Timor-Leste
Implementing Agency: Ministry of Public Works
PROJECT FINANCING DATA (US$, Millions)
SUMMARY-NewFin1
Total Project Cost 30.00
Total Financing 30.00
of which IBRD/IDA 25.00
Financing Gap 0.00
DETAILS-NewFinEnh1
World Bank Group Financing
International Development Association (IDA) 25.00
IDA Credit 25.00
Non-World Bank Group Financing
Counterpart Funding 5.00
Borrower/Recipient 5.00
IDA Resources (in US$, Millions)
Credit Amount Grant Amount Guarantee Amount Total Amount
Timor-Leste 25.00 0.00 0.00 25.00
National PBA 25.00 0.00 0.00 25.00
Total 25.00 0.00 0.00 25.00
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Expected Disbursements (in US$, Millions)
WB Fiscal Year 2020 2021 2022 2023 2024 2025 2026 2027
Annual 0.05 0.89 1.51 2.90 5.00 6.15 6.30 2.20
Cumulative 0.05 0.94 2.45 5.35 10.35 16.50 22.80 25.00
INSTITUTIONAL DATA Practice Area (Lead) Contributing Practice
Areas
Water Climate Change, Education, Health, Nutrition &
Population
Climate Change and Disaster Screening
This operation has been screened for short and long-term climate
change and disaster risks
SYSTEMATIC OPERATIONS RISK-RATING TOOL (SORT)
Risk Category Rating
1. Political and Governance ⚫ Substantial
2. Macroeconomic ⚫ Substantial
3. Sector Strategies and Policies ⚫ Substantial
4. Technical Design of Project or Program ⚫ Moderate
5. Institutional Capacity for Implementation and Sustainability
⚫ High
6. Fiduciary ⚫ Substantial
7. Environment and Social ⚫ Substantial
8. Stakeholders ⚫ Substantial
9. Other
10. Overall ⚫ Substantial
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COMPLIANCE
Policy Does the project depart from the CPF in content or in
other significant respects?
[ ] Yes [✓] No
Does the project require any waivers of Bank policies?
[ ] Yes [✓] No
Environmental and Social Standards Relevance Given its Context
at the Time of Appraisal
E & S Standards Relevance
Assessment and Management of Environmental and Social Risks and
Impacts Relevant
Stakeholder Engagement and Information Disclosure Relevant
Labor and Working Conditions Relevant
Resource Efficiency and Pollution Prevention and Management
Relevant
Community Health and Safety Relevant
Land Acquisition, Restrictions on Land Use and Involuntary
Resettlement Relevant
Biodiversity Conservation and Sustainable Management of Living
Natural
Resources
Relevant
Indigenous Peoples/Sub-Saharan African Historically Underserved
Traditional
Local Communities
Relevant
Cultural Heritage Relevant
Financial Intermediaries Not Currently Relevant
NOTE: For further information regarding the World Bank’s due
diligence assessment of the Project’s potential environmental and
social risks and impacts, please refer to the Project’s Appraisal
Environmental and Social Review Summary (ESRS). Legal Covenants
Sections and Description Schedule 2, Section I. A (3). A Project
Management Unit (PMU) under Directorate General for Water and
Sanitation
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(DGAS) which shall be established to implement all donor funded
water and sanitation projects with adequate staff and funds
throughout the implementation of the Project.
Sections and Description Schedule 2, Section I.B The Recipient
shall ensure that the Project is carried out in accordance with the
arrangements and procedures set out in the Project Operations
Manual acceptable to the Association.
Sections and Description Schedule 2, Section I. C The Recipient
shall: prepare and furnish to the Association by September 30 in
each year - beginning in the Fiscal Year 2021 - a proposed
Project’s consolidated annual work plan and budget for the
following Fiscal Year, thereafter ensure that the Project is
carried out in accordance with such Annual Work Plan and Budget, in
a manner satisfactory to the Association.
Sections and Description Schedule 2, Section I. D (1) The
Recipient shall ensure that the Project is carried out in
accordance with the Environmental and Social Standards, in a manner
acceptable to the Association.
Sections and Description Schedule 2, Section I.D (3) The
Recipient shall establish, publicize and operate an accessible
grievance redress mechanism to receive and facilitate resolution of
concerns and grievances of Project-affected people and take all
measures necessary and appropriate to resolve, or facilitate the
resolution of such concerns and grievances in a manner satisfactory
to the Association.
Sections and Description Schedule 2 Section II.2 The Recipient
shall carry out, jointly with the Association not later than three
(3) years after the Effective Date or such other date as may be
agreed with the Association, a mid-term review of the Project (the
“Mid-Term Review”).
Sections and Description Schedule 2, Section IV.1 The Recipient
through the Service Provider shall: (a) By December 31, 2022,
prepare a rolling five-year Sustainability Improvement Plan,
outlining how the Service Provider will improve its operational and
financial status, including targets and necessary measures to meet
the targets, in a manner acceptable to the Association; (b)
Commencing on December 31, 2023, by December 31 of each year, in
accordance with terms of reference acceptable to the Association,
furnish to the Association for review and comments the draft
updated Sustainability Improvement Plan; and (c) take all necessary
actions to ensure that the Sustainability Improvement Plan, as
updated, is carried out according to its terms.
Sections and Description Schedule 2, Section IV. 2 The Recipient
shall cover all of the Baucau Service Provider’s operating costs
not covered by tariffs for the infrastructure under the
Project.
Conditions
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Type Description
Effectiveness Article IV, 4.01(A) That the Project Management
Unit (PMU) has been duly established and
adequately staffed as per Section I.A.3 of Schedule 2 to this
Agreement. Type Description
Effectiveness Article IV, 4.01 (B) That the Project Operations
Manual has been prepared as per Section I.B.
of Schedule 2 to this Agreement.
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I. STRATEGIC CONTEXT
A. Country Context 1. Timor-Leste has made important strides
toward securing lasting peace and stability since its independence
in 2002. At the time it became a new sovereign state in May 2002,
extreme poverty and hunger were high; public infrastructure
(including schools, hospitals, roads, and water and sanitation
systems) was nonexistent, destroyed, or severely dilapidated;
institutional frameworks were weak; and conflict and violence were
ongoing threats. Shortages of human capital were equally severe,
with few Timorese having the necessary skills and formal education
for civil service jobs or engaging in the private sector. While
there remain political, economic, and social challenges,
Timor-Leste is a more peaceful and democratic nation today, having
gone through several parliamentary and presidential elections since
its independence.
2. Timor-Leste is classified as a low-and middle-income country,
with a gross national income (GNI) per capita (Atlas method) of
US$2,096 in 2017. Timor-Leste is a resource-rich country that has
saved much of its petroleum-related proceeds in a Petroleum
Fund—with financial assets currently valued at over US$17 billion.
However, the petroleum sector’s weight in the overall economy is
declining—from 82 percent in 2012 to 36 percent in 2017—partly
owing to the depletion of existing reserves. Growth in the non-oil
sector is mainly driven by public spending, which is mostly
financed by the Petroleum Fund. Non-oil gross domestic product
growth has been decelerating since 2008, averaging less than 4
percent in 2013–2016, and even contracting in 2017–2018. The
construction sector (dependent on public infrastructure
investments), public services, commerce, and agriculture account
for nearly 80 percent of the non-oil economy. Declining petroleum
production has contributed to a fall in GNI from a peak of US$4.6
billion (in current prices) in 2011 to US$2.4 billion in 2017.
3. Poverty levels remain very high, with 41.8 percent1 of the
population lacking the minimum resources needed to satisfy basic
needs. In 2015, the total population was 1.1 million and growing at
2.37 percent per year, with an estimated 25 percent living in urban
areas. Based on the latest Survey of Living Standards (2014/15), 42
percent of the population lives below the national poverty line,
while 30 percent lives below the US$1.90 a day international
poverty line. There are also high inequalities in access to water
and sanitation service provision countrywide. Only 55 percent of
people in the poorest quintile have access to water supply compared
to 90 percent in the richest quintile. On sanitation, only 10
percent of people in the poorest quintile have access compared to
95 percent in the richest quintile.2
4. Malnutrition and poor health are widespread and continue to
hamper the efforts of the people to improve their livelihood. At
present, nearly half of the under-five children in Timor-Leste are
stunted, a rate that is among the highest in the world. The
three-year average of the prevalence of undernourishment in 2016
was 26.9 percent.3 About 40 percent of the children under five are
underweight, as are 27 percent of women and 25 percent of men ages
15–49. Addressing the links
1 Government of Timor-Leste. 2014. Poverty in Timor-Leste.
http://www.statistics.gov.tl/wp-content/uploads/2018/02/Poverty-Report-2014-final.pdf.
2 Timor-Leste: Timor-Leste Poverty Monitoring and Analysis
(P165123). 3 Food and Agriculture Organization of the United
Nations Aquastat Database 2017.
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between nutrition, water, and sanitation is especially important
as access to safe quality water and adequate sanitation is among a
core set of critical early child development interventions.4
5. Gender equality has been a fundamental principle in the
country’s developmental efforts and remains key to achieving
sustainable development into the future. Based on the 2015 Census,
there is no significant disadvantage for female-headed households,
compared to male-headed households, in having access to improved
sanitation facilities and safe drinking water. However, significant
gender inequalities remain—including high rates of violence against
women and barriers to reproductive health care. Domestic violence
is pervasive; maternal mortality remains high; barriers to
reproductive health care are concerning; and significant gender
gaps remain in women’s access to paid employment, wage parity,
finance, and political participation.
6. Timor-Leste is vulnerable to natural disasters due to high
risk of earthquakes, tsunamis, cyclones, droughts, and heavy
rainfall, and climate change will likely increase the variability
of water availability and the exposure to water-related disasters.
Because of climate change, the country’s population faces
increasing temperatures, droughts, increasingly erratic rainfall,
and rising sea levels that threaten to exacerbate the storm,
landslide, and flood risks. Climate projections5 for mid-century
suggest (a) increased temperature of 1.25–1.75°C by 2050, (b)
increased duration of heatwaves, (c) increased rainfall of 4–10
percent by 2050 with an increase of up to 100–120 mm in coastal
areas and 260–300 mm in the mountains, (d) increased intensity of
heavy rainfall events but decreased frequency, (e) increased sea
surface temperatures of 0.6–0.8°C by 2030, (f) rise in sea level by
150–340 mm by 2050, and (g) increased cyclone intensity (higher
wind speeds) but decreased frequency.
7. The overall risk in Timor-Leste also depends on how climate
change will influence the El Niño Southern Oscillation. El Niño has
a significant impact on rainfall and thus water availability. El
Niño events can cause greatly reduced rainfall in some areas,
increased rainfall in others, and a drop in sea level (up to 20 cm)
which can affect the start of the wet season. Conversely, La Niña
events induce a general increase in rainfall, an increase in sea
level (10–20 cm), and an increase in wave height which can again
affect the timing of the wet season.6
8. The projected climate change impacts pose significant risks
to water supply and sanitation (WSS) in Timor-Leste. Key risks
include (a) reduced water supply, which lowers the water table,
leading to droughts; (b) decline in water quality due to
contamination of wells by storm surges and flooding of surface
fittings; and (c) flash floods. The projected climate change thus
places the delivery and management of water at risk. It will be
required to achieve the Sustainable Development Goal (SDG) 2030
target of increased use of adaptation measures,7 such as
climate-proof designs for infrastructure development, revision of
regulations and standards to enhance climate change resilience of
critical infrastructure, enhanced government and community
strategies to respond to climate change-
4 Chase, C., and F. Ngure. 2016. Multisectoral Approaches to
Improving Nutrition: Water, Sanitation, and Hygiene. 5 United
States Agency for International Development. 2017. Climate Risk in
Timor-Leste: Country Profile. 6 Wallace, Luke, Baskaran Sundaram,
Ross S. Brodie, Sarah Marshall, Samantha Dawson, John Jaycock,
Gerard Stewart, and Lindsay Furness. 2012. Vulnerability Assessment
of Climate Change Impacts on Groundwater Resources in Timor-Leste
Summary Report. Australian Government Department of Climate Change
and Energy Efficiency. 7 2016 Timor-Leste’s Intended Nationally
Determined Contributions of the United Nation Framework Convention
on Climate Change.
http://documents.worldbank.org/curated/en/881101468196156182/pdf/102935-WSP-Box394845B-PUBLIC-ADD-SERIES-Water-and-Sanitation-Program-WSP.pdf
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exacerbated drought, and enhanced water distribution systems and
management systems at all levels to avoid shortages.
B. Sectoral and Institutional Context 9. Timor-Leste has made
progress in increasing access to water supply, but more needs to be
done to improve infrastructure, service quality, and
sustainability. Efforts are ongoing to rebuild the country
infrastructure, but WSS infrastructure for domestic, commercial,
and industrial end users remains underdeveloped and requires
substantial investment. In 2017, although 93 percent8 of the urban
population had access to improved water supply,9 only 47 percent
among the urban dwellers had individual connections with piped
water in their premises. Urban public water supply systems in all
municipal capitals of the country are constrained by aged
infrastructure, highly intermittent supplies and low pressures,
inadequate operation and maintenance (O&M), and a high record
of illegal connections resulting in nonrevenue water (NRW)10
estimated to be higher than 90 percent of the total volume
supplied.11 In addition, there is generally no water quality
monitoring, limited or no regular water treatment, and inadequate
billing and collection systems.
10. In 2017, 75 percent of the urban population had access to
improved sanitation.12 However, most of the improved sanitation
facilities in urban areas are on-site without a properly
functioning fecal sludge management (FSM) service. Most households’
improved sanitation facilities comprise simple pit latrines, septic
tanks (generally not built up to environmental standards), or
direct discharge to public surface water, contributing to major
contamination of the environment and water bodies. Bacteriological
analyses regularly indicate widespread contamination in surface
water and groundwater and in water supply networks. The other
sections of the urban population use shared sanitation facilities
(15 percent) or unimproved sanitation facilities13 (9 percent) or
practice open defecation (1 percent). There is one septage
treatment plant (STP) in Timor-Leste located in Tibar on the
outskirts of Dili, which was inaugurated in 2015 to treat sludge
from septic tanks. Fecal sludge is collected by private operators
based on septic tank owner requests. There is no centralized
off-site wastewater system in the country.
11. The Ministry of Public Works (MPW) is responsible for the
design, execution, coordination, and evaluation of policies in the
areas of urban planning, public works, housing, electricity, water
supply, sanitation, and drainage. The MPW’s responsibilities for
the water sector are delivered through the Directorate General for
Water and Sanitation (Direcção Geral de Água e Saneamento, DGAS)
and its three national-level directorates: (a) the National
Directorate of Water Resources Management (Direcção Nacional de
Gestão de Recursos de Água, DNGRA), (b) the National Directorate
for Water Supply (Direcção Nacional de Serviço de Água, DNSA), and
(c) the National Directorate of Basic Sanitation (Direcção Nacional
de Saneamento Basico, DNSB). According to the Decree Law 4/2004,
(a) the DNGRH is
8 World Health Organization (WHO)-United Nations Children’s Fund
(UNICEF) Joint Monitoring Programme (JMP) 2017. 9 Access to an
improved water source refers to the percentage of the population
with reasonable access to an adequate amount of water from an
improved source, such as a household connection, public standpipe,
borehole, protected well or spring, and rainwater collection. 10
NRW is defined as the percentage of water produced that is not
ultimately billed to consumers. Water not billed to consumers
results from water losses (physical and commercial losses) as well
as unauthorized consumption that is not billed. 11 WaterAid Report
2010. 12 WHO-UNICEF JMP 2017. 13 A household has access to basic
sanitation services when it uses sanitation facilities that are
designed to hygienically separate excreta from human contact and
are not shared with other households. This includes flush/pour
flush to piped sewer system, septic tanks or pit latrines,
ventilated improved pit latrines, composting toilets, or pit
latrines with slabs.
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responsible for monitoring and research on the quality and
volume of water resources to support current water supply needs and
future development of the water resources; (b) the DNSA is
responsible for establishing national policy priorities, financing
capital investments of public water supply systems, and operating
water infrastructure in the capital of Dili; and (c) the DNSB has
the mandate to construct wastewater treatment facilities and
drainage systems and construct public toilets in urban areas. The
Ministry of Health (MoH), through the National Directorate for
Public Health, is responsible for water, sanitation, and hygiene
(WASH); health; and nutrition behavior change communication
programs.
12. The provision of the WSS services is the responsibility of
the municipalities placed under the Ministry of State
Administration (MSA). The MSA is responsible for promoting
municipal sustainable development, aimed at improving the efficacy,
efficiency, and quality of basic service provision, including water
and sanitation services, in the municipalities. In addition, the
MSA is responsible for collecting information and data for
evaluation of service quality provided by the municipal authorities
(Decree Law 3/2016). The WSS infrastructures are operated by the
Municipal Water, Sanitation, and Environmental Service (Serviço
Municipal de Água, Saneamento e Meio Ambiente, SMASA) that reports
directly to the municipal administration. SMASA also provides
support to community water management groups (Grupu Maneja
Fasilidade) for the delivery of service in rural communities.
13. The level of investment in the water and sanitation sector
has been low in the past years compared to the needs. The overall
sector budget, excluding donors’ contributions, for 2016 and 2017
varied between US$27 million and US$28 million per year with 79
percent of the funding for urban water supply, 18 percent for
drainage, 2 percent for sanitation, and 1 percent to develop and
manage water resources. Donor funding reached US$8 million in 2016
and US$10 million in 2017. Historically, the Government of
Portugal, the Asian Development Bank (ADB), and Japan International
Cooperation Agency (JICA) have been supporting the urban water and
sanitation sector, while United Nations Children’s Fund (UNICEF),
United Nations Development Programme (UNDP), Department of Foreign
Affairs and Trade of Australia (DFAT), World Vision, Plan
International, and Water Aid have been supporting the rural WSS
sector.
14. The financial viability of the urban water supply sector is
nowadays undermined by the lack of adequate revenue stream for its
activities. Water tariffs were established in 2004 by the Ministry
of Finance (MoF) (Decree Law 4/2004) and have never been revised.
For households, the tariff is US$0.2 per m3 from 0 to 14 m3 (per
month) and US$0.4 per m3 over 14 m3; for public institutions, the
tariff is US$0.2 per m3; for industry, restaurants, and other
commercial businesses, the tariff is US$0.6 per m3; and for public
taps, the tariff is US$0.1 per m3. However, tariff billing has
never been implemented beyond the capital of Dili. In the other 12
municipal capitals and 65 administrative posts, public water supply
service is provided free of charge. To cover O&M costs
associated with the water supply service, substantial subsidies
from the Government of Timor-Leste (GoTL) are required. Improving
the sector financial viability will require, among other things,
(a) improving infrastructure and assets management to minimize
operating costs, (b) establishing efficient billing and collection
systems, (c) restoring adequate tariff levels, (d) improving
service quality to stimulate willingness to pay, and ultimately (e)
increasing service providers’ autonomy and accountability.
15. WSS infrastructure development has been identified as a
priority in the Timor-Leste Strategic Development Plan 2011–2030,
the VIII Constitutional Government Program 2018–2023, and the
National Adaptation Programme of Action to Climate Change. By 2022,
the GoTL aims at providing 60 percent of the urban population with
access to 24/7 water supply and 80 percent of the rural villages
with
https://www4.unfccc.int/sites/NAPC/Country%20Documents/Parties/tls01.pdf
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access to a functioning water system. By 2030, the GoTL aims at
providing 100 percent of the urban population with 24/7 access to
water supply and 100 percent of the rural villages with access to a
functioning water supply system. For sanitation, the GoTL aims at
reaching open-defecation free (ODF) status countrywide by 2020 and
100 percent access to hygienic toilets and improved hygiene
behavior by 2030. Investing appropriately in the water and
sanitation sector will have a significant positive impact on the
health and well-being of the people and will contribute to economic
growth.
16. The MPW has prepared a Sector Investment Plan (SIP)14 to
accelerate water and sanitation infrastructure development. To
achieve the SIP targets, investments of US$1.323 billion are needed
to (a) improve the water production, storage, and treatment
capacity; (b) rehabilitate and expand the distribution network of
the urban water supply systems in Dili and 12 other municipalities;
(c) develop the sewerage collection and treatment and drainage
systems in Dili; and (d) construct rural water supply systems. As
part of this planning exercise, the MPW prepared, with ADB support,
a series of master plans in 2016 to address the most urgent sector
priorities.15 The GoTL requested the World Bank to support the
implementation of the SIP by financing WSS infrastructure in the
capital city of the municipality of Baucau.
17. The capital city of the municipality of Baucau is the second
largest city in the country. The capital city of Baucau had a
population of about 17,400 inhabitants in 2015,16 with high
poverty17 and stunting ratios.18 The water supply infrastructure in
Baucau is aged and underdeveloped. The existing infrastructure has
been constructed over a period involving four separate
administrations (Portuguese, Indonesian, United Nations
transitional, and in the early years of the independent
Timor-Leste) and is now in need of substantial rehabilitation and
expansion to serve an increasing urban population. Access to WSS in
the municipal capital of Baucau is a major issue. The
infrastructure provides only 56 percent of the population with
improved water supply. For the remaining population, 39 percent
rely on small-scale private water service providers delivering
water by trucks, 4 percent on springs and irrigation channels, and
1 percent on tube well. Rainwater collection is also used as a
supplementary source by many. The infrastructure comprises 1,536
registered water connections, of which 48 percent are domestic.
There are no bulk meters and household meters. There is no tariff
billing and collection system. The service is free of charge for
all customers. There is no water treatment. Supply is intermittent
with six seasonal variations ranging from 10 hours of service a day
between January and April (dry season) to 16 hours a day between
July and December (rainy season). However, in some areas of the
city, supply is only provided two days a week for one hour.
Households without regular water supply from the public
infrastructure pay to private water service providers on average
US$2.4 per m3.
18. The operation of the water supply infrastructure in the
capital city of the municipality of Baucau is poor and customers’
satisfaction is low. SMASA has limited administrative and financial
autonomy, lack of human resources in the form of shortage in number
and skilled management and technical staff, and it has limited
accountability and incentives for sustaining services. SMASA has 22
permanent staff, including 12 community and sanitation mobilizers
working mostly in the 59 rural villages of the municipality. Out of
the 22 SMASA staff, seven are female. In addition, the capacity of
SMASA to operate and maintain the system is also constrained by the
limited annual budget to fund O&M. The total SMASA 2019 budget
allocation provided by the municipality of Baucau was US$151,000,
of which 50 percent was for salaries
14 The Sector Investment Plant 2018–2030 for Water Supply and
Sanitation in Timor-Leste was approved on January 25, 2018. 15 2016
Master Plan - Second District Capital Water Supply Project Master
Plan. 16 Based on Timor-Leste Population and Housing Census 2015 -
Preliminary Results Report. 17 According to the 2014 Timor-Leste
Poverty Report, 32.6 percent of the population of Baucau was poor.
18 47.2 percent of under-five children were stunted based on
Timor-Leste Demographic and Health Survey 2016.
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and overtime and 50 percent was to cover, among other things,
office building, administrative, O&M, and training
expenditures. Consequently, due to lack of funds, water asset
maintenance programs are not implemented, and system functionality
and service quality are substandard. Because of the low coverage
and suboptimal service, customers’ satisfaction in Baucau with the
quality of water supply service is low: 78 percent of the customers
are dissatisfied with the frequency and duration of water supply,
60 percent are dissatisfied with the water pressure, and 54 percent
are dissatisfied with the quantity of water supplied.19
19. Households’ sanitation situation in the capital city of the
municipality of Baucau is particularly critical. In 2014, only 26
percent of the households had access to improved sanitation
facilities, 36 percent of the households had access to unimproved
sanitation facilities, and 38 percent of the population was
practicing open defecation.20 In 2016, 88 percent of the households
in Baucau wanted to improve their current sanitation facility,
including having new pit latrines (17 percent), new pour flush
external toilets (18 percent), new pour flush internal toilets (38
percent), and new or improved bathrooms (24 percent).21 While there
is a clear community demand for improved sanitation facilities in
Baucau, there are also major issues mentioned by the population,
including lack of financial resources (49 percent), lack of time
(27 percent), and lack of adequate water supply (18 percent). The
municipality of Baucau had an STP in Seasal, on the outskirts of
Baucau, but it is no longer functional.
20. The MPW is preparing a sector institutional reform to
improve service delivery and sustainability across the country. The
reform aims to clearly separate the policy making, service
provision, and regulation functions, which is consistent with
international best practices. It foresees the establishment of a
national public WSS utility that would be responsible for
infrastructure development, O&M, and commercial activities
across the country while DGAS would become the regulator for WSS,
and the DNGRH the regulator for water resources. The Government of
Portugal, through its national water utility, Águas de Portugal,
has provided technical assistance to the MPW to develop the
framework for the creation of a national public utility (Empresa
Pública - Bee Timor), including (a) the Decree Law and the utility
functional organigram, (b) a feasibility study assessing the
financial and economic viability of the reform, and (c) a detailed
road map of priority activities to develop the sector institutional
framework and the new utility’s operational capacity and procedures
during the first two years after its creation. The reform proposal
will be submitted in2020 to the Council of Ministers for approval,
following which a start-up committee will be formed to initiate
reform road map activities toward the creation of the national
water utility, expected in 2021. It is therefore important to note
that the national public water and sanitation utility could take
over the provision of WSS services from SMASA in the municipality
of Baucau during project implementation.22
21. The reform foresees the establishment and operations of a
national utility, possibly supported by development partners. In
parallel to the implementation of the SIP, the start-up committee
and then the newly formed national utility are expected to lead the
rollout of countrywide reform road map activities, including
staffing development and capacity building; the deployment of
utility O&M hardware and management software; the establishment
of standard operating procedures (SOPs), performance-
19 2016 Master Plan - Second District Capital Water Supply
Project Master Plan. 20 2014 Assessment Stage Household Surveys. 21
2016 Master Plan Household Survey. 22 Given that SMASA could be
replaced during project implementation by the national public water
and sanitation utility to operate the water and sanitation
infrastructure in the municipality of Baucau, from now on in the
Project Appraisal Document, the term ‘service provider’ will be
used to refer either to SMASA or to the national public water and
sanitation utility.
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oriented human resources policies, and billing policies and
procedures; and the preparation of a utility business plan. The MPW
will conduct in 2020 consultations with key development partners to
secure financial and technical assistance support for the
implementation of these road map activities.
22. The application of volumetric water tariff across the
country will be critical to ensure the sustainability of the
reform. The GoTL has demonstrated its commitment to this aspect of
the reform with the MPW’s recent decisions to open three billing
counters in the capital Dili to facilitate and increase water bill
collection and implement existing water tariffs in all municipal
capitals, starting in the municipalities of Suai and Maliana, and
at a later stage in the municipal capitals of Manatuto, Baucau,
Viqueque, Liquica, Ainaro, and Aileu. This is consistent with the
Water Supply for Public Consumption Decree Law 4/2004 providing the
legal framework for managing public water supply systems in a
sustainable manner, including recovery of costs from customers. In
addition, according to the economic and financial feasibility study
prepared by Águas de Portugal, the future O&M costs of the new
national utility could be fully covered with a marginal increase of
the current water tariff. This is largely because most urban
centers can be supplied by gravity from good quality water sources
and do not require significant pumping and treatment costs. The
reform road map foresees the preparation of a more detailed tariff
study, as one of its priority activities, to confirm the
recommended tariffs across the country.
C. Relevance to Higher Level Objectives 23. The project will
contribute to the World Bank Group’s twin goals of ending extreme
poverty and promoting shared prosperity, by increasing access to
safely managed drinking water and sanitation services in the
capital city of the municipality of Baucau. The project is fully
aligned with the World Bank Group’s Country Partnership Framework
(CPF) for Timor-Leste, FY2020–2024 (Report No. P134792 – TP) and
with the Government’s SIP and National Adaptation Programme of
Action to Climate Change. The CPF focuses on reducing poverty and
promoting shared prosperity organized around three focus areas: (a)
strengthening the foundations for private sector-led growth and
economic stability; (b) investing in human capital, public
services, and social protection; and (c) raising productivity
though investment and connectivity. The project is aligned with
Focus Area 2 (Invest in Human Capital and Service Delivery) of the
CPF.
24. Improving access to safely managed drinking water and
sanitation services in the municipality of Baucau will help
Timor-Leste meet its SDG targets. The project will contribute to
multiple benefits on health, productivity and income, mortality
rates, educational attainment, and time and opportunity
costs—particularly for women, small children, and vulnerable
populations—as well as on reducing stunting. People will save time
from not having to queue at public water points or sanitation
facilities, being ill, or having to take care of someone sick due
to water and sanitation-related illnesses, thereby increasing the
time spent at school or on productive activities. Moreover, the
project seeks to increase the resilience of the Baucau municipality
residents to droughts and floods. In addition, the project will
contribute to increase economic outputs as well as job creation in
sectors dependent on clean water supply (industry, tourism, and
recreational activities).
25. The proposed project is also part of a coordinated World
Bank effort to support the Human Capital development agenda in
Timor-Leste. Along with the Public Expenditure Review covering
Health, Education, and Stunting (FY19); the Basic Education
Strengthening and Transformation Project (P166744); the Human
Capital Development Strategy (FY20); the Nutrition and Stunting
Project (FY21); and the
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Sustainable Agriculture Productivity Improvement Additional
Financing (FY23), the project is part of the World Bank’s support
to the GoTL to improve access to basic services and nutrition.
II. PROJECT DESCRIPTION
26. The project will support the Government’s SIP comprising
major infrastructure development and institutional sector reforms.
As a first engagement of the World Bank in the water and sanitation
sector in Timor-Leste, the project provides an opportunity for
knowledge transfer and an entry point for further work in
Timor-Leste. The project aims at (a) addressing the infrastructure
and sustainability gaps to increase access to and quality of
drinking water and sanitation services in the capital city of the
municipality of Baucau and increase resilience of the services to
climate change and (b) supporting the MPW, in collaboration with
other development partners, to implement the institutional reforms
to improve service delivery and long-term sustainability of the
infrastructures.
A. Project Development Objective PDO Statement
27. The Project Development Objective (PDO) is to increase
access to safely managed drinking water and sanitation services in
the municipality of Baucau.
PDO Level Indicators
28. The PDO will be measured against the following
indicators:
(a) People with access to safely managed drinking water
services23 under the Project, disaggregated by gender (number)
(b) Customer satisfaction with the quality of the water supply
service24 under the project (percentage)
(c) People with access to safely managed sanitation services25
under the Project, disaggregated by gender (number)
B. Project Components 29. Implementation of this project will
involve the following three components: Component 1: Water Supply
and Sanitation Infrastructure Development, Component 2:
Infrastructure Sustainability Support, and Component 3:
Institutional Strengthening and Project Management.
23 Safely managed drinking water service is defined as one
located on premises, available when needed, and free from
contamination (SDG definition). 24 Quality of service refers to the
continuity of water supply, pressure, and quality of water
provided. 25 Safely managed sanitation facility is one where
excreta is safely disposed of in situ or treated off-site (SDG
definition).
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Component 1: Water Supply and Sanitation Infrastructure
Development (Cost: US$23 million; Financing: IDA - US$21 million;
Counterpart financing - US$2 million)
30. This component will finance:
• The construction of the centralized water supply system in the
municipal capital of Baucau to increase access to safely managed
drinking water services to 25,000 people through the installation
in household premises of 5,000 connections delivering continuous
water supply meeting water quality standards, as currently, only
half of the population has access to water supply a few hours a day
and with no water treatment;
• The construction of a Septage Treatment Plant (STP) to support
the existing and planned on-site sanitation using septic tanks to
ensure that fecal sludge, from schools, hospitals, government and
commercial offices, hotels, and households, is safely managed and
treated, as currently, there is no solution to safely dispose and
treat fecal sludge in the municipality of Baucau contributing to
the contamination of the environment and water bodies; and
• The construction of three simplified, community-based
decentralized sewerage network and treatment systems to increase
access to safely managed sanitation service to an estimated 500
households with toilets in the most densely urbanized areas of the
city. These three community-based systems will be implemented as a
pilot at the request of the MPW to test the feasibility of the
community-based approach and technology in Timor-Leste before a
possible scale-up across the city and country.
31. The estimated cost is US$22 million for the construction of
the water supply infrastructure, US$0.5 million for the
construction of the STP, and US$0.5 million for the construction of
community-based decentralized sewerage network and treatment
systems.26
32. The construction of the centralized water supply system
would include (a) the construction of existing and new intakes and
the protection of the respective sources; (b) increase in storage
capacity, including construction of bulk water reservoirs and
ground-level and elevated water reservoirs to guarantee continuous
supply; (c) the installation of chlorination facilities for
improved water quality; (d) construction of buildings for storage
and water quality laboratory; (e) the replacement and extension of
the transmission and primary distribution mains, including
installation of bulk meters; and (f) the construction of the
distribution network, with household water connections and
micro-metering. The construction of the water supply system in the
capital city of the municipality of Baucau will mitigate the impact
of extreme heat and droughts by increasing the supply of water—by
tapping additional water sources,27 developing additional storage,
improving the distribution systems and in parallel contributing to
water conservation (by reducing operational water losses and
introducing tariff and metering) and making water services more
efficient and reliable. The project will also induce beneficiaries
to shift away from untreated water delivered by tankers, which is a
relatively unreliable method of water service
26 Master Plan - Second District Capitals Water Supply Project -
January 2016. 27 The Government has developed policies and programs
to address knowledge gaps and foster best-practice for the
management of water supplies; this includes integrating groundwater
and surface water management. Moreover, through its national
hydrogeological framework, local water managers have received
training to precisely monitor changes to groundwater resources
(from a document produced by the Australian Government’s Pacific
Adaptation Strategy Assistance Program (PASAP 2016).
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delivery during droughts and floods, toward piped treated
potable water. An estimated half of the distribution system will be
gravity-based systems that require no energy use.
33. The construction of the STP will include (a) primary
treatment units operating through two facultative lagoons operating
in parallel which allow for the sludge to settle and digest and (b)
a minimum of two secondary lagoons operating in series. By 2025,
the plant is expected to receive a septage inflow of 900 m3 per
year covering the estimated demand. The collection, desludging, and
transportation of the septage will be by trucks to be financed
under the project and managed by the service provider in
Baucau.
34. The construction of the community-based decentralized
sewerage network and treatment systems will include a combination
of a simplified sewerage network (constructed using smaller
diameter pipes laid at a shallower depth and at a flatter gradient
than conventional sewers) and of simple treatment facilities.
Simplified sewers are designed for the scale of a housing area
involving the end users in planning and implementation. Treatment
facilities are based on simple design, non-dependent on energy,
reliable, long-lasting, tolerant toward inflow fluctuation, and low
in capital and O&M costs. Standard treatment applications are
based on four basic steps: flocculation, sedimentation, and
anaerobic and aerobic treatment using different filters and ponds.
Septage from these treatment facilities will be collected and
safely treated at the STP.
35. Decentralized sewerage network and treatment systems will be
managed by dedicated community-based organizations, building on
regional experience. Communities will participate in the design and
O&M of the systems with technical support from the service
provider and the municipal authorities. Communities will take
charge of O&M costs through the payment of a sanitation fee.
The project will provide training to the communities, the water and
sanitation service provider, and municipal authorities to ensure
appropriate design and sustainable services arrangements are in
place.
36. The construction of a resilient STP and community-based
decentralized sewerage network and treatment systems will reduce
the impact of floods, by reducing the localized contamination of
water bodies by unmanaged fecal sludge.
Component 2: Infrastructure Sustainability Support (Cost: US$4
million; Financing: IDA - US$3 million; Counterpart financing -
US$1 million)
37. The new water supply system and STP will be operated by the
service provider in charge of WSS services in the Municipality of
Baucau. The decentralized sewerage network and treatment systems
will be managed by a dedicated community-based organization, with
oversight from the Baucau service provider.
38. This component is designed to ensure the sustainability of
water and sanitation infrastructures financed under Component 1.
This component will finance the supervision of the construction
contract and provision of technical assistance, capacity building,
training, and goods for (a) designing and implementing a Community
Engagement Plan to secure community participation, buy-in, and
support for the project’s sustainability; (b) strengthening service
provider’s capacity, systems, and procedures to manage, operate,
and maintain the new water supply system and the STP according to
international quality standards; (c) preparing a rolling five-year
Sustainability Improvement Plan to ensure the technical and
financial sustainability of the investments financed under the
project; (d) supporting the municipal authorities and service
provider to develop and implement the appropriate institutional,
regulatory, and
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financial arrangements for FSM; and (e) supporting beneficiary
communities and community-based organizations to design, operate,
and maintain, with support from the service provider, a sustainable
decentralized sewerage network and treatment systems. The cost of
the supervision of the main construction contract and embedded
technical assistance and capacity-building activities to support
infrastructure sustainability is estimated at US$4 million.28
Specific detailed activities to be implemented are as follows:
• Community engagement. Technical assistance and capacity
building will be provided to the service provider in Baucau to
design and implement a Community Engagement Plan to secure
community participation, accountability, buy-in, and increased user
willingness to pay for the services. Specific activities will
include public consultations, focus groups, and household
discussions to address a wide range of issues, including water
conservation, FSM, water chlorination, connection policy, metering,
and tariffs. The Community Engagement Plan will be critical for the
smooth implementation of water tariffs, as introducing tariff is
normally a difficult undertaking and even more difficult as tariffs
have never been applied since 1975 in Baucau. As part of this
activity, a substantive female participation (at least 50 percent)
will be promoted in community discussions, consultations, and
training events. In addition, adequate number of women trainers
will be hired and both male and female trainers will be trained on
gender sensitivity and inclusion.
• O&M of the infrastructure. Technical assistance, capacity
building, and training will be provided to improve the service
provider’s capacities, systems, and procedures to operate and
maintain the water supply system and the STP in a technically and
financially sustainable way. The scope of activities is harmonized
with and complements the sector reform road map implementation,
covering priority topics such as (a) preparation of service
provider business plans; (b) preparation of a human resources
development plan; (c) development of a customer database; (d)
establishment of a billing and collection system; (e) establishment
of a management and operational monitoring system; (f) design and
implementation of a customer relations management system; (g)
establishment of an asset management system; (h) development of
planning and budgeting tools; and (i) training on water network
management (including NRW management and energy efficiency), water
quality improvement, water sources protection, commercial
management, and customer relations.
• Financial sustainability. Technical assistance will be
provided to the service provider in the municipality of Baucau to
prepare a rolling five-year Sustainability Improvement Plan to
ensure the technical and financial sustainability of the
infrastructures financed under the project. The plan will outline
actions to (a) increase the service provider’s revenues (through
efficient volumetric metering, billing, and collection and the
increase in the customer database) and (b) reduce possible
operations costs through efficiency measures aiming at a gradual
financial equilibrium and a steady reduction of dependency on
central government subsidies. The Sustainability Improvement Plan
will also consider a medium-term transition to the national public
utility service provision, following the sector reform road map. As
indicated previously, the reform road map foresees the preparation
of a detailed water tariff study based on a detailed forecast of
future O&M costs, with the objective of ensuring the financial
sustainability of the future utility. Before the completion of
construction activities,
28 Master Plan - Second District Capitals Water Supply Project -
January 2016.
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the project will review the tariff recommendation from the
reform road map and, if needed, will carry out complementary
analyses and socioeconomic surveys to refine the water tariff in
Baucau.
• Institutional, regulatory, and financial arrangements for FSM.
Technical assistance and capacity building will be provided to
support the municipal authorities and the service provider in
Baucau to prepare and implement a comprehensive FSM plan, including
appropriate institutional, regulation, and financing arrangements
for fecal sludge collection and transport, treatment, and reuse to
ensure a safe and sustainable FSM service chain in Baucau.
• Community participation for decentralized sewerage network and
treatment systems management. Technical assistance and training
will be provided to the beneficiary communities and community-based
organizations to design, operate, and maintain, with support from
the service provider, sustainable decentralized sewerage network
and treatment systems.
39. This component will support activities to ensure
sustainability and resilience of WSS services considering climate
change-exacerbated risk of extreme heat, droughts, and floods. This
will include professional management and efficiently operated
services (based on training, technical assistance, and so on) to
carry out an effective water demand management strategy that
includes NRW, energy efficiency, water pricing, water conservation,
enhanced water resources monitoring, preventive maintenance, and
asset management, among other activities. This will contribute to
reduce both the risk and impacts of service disruptions related to
climate shocks. Moreover, a well-maintained, efficiently, and
professionally operated STP will reduce the impact of floods by
reducing the local communities’ exposure to
contaminated floodwaters.
Component 3: Institutional Strengthening and Project Management
(Cost: US$3 million; Financing: IDA - US$1 million; Counterpart
financing - US$2 million)
40. This component aims both at strengthening sector
institutions’ capacity to implement project activities and support
sector institutional reforms to improve service delivery and
promote long-term sustainability of the investments. This component
will finance operational costs associated with (a) technical,
environmental, and social supervision of subprojects’
implementation (including the implementation of the Gender Action
Plan [GAP]); (b) project audits and monitoring and evaluation
activities under the project; and (c) provision of administrative
and operational support to the Project Management Unit (PMU),
including personnel and equipment for its operationalization.
41. In addition, this component will finance activities to
support MPW-led sector stakeholders’ collaborative platform to
develop and implement the sector institutional reform, including
the establishment of the national public water and sanitation
utility and the regulatory agencies for WSS and water resources.
Specific activities to be financed under the project to support the
implementation of the sector road map will be defined once the
reform process is approved by the Council of Ministers in 2020.
General activities envisaged to be supported by this component
could include, among others, staffing development and capacity
building; the development of utility O&M management system; the
establishment of Standard Operating Procedures (SOPs),
performance-oriented human resources policies, and billing policies
and procedures; and the preparation of the national utility
business plan.
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42. Project-related greenhouse gas (GHG) emissions analysis. The
project’s total net emissions are 6,649 metric tons of carbon
dioxide equivalents (tCO2-eq) for the 20-year economic lifetime,
with gross emissions of 24,371 tCO2-eq and average annual net
emissions of 333 tCO2-eq.
• The net emissions for the water supply investment of the
project are estimated at –10,988 tCO2-eq over the 20-year life of
the water supply project, an average net emission of –549 tCO2-eq
annually, and gross emissions of 3,117 tCO2-eq. The expected
elimination of trucks for delivery of water is expected to lead to
the net emission reductions mentioned earlier, while the use of
zero-emission gravity-fed systems for half of the distribution
system limits the component’s net emissions.
• For the STP, the net emissions are estimated to be 955 tCO2-eq
over the 20-year economic lifetime, given that it is initially
designed to collect, transport, and treat septage only from
schools, hospitals, government and commercial offices, hotels, and
households that have septic tanks, with average annual net
emissions of 25 tCO2-eq and gross emissions of 955 tCO2-eq.
• The community-based decentralized sewerage network and
treatment systems have estimated net emissions of 17,133 tCO2-eq
across a 20-year period, while the average annual net emissions are
estimated at 857 tCO2-eq and the gross emissions are 20,299
tCO2-eq.
43. Project cost and financing. The total IDA support to the
GoTL under the Water Supply and Sanitation Project will be SDR 18.2
million (US$25 million equivalent). The estimated project costs by
component are shown in Table 1. Counterpart funds from the GoTL
will be included in the 2021 budget.29The Municipality of Baucau is
not expected to provide any counterpart funds.
Table 1. Estimates of Project Costs and Financing, by Components
(US$, millions)
Components IDA Credit Counterpart Total Costs % of IDA
Financing
1. Water Supply and Sanitation Infrastructure Development
21 2 23 91
2. Infrastructure Sustainability Support 3 1 4 75
3. Institutional Strengthening and Project Management
1 2 3 33
Total project costs 25 5 30 83
Note: The counterpart funds for Component 1 will be provided by
the Infrastructure Fund while the counterpart funds for Components
2 and 3 will be provided by the MPW
C. Project Beneficiaries 44. The population of the capital city
of the municipality of Baucau will benefit from increased access to
safely managed drinking water and sanitation services. First, by
2026, 25,000 people across the capital city of the municipality of
Baucau will have house connections and will enjoy continuous and
safe drinking water supply at a satisfactory pressure level and
complying with national quality standards. Second, an estimated 500
households in Baucau will benefit from access to safely managed
sanitation services through the community-based decentralized
sewerage network and treatment systems, and there is the
29 For 2020 implementation, IDA credit financing will suffice
for the initial activities.
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prospect of scaling up this sanitation model to other Baucau
areas and other cities in the future. Third, all residential and
institutional owners of septic tanks will be able to have their
septic tanks’ sludge safely collected, transported, and treated.
Finally, service provider staff in Baucau will benefit from the
project through technical assistance, capacity building, and
training to improve their operational performance. As an indirect
benefit, the water and sanitation services model that will be
developed in Baucau could also be replicated to other cities in the
country through the planned new national water utility.
D. Results Chain 45. The main challenge that the proposed
investments would address is the lack of adequate WSS services for
the population of the Baucau, including strengthening the sector
institutions that manage these services.
46. The theory of change is presented in figure 1. The
construction of the water supply system will provide access to
continuous and safe water supply to all the households in the
project area. The construction of an STP will ensure safe
management and treatment of on-site septic tanks’ fecal sludge for
the area it serves. The construction of community-based
decentralized sewerage network and treatment systems will increase
access to safely managed sanitation for households located in the
most urbanized areas of the city. These proposed investments will
cumulatively help increase access to safely managed drinking water
and sanitation services in the Municipality of Baucau. To ensure
sustainability of the infrastructure (that is, continued access to
good quality services), the project will support (a) the
implementation of a Community Engagement Plan to secure community
buy-in and increase users’ willingness to pay for services; (b)
strengthening of the water and sanitation service provider’s
capacity, systems, and procedures to operate and maintain the WSS
infrastructure; and (c) preparation of a Sustainability Improvement
Plan to ensure long-term technical and financial sustainability.
Support will be also provided to the MPW to improve the
implementation of its institutional sector reforms which will
contribute to improved service delivery and long-term
sustainability of the sector investments across the country. These
activities will contribute to the overall GoTL’s strategy to
increase access to improved water and sanitation services in
Baucau. The investments will also improve Baucau’s resilience to
climate change.
47. The success of the project is premised on the assumptions
that (a) the authorities are willing to commit to introducing
tariffs and subsidy for services delivery, (b) the beneficiaries
will understand the need for tariffs and contribute for payment of
service provision, (c) the authorities are committed to operate and
maintain the WSS infrastructure in a manner which will ensure
long-term sustainability of the service delivery, and (d) the
sector reforms will be implemented by 2021 as expected.
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Figure 1. Project Theory of Change
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E. Rationale for Bank Involvement and Role of Partners 48. The
World Bank’s engagement in Timor-Leste’s water and sanitation
sector adds value by bringing in global experience of water and
sanitation service provision, infrastructure development, and
associated activities and measures to ensure services
sustainability. The World Bank project will also support the GoTL
and develop its capacity to address environmental and social
management issues related to WSS services provision. Good practices
to be developed in Baucau through the project interventions could
be replicated in other areas of the country. Moreover, this project
allows the World Bank to support the sector reforms by providing
global best practices for sector structuring and water utility
establishment.
49. The World Bank project will collaborate with the MoH to
ensure synergies and convergence between interventions in the
municipality of Baucau to adequately address the multisectoral
nature of stunting. The MoH with support from UNICEF is
implementing in parallel and in the same area of the project a
comprehensive WASH, Health, and Nutrition Social and Behavior
Change Communication (SBCC) program aiming at improving early
childhood development. The WASH subprogram aims at eliminating open
defecation and sustaining ODF status; promoting improved toilets
construction; and ensuring that the population (a) builds and uses
a hygienic toilet, (b) ensures safe disposal of child and infant
excreta, and (c) practices improved hygiene behaviors, particularly
handwashing with soap and safe water management. The health
subprogram aims at training health workers and midwives to tackle
maternal and newborn health issues, including immunization,
malnutrition detection, and management of severe acute
malnutrition; management of diarrhea and pneumonia cases; and the
safe delivery of babies. The nutrition subprogram supports the
Mother Support Groups (MSGs). The role of the MSG is to support the
mothers to adopt recommended infant and young child feeding
practices including breastfeeding promotion and complementary
feeding practices and in providing equipment, supplies, training,
and infrastructure to deliver essential nutritional information,
counseling, and support to under-five children, mothers, and
adolescent girls. Collaboration will include joint supervision
visits, advocacy workshops, and knowledge exchange activities to be
agreed with the MPW and MoH.
50. The World Bank project will also collaborate with MPW and
other donors to advance the implementation of the SIP (2018–2030),
which includes infrastructure development in Dili and 12 municipal
centers and institutional reforms. The World Bank, in collaboration
with other development partners including the ADB, DFAT, JICA, and
Millennium Challenge Corporation (MCC), is supporting the GoTL to
modernize the sector institutional framework. The implementation of
the sector reforms road map, including the creation of an
autonomous and accountable national public water utility and
independent regulator, will allow technical, financial efficiency,
and sector governance improvements by supporting the implementation
critical activities, as mentioned in Component 3. The institutional
activities under the project will draw on national-level
discussions that are under way for the SIP.
F. Lessons Learned and Reflected in the Project Design 51.
Improving water utility performance is neither quick nor easy.
Improving performance requires developing virtuous cycles that stop
downward spirals and create credibility, accountability, and
autonomy. Recent studies30 show that the actions taken by countries
and utilities that did manage to
30 Bender. 2017. Introducing Commercial Financing into the Water
Sector in Developing Countries.; Kolker et al. 2016. Financing
Options for the 2030 Water Agenda.; World Bank. 2017. Crowding-in
Commercial Finance in World Bank Water and Sanitation
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improve their utilities’ performance tended to implement the
same key actions in roughly the same order. In most cases, the
utilities established a baseline in the early stages of the
turnaround as a key input for their business plan. Utilities under
severe financial distress tended to focus first on achieving
financial sustainability by either increasing revenues or reducing
costs. Next, they set objectives through multiyear targets
incorporated into sustainable business plans. In almost all cases,
the first actions in their business plan involved improving human
resource and management information systems. The World
Bank-financed Honduras Water and Sanitation Sector Modernization
Project (P103881) promoted the creation and strengthening of
municipal water utilities through a coordinated and gradual
approach of institutional reforms, capacity building, and
improvements in the service provision. Therefore, technical
assistance, capacity building, and training will be systematically
provided to the service provider in Baucau to develop its capacity
to implement the required actions to improve its technical,
operational, and commercial performance, in parallel to the works
to substantially improve the quality of the WSS services
delivery.
52. Community-based decentralized sewerage network and treatment
systems could be an effective approach to improve sanitation in
poor communities31 as long as local context and existing capacities
are carefully considered. The simplified wastewater collecting
network and treatment system coupled with participatory planning
and community management ensure a high rate of household
connections, as demonstrated by the World Bank-financed Nicaragua
Greater Managua Water and Sanitation (P110092), which had a solid
community engagement process applied for simplified sewerage
development. Capital and O&M costs are lower than conventional
sewerage. The sewerage system can be easily extended as the
community grows. However, sustainable services require professional
design and construction, enough water for flushing, and regular
maintenance as blockages arise more frequently than with
conventional gravity sewer and necessitate regular desludging of
tanks. Finally, while community management seems appropriate,
experience shows that such infrastructure needs a comprehensive
community capacity-building program through the project
implementation cycle and continuous technical support and oversight
from the local service provider and/or municipal authorities in
supporting community-based organizations to deliver sustainable
services.32 Therefore, the project will support beneficiary
communities to actively participate in the design of these systems
and provide training to the community-based organizations to
operate and maintain these systems with oversight from the
municipal authorities.
53. The role of women is particularly important in creating
demand for higher levels of water and sanitation services. Women
play an important role in community mobilization for creating
awareness and acceptance of construction of new WSS systems. As
such, they are also key stakeholders to influence the willingness
to pay for better water and sanitation services. The women’s
contribution in demand creation for better water and sanitation
services must be considered to increase the overall services
sustainability. Community engagement tools such as participatory
planning and consultations, with adequate representation of women,
will be an important mechanism under Component 2.
Operations - A How-to Guide for World Bank Task Teams; and
Mumssen, Saltiel, and Kingdom. 2018. Aligning Institutions and
Incentives for Sustainable Water Supply and Sanitation Services. 31
SANIMAS (Sanitasi Berbasis Masyarakat or community-based
sanitation) was initiated in 2003 with focus on community
empowerment to improve the access to sanitation, especially
communal systems (decentralized wastewater treatment facilities),
in urban densely populated areas. 32 Water Environment Partnership
in Asia. 2013. “Community-based Sanitation Lessons Learned from
SANIMAS Programme in Indonesia.”
http://operationsportal.worldbank.org/secure/P103881/homehttp://operationsportal.worldbank.org/secure/P110092/homehttp://operationsportal.worldbank.org/secure/P110092/home
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54. Addressing policy, institutional, and regulatory issues and
political economy is critical for water and sanitation sector
reform. Despite large investments in the WSS sector by governments
and their development partners over the last 10–15 years, the
sustainable delivery of WSS services in developing and emerging
economies has not significantly improved.33 A holistic approach to
the issues affecting the sector is needed, such as establishing
and/or improving the sector’s institutional, financial, and
governance arrangements in parallel to improving the quality of the
service provided to the population through addressing the
utilities’ operational performance issues. Moreover, the approach
needs to be grounded in countries’ contextual realities, drawing
lessons from approaches that were successful or failed to achieve
specific objectives. Therefore, the project will support the
service provider in Baucau to develop its capacity, and in
parallel, in collaboration with other development partners, support
the development and implementation of sector structural reforms to
improve the long-term sustainability of services across the
country.
III. IMPLEMENTATION ARRANGEMENTS
A. Institutional and Implementation Arrangements 55. The
Administrative Council of the Infrastructure Fund (Conselho de
Administração do Fundo das Infra-Estruturas, CAFI) will have the
overall oversight responsibility of the project implementation. The
MPW will be the executing agency, with DGAS responsible for
implementation of the project, consisting of planning, contract
administration, financial management (FM), supervision of
environmental and social safeguards, and monitoring.
56. A PMU will be established in Dili under DGAS to implement
the project activities with adequate staff and funds throughout the
implementation of the project. The establishment of the PMU is a
legal covenant. Key PMU professional staff will include, among
others, a coordinator, a water supply engineer, an urban sanitation
specialist, a safely managed sanitation specialist, a water
operation specialist, a social specialist, an environmental
specialist, a gender specialist, an FM specialist, a procurement
specialist, and monitoring specialists all of whom with experience,
qualifications, and terms of reference satisfactory to the
Association. Effective coordination between the PMU and the Baucau
municipality is pivotal for the success of the project, and clear
roles and responsibilities for each have been agreed and will be
reflected in the Projects Operations Manual (POM).
57. The MSA will support project implementation by promoting
efficacy, efficiency, and quality of drinking water and sanitation
services and by ensuring that the municipal authorities of Baucau
contribute to the implementation of the project as needed. The MSA
and MPW have agreed on the roles and responsibilities of the Baucau
municipality in the implementation of the project. Details will be
specified in the POM.
58. The municipality of Baucau, through the WSS service provider
(currently SMASA), has an important role to play in the project
implementation in relation to (a) strengthening beneficiaries’
participation and support to the project and building consensus at
the community level, whenever
33 Soppe, Gerard, Nils Janson, and Scarlett Piantini. 2018.
Water Utility Turnaround Framework.
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necessary; (b) promoting and regulating the management of fecal
sludge; and finally (c) supporting and overseeing the service
provider.
59. The existing Inter-ministerial Technical Working Group,
co-chaired by the MPW and MoF that includes the MSA, MoH, Ministry
of Education, Ministry of Planning and Strategic Investments, and
Secretary of State for Environment to coordinate WSS development
interventions, will provide overall policy guidance during project
implementation.
60. The PMU will implement the project following the POM, which
contains detailed information on the project implementation
arrangements and processes, including procurement, FM, and
environmental and social management and relation between functions
of the PMU and Baucau municipality.
B. Results Monitoring and Evaluation Arrangements 61. To ensure
effective monitoring and evaluation, several measures will be
taken. Members of the PMU will be required to have skills in data
collection and reporting. This expertise will be bolstered through
advice from the World Bank through the provision of reporting
templates and feedback on reports prepared by the PMU.
62. DGAS will issue biannual progress reports that will be due
the last day of June and December each year. These will be
submitted to the World Bank within 30 days of the end of each
calendar semester. A midterm review will be prepared in mid-2023
(expected), and an Implementation Completion and Results Report
will be completed within six months of the end of the project
implementation.
63. In addition, the PMU will support the service provider in
Baucau in developing its monitoring system, which will be later
also used by the national water utility to report on the technical,
financial, and commercial management. A set of indicators will be
defined, agreed upon, and reported on a yearly basis.
C. Sustainability 64. The borrower’s commitment to sustaining
the infrastructures and the service provision is ensured by the
strong alignment between the project’s investments, the SIP, and
the institutional reforms recently initiated to improve service
delivery and sector governance across the country. Overall, the
project’s financial sustainability will be achieved through the
implementation of critical measures, by (a) designing project
infrastructure in a climate-resilient manner considering the
long-term impacts of climate change on water resources and demand;
(b) strengthening the service provider’s operational efficiency to
minimize operating costs and increase its capacity to collect
revenues, building on Component 2 activities; (c) expanding
services to new customers to increase the revenue base of the
service provider; (d) promoting a water tariff allowing to sustain
the recovery of O&M costs and building on the tariff-setting
activities undertaken under the national reform road map; (e)
implementing a Community Engagement Plan to stimulate users’
willingness to pay for improved services and acceptance of metered
billing and tariff payment; and (f) achieving further progress on
the planned sector reform that would set the basis for long-term
service provisions by establishing a professional nationwide
national utility and regulation arrangements. After project
completion in 2026, the service provider and community-based
organizations in Baucau, with support from the national and
municipal authorities, are expected to build on this strengthened
capacity and operate the systems without external support.
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65. In addition to the activities listed above, the GoTL will be
required to
(a) Prepare, by December 31, 2022, a rolling five-year
Sustainability Improvement Plan, outlining how the service provide
in Baucau will improve its operational and financial status,
including targets and necessary measures to meet the targets, in a
manner acceptable to the Association;
(b) Update, by December 31 of each year commencing on December
31, 2023, in accordance with the terms of reference acceptable to
the Association and furnish to the Association for review and
comments, its draft updated Sustainability Improvement Plan;
(c) Take all necessary actions to carry out its Sustainability
Improvement Plan as prepared or updated; and
(d) Cover all operating costs for the service provider in Baucau
which are not covered by tariffs.
IV. PROJECT APPRAISAL SUMMARY
A. Technical Analysis 66. The proposed project activities are
based on the Water and Sanitation Master Plan prepared in 2016. The
World Bank has reviewed the master plan and considers it acceptable
for the design of this project. The master plan’s technical design
and estimated construction costs will be reviewed during the
preparation of