document of the world bank · document of the world bank report no: icr00002030 implementation...

Document of The World Bank

Report No: ICR00002030

IMPLEMENTATION COMPLETION AND RESULTS REPORT

(TF-57598 TF-57599)

ON A

GRANT

IN THE AMOUNT OF US$7 MILLION

TO THE

KINGDOM OF MOROCCO SOCIETE DES EAUX ET D’ELECTRICITE DU NORD, LYONNAISE DES EAUX DE

CASABLANCA, REGIE AUTONOME DE DISTRIBUTION D’EAU ET D’ELECTRICITE DE MEKNES

FOR AN

IMPROVED ACCESS TO WATER AND SANITATION SERVICES PROJECT

June 29, 2012

Sustainable Development Department Middle East and North Africa Region

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CURRENCY EQUIVALENTS

(Exchange Rate Effective December 31, 2011)

Currency Unit = Moroccan Dirham

MAD 1.00 = US$0.12 US$ 1.00 = MAD8.60

FISCAL YEAR

July 1 - June 30

ABBREVIATIONS AND ACRONYMS

CAS Country Assistance Strategy CPS Country Partnership Strategy DFID UK Department For International Development DPL Development Policy Loan GA Grant Agreement GoM Government of Morocco GPOBA Global Partnership Output-Based Aid ICRR Implementation and Completion Results Report INDH National Initiative for Human Development ISR Implementation Status and Results IVA Independent Verification Agent KPI Key Performance Indicators LYDEC Lyonnaise des Eaux de Casablanca M&E Monitoring and Evaluation MAD Moroccan Dirham MENA Middle East and North Africa MFP Ministry of Finance and Privatization MoI Ministry of Interior MTR Mid-Term Review OBA Output-Based Aid OM Operations Manual PACD Project Appraisal Commitment Document PCR Project Completion Report PDO Project Development Objective PNRD Programme National de Rattrapage de la Desserte PPP Public Private Partnership RADEM Régie Autonome de Distribution d’Eau et d’Electricité de

Meknès RF Results Framework SEEN Société des Eaux et de l’Electricité du Nord USD US Dollar

Vice President: Inger Andersen

Country Director: Simon Gray

Sector Manager: Francis Ato Brown

Project Team Leader: Xavier Chauvot de Beauchene

ICR Team Leader: Fatiha Amar

KINGDOM OF MOROCCO

IMPROVED ACCESS TO WATER AND SANITATION SERVICES PROJECT

CONTENTS

Data Sheet

A. Basic Information ............................................................................................................ i B. Key Dates ........................................................................................................................ i C. Ratings Summary ............................................................................................................ i D. Sector and Theme Codes................................................................................................ ii E. Bank Staff ....................................................................................................................... ii F. Results Framework Analysis .......................................................................................... ii G. Ratings of Project Performance in ISRs ....................................................................... iv H. Restructuring (if any) ..................................................................................................... v I. Disbursement Profile ...................................................................................................... v

1. Project Context, Development Objectives and Design ................................................... 1 2. Key Factors Affecting Implementation and Outcomes .................................................. 5 3. Assessment of Outcomes .............................................................................................. 14 4. Assessment of Risk to Development Outcome ............................................................. 21 5. Assessment of Bank and Borrower Performance ......................................................... 21 6. Lessons Learned............................................................................................................ 24 7. Comments on Issues Raised by Grantee/Implementing Agencies/Donors................... 25

Annex 1. Project Costs and Financing .............................................................................. 27 Annex 2. Outputs by Component...................................................................................... 27 Annex 3. Economic and Financial Analysis ..................................................................... 31 Annex 4. Grant Preparation and Implementation Support/Supervision Processes ........... 33 Annex 5. Beneficiary Survey Results ............................................................................... 35 Annex 6. Stakeholder Workshop Report and Results ....................................................... 41 Annex 7. Summary of the Recipients’ ICR ...................................................................... 42 Annex 8. Comments of Cofinanciers and Other Partners/Stakeholders ........................... 45 Annex 9. List of Supporting Documents .......................................................................... 46 Non-Bank MAPs

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A. Basic Information

Country: Morocco Project Name: Morocco Urban WS&S Access Pilots

Project ID: P102527 L/C/TF Number(s): TF-57598,TF-57599

ICR Date: 06/29/2012 ICR Type: ILI Core ICR

Lending Instrument: SIL Grantee: Government of Morocco

Original Total Commitment:

USD 7.00M Disbursed Amount: USD 7.00M

Revised Amount: USD 7.00M

Environmental Category: C

Implementing Agencies: Lyonnaise des Eaux de Casablanca Régie Autonome de Distribution d’Eau et d’Electricité de Meknès Société des Eaux et de l’Electricité du Nord

Cofinanciers and Other External Partners: B. Key Dates

Process Date Process Original Date Revised / Actual

Date(s)

Concept Review: 07/11/2005 Effectiveness: 01/30/2007 01/30/2007

Appraisal: Restructuring(s): 12/30/2009 12/21/2010

Approval: 01/29/2007 Mid-term Review:

Closing: 12/31/2009 12/31/2011 C. Ratings Summary C.1 Performance Rating by ICR

Outcomes: Satisfactory

Risk to Development Outcome: Moderate

Bank Performance: Satisfactory

Grantee Performance: Satisfactory i

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

Quality at Entry: Satisfactory Government: Satisfactory

Quality of Supervision: Satisfactory Implementing Agency/Agencies:

Satisfactory

Overall Bank Performance:

Satisfactory Overall Borrower Performance:

Satisfactory

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C.3 Quality at Entry and Implementation Performance IndicatorsImplementation

Performance Indicators

QAG Assessments (if any)

Rating

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

No Quality at Entry (QEA): None

Problem Project at any time (Yes/No):

No Quality of Supervision (QSA):

None

DO rating before Closing/Inactive status:

Satisfactory

D. Sector and Theme Codes

Original Actual

Sector Code (as % of total Bank financing)

Sewerage 50 50

Water supply 50 50

Theme Code (as % of total Bank financing)

Urban services and housing for the poor 100 100 E. Bank Staff

Positions At ICR At Approval

Vice President: Inger Andersen Daniela Gressani

Country Director: Neil Simon M. Gray Theodore O. Ahlers

Sector Manager: Francis Ato Brown Narasimham Vijay Jagannathan

Project Team Leader: Xavier Chauvot De Beauchene Pier Francesco Mantovani

ICR Team Leader: Fatiha Amar

ICR Primary Author: Fatiha Amar F. Results Framework Analysis Project Development Objectives (from Project Appraisal Document) The objective of the project is to provide sustainable access to combined water and sewerage services to peri-urban "quartiers"' with high levels of "vulnerable" households, i.e. with household incomes falling under 295 US$/month (150% of the poverty line of Dh 1687) or about US$60/cap/month. Revised Project Development Objectives (as approved by original approving authority) The PDO was not revised.

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(a) PDO Indicator(s)

Indicator Baseline Value

Original Target Values (from

approval documents)

Formally Revised Target

Values

Actual Value Achieved at

Completion or Target Years

Indicator 1 : Number of water and sewerage connections made (total number of beneficiary households)

Value quantitative or Qualitative)

0 12,025 connections 10,421 connections

11,147 connections

Date achieved 06/01/2006 12/31/2009 12/31/2010 03/31/2011 Comments (incl. % achievement)

Achievement exceeded revised target value by 7%.

Indicator 2: Number of people in urban areas provided with access to improved sanitation under the project

Value quantitative or Qualitative)

0 10,213 people 47,390 people 47,895 people


Achievement exceeded revised target value by 1%.

(b) Intermediate Outcome Indicator(s)

Indicator Baseline Value

Original Target Values (from

approval documents)

Formally Revised Target

Values

Actual Value Achieved at

Completion or Target Years

Indicator 1 : Uptake by Beneficiary households per operator and eligible area

Value (quantitative or Qualitative)

0

Casablanca: 80% Meknes: 90% Tangiers: 85%

Casablanca: 80% Meknes: 90% Tangiers:85%

Casablanca: (Lahraouine) 63% (Lamkensa) 73% Meknes: n/a Tangiers: 93%


The latest values were not recorded. However, survey results confirmed the attainment of this IOI.

Indicator 2 : Average monthly consumption per Beneficiary


No piped service provided

indicative target is 40l/ day/person, translates into 6 m3/mo in a 5-person household

indicative target is 40l/ day/person, translates to 6 m3/mo in a 5-person household

Casablanca: (Lahraouine) 10m3 (Lamkensa) 6.2m3 Meknes urban: 9.2m3Tangiers: 10m3

Date achieved 06/01/2006 12/31/2009 12/31/2010 03/31/2011

iv

Comments (incl. % achievement)

IO achieved (100%)

Indicator 3: Average consumption bill per beneficiary household


no service

Casablanca: (Lahraouine) 54Dh (Lamkensa) 30Dh Meknes urban: Tangiers: 10m3

Information, no target value

Information, no targetValue


No target value was established for this IO, rather information was provided by the Implementing agencies.

Indicator 4: Collection ratio for consumption bills per operator, and to the extent possible collection ratio of connection fees


0% (no service)

Collection ratio in project areas equal or superior to the operator's average collection ratio

Collection ratio in project areas equal or superior to the operator's average collection ratio

Consumption bills Casablanca Lahraouiyine: 99% Casablanca Lamkensa: 96% Meknes: 99% (Feb. 28, 2010) Tangiers: 90% (from 79% to 96% depending on area) Connection fee monthly payment Casablanca: -Lahraouiyne: 93% -Lamkensa: 96% Meknes: 61%


Achievement recorded as of June 30, 2010.

G. Ratings of Project Performance in ISRs

No. Date ISR Archived

DO IP Actual Disbursements

(USD millions) 1 12/11/2008 Satisfactory Satisfactory 1.14 2 12/30/2009 Satisfactory Moderately Satisfactory 2.12 3 03/16/2010 Satisfactory Moderately Satisfactory 2.12 4 10/31/2010 Satisfactory Satisfactory 2.77 5 06/26/2011 Satisfactory Satisfactory 6.37 6 01/11/2012 Satisfactory Satisfactory 6.99

v

H. Restructuring (if any)

Restructuring Date(s)

Board Approved PDO

Change

ISR Ratings at Restructuring

Amount Disbursed at

Restructuring in USD millions

Reason for Restructuring & Key Changes Made

DO IP

12/30/2009 S MS 2.12 12/21/2010 S S 3.18

I. Disbursement Profile

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1. Project Context, Development Objectives and Design

1.1 Context at Appraisal This operation was appraised in 2006 at the time when the Government of Morocco had engaged into comprehensive reform of the water sector focusing on improving integrated water resources management. In 2005, Morocco had good water infrastructure assets and potable water reached almost all urban residents. The Joint Monitoring Program for monitoring the achievement of the Millennium Development Goals reported that 97 percent of the urban population had access to improved water services. Of those who had access to improved water supply services, 86 percent had access to pipe-borne water in 2005. Access to improved sanitation services lagged behind that of water supply as 83 percent of the urban population had access to improved sanitation. The figures for the poor urban and peri-urban1 areas are much lower and characterized by intermittent services and higher costs for alternative supplies. The challenge for the water and sanitation sector in Morocco was to improve service access and efficiency at an affordable cost to beneficiary households. The connection fee to access piped services is priced at about the marginal cost of service extension. As poor and vulnerable settlements often are located far from existing networks, this cost is unaffordable to them, despite facilities provided for them to pay over time, through the water bill. Improving access to basic infrastructure services and tackling housing shortages became a high priority for the Government. Following the 2002 parliamentary elections, the Government’s priorities were to reduce unemployment and pay special attention to the vulnerable social segments through accelerated growth. In May 2005, the King ordered the government to prepare the National Initiative for Human Development (INDH) to fight poverty by improving the dire living conditions in urban and peri-urban informal settlements and rural communities. The INDH program was a clear political commitment to extend access to selected areas across all administrative levels regardless of their land tenure status. This orientation was a clear shift from earlier policies towards those segments of the population which imposed regulation, rehabilitation and resettlement as conditions for providing improved basic services. In addition, the Government’s Cities without Slums program (VSB) succeeded in mobilizing elected officials and authorities at all levels to recognize and agree to upgrade those informal settlements. Those initiatives provided a strong drive for municipalities and utility companies to explore mechanisms, such as reduced connections fees, to expand access to basic infrastructure in INDH-identified poor peri-urban settlements. Moreover, Morocco benefits from the presence of professional operators, public (régies) and private (concessionaires) which are providing a good quality service. All these factors contributed to creating an environment conducive to extending basic services to poor and informal settlements. It was in this context that the Government and the operators in Casablanca, Meknes, and Tangiers jointly requested a Grant from the Global Partnership on Output-Based Aid (GPOBA), a multidonor trust fund administered by the World Bank, to pilot the introduction of performance-based subsidies to facilitate access to water and sanitation services to the poor. Since 2006, the

1 Peri-urban refers to all settlements found at cities’ outskirts−whether structured in city quarters or hamlets, legal or not−and consist of hamlets in urban communes presenting characteristics of rural areas.

2

GPOBA has been developing an OBA subsidy scheme with the objective of building a strong portfolio of pilot projects. The Pilot2 in Morocco is one of the early ones funded by the GPOBA. It is groundbreaking in many aspects. It is the first to use an OBA approach for both, the water and sanitation sectors, the first to be implemented in the MENA Region, the first to involve a public utility and the first to disburse in local currency. The proposed Pilot offered not only an opportunity to facilitate access to service and pilot a new approach but also gave financial incentives to the utility companies to connect households in informal low-income areas. Moreover, the project would have a direct impact on the beneficiaries who would benefit from immediate access to water and sewerage services. It was given a renewed impetus by the INDH/VSB programs as there was already then a high potential for scaling up the Output-based Aid (OBA) mechanism in Casablanca and Tangiers, and for assessing the extension of the approach to other major cities. At the time, initial discussions highlighted a significant interest to scale up an OBA subsidy program that could enhance reforms in the financing of the water and sewerage sector. The piloting of the approach and the opportunity for its replication were made objectives of its sector wide reform, supported by the World Bank water sector Development Policy Loan (DPL). It is worth noting that while this report refers to the OBA Pilot as being implemented as part of the “INDH programs,” it is a completely independent approach to the nationwide Community Driven Development program called INDH. The World Bank DPL supported the first phase of this important program. “INDH programs” in this document refer to social connection programs promoted by the Ministry of Interior (line Ministry for the Recipient utilities) for extensions of water and sanitation services by the utilities in areas located within the INDH coverage areas and in accordance with the objectives of the INDH. These programs were neither processed through the INDH institutional arrangements, nor were they funded by the INDH. They were implemented by water and sanitation utilities directly, in coordination with INDH local commissions for synergy and problem solving purposes. Albeit small in amount, the OBA pilots played a critical role in the successful implementation of the INDH social connection programs as each implementing utility adopted its implementation arrangements for the execution of their respective INDH program. The Pilot project tested four different approaches: (i) passing performance risks from national governments to a Public Private Partnership (PPP) between private firms and municipalities, with both parties bearing the risks for non performance, (ii) easing the administrative constraints otherwise faced by the users if they have to request a connection individually, (iii) experimenting with the implementation of an OBA approach by a public utility to facilitate the provision of improved services, and (iv) contributing to the successful implementation of the INDH program. The Pilot was fully aligned with the priorities set forth in the Bank Country Assistance Strategy (2005-2009 CAS), which identified “increased access to basic services to poor and marginalized groups” as its second pillar and “improved water management and access to water and sanitation” as its fourth pillar.

2“Pilot” refers to the three pilots in the three cities, while ‘pilot” refers to each individual project in Meknes, Casablanca, and Tangiers.

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1.2 Original Project Development Objectives (PDO) and Key Indicators As set forth in the Grant Agreement (GA), the objective of the Project was to promote, following an output-based approach, the connection to water and sanitation services of about 11,300 low income households in disadvantaged peri-urban and rural INDH neighborhoods in the urban centers of Casablanca, Tangiers and Meknes. Yet, the Project Appraisal Commitment Document (PACD) defines the Project Development Objective (PDO) as to provide sustainable access to combined water and sewerage services to peri-urban “quartiers” with high levels of “vulnerable” households, i.e. with households incomes falling under 295 US$/month (150% of the poverty line of Dh 1687) or about US$60/cap/month. The project will benefit 11,300 households (56,000 inhabitants). The operation established eight Key Performance Indicators (KPIs) as follows3:

(1) Number of connections made; (2) Total number of beneficiary households; (3) Annual reports on service quality (as required under the applicable regulatory regime); (4) Average monthly consumption per beneficiary household; (5) Average residential tariff per beneficiary household (no target value set); (6) Total project costs as per actual incurred expenditures (breakdown into components) (no

target value set); (7) Actual project costs per beneficiary household or per connection and discrepancies with

projections (no target value set); and (8) Collection rate in OBA pilot areas and discrepancies with operators’ total percentage equal

or superior to operator’s average collection ratio. The three operators were also requested to collect additional information aimed at enhancing the project monitoring, such as: Average expenditure on service per beneficiary household (as a percentage of total

household expenditure); Average household expenditure on alternative sources of water to the project based on

information provided by households.

1.3 Revised PDO (as approved by original approving authority) and Key Indicators, and reasons/justification The PDO remained unchanged throughout the implementation of the project. However, OBA KPIs were revised during the Mid-Term Review (MTR). The KPIs and the required information from the operators, as outlined in the original and the improved Operations Manual (OM),4 were:

3 Operations Manual, 2007 4 Revised Operations Manual dated October 23, 2008

4

Table 1: Original and Revised Key Indicators

Original Key Indicators Revised Key Indicators Number of connections made Number of connections made Total number of beneficiary households Number of beneficiary households Annual reports on service quality (as required under the applicable regulatory regime)

Uptake by beneficiary households per operator and eligible area

Average monthly consumption per Beneficiary household

Average monthly consumption per Beneficiary household

Average residential tariff per beneficiary household

Average residential monthly consumption bill per beneficiary household

Total project costs as per actual incurred expenditures (breakdown into components)

(moved to additional information)

Actual project costs per beneficiary household or per connection and discrepancies with project

(moved to additional information)

Collection ratio in OBA pilot areas and discrepancies with operators’ total percentage

Collection ratio for consumption bills per operator, and to the extent possible collection ratio of connection fees in the OBA pilot areas and discrepancies with operators’ total percentage

Additional Monitoring Information to be provided by Utilities Original indicator New indicator Average expenditure on service per beneficiary household (as a percentage of total household expenditure)

Average expenditure on service per beneficiary household (as a percentage of total household expenditure)

Average household expenditure on alternative sources of water to the project based on information provided by households

Average household expenditure on alternative sources of water to the project based on information provided by households

Total project costs as per actual incurred expenditures (breakdown into components)

Actual project costs per beneficiary household or per connection and discrepancies with project

1.4 Main Beneficiaries The Grant’s recipients were the Kingdom of Morocco, the Société des Eaux et de l’Electricité du Nord (SEEN), Lyonnaise des Eaux de Casablanca (LYDEC), Régie Autonome de Distribution d’Eau et d’Electricité de Meknès (RADEM). The direct beneficiaries of the project were the 11,300 low income households selected in the disadvantaged peri-urban and rural INDH neighborhoods in the centers of Casablanca, Tangiers and Meknes getting connected to piped-borne water and sewerage services. 1.5 Original Components The Grant Agreement does not reflect the project components, yet the PACD lists a number of components under their respective implementation arrangements sections, the results of which are outlined in Annex 2. Component 1: Assessment of demand for connections and marketing/outreach efforts to sign up households for subsidized social connections by all utility companies through undertaking market surveys and providing GPOBA with demand projections. It also involved: i) carrying out

5

marketing activities to promote the terms of the subsidized connection program to sign up households to their respective programs, ii) submitting semi-annual updates on the projections, iii) assessing the discrepancies and actual sign-up with projections, and iv) devising a proposal for a new action plan to mobilize lagging customer demand. Component 2: Management and implementation of works as required for establishing functioning household connections as substantiated by the participating operators’ established track record in planning, overseeing and executing the extension of water and sewerage networks and providing water and sanitation services. That included pre-financing of all works and household connection fees by the operators, the design and construction of facilities required to allow access to services to households who had to sign up for social connections, and the strict compliance with the procurement policies in place, as found acceptable by the World Bank. Component 3: Monitoring and household certification of output (active social connections) by all participating utility providers which connected beneficiary households to the network, and for each connection, collected connection certificates signed by the same beneficiaries who confirmed that they were connected in accordance with the applicable rules, regulations, and terms of social connections. The recipients were also required to submit semi-annual summary reports reflecting the number of households connected per reporting period, the location of the households within the INDH settlements, the billing and payment documents, in addition to retaining the original documents for audit purposes at the request of the Ministry of Interior (MoI) and the World Bank. Component 4: Provision of ongoing service by all utility providers would be guaranteed by their proven record for the provision of water and sewerage services and under a well-established regulatory framework. That involved the provision of service to households according to applicable regulatory provisions and the households’ obligation to pay tariffs for consumption, while enjoying the rights and assuming obligations as per the relevant regulations on quality of service and tariffs. 1.6 Revised Components The number and description of the components remained unchanged throughout the implementation of the operation.

1.7 Other significant changes There were no significant changes in the design, scope and scale, the implementation arrangements, or the funding. 2. Key Factors Affecting Implementation and Outcomes

2.1 Project Preparation, Design and Quality at Entry Because the funds made available through the GPOBA covered only a portion of the financial costs to extend access to water and sewerage services to the low-income population located in the INDH-identified areas, it was crucial to determine the amount of subsidy, and its allocation among the three cities upfront so as to optimize the number of households to be connected.

6

Project preparation and design. Project preparation spanned over a period of 18 months from the date of the concept note, to the provision of applications by the Bank to the operators in June 2005, and the signing of the Grant Agreement in January 2007. The time allocated to the preparation was appropriate as the design and the needed institutional arrangements had to be carefully vetted and examined. The operation identified a comprehensive OBA mechanism and helped the Government establish an enabling institutional and regulatory framework to ensure a transparent and effective allocation of grant proceeds in the three cities and to administer the disbursement of funds. The preparation included:

assessing the capital expenditures and subsidies to ensure that the agreed capital expenditures for water supply and sanitation were consistent with a number of global benchmarks and estimates5;

estimating the subsidy based on geographical targeting and sizing it carefully to reflect household beneficiaries’ ability and willingness to pay;

an assessment by each operator of their evaluation of the investment costs and subsidy needs which were examined in details by the consulting firm6 contracted out to propose feasible design and implementation arrangements for the pilots. The recommendations of the consulting firm were deemed feasible and adopted as a basis for the design of the pilots, as reflected in the PACD.

Identifying operators’ legal obligations as stipulated in the GA, namely: (i) implementing the project and preparing quarterly output reports, (ii) selecting beneficiary households in accordance with the eligibility criteria as set forth in the OM, (iii) guaranteeing quality of service standards in accordance with the provisions of the relevant Concession Contract or RADEM’s Service Agreement (“cahier des charges”), (iv) retaining all documents attesting to the eligibility of connected beneficiary households and the quality of service, and (iv) monitoring project outputs in compliance with the OM’s provisions.

Table 2. Total GPOBA Subsidy Requirements at Project Preparation and Closing GPOBA Subsidy allocation at appraisal7

Casablanca Tangiers Meknes Urban Rural Total adjusted capital expenditure in (US$) per water/sewerage connection

2,035 3,044 1,931 799

Total GPOBA unit subsidy requirement (% of total adjusted capital expenditures)

563* (28%)

700* (23%)

1,027 (53%)

591 (74%)

*Simultaneous connection to water supply and sanitation services.

Lessons learned. The PACD did not list any lessons learned from previous OBA operations as that was the first OBA operation in the MENA Region, but instead modeled the approach by:

Bringing in OBA core principles among them, transparency, accountability for results, private sector participation, innovation, efficiency, and sustainability which were all directly linked to the project objective;

5 World Water Council: Costing MDG Target 10 on Water and Sanitation: Comparative Analysis, Obstacles and Recommendations, March 26. 6 Infrastructure Development Consultants, IDC 2006, Page 8. 7 As reflected in the PADC

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Relying on strong institutions to implement the pilots to enhance the chances of achieving the development objective namely LYDEC, SEEN (commercially known as AMENDIS) and RADEM, in promoting, with the participation of civil society and other stakeholders, awareness of the subsidized water and sanitation connection plan to the disadvantaged segments of the populations located in INDH settlements;

Undertaking preparatory work to reduce the number of non participating households by identifying factors preventing those households from participating in the programs, through economic studies;

Promoting social connection programs by allocating adequate resources to the financial and human resources to the awareness-raising campaigns.

The pilot offered the GPOBA an opportunity to test a new approach whereby performance risks were jointly borne by both the private and the public sectors. The approach also offered an opportunity to test a new financing mechanism to give access to sanitation to the poor in the MENA Region and disburse in local currency. By selecting RADEM (a public sector utility provider) as one of the grant recipients, GPOBA’s funds were for the first time, transferred to a public utility provider to foster the provision of water and sanitation services to underserved segments of the population in Morocco. This novelty which assigned performance risks to both the municipalities and the private sector, coupled with an emphasis on output triggered the GoM’s interest in scaling up the OBA approach nationwide since it resulted in the delivery of a more sustainable service. Risks. The risk appraised at project preparation was rated low because of the strong capacities of the implementing agencies. The satisfactory outcome of a fiduciary assessment which included an evaluation of procurement and financial management was a condition of their participation in the Pilot and the signing of the GA. 2.2 Implementation The three pilots were coordinated and administered by the Ministry of Interior (MoI) through the Direction des Régies et des Services Concédés and implemented by the three water providers, in accordance with the provisions of both the OM and the GA8. Two of the three pilots’ promoters were subsidiaries of financially sound international water companies and the third one was a public sector utility provider (“Régie”). Those were: (i) Lyonnaise des Eaux de Casablanca (LYDEC), (ii) Société des Eaux et d’Electricité du Nord – also known as AMENDIS, and (iii) Régie Autonome de Distribution d’Eau et d’Electricité de Meknès (RADEM), respectively. The first year of the project was marked by slow implementation progress. Most of the factors contributing to delays were not specific to the OBA approach, but linked to the implementation of the INDH program. They were caused by: Difficulties in meeting the beneficiary households criteria as set forth in the OM, including

obtaining authorization for connections from the local authorities and the municipalities; Time needed to approve the lists of eligible beneficiaries (mostly in Casablanca); Issues related to works to be completed by third parties (such as Al-Omrane), as LYDEC

had to wait for Al-Omrane to finalize the off-site sanitation works before starting to connect households to water and sewerage networks.

8 Schedule 2

8

The Bank procurement team refusing that operators use framework contracts for more than three years, which forced RADEM to procure dedicated contracts after appraisal, delaying the start of the network extension works, in Meknes, by almost one year.

At Mid-Term review, the project team hired a consulting firm 9 to independently assess the progress of the project and to further explore the comparative advantage of the OBA approach. The review found several factors accounted for the Pilot’s slow performance: (i) delays due to the sequencing of works, since the operators had to finalize works before connecting people, (ii) issues related to households’ precarious land tenure and limited legal status, specifically in Casablanca, where restructuring, relocation and resettlement issues were significant, and prevented beneficiaries from joining the social connection program, and (iii) low beneficiary households’ uptake rate at the beginning of the project. To remove the factors hindering implementation progress, the team then introduced the following changes to the project design: revision of several important aspects of the original OM provisions, namely adjustment of

the beneficiary households eligibility criteria as shown in Table 3, such as: (i) increasing the beneficiary households’ contribution in Tangiers to include a change in the VAT from 14% to 20%, and (ii) clarifying the billing record needed to disburse 40% of the subsidy amount coupled with a change in the disbursement method (reimbursement instead of direct payment). These measures were aimed at refocusing the IVA’s review on satisfactory output provision, by limiting the original record keeping review requirements which translated into accelerating disbursement.

introduction of the flexibility of the reporting rate, allowing quarterly or bi-annual progress reports and adapting IVA review frequency accordingly (15 days10 after the end of each reporting period);

change of the submission date of the IVA’s progress reports;11 amendment of the number of project performance indicators (refer to section 1.3); proposal of a new format to distinguish the connection unit cost; expanding the original geographic units (table 3);

As reflected in Table 4, new areas were included because the utility providers had already completed the work in these areas and were ready to connect new households, as opposed to the originally selected areas where additional works had to be carried out which would have resulted in slowing down the project implementation. Each operator provided information about cost estimates and the number of potential beneficiaries in the additional areas, which were reviewed by the consultant firm which confirmed compatibility with the set unit subsidy amounts.

mobilizing local authorities. All operators engaged in discussions with the local authorities (municipalities and communes) to identify suitable solutions to the sensitive and complex issue of land tenure and the approval of the list of eligible beneficiaries. Notwithstanding the fact that the consultation was pretty lengthy all parties involved managed to find the right solutions to land tenure matters as they related to households’ informal situation.

proposing a new format to itemize the connection unit cost.

9 IDC’s Mid-Term Review Report (October 2008). 10 The initial requirement was 30 days. 11 The IVA had to submit his report to the Bank and the MoI no later than 15 days following the date of his last review, instead of 6 weeks.

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Table 3. Original and Revised OBA Beneficiary Households’ Eligibility Criteria per City

Table 4. Original and Revised OBA Targeted Areas per Operator

O pe ra t o r O r i g in a l a n d a dd i ti o na l O B A ta r g ete d a re a s A d di tio n a l O B A a r ea s a t M T R

C as ab la nc a (L Y D E C )

L a h ra o u y ine s (C o m m u ne )L a h ra o u y in e s N o r d L a m k en s a Su d

B o u s ko u ra (C o m m un e) L a m k en s a N o rd L a m k en s a Su d

M ejj a tia O u le d T a le b( M e d io u na P ro v in ce ) D o u a r L ah fa ri D o u a r H m a d ate D o u a r B e l B aj i

M a ns o u ri ( B e ns l im a ne P r o v in ce )

D o u a r M ek k za zT a n g ie rs (A M E N D IS

B e ni M a ka d a (C o m m un e)D h ar A h aj j a m E l M e rs B e ni Sa id M 'R ab e t 1

C ha r f-M o g ho g a (C o m m un e)M o g h o g h a K eb i ra 1 s t T r M o g h o g h a K eb i ra 2 n d T r D h ar M e rs T an ja B al i a O u ed S an i a

B en i M a ka k aM er s A c h en n a d M g h o g h a Sg h i ra K d im a A o u a m a g ha rb ia

T a n g er M éd in a M e s na n a In f éri eu r M e s na n a S up é ri eu r ( A + B )

M ek n e s u rb a n (R A D E M )

M e kn es D o u ar M o u s sa H ay I n ar a A t l a s B o u alam T ao u ra

D o u a r T ab a c D o u a r A d d a O u i s l an e L ak ta ta re W afa

O u i s la n e L a k tat ar e W af a Z i f er

D o u a r B a ya d O u i s l an e

O ui s la ne O u is l an e

M ek n e s ru r al (R A D E M )

D kh is sa D k h is s a

D a r O um Su l ta n e W id ad K afs

G a a d a K a sb a t H a rt an e

S idi S l im a n e M o u l K i fa neD o u ar B en i M ’ G u ild

A it O u a lla lL aa y o u n e

10

Overall, those changes helped to accelerate the project implementation. Nevertheless the implementation took more time than expected due to connection construction work which was held up in both Tangiers and Meknes. In Casablanca, implementation was halted for over a year because the utility was addressing challenges related to slum upgrading and land acquisition for works to be carried out by Al Omrane. That development prevented the extension of services to an additional 5,000 households in Lahraouiyine, the most important targeted neighborhood in the city. The operators had to ensure that no land acquisition was required for the purpose of work and construction activities to be carried out under the Project and no resettlement of local population was envisaged. In the event that works and construction activities under the Project took place on land owned by the municipalities or on rights of way granted to local communities, the operators and the government had to ensure that the said works and activities complied with the provisions of the Bank’s environmental and social policies and the environmental and social procedures set forth in the OM. Because of delays in implementation, the project’s closing date had to be extended twice with a final closing date in December 2011. The first extension was critical to allow the full disbursement of the grant proceeds and to achieve the Project’s objectives for each operator. Delays were most significant in Casablanca and in Tangiers, where 61% of households were already connected to water and sanitation, while the remaining connections were conditioned by works for trunk infrastructure which fell under the responsibility of other agencies. 2.3 Monitoring and Evaluation (M&E) Design, Implementation and Utilization

Monitoring and Evaluation (M&E) Design. The MoI had the primary responsibility for monitoring progress and results achieved by the operators, as summarized by the performance of the OBA key indicators (listed in section 1.3) and their inclusion in the quarterly and bi-annual progress reports to be submitted by the three operators to the MoI and the Bank. The Ministry of Finance and Privatization (MFP), in consultation with the MoI, had to participate in the Pilot monitoring through the Steering Committee.12 Moreover, the Pilot required a high level of monitoring, with a set of indicators that focused on the overall performance of the pilots in terms of results and impact, particularly with respect to the broader GPOBA objectives.

Design. The pilot M&E was a reflection of OBA’s requirement and the appointment of an external auditor (IVA) was successfully adopted as a strong commitment to certify eligibility criteria and review outputs enhanced transparency and traceability of results. However, the project lacked a coherent Results Framework that better linked the outputs, outcomes and impacts of the project, and furnished detailed information on the results of the pilots in each of the three cities. In addition, some of the delays in implementation, such as obtaining authorization for connections from the local authorities and the time needed for them to approve the lists of beneficiary households, could have been better assessed.

The project provided for M&E to be conducted by both the utility provider and an Independent Verification Agent (IVA). As part of their legal obligations, the three operators were required to prepare quarterly and semi-annual output reports in relation to: (i) the selection of beneficiary households in accordance with the eligibility criteria set forth in the MO, and (ii) the guarantee of

12 The Steering Committee was responsible for monitoring and coordinating the Project and was comprised of representatives of the MoI, including MoI’s representatives already on RADEM’s Board of Directors, the MFP, the local contract administration units in Casablanca and Tangiers monitoring the LYDEC and SEEN Concession Contracts, and other ministries participating in the Project.

11

the quality of service standards, consistent with the provisions of both the Concession Contracts or the public utility Service Agreement (“Cahier des charges”). Upon receipt of periodic progress reports and the withdrawal applications submitted by the operators and prior to disbursing the grant funds, the World Bank carried out verification missions to evaluate results in the field through the hiring of an IVA, who conducted seventeen (17) supervision missions throughout the life of the project. His responsibility was three-fold: (i) review, on a sample basis, at least 7% of the connections for which the operator requested the payment of the first tranche of the subsidy - 60% of the applicable unit subsidy amount - using verifiable information (such as the number of connections to potable water and sanitation installed, the number and location of beneficiary households in the OBA areas, and satisfaction of the beneficiary households’ criteria), (ii) review, on a sample basis, at least 7% of the connections for which the operator requested the payment of the second tranche of the subsidy, corresponding to the remaining 40% based on a review of data related to metering and billing in order to validate the provision of satisfactory service for at least six months, and (iii) gather the lessons to be learned from the implementation of the Pilot, as well as the identification of both issues and appropriate solutions for their resolution. Following the review, the IVA prepared and submitted a report to the Bank on a quarterly basis,13 highlighting both his findings and recommendations of payment amounts to each operator for the period. Implementation and utilization of M&E. The set of indicators specified was appropriate in measuring outputs, but less so with regards to tracking outcomes. The key performance indicators were informally revised. However, this change is not reflected in the RF as the first ISR14

was submitted after the project MTR. The PDO was tracked through the core indicator Number of water and sewerage connections made (total of beneficiary households (ISR 1-4 2009-2010) and (ISR 5-6 2011). Three additional core indicators were then introduced in the new ISR template to include the number of new piped-borne household water connections resulting from the project as well as the number of people in urban area provided with access to improved sanitation in each city. Three intermediary indicators were also identified. One important deficiency to be noted in the project results framework is that the categories of eligible expenditures were selected as components. Yet, it is worth mentioning that the Results Framework recorded the number of connections installed in the OBA areas and not the number of connections subsidized15. The achievement of the PDO would be assessed on the basis of the number of connections installed in the areas targeted by the three pilots. Table 5 presents the original project end targets and achievements for both the core output indicators.

13 During the MTR, the operators were given the choice to prepare reports on a quarterly or semi-annual basis. This choice determined the frequency of the IVA’s visits. 14 More attention to details should have been paid to the first ISR as the country name is Tunisia instead of Morocco. 15 As per the latest figures reported by the team in the September 2011 Aide-Memoire , the total subsidized connections was: (i)Total water – 10,504, (ii) total Sanitation – 9,036, and total number of people connected to water = 52,500 people, and total number of people connected to sanitation = 52,500 people

12

Table 5: Project Development Objective Core Indicators (2009-2011)

2.4 Safeguard and Fiduciary Compliance Safeguard. The pilot was classified as category “B.” Thus as required by Bank Operation Policy OP 4.01, a partial environmental assessment was conducted as part of the preparation of the project. The environmental assessment process was reviewed and found acceptable by the Bank. For the most part, compliance with environmental and social safeguards was rated satisfactory. These aspects were monitored closely throughout the life of the project and when deficiencies were noted, they were acted upon by the utility providers as substantiated by the project documentation (Aide-memoires, ISRs, quarterly and bi-annual reports, and IVA's reports). Financial management. The financial management requirements for the project were for the most part, rated moderately satisfactory since a large number of audit reports were usually received after the due date. The reports were reviewed and were generally found satisfactory by the Bank. Despite significant improvements, final audit reports were submitted with delays by utility providers, not in compliance with the provisions of the GA16. Additionally, the operators’ financial statements did not distinguish between costs related to ‘in-site” and “off-site” works and did not single out the cost of the connection. Fulfilling that requirement proved to be a rather difficult task. It was therefore agreed that the Bank would accept these combined costs, if costs associated with the different types of works were still identified. The lack of insight regarding the precise

16 The Grant recipients were supposed to ensure that financial unaudited financial reports for the project were prepared and furnished to the Bank, no later than forty-five (45) days after the end of each calendar quarter, covering the quarter, in form and substance satisfactory to the Bank.

Original Target (ISR) (12/30/2009

Revised Target (ISR) (12/31/2010)


Achievements (Date of Total Grant Funds Commitment) (03/31/2011)

End Target reported by the operators at Project Closing (12/31/2011)

Achievements based on Operators’ Closing reports (12/31/2011)

PDO: Number of water and sewerage connections made (total of beneficiary households) Casablanca 6,218 6,218 5,782 5,622 6,213 6,751 Meknes urban 2,025 (total)

Meknes water

603 603 603

705 1,811 (total) 2,60

n/a 2,60

Meknes sanitation

795 581 794 (total) n/a

Meknes rural 1,209 1,208 1,134 1,444 n/a 705 (total) Total Meknes 2,607 1,811 1,737 2,730 2,605 2,730 Tangiers 3,200 3,200 2,902

3376 3,200 2,945

TOTAL 12,025 11,229 10,421 11,728 (+1307) 12,018 12,426 (+ 408) Comment: The original PDO mentioned 11,300 connections in 3 cities, but without any reference to the

particular results in each of the three cities. PDO Indicator: Number of people in urban areas provided with access to improved sanitation under the project Original

Target (ISR) (12/30/2009



Achievements 03/31, 2011 (Date of Total Grant Funds Commitment)

End Target reported by the operators at Project Closing (December 31, 2011)

Achievements based on operators’ closing reports (12/31/2011)

Not available

10,213 47,390 47,895 (+ 505) 55,742 60,000 (+4,258)

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connection cost was an issue that was insufficiently addressed as a properly targeted subsidy policy was utterly dependent on having access to information on the cost of the connection. Procurement. There were no serious procurement issues during the project implementation. Throughout the life of the project, the operators did not always follow the Bank’s standard procurement guidelines. Overall, procurement was rated moderately satisfactory, as the procurement post review conducted in 2009 and the subsequent supervision missions revealed moderate compliance ratios. Technical support was therefore required by the Bank during the IVA’s missions and the supervision missions to better acquaint the operators with the requirements. Consequently, training was organized for the operator with the lowest compliance ratio. The GA provided for the procurement guidelines to follow in project design and implementation17 and did not include provisions for contracts prior review. All contracts were, therefore, subject to post review. It was noted that the operators followed the public procurement legislation for goods and services which involved a two-stage bid opening in accordance with Decree 298.482, and did adhere to it. To resolve these compliance issues, several solutions were explored, among them was a request that the utility companies provide the Bank with a list of future contracts to be procured and to submit any contract bidding process to the Bank for no objection, in addition to identifying the costs for the connections installed. It is, however, important to reflect on the relevance of the Bank’s procurement guidelines and their application in OBA projects. As pointed out by all operators, unlike an investment lending operation, the GPOBA grant did not actually finance contracts for goods or works, but subsidized connections to water and sanitation services and linked the payment to the delivery of output following a verification based on predefined criteria listed in both the GA and the OM. Consequently, observance of national procurement regulations might have been sufficient to ensure the successful implementation of GPOBA projects. Disbursement. There were delays as a result of the late submission of withdrawal applications for the payment of the connections made prior to the signing of the GA, as confirmed by the supervision mission of March 2007. The Bank had to reject payments requested by some operators because the amount of the beneficiary household contribution18 exceeded the amount already set forth in the OM which contributed to deterring households from participating in the social connection program. Overall, because of the slow submission of disbursement requests by some operators throughout the implementation of the Pilot, the performance of the operators was only rated satisfactory. 2.5 Post-completion Operation/Next Phase At project closing, the OBA approach was seen as strategically relevant, especially as Morocco did not have subsidy mechanisms targeted at poor households in informal settlements. Throughout the project implementation, the Government19 expressed interest in expanding the approach as part of the INDH program on a citywide or nationwide scale. The first discussions took place during the MTR, which offered the ideal forum to share the findings of the consultant firm20 hired to assess the potential for replication, the financing needs, the design, and the implementation arrangements

17 According to the provisions of the Grant Agreement, all goods and works required for the project and to be financed by the proceeds of the Grant were to be procured in accordance with the “Guidelines for Procurement under IBRD Loans and IDA Credits” published by the World Bank in May 2004 18 The amount set forth in the OM was 100 Dh to be paid in 84 installments and RADEM applied the INDH rate of 130Dh, corresponding to a difference of 1680 Dh per connection 19 From Aide-Memoire dated (October-November 2007) onward 20 Infrastructure Development Consultant (IDC)

14

of a potential large scale project. The implementation results point to several issues that could reduce the chances of replicating the Pilot on a larger scale, namely: the cost of the individual connection which proved to be difficult to single out by the

operators making capital expenditures requirement rather impossible to assess; the subsidy targeting since the selected areas had different levels of poverty, hence the

difficulty to determine the affordability of the beneficiary households and the accuracy of the tools used by the utility providers in targeting poverty.

The experience with the OBA approach was documented and disseminated through several media. A documentary film was produced with the objective of generating interest within the donor community with a view to building partnerships to finance the Government program. Other dissemination activities, including numerous presentations to various Ministries in Morocco, including the Ministries of Finance, Housing, General and Economic Affairs, and Interior, were also undertaken and on Bank premises, through the Infoshop, on November 29, 2011. Presentations have also been made to the UN thematic group on Water (2011). More recently, the approach was showcased at the International Water Forum in Marrakesh, and Marseilles (2012). In addition, the Pilots attracted the attention of the Bank’s management and in February 14, 2011, the Middle East and North Africa (MENA) Region’s Vice President paid a visit to Lamkensa21 to meet the grant’s beneficiaries to reinforce the Bank’s commitment to supporting Morocco in achieving its social and development goals. It is worth mentioning that 2011 was an election year and the new Government in place is not familiar with the OBA approach and its application in increasing access to basic services to the poor. Consequently, additional dissemination activities have been carried out in 2012 by the project team to spark greater involvement of the authorities in the much needed implementation of the strategy to bridge the water and sanitation services gap in peri-urban areas (PNRD22), which was finalized with the support of a GPOBA–funded TA activity. 3. Assessment of Outcomes

3.1 Relevance of Objectives, Design and Implementation The PDO was deemed relevant since it addressed the need for the Government of Morocco to extend water supply and sewerage service to the poor and vulnerable communities, in accordance with the spirit of the King’s National Initiative for Human Development (INDH). It was also consistent with the Bank Assistance Strategy (2005-2009 CAS) which includes among its pillars “increase access to basic services by poor and marginalized groups” and “service delivery to citizens” (Country Partnership Strategy (2010-2013 CPS). It is worth noting that implementation difficulties were resolved thanks to the commitment and the extraordinary efforts of the implementing agencies in promoting, with the participation of civil society and all stakeholders, awareness campaign of the importance of the subsidized water and sanitation connection plan and therefore contributing to the achievement of the project outcomes. Intermediary Output Indicators (IOI). The first IOI Uptake by beneficiary households per operator and eligible areas was, based on the survey results, achieved in both Casablanca and Tangiers. The information collected during the same period of time, also revealed higher than

21 One of the urban areas in Casablanca which benefitted from the OBA subsidy 22 Programme National de Rattrapage de la Desserte

15

expected consumption levels. The accuracy of information recorded and related to the third IOI, confirming the achievement of the second IOI (average monthly consumption per beneficiary) and the accuracy of the information related to the third IOI (average consumption bill per beneficiary household). 3.2. Achievement of Project Development Objectives The objective (PDO) of the project was to promote, following an output-based approach, the connection to water and sanitation services of about 11,300 low income beneficiary households of Casablanca, Tangiers and Meknes in the territory of the Kingdom of Morocco, was achieved based on the final core PDO indicator value of 12,426. Assessment of the number of people connected to water and sewerage services using the average size of households as determined at project preparation were to be considered, the final result (60,000 people) attests to the attainment of the number of people benefiting from improved water and sewerage services compared to the 56,000 people originally targeted by the PDO. Table 6. Connections Installed and Total of Approximate Number of People Connected at Project Closing Number of Connections Installed Target at

preparation PACD (08/21/2006

End Target (ISR) (12/31/2009)

Revised End target (ISR) (12/31/2010)


Achievements (commitment of total grant funds) (March 31, 2011)

End Target reported by the operators

Achievements as reported by the operators

Casablanca

6,213 6,218 6,218 5,782 5,622 6,213 6,751 (+538)

Meknes 2,291 2,607 1,811 1,737 2,730 2,605 2,730 (+125)

Tangiers 2,791 3,200 3,200 2,902 3,376 3,200 2,945 (-255)

TOTAL 11,295 12,025 11,229 10,421 11,728 12,018 12,426

Number of People Connected per PACD’s Estimates Casablanca Tangiers Meknes

Number people per households

(4.8)

(4.8)

Urban (4.7)

Rural (5.6)

Number of connections

6751 2945 2025 705

Total Number of People per City Casablanca Tangiers Meknes

Urban Rural

32,404.80 14,136.00 9,517.50 3,948.00

Total number of people targeted by the project

~60,000

The project monitoring proved to be challenging throughout the implementation of the project, largely due to the lack of attention from the operators to comply with the reporting requirement even though the proposed reporting structure in place was, in theory, adequate. As this project was designed as a pilot, the relatively inadequate results framework made it a lesser relevant tool to get better insight into the sustainability of the services provided and the effectiveness of the subsidy policy, beyond the monitoring of the connection rates. Regular IVA reports, additional screening method introduced by some operators to select subsidies beneficiaries based on the characteristics

16

of the dwelling and the collection ratios above the operator’s average, both for consumption and connection fees, are better indicators to monitor these aspects. It is important to underline that the Pilot PDO was defined differently in the PACD which provided not only the number of households to be connected to water and sewerage services, but also the total number of people, their poverty level and location, and the level of sustainability of the service. Yet, the PDO as per the Grant Agreement was met. The indicators measuring the sustained level of services and the effectiveness of poverty targeting were, for the most part, not included in the proposed set of monitoring indicators. Careful attention should have been paid to the intermediate results indicators. However, the project team relied entirely on the information communicated by the operators’ quarterly and semi-annual reports and tried its best to monitor PDOs, as described in both the Pilot’s PACD and the GA. Additional indicators related to the affordability, including “average household expenditures for water and sewerage services as percentage of monthly household income” and “average household expenditures on alternative water sources” were not indicators that could be easily or regularly measured as they required verification through household surveys. 3.3 Efficiency The economic and benefit assessment carried out at project preparation did not provide any details on the methodology and assumptions used, and hence could not be replicated for this review. The PACD anticipated a number of general economic benefits among them the convenience time savings, but were never monitored throughout the project, mainly because of lack of information (refer to Annex 3). At first sight, the three implementing agencies were efficient in the amount of subsidies used as the total number of connections to be financed out of grant proceeds of USD 7,000,000 facilitated the financing of a total of 12,426 household connections, which was well above the 11,300 anticipated at appraisal. Yet, it is important to highlight that the total subsidy amount in MAD made available to the operators was fixed and depended heavily on the exchange rate fluctuations between the MAD and the USD. Therefore the number of connections subsidized by the grant kept fluctuating throughout the life of the project making the target value of 11,300 rather difficult to achieve. Based on the final results and available data the project has been efficient in the use of the project resources reflecting the operators’ commitment to install the highest number of connections without requesting additional grant funds from the Bank.

The actual subsidy provided. At project appraisal the required subsidy related to the connection cost was assessed to be the highest in Meknes, followed by Tangiers and Casablanca as other financing sources were made available to the private operators and/or connections costs were comparatively lower. The high subsidy needs in Meknes were explained by the limited availability of other financing sources other than the grant funds and the fairly small beneficiary households’ contribution. At project closing the number of connections the grant subsidized was lower than anticipated for all operators. These downward variations could be explained by exchange rate fluctuations between the Moroccan Dirham and the US dollar which contributed to shrinking the available funds and resulted in lowering the number of connections subsidized leaving no option to the operators but to use their own funds to meet the pilot PDO and install the required number of connections. Interestingly, at appraisal it was assumed that the highest per capita subsidies would be needed for Meknes, but they actually did not differ much from the

17

subsidy requirements in the other two towns even though both urban and rural populations were targeted in this city.

The cost of works and connection installations in Casablanca and Meknes were claimed to be much higher by the two operators that provided this information. This assertion was substantiated by the available information, since the costs incurred by LYDEC seemed to be almost twice higher than expected, while AMENDIS’ seemed to have been appropriately determined since current costs are around 18% lower. These are large differences and are based on the costs provided by the operators and whether they were standardized across the different operators could not be confirmed. The risk for the project was minimal as the utility providers had to bear all additional expenses not covered by the grant to complete the works and successfully deliver the required number of connections. Yet, all operators pointed out that, the entire social program would reveal a risk of a financing gap, and as such the replication of the approach could be adversely affected until more details were provided about the actual cost of service provision in such areas.

Table 7: Number of Connections Financed by the Grant Proceeds and Reported by the Operators Disbursement documented by Operators Disbursement as of end disbursement date23

Grant

allocation per operator (estimates) (USD)

Number of connections

Subsidy per connection (estimates) (USD)

ActualDisbursement per operator (USD)

Actual Subsidy requirement per connection (USD)

Casablanca 3,297,144.87 6,751 488.39 3,499,918.13 518.43 Meknes 1,487,046.02 2,730 544.71 1,499,848.18 549.39 Tangiers 1,879,456.19 2,945 638.19

2,000,000 679.12

Total 6,663,647.08 6,999,766.31

Table 8: Subsidy requirements and cost of connection at appraisal and Project Closing

Indicator Casablanca Tangiers Meknes Urban Rural

Total subsidy requirement at appraisal 563 700 1,027 591 Subsidy requirement per connection at project closing24

518 679 549

Cost of connection per appraisal 2,035 3,044 1,931 799 Cost of connection at project closing 4,148 2,826 n/a n/a

3.4 Justification of Overall Outcome Rating Rating: Satisfactory The overall outcome of the project was rated satisfactory based on the level of achievement of the PDO and the relevance of the project. It was also assessed based on the grant beneficiaries’ recognition of the tremendous economic, financial, and social benefits of the three pilots coupled with a significant environmental impact.

23 Exchange rate as of December 31,2011 24 It is important to note that the USD equivalent varied over the project lifetime

18

The project contributed to enhancing the operators’ reputation through a more collaborative partnership with the communities targeted by the pilots, guaranteeing results through the OBA innovative approach that promoted transparency and accountability. It also succeeded in increasing competition between the three operators and fostering capacity building through the IVA’s technical input and the compliance with stringent monitoring and reporting mechanisms. The pilots have shown that a well-targeted subsidy combined with a financing mechanism that fosters transparency and accountability for results can guarantee access to basic services for the underserved segments of the population with tremendous impact on their lives. The pilots succeeded in providing over 60,00025 people in the peri-urban “quartier” with access to water and sewerage services. According to the survey findings, the alternative, as was the only option prior to the project, would have been spending each day fetching water, with half of that time spent queuing at standpipes, fetching water from a spring, or queuing to buy it, with all the health risks associated with alternative water resources. More importantly, this operation has also shown that people are ready to pay for water (as revealed by survey results), if access to water actually translates into a direct and vital impact on the quality of their lives. 3.5 Overarching Themes, Other Outcomes and Impacts (a) Poverty Impacts, Gender Aspects, and Social Development The pilot had a significant impact on the 12,426 households living in the poor peri-urban and urban areas, who benefitted from the subsidy as access to water and sewerage services contributed drastically to improving the quality of their lives. Another noteworthy aspect of the operation was that the provision of water and sewerage services sparked an incredible economic development in targeted areas of both Meknes and Tangiers, as the recently served areas with water and sewerage services were transformed into bustling neighborhoods for all urban people. In Casablanca many beneficiary households were newcomers who decided to move to Lamkensa because they could actually own their homes as opposed to paying a high rent in other parts of the city. Equally, in Tangiers people were moving from rural areas to the areas included in the pilots to search for better job opportunities. The project, however, fell short of fulfilling its indirect social impacts in relation to gender equality. The anticipated positive social impact included greater autonomy for women as they engage in income generating activities by utilizing the time previously spent fetching water. While access to piped-borne water services helped free time for more productive activities (since the children and the women did not have to spend time collecting water), the survey results revealed that women were not necessarily engaging in income generating activities or using the additional time more productively. (b) Institutional Change/Strengthening A number of significant positive developments resulted from the implementation of the pilots as documented by the IVA’s reports and the Aide-memoires, and validated by the discussions and the surveys carried out by the Bank team, notably: (i) the adoption of organizational and administrative structures developed and proposed by the IVA and implemented by the utility providers which contributed to supporting them with the compliance of state audit requirements, and (ii) the technical input and introduction of continuous improvement practices coupled with

25 Calculation based on the household composition provided in the PACD

19

knowledge shared by the IVA, which helped the utility providers perform better and adopt the best technical practices. Those were small but significant steps towards improving the institutional capacity of the implementing agencies to ensure the successful achievement of the objective of the OBA Pilot and the entire INDH program. (c) Other Unintended Outcomes and Impacts (positive or negative) Interviews conducted with the operators and the beneficiaries validated the expected positive economic results in both urban and rural areas and confirmed a striking reverse migration from urban areas to rural Meknes, as people were actually moving to rural areas because of property price appreciation in these newly developed neighborhoods. This new population would contribute to increased demand for service, force the utility providers to plan for the future and consequently exacerbate the funding issue. 3.6 Summary of Findings of Beneficiary Survey Objective of the March 2012 evaluation. An independent ICRR team26 from the MENA Region carried out a beneficiary survey from March 19-30, 2012, in the cities of Meknes, Casablanca, and Tangiers. The objective of the evaluation was to collect data in order to assess the overall impact of the project, record households’ level of satisfaction with the basic services provided by the three operators, and hold discussions with the three utility providers to better capture results.

I. Indirect beneficiaries The team held discussions with representatives from the utility providers in some areas targeted by the pilots in Meknes first, then in Casablanca, and finally in Tangiers. The same team also met with Veolia Environment representatives in Paris. The important feedback received from the extensive consultations with the operators provided a wealth of information which has been included in this ICRR to validate the key findings presented in this document. The key feedback obtained is summarized below:

(i) Urgent need to identify new sources of financing to complete the remaining portion of the INDH program as the provision of water resulted in a much higher than anticipated demand for services in both Meknes and Tangiers.

(ii) Re-evaluation of some aspects of the OBA methodology. Observance of procurement

guidelines were regarded by all as irrelevant to the particular context of the OBA approach. In addition, compliance with the OM requirements was found very challenging in terms of funding, time, and staffing.

(iii) Greater collaboration with the commune. The involvement of the commune, at all stages

of project implementation would be crucial to reducing delays and ensuring the quick

26 ICRR team was composed of Fatiha Amar (Operations Analyst) and Malika Drissi (Consultant)

20

implementation of any future operation through the resolution of the core issue of land tenure.

(iv) Banks’ contribution to the project. The significant contribution of the Bank in securing

financing, providing a sound institutional framework, and a rigorous OBA methodology to achieve the expected results. All operators expressed their appreciation of the Bank’s collaborative efforts and for remaining flexible throughout the implementation.

(v) Verification of outputs by the Independent Verification Agent (IVA). The IVA was

regarded as very competent, meticulous and impartial in his assessment of the project. Still, the same feedback suggested some room for improvement with regard to the IVA’s scope of intervention and the proposed OM criteria originally established to guarantee proper evaluation.

(vi) New demand generation. The operators succeeded in tapping into new market segments, in

areas where the population could not previously benefit from basic services because of the high connection fee and because those settlements were not formally recognized as inhabited areas by the Moroccan authorities.

II. Direct beneficiaries Beneficiary household surveys were undertaken in the three cities and covered 9 of the 13 communes included in the pilots, namely: i) Meknes, Ouislane, Dar Oum Sultane, and Dkissa in Meknes; ii) Bouskoura and Mejjatia Ouled Taleb in Casablanca; and iii) Charf-Moghogha, Tanger Medina, and Beni Makada in Tangiers. The following summarizes the findings of beneficiary household survey, which revealed a high level of satisfaction with the utility providers’ services, except in urban Meknes (Douar Tabac), and the tremendous impact on the quality of their lives. The results of the survey did, however, reinforce the need to reassess the monthly contribution in some areas targeted by the pilot in Meknes. Beneficiary households’ contribution and willingness to pay Households willingness to pay indicated mixed results. In Casablanca, the survey results showed that the entire surveyed population highlighted the affordability of the connection and their willingness to pay. In rural Meknes, all selected beneficiary households confirmed the affordability of the connection fee and their willingness to pay for water only, mainly because sanitation was not covered by the subsidy as well as not seen as a priority. In Tangiers, the majority of the respondents emphasized the tremendous change in their lives and expressed a strong willingness to pay because of the affordability and adequacy of the monthly contribution. These results were not completely unexpected, as the monthly payments in the cities differed significantly. Apart from the connection fee, consumers were expected to pay a monthly bill. Meknes’s urban and Tangiers ended up with the highest monthly fees to be paid.

21

Table 9. Total Household Expenditures for Water Consumption

Meknes (MAD/month) Tangiers (MAD/month) Casablanca (MAD/month)

Water consumption

15-30

20-97

25-75

Urban Water & Sanitation

Rural Water only

Beneficiary household monthly contribution

110

55

105.26

30

Total Consumption Bill

125-140 70-85 125.26-202.26 55-105

Service interruption. Overall, all interviewees in the three cities confirmed the quality and the continuity of service, and pointed to periodic interruptions of service justified by either the need to carry out works to improve or extend service, or because of irregular payments for services. Alternative sources of water supply. Most beneficiaries confirmed that prior to having access to basic services, they relied on standpipes (generally free to them – as billed to the commune), or had to buy or fetch water from springs. 4. Assessment of Risk to Development Outcome Rating: Moderate The risk of not achieving the development outcome was rated moderate. All operators were carrying on with the works and the installation of new connections albeit anticipating the GoM to scale up the approach. People in the INDH neighborhoods were still signing up for service, as some of the key actions taken by the private operators included intensive awareness campaigns on health risks associated with contaminated water, coupled with specific focus groups and information sessions on the benefit of participating in the social programs. They were also assisting the targeted population in preparing the required documentation, in addition to solving all administrative issues. An aspect of the program that needed to be seriously considered was the affordability of the monthly fee for the beneficiary households in urban Meknes as substantiated by the data collected. 5. Assessment of Bank and Borrower Performance

5.1 Bank Performance (a) Bank Performance in Ensuring Quality at Entry Rating: Satisfactory The project preparation extended over a period of 18 months and included feasibility studies carried out by both the Bank and the three operators. The Bank team, in consultation with the MoI, conducted extensive consultations with the potential implementing agencies to confirm the project design and the OBA approach that was being proposed for the implementation of the three operations.

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It is, however, important to stress that better economic and cost benefit analysis would have improved the ability to better quantify the results at project closing. The beneficiary assessment has, nevertheless, contributed to remedying some of the shortcomings by providing additional data to validate some of these tangible results. Yet, as pointed out previously, the lack of data on cost and efficiency might need to be addressed, if the Pilot were to be scaled up. Still, at project design, some of the delays in implementation such as repeated delays in securing authorization for connections from the local municipalities and in succeeding in having the lists of beneficiary households approved could have been reasonably foreseen and the time allocated to the project implementation determined accordingly. While the project was not flawless, it has made leaps and bounds operationally in terms of providing the framework to guide future OBA operations27. Moreover, the assessment of the utility providers’ commitment and ability to implement the three pilots was rightly estimated. Therefore, the Bank’s preparation efforts, assessment of relevance, and project design were comprehensive and realized with due diligence. (b) Quality of Supervision Rating: Satisfactory The Bank team carried out nine (9) supervision missions throughout the life of the project, supplemented by seventeen (17) evaluation missions conducted by the IVA. There was unquestionably close and responsive supervision from the Bank as required by the OBA approach. The supervision was characterized by a close collaboration with local authorities and the three implementing agencies. The MTR was a turning point for all operators as it provided them with an opportunity to directly raise issues related to the compliance with the OM criteria and to discuss the findings of the independent review. The report reinforced the need to revise the original OM and identified a number of factors hindering the implementation of the project. There was also a high level of input from the Bank’s procurement, disbursement and legal staff throughout the project. Similarly, all Aide-memoires attested to the right assessment and the documentation of all issues which were conveyed in a candid and transparent manner to the GoM. Nevertheless, supervision input related to M&E was neglected as the project team could have better monitored the results indicators in the ISR results framework. The fact that the disbursement of grant proceeds was conditional on achieving the expected results was a guarantee that the Pilot implementation would be focused on results rather than inputs (contracts). It is also worth mentioning that the quality of reporting and the IVA’s regular stringent reviews were all factors that contributed to ensuring high performance on the part of all three implementing agencies.

27 The preparation of this Pilot led to the development of a Guidance Note entitled “Procurement Issues in Structuring Output-Based Aid (OBA) Operations Financed by the World Bank - Guidance Note for Procurement Staff”, jointly issued, on April 11, 2008, by both GPOBA and OPCPR.

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(c) Justification of Rating for Overall Bank Performance Rating: Satisfactory The Bank team exercised good judgment in determining the right technical framework for the OBA approach and in ensuring the active participation of the utility providers and by coordinating with the relevant government counterparts and other stakeholders during project preparation. The project team was also able to quickly identify the operational bottlenecks and propose appropriate actions and solutions and was always responsive to the needs and challenges of the pilots’ implementers. 5.2 Borrower Performance (a) Government Performance Rating: Satisfactory The Government’s involvement in the pilot was significant from preparation to implementation through the commitment and the sustained support to the Bank and the three pilot implementers, which was always backed up by strong actions particularly in resolving land and administrative issues. The performance of local authorities is rated as satisfactory on the basis of their strong supporting role during project preparation and implementation in each city. Their assistance was essential to guaranteeing the strong participation of all parties involved and to solving land tenure matters and ensuring proper performance monitoring of the operators. (b) Implementing Agency or Agencies Performance Rating: Satisfactory The three implementing agencies were the three operators, namely, RADEM in Meknes, LYDEC in Casablanca, and AMENDIS in Tangiers. All utility providers faced different implementation challenges, with LYDEC having to deal with the most acute problems related to land acquisition, validation of lists of eligible beneficiaries and works to be carried out by third parties. The main challenges faced by the pilots’ implementers were compliance with the reporting requirements, primarily irregular submission of progress and audit reports as well as adhering to Bank’s procurement guidelines. Their immediate attention to the project management contributed to upgrading their performance to a higher rating. Safeguard-related aspects were also handled in a satisfactory manner. The project resulted in a significant improvement of the environmental conditions of the beneficiary households in the pilots targeted areas, thanks to the concrete remedial actions taken by the three utility providers. Overall, implementation was rated satisfactory as some of the operators managed to overcome issues related to delays in delivering connections, but more importantly because two of the three operators showed a higher level of performance by satisfying the PDO earlier than planned.

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(c) Justification of Rating for Overall Borrower Performance Rating: Satisfactory

The performance of the grant recipients and implementing agencies was rated as satisfactory based on their ability to overcome all issues resulting from the pilots’ implementation and for proposing and implementing the needed remedial actions. Their efforts and their commitment to removing operational bottlenecks and effectively implementing their respective pilot ensured the achievement of the PDO. At project closing, compliance with provisions of Section 2.06 of the Standard Conditions remained an issue. However, all three operators have submitted their individual reports reflecting their assessment of the execution of their respective pilot. 6. Lessons Learned A number of important key lessons emerged from the implementation of the pilots in the three Moroccan cities which could offer the ideal framework for OBA future operations in the water and sanitation sector, these are: Successful adoption of the OBA approach by a public utility provider. The experience in Meknes revealed that the public sector could also bear the performance risk and that a public utility provider could successfully adopt the OBA methodology to ensure the provision of basic services to the neglected segments of the population. Organization of awareness and information campaigns was crucial to guaranteeing the populations buy-in in the social program. Feedback received during the impact evaluation mission suggested that operators needed to be present throughout the carrying out of works and that it was imperative to spend time and allocate the necessary resources to ensure the involvement of the potential beneficiary households in the social program. Revisiting the operators’ obligation to address all social issues and encourage the active involvement of the local authorities. The resolution of land tenure issues relied heavily on local authorities’ active involvement and their willingness to assist the three operators. A close collaboration with the GoM was essential to accelerate project implementation. In addition, it is important to recognize the primary role of the utility provider which was limited to service provision and by no means included the task of tackling social issues which are the responsibilities of the GoM. Addressing the poor in informal settlements relies on experience, mature knowledge and adequate strategy on the part of the operators. Successful implementation of any project of this nature could only be assured by utility providers with a proven track record of developing and executing similar operations. All operators highlighted their readiness and their capacities in implementing social programs. Still, they would continue to install connections as long as they were able to compensate for the loss that could arise from the imposed obligation to fulfill social service. Relevance of the compliance of Bank’s procurement policies. The adherence to national procurement regulations should be sufficient to ensure the successful implementation of GPOBA

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projects. Especially, when the Bank provided guidance and input to the drafting of these national policies. Monitoring and evaluation is key to achieving a rigorous framework to measure, report, and amend especially to ensure successful replication of the Pilot. However, information collection should solely aim at directly enhancing the project implementation capacity and its outcomes. 7. Comments on Issues Raised by Grantee/Implementing Agencies/Donors (a) Grantee/Implementing agencies n/a (b) Cofinanciers/Donors (c) Other partners and stakeholders (e.g. NGOs/private sector/civil society) n/a Original financing arrangements28. Despite the fact that the right project design was chosen, the financing arrangements and especially the impossibility to open an escrow account in Moroccan Dirham (MAD), as recommended by the consulting firm to mitigate the potential impact of the exchange rate fluctuations between the Dirham and the US Dollar on the number of connection the grant could finance, had a direct influence on the overall project costs, particularly in Tangiers where it resulted in a reduction of the initial grant amount allocation by MAD 2 millions. Moreover, failure to introduce mechanisms to revise subsidy amounts such as pass-through criteria proved an important factor in affecting the operators’ financial viability, since they had to bear the additional unanticipated costs or variation costs of their respective pilots. The unit subsidy amount per connection became disconnected to real costs over time, as commodity prices increased sharply during the project implementation period, which was particularly felt by the operators, as the highest number of connections were installed in the last two years, and as the USD/MAD exchange rate variation reduced the number of connections the grant could subsidize. Economic and social assessment. The project design involved both an economic and financial assessment and the conduct of a socio-economic study. At the end of the project, a number of beneficiary households surveyed in the urban areas of Meknes confessed to not being able to pay the connection fee. While that issue could be attributable to an inaccurate evaluation of the monthly households’ contribution in that particular city, the reasons could, however, be purely financial. In fact, the inability to pay might also be directly linked to a change in employment. The encouraging number of beneficiary households who signed up for the program in all cities including, rural and urban areas in Meknes, and their willingness to pay, served to encourage local authorities to take the necessary measures to eliminate current constraints contributing to slowing down the implementation of the INDH program.

28 IDC’s preparation report spelled out the financing arrangements which included the choice of a Moroccan Bank, an account denominated in Dirham, and the account signatory.

26

Results Framework. As revealed by the project documentation, the Results Framework (RF) was not identified in the GA or the PACD. Instead an incoherent results framework was used to track progress in the ISR, reflecting an incomplete measurement of the intermediary indicators even after the introduction of the MTR amendments. Reliability of the information. The different sources of information on which the pilots’ monitoring were based, could raise the question of the lack of accuracy and quality of data recorded in the ISRs, as numbers listed as current end target values were infrequently updated throughout the project implementation. Data validation by the IVA. The IVA was instructed to verify data shared by the operators, based on a representative sample of at least 7% of the number of connections for which they had requested payment. He managed to identify a large number of issues mainly related to the compliance of the eligibility criteria and forced the utility providers to act upon the deficiencies noted by proposing suitable solutions as well as the best practice approach. However, the role of the IVA went beyond the scope and the responsibilities originally defined in the OM as he contributed to building the operators’ technical capacity and enhancing their organizational structure through a set of recommendations immediately followed by the three utility providers.

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Annex 1. Project Costs and Financing

(a) Grant Proceeds Allocations (in USD Million equivalent)

Category

Amount Allocated

at Appraisal Estimate (USD

millions) TF57599-MOR

Amount Allocated at

Appraisal Estimate (USD millions) TF57598-MOR

Actual/Latest Allocation Estimate (USD millions)

Goods & Civil Works

Category 1-A: Goods and Works by SEEN

1.400.000 600,000 0.00

Category 1-B Goods and Works LYDEC

2.450.000 1,050,000 0.00

Category 1-C Goods And Works by RADEM

1.050.000 450000

Total Amount 4,900,00 2,100,000 7,000,000 Project Costs at appraisal and Implementation Project Preparation Costs 332,697.33 Project Implementation Cost

632,515.36

Total Financing

Required 965,212.69

(b) Financing

Source of Funds Type of

Cofinancing

Appraisal Estimate

(USD millions)

Actual/Latest Estimate

(USD millions)

Percentage of Appraisal

Trust Funds 0.00 0.00 Global Partnership on Output-based Aid

7.00 0.00 .00

Annex 2. Outputs by Component The Project had four components which combined the various activities to be implemented by both the operators and the IVA. As mentioned earlier, the team chose to list categories of expenditures (as reflected in Schedule I) as components in the results framework. The proposed intermediary indicators were, however, in line with some components such as: (i) uptake by beneficiary households per operator and eligible area, (ii) average monthly consumption per beneficiary

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household, and (iii) average consumption bill per beneficiary household. In addition, all components were monitored based on the quarterly or semi-annual reports as well as the IVA’s supervision missions. The components and the main achievements under the project were: Component 1: Assessment of demand for connections and marketing/outreach efforts to sign up households for the subsidized social connection. This was achieved by undertaking market surveys and providing GPOBA with demand projections. It also involved several other activities on the part of the operators such as: i) marketing activities to promote the terms of the subsidized connection program to sign up households to their respective programs, ii) provision of semi-annual updates on the projections, iii) identification of the inconsistencies and actual sign-up with projections, and iv) presentation of a proposal for a new action plan to mobilize lagging customer demand. This component was monitored based on information presented in the quarterly and semi-annual reports which listed the specific actions taken in order to increase households’ participation in the social programs as well as one indicator which was the uptake by beneficiary households per operator and eligible area. At the end of the project, most operators complied with the GA’s provisions compelling them to promote the subsidized water and sanitation plan to the beneficiary households. Progress reports were prepared and submitted on a quarterly and semi-annual basis confirming progress in the implementation of these specific activities. It is worth noting that the indicator end values of June 30, 2010 were respectively, 80 percent in Casablanca, 73 percent in Meknes, and 93 percent in Tangiers. At project closing and as validated by all operators during the ICRR mission, beneficiary households’ participation in the program reached 75 percent (Meknes), 80 percent (Casablanca) and 90 percent (Tangiers) and operators were still connecting people at the same affordable fee, thanks to the active engagement of the mobile agencies in Tangiers, the dedicated staff for awareness and information campaigns in Casablanca, and the customer service employees in Meknes. The high participation rates attested to the achievement of the overall awareness program undertaken by the utility providers in assuring the promotion of the subsidy program in the three cities. The survey results confirmed households’ willingness to participate in the social connection programs and pay the proposed current fee. Therefore, the implementation of this component was satisfactory. Component 2: Management and implementation of works as required for establishing functioning household connections. Activities supported under this component related mainly to: i) the pre-financing by all participating utility providers of all works and household connection fees, ii) the design and construction of facilities to allow access to services to households who had signed up for social connections, and iii) the strict compliance with World Bank’s procurement policies. The monitoring of the pre-financing by all operators was realized through their respective progress reports in which they were required to reflect all costs associated with all works and the relevant information on procurement of works and goods. As explained in the main section of this document, all the utility providers had to bear additional costs resulting from the fixed subsidy amount to complete the required activities financed under the various project components. Moreover, compliance with procurement had proved to be a rather challenging task, hence the option to explore the compliance with national procurement rules for the implementation of a future OBA project.

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Notwithstanding the difficulties associated with the additional unanticipated costs which resulted in increasing the counterpart funding, and the difficulty to observe all Bank’s procurement rules, successful implementation of this component was achieved through: (i) a compromise between the Bank and the operators during MTR to reflect separately the costs associated with both “in-site” and “off-site” works, since “off-site” works were not to be financed by the grant proceeds, and (ii) the provision of procurement training. The next tables list the amounts disbursed (as of March and December 2011), in addition to the costs associated with the connection, as communicated by the operators in March 2012.

Table 10: Documented Connection Costs and Grant Allocation in MAD and USD (Exchange rate December 31, 2011)

AMENDIS LYDEC RADEM (MAD) (MAD) (MAD)

Total GPOBA connection costs

65,482,420 240,790,144 Not available

GPOBA Grant Allocation 16,159,564 28,348,851

12,785,621.40

Total GPOBA connection costs (USD)

8,321,832.69 3,297,144.87 Not available

GPOBA Grant Allocation (USD)

1,933,356 3,297,144.87 1,487,046

The output indicators for this component were: (i) number of water and sewerage connections made (total of beneficiary households, and (ii) number of people in urban areas provided with access to improved sanitation under the project. The output of these two indicators was achieved. The total number of connections and people connected, as anticipated at project closing in both the ISRs and the operators’ reports (table 5), attest to the attainment of both indicators as a total of 12,426 connections were installed and around 60,000 people were connected to water and sewerage services, exceeding the project development objective of 11,300 household connections and 54,000 people. The rating of this component is satisfactory. Component 3: Monitoring and household certification of output (active social connections). This component was in place to connect beneficiary households to the network and collect connections certificates signed by the same beneficiaries confirming that they were connected in accordance with applicable rules, regulations, and terms of social connections. The requirement was also to submit semi-annual summary reports presenting the number of households connected per reporting period, the location of the households within INDH settlements, the billing and payment documents, as well as the retention of the original documents for audit purposes at the request of the MoI and the Bank. As explained earlier, the IVA’s responsibility was to review the documentation provided by the utility providers as it related to the number of households connected, their location and payment, and the billing documents to demonstrate quality of service and water consumption. There were also two indicators in the results framework dedicated to this component, such as: (i) average monthly consumption per beneficiary household, and (ii) average consumption bill per beneficiary households. The seventeen (17) reports submitted by the IVA described the challenges faced by the operators and the proposed actions to overcome them to succeed in connecting households in the areas targeted by the three pilots. The output indicators

30

were partially recorded, as revealed by the figures presented in the ISRs with and indicative end target value of average consumption of 6m3/month in a 5-person household. The values recorded at the end of June 30, 2010 were, notably: i) between 6m3 and 10m3 (Casablanca), ii) 9.2m3 (Meknes as of Feb. 2010), and (iii) 10m3 (Tangiers). Similarly, there was no end target value for the average consumption bill and the values provided as of June 30, 2010 were: i) 36MAD-69MAD/month, and ii) 47Dh/month (Meknes as of Feb. 2010). The rating of this component is moderately satisfactory. Component 4: Provision of ongoing service. This component sought to guarantee provision of water and sewerage services under a well-established regulatory framework. This involved the provision of service to households according to applicable regulatory provisions and the households’ obligation to pay tariffs for consumption. Implementation of this component was satisfactory thanks to the utilities good track record for the provision of service and the IVA’s exhaustive monitoring. In fact, 40% of the payment requests were paid based on the effective use of the connection by the beneficiary households for a minimum of six months as documented by original metering and billing records. The survey results did not bring to light any issue related to the quality of service and revealed the exact opposite, as service interruptions were always justified by either the need to carry out works or based on utilities policies for service interruption for non-payment. Yet, the affordability of service remained an issue in some areas in urban Meknes.

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Annex 3. Economic and Financial Analysis At appraisal, the economic and financial analysis assessed mainly the investment costs and the subsidy requirements and provided a rather unclear economic and cost benefit analysis. Investment cost and subsidy As pointed out earlier, the investment costs and subsidy needs were examined carefully by an engineering consultant firm to ensure prudence and efficiency and were originally proposed by all three operators in their respective designs and implementation plans. At appraisal, the total GPOBA subsidy requirement was supposed to cover 28% of total adjusted capital expenditures in Casablanca, 23% in Tangiers, 53% in Meknes urban and 74% in Meknes rural. Based on the available data in MAD shared by two operators, namely AMENDIS and LYDEC, GPOBA’s subsidy share in total expenditures incurred by both operators, as of May 5, 2011 (Tangiers) and December 31, 2011 (Casablanca), equaled 25% and 12%. With regard to the anticipated GPOBA subsidy requirement as a percentage of total adjusted capital expenditure, it is worth nothing that the actual costs incurred by LYDEC were increased by 16% while the subsidy requirement as a portion of the total costs was rightly assessed for AMENDIS, as revealed by the 25% at project preparation and closing. This increase is largely explained by the delays faced by the operator during pilot implementation which resulted in additional costs, as substantiated by the available data. Since RADEM did not communicate the actual costs of its operation, the same assessment was not possible. As LYDEC communicated a detailed fund allocation and utilization, it was interesting to identify the various financing contributions, in addition to the GPOBA subsidy as follows:

Table 11: LYDEC Source of Funding and Total Funds Allocation as of December 31, 2011 Sources of Funding Amounts (MAD) Percent of total

contribution Beneficiary Contribution (excluding taxes) 50,090,100 20.80% GPOBA subsidy 28,348,851 11.77% Pre-financing 159,551,192 66.26% Communes contribution 2,800,000 1.16% Other subsidies -- Total Project Funds 240,790,144

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Table 12. LYDEC Use of Funds as of December 31, 2011

Use of Funds Amounts (MAD) Water Connection Costs

Off site (water excluding Tax) 12,898,856 Off-site (water Tax included) 2,379,047 In-site + water connections (excluding Tax) 30,945,451 In-site + water connections (excluding Tax) 6,039,453

Sewerage Connection Costs Off site (sewerage excluding Tax) 3,343,324 Off-site (sewerage including Tax) 661,905 In-site + sewerage connections (excluding Tax) 154,043,008 In-site + sewerage connections (including Tax) 30,479,099

Total Project Costs 240,790,144 As validated by these figures, with the GPOBA subsidy contribution, LYDEC had to pre-finance 66% of the total costs, without the subsidy the pre-financing would have totaled 75%.

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Annex 4. Grant Preparation and Implementation Support/Supervision Processes

(a) Task Team members

Names Title Unit Responsibility/

Specialty Lending/Grant Preparation Dirk Sommer Senior Infrastructure Specialist IEF Task Team Leader Pier Francesco Mantovani, Senior Water & Sanitation Specialist MNSIF Task Team Leader Alaleh Motamedi Senior Procurement Specialist MNA Procurement Xavier Chauvot De Beauchene

ET Consultant MNSIF

Zakia Chummun Language Program Assistant MNSIF Supervision/ICR Xavier Chauvot De Beauchene

Sr. Water & Sanitation Spec. MNSWA Task Team Leader

Abdellah El Bitar Consultant MNCMA Mohamed Larbi Khrouf Consultant MNSWA Pier Francesco Mantovani Lead Water and Sanitation Spec ECSS6 Mohamed Mehdi Consultant MNAFM Alaleh Motamedi Senior Procurement Specialist OPCPR Agathe Laure Consultant MNSSD Augustin Pierre Maria

Young Professional

MNSWA

Esther Illouz Loening Infrastructure Specialist GPOBA Catherine M. Russell

Communication Officer

GPOBA

Fatiha Amar

Operations Analyst

MNSWA

ICR Author and TTL

Zakia Chummun Language Program Assistant MNSSD Drissi, Malika ET Consultant MNSSO

(b) Staff Time and Cost

Stage of Project Cycle Staff Time and Cost (Bank Budget Only)

No. of staff weeks USD Thousands (including travel and consultant costs)

Lending FY06 7.07 11.00 FY07 22.27 22.27

Total: 29.34 33.27 Supervision/ICR FY07 6.12 3.57 FY08 15.61 18.69

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FY09 10.44 10.64 FY10 8.30 9.64 FY11 9.40 11.44 FY12 14.90 9.27

Total: 64.77 63.25 It is to be noted that, as agreed with GPOBA, the cost of the IVA was included in the Bank supervision budget, and so was the cost of the independent MTR by a consultant firm.

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Annex 5. Beneficiary Survey Results An independent ICRR team from the MENA Region carried out an impact evaluation from March 19-30, 2012 in the cities of Meknes, Casablanca, and Tangiers. The objective was to perform a broader assessment of the overall or net effects, intended or unintended, of the Pilot as a whole. Surveys and interviews were the types of measures used to complete the process of recording observations as part of this research effort, which included the following steps: I. Selection of the research population, data collection, and design Sampling Household beneficiaries in the OBA eligible areas were randomly selected. The method used was to select every tenth household from the proposed beneficiary lists. When the selected household was not available, then the team proceeded to the person next door. Sampling frame Survey participants were drawn from the extensive lists compiled by the IVA throughout the implementation of the project. Unit of analysis The units of analysis in this particular assessment were individuals and groups of people interviewed in the targeted areas by the three pilots. Data used The research focused exclusively on qualitative data which was comprised of photographs, videos, and sound recording. Design The evaluation was crosss-sectional, in other words, took place at a single point in time. II. Covering Ethical issues Ethical issues To protect the rights of the participants, the principle of voluntary participation was followed as all participants were fully informed about the procedures and risks involved in the assessment and gave their consent. III. Survey The surveys consisted of questionnaires, interviews and direct observation. Personal interviews were conducted with both the operators and the beneficiary households. In some instances, “group” interviews, which allowed the team to probe the interviewees and collect additional information (mainly in rural areas), were also explored. Direct observation allowed the interviewees to view the assessment process from a more detached and clear perspective and participate in the cultural context without taking part by resorting to video and audio support.

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IV. Areas and number of people surveyed The survey areas included nine (9) of the thirteen communes targeted by the three pilots. The following table lists the communes selected and the number of beneficiary household participants.

Table 13. Communes Surveyed in Meknes, Casablanca and Tangiers Urban Rural Number of

people Meknes Meknes

Borj Adda Douar Tabac

Dar Oum Sultane Widad Dhissa

Dkhisssa Douar Zoualet Douar Lamkhater Douar Abdallah ben Rahou

19

Ouislane Ouislane Zifer

14

Casablanca Bouskoura Majjatia Ouled Taleb 18 Lamkensa North Tr2

Hmadat

Tangiers Charf-Moghogha Oued Sania Dhar Mers Tanja Balia Moghogha Kebir Tr 1

26

Tanger Medina Mesnana inferior

Beni Makada Mrabet 1 Ouama Gharbia

Total Number of people

77

V. Respondent profile An analysis of the respondent profile revealed a correlational relationship with male employment and the sex of the respondent. Interestingly, based on the sample of interviewees, the low participation of men in interviews in both Casablanca and Tangiers could be explained by a higher employment rate and a lower poverty incidence. In fact, most men were at work during the day as opposed to most male household beneficiaries in urban Meknes who were home and who stressed their inability to afford the connection fee because of lack of income. VI. Impact evaluation scope and objective The objective of the evaluation was to collect the necessary data in order to assess the overall impact of the project, record households’ level of satisfaction with the basic services provided by the three operators, namely water and sanitation, and hold discussions with the three utilities.

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VII. Survey results Additional survey results are highlighted below: Indirect Beneficiaries Project Design: it was pointed out that delays in project preparation resulted in having to revise the cost estimates and delaying the tendering process as the original costs assessed on the results of specific studies were no longer relevant. Motivation for participation in the pilot: the subsidy was recognized as the first motivation, as the major impediment to the provision of water and sanitation services was the connection fee, followed by the OBA’s rigorous methodology, partnership with the World Bank to ensure the promotion of the pilots at the international level, and the operation association with the national INDH program. Risk identification: the major risks associated with the provision of basic services in the illegal and informal settlements in the three cities, as confirmed by the three utility providers were: (i) risks associated with illegal settlements encouragement (the provision of access to water and sanitation services is linked to the potential risk of contributing to increasing informal groups settling around cities, in addition to promoting substandard housing), (ii) standard risks associated with the carrying out of works in informal neighborhoods, and (iii) obvious financial risk (since the pre-financing requirement posed a risk to the financial stability of the private operators and even more so to the public utility).

Provision of water and sanitation connections with the same conditions: all three operators confirmed that they were still connecting people in the INDH neighborhoods to both water and sanitation services at the same discounted tariff. Project impact: the impact of the implementation of the OBA pilots was particularly remarkable in the three cities:

(i) First, thanks to the social connection programs, the operators succeeded in tapping into new market segments, in areas where the population could not previously benefit from basic services because of the high connection fee and because these settlements were not formally recognized as inhabited areas by the Moroccan authorities. (ii) Second, the tremendous social and economic impact is worth mentioning as the provision of basic services in the OBA targeted neighborhoods resulted in a real estate boom in both Meknes and Tangiers and contributed to increasing the value of land and demand for basic services. Land value today is ten times higher in Meknes and as a result, entire cities are being built following the implementation of the pilots. (iii) Third, the recognition of these beneficiary households as full-fledged citizens because of all the efforts deployed by the private operators, as substantiated by their high recovery rate and the close relationships established with the targeted population.

Replication at the national level: operators’ recommendations for replication were:

the need to simplify the OBA criteria and the verification mechanisms since the

replication at the national level will involve all private and public operators;

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the provision of subsidies was considered important for both the operator and the household beneficiaries. However, the adoption of the OBA rigorous methodology and monitoring arrangements was also seen as important to ensuring the success of the project;

the issue of the grant allocation as not being balanced was raised by the public operator, as higher subsidy amounts were allocated and given to the private operators. However, the allocation was determined by the number of connections to be installed and RADEM had to implement the lowest number of connections, hence the amount of the grant allocated;

the importance to assess an equal or higher level of contribution than those proposed by the pilots, since costs turned out to be higher than anticipated to ensure the financial sustainability of the program;

the obligation to finance off-site infrastructure works and to distinguish costs associated with water and sanitation infrastructure and the installation and connection works;

the necessity to promote the success of the project to increase the chances of its replication at the national level, since the GoM is still very much aware of the importance of continuing the implementation of the social program;

the promotion of a close collaboration with the local authorities; and the need to implement multi-sectoral water and electricity infrastructure projects to meet

beneficiary households increasing demand for basic services, as noted by the public operator, as standalone water and sanitation projects can longer meet this growing demand for basic services.

Direct beneficiaries Coverage of the study. The same ICRR mission carried out beneficiary household surveys in the three cities of Meknes, Casablanca and Tangiers. It covered 9 of the 13 communes included in the pilots, namely: i) Meknes, Ouislane, Dar Oum Sultane, and Dkissa in Meknes; ii) Bouskoura and Mejjatia Ouled Taleb in Casablanca; and iii) Charf-Moghogha, Tanger Medina, and Beni Makada in Tangiers. Survey Methodology used. Ten (10) beneficiary households were randomly selected from the extensive lists of households compiled by the IVA and reflecting the information pertaining to all households targeted by the project, such as names, addresses or location, and identification numbers. The method used was to select every 10th person households from these lists. When the selected beneficiary was not available, then the team proceeded to the person next door. The same procedure was adopted uniformly in all surveyed communes. A representative sample of 30 households was drawn, yet a total of 77 beneficiary households were interviewed in the field: (i) 33 beneficiary households in Meknes, (ii) 18 in Casablanca, and (iii) 26 in Tangiers. Beneficiary household characteristics. The survey interviewed a total of 77 beneficiary households in the 9 communes. The majority of households interviewed were female: (i) 94 percent in Casablanca, (ii) 58 percent in Tangiers, and (iii) only 33 percent in Meknes. Results show that the proportion of female in the surveyed population is larger, representing 56 percent of the total of the selected beneficiary households in the three cities. Meknes urban Survey results reveal that 45 percent of the selected beneficiary households in Meknes urban areas stressed the very high level of their monthly contribution and were either paying irregularly or planning to discontinue payments. They also confirmed their inability to pay the connection fee.

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More importantly, the issue was more critical in “Douar Tabac” in Meknes where the entire neighborhood complained openly about the connection fee as being totally out of reach. This statement is validated by the information reflected in table 7 in Annex 5, since the total consumption bill is much higher in Meknes than Casablanca where the poverty level is considered moderate compared to Meknes.29 1. Cost of water Survey results reveal that consumption bills ranged from MAD 15-97. Adding the monthly beneficiary households’ contribution to the current price of water consumption, as shown in the following table, confirms that setting the original household affordability at MAD 150 Dh was reasonable for Urban Meknes, Tangiers and Casablanca. Actual beneficiary monthly bills ranged from MAD 55-202.26, as follows: a) in Casablanca (MAD 55-105), b) in Tangiers (MAD 125.26-202.26), and Meknes (Rural: MAD70-85 - Urban: MAD 125-140).

Table 14. Total Household Expenditure for Water Consumption Meknes (MAD/month) Tangiers (MAD/month) Casablanca (MAD/month) Water consumption

15-30

20-97

25-75

Urban Water & Sanitation

Rural Water only

Beneficiary household monthly contribution

110

55

105.26

30

Total Consumption Bill

125-140 70-85 125.26-202.26 55-105

2. ISRs Intermediary Output Indicators (IOI) The data collected during the ICRR mission also shed some light on some intermediary indicators and confirmed the nonattainment of the first IOI in Meknes and the achievement of the second IOI.

29 At appraisal poverty levels were assessed to be different across the selected areas, from the Meknes area with the highest poverty incidence, followed by Casablanca and more moderate poverty levels in the Tangiers areas.

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Table 15: ISRs Intermediary Indicators (Achievements at Project Closing

Original Target (12/30/2009)

Revised Target (12/31/2010)

Achievements based on survey results (March 2012)

Intermediary Output Indicators (IOI) : Uptake by Beneficiary Households per operator and eligible area

Casablanca 80% 80% 80% Meknes 90% 90% 75% Tangiers 85% 85% 95%

Comments: relying on the available ISRs data, the IOI was not achieved. However, based on the survey results, the IOI was achieved in Casablanca, was below target in Meknes and above target in Tangiers. Intermediary Output Indicators (IOI): Average monthly consumption per Beneficiary Casablanca indicative

target is 40l/ day/person, translates into 6 m3/mo in a 5-person household

indicative target is 40l/ day/person, translates to 6m3/mo in a 5-person household

10m3 10m3 Lahraouiyine 6.2m3 Lemkensa 9.2m3

Meknes between 4.5 m3- 8m3 Meknes urban n/a Meknes rural

Tangiers 10m3 (7 to 12m3) (6.3m3-13m3) Comments: the information collected by the ICRR mission seem to reflect higher average consumption bills than recorded during project implementation. Intermediary Output Indicators (IOI): Average consumption bill per beneficiary household Casablanca 25-75Dh/month

Lahraouiyine No information no target value information

No information no target value information

69Dh/l

Lemkensa 36Dh/l Meknes 47Dh/l

Meknes urban 76Dh/month 125-140Dh/month Meknes rural (from 54 to 70-85Dh/month

Tangiers

95Dh/month) depending on area

125.26-202.26Dh/month

Comments: as noted in section 1.3, these IOI were not assigned a target value. Operators were requested to collect the information related to beneficiary households’ consumption and bill. Based on the survey results, the information recorded seems rather accurate. 3. Households’ Composition The size of the household was also determined at appraisal. The data collected during the evaluation mission indicated different household compositions, contributing to attest to the variability of household size in illegal and informal settlements, as presented in table 16.

Table 16. Household Composition (Meknes, Casablanca and Tangiers) Number of people Meknes 3-4 Casablanca 5-10 Tangiers 6-10

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Annex 6. Stakeholder Workshop Report and Results (if any) Not applicable

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Annex 7. Summary of the Recipients’ ICR The three implementing agencies, namely RADEM, LYDEC, and AMENDIS submitted to the Bank their respective Project Completion Reports (PCRs), which provided a complete assessment of the execution of each pilot in each city. The operators’ PCRs concluded that all project activities were implemented successfully despite all the delays and the challenges they faced as implementing agencies throughout the life of the Pilot project. They also stressed that the achievements required a lot of human and financial resources. The main points raised by the operators are summarized as follows: I. Assessment of the Development Results at Project Closing The PCRs highlighted the fact that the number of connections to be subsidized depended heavily on the impact of the exchange rate fluctuations between the US dollar and the Moroccan Dirham. They also underlined that the unit connection cost was calculated by the consulting firm hired to contribute to the design of the Pilot in such a way that the unit subsidy and the beneficiary contribution would cover the actual capital expenditure investment per connection. The reports confirmed that in June 30, 2010, the utility in Tangiers managed to install 3,373 connections of which only 2,945 were subsidized because of the exchange fluctuations between the USD and the MAD. In Meknes, the operator connected 2,730 households and provided access to basic services to 11,000 people. In Casablanca, the operators validated a total of 6,130 connections in urban areas and 621 connections in rural areas. On the total investment required in Tangiers to implement the overall OBA program, the same documents confirmed that the total capital expenditures equaled MAD 78,578,904. In addition, fourteen percent (14%) of Amendis total costs were financed by the beneficiary contribution, twenty-one percent (21%) by the subsidy and the remaining sixty-five percent (65%) were pre-financed by the operator. The PCRs also indicated that the level of the beneficiary contribution was correctly assessed as demonstrated by the actual successful implementation of the pilots, the high uptake by beneficiary households, and the high recovery rate. Meknes, however, had a low recovery rate.

II. Implementation The reports underlined a number of implementation difficulties during the first two years of the project, as presented below: Factors affecting the Pilot implementation

Changes in local authorities’ priorities. Several neighborhoods were no longer considered a priority by the local authorities, therefore the implementation of the connections in these areas was further delayed.

Works to be carried out prior to installing the connections and land issues delayed the pilot implementation.

Works to be carried out by third parties such as Al Omrane hindered efforts to connect some households in a number of areas.

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Beneficiary households’ low participation in the social program in Meknes, at the beginning of the project, slowed down implementation. Additional contributions were required from the communes to make it affordable for some households to participate in the program.

Adoption of an Action plan to meet the development objective

The selection of new eligible areas during the MTR contributed to speeding up the implementation.

The extension of the closing date allowed the operators to effectively execute the new action plan and speed up the execution of the pilot to finally meet the grant development objective.

The establishment of a committee linked to the local committee in charge of the implementation of the INDH to discuss and identify the appropriate solutions to all issues resulting from the Pilot implementation.

Project financing Gap The PCRs projected a 25% deficit for the overall pilot in Tangiers by 2020. The expected deficit stems from (i) a 20% VAT not taken into account in the subsidy calculation with an important impact estimated at MAD 21 million and representing 27% of the total investment, (ii) the assessment of the subsidy amount during the preparation of the project was never revised throughout the life of the pilot projects, (iii) the increase of the VAT from 14% to 20% in 2008 representing an additional financing requirement of MAD 4 million, and (iv) the exchange rate fluctuations between the MAD and USD resulting in a short fall of MAD 2 million. Transaction costs The reports also mentioned the huge costs resulting from the carrying of a large number of financial audits during the life of the Pilot project and the additional financial resources needed which were estimated at MAD 400,000. Extension of closing Date The PCRs referred to the number of exogenous factors which imposed a number of constraints on all three utility providers which led to the submission to the Bank of one combined request to extend the closing date for the second time, from December 2011 to December 2011, even though AMENDIS had already met the pilot objective in 2010 and committed its entire subsidy allocation. Risk associated with the extension of basic service in informal settlements The PCRs considered the risk associated with the extension of basic services to informal settlements and emphasized that giving access to water and sanitation services could encourage additional informal settlements. Lessons Learned The PCRs indicated a number of lessons learned, especially from the implementation experience.

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They included: The recognition that the INDH-inspired program30 was the right framework to implement

the OBA pilot and that the OBA approach was the right instrument to give access to the poor in peri-urban and informal settlements.

The uptake by the beneficiary households was essential to ensure the implementation of the social connection programs in the three cities and the viability of these important programs.

The World Bank’s role in the implementation of the pilots through its technical input, its audit requirements, and its close monitoring contributed to enhancing the execution of the overall social program.

The OBA approach played an important role in promoting competition among the three operators and a culture of high performance through the achievement of tangible results.

The adoption of the OBA organizational and administrative structures by the overall INDH program for service extension by the operators enhanced the execution of the national social program.

The active engagement of the mobile agencies in Tangiers, the dedicated staff responsible for the awareness and the information campaigns in Casablanca, were all instrumental in increasing the beneficiary households’ participation in the social program.

The establishment of a Committee in Tangiers was crucial in solving all the issues encountered throughout the life of the Pilot project, but more importantly in gathering all parties involved around the same table (the operators, communes and local authority representatives, and other stakeholders).

The feasibility study was crucial for identifying the pilot costs as well as the involvement and the participation of the various financial partners.

The active participation of the local authorities in the execution of the Pilot was critical. III. Bank’s Performance Regarding the Bank’s performance, the PCRs cited the various institutional support provided by the Bank. The Bank’s flexibility and its guidance throughout the implementation were also mentioned. However, the reports highlighted some areas for improvement. Those were: Stringent procurement procedures, the application of which was in contradiction with the

Moroccan public procurement code; The duplication of audits throughout the life of the project with some regarded as both

unnecessary and irrelevant to the output based approach (annual financial audits and other additional unnecessary audits), while the only relevant audits were those carried out by the IVA.

The complete PCRs can be found in the Project Files (Annex 9).

30 Program promoted by the Ministry of Interior (line Ministry for the Recipient utilities) for water and sanitation services expansion by utilities in INDH-identified areas, in accordance with the spirit of the INDH program. These programs were not processed through the INDH institutional arrangement, nor were they funded by the INDH. They were implemented by water and sanitation utilities directly, in close collaboration with INDH local commissions for coordination and problem solving purposes.

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Annex 8. Comments of Cofinanciers and Other Partners/Stakeholders Not applicable

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Annex 9. List of Supporting Documents 1. Supervision Mission’s Aide-Memoires from 2005 to 2011 2. Independent Verification Agent’s (IVA) report (17 reports in total) 3. Project Appraisal Commitment Document (PACD) 4. Grant Agreement – TF Grant No. 057598 and 057599 - January 29, 2007 5. Implementation Status and Results Report (ISRR) 1 to 6 6. Original Operations Manual, January 25, 2007 7. Revised Operations Manual, October 2008 8. Procurement Mid-Term Review Report 9. Social and Economic Report (Infrastructure Development Consultants dated March 15,

2006) 10. Environmental Report 11. Mid-Term Review Report (Infrastructure Development Consultants, April 2008) 12. IVA’s Procurement Report, April 2008 13. Financial Modeling Report (Infrastructure Development Consultants dated March 15,

2006) 14. Preparation Report (Infrastructure Development Consultants dated March 15, 2006) 15. Operator’s quarterly and semi-annual reports 16. Disbursement, audit and budget reports 17. Operators Project Completion Reports (PCRs) – LYDEC, AMENDIS, and RADEM

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MAP SECTION

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MAP 1: MEKNES (DAR OUM ELSOULTANE)

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MAP 2: TANGIERS (AOUMA GHARBIA)

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MAP 3: TANGIERS (MRABET 2)

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MAP 4: TANGIERS (MRABET 1)

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MAP 5: TANGIERS (DHAR AJJAM EL MERS)

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MAP 6: TANGIERS (MESNANA INFERIEUR)

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MAP 7: CASABALANCA (LAMKENSA and LARHAOUIYNE NORD)